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The Year of Institutional Adoption 🏦 + Devs Set the Record Straight ☝️

Ether Capital Newsletter
Ether Capital Newsletter
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It’s shaping up to be a big year for institutional adoption of digital assets — something we at Ether Capital are very excited about. A new wave of enthusiasm for cryptocurrency has financial advisors fielding tons of questions from clients about how to increase exposure and maximize returns. Before we get to that, we wanted to share the latest news on Ethereum’s big upgrade. 🔧
Debunking Rumours About the Merge
Ethereum’s core developers put speculation to bed that the Merge was scheduled for June, when it fact it never had a hard launch date. Tim Beiko said if all goes according to plan, it would likely take effect closer to the fall and shared details on the network’s progress.
In our view, this critical upgrade can’t be rushed — something we explained during an interview with Bloomberg on Thursday. Developers 👩‍💻 👨‍💻 need time to properly stress-test the code before merging the Mainnet (execution layer) and the Beacon Chain (consensus layer) that are currently running side-by-side. They want to get this right the first time around and avoid launching code that exposes vulnerabilities in the network 👾 that could put millions of end users at risk.
We also talked about why an asset’s value should not be defined by its short-term price point (a popular topic in the mainstream). Those who are new to the space should start by understanding the core value propositions of assets like ether and bitcoin to help guide their investment decisions. By assessing the fundamentals, it will help to answer more important questions around the long-term impact of digital assets and how they will service the next generation of investors. Similar to tech disrupters like Twitter, Airbnb and Uber, Ethereum thrives off of a network effect. 🔮
ICYMI we spoke with CTV’s Chief Financial Commentator Pattie Lovett-Reid last November about what new investors should think about when entering the space.
The Year of Institutional Adoption 🏦
As the industry matures, we’re seeing more institutions put their weight behind digital assets and seek exposure beyond bitcoin. 👀 📈
Wall Street giants like Goldman Sachs are doubling down on crypto endeavours and introducing new product offerings. The bank also recently said it’s gearing up to offer over-the-counter (OTC) ether options trading to meet rising demand from clients.
The stats
If you don’t believe us, just look at the numbers! 🤷🏻‍♀️
New data shows institutional clients traded roughly US$1.14 trillion 💸 worth of cryptocurrencies on Coinbase in 2021 — a sharp increase from the US$120 billion in 2020, and more than twice the US$535 billion traded by retail investors.
In Canada 🇨🇦 specifically, nearly one-third (32%) of financial service providers that participated in a recent KPMG survey say they have made allocations to digital assets. Despite crypto being touted as a good technology play (43%) and a hedge against inflation (21%), Canada’s uncertain regulatory landscape is what appears to be causing investors to have more “reserved perceptions.” This is a risk that could force Canadians to look elsewhere for access points and put the country at a competitive disadvantage. 👎
The Federal government also made brief mention of digital assets in last week’s budget and said it would set aside $17.7 million for a five-year 👀 ⁉️ review aimed to study the role of CBDCs and cryptocurrency. We recently spoke with the Financial Post about how the crypto industry could be a boon for our economy, and what’s at stake if we don’t take steps to issue proper guidance. ⏳
Our take
A vote of confidence from some of the world’s oldest banks 🏦 and hedge funds helps build credibility for an industry that is at the cutting-edge of innovation. Cryptocurrency and blockchain went from a niche hobby used by tech developers to a multi-trillion-dollar asset class with new use cases emerging almost every day.
Institutions are starting to consider different parts of the ecosystem and assets, like ether, that offer utility and act as yield-generating instruments.
Daily block rewards for miners under PoW model
Daily block rewards for miners under PoW model
Staking will also be front and centre once the Merge takes full effect, which will mark the end of 🔋 energy-intensive mining on Ethereum and reduce issuance of new tokens. With a much reduced 👣 carbon footprint, we could see the price of ETH get a boost and institutions with strong ESG mandates start to build a position.
Investors can stake their ETH to generate a handsome return as well (currently calculated at ~5%), which up until this point has been restricted to miners with specialized computer equipment.
Breakdown of depositors on the Beacon Chain
Breakdown of depositors on the Beacon Chain
⛏️ Pick-and-shovel play
Companies that address some of the pain points brought on by staking are also likely to benefit from the Merge. Because Ethereum is not yet equipped to allow users to withdrawal staked ether (expected to occur in an upgrade post-Merge) liquid staking providers like Lido have collateralized the process of staking in order to solve the issue of immobility. There’s no minimum deposit amount required and users receive a tokenized version of their staked ETH so they can still receive rewards (in addition to Lido taking a cut), while participating in on-chain activities like lending.
We know this gets a bit technical 🤓, but Lido currently accounts for a large portion of ether deposited on the Beacon Chain — a percentage that could increase post-Merge.
Upcoming Events ⏰ 🗓️
It’s our first in-person speaking event of 2022 — and we’d love for you to attend! 🤩
On Monday April 25th at 6:00pm ET, Ether Capital’s CEO Brian Mosoff will be participating in a fireside chat with Marcel Kasumovich, Head of Research at One River Digital.
Join us to learn more about our business strategy, the unique access point we offer our shareholders and how we’re bridging the gap between traditional finance and Ethereum. We’ll also shed light on the latest developments in the space and discuss our work as founding members of the Canadian Web3 Council — a new association that’s encouraging policymakers to work alongside industry professionals to thoughtfully regulate the sector. 💡
Space is limited, so make sure you sign up! 🖋️
Crypto Funding Deals 💵
Cryptocurrency payments startup, MoonPay, secured its latest funding round by a group of 60 actors and musicians. A-listers like Justin Bieber, Drake and Ashton Kutcher (plus many others) collectively offered US$87 million to the company. This comes at a time when artists are increasingly gravitating towards blockchain to secure financing, control their intellectual property and sell their products directly to consumers without the need for intermediaries.
USDC stablecoin issuer, Circle, also recently received a cash injection. 💉 The company announced earlier this week it has entered into an agreement for a US$400 million funding round with BlackRock, Inc., Fidelity Management and Research, Marshall Wace LLP and Fin Capital. In addition to the capital raise, BlackRock has entered a strategic partnership with Circle to be its primary asset manager of USDC cash reserves and explore capital market applications for its stablecoin.
Have Questions About Crypto? 🧐
The industry is quickly evolving and there’s a lot of information to keep up with. That’s why we want to help! 🦸
Email us your questions and we’ll respond to as many as we can. While we can’t provide investment advice, we do want to steer you in the right direction so you can be informed.
Thank you for subscribing to our weekly newsletter! We’d love to hear from you, so please don’t hesitate to reach out. 😎 🚀
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