9th August 2023 > > ETFs and Chainlink.

tl;dr

Prices benefit from ETF speculation. Coinbase partners with Chainlink in an exciting development for holders of LINK.

Market Snap

Market Wrap

A breach of $30k to the upside followed a comment by Mike Novogratz, CEO of Galaxy Digital, about the prospects of a spot based BTC ETF (see below). Bring on that vol!

Curious Cryptos’ Commentary – Spot-based BTC ETF

Mike Novogratz, CEO of Galaxy, claims that we are four to six months away from SEC approval of a spot based BTC ETF. Note that August 13th is the first deadline for the Ark Invest application whilst 2nd September is the first deadline for the Blackrock application. Cathie Wood, CEO of Ark Invest, told Bloomberg:

“I think the SEC, if it’s going to approve a Bitcoin ETF, will approve more than one at once.”

Which probably explains Mike’s four-to-six-month time horizon.

When we do see approval of one or more ETFs, price action will be very choppy, with an initial large rally (maybe to new all-time highs) followed by bouts of profit-taking. The CCC Treasury might lighten up a bit in those circumstances, but only with the intention of reloading in the short term. Adoption by institutions will be turbo-charged by an ETF, but that flood of money won’t all arrive on day one – it will play out over a timescale of months then years.

What we will see is a lot of new, speculative, retail money putting BTC into weak hands. This will be the driving force for elevated volatility. Bear markets come and go, triggered by external factors, but they are amplified by weak hands who join late. The corollary of which is that bull markets only start once capitulation by those weak hands is done and dusted, which we likely saw happen in the dark days of Q4 2022 when BTC was trading in the mid-teens.

Curious Cryptos’ Commentary – LINK (Chainlink) & Coinbase

The CCC rarely strays into the territory of looking at individual alts, but there are some that seem so compelling, that we must revisit them from time to time, not for investment purposes, but to aid education and understanding of the crypto world.

LINK has long been a favourite of the CCC Treasury. Returns to date have been around 300%, but frankly – given its potential – I am a little disappointed by that. At the back end of 2021 those returns were over 2,000% so perhaps I need to learn to take profits every now and then.

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LINK is the native token of Chainlink, whose objective is to provide reliable data feeds from centralised sources (stock prices, baseball scores, temperature readings, whatever data you can think of) for use in decentralised smart contracts by moving data on and off-chain through “hybrid smart contracts”.

The need for oracles is obvious. Take for example tokenisation of financial assets, an area of activity predicted to be worth anywhere between $5 TRILLION and $36 TRILLION by 2030. Reliable data feeds are a necessary prerequisite for this nascent industry. As a leader in this field, Chainlink has the possibility of gaining significant market share for the provision of data for tokenisation purposes.

Moving insurance contracts to the blockchain will immensely benefit insurance buyers with guaranteed payouts once certain conditions have been met. Oracles allow that to happen.

And Chainlink is about to get bigger.

Coinbase is launching Base, a new Ethereum layer-2 solution, today. Chainlink will be Base’s partner. Jesse Pollak, Creator of Base and Head of Protocols at Coinbase, explains:

“The native integration of Chainlink Price Feeds into Base will enable developers with the tools they need to port existing applications over to Base and empower them to experiment with novel use cases that can be built on Base’s hyper-scalable layer-2 environment.”

Base will be operating in a crowded market, but its creation by a publicly listed company gives it legitimacy denied to independent layer-2 start-ups, which in turn bestows legitimacy on LINK denied to other oracles. If Base is a success, holders of LINK will themselves be beneficiaries of that success.

At least, that’s what my Treasury manager tells me, but he isn’t always right.

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I repeat, this commentary is solely for education about one small area of crypto activity, but possibly an area of growing importance, which is why I bring it to your attention.