Greetings Arca Friends,
The first half of 2021 was marked by optimism as we experienced the reopening of our economy and recovered mentally, physically, and economically from Covid-19. The digital asset ecosystem helped drive our positive outlook, achieving its highest market value yet, $2 trillion. We, at Arca, have remained focused on our mission and continue to build on the foundation we laid last year.
While the market cap did not endure, the industry has seen substantial achievements in the first half of 2021, particularly in DeFi, revealing its potential to solve governance, yield generation, and other universal challenges. Investors are increasingly optimistic to find additional ways DeFi can resolve investment obstacles and provide opportunities where traditional markets fall short.
The digital asset ecosystem has seen an influx of incumbent activity despite its recent price oscillations. In such a nascent asset class, extraneous events can easily overshadow positive achievements, as we’ve seen with Elon Musks’ tweets and China’s prohibition of cryptocurrencies. Despite the negative press, we are still earnestly bullish, debunking these bear market theses in our investment team’s recent That’s Our Two Satoshis commentary.
The longer the digital asset marketplace is active, the more extensive data and trend information is available to formulate fundamental market theses and better predict future activity. This progression furthers the asset class’s maturity, providing comfort and an optimal entry point for sophisticated investors to get involved. The digital asset ecosystem will continue to have market unpredictability, but that is arguably why institutional investors are deploying their capital here - high risk, high reward. More institutional capital and further experience are expected to continue to unlock this remarkable asset class’s future impact.
News and New Hires
At Arca, we hit the ground running in 2021. In addition to the completion of our Series A Funding Round, we have received a notable endorsement of our accomplishments thus far, and our plans for the future: former PIMCO executive Bill Powers has joined as principal and strategic advisor. We believe our thoughtful approach to asset management and digital assets differentiates us from our peers, and Bill sees substantial synergies between what he accomplished at PIMCO, a fixed income first mover, and Arca, a pioneer in digital assets. Bill recognizes PIMCO’s early days in our customer-centric, regulation-first, team-obsessed vision.
Bill Powers’ endorsement is just one of many recent business highlights and further emphasizes our people-first approach. Arca is a company that differentiates itself through its diverse and talented team. We have welcomed 18 new team members to our firm, spread across our investment, marketing, finance, sales, and innovation divisions. Our business is scaling upwards and that is made possible by our teams’ individual expertise and collaboration allowing us to execute and grow in such a dynamic space. We would not have been able to achieve the impressive accomplishments that we did in the first half of this year if it were not for them.
Growing Product Suite
We have expanded our offering to include multiple actively managed funds, passive vehicles, and blockchain transferred funds (BTFs).
The Arca Digital Asset Fund, our flagship hedge fund, continues to be the engine that drives growth across the firm. The fund has exceeded expectations, with assets under management (AUM) doubling quarter after quarter for the last 18 months.
Our new Arca Accredited Investor Bitcoin Trust is our first passive fund, and what we anticipate to be the first of many new funds to launch from our immediate product roadmap. Listen to the replay of our Arca Accredited Investor Bitcoin Trust webinar for details, and stay tuned for more new products.
Arca’s mission is to have the right product at the right time for the right investor. This objective requires massive innovation efforts from our Arca Labs business line. Established to incubate ideas and build financial structures that incorporate blockchain to improve investors’ experience, Arca Labs is blazing a trail to the future of digital investments.
In our innovation division, Arca Labs, we continue to build out the infrastructure for digital asset securities and tokenized funds. Our first product launched in July 2020, a tokenized closed-end fund registered under the Investment Company Act of 1940 (‘40 Act), continues to be the only ‘40 Act fund to issue digital shares on the blockchain. Being first-to-market requires us to build the infrastructure compatible with a broad range of service providers. Arca now offers eight different custody solutions to store ArCoin, the digital share of the Arca U.S. Treasury Fund, and access to Signature Bank’s Signet digital payment platform to reduce costs and transaction time. Additionally, the Arca U.S. Treasury Fund has amended its prospectus to allow for monthly, rather than quarterly, redemptions and we continue to work on creating a liquid ecosystem for ArCoin. This is just a small sample of the initiatives we are engaged in to create a better investor experience using blockchain.
Digital Asset Resources for Sophisticated Investors
We continue to focus on being a resource for sophisticated investors to obtain insightful and thought-provoking education on blockchain and digital assets. Aligned with our mission to curate educational thought leadership needed to make informed financial decisions, we hosted the 4th Annual FO256 Conference on May 25, 2021. The event was spearheaded by senior industry experts deliberating on industry hot topics, including institutional adoption, NFTs, ESG, and more. Full panel videos available on demand here.
The aspirational and often misguided ESG dialogue, especially associated with Bitcoin’s energy consumption, has prompted us to pause, ponder, and probe. We are dedicating this summer to stimulate productive ESG conversation around digital assets by reversing the discussion to focus on Governance. Awareness of the catalysts behind the current ESG discourse helps us rethink the logical way to more accurately frame the dialogue for digital assets, and switch the narrative to GSE, since digital assets were born to solve Governance challenges. Our #GSEnotESG campaign aspires to drive introspective thinking and result in an open-minded outlook on digital assets and their potential impact on our world. Our newly released Digital Assets: ESG - Why Not GSE (Governance, Social, Environmental)? paper kick starts our initiative, followed by a podcast tour and fireside chat series. Learn more about ESG and digital assets here.
We have seen an explosion of attention in digital assets in the first half of 2021, and the industry is just starting to show its potential. The continued development, interest, and adoption of the digital asset ecosystem has further accelerated ingenious ways to incorporate its technology into our practical world. This mainstream acknowledgement provides opportunities and we are confident that Arca’s team is uniquely positioned to seize them.
Onward and upward,
Rayne Steinberg, CEO
To learn more or talk to us about investing in digital assets and cryptocurrency call us now at (424) 289-8068.