--- title: “That’s Our Two Satoshis” - A Disappointing 2Q For Digital Assets description: The second quarter was unfavorable for digital asset investors. Markets are disregarding the SEC, why airdrops are failing, and how Bitwise's new marketing campaign is targeting the wrong audience. image: https://www.ar.ca/hubfs/Copy%20of%20TO2S%20375x175%20%282845%20%C3%97%201600%20px%29%20%2845%29.png --- [![email-sig-logowhite](https://www.ar.ca/hs-fs/hubfs/email-sig-logowhite.png?width=102&height=96&name=email-sig-logowhite.png "email-sig-logowhite")](https://www.ar.ca/) [![Get in Touch](https://no-cache.hubspot.com/cta/default/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3.png)](https://cta-redirect.hubspot.com/cta/redirect/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3) ** ** ** [![Arca](https://www.ar.ca/hs-fs/hubfs/arca_square_576x576.png?width=60&height=30&name=arca_square_576x576.png "Arca")](https://www.ar.ca/) [![Get in Touch](https://no-cache.hubspot.com/cta/default/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3.png)](https://cta-redirect.hubspot.com/cta/redirect/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3) ** ** ** Search **Menu** ** ** [![Data Room](https://no-cache.hubspot.com/cta/default/4536350/72e2934a-0f70-4634-897e-b99fd4807a9b.png)](https://cta-redirect.hubspot.com/cta/redirect/4536350/72e2934a-0f70-4634-897e-b99fd4807a9b) [![Get in Touch](https://no-cache.hubspot.com/cta/default/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3.png)](https://cta-redirect.hubspot.com/cta/redirect/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3) ![](https://www.ar.ca/hubfs/Blog/Thats%20Our%202%20Satoshis/Branding/2-Sats-Header.png) [Market Recap](https://www.ar.ca/blog/tag/market-recap) | # “That’s Our Two Satoshis” - A Disappointing 2Q For Digital Assets [![Jeff Dorman, CFA](https://www.ar.ca/hubfs/Jeff%20Dorman.png)](https://www.ar.ca/blog/author/jeff-dorman-cfa) Written by [Jeff Dorman, CFA](https://www.ar.ca/blog/author/jeff-dorman-cfa) Jul 1, 2024 ******![Thats Our 2 Satoshis Logo](https://www.ar.ca/hs-fs/hubfs/Thats%20Our%202%20Satoshis%20Logo.png?width=300&name=Thats%20Our%202%20Satoshis%20Logo.png)****** ******![Screenshot 2024-07-01 at 9.25.42 AM](https://www.ar.ca/hs-fs/hubfs/Screenshot%202024-07-01%20at%209.25.42%20AM.png?width=699&height=462&name=Screenshot%202024-07-01%20at%209.25.42%20AM.png)****** *Source: TradingView, CNBC, Bloomberg, Messari*   **A Rough Quarter Despite Positive News** Here are some pretty surprising stats: - Bitcoin finished the 2nd quarter of 2024 down -12.11%.   - The Bloomberg Galaxy Crypto Index (BGCI), which is largely weighted towards BTC and ETH, finished the quarter down -16.65%.  - The S&P Cryptocurrency BDM Ex-MegaCap Index (SPCBXM) excludes BTC and ETH and, therefore contains mostly “altcoins,” finishing the quarter -29.97%.   - Meanwhile, the S&P 500 finished the quarter +3.92%.   In short, crypto got hammered while stocks reached all-time highs, even though the Bitcoin halving occurred in April and the largest U.S. regulatory 180 in history happened in May (which we called at the time the most [important week in digital assets history](https://www.ar.ca/blog/the-most-important-week-in-digital-assets-history)).     The industry is surrounded by tailwinds (new ETF flows, the shift in Washington, multiple legal victories, new successful products in gaming, RWA, AI, DePin, and SocialFi), and yet a few short-term market headwinds related to increased supply pressures (government coins, Grayscale, VC unlocks, new issuance) are going to shake many investors out of the market ultimately.  While there is no guarantee that prices will rebound, it’s about as safe a bet as the digital assets market has ever faced.  Positive news plus negative price action is usually a time to buy.    **The “So the SEC Said You’re a Security” Investing Playbook** The U.S. SEC sued Consensys Friday, alleging MetaMask's swaps and staking products violated federal securities laws. The suit also targeted Ethereum staking services Lido and Rocket Pool, referring to their popular stETH and rETH tokens as unregistered securities. Unlike two years ago, when this would lead to an immediate delisting of the tokens in question and a turtle-in-shell market response, today, the market just shrugs this off. For good reason.     The "SEC said you're a security" investing playbook is as follows:   1. Securities aren't illegal.  It’s ok to invest in securities. 2. If a token IS a security, it only affects the issuer of the token, and the exchanges who list these tokens (requires different rules/disclosures). 3. Issuers and exchanges are now fighting back, and often winning.  The exchanges no longer delist these tokens, and issuers no longer live in fear. Therefore, from a market perspective, it is safe to ignore these allegations until actual laws are in place.   **Enough With the Lockups and Airdrops** Recently, airdrops and lockups of tokens have been actively debated in digital assets. There is a lot to unpack here, and none is good.    For starters, ICOs actually worked really well. Early-stage projects were able to sell tokens to its’ community, find a market-clearing price via a sale, and create sticky users and evangelists in the process. While most likely illegal under securities laws, let's not forget that this was still a good process.  Early-stage investors became the product’s first users, and the growth of a token and a project happened simultaneously.   Fast forward to today. ICOs are illegal, so the market had to adjust, and the adjustment is WAY WAY WAY worse. All token sales are now done via private 144a transactions to AIs and QIBs only (i.e. VCs), eliminating the community's ability to benefit early, and driving prices up in the private markets before retail can participate. These VCs have so much power and control over exchanges and market makers that they mark these tokens way higher before listing them on exchanges, and the price inevitably falls like a stone once listed because retail is (rightfully) [balking at these tokens](https://cobie.substack.com/p/new-launches-part-1-private-capture) at multi-billion dollar valuations.    However, the founders still wanted to get tokens into retail users' hands, so they started airdropping (gifting) tokens to users of their products. The problem is that people value things based on what they paid for them, and when you don't pay, you don't value them. As a result, airdropped tokens are getting dumped immediately.     The biggest problem in digital assets capital markets is that there is no "market clearing price" based on what someone would actually pay for it. You need buyers to dictate the price for a seller.  Letting market makers, exchanges, and VCs dictate the price in a completely arbitrary process is a recipe for tokens being dumped the second they hit the public markets.  We’ve discussed some potential fixes [recently](https://www.ar.ca/blog/the-issues-potential-solutions-for-new-token-issuances). Unfortunately no one is incentivized to change the system.     **The Bitwise Marketing Campaign** Let me start by saying that I love Bitwise, and I am by no means a marketing expert.  But I do not understand the new Bitwise marketing campaign.  Bitwise dropped a series of ads last week (see [here](https://x.com/BitwiseInvest/status/1803789737620078875), [here](https://x.com/BitwiseInvest/status/1806326930477654147) and [here](https://x.com/BitwiseInvest/status/1805239486554480909)), and all of them carry a similar theme:  *Traditional finance is old and out of touch, while crypto is new and better.*    Forgive my ignorance, but who is this resonating with?  Bitwise is attacking “big finance” to sell the merits of a new technology, even though Bitwise’s largest product offerings are ETFs, which jams this new T+0 technology into the old antiquated T+1 box of big finance.  Doesn’t that seem both hypocritical and uninviting?      Clearly, I’m in the minority.  The crypto Twitter reaction was naturally to love these ads.  But crypto people already love crypto – you won’t win any new investors by telling people what they already think.  And non-crypto investors who have been making money hand-over-fist for decades in the stock market aren’t going to watch this and say, “*yeah, even though big finance works perfectly fine and makes me tons of money, I’m going to switch to crypto because it’s cool*”.  It’s generally not a good idea to tell people how they are doing something wrong.    Bitwise and others marketing Bitcoin and soon-to-be Ethereum ETFs need to market Bitcoin and Ethereum.  That’s what you’re buying.  Bitcoin is digital gold; Ethereum is the Apple app store.  That’s the selling point.  There’s no question that blockchain has some technological advantages over traditional finance, and many companies and projects are trying to take advantage of this new technology by cutting out the middleman and traditional finance altogether. But Bitwise is not one of them.  They are actively utilizing Big Finance by selling old, antiquated ETFs.  Consider me confused, and I’d love to understand what I’m missing here.     ***And That’s Our Two Satoshis! ****Thanks for reading everyone! Questions or comments, just let us know.*   **The Arca Portfolio Management Team** *Jeff Dorman, CFA - Chief Investment Officer* *Katie Talati - Director of Research* *Sasha Fleyshman - Portfolio Manager* *David Nage - Portfolio Manager* *Wes Hansen - Director of Trading and Operations* *Michal Benedykcinski - Senior Vice President, Research* *Nick Hotz, CFA - Vice President, Research* *Kyle Doane - Vice President, Trading* *Alex Woodard - Associate, Research* *Christopher Macpherson - Research Analyst* *Andrew Masotti - Associate, Trading and Operations*     **To learn more or talk to us about investing in digital assets and cryptocurrency** **call us now at [(424) 289-8068](tel:+14242898068).** ### Subscribe For the Latest Blockchain News & Analysis     Disclaimer: This commentary is provided as general information only and is in no way intended as investment advice, investment research, legal advice, tax advice, a research report, or a recommendation. Any decision to invest or take any other action with respect to any investments discussed in this commentary may involve risks not discussed, and therefore, such decisions should not be based solely on the information contained in this document. Please consult your own financial/legal/tax professional. Statements in this communication may include forward-looking information and/or may be based on various assumptions. The forward-looking statements and other views or opinions expressed are those of the author, and are made as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated and there is no guarantee that any particular outcome will come to pass. The statements made herein are subject to change at any time. Arca disclaims any obligation to update or revise any statements or views expressed herein. Past performance is not a guarantee of future results and there can be no assurance that any future results will be realized. Some or all of the information provided herein may be or be based on statements of opinion. In addition, certain information provided herein may be based on third-party sources, which is believed to be accurate, but has not been independently verified. Arca and/or certain of its affiliates and/or clients may now, or in the future, hold a financial interest in investments that are the same as or substantially similar to the investments discussed in this commentary. No claims are made as to the profitability of such financial interests, now, in the past or in the future and Arca and/or its clients may sell such financial interests at any time. The information provided herein is not intended to be, nor should it be construed as an offer to sell or a solicitation of any offer to buy any securities, or a solicitation to provide investment advisory services. 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