--- title: “That’s Our Two Satoshis” - How to Improve Digital Assets Markets description: We present six different ways in which the digital assets market is flawed and offer solutions to address these issues. image: https://www.ar.ca/hubfs/Copy%20of%20TO2S%20375x175%20%282845%20%C3%97%201600%20px%29%20%2839%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” - How to Improve Digital Assets Markets [![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) May 20, 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 2024-05-20 at 8.19.27 AM](https://www.ar.ca/hs-fs/hubfs/Screenshot%202024-05-20%20at%208.19.27%20AM.png?width=700&height=464&name=Screenshot%202024-05-20%20at%208.19.27%20AM.png)****** *Source: TradingView, CNBC, Bloomberg, Messari*   The digital assets market bounced back last week, with most large cap tokens gaining +5-10%, and a few notable outperformers like Solana (SOL +25% wow), Arweave (AR +26%), and Chainlink (LINK +25%).  Equities also had a nice week, as did gold, and the 10-year Treasury yield continues to slowly decline post the FOMC meeting earlier in the month. Crypto gains were likely driven by a reversal in sentiment, largely due to two crypto-specific macro data points:   1. The Senate rebuked the SEC by [overturning of SAB 121](https://www.coindesk.com/policy/2024/05/16/us-senate-votes-to-kill-secs-crypto-accounting-policy-testing-bidens-veto-threat/?utm_campaign=Galaxy%20Research%20Newsletter&utm_medium=email&_hsmi=307524917&utm_content=307524917&utm_source=hs_email) 2. A slew of 13F filings confirmed that the Bitcoin ETF audience is much bigger and more diversified than many anticipated. ![](https://lh7-us.googleusercontent.com/0w69LSoZ6cAfXCHShe8XXghDwyWaas6dYb7o8FlRV_oiDG-UpEZ0pmDi-ARQ96VMq93erFaPjvS0dg0JkusOCGVLjc-Kmnl1DFBih6wzuIsw2JJ7B2euSglBuYxKgjTIBs-dhnSnoI8saIXJGUWdbf0) *Source:  *[*X/Twitter*](https://x.com/EricBalchunas/status/1791079436953022885)* / Bloomberg*   **6 Random Thoughts on How The Digital Assets Market Can Improve** As I was digesting current events this weekend, I started to jot down a few random thoughts about the digital assets market, each of which will probably become its own blog post at some point in the future.  In no particular order, here are 6 random thoughts on how the market can improve.   1. The [low float, high FDV](https://x.com/Crypto_McKenna/status/1785206863950237820) token launches are killing retail investors, generating mistrust between investors and the exchanges who list these tokens, and creating more public hatred towards venture capital investors. It’s surprising to me that this type of token launch is [still happening](https://www.binance.com/en/research/analysis/low-float-and-high-fdv-how-did-we-get-here), given the person who basically invented this style is [facing 25 years in prison](https://www.coindesk.com/policy/2024/03/29/sbf-is-going-to-prison-for-25-years/).  Most successful token launches over the past 5 years have had a much larger initial float and lower starting prices. We tackled this issue a few weeks ago with our [suggested improvements for token launches](https://www.ar.ca/blog/the-issues-potential-solutions-for-new-token-issuances). 2. Regulation, especially in the U.S., has stifled token sales to anyone other than Accredited Investors and Qualified Institutional Buyers, resulting in a plethora of private rounds. But since these tokens are already public, this is effectively a PIPE (Private in Public Equity) – or a PIPT (Private in Public Token). PIPEs are essentially a last-ditch resort in the equity market, which makes it even stranger that this has become the norm in digital assets. In most cases, there is no reason for token issuers to continue to make private sales after their token is already publicly traded. Doing so creates more special treatment for VCs, unnecessary discounted sales, future overhangs from lockups, and added secrecy.  Alternatively, since crypto projects and market makers already have direct access to exchanges, they should simply leak tokens out slowly to the market, fully transparently, and allow market participants to find the clearing price. 3. Part of the reason governance often doesn’t work, specifically from DAOs, is because herding cats is difficult. Many token holders don’t participate in voting simply because they aren’t paying attention and miss the voting days.  Governance should have a defined cadence – something like “Any proposals need to be submitted before the second Tuesday of every month, and voting on any outstanding proposals will always occur once per month on the 23rd”. If tokenholders know when voting will occur, it will lead to a more engaged community and a higher threshold for creating proposals that move to a vote. Imagine if the presidential election happened randomly and continuously throughout the year instead of on a set day every year – would that improve voter turnout? 4. ETH has been categorized in a variety of ways, from “ultrasound money” for its supply burn mechanism to the “internet bond” for its non-inflationary staking yield to a “Supercomputer”. With the expansion of L2s and restaking, narratives like “settlement layer asset” or a more esoteric “universal objective work token” have also come to light. But ultimately, we don’t think these characterizations can holistically capture ETH’s dynamism on their own. In fact, we believe the increasing complexity around ETH’s use cases has made it difficult to define singular metrics of value capture. Instead, the confluence of these narratives may even appear negative as they can detract from each other – distracting market players from the token’s positive drivers. These terms do not resonate with investors.  At all. It is confusing at best, and inaccurate at worst.  The analogy that makes the most sense is that Ethereum (and all smart contract protocols) are App Stores. Like any app store, upon launch, it is a blank canvas with some speculative value based on what could one day be built inside, but the true value comes over time as new apps are built and launched. Your phone has banking apps, games, maps, and much more.  Similarly, Ethereum has banking apps (DeFi), gaming apps (Axie, Illuvium, etc), NFTs, maps (DePin) and much more.  As these apps get used and interact with each other, ETH is your “Apple Pay”, and the transactions that occur drive transaction revenue back to the app store (Ethereum).  Any investor would happily invest directly into the Apple app store if it were a separate, publicly traded entity.  Investors understand how Apple generates revenue from the listing and usage of apps.  The same is true for Ethereum.  And if Ethereum is Apple IOS, then Solana is Android.  5. Bitcoin is not an asset class. It is an asset.  In fact, the entire crypto universe may not be an asset class.  Right now, it may feel that way, given there is a segregated investor base, but in reality, ALL other asset classes can be represented in tokenized form.  When that happens, crypto will no longer feel like a separate asset class, but rather, tokens will be viewed as a wrapper that can house any and all assets inside. The ETF is a good analogy.  ETFs are not an asset class.  ETFs are a wrapper with which any asset class can be represented inside. Commodity ETFs, currency ETFs, Bond ETFs, real estate ETFs.  Tokens are no different.  We have currency tokens (Bitcoin, stablecoins), we have fixed income tokens (RWAs, yield tokens, etc), we have commodity tokens (Smart contract protocols), we have real estate ETFs (RWAs), and there are many equity-like tokens (applications where all revenue and profits accrue directly to tokenholders). 6. While we’re at it, [Bitcoin is not digital gold either](https://x.com/hhorsley/status/1786250824743797149?t=e_HO6YZP2lhbFDHG5e0fKQ).   ***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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