“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.”
“I just wrapped up an incredibly successful week in Singapore, where I met with several allocators, founders, custodians, exchanges, and sovereigns in the digital assets and blockchain spaces. I learned a great deal about how Singapore views the crypto world, and what projects various institutions are engaged with. Settlement is top of mind and coalition building is how you achieve the desired results.One thing that surprised me was how the mindset of Singaporean regulators has shifted since 2019/2020 regarding the establishment of Family offices in Singapore. Back then, families from China and India could easily set up a family office, in many instances, in just a matter of weeks or a month.There was a major trend of such vehicles being set up, particularly as investors and family office wealth managers preferred leaving Hong Kong as their primary residence and jurisdiction for various reasons.As of April 2024, the application process to establish a family office in Singapore can now take up to 18 months, and opening a private bank account can take 3–6 months. While some will tell you that this is due to a backlog of applications, the reality is that the regulator has imposed stricter regulations due to concerns about money laundering and a lack of oversight that can often lead to financial turmoil. Whereas the minimum AUM was previously $500,000 or so, I am told that The Monetary Authority of Singapore (MAS) has now imposed a minimum limit of $20 million in AUM. Further, there is a greater due diligence effort as to whom is managing a family office, their backgrounds and whether or not they are qualified to be in such a position.This has led to fewer attempts by wealthy families, particularly from China and India, to set up bases in Singapore.In nearby Hong Kong, family offices are still concerned about being under the oversight and grip of China to a certain extent. And, while some Chinese officials were reportedly approving Hong Kong’s pro-crypto efforts in early 2023, perhaps using it as a test bed or launching pad for crypto so long as it did not threaten the country’s financial stability, folks in Singapore consistently encouraged me to look deeper as I assessed which jurisdiction would ultimately win the battle for family offices and capital inflows - and, ultimately, the crypto race. Namely, they said, the Hong Kong Securities & Futures Commission has compulsory insurance/comp arrangement requirements to help protect clients and a 98% cold storage wallet requirement that licensed corporations must comply with. That naturally impedes upon a family office’s ability to trade in and out of positions in the space at a lightning pace.Where will the money go?”
And That’s Our Two Satoshis!
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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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