“That’s Our 2 Satoshis” — Two Hands Tied Behind Our Back

Jeff Dorman, CFA
Jun 6, 2022

Thats Our 2 Satoshis LogoWhat Happened This Week in the Digital Assets Markets?
Week-over-Week Price Changes (as of Sunday, 6/05/22)

crypto prices week over week june 6, 2022
Source: TradingView, CNBC, Bloomberg, Messari
The Deck is Stacked Against Digital Assets, Yet They Continue to Persevere 
The digital assets market has been through a lot in the past few months. Perhaps it is no different than what the industry went through in 2014, 2018, or 2020 in terms of price action, but it is very different now in terms of the number of eyeballs glued to this industry and the number of people who are both positively and negatively impacted by the price action and regulatory actions. This is why the biggest story this past week may have been that there was no story at all; prices were relatively unchanged, news flow was minor, and volumes were low. So while many market participants and media outlets continue to force a narrative about the “next shoe to drop” (e.g. stablecoin depegs, lender implosions, fund wind downs, etc.), it’s possible the worst is actually over. But of course, it’s also possible that another shoe will drop. As always, in a loosely regulated and highly fragmented market, there’s always something that seems to come out of left field.
An unexpected event coming out of left field seems entirely more palatable than when the umpire calls time out, makes a spectacle on the pitcher’s mound, spits on the players, and draws attention to themself instead of allowing the game to carry on. But unfortunately, that’s what is happening right now in digital assets. 
For context, I constantly take notes on market events, often randomly, and then review them periodically to try to identify pieces of information that are somehow related. This helps me determine what is relevant to price action in a given week, month, or year. In the last six days, these are the only notes I took, which are all related and indicate a sad state of affairs:
  • According to a report commissioned by the Federal Reserve, 12% of U.S. adults have held or utilized digital assets in 2021. That seems like the kind of technology adoption that both the private and public sectors would happily get behind and foster further growth, right? 
  • Instead, the NY Attorney General decided to issue an investor alert to her constituents warning about the “dangers” of digital assets while using misleading characterizations and inaccurate information (no, the market is not at record lows). The NY AG seems to be jockeying for a seat at the crypto regulatory table and is doing so by issuing a factually incorrect PSA. The NY AG also appears to be fighting for regulatory relevance in a time when the federal financial regulators are each making their plays for dominance—DOJ/US Attorney, CFTC, SEC, OCC, Fed. Meanwhile, the bond and equity markets have collectively lost investors tens of trillions of dollars this year, but of course, digital assets are the focus for political gain. 
cyrpto tweet-
  • Meanwhile, the SEC has chosen a different tactic: flat out mocking investors who don’t invest the way they think investors should. On the official SEC YouTube channel, the SEC trivializes the decisions millions of retail investors have consciously made over the past two years (investing in meme stocks), which had become one of the prominent investing themes of 2021. Naturally, the SEC is getting severe pushback for these videos, but it still raises questions about the very foundation of investor protection. Instead of focusing on rules and regulations that encourage best practices, the SEC is playing the role of an older brother mocking the decision of a little sibling without the guidance necessary to educate and protect.
  • Despite this, a small cohort of digital asset companies still want to play by the rules and do what’s best. Unfortunately, that’s damn near impossible. From SEC registration to FASB accounting rules, no one knows what to do right now, but everyone fears repercussions for doing it wrong. 

jeremy hogan crypto tweet

At this point, it's a good time to remind everyone that the lead-in to this section was that 12% of U.S. adults had utilized digital assets. Twelve percent! That’s a great achievement, but one must wonder how much further this industry would be if it didn’t have both hands tied behind its back. 
What We’re Reading This Week

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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
Hassan Bassiri, CFA - Portfolio Manager 
Sasha Fleyshman - Portfolio Manager
Alex Woodard - Research Analyst
Nick Hotz, CFA - Research Analyst
Bodhi Pinker- Research Analyst 
Wes Hansen - Director of Trading & Operations
Mike Geraci - Trader
Kyle Doane - Trader
David Nage - Principal, Venture Investing
Michael Dershewitz - Principal, Venture Investing
Michal Benedykcinski - Research Analyst
Andrew Masotti - Trading Operations
Topher Macpherson - Trading Operations


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