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

What 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?

cyrptocurrency use among adults- graph

Source: Economic Well-Being of U.S. Households in 2021

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.

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

Central Bank in India to Take Phased Approach to Introduction of Digital Currency

Former OpenSea Employee Charged in First-Ever NFT Insider Trading Case

Coinbase to Rescind Employment Offers, Extend Hiring Freeze

Winklevoss Twins’ Gemini Gets Sued For Allegedly Lying to Federal Regulators

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

To learn more or talk to us about investing in digital assets and cryptocurrency

call us now at (424) 289-8068.

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.