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Digital assets are forming a new asset class and established financial services providers are positioning themselves in the growing sector. In the United States, leading investment banks such as JPMorgan, Goldman Sachs, Fidelity Investments and Wells Fargo are participating. Meanwhile, BlackRock, the world’s largest asset manager, is positioning itself in the area. The financial institution, with $10 trillion in assets under management, has been seeing increased demand for cryptocurrencies for some time and is now enabling institutional customers to access digital assets through a partnership with cryptocurrency exchange Coinbase.
Through a partnership with Coinbase, the world’s largest asset manager BlackRock gives its clients access to cryptocurrencies.
Since November of last year, the cryptocurrency market has been in a pronounced correction phase. Over time, many new applications have emerged on smart contract-enabled blockchains, with the DeFi and NFT sectors experiencing the most growth. The latter is currently the area that attracts the majority of new crypto users.
Non-fungible tokens (NFTs) continue to prove themselves as drivers for wide adoption of cryptocurrencies and blockchains like Ethereum.
Efforts around digital central bank currencies (CBDCs) are accelerating internationally. China is at the forefront with the digital yuan, the partial launch of which has already taken place. The European Union is also taking the development of a digital euro seriously, while the U.S. is in an initial consultation phase. Meanwhile the central bank of Japan has announced that it will not be pursuing the development of a digital yen, instead focusing on other payment technologies. This decision puts the bank at odds with other major central banks around the world who are accelerating their efforts in this area.
The Bank of Japan is putting the introduction of a CBDC on the sidelines, despite the eagerness of Western countries to do so.
The spectacular collapse of crypto hedge fund Three Arrows Capital led to a domino effect in the industry. The debacle revealed inadequate risk management practices at various firms, with mainly lenders and brokers affected. Under-collateralized loans, poor asset-liability management, and discretionary trading with customer funds led to the downfall of numerous crypto firms. Credit platform Babel Finance is another example of the liquidity crisis.
Stuggling crypto lender Babel Finance has lost over $280 million of customers’ funds through its proprietary trading desk.
In addition: After three deep red months for the cryptocurrency markets, July finally brought a small recovery. This was partially bolstered by the formative narrative around Ethereum’s switch to Proof of Stake – also known as the “Merge” – as well as inflation appearing to reach a temporary peak, with some investors already speculating on a Fed policy reversal. How the US central bank wishes to proceed in the face of stagflation risks remains to be seen.
A summarizing monthly review of what’s happening in the crypto markets in cooperation with the Swiss specialist 21Shares AG.
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