Q9 Weekly: X-Rated Content

6 min readSep 7, 2023

7 September 2023

· SEC delays spot Bitcoin ETF decision

· Real-World Assets cross $3bn on-chain for first time

· Musk’s X receives crypto payment license, creating “everything app”

It’s a long road to a Bitcoin ETF… and this week the regulator has announced delays for all six of the new applications until October.

As a result, Bitcoin fell 5.7% to dip below $26k, with the rest of the market following down. Blaming insufficient time to evaluate, the SEC has stayed applications from Blackrock, WisdomTree, Fidelity, Bitwise, VanEck, Valkyrie and Invesco. The regulator said in filings that it would delay its ruling on the proposals by at least another 45-days.

The SEC has a total of 240-days from when it first begins its review of an applications to make a final decision to approve or deny. SEC staff have traditionally used every possible opportunity to delay making final decisions until those 240-days have elapsed, making Thursday’s agency filings expected.

The news comes a week after Grayscale won a landmark ruling against the regulator for denying its conversion into at ETF, with the court finding that the SEC acted “capriciously” and “arbitrarily”.

This toing ad froing will continue for some time.

Bitcoin and Ethereum Track Downwards (%, 1 Month)

Source: TradingView

Up in the Ether

ETH has a decent chance to outperform BTC in September and October. There is a high probability that the US’s first futures based Ethereum ETF will be approved in mid-October, providing needed momentum to the #2 digital asset.

Unusually, Ethereum’s volatility has recently fallen below Bitcoin’s. The chart below shows the ratio between 30-day realized volatility for ETH and BTC and the 20-day moving average of the ratio. The ratio has dropped below 1, meaning ETH has recently seen less volatility than BTC, a rare occurrence.

This trend should be reversed if an Ethereum ETF approval provides a boost of impetus.

Source: Matrixport

Liquid Courage

One particular corner of crypto has shaken off a prolonged digital-asset slump to come within touching distance of an all-time high — Liquid Staking.

DefiLlama data shows that the value of assets locked in liquid staking services has jumped 292% to $20bn from a June 2022 low, when crypto was reeling from a crisis.

This has made liquid staking the biggest segment of DeFi. Previously, that mantle belonged to DeFi lending which has taken a hit as investors fret about credit risks.

Source: Bloomberg

Staking has grown in popularity after being embraced by Ethereum as part of upgrades to the network over the past year. Investors who lock their ETH tokens to help operate Ethereum currently earn the equivalent of about 4% annually. Rival blockchains such as Solana and Cardano also offer staking rewards.

Staking has been described as the on-chain equivalent of government bonds. While they aren’t entirely risk-free, they represent lower risk and haven’t yet suffered any hacks or exploits.

Welcome to the Real World

The value of real-world assets (RWAs) on-chain crossed the $3bn mark on August 14 (now at $3.1 billion). This exceeds the value of their previous all-time high of $2.75bn (set in April 2022) by 13%.

Source: Galaxy Research

The value is comprised of 37.3% gold and precious metals; 1.63% equities; 0.41% carbon offsets; 22.98% money markets; 20.04% treasuries; 4.38% real estate; and 13.27% private credit.

As it currently stands, yield-bearing RWAs capture 61% of the cumulative RWA market cap, with the recent expansion fueled by demand for sources of income.

Source: Galaxy Research

In the wake of aggressive rate hikes, yield-bearing RWAs (i.e. treasuries, money markets, real estate, and private credit) have grown by $1.44 billion; accounting for 87% of the $1.66 billion in value added to RWAs this year.

X-Rated Content

Elon Musk’s X (formerly Twitter) has moved a step closer to becoming an “everything app” as it acquires a payments license for crypto.

Rhode Island has officially approved a license requested by Twitter Payments LLC, X’s payment branch, to be able to store, transfer, and exchange Bitcoin and other digital assets on behalf of its users. This license also includes related service providers, such as wallets, payment processors, and exchanges.

Elon Musk has previously stated that he wants to turn X into the “everything app,” sharing that the platform “will add comprehensive communications and the ability to conduct your entire financial world.”

In Silicon Valley, the pursuit of an everything app has come up time and again as tech leaders have strained to expand their digital empires. Mr. Zuckerberg tried it. So did Dara Khosrowshahi, the chief executive of Uber. Evan Spiegel, the head of Snap, said he wanted to go for it, too.

Yet those efforts fell short, with the tech executives unable to replicate the magic that has abounded in Asia with “super apps” like China’s WeChat, Japan’s Line and South Korea’s KakaoTalk.

Many consider WeChat the gold standard for mobile apps — a messaging, social media and payments app used by more than one billion people, mostly in China. WeChat dominates the mobile internet and is a one-stop shop to read news, talk with friends, order pizza or pay the landlord.

US tech giants have instead run into cultural differences, regulatory scrutiny and a splintered financial system that has made the quest to build such apps more difficult.

So far Musk has taken a wrecking ball to Twitter. Aiming to be the future state of unlimited interactivity — cantered in audio, video, messaging, payments, banking — creating a global marketplace for ideas, goods, services, and opportunities. Powered by AI, X could connect us all in ways we’re just beginning to imagine.

“If done right,” Musk said in a podcast interview, X could become “half of the global financial system”.