  What you need to know today in crypto and beyond April 29, 2021 Sponsored By:  If you were forwarded this newsletter and would like to receive it, sign up here.
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Today's must-reads Top Shelf  BAFIN BARKS: Binance's tokenized stock offerings might violate securities law, according to Germany's financial watchdog, BaFin. The crypto exchange launched a new service that tracks the value of popular equities including TSLA and COIN – though it may now lead to a multimillion-dollar fine. CAPITAL HOSES: Paxos, a sort of bridge between legacy and crypto finance, is now a "crypto unicorn" valued at $2.4 billion after a $300 million Series D. Another blockchain back end, Alchemy, aka "AWS for Blockchains," raised $80 million. Finally, Polygon, red-hot Ethereum scaling solution, has launched a $100 million fund to popularize DeFi. A FROTHY MARKET: U.S. Federal Reserve Chairman Jerome Powell thinks capital markets, as typified by the dogecoin craze, are a "bit frothy." He also said the central bank's easy-money policy may have had something to do with that froth. Powell restated that the U.S. is entirely uninterested in running a "digital currency" race against China, which is testing a "digital yuan" now.
– Daniel Kuhn
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Read more about CoinDesk Indexes, the industry standard in crypto benchmarks. Putting the news in perspective The Takeaway  Bring on the BTC ETFs Financial Times writer Pan Kwan Yuk makes the case that markets are too immature for a bitcoin exchange-traded fund (ETF). There have been dozens of proposals put forward, beginning with the Winklevoss twin's failed bid eight years ago, which have all been summarily rejected. Typically the U.S. Securities and Exchange Commission cites limited trading activity and the potential risk of market manipulation as reason for shooting down these proposals. BItcoin ETFs stand as the "Holy Grail" for the crypto industry because it provides a "low-cost way for investors to access bitcoins without the hassle of dealing with digital wallets and custodians," Kwan Yuk notes. Without writing off the possibility entirely – the industry is " too big to ignore" – Yuk suggests the SEC take its time in determining now is the right time to introduce these financial products to U.S. investors.
She says, inexplicably, that bitcoin's liquidity problem stems from its design. There will only ever be 21 million BTC – meaning in a supply crunch, "investors could find themselves locked into the shares."
Real liquidity concerns exist in bitcoin markets. It's an asset that most frequently trades behind the walls of centralized exchanges. Each exchange is essentially its own market, and those markets can have liquidity issues depending on the time of day or number of active traders.
But taken as a whole, bitcoin is remarkably liquid. Tesla CEO Elon Musk recently tweeted his auto manufacturer sold 10% of its BTC stash to "prove" it was a liquidity alternative to cash (perhaps to convince skeptical board members.) Meanwhile, as The Block's Frank Chaparro noted, bitcoin's spot activity (just on a dozen or so trusted exchanges) is well over $1 trillion this month alone.
When looking at the type of institutions looking to put forward a BTC ETF, like Fidelity and VanEck, it's unlikely they would choose custodians with limited access to the market. Things can happen. The March 2020 "Black Thursday" event saw massive liquidations across the board, made worse from a supply crunch in particular assets. But that wasn't unique to crypto alone.
Finally, look just to our northern neighbor Canada, whose three bitcoin ETFs immediately became among the most active financial products on the Toronto stock exchange. They had no issue hoovering up BTC either.
It's hard to call any market immature that is now worth more than $2 trillion.
– Daniel Kuhn
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Thursday, April 29, 2021
Crypto Unicorns
