WEEKLY - What institutions building crypto services want
plus, SOL futures, assorted links, and more!
Hello everyone, I hope you’re all doing well! Apologies for the late send today!
You’re reading the free weekly Crypto is Macro Now, where I reshare/update a couple of posts from the week, offer some interesting links I came across in my weekly reading, and include something from outside the crypto/macro sphere that is currently inspiring me (it’s a fascinating world out there).
I’m introducing a new section! Assorted links, which shares – you guessed it – a list of articles you might find interesting. They’re not specifically macro or crypto-focused, rather they help paint the bigger picture unfolding before us, and highlight just how beautifully weird the world is.
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Earlier this week, I stepped in as a substitute host on Scott Melker’s Macro Monday show – a spirited debate as always, you can see that here.
In the latest episode of Bits & Bips , James Seyffart, Joe McCann, Ram Ahluwalia and myself debate markets, Trump’s strategy, SOL futures and more… You can watch it here, or listen here (Spotify link).
In this newsletter:
Institutions and crypto: Gaps rather than barriers
SOL futures: What next?
Some of the topics discussed in this week’s premium dailies:
Coming up: what to keep an eye on this week
FOMC: Bracing, but for what?
The Fed offset
SOL futures
Podcast notes: The Bessent interview
Institutions and crypto: Gaps rather than barriers
Podcast notes: Jim Bianco on Monetary Matters
NEW FEATURE: Macro-Crypto Bits
Institutions and crypto: Gaps rather than barriers
The word “mainstream” has been doing some heavy lifting recently. I’ve lost count of the number of articles I’ve seen with catchy headlines along the lines of “crypto is going/has gone mainstream”, and as a click-grabber, it does check some boxes: for supporters, it’s the serotonin rush of achieving what we’ve been working towards; for critics, it’s the adrenaline of seeing your fears materialize, or the frustration over confirmation that the majority can be so foolish.
But what does “mainstream” mean in this context? Google’s definition reads: “the ideas, attitudes, or activities that are shared by most people and regarded as normal or conventional.” That’s obviously not what we’re talking about here. I hardly ever go to parties these days (don’t enjoy them), but I know that among friends from my youth, no-one cares about crypto. Were I to canvas my fellow shoppers in the supermarket on any given day, I’m pretty sure us crypto holders would be a lean minority. Even many of those I’ve worked with in the crypto industry over the years don’t own digital assets.
So, what do journalists mean when they say crypto is going mainstream?
I’m going to venture a guess: they’re talking about the institutional embrace. Big household names dedicating teams to the development of crypto-related services; politicians touting crypto support; legislators pushing through validating frameworks… that feels mainstream enough. Maybe my fellow shoppers don’t care enough to find out more, or perhaps they recoil from the idea because of the scams and fraud they’ve heard about – but crypto can no longer be considered “underground” or “alternative”. Even for a pedant like me, it seems like mainstream, in the safe-to-introduce-to-your-parents sense of the word, is within reach.
There’s still a lot of work to do, though. Institutional involvement is still spotty, legal frameworks are uneven, and general understanding is thin.
In a report published this week, Bloomberg canvased representatives from leading financial institutions building crypto services on what they feel is most needed to push the industry along. I like the approach: rather than usual “what are the main barriers” question, the executives were asked what is missing, which feels more constructive.
Here’s a rough summary, in descending order of the number of times mentioned:
Greater regulatory clarity
Explicit regulatory clearance to use public blockchains
Industry-wide collaboration
Industry-wide expertise
Education
Digital currencies having legal tender
Tokenized deposits
“The integration of an interoperable, institutional-grade infrastructure that connects blockchain ecosystems with traditional finance systems”
Global governance
Standardization
Mine, if I had to choose only one? The question itself is impossible to answer as there are still SO many missing steps and pieces and they all build on each other – to the above list I’d add “explicit clearance to use decentralized applications” – but if I had to choose one intangible concept to solve first, it would be education. This would remove barriers to pretty much everything else, and should go some way towards undoing the damage inflicted by those who to this day insist crypto is only for criminals.
Of course, people have to want to learn more, which is why articles about how crypto is going “mainstream” do help. Most of us don’t like feeling left out, and even just scratching the surface of blockchain’s decentralization and flexibility opens up a colourful landscape of new questions. I’m too much of a stickler for detail to use the word in a headline myself, but I appreciate the work it is doing here. For me, crypto isn’t mainstream yet, far from it – but it’s getting there.
SOL futures: What next?
On Monday, SOL futures started trading on the CME, marking the first time the regulated institutional derivatives venue has ventured into crypto beyond BTC and ETH products.
But the launch felt anti-climactic. Volumes and open interest were relatively low, as the below chart by K33’s Vetle Lunde shows:
(chart via @VetleLunde)
And the SOL price barely reacted, moving more or less flat on Monday, and down on Tuesday.
(SOL/USD chart via TradingView)
This is a very different reaction to the launch of BTC futures on the CME back in December 2017. It turns out that day marked the cycle top, with BTC falling a whopping 84% over the following 12 months.
(BTC/USD chart via TradingView)
Then again, BTC had enjoyed a spectacular run in the months leading up to the CME futures launch, on expectations of a boost in institutional demand. The market mood is nowhere near as frothy today.
And, first day volumes and open interest are actually not bad at all when normalized for market cap. In other words, relative to asset size, the SOL futures launch did better than that for ETH.
(chart via @VetleLunde)
There are two takeaways here:
1) SOL is now definitively an institutional crypto asset. Monday was not the first time the token’s futures became available on a regulated platform in the US – they also trade on Coinbase’s derivatives exchange. But the CME is the venue large institutions use for their trading and hedging, and the futures volume shows there is interest.
2) We are still early in the cycle. The CME listing is a big deal, and yet there was little froth in the run-up to the listing. It felt like just another milestone among many, with mild market impact given the lack of hype and given everything else going on in the market.
On Thursday, two ETFs tracking SOL futures start trading. Issued by Volatility Shares LLC, one will follow the underlying futures price while the other offers 2:1 leveraged exposure.
When can we expect SOL spot ETFs? There are several proposals already filed, but it’s likely the SEC will push any decision on those until some time after Paul Atkins takes over as Chair – his Senate Banking Committee confirmation hearing is next week, so that could be as soon as early April. Even when he’s in his seat, he’ll have a backlog of things to dive into – but the launch of CME derivatives makes it even more likely we’ll see SOL spot ETF trading on major US exchanges sometime this year.
ASSORTED LINKS
Introducing a new section* exclusively for the free weekly where I share, you guessed it, assorted links that I found interesting over the past few days. There’s a high risk this ends up getting too long as I read a lot* and most of it is jaw-dropping, brow-furrowing, view-changing or just plain inspiring, but I’ll do my best to keep this list varied and relatively concise.
*Many new sections this week! Maybe it’s because Spring is around the corner and change is in the air… In the Premium Daily, I introduced Podcast Notes, where I bullet-point interviews I found particularly informative, and Macro-Crypto Bits, with short summaries of news items relevant to topics I write about: geopolitics, macro trends, crypto moves and regulation.
Janan Ganesh points out that Europe’s lack of a fiscally sensible plan to pay for increased defence spending is the least of its problems – it also doesn’t have the popular support needed to implement the result. (Europe is only half-awake from its long sleep – Financial Times, paywall)
“We don’t know what European citizens are willing to give up for rearmament. We know even less which ones will bear those arms, where. Until that changes, the metaphor of a giant stirring after all too long a sleep is imperfect. The continent is half-awake, with rheum in its eyes, perhaps still hoping to ignore the alarm.”
On the sustainability of environmental activism and investing in cheap transition assets. (The shocking truth about actions – Irina Slav on energy, paywall)
“Confirmation bias can be a female dog — and an unfriendly one.”
Hamster wheel or downward spiral? Oliver Bateman looks at the roots of digital addiction, why it has spread so fast, the societal cost, and how likely it is we will be able to wean ourselves off it. (The Work of Dystopia – Oliver Bateman does the work)
Barry Eichengreen with a history of dollar dominance and why that is now at risk. (Can the dollar remain king of currencies? – Financial Times, paywall)
John Burn-Murdoch on the role fragmented media plays in political polarization. (The misinformation discourse is a distraction – Financial Times, paywall)
JP Koning on the risks of depending on US payment platforms such as Mastercard and Visa, and why there are so few alternatives. I’ve been writing about this in relation to the ECB’s justification for the digital euro. (Trump-proofing Canada means ditching MasterCard and Visa – Moneyness)
Yascha Mounk on how the World Happiness Report (published here) is at best a sham and at worst a sinister misrepresentation – the questions asked in the survey aren’t about happiness at all, which suggests a deeper problem with our understanding of the word. (The World Happiness Report Is a Sham – The Free Press)
An eye-opening (ear-opening?) look at why different languages write animal sounds differently, how in some cases they don’t, and what this means for language in general. Very cool graphics and sound effects. (Onomatopoeia – Pudding)
HAVE A GREAT WEEKEND!
(in this section, I share stuff that has NOTHING to do with macro or crypto, ‘cos it’s the weekend and life is interesting)
The gallery of finalists of the Sony World Photography Open Competition for 2024 is in! Too many amazing images to select a list of favourites, but here are just a few of the ones I loved:
Arun Saha
Ilena Fasci
Radek Pohnan
Kathryn Mussallem
DISCLAIMER: I never give trading ideas, and NOTHING I say is investment advice! I hold some BTC, ETH and a tiny amount of some smaller tokens, but they’re all long-term holdings – I don’t trade.