The Crypto Stories You Need to Know This Week (#167 - 18 February 2023) - Bitcoin Spot ETFs Breaking Records, Crypto Money Laundering Plummets

1. Bitcoin Spot ETFs Continue Surge

Bitcoin Spot ETFs continue to break records.

4 Bitcoin ETFs now have at least $1 billion in assets. 

The list includes:

• BlackRock’s iShares ETF (IBIT) - $6 billion

• Fidelity Investments’ Wise Origin Bitcoin Fund (FBTC) - $4.3 billion

• Ark 21Shares Bitcoin ETF (ARKB) -$1.4 billion

• Bitwise Bitcoin ETF (BITB) - $1.1 billion

These ETFs now rank amongst the most successful ETF launches in history (vs >5,000 other ETF launches over 30 years). 

This demonstrates how much interest there is in such products. This data is also important as there will be 2-3 winners of this Bitcoin spot ETF game, so there is a race to gather as much AuM as possible, especially as the fees are relatively very low.

This is worth reflecting on and there are a couple of things to watch now. 

First, this momentum will likely continue, especially as advisers across the U.S. just get started recommending to clients to gain some Bitcoin exposure. 

Second, this may lead to price action on Bitcoin, which not surprisingly crossed the $50k mark this week. 

Third, it will be fascinating to watch how these ETF providers decide to compete. Fees on these products are low, so they will need to resort to either more imaginative or costly ways to encourage clients to buy their Bitcoin ETF vs others. 

Finally, it will also be interesting to watch the impact on crypto exchanges in the U.S. as the typical newcomer to crypto who will get its Bitcoin exposure via an ETF would have previously gone to a U.S. crypto exchange to open an account. 

Definitively a development to follow. 

2. Crypto Money Laundering Plummets 

Chainalysis’ upcoming Crypto Crime Report shows that crypto money laundering dropped ~30% in 2023.

A couple of things to note. 

First, US$22 billion is very small when it comes to global money laundering. For example, the UN estimates that between 2-5% of global GDP is laundered each year, basically $800 billion - $2 trillion via the traditional channels, so this crypto amount is a drop in the bucket despite what many may think. 

Second, part of this drop is due to the lower market volumes of the bear market. However, the drop in crypto money laundering is more significant than in crypto transaction volumes of ~15%.

As I have often said, today's traceability tools are so advanced and crypto exchange compliance teams so sophisticated that crypto laundering is only an option for large, sophisticated groups, like North Korea’s Lazarus Group. 

Third, sophisticated criminals are increasingly using mixers and cross-chain bridges. Whilst this is not surprising, the crypto-to-fiat leg of the money laundering cycle remains very concentrated, with five off-ramps receiving around 70% of the volume.

The report does not mention who those five off-ramp services are, but we should assume that law enforcement is all over it. 

I am a big fan of these Chainalysis reports (for full disclosure - a previous sponsor of my educational content), and they are worth a read for anyone interested in crypto compliance. 

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My Latest Podcast Episode Is Out!

My podcast episode with VALR's CEO and co-founder, Farzam Ehsani, is now out!

Whilst much of crypto media focuses on the US and Europe, I believe Africa is a great case study for digital assets.

VALR is based in Africa, making Farzam the perfect guest to discuss what's happening on the continent.

In a wide-ranging interview, I ask:

• Why are stablecoins so popular?

• Why are local trading pairs essential?

• What's happening in Africa's crypto scene?

• Does the crypto industry have a trust crisis?

• Has hyperinflation boosted demand for crypto?

• What are the primary use cases for crypto in Africa?

• Which African countries have the highest demand?

Farzam has deep knowledge of this vibrant market, stretching from Ethiopia to Eritrea, Zimbabwe to Zambia.

And as VALR prepares to mark its sixth anniversary, the entrepreneur shares the fascinating lessons he's learned while building an exchange used by retail and institutional customers in Africa and beyond.

Catch the full episode on your preferred platform:

Spotify: https://spoti.fi/47ZCF8F

Apple: https://apple.co/3PM4eKh

Google: https://bit.ly/3Ruwkfh

YouTube: https://bit.ly/3GuZiW7

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See you all next week!! 

Henri Arslanian

*Please note that this newsletter reflects Henri’s personal views and not those of any organisation he is involved with. This newsletter is for educational purposes only, and none of its content should be construed as investment or financial advice of any kind. 

Who is Henri?

Henri Arslanian is the co-founder and managing partner of Nine Blocks Capital Management, an institutional-grade hedge fund focused exclusively on digital assets, with a market-neutral crypto fund focused on generating alpha from inefficiencies in crypto markets using relative value, arbitrage, and quantitative strategies. 

Henri was previously a partner and global crypto leader at PwC. In that role, he advised many of the world’s leading crypto exchanges, investors, financial institutions, and tech firms on their crypto initiatives and numerous governments, regulators, and central banks on crypto regulatory and policy matters.

With over 500,000 LinkedIn followers, Henri is a TEDx and global keynote speaker, a best-selling published author, and is regularly featured in global media, including Bloomberg, CNBC, CNN, BBC, The Wall Street Journal, The Economist, and the Financial Times. 

Henri was named by LinkedIn as one of the 2022 global Top Voices in Finance and is the host of the CryptoCapsules™ social media video series as well as The Future of Money podcast and newsletter.