Welcoming H2 2024: June’s Web3 Developments
As June comes to an end and we enter the second half of the year, the Six Capital team extends their appreciation to all investors who have contributed to Core Fund. While the price action in June has been bearish, with many projects experiencing significant corrections, we don’t want to take away from all the developments that have happened in the first half of the year. With Bitcoin breaking all-time highs, regulatory developments and institutional adoption surging, the Six Capital team looks forward to continuing to build on this success in the second half of the year.
Strong Progress Despite Cool Down
There is no way around it, Web3 markets have not performed well in June. Bitcoin has experienced 6.96% drop in the flagship digital asset’s value. Other Web3 assets also saw a bearish June with many projects seeing double-digit corrections. That being said, price decreases and corrections are only healthy for the market, allowing opportunity for sustainable growth. As the market pulls back, opportunities are presented to rebalance portfolios,reduce risk exposure and optimize asset allocation. Price action isn’t everything, and the sector continues to build on the positive momentum established in the first half of 2024 with many significant developments.
Join us in this month’s newsletter as we take a closer look at major developments and key events in June.
Mt. Gox to Distribute Bitcoin and Bitcoin Cash
As the markets see a healthy correction, positive developments continue to show long-term progress. Mt. Gox, once the largest Bitcoin exchange, collapsed in 2014 after losing 850,000 BTC in a massive security breach. In late June, the Mt.Gox bankruptcy trustee announced that reimbursements would begin at the start of July. Approximately $9 billion worth of Bitcoin (BTC) and $50.8 million in Bitcoin Cash (BCH) will be distributed to Mt. Gox creditors. This development follows a wait of ten years and three months, and is a major step forward in resolving one of the most notorious failures in cryptocurrency history. The proactive push for repayments shows the industry’s commitment to rectifying past mistakes and paves the way for how other Web3 projects can handle similar challenges in the future.
SEC Drops Investigation into Ethereum
In late June, the SEC halted its investigation into whether Ether is a security due to challenges in proving its case. While this is a win for the sector, the move highlights the need for clearer regulations in the industry. Later at the end of June the SEC sued Consensys, claiming MetaMask’s features violated securities laws, and targeted Lido and Rocket Pool over unregistered securities. Instead of pursuing legal action against projects, efforts should focus on developing regulatory frameworks. With regulations like Europe’s MiCA setting the stage for pro-growth policies, there is growing pressure on other jurisdictions like the American SEC to establish similar clarity.
JPMorgan highlights that U.S. regulations are focusing on ensuring a cautious approach to the sector. While regulations often take time to come into practice, established frameworks are needed for mass adoption. With initiatives like the Clarity for Payments Stablecoins Act and the FIT21 (Financial Innovation and Technology for the 21st Century Act), regulatory bodies are recognizing the adoption of Web3 projects and establishing frameworks to provide clearer guidelines.
Adding to this development, Bloomberg predicts that spot Ether ETFs could begin trading in the U.S. as early as July 12th. It is noted that the SEC’s comments on the ETF applications were minimal and suggest a high likelihood of approval soon. The SEC Chair, Gary Gensler, provided a broader timeframe stating that trading could start by the end of September. That being said, the exact timing depends on how quickly issuers can address the SEC’s feedback.
European Central Bank Cuts Interest Rates
In another standout development, the European Central Bank (ECB) has cut its key interest rates by 0.25%, marking the first reduction since 2019.The interest rate cut can be beneficial for the Web3 sector, by creating a more favorable macroeconomic environment. This move aims to ease monetary policy after a period of aggressive rate hikes. What does this mean for Web3? Lower interest rates enhance consumer spending and business investment which increases liquidity, driving more capital into the investment markets. The rate cut is generally bullish for markets, signaling confidence in their growth potential. Eyes are now on the FED to see if a similar monetary easing will follow, which could further push capital into the markets.
MicroStrategy’s Continued Bitcoin Investment and Institutional Trends
Despite a market cool down, institutions are taking advantage of the pullback and continue to invest in the Web3 sector. MicroStrategy, the largest corporate Bitcoin holder, has acquired an additional 11,931 Bitcoins, bringing its total holdings to 226,331 BTC. This purchase, funded by an $800 million convertible note offering, showcases MicroStrategy’s commitment to Bitcoin as a reserve asset and confidence in the digital asset. Since 2020, the company has really been at the forefront of corporate adoption of Bitcoin. Other institutions also continue to invest into the sector. Of particular note is publicly listed Semler Scientific, which recently added Bitcoin to its treasury. This trend shows the growing institutional confidence in web3 as long-term investments.
Conclusion
In conclusion, June’s market cooldown was marked by downward pressure on Bitcoin and altcoins and reflects a healthy correction that enables sustainable growth. This period has been central for the Web3 industry, with regulatory progress and institutional investments continuing. Notable developments include the start of Mt. Gox repayments SEC dropping its investigation into Ethereum and the ECB’s interest rate cuts. Despite the slowdown in price action, these factors demonstrate the industry’s ongoing growth, continue to instill investor confidence.
The Six Capital team has leveraged these developments to adjust their investment portfolios according to the market sentiment. The opportunity is now to capitalize on these developments while the market is still evolving. We are looking forward to the launch of the Ethereum ETFs as the amount of inflows is going to be an important measure for the market sentiment.
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