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Special Report: What Does the Court’s Order Mean for XRP and the Broader Crypto Industry?

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Broader Crypto Industry One of the main stories this week was a U.S. court decision in the Ripple case involving the U.S. Securities and Exchange Commission (SEC). Notably, U.S. District Court Judge Analisa Torres issued a summary judgment opinion holding that the XRP token, by itself, was not a security under U.S. law. Ripple’s XRP token soared by over 50% this past week. Before we elaborate on what happened, why it matters, and what to expect, here is an overview of the broader market last week.

One of the main stories this week was a U.S. court decision in the Ripple case involving the U.S. Securities and Exchange Commission (SEC). Notably, U.S. District Court Judge Analisa Torres issued a summary judgment opinion holding that the XRP token, by itself, was not a security under U.S. law. Ripple’s XRP token soared by over 50% this past week. Before we elaborate on what happened, why it matters, and what to expect, here is an overview of the broader market last week.

The biggest gainers of last week were Solana (+26%), Optimism (+23%), and Aave (+8%). Given it was classified as a security in recent lawsuit filings by the SEC, Solana, among other tokens like Cardano and Polygon, enjoyed a recovery following the news. Aave’s jump in price and assets under management, as shown in Figure 1, is influenced by the launch of Aave’s GHO stablecoin on the Ethereum Mainnet.

Figure 1: Weekly Price and TVL Developments of Cryptoassets in Major Sectors

Source: 21Shares, CoinGecko, DeFi Llama. Close data as of July 17, 2023.

What Happened

• For the Ripple case, on July 13, Judge Torres issued a summary judgment order that was partly in favor of the SEC and partly in favor of Ripple. Specifically, Judge Torres distinguished between the target of an investment contract (e.g., XRP as a token) versus the sale and marketing of that asset (e.g., the investment contract around the sale or offer of XRP). The former was not held to be a security, but the latter was in certain circumstances. Judge Torres’ decision also held that there were disputes of material fact that were not appropriate to resolve on summary judgment, so there could be a trial relating to a few additional issues (including whether Ripple’s founders aided and abetted Ripple’s securities law violations).

• Key takeaways from the order:

  1. Programmatic sales (e.g., those sold on exchanges) and certain other distributions of XRP (e.g., to employees, etc.) did not constitute a securities offering.
  2. Institutional sales constituted a securities offering.
  3. The Court left open the question of whether secondary market sales of XRP constituted a securities offering, explicitly stating that that question was not before the Court.

Short-lived recovery following a prolonged decline: Over the past few months, Bitcoin has been experiencing a slow recovery after over a year of decline. On July 13, Bitcoin reached $31.45K, the highest since May 2022. Ethereum, on the other hand, surpassed the $2K, a level last seen in April following the Shanghai upgrade.

Figure 2: Bitcoin and Ethereum’s Price (3 Years)

Source: Glassnode

• How did “altcoins” react? XRP led the market-wide recovery, increasing close to 100%, generating more volume than Bitcoin and Ethereum, as shown in Figure 2. Other assets previously deemed securities, such as Solana, Cardano, and Polygon, were also positively impacted. The news of the ruling led them to soar by roughly close to 30% each over the following 48 hours, to then retrace over the weekend. Finally, XRP surpassed BNB in its ranking by market value to regain its position as the fourth largest cryptoasset, while its open interest for XRP futures soared by more than 90% following Judge Torres’ verdict.

Figure 3: Market Share of Crypto Trade Volume

Source: Kaiko

What to Expect

• Potential Relisting of XRP Across US-Based Exchanges
Given the recent court decision, we may expect a reversal on relisting the XRP token. The impact could extend along to include the suite of the other assets allegedly deemed as a security by the SEC in their legal dispute against Coinbase and Binance, such as Solana, Matic, Cardano, and a dozen others.

• Revised Valuations
The implications of this case have the potential to fundamentally reshape the strategies employed by foundations and developers when bootstrapping their services and products. In a scenario where projects choose to launch their applications without a token, they would likely opt for fundraising through traditional venture capital (VC) and angel rounds. Furthermore, bypassing the token in the initial stages of the project could trigger a significant shift in investor valuations of existing protocols, prompting a closer examination of the project’s underlying fundamentals. Key factors such as recurring revenue and user retention, measured through active and returning users, would take precedence in this revised valuation framework.

For further insights on applying valuation frameworks to digital assets, refer to our State of Crypto Issue 7.

• New Token Economics and Go-To-Market Strategies
If the ruling remains unchanged, projects will likely be encouraged to adopt community-owned governance models, driven by the need to accommodate ‘asset morphing.’ The latter is a concept argued as part of the unconcealed Hinman documents that outline how certain assets can transition from reflecting security characteristics to representing commodities as decentralization progresses.

Moreover, as the sale of XRP to institutional investors was deemed an unregistered sale of securities, projects may reconsider raising equity through primary (non-exempt) sales involving private and venture capital. Instead, they might prioritize a sustainable protocol path that generates additional revenue from the outset, with less emphasis on subsidized demand to incentivize user adoption and capital migration during the early growth stages.

Uniswap is a compelling case study where they refrained from launching a token until after an extensive two-year period dedicated to refining their platform through user iterations. This meticulous approach has proven instrumental in establishing Uniswap as one of the most prosperous decentralized exchanges, boasting a substantial user base with consistently high daily activity levels.

Consequently, we foresee two potential outcomes resulting from this anticipated shift in market behavior. First, more projects at the application layer could postpone token launches until they establish alignment between their product’s core services and market demand. Tokens would then serve as a must-have utility, enabling users access to a given product suite rather than solely serving as governance tokens. The argument changes regarding smart-contract platforms as a token is needed to maintain security, decentralization, and stakeholders’ alignment. So instead, we could see more emphasis on secondary market sales for these types of tokens instead of the token-as-fundraising model witnessed in 2017.

Finally, established projects may overhaul their entire business models to enhance token value capture. A notable example is Polygon, which has unveiled a new network architecture where the token plays a more prominent and active role within the ecosystem. Within the emerging ecosystem, POL will serve as the essential asset for validating interconnected chains across the interoperable Polygon universe, thereby fostering increased engagement and participation among token holders.
Bookmarks

• Want to learn more about Ripple? Read our investment thesis here.

• Celsius has been selling its assets as part of its bankruptcy proceedings. You can track the massive sales in our dashboard here.

• Learn more about Ethereum’s Liquid Staking Derivatives, which now constitute the largest DeFi sector by AUM and are expected to continue proliferating as the ETH staking ratio grows. Check out our dashboard here.

• We had Blockdaemon as our guest in last week’s Analyst Call. Watch here.

Next Week’s Calendar

These are the top 3 events we’re monitoring for next week.

Polygon 2.0 last week of announcements: we should learn more about Polygon’s new governance system.

ETH CC: the largest ETH annual conference, which ends on the 20th, should continue to reveal more details about the exciting new primitives and technologies of the Ethereum ecosystem.

• Lummis-Gillibrand Act: Sens. Cynthia Lummis and Kirsten Gillibrand will bring a revised version of their comprehensive crypto regulatory bill to the Senate on Wednesday.

Source: Forex Factory

Research Newsletter

Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com

Disclaimer

The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.

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Tillgång till obligationsmarknaden för företagsobligationer från utvecklade marknader

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Sedan i fredags handlas en ny börshandlad fond utgiven av Invesco på Xetra och via Börse Frankfurt. Denna ETF ger tillgång till obligationsmarknaden för företagsobligationer från utvecklade marknader.

Sedan i fredags handlas en ny börshandlad fond utgiven av Invesco på Xetra och via Börse Frankfurt. Denna ETF ger tillgång till obligationsmarknaden för företagsobligationer från utvecklade marknader.

Invesco Global Corporate Bond ESG UCITS ETF (GLBD) ger investerare tillgång till en brett diversifierad portfölj av skattepliktiga företagsobligationer utgivna av industriföretag, allmännyttiga företag och finansiella företag baserade på utvecklade marknader.

Obligationerna med fast ränta ska ha en investment grade rating och en återstående löptid på minst ett år. Emissionsvalutan kan vara CAD, EUR, GBP och USD. En emittents viktning är begränsad till 5 procent. De utvalda obligationerna måste också ha en solid ESG-profil.

Det är en utdelande andelsklass i fondvalutan, US-dollar.

NamnISINAvgiftUtdelnings-
policy
Referens-
index
Invesco Global Corporate Bond ESG UCITS ETFIE000FVQW7E70,15 %UtdelandeBloomberg MSCI Global Liquid Corporate ESG Weighted SRI Bond Index

Produktutbudet i Deutsche Börses XTF-segment omfattar för närvarande totalt 2 151 ETFer. Med detta urval och en genomsnittlig månatlig handelsvolym på mer än €14 miljarder är Xetra den ledande handelsplatsen för ETFer i Europa.

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IUKP ETF investerar i brittiska fastighetsbolag

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iShares UK Property UCITS ETF (IUKP ETF) med ISIN IE00B1TXLS18, strävar efter att spåra FTSE EPRA/NAREIT Storbritanniens index. FTSE EPRA/NAREIT Storbritanniens index följer brittiska börsnoterade fastighetsbolag och Real Estate Investment Trusts (REITS).

iShares UK Property UCITS ETF (IUKP ETF) med ISIN IE00B1TXLS18, strävar efter att spåra FTSE EPRA/NAREIT Storbritanniens index. FTSE EPRA/NAREIT Storbritanniens index följer brittiska börsnoterade fastighetsbolag och Real Estate Investment Trusts (REITS).

Den börshandlade fondens TER (total cost ratio) uppgår till 0,40 % p.a. iShares UK Property UCITS ETF är den enda ETF som följer FTSE EPRA/NAREIT Storbritanniens index. ETFen replikerar det underliggande indexets prestanda genom full replikering (köper alla indexbeståndsdelar). Utdelningarna i denna ETF delas ut till investerarna (kvartalsvis).

iShares UK Property UCITS ETF är en stor ETF med tillgångar på 742 miljoner euro under förvaltning. Denna ETF lanserades den 16 mars 2007 och har sin hemvist i Irland.

Varför IUKP?

  • Diversifierad exponering mot brittiska fastighetsbolag
  • Direktinvestering i börsnoterade fastighetsbolag och REITS
  • Enstaka landsexponering med fokus på tillväxt

Investeringsmål

Fonden strävar efter att följa resultatet för ett index som består av brittiska börsnoterade fastighetsbolag och Real Estate Investment Trusts (REITS).

Handla IUKP ETF

iShares UK Property UCITS ETF (IUKP ETF) är en börshandlad fond (ETF) som handlas på London Stock Exchange.

London Stock Exchange är en marknad som få svenska banker och nätmäklare erbjuder access till, men DEGIRO gör det.

Börsnoteringar

BörsValutaKortnamn
gettexEUR2B7U
London Stock ExchangeGBXIUKP
Borsa ItalianaEURIUKP
SIX Swiss ExchangeCHFIUKP

Största innehav

KortnamnNamnSektorVikt (%)ISINValuta
SGROSEGRO REIT PLCReal Estate21,41GB00B5ZN1N88GBP
LANDLAND SECURITIES GROUP REIT PLCReal Estate8,75GB00BYW0PQ60GBP
LMPLONDONMETRIC PROPERTY REIT PLCReal Estate6,93GB00B4WFW713GBP
BLNDBRITISH LAND REIT PLCReal Estate6,58GB0001367019GBP
UTGUNITE GROUP PLCReal Estate6,09GB0006928617GBP
BBOXTRITAX BIG BOX REIT PLCReal Estate5,34GB00BG49KP99GBP
DLNDERWENT LONDON REIT PLCReal Estate4,32GB0002652740GBP
BYGBIG YELLOW GROUP PLCReal Estate3,67GB0002869419GBP
GRIGRAINGER PLCReal Estate3,50GB00B04V1276GBP
SHCSHAFTESBURY CAPITAL PLCReal Estate3,46GB00B62G9D36GBP

Innehav kan komma att förändras

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HANetf presenterar investeringscase för uran

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Tom Bailey, chef för ETF Research på HANetf, presenterar investeringscase för urans ljusa framtid och han diskuterade Sprott Junior Uranium Miners UCITS (U8NJ) under Proactive One2One Investor Forum. HANetf, en white label ETF-emittent, samarbetar med tredje parter som Sprott Asset Management (TSX: SII) för att skapa, hantera och distribuera ETFer i Europa.

Tom Bailey, chef för ETF Research på HANetf, presenterar investeringscase för uran och han diskuterade Sprott Junior Uranium Miners UCITS (U8NJ) under Proactive One2One Investor Forum. HANetf, en white label ETF-emittent, samarbetar med tredje parter som Sprott Asset Management (TSX: SII) för att skapa, hantera och distribuera ETFer i Europa.

Bailey betonade den växande globala efterfrågan på el, särskilt i Asien, och sambandet mellan stigande BNP per capita och ökad energianvändning. Han betonade vikten av kärnkraft för att möta denna efterfrågan, med tanke på energisäkerhet och klimatförändringsutmaningar.

Kärnkraftens tillförlitlighet, låga driftsbränslekostnader och minimala koldioxidutsläpp gör den till en tilltalande källa för ren, säker energi. Med 22 länder som siktar på att tredubbla kärnkraftskapaciteten till 2050, förväntas efterfrågan på uran öka, vilket skapar ett utbudsunderskott.

Bailey noterade den nuvarande och framtida konstruktionen av kärnreaktorer över hela världen, särskilt i Kina, som sannolikt kommer att överträffa USA i kärnkraftskapacitet till 2030. Han hävdade att detta underskott på uranmarknaden signalerar en ny uran-tjurmarknad, där priserna har stigit avsevärt under det senaste året.

Presentationen avslutades med en översikt över HANetfs uranfokuserade ETFer, särskilt juniorversionen som fokuserar på små gruvbolag, vilket ger investerare exponering för den potentiella uran-supercykeln.

Handla U8NJ ETF

Sprott Junior Uranium Miners UCITS ETF (U8NJ) är en europeisk börshandlad fond. Denna fond handlas på flera olika börser, till exempel Deutsche Boerse Xetra och London Stock Exchange.

Det betyder att det går att handla andelar i denna ETF genom de flesta svenska banker och Internetmäklare, till exempel DEGIRONordnetAktieinvest och Avanza.

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