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Good Morning and Happy Monday from Cumberland APAC! The crypto market right now seems to be divided into three categories: Stablecoins, Bitcoin, and everything else. This is a simplified but fairly useful lens through which to view the market. It highlights the extent to which stablecoins have emerged as one of crypto’s primary use-cases. It illustrates that, especially as it has gone mainstream on institutional adoption, Bitcoin is special amongst all digital assets. And it recognizes that outside of BTC, almost nothing this year has worked as a trade.

Alts were weak last year, but it wasn’t blatant. BTC was strong enough that ETH, even while being on the wrong side of the narrative, still ended the year more or less unchanged. And there were pockets of the market that worked; SOL was up 80% on the year, and SUI was a breakaway outperformer, up more than 500%. TON and BNB were both more or less independent of the general market trends. Most of the alts market didn’t work, but there was enough that did work that it didn’t feel that awful. Where there was pain, though, was in the new listings space. Most of the coins that launched last year struggled, with high FDVs off the bat that then slid lower as time passed. Because of the high initial launches, the VC playbook still largely worked, but for anyone who bought in the secondary, it was a tough year for TGEs. The market is starting to feel the wear; most new tokens have struggled even more this year, as the appetite just has not been there. BERA was one of the anticipated launches of the year, and it’s currently down 30% from its launch at a lower-than-expected $3.3b FDV. Outside of new launches, the ennui is more pronounced, where there are really no sectors that are working. ETH is down 40%, L1s and L2s are distributed around that, DeFi names are mostly worse, and memecoins are nowhere. The only sector that seems to have some life to it is the RWA sector (and more on that later).

BTC, though, has felt unique. It felt special last year as well, due to the ETF launches, but last year it was “BTC and ETH and everything else”, and this year it feels like “BTC and everything else”. One of the primary conversations driving price action this year has been around potential crypto strategic reserves, and that feels to be about BTC. Other coins have been discussed as part of strategic reserves, but that almost feels like wishcasting; it seems very clear that the strategic reserve conversation draws its comparison to gold, and in crypto, BTC is the only gold analogue. As institutions come to crypto, it is predominantly about BTC and nothing else. On crypto Twitter, the conversation is about alts, but at institutional events, the conversations are all about BTC; it’s rare that other coins are even mentioned. BTC.  We’re even seeing liquid funds focus more on BTC; our BTC options volumes have continued to increase every month, making up the majority of all OTC options trades.

The one sector that has been working undeniably is stablecoins.  Stablecoin market cap is now over $230b, with the pre-Terra high in 2022 around $190b. Stablecoins as a tool to move value seamlessly have been one of the most successful use-cases for crypto, and it’s evident in the acquisition space as well, where Stripe’s $1.1b acquisition of Bridge last year was one of the major deals across the whole ecosystem. (The growth in stablecoins has not, to date, meant diversification; USDC and USDT combine for around 89% of all stablecoin issuance, a level of dominance that has not changed much over recent years.) Of course, stablecoin growth is a challenging narrative to trade or invest on; there’s not any speculative asset to hold to represent stablecoins. Some of the more decentralized stablecoins have governance tokens, but because dominance by USDC and USDT has persisted, there hasn’t been much focus there. We have seen some tokens which are labeled as being in the RWA sector outperform this year, but that generally seems to be more driven by narrative than fundamentals. We’re watching for which L1s find consumer application adoption on the stablecoin side, as stablecoins will probably be among the first true consumer use-cases.

As this is the first market update being written in this space for a while, we wanted to share some updates coming from the Cumberland family:

  • Expand, a Cumberland Labs incubatee, was acquired by Blockdaemon; congratulations to Demo and the team! This comes on the back of Circle’s acquisition of Hashnote, another Cumberland Labs incubate, in December. (Blockdaemon to Acquire expand.network)
  • Kraken acquired Ninja Trader, a DRW VC portfolio company, for $1.5b, the largest crypto acquisition to date (Cryptocurrency exchange Kraken to buy NinjaTrader for $1.5 billion)
  • Cumberland SG has received in-principle approval for the Major Payment Institution from the Monetary Authority of Singapore (Cumberland Secures In-Principle Approval for Singapore Payment License)
  • Cumberland has added the following coins to its OTC offering so far this year, with many more to come. Please note that OTC coins are available on a jurisdiction-by-jurisdiction basis; if you’re interested, please reach out to a Cumberland RM. New OTC coins: EURC, PENGU, PNUT, POPCAT, TRUMP, WIF, ZK

Happy Trading!

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