21Shares Research Newsletter - Issue 31

Market Outlook

The last week has been another difficult one for the large-cap crypto assets with Bitcoin currently hovering in the low $8000 range — BTC (-6.08%), ETH (-3.45%), XRP (-7.98%), BCH (-13.67%), and LTC (-9.45%).

Adjusted transaction volumes were also down from a total of $2.78B to $2.21B for the top five crypto assets' averages. The midweek drop across the board for transaction volumes was driven by the downturn in crypto asset price between November 15 - 17 of last week, perhaps as the market calmed down following a previous surge in response to China's ostensible newfound interest in the industry — BTC ($1.78B), ETH ($214M), XRP ($114M), BCH ($90.8M), and LTC ($35.5M).

Product - 21Shares Launches Tezos ETP (AXTZ)

Last Thursday we announced the launch of the world's first Tezos ETP — AXTZ — on the Six Swiss Stock Exchange, as well as an admission to trade AXTZ on Börse Stuttgart and an admission to list AXTZ on BX Swiss. AXTZ marks the ninth ETP issued by 21Shares to date and is unique because of the fact that it will issue staking rewards — newly-inflated units of AXTZ awarded to users that partake in the block validation process — which will then be automatically reinvested into the AXTZ shares.

21Shares' CEO Hany Rashwan was quoted by CoinDesk as saying: “Via our ETP, [investors can] participate in the associated rewards for contributing to the security and stability of the Tezos blockchain – without the need to ever have to set up a crypto wallet or taking care of a private key.” AXTZ is the world's first staking ETP and represents a new way for investors to benefit from one of the newest trends within the crypto asset space.

Learn more here.

Product - 21Shares Admits to Trade Seven ETPs on Börse Stuttgart

We also announced that 21Shares has admitted to trade seven crypto ETPs in Germany on Börse Stuttgart. Some of the ETPs admitted to trade include the 21Shares Crypto Basket Index ETP (HODL), the 21Shares Bitcoin Crypto Single Tracker (ABTC), and the 21Shares Bitcoin Suisse BTC/ETH ETP (ABBA); in addition, all the ETPs will be denominated in euros.

Leif Oesterwind, director of Lang & Schwarz, commented in ETF Stream: “Since we are the official market maker for 21Shares on BX Swiss, it made complete sense to offer an admission to the popular Boerse Stuttgart and offer these innovative products in euros.” In addition, Laurent Kssis, Head of ETPs at 21Shares, added: “The listing of our products in Germany marks a significant step towards the mainstream adoption of crypto assets for qualified and accredited European investors.”

Learn more here.

Product - 21Shares Admits to List Six ETPs on BX Swiss

In addition, last Thursday we also announced that 21Shares has admitted to list six crypto ETPs on the BX Swiss exchange. Some of the ETP admitted to list include the 21Shares Bitcoin Single Tracker (ABTC) and the 21Shares Binance BNB ETP (ABNB); these ETPs will be denominated in Swiss francs (CHF). These product announcements demonstrate the increasingly wide range of investors who are now able to get exposure to the crypto asset market through our ETPs.

Learn more here.

Podcast - Open Source Governance in Crypto

In this week's episode, the 21Shares team is joined by Richard Muirhead (Founding Partner at Fabric Ventures) to discuss the dynamics of open source governance for crypto assets. From the 21Shares team, the participants are Hansen Wang and Lanre Ige. This podcast is presented by BlockWorks Group. You can listen to the episode on Spotify or Apple Podcasts.

News - UK Law Panel Defines Crypto Assets as Property | CoinDesk

What Happened?

The UK Jurisdiction Taskforce of the Lawtech Delivery Panel published a legal statement Monday, recognizing crypto assets as "tradable property" under English and Welsh law. The statement also defines smart contracts as "enforceable agreements" under English law. The government-backed LTDP is an industry-led effort set up to assist the transformation of the U.K. legal sector through technology. The UK Jurisdiction Taskforce – one of six panels under its umbrella – is chaired by Sir Geoffrey Vos, chancellor of the U.K.'s high court, and also includes members such as Christopher Woolard, board member of the Financial Conduct Authority, and Sir Antony Zacaroli, justice of the high court.

Calling the statement a "watershed," Sir Vos said it addresses a number of "difficult legal topics in a very approachable and intelligible manner." The task force undertook the effort to "provide much-needed market confidence and a degree of legal certainty as regards English common law in an area that is critical to the successful development and use of cryptoassets and smart contracts in the global financial services industry and beyond," he said.

Why Does This Matter?

It should be noted, however, that as crypto-lawyer Preston Byrne pointed out, the UK Jurisdiction Taskforce has no power to make UK law and their definition of crypto assets as property is simply an opinion of a body of eminent "firms and counsel".

In his opinion, it is correct to deem Bitcoin as property under UK law, however in the case of the theft of Bitcoin then a precedent set by Oxford v Moss — which made it clear that information cannot be stolen as it is not property — could complicate things.

Learn more here.

News - China Is Poised for Another Crypto Trading Crackdown as Speculative Fever Returns | CoinDesk

What Happened?

Regulators in each district of Shanghai must search and inspect local crypto exchange-related services before Nov. 22 and report to the central bank for further actions, according to an official notice signed by the Shanghai Internet Finance Rectification Agency and the Shanghai Bureau of the People’s Bank of China. The notice emerged online on Friday. Chinese business publication Caixin confirmed its authenticity in a report published later that evening. The effort is led by the Shanghai government’s finance bureau, Caixin said.

The move underscores China’s complicated relationship with emerging decentralized technologies. In his speech earlier this month, President Xi called on his countrymen to “accelerate the development of blockchain technology,” and China has long been a favored location for bitcoin miners. On the other hand, the government banned crypto-to-fiat trading and initial coin offerings (ICOs) two years ago, near the height of the bubble. Crypto-to-crypto trading remained accessible.

Why Does This Matter?

One of the reasons behind the market volatility over the last few weeks has undoubtedly been the mixed messages which have come out of President Xi's administration in China. For example, two weeks ago a speech by President Xi Jinping extolled the benefits of blockchain technology and signaled the government's intention to focus on the innovation; however, this news item demonstrates that the government is still cautious of the wider crypto asset industry — being consistently keen to crack down on businesses operating in the space.

In the context of China's wider efforts to use "blockchain technology" with their own digital currency, it is interesting to see how the administration will square their openness to blockchain technology to their historical hardline on the wider crypto asset industry. Policy decisions will inevitably affect the kinds of innovation which comes out of China going forward and the current China-based crypto-incumbents may have to redefine their business lines going forward in order to maintain compatibility with government policy.

Learn more here.

News - Multi-Collateral Dai Goes Live on MakerDAO | The Block

What happened?

Multi-Collateral Dai (MCD) has activated on the MakerDAO system after MKR token stakeholders made an executive vote last Friday to pass it through. MCD, as its name states, will enable users to create Dai stablecoin coins backed by multiple collateral types. The initial collaterals for MCD will be ether and basic attention tokens.

Along with the MCD transition will be the introduction of the Dai Savings Rate, which will reward Dai holders with a variable interest rate paid out in Dai. With MCD's activation, there are now two Dai systems in Maker: Single Collateral Dai (SCD), which has been renamed Sai, and Multi-Collateral Dai, which has taken the Dai name. The Maker system and its users will ultimately completely migrate over to MCD.

Why does this matter?

The Dai-Maker Stablecoin Credit system is one of the first projects to begin development on Ethereum and has been seen by many as the stalwart within the Decentralized Finance ('DeFi') ecosystem. The launch of Multi-Collateral Dai is the culmination of efforts to launch a fully-decentralized stablecoin on Ethereum — with the key difference being that, unlike other stablecoins, the asset's stability does not ostensibly incur significant counterparty risks as seen in a deposit-redeem stablecoin system.

Below we plot the hourly issuance of MCD Dai over the last day since its launch and the circulating supply of Dai since its launch in late 2017 (Source: Dune Analytics).

Currently, the majority of Dai in circulation was issued through the SCD system, however, as the chart above shows, there has already been a demand to issue Dai through MCD. Dai's supply has been limited to 120M Dai but, following the launch of MCD, this has been raised to 153M Dai due to the introduction of a new collateral type, Basic Attention Token (BAT), with a BAT-collateralized Dai supply cap of 3M and an increase in the ETH-collateralized Dai supply cap to 150M.

Learn more here.