Approved from Bitcoin Futures ETF: Looking at the changes in the global blockchain industry

This report tracks and counts the current status of the Chinese and American supervision of crypto assets and the development of the U.S. industry, depicts the overview of the two countries’ supervision of various links in the industry, and compares a number of important documents in the history of China’s crypto asset supervision, Bitcoin futures ETFs and spot ETFs. The difference and business data related to crypto asset trading of multiple U.S. stock companies listed on the stock market.

With the promulgation of the ” Twenty-Four ” document, China’s crypto asset supervision has entered a new era. On September 24, ten departments including the People’s Bank of China and the Office of Cyberspace Affairs issued the “Notice on Further Preventing and Disposing of the Risks of Virtual Currency Trading Speculation” (hereinafter referred to as “Twenty-Four”). We believe that the above-mentioned policy is the most stringent in the history of China’s crypto asset supervision after the “Announcement on Preventing Token Issuance Financing Risks” issued by seven departments including the People’s Bank of China and the Office of Cyberspace Affairs on September 4, 2017. Policy. We believe that compared with the “Nine-Fourth Movement”, the “September 24” has the following characteristics: 1. The regulatory situation is more severe; 2. There are more regulatory agencies, and the Supreme Law, the Supreme Procuratorate, the Ministry of Public Security, and the Foreign Exchange Bureau have entered the bureau, which is more stringent; More regulatory reasons involved; 4. More regulatory measures; 5. More business types involved; 6. More business activities involved.

The first Bitcoin futures ETF was approved, a new milestone in US crypto asset supervision. The underlying asset of a futures ETF is a Bitcoin futures contract listed on the CME Group. Although it is not a spot ETF (the compliance risk of the spot is still a concern for the regulators), the standardized financial products created thereby have a strong demonstration significance. First, there may be more bitcoin futures ETFs approved in the US. According to media reports such as CNBC and Bloomberg, the crypto asset management company’s Grayscale Investment Plan has applied for the conversion of the world’s largest Bitcoin fund into a spot ETF; Bitcoin futures ETFs issued by VanEck and Valkyrie have also been approved. Invesco ( The Bitcoin futures ETF issued by Invesco and Galaxy is expected to be approved. Secondly, the approval of futures ETF means that the U.S.’s acceptance of crypto assets has further increased. Although its forward contracts are more expensive than recent contracts due to rolling renewals, there may be loss of adjustments, but after all, it provides investors with more choices. Pave the way for spot ETF approval.

The U.S. crypto asset industry is developing rapidly: mining has become the world’s number one, and trading is active. 1. In the proportion of Bitcoin to legal currency transactions, the US dollar ranked first (300,000 daily trading volume, accounting for 84%); in February, China’s computing power plummeted, in July, China’s computing power returned to zero, and the United States rose to the top One (35EH/s, 35%). 3. Encrypted asset exchange Coinbase Q2 has revenue of approximately US$2 billion, of which retail business has achieved revenue of US$1.8 billion; 4) In the past three years, the number of Bitcoin investors in the United States has tripled, accounting for 11% of the total population; 5) U.S. stock-related institutions hold a total of 860,000 bitcoins through mining or purchase, accounting for 4% of the total number of bitcoins (21 million). Among them, Tesla holds 43,000; 6) The total scale of gray asset management has reached 54.3 billion US dollars, of which Bitcoin Fund (GBTC) has 40.5 billion assets and Ethereum Fund ( ETH E) has 11.9 billion assets.

Investment advice: With the gradual migration of the focus of the encrypted asset industry chain overseas, the global capital focusing on such assets will gradually go overseas, forming new centers in the United States, Singapore, and Dubai. It is recommended to pay attention to overseas US stocks that have compliant crypto asset trading business, such as Coinbase, Robinhood, Paypal and Square, etc., and pay attention to Canaan Technology (CAN) in the mining machine industry chain.

Risk warning: KYC, AML and CFT compliance risk, stable currency compliance risk, securities synthetic asset compliance risk, oracle risk, code vulnerability, lightning loan attack risk.

Approved from Bitcoin Futures ETF: Looking at the changes in the global blockchain industry

1. Research background: “September 24”, a new milestone in China’s crypto asset supervision after the “September Fourth”

Event : On September 24, ten departments including the People’s Bank of China and the Office of Cyberspace Affairs issued the “Notice on Further Preventing and Disposing of the Risks of Virtual Currency Trading Speculation” (hereinafter referred to as “Twenty-Four”).

We believe that the above-mentioned policy is the most stringent in the history of China’s crypto asset supervision after the “Announcement on Preventing Token Issuance Financing Risks” (the “Nine Four”) issued by seven departments including the People’s Bank of China and the Office of Cyberspace Affairs on September 4, 2017. Policy. Compared with the “Notice on Preventing Bitcoin Risks” issued by five departments including the People’s Bank of China and the Ministry of Industry and Information Technology in 2013, the “Nineteenth Fourth Movement” has been more stringent, and the business formats involved have exceeded the scope of previous “Bitcoin” related businesses. We believe that the “September 24” has the following characteristics compared with the “September Fourth”:

The regulatory situation is more severe. The “Twenty-Four” document stated that the purpose of supervision is to “further prevent and deal with the risks of virtual currency trading hype and effectively maintain national security and social stability”, compared to the relevant expression in the “Nine-fourth” document “Implement the National Financial Work Conference” It can be seen that the relevant regulatory authorities believe that the risks of virtual currency trading activities have exceeded the scope of “financial” and may endanger “national security and social stability.” In other words, the regulatory authorities believe that the supervision of virtual currency trading hype activities requires not only financial regulatory agencies, but also national security agencies.

There are more regulatory agencies, and the Supreme People’s Court, the Supreme People’s Procuratorate, the Ministry of Public Security, and the Foreign Exchange Bureau have entered the bureau with stricter qualifications . This reflects that 1) the judicial authorities have intervened, and there have been more regulatory measures; 2) the regulatory authorities believe that crypto asset trading may violate foreign exchange regulations. The “Twenty-Four” document clarified that virtual currency-related business activities are illegal financial activities. Those who carry out related illegal financial activities that constitute crimes shall be investigated for criminal responsibility in accordance with the law, clearly warning related possibilities or criminal penalties, and stronger deterrence.

Approved from Bitcoin Futures ETF: Looking at the changes in the global blockchain industry

There are more regulatory reasons involved . From “not conducive to dual carbon and residential electricity consumption” to “with financial risks”, mining has been completely abolished in China. Compared with the trading and wallet formats, the crypto-asset mining business is facing a regulatory overweight situation earlier in 2021. The initial reason was “not conducive to dual-carbon and residential electricity consumption”. As the scale of global crypto-asset transactions continues to expand, With the issuance of the document, the reason for the supervision of the mining business has added a layer of “financial risks.”

There are more regulatory measures : from power cuts to seizures of mining machines and IP inspections.

More business types are involved : from mining to transactions and wallets, from thermal power mining (Inner Mongolia and other places) to hydropower mining (Sichuan, Yunnan and other places).

More business activities are involved : overseas crypto asset service providers are not allowed to serve Chinese customers. After the “Nine Four”, many Chinese crypto asset exchanges set up their servers overseas, which is difficult for domestic users to access directly, but they may still be exposed through some technical means. “September 24” directly allowed exchanges such as Binance and Huobi to withdraw from the Chinese market.

Approved from Bitcoin Futures ETF: Looking at the changes in the global blockchain industry

Approved from Bitcoin Futures ETF: Looking at the changes in the global blockchain industry

Approved from Bitcoin Futures ETF: Looking at the changes in the global blockchain industry

It should also be noted that governments at all levels in China are still vigorously encouraging the development of the blockchain industry . For example, Xi Jinping, General Secretary of the CPC Central Committee, emphasized when presiding over the 34th collective study of the Political Bureau of the CPC Central Committee on October 18, “In recent years, the Internet, big data, cloud computing, artificial intelligence, blockchain and other technologies have accelerated innovation. Increasingly integrated into the entire process of various fields of economic and social development, the rapid development of the digital economy, the wide range of radiation, and the unprecedented depth of influence are becoming a key force in reorganizing global factor resources, reshaping the global economic structure, and changing the global competitive landscape. Standing at the height of coordinating the overall strategy of the great rejuvenation of the Chinese nation and the great changes in the world unseen in a century, coordinating the two major issues of domestic and international development and security, giving full play to the advantages of massive data and rich application scenarios, and promoting the depth of digital technology and the real economy Integration, empowering the transformation and upgrading of traditional industries, spawning new industries, new business forms and new models, and continuously strengthening and improving China’s digital economy.” This statement reflects China’s consistent attitude of “chain” and “currency” separation in the supervision of encrypted assets: Support the development of blockchain technology to prevent risks related to encrypted asset transactions. We believe that China’s blockchain industry still has a lot to do with the support of regulatory policies.

At the same time, on October 20, the “Shanghai Data Regulations (Draft)” officially ended the public comment period, and the Shanghai Digital Exchange was ready to come out. Previously, China has clearly made data as a new production factor, and the transaction of production factors has always been a bottleneck. Now that the requirements for big data management are becoming increasingly standardized, on the basis of blockchain storage, a data flow based on privacy computing is created. The platform is of great significance and far-reaching influence.

2. Overseas: The first Bitcoin futures ETF was approved, testing the waters of standardized financial products based on encrypted assets

Replacing blockage with dredging, keep testing the water. Looking at several links in the encrypted asset industry chain, whether it is the mining and issuance of the issuance part, or the operation of exchanges and participation in the transaction link, the United States has not explicitly prohibited it, but all have strict supervision. Announcements are mainly issued by various regulatory authorities stating which activities require reference to other activities to apply for licenses. For example, the issuance of securities tokens should refer to the issuance of securities and apply to the Securities Regulatory Commission, similar to projects without actual controllers such as Bitcoin and Ethereum , Can be exempted from application, similar to EOS and other securities projects, which need to pay a fine to the Securities Regulatory Commission, and the US qualifies some encrypted assets as commodities, and the futures transactions related to them are regulated by the US Commodity Futures Trading Commission (CFTC). There are also some states in the United States that require service providers to operate crypto-asset-related activities in the state and require the state government’s financial regulatory department to apply for a “bit license”, such as the BitLicense of New York State.

A number of crypto asset industry chain companies are listed in the United States. U.S. stocks already have a number of crypto asset concept stocks: 1) Mining related: Canaan Technology, Riot Blockchain, Marathon, etc.; 2) Transaction related: Coinbase, PayPal, Square, Robinhood, Affirm, etc.

Stablecoins and DeFi , the frontiers of U.S. crypto asset regulation. In recent years, the more important topics in the crypto asset world, “Stablecoin” and “DeFi” have also received the attention of U.S. regulators. The U.S. Congress has convened Facebook and other companies many times to hold hearings on stablecoins, and the Federal Reserve and other departments have also issued more Research papers.

Approved from Bitcoin Futures ETF: Looking at the changes in the global blockchain industry

The first Bitcoin futures ETF has been approved, a new milestone in U.S. crypto asset regulation. According to statistics, since 2013, at least 15 asset management institutions in the United States have applied for encrypted asset ETFs at least 35 times, and no spot ETFs have been approved.

However, in recent years, there have been many good news in the US ETF for encrypted assets. In early October, the US Securities Regulatory Commission approved the Volt Crypto Industry Revolution and Tech ETF (Volt Crypto Industry Revolution and Tech ETF), which allocates 80% of its funds to companies whose net assets or income mostly come from BTC mining, lending or trading.

On October 15, the Nasdaq official website showed that it had approved the listing of the Bitcoin futures ETF applied for by the ETF giant ProShares under the code BITO, and the management fee was 0.95%. On the 16th, according to CoinDesk, the US Securities Regulatory Commission (SEC) Approved the ETF. The trading volume on the first day of listing was close to 1 billion U.S. dollars, and the market was very concerned.

We believe that the underlying asset of a futures ETF is a Bitcoin futures contract listed on CME Group. Although it is not a spot ETF (the compliance risk of spot is still a concern for regulators), the standardized financial products created therefrom have considerable Strong demonstration significance.

First, there may be more bitcoin futures ETFs approved in the US. According to media reports such as CNBC and Bloomberg, the crypto asset management company Grayscale Investment plans to apply for the conversion of the world’s largest Bitcoin fund into a spot ETF earlier this week; the Bitcoin futures ETF issued by VanEck and Valkyrie has also been awarded. Approved, Bitcoin futures ETFs issued by Invesco and Galaxy are expected to be approved. According to our understanding, there is currently no Bitcoin reverse futures ETF approved in the United States.

Secondly, the approval of futures ETF means that the U.S.’s acceptance of crypto assets has further increased. Although its forward contracts may be more expensive than recent contracts due to rolling renewals, there is a loss in adjustments, but after all, it provides investors with more choices. , Paving the way for spot ETF approval.

Approved from Bitcoin Futures ETF: Looking at the changes in the global blockchain industry

3. Industry: Current status of the global crypto asset industry chain

3.1 Industry scale: the scale of development of the crypto asset industry in the United States and its global position

The U.S. dollar occupies an absolute dominant position in the trading of crypto assets. According to Coinhills data, the U.S. dollar ranks first with 298,825 daily trading volume, accounting for 84% of all transactions, in the current proportion of bitcoin-to-fiat transactions, and the Korean won ranks second with 5%; the euro accounts for 5%; ranked fourth The five places are the Japanese yen (5%) and the British pound (0.45%). The U.S. dollar has absolute influence on the redemption and measurement of encrypted assets.

Approved from Bitcoin Futures ETF: Looking at the changes in the global blockchain industry

The reform of institutionalization and specialization brings pains. According to the Chainalysis Global Encryption Adoption Index, the United States has dropped from sixth place in 2020 to eighth in 2021. The main reason for the decline is that the U.S.’s ranking in P2P transactions weighted by the Internet population has dropped significantly, which is mainly related to the United States. Encrypted asset review is strengthened.

Approved from Bitcoin Futures ETF: Looking at the changes in the global blockchain industry

US stock institutions hold a total of 860,000 bitcoins, accounting for 4% of the total bitcoins According to the statistics of Bitcoin Treasuries, as of October 19, 2021, U.S. stock-related institutions held a total of 860,000 bitcoins through mining or purchase, accounting for 4% of the total number of bitcoins (21 million). Among them, Grayscale holds the largest amount of coins, at 650,000, accounting for 3% of the total amount of bitcoins; followed by the listed company MicroStrategy, which holds 110,000 bitcoins. The market value of the bitcoins held by the company is about It is 98% of the company’s stock market value; the third is Tesla, which holds 43,000 bitcoins. The market value of the company’s bitcoins is about 0.4% of the company’s stock market value.

Approved from Bitcoin Futures ETF: Looking at the changes in the global blockchain industry

3.2 Mining: Bitcoin’s entire network computing power center moved from China to the United States

On May 21, the Financial Stability and Development Committee of the State Council of China held its 51st meeting and stated that it would crack down on Bitcoin mining and trading. Since then, governments across China have shut down and cleared bitcoin mines, and investigated related IPs. According to statistics from the University of Cambridge, in May, China’s Bitcoin mining power ranked first in the entire network (71EH/s, accounting for 44%). In June, China’s computing power plummeted. In July, China’s computing power returned to zero, and the United States Rising to the top (35EH/s, 35%), the migration of computing power has been basically completed, and the United States, Kazakhstan, Russia, and Cambodia have become new mining centers.

Approved from Bitcoin Futures ETF: Looking at the changes in the global blockchain industry

3.3 Retail market: Coinbase and Robinhood performed well

The number of cryptocurrency investors in the United States continues to grow. According to Bitcoinist survey data, the number of cryptocurrency investors in the United States continues to grow. In the past three years, the number of Bitcoin investors has tripled. U.S. cryptocurrency investors account for about 11% of the total population. Among them, the proportion of men who invest in cryptocurrencies is slightly higher than that of women, and women who invest in cryptocurrencies account for the majority of the female population. 7%. Men who invest in cryptocurrency account for 16% of the male population. This has a certain relationship with the reduction in the yield of traditional fixed-income investment products under the influence of the US government’s low interest rate policy.

The scale of retail transactions of encrypted assets has grown rapidly. According to a joint research report published by crypto asset exchange OKEx and blockchain analysis service Catallact, in the first quarter of 2021, retail activity in the Bitcoin (BTC) market exceeded that of institutional players. US stock-listed companies such as Coinbase, Robinhood, Paypal, Square, and Affirm have all laid out crypto asset trading businesses, among which Coinbase and Robinhood are more eye-catching.

Coinbase’s revenue in the second quarter of 2021 is approximately US$2 billion, of which the retail business achieved revenue of US$1.82 billion, which is its main source of income. On July 29th, Robinhood, whose main business is retail, officially landed on Nasdaq. In its prospectus, Robinhood stated that about half of its users are first-time investors, with a median age of only 31. The company’s average account in February The scale is $5,000. In the second quarter, Robinhood’s total net income was US$565 million, a year-on-year increase of 131%, and monthly active users (MAU) were 21.3 million, a year-on-year increase of 109%.

Approved from Bitcoin Futures ETF: Looking at the changes in the global blockchain industry

3.4 Institutional Market: Encrypted asset institutional investment is active

The number of institutional investors has increased, and the returns of crypto hedge funds have been high. According to NilssonHedge data, a total of 144 institutional investors were added in 2019 and a total of 127 were added in 2020; the average yield of crypto hedge funds in 2020 is as high as 73% (excluding December), and the average yield in 2019 is about It’s 16%, almost a five-fold increase. Coinbase’s institutional trading volume in the second quarter was 317 billion U.S. dollars, an increase of 47% from the previous quarter.

Approved from Bitcoin Futures ETF: Looking at the changes in the global blockchain industry

3.5 Two special products

Among retail and institutional products, there are several types of special products that can hold investments for both individual and institutional investors.

3.5.1 Grayscale Encrypted Asset Trust and its listed shares, such as GBTC

The “big whale” and “big whale” in the primary and secondary markets-GBTC. GBTC is a Bitcoin trust initiated by Grayscale and started to raise funds in 2013. In essence, GBTC is a private equity trust and only qualified investors can invest. However, GBTC was listed on the OTCQX over-the-counter market in March 2015, with an issue share of approximately 402941400. This means that GBTC’s investment requirements have been expanded from qualified investors to non-qualified investors, which greatly optimizes the choice of individual investors. Investors can enjoy investment opportunities brought about by the high volatility of BTC prices without having to hold the BTC itself, without having to bear the risks (such as theft of private keys, runaways from exchanges, etc.) that are required for direct trading and storage of BTC.

3.5.2 CME Group Bitcoin, Ethereum and other crypto asset derivatives

From encrypted assets to traditional finance-the listing of derivatives. On December 11, 2017, the Chicago Mercantile Exchange (CME) officially launched Bitcoin futures, attracting institutional traders to carry out stable market participation. On February 8, 2021, announced the launch of micro-bitcoin futures. Micro-bitcoin futures are one-tenth the size of bitcoin and can be settled in cash. This will allow investors to purchase certain units in an efficient and low-cost manner. Trading Bitcoin lowers the investment threshold.

Approved from Bitcoin Futures ETF: Looking at the changes in the global blockchain industry

Approved from Bitcoin Futures ETF: Looking at the changes in the global blockchain industry

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