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CF Benchmarks Newsletter - Issue 74

Whilst the outcome of the US election may have been a surprise for some, the follow-on reaction by ‘risky’ assets broadly, including the digital class, was well within the range of widely trailed expectations.

Ken Odeluga

• 5 min read
CF Benchmarks Newsletter - Issue 74

Whilst the outcome of the US election may have been a surprise for some, the follow-on reaction by ‘risky’ assets broadly, including the digital class, was well within the range of widely trailed expectations.

Just short of a week after it became clear Donald Trump had definitively been re-elected to a rare non-consecutive second U.S. Presidential term, cross-asset price action is itself unusually unequivocal, particularly given the increasing likelihood of a Republican majority in both congressional chambers.

Bitcoin continued to epitomise the ‘Trump trade’, both perceptually, and increasingly in fact, post facto.

By Tuesday 12th, November’s afternoon, London Time, front-month CME Bitcoin Futures, settling to the most institutionally trusted and liquid regulated BTC benchmark, CME CF Bitcoin Reference Rate (BRR), had notched the latest of multiple fresh records seen in the wake of the poll, this time printing as high as $90,725, marking a surge by Bitcoin of some 34% above its close on election eve.

No records per se for ETH, though CME’s prompt Ether contract, settled by the CME CF Ether-Dollar Reference Rate (ETHUSD_RR), did arch to its highest since late July 2024, in synch with BTC, marking $3,483 at its best on Tuesday, at the time of writing, and approaching 50% above its November 4th low.

For a concise summary of crypto market price action through the week of Donald Trump’s re-election, grab our latest Weekly Index Highlights. As usual, it provides a comprehensive slate of the performance of our benchmark single-asset and portfolio indices, mapped against the only taxonomy of digital assets based on institutionally investible eligibility, the CF Digital Asset Classification Structure.

Weekly Index Highlights, November 11, 2024
Quickly get up to speed with how digital assets performed during the most critical US election week for decades, with our Weekly Index Highlights for November 4th to November 10th, 2024.
CF BenchmarksCF Benchmarks

Large cap indices within the CME CF Single Asset Series posted their best gains for weeks, seemingly tracking Trump's pledge to foment a more accommodative regulatory regime for digital assets.

Outperformance was skewing towards highly capitalized altcoins, partly on the basis of a potential path towards inclusion within exchange traded investment products, predicated on leadership and ethos changes at the SEC.

Erstwhile outliers for ETP prospects duly rose the most by the start of the current week. Cardano (ADA) surged +82.82%, followed distantly by Chainlink (LINK), +39.53%, and Avalanche (AVAX), +38.24%.

The calculus for the probability of regulatory approval for several assets will almost certainly remain unclear for months, though many participants had clearly decided months before that the odds were already improving, particularly with regards to a U.S. listed fund investing in Solana.

Likewise, whilst new Ethereum funds listed by CF Benchmarks clients utilising our CME CF Ether-Dollar Reference Rate - New York Variant (ETHUSD_NY) for NAV calculation continue to secure the lion's share of fresh flows into the newest crypto product class, the possibility that a change of leadership at the SEC could pave the way for such vehicles to participate in the complete range of potential Ethereum network activities, chiefly staking rewards, has also been front and centre, post election.

Approximately anticipating changes in the regulatory landscape, CF Benchmarks' Product team had begun to formalise the first institutionally ready framework for such participation some time ago.

Read an excerpt of our launch post below - then get fully informed by clicking the link to download the paper.

Introducing CF Benchmarks’ Risk and Reward Framework for Ethereum Staking Returns

Finally, an institutional-grade analysis of Ethereum staking risks and rewards

CF Benchmarks, the leading cryptocurrency Benchmark Administrator, is excited to present the first comprehensive, public framework, for institutional quantification and participation in Ethereum staking rewards.

We’re launching this fresh perspective in the form of a research paper, produced by the CF Benchmarks Product team, to the highest objective standards of accuracy and integrity that befits our role as a Benchmark Administrator:

Understanding the Dynamics of Ethereum Staking Returns: Risk and Reward Framework

Critical timing

This report coincides with a critical juncture for the Ethereum network.

The listing of the first U.S. spot Ether ETFs in July was a major inflection point for adoption, enabling large institutions to gain exposure to the asset’s price for the first time.

U.S. Ether ETF vehicles are not currently permitted to stake ETH. Nevertheless, institutional participation in Ethereum staking, in a number of forms, has clearly been on the rise for some time.

The growth of staking

ETH deposited on the Beacon Chain - the Ethereum 2.0 component that enabled the network to transition to a Proof of Stake (PoS) consensus mechanism from Proof of Work (PoW) - has increased by approximately 5.7 million ETH this year, after almost doubling in 2023.

At the time of writing, around 29% of total ETH supply is staked, with a dollar value of at least $115 billion, easily the highest for any PoS blockchain.

Meanwhile, the number of validator nodes, Ethereum’s critical network function for block proposal, voting, and transaction verification, has risen from less than 450,00 in January 2023, to more than 1 million currently.

The proliferation of staking protocols in recent years complicates assessments of the institutional proportion of that growth. Still, the most popular protocol, Lido’s stETH, which accounts for some 28% of total staked ETH, grew 5% year-on-year to late October 2024, following its 93% surge in 2023.

Moreover, a survey of “institutional token holders”, published in October 2024, by Blockworks Research, showed 69.2% were staking Ethereum. Blockworks Research noted 78.8% of respondents were investment firms or asset managers.

Asymmetric awareness

Inevitably though, given the accelerating growth of institutional ETH staking, the distribution of comprehensive, up-to-date, understanding of its granular mechanics, risks, and even key aspects of its fundamental value proposition, are also, almost certainly, increasingly asymmetric.

In order to close this gap in understanding, CF Benchmarks has deployed its proven expertise in defining and quantifying the blockchain economy, towards providing the most thorough and unbiased assessment of the potential rewards and inherent risks involved in Ethereum staking available.

Read the rest of the summary here.

Download the compete research paper from here

CFB Talks Digital Assets Episode 31: CF Benchmarks’ Q4 Market Outlook as the Trump 2.0 Era begins

CF Benchmarks’ recently launched quarterly market outlook series is on tap for an extra special episode of the CFB Talks Digital Assets podcast.

The first report in the series, for Q4 2024, landed in the run-up to the hotly anticipated U.S. election. Join our Head of Research, Gabe Selby, CFA, Research Analyst, Mark Pilipczuk, and Head of Content, Ken Odeluga, as they talk through the key macro and political details that really matter, after Trump’s second presidential win.

Hear our research team’s base case economic outlook for a soft landing - which remains on track - plus implications for digital asset returns and positioning

  • Learn why the Fed is increasingly boxed into a corner on policy, as markets signal a deeper easing path will be necessary, with potential impacts on digital asset
  • The secular crypto themes most likely to prevail in the medium to long term:
    • The rise and rise of stablecoins
    • Ethereum winning the scalability wars
    • Money market funds at the vanguard of tokenization growth
    • Also, what are DePINS?

Whether you’re an institutional or individual investor, be sure to grab a coffee and lean into our research team’s long-form insights at this critical macro and geopolitical juncture!

Listen on Spotify

Listen on Apple Podcasts

Watch on YouTube

Watch all episodes here

Subscribe for updates!

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