The end of Wall Street, the bull's return? "The strongest lineup" exchange EDX Markets launched

**Besieged by regulation, Wall Street has stirred up the muddy waters in the encryption field and injected a dose of stimulant into the dying industry. **

The news of BlackRock's application for a spot trust has not yet calmed down, and a cryptocurrency exchange called EDX Markets has emerged in the market and has become a hot topic this week. It is reported that the exchange was established in September 2022 and is supported by a group of Wall Street giants. Its disclosed investors include Idelity, Schwab, Paradigm, Sequoia Capital and Citadel, with a strong traditional financial atmosphere.

EDX announced this week that the company has launched the digital asset market EDX in the United States after the technology construction in the past 9 months, and completed the first transaction. With the launch of its digital asset market, the company has a new round of financing It has also been completed, and participating institutions include Miami International Holdings, DV Crypto, GTS and HRT Technology.

As soon as the news came out, the market reacted strongly. BTC broke through the shock range and rose to a maximum of 29,000 US dollars, an increase of nearly 10% in 24 hours.

BTC price changes in the past 5 days, data source: Binance

Why does EDX receive so much attention?

Looking at the current market, the giants Binance and Coinbase are still deeply involved in compliance suspicions, and they are constantly at odds with the SEC. In the strong remarks of the SEC, almost all cryptocurrencies except BTC, ETH, and USD are classified as securities. More than 68 coins have been listed as securities. With the continuous growth of the encryption list, in order to avoid risks and stabilize returns, large capital players such as market makers and securities institutions have gradually withdrawn from the market. For example, Robinhood urgently removed controversial currencies such as ADA, SOL, and MATIC after the lawsuit occurred. As a result, the market has entered a deep bear state.

From the analysis of stablecoin data, the liquidity of the entire market is being withdrawn. Beginning in 2022, the market value of the main stablecoin has continued to decrease, dropping from the highest point of nearly 150 billion to about 110 billion, and it has begun to show an accelerated downward trend in the past two months, especially under the influence of BUSD being regulated. It has returned to historical highs, but USDC and BUSD, the main stablecoins, have fallen significantly, and the decrease in the total market value of the two has always been ahead of the increase in the market value of USDT. Purchasing power can also reflect this argument. Taking USDC as an example, due to the endorsement of Circle, USDC is mostly composed of traditional capital, which can reflect the attitude of traditional US funds towards encryption to a certain extent. As of 8 am today, there are only less than 4.2 Billion USD transferred from USDC to the exchange becomes possible purchasing power, and in April, the value was 600 million USD.

Stablecoin market value price trend, data source: Coingecko

Against this background, market sentiment has always been in a downturn. Even in June when the Federal Reserve announced the suspension of interest rate hikes, there was no significant rebound. The entry of new funds has become a key fulcrum to break through this sentiment threshold. Looking back at the last round of bull market, it was Grayscale that took the lead in attracting traditional capital through the Bitcoin Investment Trust (GBTC), which pushed BTC to a peak of $60,000. Since GBTC does not have a redemption function, its price continues to discount compared to BTC. In this regard, Grayscale and the SEC are entangled in the ETF conversion. The SEC rejected Grayscale’s request to convert its Bitcoin trust fund into a spot ETF on June 29, 2022.

After iShares, a subsidiary of asset management giant BlackRock, submitted an application to the US SEC for a quasi-spot ETF trust named "iShares Bitcoin Trust", driven by optimism that GBTC could be converted into an ETF, the daily trading volume of GBTC It soared from $16.1 million to $80 million, an increase of about 400%. As of 16:00 today, according to Coinglass data, the grayscale GBTC negative premium rate has narrowed to 33.45%, which has recovered about 31.58% from the highest point (48.89%) observed in December 2022.

Grayscale GBTC price changes, data source: Coinglass

And the emergence of EDX, intentionally or unintentionally, bears huge industry expectations.

The most different point from native cryptocurrency exchanges is that EDX Markets complies with the current SEC regulatory framework for the encryption field. In the field of custody and asset separation, where exchanges are most criticized, EDX has chosen the diametrically opposite path, that is, it does not host customers' digital assets. Instead, EDX will select third-party banks and cryptocurrency custodians to hold customer asset custody, and users will have to buy and sell cryptocurrency assets through financial intermediaries. For exchanges (NYSE) or NASDAQ (NASDAQ), in addition to trading, custody and market making will achieve business splits and be hosted by a third party. Its CEO, Nazarali, said that regulators agree with this different approach because they believe that the separation between exchange functions and broker functions is critical for compliance.

On the other hand, contrary to the rich encrypted asset targets of other exchanges, referring to the traditional brokerage model, EDX does not directly provide services for individual investors, but provides order routing services for retail brokers, and retail investors need to achieve through brokers Buy. Currently, EDX provides four types of currencies: Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. Investors access transactions through APIs instead of traditional front-end user interfaces. These four types of currencies also respond to the SEC’s request. compliance argument. Despite the limited number of coin categories, the token portfolio accounts for 67% of the entire cryptocurrency market in terms of market capitalization, according to CoinGecko.

Regarding the positioning of EDX, CEO Nazarali is quite clear and will not step on the red line. “We only have a limited number of tokens because we don’t want to trade what could be securities until there is more clarity on regulation.

We believe cryptocurrency is here to stay, but for it to evolve as an asset class, it needs to adopt the same rules and investor protections that exist in traditional finance. "

This principle is inseparable from Nazarali's previous work experience. Before becoming CEO, Nazarali served as the head of global business development at Citadel Securities, a leading market maker in the United States. He has a high degree of familiarity with Wall Street and traditional finance, and the exchange has also received With the strong support of Citadel.

** This move is obviously not groundless, and the attention brought by compliance is increasing like never before. **

On June 16, the U.S. House of Representatives Financial Services Committee held a hearing entitled "The Future of Digital Assets: Providing Clarity to the Digital Asset Ecosystem," which aimed to focus lawmakers and the public on digital The potential risks and returns of assets and the role of governments in regulating them. However, in the hearing, although it was agreed that regulation needs to be developed urgently, the major factions still held their own opinions and debated endlessly around the attributes of virtual currency.

Among all the controversies, the industry generally believes that the United States is squeezing and screening entrants in a compliance-based manner. The publicity of EDX at this moment has further increased this speculation, and some market analysts even believe that it may become a so-called encryption "National" exchanges. But at the moment, EDX Markets’ attitude is more ambiguous. Although it has considered entering the international market in the future, it will only focus on the US business at present. Nazarali made it clear in April, “Our establishment is to solve the problems in the US market. .”

In any case, the news still brought rare market sentiment. Binance founder Zhao Changpeng commented on his Twitter: Impeccable timing, but the more the better, showing his positive attitude towards the news.

**The reality will inevitably be a bit skinny. First, under the strong policy of the Federal Reserve, the problem of lack of encryption liquidity has not been fundamentally resolved. Instead, the competition targets continue to increase. The US stock market has risen strongly under the AI hotspot, and the risk-free rate of return Steady rise. In contrast, the uncertainty of encryption is stronger. When the grayscale GBTC triggered a bull market, the global market was still in a stage of abundant liquidity. Grayscale, everyone seems to have forgotten that the success rate of this move is obviously not high. **

From the perspective of planning, EDX Markets claims that it will launch the settlement system EDX Clearing later this year to improve the settlement efficiency of this market.

Although the follow-up direction is still unknown, it may be more important for the current market to let the positive sentiment fly for a while before the final conclusion is reached.