Article source: Golden Finance
Author: Alex Thorn, Head of Research at Galaxy Digital
Compiled by: Bai Shui, Golden Finance
I discussed the intersection between the public market and cryptocurrencies with the team at Galaxy Digital, which led to an interesting perspective—regulators are also about to undergo a significant change.
A guest article by Alex Thorn, Head of Research at Galaxy Digital, explaining our situation, the changes currently underway, and where he believes we are headed. I hope this information and perspective are valuable to everyone.
The following is a guest article by Alex:
Bitcoin is the biggest winner of the election so far. Since November 5, the world's oldest and largest cryptocurrency, Bitcoin, has risen by 40%, and there is reason to believe there will be more gains in the future.
Other crypto assets will also benefit. Investors expect a shift in the U.S. Securities and Exchange Commission's attitude toward digital assets, and many have already written about how the easing or rollback of the SEC's classification of crypto assets as securities will support the crypto market and stakeholders.
Less discussed is how the public market will benefit from the new practices surrounding U.S. digital assets. Since Coinbase went public through direct listing in 2021, only Bitcoin miners and a few small SPACs have successfully leveraged the public market. Gary Gensler, the current chairman of the U.S. Securities and Exchange Commission, took office on April 17, 2021, just four days after Coinbase's direct listing, and since then, the public market has been largely closed to crypto companies. But all that is about to change. The public market is about to taste cryptocurrencies.
Signs of this shift may have emerged in the past few weeks. Japanese cryptocurrency exchange CoinCheck announced that it has received approval to go public through a U.S. SPAC. This will be the first cryptocurrency exchange to gain public market status in the U.S. since Coinbase, but it will not be the last. SPAC shareholder Thunder Bridge IV (stock code: THCP) will vote on the merger on December 5 (Wednesday), and the merger is expected to be completed around December 10.
Currently, investable cryptocurrency stocks in the U.S. include Coinbase, Bitcoin miners, balance sheet holders (like MicroStrategy), and a range of fintech companies related to cryptocurrencies, such as PayPal and Robinhood. However, the expected change in the leadership and stance of the U.S. Securities and Exchange Commission may ultimately open the public market to crypto companies in a meaningful way, leading to a significant expansion of the crypto stock market.
The expansion of crypto stocks, including exchanges, brokerages, data companies, infrastructure providers, and more, is a boon for both venture capitalists and public market investors. According to my statistics, since 2018, at least 300 startups have received $50 million or more in venture funding, with over 50 securing $100 million or more. Venture capitalists may help revitalize the lackluster venture funding environment of the past two years, while public market investors will have more ways to invest in this growing industry.
Broadening pathways to the public market will also revitalize the entrepreneurial environment for cryptocurrencies in the U.S. The current stance of the U.S. Securities and Exchange Commission incentivizes venture capitalists to focus on complex token-based trades rather than traditional businesses, which could harm the entire crypto ecosystem. Certain stock startups, particularly those directly handling digital assets, such as exchanges and brokerages, have mostly moved overseas. However, changes in the regulatory environment and an open public market may revive entrepreneurial activity in the U.S., bringing more job opportunities and capital formation.
Bitcoin and cryptocurrencies are not illegal in the U.S., but over the past four years, banks and market regulators have been working to curb their growth or shut them down entirely. Jurisdictions like the UK, Europe, the Middle East, Hong Kong, and Singapore have taken advantage of this restrictive stance in the U.S. to create clear regulatory frameworks and entice companies to leave the U.S., but this situation is about to change.
The market expects a significant shift in the United States' attitude toward cryptocurrencies, which will support a range of industry areas such as stablecoins, token issuance rules, taxation, and compliance reporting, among others. But let's not forget the public market. This is a new dawn for digital assets in the U.S., and the public market may seriously join this party.
