The Hivemind Brief 001: Volatility Strikes, Regulatory Advancements + An Inside Look at the Digital Culture Fund

Welcome to the first edition of The Hivemind Brief!

This newsletter is our new platform for engaging with our ecosystem and providing you with a comprehensive overview of our latest activities and insights.

Expect to receive quarterly updates inclusive of market and legal commentary, long-form content, and Hivemind updates, like the one below, along with occasional special announcements.

Thanks for reading and we’ll see you in our next edition!

From Richard Skeet, Managing Partner, Head of Research

"You will be much more in control if you realize how much you are not in control." ― Benjamin Graham, The Intelligent Investor.

For market participants, the ritual of US employment-related economic data releases on the first Friday of every month is familiar. There is a significant focus on the headline data releases, relatively little on the revisions to historical figures, and even less on the underlying details, which is hardly surprising as we live in a (short-term) attention culture that leaves little room for nuance. Given Wall Street's setup of always being on the lookout for a product to sell, we are used to being told each data set is the most critical (since the last time and until the next). Sometimes, they are proved right. When that happens, prices can move in a hurry.

Indeed, the data at the start of August revealed an "unexpected" weakness in the employment picture, which we believe contributed to the intense volatility experienced by risk assets. Whether the weakness was unexpected or an inconvenient truth ignored matters little. Prices make perception, and with prices adjusting aggressively, expectations of the future experienced whiplash. When Federal Reserve Chair Jay Powell announced at the most recent press conference that the "Sahm Rule" was merely a 'statistical regularity,' he, in effect, uttered the most dangerous words in investing - "this time it's different."

When the economic outlook sours, geopolitical risks hang heavy, and prices move enough to force the - at least partial - unwind of structural trades that have supported markets like a coiled spring, then trading conditions can be treacherous in all markets; the first whole week of August saw both the worst and best day of performance for S&P500 since November 2022. On top of this, the Digital Asset markets experienced a large legacy player exiting positions into a less liquid order book on a Sunday for reasons only known to themselves, creating a tsunami of volatility local to our asset class that compounded the adverse price action.

Markets tend to calm once policymakers begin to panic. Economic conditions should provide the Federal Reserve with the air cover required to join the monetary easing party kicked off by other Central Banks across the globe. Add to that the emergency meeting from those controlling monetary policy in Japan and the signs that global liquidity is again in an expansionary phase - historically correlated with more robust price performance in digital assets - and you get an outlook that supports digital assets. Perhaps events of recent days can be considered the "pause that refreshes" ahead of the seasonally strong fourth quarter.

2024 has already been a remarkable year in so many ways, especially for Digital Assets. Bitcoin and Ethereum are now tentatively considered commodities with associated spot ETFs launched, broadening access to the space and cementing Digital Asset allocation into portfolio construction conversations. The regulatory landscape is beginning to clear up in the US and solidifying in many other jurisdictions globally. Couple this with an outlook for improving global liquidity conditions, and there is plenty to be excited about for the rest of 2024, even if further bouts of volatility are conceivable.

—

Read our ETH ETF Market and Legal Update: Slow Start, Bright Future here.

From Sayuri Ganesarajah, Head of Legal and Compliance

As per the Market Update, the digital asset sector saw significant regulatory developments, with the approval of ETH ETFs standing out as a clear milestone following the approval of BTC spot ETFs at the beginning of this year. Amongst the many positive inferences from these milestones is the fact that the crypto industry has seen a warmer reception from the regulator in recent months. Furthermore, the public sees that the regulator simply pursuing an enforcement action is not in and of itself indicative of its success in those actions.

Earlier this month, Ripple Labs Inc. was ordered to pay a civil penalty of approximately 125m USD for improperly selling its XRP token to institutional investors—a significant reduction from the 2bn USD the SEC sought. Ripple’s CEO commented that this was a “victory for Ripple, the industry, and the rule of law.”

Up until the beginning of Q2, the political views around the crypto asset industry were relatively clear – President Biden and Former President and current Republican presidential nominee Trump have not been shy about their views. However, the views of Kamala Harris, the Democratic presidential nominee, are more unclear, which has brought uncertainty from a political perspective. The same can be said for Prime Minister Keir Starmer and the new Labour government in the UK. However, while we welcome musings around Harris’ appointment of Gene Sperling as one of her top advisers and the Labour Party’s previous support of the Bank of England's work in respect of the digital pound and establishing the UK as a securities tokenization hub, we will have to wait a little longer to see what the future holds, in both jurisdictions.

The UK continues to make progressive steps to provide a clear framework and oversight for digital assets. Notably, the Law Commission published a scoping paper on Decentralised Autonomous Organisations (DAOs) seeking to, amongst other things, give a clear introduction to what DAOs are and explore how they could fit within the legal framework of England & Wales. Notably, the Law Commission seeks to identify areas where further work can be done to accommodate DAOs. In addition, the Law Commission published a draft Bill and supplemental report on the ownership of digital assets as “personal property.” Personal property rights are crucial not only for arrangements regarding custody and collateral but also in understanding the implications of circumstances concerning bankruptcy, insolvency, and succession on death – this bill could positively affect millions of digital asset owners.

Access and Education: The Road to Digital Art Adoption 

NFTs and digital art have undoubtedly broadened the scope of art engagement, inviting a more diverse group of participants. However, the technology's complexity and the digital realm's distinct culture can still pose challenges to newcomers. Education plays a key role here, not only in demystifying technology and culture for traditional art participants but also in making art history and fine arts more accessible to digital natives. Digital art, existing at the intersection of these distinct groups, offers a unique opportunity to cultivate an environment where traditional art enthusiasts, and digital natives can push a movement forward.  

Ultimately, broadening the adoption of digital art relies on making it accessible and understandable to a wide range of audiences. This approach enriches the cultural tapestry and heralds an exciting new chapter in the ongoing story of art and digital innovation. 

Investment Spotlight: TRLab 

TRLab addresses this issue. A pioneering platform at the intersection of fine art and digital innovation and one of Hivemind’s recent investments, TRLab has distinguished itself by offering digital-first art experiences that resonate with new-age collectors and traditional art admirers . 

Their unique proposition lies in their ability to seamlessly blend esteemed artistry with cutting-edge digital experiences, helping to expand the art market's boundaries to include digital-native audiences. The platform's innovative 'play-to-learn' model exemplifies this blend, leveraging interactive and educational approaches to engage users deeply with art and its history. 

The decision to invest in TRLab was driven by several key factors that echo our investment philosophy: 

• Innovative Business Model that Introduces a New Generation of Fine Art Collectors: TRLab's innovative business model caters to a new wave of fine art collectors, emphasizing digital art experiences that blend education and engagement. Unlike general NFT marketplaces that attract traders with no fees and flexible royalties, TRLab offers a curated experience for those keen on owning and preserving fine art NFTs. This approach helps meet the rising demand for interactive digital content, and opens an exclusive asset class to collectors willing to pay for a more intimate connection with art and artists. 

• Strategic Partnerships: TRLab's collaborations with celebrated artists, prestigious institutions, and leading brands highlight its prowess in curating premium content and nurturing a dynamic community of art enthusiasts and collectors. By partnering with eminent figures, TRLab delivers iconic art to a worldwide audience, ensuring the integrity of artistic visions through bespoke communication and creative design. Each collaboration involves a tailored narrative that enriches the audience's comprehension of the artist's work and history, enhancing the overall experience. 

• Market Potential: The digital art market, buoyed by the NFT wave, presents significant growth opportunities. We believe the team’s roadmap shows a superior understanding of the space and will enable TRLab to capture a significant share of a growing market. We want to invest in category leaders and believe that TRLab will be one of them. 

Our commitment to TRLab is a testament to our belief in the transformative power of blockchain and digital technologies in reshaping the art world. As TRLab continues to innovate and expand its offerings (including physical collectibles and representation of digital artists), we anticipate it will play a pivotal role in defining the future of art collection and appreciation in the digital age. 

Digital Vanguards: Audrey Ou, Co-Founder and CEO, TRLab

We are thrilled to launch Digital Vanguards, a series by Hivemind spotlighting the visionary founders and leaders who are shaping the future of digital assets and the blockchain industry. To accompany our investment thesis above, we wanted to chat with Audrey Ou, Co-Founder and CEO of TRLab, for our inaugural edition, so you could hear about her story first hand.

Audrey shares her vision for the future of digital art, reflections on her journey thus far, advice for aspiring collectors and artists, and more!

Enjoy!

Further Reads from Hivemind

• Report on Current State of $KARATE – Beaten Up Enough

• ETH ETF Market and Legal Update: Slow Start, Bright Future

Hiring

Open Hivemind Positions:

• Accountant - United Kingdom

• Accountant - New York

• Investment Principal - Hong Kong

• Investment Principal - New York

• Investment Partner - New York

More roles within our network here!

Events

Hivemind will be in town at the following events - we’d love to see you there!

• Korea Blockchain Week | September 1 - 7 | Seoul, Korea

• Messari Mainnet | September 30 - October 2 | New York, New York

• Fordham Law Blockchain Regulatory Symposium | October 7 | New York, New York

• Money 20/20 | October 27 - 30 | Las Vegas, Nevada

• Hong Kong FinTech Week | October 28 - November 1 | Hong Kong

• The Bridge from The Tie | November 6 | New York, New York

• Art Blocks Marfa Weekend | November 14 - 17 | Marfa, Texas

• Permissionless III | October 9 - 11 | Salt Lake City, Utah

New events are added as they are confirmed. Follow us on X and LinkedIn to stay up to date on where we’ll be and to connect with us!

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