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Seeking Regulatory Clarity For Crypto | 4/19 Newsletter

Does the SEC believe that ETH is a security or commodity?

Welcome to the latest edition of Index Insights! This week we’ll take a look back at a significant time in the history of DeFi, staking tokens, and icETH. Along with a walkthrough of how the FLIs and our automated products have performed in Q1 2023.

In this edition, you'll learn:

  • FLI products surge in 2023, amplifying ETH/BTC returns
  • Gensler testifies in front of Congress
  • Q1 Risk Automated Product Report

— The Index Coop team

FLIs Up Big in 2023

As the cryptocurrency market experiences a significant surge in interest, Ethereum (ETH) and Bitcoin (BTC) have seen remarkable year-to-date (YTD) returns. Their corresponding FLI products, ETH2x Flexible Leverage Index (ETH2x-FLI) and BTC2x Flexible Leverage Index (BTC2x-FLI), provide amplified exposure to these digital assets. Ethereum's 76% YTD return is driven by the growing popularity of decentralized finance (DeFi) and the successful Ethereum 2.0 upgrade, while its ETH2x-FLI has a YTD return of 169%.

Bitcoin, the original and largest cryptocurrency, has an 88% YTD return, bolstered by being seen as a safe haven during the recent bank closures and growing acceptance as a digital store of value. Its BTC2x-FLI outperforms with a 208% YTD return. FLI products present an attractive opportunity for traders to optimize their exposure to these leading digital assets.

Buy dsETH

Congress Seeks Regulatory Clarity From The SEC

On Tuesday, Gary Gensler, the SEC Chair, faced questions from the House Financial Services Committee about his aggressive stance on the crypto industry. Gensler defended his position, stating that he has never seen a field as non-compliant as crypto, and argued that the SEC has provided clarity on crypto custody, exchanges, and asset definitions.

Under Gensler's leadership, the SEC has issued 130 enforcement actions on crypto businesses, including a recent crackdown following the collapse of exchange FTX.

U.S. Rep. Patrick McHenry, chairman of the House Financial Services Committee, questioned Gensler on whether he views ether (ETH) as a security or commodity.

We’ll let you judge whether or not Gensler answered the question.

Read The DeFiLlama Recap

Q1 Automated Products Risk Report

Yield Products' icETH has shown a steady growth of 1.15% in ETH terms since February, reaching 1.05 ETH per icETH. The supply cap, a global limit on the total units of icETH, currently stands at 69% utilization, with 10.4K units in circulation.

No parameter updates have been made recently, but an update to the supply cap is anticipated in the coming months as the circulating supply approaches 80%. Meanwhile, the stETH:ETH price has remained relatively stable, with liquidity on the Curve stETH:ETH pool increasing by over 50% to almost $1.5B.

ETH2x-FLI has experienced a 25% growth since February, with a price rise of 19% for ETH. The current supply cap for ETH2x-FLI is at 58% utilization, with 1.44M units in circulation.

No parameter updates have been made in this period, and ETH2x-FLI relies on the UniV3 ETH:USDC pool for daily rebalancing. The price impact for rebalancing trades has been less than 0.1%, and the NAV vs DEX premium has remained between -4% to 4%.

Read The Full Risk Report

Disclaimer: This content is for informational purposes only and is not legal, tax, investment, financial, or other advice. You should not take, or refrain from taking, any action based on any information contained herein, or any other information that we make available at any time, including blog posts, data, articles, links to third-party content, discord content, news feeds, tutorials, tweets, and videos. Before you make any financial, legal, technical, or other decisions, you should seek independent professional advice from a licensed and qualified individual in the area for which such advice would be appropriate. This information is not intended to be comprehensive or address all aspects of Index or its products. There is additional documentation on Index’s website about the functioning of Index Coop, and its ecosystem and community.

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