Weekly Spotlight

After the spot ETFs: outlook for BTC

For regular readers of the weekly, this is going to feel like a broken record moment, but we do have to repeat it at least one last time: the ETF approval for BTC was always going to be a hard sell-the-news event. The only thing that was really up for debate in our view was whether the post-ETF sell-off would take place on the day, or whether we would see a brief stabilisation through the first two days before selling off, and it of course turned out to be the former. The 1-hour high for the year to date on Coinbase was set in the same hour that the ETFs started trading; we don’t think it gets any clearer than that.

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Written On Jan 24, 2024
9 Min Read

Executive Summary

  • We look at price action following the spot ETF launch and at what comes next.
  • Short-term: prices to remain depressed, stabilisation into grind down through Q1.
  • Medium and long-term: lows marked mid-year, strong Q4, very strong 2025.

For regular readers of the weekly, this is going to feel like a broken record moment, but we do have to repeat it at least one last time: the ETF approval for BTC was always going to be a hard sell-the-news event. The only thing that was really up for debate in our view was whether the post-ETF sell-off would take place on the day, or whether we would see a brief stabilisation through the first two days before selling off, and it of course turned out to be the former. The 1-hour high for the year to date on Coinbase was set in the same hour that the ETFs started trading; we don’t think it gets any clearer than that.

To delve a little more deeply here, in our view, everything still comes back to a fundamental misapprehension by market participants with respects to what the ETFs represent – that being, short-term market access for retail and institutional clients alike. The narrative for years has been that spot ETFs represent essentially the final frontier for market access for crypto – once they’re achieved, there is essentially no money that is theoretically off limits with regards to being able to invest in crypto, other internal controls on said money notwithstanding.

There is a sort of reverse-Bell curve with how true this is over time. During the first great bull market in 2017, an immediate spot ETF would probably have indeed created an even greater rush of money into crypto than happened at the time (and created a bubble that would genuinely put everything seen before to shame and made the comparisons to tulips or what have you slightly less trite and hackneyed) because of how genuinely difficult it was to onboard into crypto without using extremely disreputable and poor provenance venues. Five years from now, the spot ETFs will aggregate to likely hundreds of billions in in-flows and bring BTC to its summit (i.e. ‘digital gold’ realised).

Right now, however, the impact of that market access is not that significant. The situation with respects to both exchanges and custody at all levels for on-shore clients is light-years ahead in 2024 of where it was in 2017; simply put, anybody with a shred of real will to invest in crypto assets in the moment has been able and comfortable in doing so for several years now. The flows that the ETFs will unlock in the longer-term, coming as they do from 401ks and the like and in general being advisor-driven, will be very real, but there will be a ramp-up period measures in years rather than weeks or months, as there always is with said products.

This reality is completely and totally reflected in what we’ve seen in terms of ETF inflows and outflows so far. Inflows were decent and technically record-breaking at $4.5bn in the first 7 days (with much of that having been frontloaded), but when GBTC redemptions are factored out, only represent about $1bn net – definitely good, but far from indicative of big tickets being written to only now get into BTC, especially given that these figures don’t include various outflows on non-US ETFs and other more obscure products.

Volumes arguably print a slightly better picture here at $6bn in the first 7 days ex-GBC ($14bn including it), but the crux of the ETF argument wasn’t that the ETFs would or wouldn’t quickly become strong and tradeable assets, but rather that they would be a gateway to short-term net inflows, and they haven’t lived up to bull case expectations here.

There has been a tendency here to ascribe all woes to GBTC, and specifically to firms stuck in the long-GBTC short-BTC ‘widowmaker trade’ from 2020. We think this is being overstated. As a refresher here, said trade involved larger firms borrowing spot BTC to create GBTC and therefore profit off the premium when they were able to sell the unlocked GBTC. The logic hence goes that redemptions are coming from parties who have been stuck long GBTC for the past 3 years, and are hence redeeming shares as fast as they can, with Grayscale forced to liquidate BTC every time to pay them back (since they can only be redeemed in cash).

We largely don’t think that this holds up. The idea that the initiators of said trade are largely still in the market is ludicrous; most exited (at a loss) in 2021 and 2022. There certainly were firms who bought discounted GBTC in anticipation of redemption over the last year (even unhedged), and we would expect to see consistent outflows via GBTC for a while yet as people cash in on said trade, but given that we’re still seeing net inflows overall, we don’t buy that GBTC alone is causing ETFs to drag massive net money out of the market. In any case, with APs seemingly able to process around $500m a day and Grayscale AUM having started at $29 billion, any influence here should only last for a month or so; at that point, discount on GBTC should go to zero (it was still at -1.18% on Friday 12th but is down to just 10-20 bps now) and redemptions should largely cease.

With that in mind, here are our general views over the coming weeks and months on BTC:

Short-term

As bearish as we have consistently been coming through and out of ETF approval, we do tend to think that there is a degree of relief coming in the next few days, precisely because of our view on what happened coming into it; this fundamentally feels like a demand-size shortage rather than a supply-side one, and as much as we felt the rally in December extended far beyond where it might be expected to in the median case, the conditions probably aren’t there for a sudden breakdown from current levels.

We have noted in the past that there has been a tendency for price to pivot off options expiry in either direction; with monthly expiry coming up on Friday, and with the tendency of the sort of money that was chasing ETF approval as a buy event to load up heavily on monthly options, we think that price action through Friday will probably be very telling of the month ahead. Our default case here is that we see a degree of stabilisation and possibly a small uptick over the weekend and into early next week. We should stress here that even if this does come through, we are talking about relatively limited upside potential (i.e. maybe to 43-44k on BTC and some overperformance on ETH) before we start to grind down again.

Medium-term

We would be very, very surprised if the levels over the weekend (high 38ks on BTC) ended up marking quarterly or annual lows. We will point out here that we did underestimate the overall strength of the market in November and December, and we expected said levels to end up marking basically the Q1 high rather than (for now) its low; regardless, a -20% drawdown would be getting off lightly in historical terms, and we do think that we will see a deeper albeit very slow drawdown that ultimately lands closer to the 31-33k level than anything else over the next two to three months.

When will markets start trending up again? We think there are two catalysts worth keeping an eye out for here. Bitcoin is again near another halving, due for some time in May; for those unfamiliar, BTC’s new issuance essentially works on a Zeno’s paradox level, wherein issuance rate is halved every four years so that it gets infinitely closer to the 21 million cap without ever reaching it. (In practice, this means new issuance goes to effectively 0 for all intents and purposes within a few more halvings, but that is a discussion for another time)

BTC price has generally rallied 6-12 months after halvings. In the early years, there is an argument to be made that the two may have been causally linked to some degree (i.e. a contraction of new supply coming onto the market from miners etc.); this has weakened somewhat as markets around BTC (especially non-spot) have evolved, and we will note that there were similarly between the 2020 halving and the ETF approval re: enthusiasm and anticipation in certain quarters, those in said quarters getting long in expectation of it being a catalysing event, and it ultimately disappointing in the short-term and price only moving significantly a couple of quarters down the line.

That is to say: we don’t think the halving is structurally significant for the market, but it can’t be ruled out entirely as an event that may grab attention and therefore inflows.

The other thing to watch for is conversion and approval of Ethereum spot ETFs. Grayscale have filed to convert their ETHE trust into a spot ETF, and several of the firms (including Blackrock) who filed successfully for spot BTC ETFs have done the same for ETH. Dates on this are still relatively murky, but estimates for potential approval here range from May to August (the latter being Blackrock’s final deadline on their current filing), though we will note that these aren’t hard deadlines due to the possibility of re-filing.

It is difficult to see how regulators in the US will be able to reject spot ETH ETFs after approving spot BTC ETFs given that almost everything is identical in terms of the exchanges and custodians servicing them, the availability of commodity ETH futures, and so on. That being said, there are possible lines of attack with regards to the size of ETH DeFi markets (being a vital part of the asset’s structure and being explicitly decentralised and unregulated), ETH’s proof-of-stake system meaning it can be claimed as a security or at least non-commodity (BTC’s proof-of-work has inured it against that), and so on; these would almost certainly not hold up in any lawsuit against the SEC, and we tend to think that the SEC will try to avoid a repeat on the embarassment that was the GBTC lawsuit, but it does need to be mentioned.

Anyway: conversely to both our BTC ETF call and the consensus we’ve seen among people who made similar calls, we think that ETH probably rallies on spot ETF approval (with BTC likely going along). Why? Firstly, insofar as GBTC has been a drag, we don’t think ETHE profiles out the same; the timeframes on the GBTC trade (i.e. starts to ramp up for creation in Q2 2020, first gains realised Q4 2020, firms repeat the trade in Q4 and get trapped in 2021) meant very few firms were willing or able to conduct basis-style ETHE trades (low timeframe before premiums started inverting and difficulty of finding ETH borrows). Additionally, while ETHE premium was much higher than GBTC, discount generally pegged quite closely to the much more liquid GBTC, and that combined with ETH’s underperformance over the last year or two should have prevented most naked or late discount trades. There will be outflows (especially if ETHE sticks at 150bps fees – we don’t think this is certain but it’s likely) but compared to the relative scale of the token markets it will be fewer per market cap than on GBTC.

Second, expectations matter. Enough people with enough money thought that the BTC ETFs would be catalysing, were long into it, and when that didn’t come to pass it basically necessitated a sell-off. We expect few to be long ETH going into a potential ETF as a result of that, and for early expectations for the success of said ETFs to be set so low that the actual results will be surprisingly positive on that basis near-regardless of what happens.

Third, mindshare. While BTC and ETH may be comparable in terms of market structure, exchange, custody, liquidity, and all of that, they are not comparable in terms of provenance or brand recognition. Bitcoin has been part of the cultural zeitgeist in most Western companies since probably 2013 or so; Ethereum has not, and if we take Google search data as a proxy for interest, we see that outside of a very brief moment in Q2 2021, it has barely made up any ground even in relative terms:

It is not the market access itself that matters here, but the publicity that ETF approval may bring to Ethereum as an asset. Our base case here for now would be modestly positive price action coming both in and out of the ETF, with ETH outperforming and BTC following during that; this would in turn set the stage for a stronger uptrend into Q4 for the market as a whole.

Our long-term view remains the same as ever: net positive in 2024, signs of a strong rally late in the year, breakthroughs on all-time highs on BTC and ETH in 2025, strongest beta in general on layer-2s and a handful of layer-1s that are particualrly successful in attaching themselves to ZK and scaling narratives (Solana, Monad, Sui, Worldcoin being the strongest candidates as it stands), and ultimately said rally probably being the last truly exponential one due to the lack of new worlds left to conquer for BTC in the long-term and ETH in the medium-term.

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Written On Jan 24, 2024
9 Min Read

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Appendix 1

Electronic Connectivity and Trading Platform Facilities

A1 Access and use: We may permit You to place transaction orders in cryptocurrencies with us by direct electronic communication to us through an electronic system (“Connectivity”). We may also provide You with electronic access to a platform to enable You to execute transactions electronically (the “Trading Platform”) which includes all related software and accompanying documentation. Your right to use Connectivity or the Trading Platform and any financial data, market and business information provided on or through Connectivity at the Trading Platform (“Information”) is limited to use for the purpose of receiving and viewing Information for the transmission and execution of transaction orders. We may amend the terms of this Appendix 1 with respect to the addition of a financial instrument or an execution issue to our Connectivity or Trading Platform services.

A.3 Licences: Connectivity and the Trading Platform are owned by us (and/or an affiliated entity) or third parties that license their use to us (and/or an affiliated entity) (the “Licensors”). You acknowledge and agree that Connectivity and the Trading Platform are the exclusive property of the Company and/or the Licensors, and that the Information is the exclusive property of ours and/or the Licensors or such licensor’s third party vendors or their suppliers, and we the Licensor and such third party vendors and their suppliers retain all proprietary right, title, and interest, including, without limitation, copyright, in the Information. We grant You a personal, limited, revocable, non-exclusive, non-transferable license to access and use Connectivity and the Trading Platform under the terms of this Appendix 1. You shall not copy, license, sell, transfer, make available Connectivity or the Trading Platform or information to any other person. You shall not remove or alter any copyright notice or other proprietary or restrictive notice contained in Connectivity, the Trading Platform or Information.

A.4 Access responsibility: You are responsible for obtaining and maintaining, at Your cost, the necessary computer equipment and internet access required to enable You to access and use the Connectivity, the Trading Platform and Information. You are responsible for any equipment, software or internet access provided by a third party which You require to access and use Connectivity and the Trading Platform. You acknowledge and agree that we (and affiliated entities) are not responsible for any Connectivity or Trading Platform interface applications with third parties such as execution venues, information vendors and other investment firms such as derivative exchange execution and clearing brokers.

A.5 Information changes: Certain Information may be provided by third parties. If any of the Information ceases to be furnished by any third party vendors in a manner which is compatible with Connectivity or the Trading Platform, we may remove as much Information as is affected, without advance notice, without incurring any liability to You, and without any change to any of Your payment or other obligations. Further, we may modify, amend, alter, update, supplement or replace Connectivity or the Trading Platform software (which, among other things, determines the functionality and appearance of some or all of the Connectivity or Trading Platform features) from time to time, in whole or in part, without any notice (except for material changes to functionality as reasonably practical), without incurring any liability to You, and without any change to any of Your payment or other obligations. You acknowledge and agree that Your use of Connectivity or the Trading Platform after any modification, amendment, alteration, update, supplement or replacement shall constitute Your acceptance of such modification, amendment, alteration, update, supplement or replacement.

A.6 Security: You shall keep any user name, password or access code (referred to in this Appendix 1 as “User Codes“) provided to You for Connectivity or access to the Trading Platform confidential and secure. You shall be responsible for the safeguarding and security of Your User Codes. You shall be solely responsible for all orders and transactions arising from any person’s Connectivity use or access to the Trading Platform using Your User Codes notwithstanding any lack of our access controls or the failure of any access controls we may have implemented. You shall notify us immediately and in writing in the event of (i) any loss or theft of part or all of the User Codes; or (ii) any actual or suspected unauthorised use of the User Codes; or (iii) any actual or suspected breach of security or confidentiality of the User Codes. You shall maintain with respect to Connectivity and the Trading Platform adequate systems and controls to ensure that (i) use is only by authorized personnel; (ii) order accuracy, order size, compliance with credit and order limits is checked and validated; and (iii) order direction, order duplication and order retransmission errors do not occur. You will ensure that no computer viruses, worms or similar items are introduced through Connectivity to our computer systems and networks or to the Trading Platform. You will be responsible for the installation and proper use of any virus detection software which we may require.

A.7 System risk: Connectivity the Trading Platform and Information is provided “as is”. The entire risk as to the quality and performance of Connectivity or the Trading Platform or Information and any third party related goods and services is with You. We (or affiliated entities) make no warranties (express or implied), representations, or guarantees as to merchantability, fitness for any particular purpose, performance, service continuity, absence of interruptions or errors or otherwise with respect to Connectivity or the Trading Platform or Information. Neither we nor our affiliated entities nor licensors, third party vendors or suppliers of Connectivity, the Trading Platform or Information, shall have any obligation or liability to maintain Connectivity, the Trading Platform or Information or to supply any corrections, updates or releases. We reserve the right, in our absolute discretion, and without prior notice, to reject cancel or refuse to display or seek execution of any order for any reason. We may at any time and in our absolute discretion impose and vary limits and conditions upon the placement of orders using Connectivity or the Trading Platform including limits on size, order types and execution venues and conditions concerning collateral requirements.

A.8 No execution guarantee: You acknowledge and agree that Connectivity or Trading Platform order entry does not guarantee order execution. We will not be responsible for any execution of orders that are not received by reason of Connectivity or Trading Platform malfunction or otherwise. When You use Connectivity or the Trading Platform, unless You have received an electronic order acknowledgement, Your order will be deemed not to have been received. In the event You dispute or deny knowledge of any order which has been electronically acknowledged we will in either case be entitled immediately to liquidate or otherwise offset the position in the relevant investment or financial instrument without prejudice to such other rights we may have under this Appendix 1. Execution venues may reject or cancel Your transaction orders for which we accept no responsibility. You acknowledge that: (1) orders may be delayed for many reasons and the price of a security at the time of order entry may not be the same as the price of such security at the time such order is executed; and (2) cancellation of orders may not be possible prior to execution, even if the cancellation order is received prior to the time at which the order was to be executed.

A.9 System compliance training: You shall provide Your employees that use the Connectivity or Trading Platform with adequate information and training upon (i) the terms of this Appendix 1; and (ii) execution venue rules which we or our affiliated entities are subject and which You must also comply to ensure there is no breach of such rules by us or an affiliated entity. With respect to Connectivity or Trading Platform use for transactions on regulated markets, multilateral trading facilities or exchanges You shall neither engage in, nor facilitate, nor fail to take reasonable steps to prevent:

  • any action or any course of conduct that has the effect, or may be expected to have the effect, of artificially and/or abnormally moving the price or value of any cryptocurrency, or securities admitted to the regulated market or exchange, or any instrument underlying such cryptocurrency or securities or the level of any index of which such cryptocurrency or securities are a component;
  • entering artificial orders or otherwise entering into or causing any artificial transaction;
  • reporting a fictitious transaction or any other false data to the regulated market, exchange or other competent authority or causing such data to be input into any of their systems;
  • any action or any course of conduct that creates or may reasonably be expected to create any false or misleading impression as to the market in, or price or value of, any cryptocurrency, securities or related financial instruments;
  • any other action or any other course of conduct that may damage the integrity and the transparency of the regulated market or exchange; or
  • agreeing or acting in concert with, or providing any assistance to, any person with a view to or in connection with any action or course of conduct referred to in paragraphs (a) to (f) inclusive.

A.10 System misuse: You shall not use the Connectivity or Trading Platform for orders or transactions for or in connection with any activity which may constitute a fraudulent or illegal purpose or market abuse or otherwise use the Connectivity or Trading Platform in contravention of any applicable law and regulatory provisions. For the purposed of this Appendix 1 “market abuse” means behaviour in relation to investments which involves insider dealing, market manipulation or market distortion in breach of applicable laws or regulatory provisions. You undertake to familiarise Yourself and comply with any applicable law and regulatory provisions concerning the short sale of securities if You seek to execute a short sale transaction and You will ensure that Your use of the Connectivity or the Trading Platform will not result in a breach by us (or any affiliated entity) of any applicable law and regulatory provisions concerning the short sale of securities or any terms of this Appendix 1 concerning short sale orders or transactions.

A.11 Order entry error: If an order entry is made using the Connectivity or Trading Platform by mistake or does not reflect the intended transaction (an “erroneous order”) then You shall be responsible for amending or canceling such orders as necessary and for closing any resultant positions subject to our rights in this Appendix 1.

A.12 Preexecution controls: We reserve the right to limit Your use of Connectivity and the Trading Platform and apply pre-execution trading controls as may be appropriate to preserve compliance with applicable law or this Appendix 1 or any other trading limits or redirection which may be notified to You. With respect to the use of Connectivity or the Trading Platform, we shall have the right to reject or cancel orders or enter off-setting orders or restrict Your ability to enter further orders in the event You act in breach of the terms concerning Connectivity or the Trading Platform in this Appendix 1. Connectivity or the Trading Platform, Your access thereto and any information, service feature or function provided by means of Connectivity or the Trading Platform may be changed, limited, suspended, discontinued or terminated by us at any time without notice or liability.

A.13 Disclaimer: Neither ourselves nor any affiliated entity (nor any director, officer or employee thereof) shall have any liability to You or any third party for any losses (including loss of profits), expenses, costs, claims, damages (including punitive, special or exemplary damages) or for any account of profits or other restitution of any kind whatsoever arising from or incidental to the provision of access to or use of Connectivity or the Trading Platform or Information (including any failure to provide access to Connectivity or the Trading Platform or any operational failure of Connectivity or the Trading Platform or the introduction of any viruses, worms or similar items into Your computer systems and networks through Connectivity or the Trading Platform or any software we provide).

A.14 Indemnity: You shall indemnify and hold us and any affiliated entity harmless (and our respective employees, officers, directors and agents) from and against any and all claims, demands, legal actions or proceedings and all liabilities, damages, losses, expenses and costs (including legal and accounting fees and expenses) (collectively “Losses“) arising out of or incidental to Your use of, or access to, Connectivity or the Trading Platform or any associated third party services or equipment provided under the terms of this Appendix 1 except to the extent that any such Losses, as finally determined by a Court of competent jurisdiction, were caused solely and directly by dishonest or wilful misconduct of us or any affiliated entity.

A.15 Thirdparty software: To the extent that You are using Connectivity or the Trading Platform in conjunction with a third-party software (including, but not limited to, an algorithm), we expressly disclaim liability for any Losses arising from such third-party software. This disclaimer is without prejudice to any other provision of the Terms or Appendix 1.

1. Acceptance of the Terms

1.1. These terms of use (the “Terms”) set out the terms and conditions under which you (“You” or “Your” as appropriate) can trade cryptocurrencies, for example Bitcoin or Ethereum (“Crypto” or “Cryptocurrency”) using Enigma Securities Limited (the “Service”). Enigma Securities Ltd (“Us”, “We” or “Enigma” as appropriate) is a company registered in England and Wales with company number 11114339 and registered office 6th Floor, 30 Panton Street, London SW1Y 4AJ, UK. Enigma is registered with the Financial Conduct Authority (the “FCA”) for certain cryptoasset activity (with reference number 930442) and is an Appointed Representative of Makor Securities London Ltd which is authorised and regulated (with reference number 625054) by the FCA.

1.2 .  You acknowledge and agree that by engaging with Enigma to execute transactions or generally using the Service in any way, You will be deemed to have accepted these Terms. You understand that each order submitted to Enigma (whether by voice broking, email or via any other electronic interface that We may provide and/or accept) may result in Your entry into one or more binding transactions (a “Transaction”). You assume full financial and performance responsibility for all such Transactions created as a result of the process set out in these Terms.

2. Amendment to the Terms

Unless We consider any amendment to be a material change to the Terms (in which case we will provide You with not less than 7 (seven) days’ prior notice (a “Notice”)), We reserve the right to amend the Terms at any time without prior notice to You. All changes shall take effect immediately and an updated version of the Terms shall be published on Our website. If You do not agree to any amendment then You should stop using the Service immediately.

3. Risks

3.1. Cryptocurrencies such as Bitcoin and Ethereum are not currently classified as a type of regulated financial instrument under the current UK or European regulatory frameworks (including MiFID II). This means that the Service and Related Services are not governed by the same rules and regulations that apply to similar services relating to other products, for example, derivatives. You will not therefore benefit from the statutory client money protections available to clients receiving regulated investment services, including access to the Financial Services Compensation Scheme and the Financial Ombudsman for dispute resolution. The FCA client money regime, as set out in the FCA’s Client Asset Sourcebook, will also not apply to our provision of the Services to You.

3.2. The risk of loss in trading or holding Cryptocurrency can be high. The price of a given Cryptocurrency can vary greatly in a very short space of time. Many Cryptocurrencies are not backed by any asset, commodity or central bank. You should ensure that You fully understand these risks and You may therefore wish to take legal or financial advice before using the Service or placing any order.

4. Users

4.1. You must set up and maintain an account to use the Service and submit orders (an “Account”). Your eligibility to use the Service will be assessed on a case-by-case basis and may depend on the country where You reside. Enigma reserves the right to refuse to allow You to establish an account or use the Service for any reason at its absolute discretion.

4.2. You represent and warrant that Your use of the Service, and Your entry into each Transaction to which You become a party complies with applicable law and regulation in Your jurisdiction, including but not limited to: (i) legal capacity and any other applicable legal requirements in Your jurisdiction for trading Cryptocurrency and using the Service, (ii) any foreign exchange or regulatory restrictions applicable to Your use of the Service, and (iii) the receipt of any governmental or other consents (or exemptions) that You may need to be obtain prior to Your use of the Service.

4.3. Nothing in these Terms shall be deemed, nor shall cause, You and Enigma to be treated as partners or joint ventures.

5. The Service

5.1. We will process Your orders in relation to Crypto at our absolute discretion. In order to provide the Service, Enigma may rely on data and prices of third party exchanges and/or arrange for orders to be executed with or through an unaffiliated third party (the “Related Services”). You acknowledge and understand that Enigma has no responsibility or liability for the provision of the Related Services, which, whether provided by an affiliate or otherwise, are outside the scope of the Terms. Any authority granted by You to Enigma shall extend to the providers of the Related Services, where applicable.

5.2. The Service includes Crypto exchange services (namely the buying and selling of Crypto). Enigma shall not, nor is it under any obligation to, provide You with any advice in relation to the merits or suitability of any Transaction and You are required to rely on Your own judgement before submitting any order to Us.

6. Orders

6.1. You must submit all orders in accordance with these Terms and/or the Enigma Website if applicable. You acknowledge that We reserve the right to decline any order for any reason (including Your breach of the Terms, inadequate funds in Your Account, or market conditions).

6.2. If, following acceptance but before execution of Your order, an event takes place which, in Our reasonable opinion, means it is no longer reasonable to execute such order (for example regulatory action, change in law or following the request of an applicable third-party exchange), You acknowledge that We may cancel Your order without any liability to You (and update Your account balance accordingly).

6.3. Irrespective of the time at which (or medium by which) You place an order, You agree to pay or receive the price at the time the associated Transaction is executed. You acknowledge and understand that the nature of the Crypto market means that the price at which Your Transaction is executed may vary significantly from the price indicated at the time of Your order. Enigma is not liable for any such price fluctuations. The Service is independent of any exchanges, and We are under no obligation to quote or refer to a particular price or index.

6.4. We will use our reasonable endeavours to act upon any request to cancel or amend an order. You acknowledge and agree that if We are unable to cancel or amend an order, You will be bound by the resultant Transaction. You agree to accept the price in which Transactions are executed as final and binding.

6.5. You acknowledge and understand that all Transactions are entered into on a matched principal basis and Enigma owes You no fiduciary duty in the course of providing the Service. For the avoidance of doubt, nothing in these Terms shall preclude Enigma (or any other party approved by Enigma at Our absolute discretion) from acting as a market maker (“Market Making Activity”). Any terms, conditions, agreements or rules in relation to Market Making Activity shall be provided separately.

7. Funds

7.1. Enigma’s fund settlement process operates on either a same day (T+0) or delayed settlement basis. All purchase orders to buy Crypto must be paid for with an amount of fiat currency equal to the relevant purchase price plus any associated fees transmitted to and received by our relevant account(s). For all sell orders to dispose of Crypto: (i) the associated number of Crypto; and (ii) an amount of fiat currency equal to the associated fee, must be transmitted to and received by our relevant accounts. Failure to conclude that will result in the rejection of future orders. A list of fiat currencies We accept is available on Our website (“Accepted Currency”) or will be communicated to You in due course. If You attempt to make a payment in any currency other than an Accepted Currency, then such payment may be rejected.

7.2. It is Your responsibility to ensure that You hold sufficient cleared funds and Crypto (when applicable) to satisfy the settlement of any Transaction. The Service does not include the provision of margin.

8. Price

8.1. You acknowledge and understand that when You enter into a Transaction via the Service, the fee for the Transaction will be a fee determined by Us, taking into account market conditions. Such price may include a spread (the “Spread”) as against the price available to Us to fill Your order. You acknowledge and understand that the size of the Spread can vary dependent on market conditions.

8.2. You also acknowledge that any third-party fees, such as conversion charges and/or card processing fees, will be passed on to You (“Third Party Fees” and together with the Spread, the “Fees”).

9. Cash/Crypto Transmission

9.1. We will establish and maintain one or more bank accounts or digital wallets for accepted fiat currency or Crypto to be transmitted to us by You prior to an Order being executed. You acknowledge and accept that once transmitted, the funds or Crypto will be held in Our account in our Our name, or in that of a third-party firm, which may be an affiliate of ours (including, without limitation, Makor Securities London Limited) (a “Third Party Account Provider”). You acknowledge and understand that: (i) Your funds or Crypto will therefore be held in the same bank account or digital wallet as Enigma’s own funds or Crypto; (ii) the rules and regulations of the FCA’s Client Asset Sourcebook do not apply to You and/or Your use of the Service and Related Services and therefore You may not benefit from the FCA client money regime for the protection of Your funds or Crypto post transmission to Our account; (iii) the transfer of funds or Crypto from You to Us is solely referable to Your purchase of Crypto or Our purchase of Your Crypto and is not therefore a deposit as defined under the FCA rules.

9.2. In the event of our insolvency, in respect of fiat currency, You will rank as an unsecured creditor of ours for return of such funds if such entitlement arises under the relevant insolvency laws of England; and (vi) in the event of insolvency in relation to the Third Party Account Provider, Enigma may only have an unsecured debt claim against the Third Party Account Provider on Your behalf if such entitlement arises under the relevant insolvency laws of England. Enigma does not accept any liability for losses resulting from its insolvency or the insolvency of a Third-Party Account Provider. Your claim in respect of Crypto if such a claim arises following the insolvency of the Enigma Wallet holder may be limited to an unsecured debt claim, and the Crypto or cash sum You receive in respect of Your Crypto may be insufficient to satisfy Your Account balance.

9.3. In respect of the transfer of the funds, we will aim to credit Your Account with the corresponding amount of Crypto (provided the terms of your Order have been accepted by Us) within 1 business day of receipt of the relevant Order. In respect of withdrawals, we will debit Your Account, when agreed upon delay, with the corresponding amount of fiat currency following Your authorisation. The corresponding funds will then settle to Your bank account within 3 business days. We are not responsible for any delay in the settlement of a Transaction resulting from circumstances beyond our control, including any third-party systems failure.

9.4. You acknowledge and understand that the Crypto Which Enigma supports may change from time to time.

9.5. You will not be entitled to interest in respect of any funds or Crypto held by Us, a Third-Party Account Provider or an Enigma Wallet holder.

9.6. As described above, Your money and Cryptocurrency will not be segregated. Consequently, If We or a Third- Party Account Provider become insolvent, there may be delays in identifying individual assets, increasing the risk of loss.

10. Tax

It is Your sole responsibility to determine whether and to what extent any taxes apply to the Transactions and, if applicable to report and remit the correct payment to the appropriate tax authorities. Enigma does not and will not provide any advice with respect to the tax implications of Your entry into Transactions.

11. Delivery

Following the execution of a Transaction, delivery will occur on Enigma’s records and Your Account balance will be updated accordingly.

12. Security

12.1. You shall be solely responsible for controlling and monitoring the use of the password to Your Account, and shall not permit any person to provide Your password, to any third party. You acknowledge and agree that You shall be bound by any actions taken through the use of Your Account including all orders and the resulting Transactions or other arrangements, as applicable, whether or not such actions were authorised by You. We accept no liability for any loss that You may sustain due to compromise of Your password and/or Account that did not arise directly as a result of Our loss or negligence. If You believe Your Account has been compromised, You should contact us immediately at info@enigma-securities.io.

12.2. By registering an Account, You agree to be bound by and to indemnify and hold Enigma harmless for any and all actions taken by, or omissions of, individuals using an instruction to transfer Crypto to a digital wallet (a “Wallet”).

13. Information Provided

13.1. Any information provided to You via Our website or otherwise does not amount to investment advice. You may use this information for the purposes of the Service only, and shall not disseminate or reproduce the information in any way. Any price quoted or referenced on the website if applicable may be different from the execution price of the Transaction.

13.2. We provide the Service on an “as-is” basis to facilitate the submission of orders and execution of Transactions and any reasonably related activity (the “Permitted Purpose”).

14. Your Warranties

14.1. You hereby represent and warrant that:

14.1.1. You are and have been in compliance with the laws of the United Kingdom and any other jurisdiction that may have an interest in any transaction under this agreement including any anti-money laundering laws or any anti bribery and corruption laws of any other countries or jurisdictions that are applicable to such transactions and will remain in compliance with all such laws for as long as You are party to the Terms;

14.1.2. You have not taken and will not take any actions in furtherance of an offer, payment, promise to pay or authorisation of the payment or giving of, or a request or acceptance of, money, Crypto or anything else of value, to or by any other person (whether or not a government official) while knowing that all or any portion of the money or value offered, given or promised to such other person is for the purpose of securing the improper performance of that person’s function or the misuse of that person’s position; and

14.1.3. In the event that You authorise Enigma to transfer Crypto to a Wallet, whether hosted by You or a third party, such Wallet is beneficially owned by You.

14.2. In connection with the foregoing representations and warranties, You further agree as follows:

14.2.1. You shall indemnify, defend and hold Enigma harmless for any and all claims, losses or damages arising from or related to any breach of the foregoing representations and warranties; and

14.2.2. Enigma may terminate Your Account immediately upon written notice in the event that it concludes, in its reasonable opinion, that You have materially breached any representation or warranty under this Agreement (following applicable notice, grace and cure periods).

15. No Warranty

15.1. The Services are provided on an “as is” and “as available” basis. To the maximum extent permitted by applicable law, we specifically disclaim any implied warranties of title, merchantability, fitness for a particular purpose and/or non-infringement. We do not make any representations or warranties that access to any part of the Services will be uninterrupted or error-free.

15.2. Neither Enigma nor its affiliates gives any express or implied warranties or representations (including warranties of satisfactory quality and fitness) relating to: (i) any third party systems or protocols used to support the Service; (ii) the long-term value of any Crypto; (iii) the liquidity of any Crypto market or exchange; (iv) the accuracy or timeliness of historical Crypto price data made available to You by one of Our brokers; (v) the amount of time needed to execute a Transaction following an order (which is dependent on factors outside of Our control); (vi) the immutability or security of blockchain or underlying software underpinning any Crypto or any digital wallet (including the Enigma Wallet) associated with the Service (together, the “Technology”); or (vii) the freedom of the Technology from any errors, viruses or disruption.

16. Limitation of Liability

Enigma shall not be liable to You or any person for any losses, liabilities, damages, claims, costs or expenses arising from: (i) the performance of any Related Services; (ii) any delay in the execution of a Transaction; or (iii) the occurrence of any event describe in Clause 17, above (except where such an event was caused by Our negligence, fraud or wilful default). Without limitation to the above, in no event shall Enigma be liable for any amount greater than the value of the Crypto and fiat currency that is credited to, (or where applicable, ought to have been credited to, Your Account) at the time of any alleged loss or claim.

17. Termination

We may, at Our sole discretion: (i) close Your Account for any reason by giving seven (7) days’ notice or (ii) with or without prior notice suspend or terminate the Service (or any part of the Service) without liability to You. If Your Account is in credit on the date of termination (howsoever occurring), We will aim to transfer the funds and/or Crypto to Your bank account or Crypto wallet (as applicable) within 3 working days minus any Fees or payments that are due to Us.

18. Supplemental Terms

If You have agreed to use Connectivity or a Trading Platform (both as defined in Appendix 1), the terms of Appendix 1 will also apply.

19. Governing Law

These Terms are governed by and construed in accordance with the law of England and Wales. The courts of England and Wales will have exclusive jurisdiction to adjudicate any dispute arising under or in connection with these Terms.

Appendix 1

Electronic Connectivity and Trading Platform Facilities

A1 Access and use: We may permit You to place transaction orders in cryptocurrencies and derivatives thereof (including foreign exchange) with us by direct electronic communication to us through an electronic system (“Connectivity”). We may also provide You with electronic access to a facility to enable You to execute transactions electronically through us on execution venues that we (or an affiliated entity) are a member or participant and which we may notify to You (the “Trading Platform”) which includes all related software and accompanying documentation. Your right to use Connectivity or the Trading Platform and any financial data, market and business information provided on or through Connectivity at the Trading Platform (“Information”) is limited to use for the purpose of receiving and viewing Information for the transmission and execution of transaction orders. We may amend the terms of this Appendix 1 with respect to the addition of a financial instrument or an execution issue to our Connectivity or Trading Platform services.

A.2 Central counterparty, clearing agent or prime broker: The terms of this paragraph A.2. apply to cryptocurrency derivatives. We may provide Connectivity to the Trading Platform for the execution of transactions on an exchange, multilateral trading facility or other regulated market or trading platform (where the transaction is cleared through a central counterparty) for execution of transactions. We may make Your access to and use of Connectivity to the Trading Platform for execution of such transactions conditional upon Your execution of a give-up agreement on terms approved by us with (i) a clearing member and/or an execution broker member of the relevant exchange, multilateral trading facility or regulated market; or (ii) or a prime broker participant or central-counterparty for the relevant multilateral trading facility, regulated market or trading platform. We may pay a portion of the fees or charges we receive from You for our services to a central counterparty or operator of an exchange, multilateral trading facility, other regulated market or trading platform.

A.3 Licence: Connectivity and the Trading Platform are owned by us (and/or an affiliated entity) or third parties that licence their use to us (and/or an affiliated entity). You acknowledge and agree that Connectivity and the Trading Platform are the exclusive property of ours and/or the Licensors, and that the Information is the exclusive property of ours and/or the Licensors or such licensor’s third party vendors or their suppliers, and we the Licensor and such third party vendors and their suppliers retain all proprietary right, title, and interest, including, without limitation, copyright, in the Information. We grant You a personal, limited, revocable, non-exclusive, non-transferable licence to access and use Connectivity and the Trading Platform under the terms of this Appendix 1. You shall not copy, license, sell, transfer, make available Connectivity or the Trading Platform or information to any other person. You shall not remove or alter any copyright notice or other proprietary or restrictive notice contained in Connectivity, the Trading Platform or Information.

A.4 Access responsibility: You are responsible for obtaining and maintaining, at Your cost, the necessary computer equipment and internet access required to enable You to access and use the Connectivity, the Trading Platform and Information. You are responsible for any equipment, software or internet access provided by a third party which You require to access and use Connectivity and the Trading Platform. You acknowledge and agree that we (and affiliated entities) are not responsible for any Connectivity or Trading Platform interface applications with third parties such as execution venues, information vendors and other investment firms such as derivative exchange execution and clearing brokers.

A.5 Information changes: Certain Information may be provided by third parties. If any of the Information ceases to be furnished by any third party vendors in a manner which is compatible with Connectivity or the Trading Platform, we may remove as much Information as is affected, without advance notice, without incurring any liability to You, and without any change to any of Your payment or other obligations. Further, we may modify, amend, alter, update, supplement or replace Connectivity or the Trading Platform software (which, among other things, determines the functionality and appearance of some or all of the Connectivity or Trading Platform features) from time to time, in whole or in part, without any notice (except for material changes to functionality as reasonably practical), without incurring any liability to You, and without any change to any of Your payment or other obligations. You acknowledge and agree that Your use of Connectivity or the Trading Platform after any modification, amendment, alteration, update, supplement or replacement shall constitute Your acceptance of such modification, amendment, alteration, update, supplement or replacement.

A.6 Security: You shall keep any user name, password or access code (referred to in this Appendix 1 as “User Codes“) provided to You for Connectivity or access to the Trading Platform confidential and secure. You shall be responsible for the safeguarding and security of Your User Codes. You shall be solely responsible for all orders and transactions arising from any person’s Connectivity use or access to the Trading Platform using Your User Codes notwithstanding any lack of our access controls or the failure of any access controls we may have implemented. You shall notify us immediately and in writing in the event of (i) any loss or theft of part or all of the User Codes; or (ii) any actual or suspected unauthorised use of the User Codes; or (iii) any actual or suspected breach of security or confidentiality of the User Codes. You shall maintain with respect to Connectivity and the Trading Platform adequate systems and controls to ensure that (i) use is only by authorised personnel; (ii) order accuracy, order size, compliance with credit and order limits is checked and validated; and (iii) order direction, order duplication and order retransmission errors do not occur. You will ensure that no computer viruses, worms or similar items are introduced through Connectivity to our computer systems and networks or to the Trading Platform. You will be responsible for the installation and proper use of any virus detection software which we may require.

A.7 System risk: Connectivity the Trading Platform and Information is provided “as is”. The entire risk as to the quality and performance of Connectivity or the Trading Platform or Information and any third party related goods and services is with You. We (or affiliated entities) make no warranties (express or implied), representations, or guarantees as to merchantability, fitness for any particular purpose, performance, service continuity, absence of interruptions or errors or otherwise with respect to Connectivity or the Trading Platform or Information. Neither we nor our affiliated entities nor licensors, third party vendors or suppliers of Connectivity, the Trading Platform or Information, shall have any obligation or liability to maintain Connectivity, the Trading Platform or Information or to supply any corrections, updates or releases. We reserve the right, in our absolute discretion, and without prior notice, to reject cancel or refuse to display or seek execution of any order for any reason. We may at any time and in our absolute discretion impose and vary limits and conditions upon the placement of orders using Connectivity or the Trading Platform including limits on size, order types and execution venues and conditions concerning collateral requirements.

A.8 No execution guarantee: You acknowledge and agree that Connectivity or Trading Platform order entry does not guarantee order execution. We will not be responsible for any execution of orders that are not received by reason of Connectivity or Trading Platform malfunction or otherwise. When You use Connectivity or the Trading Platform, unless You have received an electronic order acknowledgement, Your order will be deemed not to have been received. In the event You dispute or deny knowledge of any order which has been electronically acknowledged we will in either case be entitled immediately to liquidate or otherwise offset the position in the relevant investment or financial instrument without prejudice to such other rights we may have under this Appendix 1. Execution venues may reject or cancel Your transaction orders for which we accept no responsibility. You acknowledge that: (1) orders may be delayed for many reasons and the price of a security at the time of order entry may not be the same as the price of such security at the time such order is executed; and (2) cancellation of orders may not be possible prior to execution, even if the cancellation order is received prior to the time at which the order was to be executed.

A.9 System compliance training: You shall provide Your employees that use the Connectivity or Trading Platform with adequate information and training upon (i) the terms of this Appendix 1; and (ii) execution venue rules which we or our affiliated entities are subject and which You must also comply to ensure there is no breach of such rules by us or an affiliated entity. With respect to Connectivity or Trading Platform use for transactions on regulated markets, multilateral trading facilities or exchanges You shall neither engage in, nor facilitate, nor fail to take reasonable steps to prevent:

    • any action or any course of conduct that has the effect, or may be expected to have the effect, of artificially and/or abnormally moving the price or value of any cryptocurrency, or securities admitted to the regulated market or exchange, or any instrument underlying such cryptocurrency or securities or the level of any index of which such cryptocurrency or securities are a component;

    • entering artificial orders or otherwise entering into or causing any artificial transaction;

    • reporting a fictitious transaction or any other false data to the regulated market, exchange or other competent authority or causing such data to be input into any of their systems;

    • any action or any course of conduct that creates or may reasonably be expected to create any false or misleading impression as to the market in, or price or value of, any cryptocurrency, securities or related financial instruments;

    • any other action or any other course of conduct that may damage the integrity and the transparency of the regulated market or exchange; or

    • agreeing or acting in concert with, or providing any assistance to, any person with a view to or in connection with any action or course of conduct referred to in paragraphs (a) to (f) inclusive.

A.10 System misuse: You shall not use the Connectivity or Trading Platform for orders or transactions for or in connection with any activity which may constitute a fraudulent or illegal purpose or market abuse or otherwise use the Connectivity or Trading Platform in contravention of any applicable law and regulatory provisions. For the purposed of this Appendix 1 “market abuse” means behaviour in relation to investments which involves insider dealing, market manipulation or market distortion in breach of applicable laws or regulatory provisions. You undertake to familiarise Yourself and comply with any applicable law and regulatory provisions concerning the short sale of securities if You seek to execute a short sale transaction and You will ensure that Your use of the Connectivity or the Trading Platform will not result in a breach by us (or any affiliated entity) of any applicable law and regulatory provisions concerning the short sale of securities or any terms of this Appendix 1 concerning short sale orders or transactions.

A.11 Order entry error: If an order entry is made using the Connectivity or Trading Platform by mistake or does not reflect the intended transaction (an “erroneous order”) then You shall be responsible for amending or cancelling such orders as necessary and for closing any resultant positions subject to our rights in this Appendix 1.

A.12 Pre-execution controls: We reserve the right to limit Your use of Connectivity and the Trading Platform and apply pre-execution trading controls as may be appropriate to preserve compliance with Applicable Regulations or this Appendix 1 or any other trading limits or redirection which may be notified to You. With respect to use of Connectivity or the Trading Platform we shall have the right to reject or cancel orders or enter off-setting orders or restrict Your ability to enter further orders in the event You act in breach of the terms concerning Connectivity or the Trading Platform in this Appendix 1. Connectivity or the Trading Platform, Your access thereto and any information, service feature or function provided by means of Connectivity or the Trading Platform may be changed, limited, suspended, discontinued or terminated by us at any time without notice or liability.

A.13 Disclaimer: Neither ourselves nor any affiliated entity (nor any director, officer or employee thereof) shall have any liability to You or any third party for any losses (including loss of profits), expenses, costs, claims, damages (including punitive, special or exemplary damages) or for any account of profits or other restitutionary relief of any kind whatsoever arising from or incidental to the provision of access to or use of Connectivity or the Trading Platform or Information (including any failure to provide access to Connectivity or the Trading Platform or any operational failure of Connectivity or the Trading Platform or the introduction of any viruses, worms or similar items into Your computer systems and networks through Connectivity or the Trading Platform or any software we provide).

A.14 Indemnity: You shall indemnify and hold us and any affiliated entity harmless (and our respective employees, officers, directors and agents) from and against any and all claims, demands, legal actions or proceedings and all liabilities, damages, losses, expenses and costs (including legal and accounting fees and expenses) (collectively “Losses“) arising out of or incidental to Your use of, or access to, Connectivity or the Trading Platform or any associated third party services or equipment provided under the terms of this Appendix 1 except to the extent that any such Losses, as finally determined by a Court of competent jurisdiction, were caused solely and directly by dishonest or wilful misconduct of us or any affiliated entity.

A.15 Third party software: To the extent that You are using Connectivity or the Trading Platform in conjunction with a third party software (including, but not limited to, an algorithm), we expressly disclaim liability for any Losses arising from such third party software. This disclaimer is without prejudice to any other provision of the Terms or Appendix 1.