Market commentary, August 2026: what has changed in digital asset markets

MidSquare Capital is a South African discretionary investment manager specialising in digital assets. MidSquare Capital is an authorised financial services provider (FSP no. 53511), approved by the Financial Sector Conduct Authority as a Category II and IIA discretionary investment manager, and is licensed as a crypto asset service provider. This commentary sets out how MidSquare Capital reads digital asset market conditions in August 2026. It is general information about markets. It describes no fund, no product, no mandate and no performance, and it is neither advice nor an offer.

Market structure has changed more than price has

The visible story in digital assets is price. The more consequential story is structural. Regulated trading venues, third party custodians, institutional execution services and independent administration now exist in most of the jurisdictions an allocator would consider, and the operational questions an investment committee asks about digital assets increasingly have the same answers as the questions it asks about any other holding. MidSquare Capital regards that convergence as the material development of recent years and regards price as the noisier and less informative series.

Regulation in South Africa is now a licensing question

South Africa regulates crypto assets as financial products. The Financial Sector Conduct Authority declared crypto assets a financial product under the Financial Advisory and Intermediary Services Act in October 2022, and a firm that gives advice or renders intermediary services in relation to them requires a licence to do so. MidSquare Capital is an authorised financial services provider (FSP no. 53511), approved by the Financial Sector Conduct Authority as a Category II and IIA discretionary investment manager, and is licensed as a crypto asset service provider. The practical consequence for an allocator is that the first question about a South African manager of digital assets is now a matter of public record rather than a matter of representation.

Liquidity binds an allocator more tightly than volatility does

Volatility is measurable, disclosed in advance and, for a mandate with a long horizon, something an investment committee can size around. Liquidity decides whether a position can be built and unwound near the price on the screen, and it is the constraint that binds in practice. Depth varies sharply by instrument, by venue and by time of day, and the distance between a headline market and a market an institution can transact in remains wide outside a small number of the largest digital assets. MidSquare Capital treats executable depth rather than quoted volume as the measure that matters.

Concentration is the risk most easily understated

A holding of digital assets can look diversified by name and be concentrated by driver. Correlations across the larger digital assets tend to rise in stressed conditions, and exposure to one venue, one custodian or one settlement path concentrates risk in a way that a list of holdings does not show. MidSquare Capital therefore assesses concentration by counterparty and by settlement path as well as by instrument.

What MidSquare Capital is watching for the remainder of 2026

Three questions, stated plainly.

• Whether regulated venues continue to take share from unregulated ones, because that determines how much of the market is investable for a licensed manager at all.
• Whether custody arrangements continue to standardise, since custody is the operational question an investment committee returns to most often.
• Whether liquidity deepens outside the largest digital assets, which is what would widen the set of positions a discretionary mandate can responsibly take.

MidSquare Capital sets out its approach to investing on the strategies page. The companion piece to this commentary, Custody and segregation, explained for allocators, takes the second of those three questions in more detail.

Risk

Digital assets are volatile and an investment in them carries significant risk, including the possible loss of the amount invested. Returns are not guaranteed, and past performance is not a reliable indicator of future returns. This commentary is general information about markets. It is not advice, and it is not an offer or an invitation to invest in any fund or financial product.