Top Stories of Last Week

Regulatory

  • Gary Gensler confirmed as new chair of SEC, after 53-45 vote by U.S. Senate. Gensler previously ran CFTC, overseeing implementation of new regulations around derivatives, and will be looking at shaping regulations addressing cryptocurrency industry. Gensler will take office as agency grapples with number of high-profile actions in cryptocurrency space, including lawsuit against Ripple and nine Bitcoin ETF applications to consider.
  • President Joe Biden’s administration reportedly troubled by long-term effects digital yuan may have on dollar’s status as world’s reserve currency, according to report by Bloomberg. Officials at U.S. Treasury, State Department, Pentagon and National Security Council are reportedly unfazed by short-term impacts of digital yuan on the dollar, but multiple government departments are increasing efforts to better understand possible threats posed by China’s initiative, how digital yuan will be distributed and whether it works around trade sanctions.
  • European Union’s lending wing reportedly planning to trade, settle and sell digital bonds using blockchain technology. European Investment Bank tasked Goldman Sachs, Banco Santander and Societe Generale with assessing feasibility of settling and registering bonds using tech, with initial investor meetings commencing April 15 and continuing for weeks.
  • Thailand’s fourth-largest bank by assets, Kasikorn (KBank), reportedly furthering exploration of project that seeks to bypass financial intermediaries using decentralized finance. In collaboration with Stock Exchange of Thailand, project known as Kubix has been set up to run as initial coin offering portal for digital tokens. Specifically, project uses smart contracts to allow users to lend and borrow funds from others without relying on brokerages, exchanges or banks to provide traditional services.
  • European Central Bank announced results of survey’s 8,200 replies to its public consultation on digital euro, with privacy being number one thing Europeans want. While 43% of respondents said privacy is most important feature, fewer than one in 10 showed support for full anonymity. Second most important issue was security, flagged by 18% of respondents. Digital euro expected to be rolled out within four years if policymakers give project green light this summer.

Project Development

  • Telegram close to fully repaying investors in its TON blockchain effort nearly year after settling allegations it violated U.S. securities law in raising over $1 billion for project. Next step allegedly might be an initial public offering in 2023, aiming for $30-50 million valuation. IPO will benefit buyers of Telegram’s bonds, which company sold in February to raise $1 billion.
  • Code for Taproot’s “Speedy Trial,” an activation method for Taproot upgrade, has been merged into Bitcoin Core. With Speedy Trial now merged, Taproot’s code is ready to start first step toward activation when code is released in May. Three-month activation window initiates, during which time network requires certain threshold of miners to signal for upgrade. If threshold reached, Taproot is “locked in” and activates three months after threshold is crossed.

Institutional

  • Galaxy Digital filed with U.S. regulators for Bitcoin exchange-traded fund. SEC is reviewing two applications, and companies have filed another six. These other six applications (including Galaxy’s) still need exchange partners to file corresponding forms before SEC can begin review.
  • Daniel Loeb’s Third Point LLC shown to hold cryptocurrency in five of its funds with Coinbase, according to regulatory documents showing billions of dollars in underlying assets. However, it is not clear how much of that is in crypto, which assets, or for how long they’ve invested.
  • SEC kicked off review of WisdomTree’s Bitcoin ETF application, announcing it would begin evaluating WisdomTree Bitcoin Trust. WisdomTree first filed for ETF last month, but previously attempted to launch regulated financial product with exposure to cryptocurrencies.
  • VanEck launched a new ETF on Nasdaq that aims to track companies working in digital asset space or those that have exposure to asset class. ETF, called Digital Transformation ETF, would provide exposure to various companies including crypto exchanges, miners, payment gateways, hardware, and technology providers.
  • Asset manager WisdomTree Investments announced it has listed its Bitcoin exchange-traded product on Deutsche Boerse’s Xetra market. WisdomTree Bitcoin ETP tracks spot price of bitcoin and is trading under ticker “WBIT.” SEC officially started review of WisdomTree’s Bitcoin ETF application recently. 
  • Brevan Howard Asset Management announced they will invest up to 1.5% of main fund worth $5.6 billion in undisclosed cryptos, according to unnamed sources cited by Bloomberg. Bloomberg said digital asset investments will be overseen by executives at crypto venture firm Distributed Global.
  • Rothschild Investment Corporation recently bought 265,302 shares of Grayscale Ethereum Trust, its first investment in vehicle. Investment manager also increased position in Grayscale Bitcoin Trust by 8,000 shares to 38,346 shares, up from 30,454 shares it reported at end of 2020. Shares in ETH trust were worth $4.75 million as of March 31 and holdings in BTC trust were worth $1.92 million.

Exchanges

  • Coinbase shares fell below initial opening price after historic direct listing on Nasdaq. After opening at $381, Coinbase shares soared to as high as $429.54 before dropping more than 100 points to close at $328 in volatile first day. Even with the drop, Coinbase shares were above $250 reference price assigned by Nasdaq.
  • Binance allowing users to buy fractions of companies’ shares with new tokenized stock trading service called Binance Stock Tokens, which are zero-commission digital tokens that qualify holders for returns including dividends. Users will be able to buy fractions of actual Tesla shares, with prices settled in Binance USD. Binance product is backed by depository portfolio of underlying securities managed by investment firm in Germany.

Mining

  • U.S. Bitcoin mining company Blockcap established headquarters in Austin, Texas, and anticipates bringing 32,000 new mining machines online over next year. Blockcap, which just completed $38 million raise, says it currently mines roughly 6 BTC a day using 10,000 machines. Blockcap plans to grow hashrate to 3.5 exahashes per second.
  • CleanSpark said it has signed contracts to purchase 22,680 S19j Pro and S19 Pro Antminers with goal to increase total hash rate capacity to over 1.1 EH/s by summer. Company bought 7,200 Sj19 Pro Antminers from Bitmain Technologies and signed contracts with unnamed dealer to purchase 15,480 rigs.
  • Distributed storage service provider IPFS Union funneling $1.3 billion in funding to build largest Filecoin mining facility in China as part of vision of building “Big Data Industrial Park” based in Jiangxi Province of Fuzhou City.
  • Chinese gaming company The9 said it agreed to buy 2,000 units of AvalonMiners Bitcoin mining machines for about $6.72 million in stock with a total hashrate of about 100PH/S.
  • Integrated Ventures entered purchasing agreement to buy $35 million worth of Bitcoin mining equipment. In partnership with Wattum Management, Integrated Ventures purchased 4,800 Antminer model S19Js from Bitmain. Integrated Ventures anticipates that 2,000 bitcoin miners will be operational by December 2021.
  • Gryphon Digital Mining raised $14 million to establish 100% renewables Bitcoin mining operations in United States. Team would not reveal where they will host machines, though press release says they can “access electricity costs as low as $0.013/kWh.” Gryphon’s first fleet of miners, roughly 730 petahashes worth, is already set up and will launch in coming months.
  • Toronto-based ePIC blockchain raised $7.5 million series A funding round to bring ASIC manufacturing to North America. ePIC currently produces ASICs to mine Siacoin, and development of Bitcoin ASICs is on company’s roadmap. 

Fundraising

  • ConsenSys raised $65 million from JPMorgan, Mastercard and UBS, Filecoin’s Protocol Labs, Maker Foundation, Fenbushi, The LAO, Alameda Research, CMT Digital, Quotidian Ventures and Liberty City Ventures, among others.
  • NFT Investments, an investment company focused on NFTs, raised £35 million ($48 million) through a listing on Aquis Stock Exchange Growth Market in London. Raise values NFT Investments at £50 million ($68 million). Firm claims to be first investment company focused solely on NFT market to launch on stock market in major jurisdiction.
  • Crypto wallet provider Exodus raised more than $59 million in public offering. Exodus Movement, Inc. began selling stock on April 8 in sale approved by SEC. Offering will close once maximum amount of $75 mil has been reached.

Defi / NFT

  • Crypto analytics firm CipherTrace is adding to its list of regulatory compliance tools with new sanctions-friendly address tracker for DEXs. DeFi Compli tool creates oracle on Chainlink that details crypto wallet addresses on government watchlist, preventing transactions from touching sanctioned addresses. 
  • Topps announced plans to issue flagship baseball cards as NFTs in partnership with MLB and the MLB Players Association. New project set to debut on Wax blockchain on April 20, marking MLB’s official entrance into NFT space.

Things to Watch This Week

  • FATF VASPs Definition Comment Period Ends
    • The FATF’s Draft Updated Guidance For a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers, which was released March 19th to help clarify the AML and counter-foreign terrorism financial obligations of VASPs under FATF standards, will see its comment period end early this week. Of particular concern with regard to this draft were the implications it posed for Defi, with distinctions and descriptors aimed at decentralized exchanges and NFTs to include them in the umbrella that falls under the FATF. Combined with last week’s Bloomberg report citing Sheila Warren, head of data, blockchain and digital assets with the World Economic Forum stating that “we’re going to see another round of pretty dramatic attempts at regulating this space,” it seems likely that we’ll be receiving some form of regulatory impact relatively soon. Additionally, with Gary Gensler being sworn in as the chairman of the SEC this weekend, it probably won’t be long before he tries to make his presence felt, so it will be important to keep an eye towards the regulatory front for more updates this week.   
  • Bitcoin Hashrate and China Mining Operations
    • Another situation to take note of is the recent dip in the Bitcoin mining hash rate, allegedly due to government-instituted blackouts in Northwest China. Several China-based Bitcoin mining operations and pools saw significant drops in their hashrate, including Binance Pool, BTC.com and Poolin. The blackouts were reportedly due to a “comprehensive power outage safety inspection” in Xinjiang after three recent coal mine accidents had occurred. Metrics calculating the drop range considerably, but it seems the consensus is that a 20-30% drop in hashrate occurred, although a slight recovery is already underway as of this writing. Nevertheless, the current estimated difficulty adjustment is showing a projected -3.55% adjustment to come in roughly two weeks, after three consecutive positive difficulty adjustments saw Bitcoin’s hashrate reach a new all-time high of 179.4, according to Coinmetrics. We’ll be closely monitoring both the situation affecting mining operation in China as well as Bitcoin’s hashrate progress throughout the week.
    • Wu Blockchain@WuBlockchain
      The hashrate of Bitcoin mining pools plummeted in 24 hours. Antpools fell by 24.5%, http://BTC.com fell by 18.9%, Poolin fell by 33%, Binance pools fell by 20%. The reason is that Northwest China is undergoing a complete blackout for safety inspections.
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      Joe McCann@joemccann
      Citi explaining @MakerDAO and DeFi to fund managers.
      balajis.com@balajis

      The thing people don’t get is: due to rapid growth, a surprising number of people suddenly have >50% of their net worth in crypto. Many personal flippenings have thus already happened. And crypto exchanges have all the deposits, so will replace legacy banks.

      Unlike today’s banks, but like older banks, you can withdraw all your digital cash from a crypto exchange — and this is good practice. However, keeping a “checking account” there to do international wires in USDC to other exchanges, or other financial services is reasonable.

      It’s a technical problem, but there are various ways to combine fully user-controlled wallets with centralized liquidity & order books. Many are working on this. This would address the (valid) not-your-keys, not-your-coins argument. And shift exchanges to a hub-and-spoke model.

      Nothing goes vertical faster than price when it starts soaring, so legacy banks may get flippened by crypto exchanges much faster than most expect. This is the real reform of the system post-2008. Rather than no new banks, everyone can be their own bank, with exchanges as hubs.

      Autism Capital @AutismCapital
      Even Arthur Hayes has capitulated and come around to Ethereum. “Ethereum…offered a substantial improvement…Don’t you wish you bought some ETH in the pre-sale? I know I do – I publicly called it a shitcoin in a very early edition of this newsletter.”
      blog.bitmex.com/yes-i-read-the…

      Brian Armstrong@brian_armstrong
      1/ Today is a big moment for @coinbase as we become a public company. But it’s also a big one for crypto. This all started with the Bitcoin whitepaper 12 years ago, a deceptively simple 9 page document by Satoshi Nakamoto that ignited a global movement.
      bitcoin.org/bitcoin.pdf

      2/ The Coinbase journey started when I read the Satoshi whitepaper while I was home for Thanksgiving in 2010. As I read it, I realized that crypto had the power to unlock a future where economic freedom was a reality for everyone.
      READ MORE

      CoinGecko@coingecko
      0/ Q1 has been an amazing time and the @coinbase listing really put the cherry on top! #Crypto is finally getting the recognition it deserves! Now buckle up for a sneak peek at our Q1 report  
      Grab the full report here: gcko.io/q1-2021-report

      Drew Hinkes@propelforward
      We’ve got a new proposed #SEC #token #safeharbor that would let issuers offer tokens in the US. It’s big. But, what’s new? How is it different from the prior proposal? What’s new? You guessed it. It’s unavoidable, It’s inevitable. It’s a #THREAD. Let’s dive in/1

      Right off the top, we have the elimination of the “good faith” provision that was previously implied upon the issuers in a(1) & of a(4) which required the issuer to act in good faith to “create liquidity for users.” /2

      New section a(5) includes reference to the new “Exit report” which is a new requirment defined and explained further down but tldr; its a report issued by the issuer’s counsel that asserts whether the tokens will be a security or not after the 3 year period. Good inclusion /3

      section b(v) is interesting; it contemplates that tokens may have been sold prior to the notice of reliance on the safe harbor having been issued by the issuer; this previews a BIG change further down- this rule can be relied upon by issuers whose tokens are already out there /4

      by way of private placement (i.e. exemption) or in an offering that violated rule 5 (i.e. was improperly unregistered). this is a path to fixing prior defective issuances. We’ll talk about this later… /5

      section b(iii)(E) also requires a new disclosure- the tokens need to have a block explorer. This makes sense & is good- its more disclosure. /6
      READ MORE

      Sam Trabucco @AlamedaTrabucco
      Heading into Coinbase’s hotly anticipated listing, markets have been volatile, and there’s been a lot of great trading to do if you know where to look. Honestly, the trading has seemed almost … *too* great? And pretty easy to predict. A thread about efficiency.

      Let me first discuss this notion more generally — efficiency. A market is called *efficient* if prices in the market consistently reflect some true fair value, based on all possible data at the time — trade history, blockchain data, news, etc. How efficient are crypto markets?
      READ MORE

      Elias Simos@eliasimos
      So “Flashbots is responsible for low(er) gas prices” is the dominant narrative this week. But when you zoom out a bit, you see that gas prices started topping out in early Feb. Are flashbots really saving Ethereum or is this just the effect of frontrunners moving to BSC?
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      The chart that no-one wants to look at; Ethereum vs BSC daily active addresses. BSC is a stone’s throw from overtaking Ethereum in DAAs.

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      Dylan-BTCization@BTCization
      JPMorgan just released a report titled: “Why is the Bitcoin futures curve so steep?” The big banks are eyeing Bitcoin’s contango
      Here are some of the highlights: Thread/
      1. “As has often been the case in the past, the growth and gradual maturation of cryptocurrency markets has naturally generated interest in derivatives and other sources of leverage. Though futures trade against a range of pairs, Bitcoin unsurprisingly dominates…”

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      2. “As of this writing, the June CME Bitcoin contract offers ~25% annualized slide relative to spot. The richness of futures is even more acute if we broaden our view to include unrelated exchanges, where carry can be as high as 40+% “

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      3. “Bitcoin ‘yields’ implied by futures are substantially higher than all major currencies across developed and emerging markets, and the situation is even more pronounced on offshore exchanges.

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      4. To put this into context, very few fiat currencies, including both developed and emerging markets, offer easily monetizeable local yields (e.g., from FX swaps) in excess of 5%.
      5. There is of course the special case of TRY, but with local consumer price inflation around 10% or higher, as compared to the explicitly deflationary monetary policy and cross-border transferability of Bitcoin, this hardly seems a plausible substitute.”
      6. “Why has such attractive pricing not simply been arbitraged away?” – Counterparty & repatriation risk in offshore markets – Complications with obtaining spot BTC exposure in the legacy system – GBTC being a main source of BTC exposure on the street (premium/discount problems)
      7. “This makes launching a Bitcoin ETF in the U.S. the key to normalizing the pricing of Bitcoin futures, in our view. As has been widely discussed, it could reduce many barriers to entry, bringing new potential demand into the asset class.
      8. A risk factor worth considering, however, is that it would also make basis trading much more efficient and attractive at current pricing, particularly if those ETFs can be purchased on margin. We would expect that to bring more basis demand into futures markets, especially
      9. the CME but also potentially other onshore exchanges. To the extent that contango normalizes for those contracts, we would expect some pass-through to pricing on unrelated exchanges as well, since presumably there is some arbitrage activity between the two.
      10. Normalizing these implied funding spreads with more two-way flow is likely a prerequisite for broadening the base of participants in BTC derivatives more generally, since it takes quite a bullish outlook to be willing to pay 30-40% annually to source levered long exposure.”
      11. Expect JPMorgan and other legacy institutions to enter this trade in a big way, at first for the yield, and stay when they come to realize what Bitcoin truly is. The game theory is just starting to heat up. The financial & economic incentives are too strong to ignore.