Top Stories of Last Week

Regulatory

  • Recently appointed deputy governor of People’s Bank of China Li Bo reportedly spoke on benefits of crypto as investment tool while highlighting regulatory uncertainty in comments at Boao Forum. PBoC head said there are still regulatory risks for central bank, but that PBoC seemed to recognize the investment potential of crypto, saying “we believe that crypto assets should play a major role in the future, either as an investment tool or as an alternative investment.”
  • Bank of England and HM Treasury jointly created taskforce to explore potential CBDC in U.K. Two government authorities will explore use cases and risks and also evaluate design features of CBDC and monitor international CBDC developments to ensure U.K. “remains at the forefront of global innovation.” CBDC taskforce will be co-chaired by Bank of England’s deputy governor for financial stability Jon Cunliffe and HM Treasury’s director general of financial services Katharine Braddick. 
  • U.S. House of Representatives passed legislation on digital assets known as Eliminate Barriers to Innovation Act of 2021, which seeks to set up digital asset working group with representatives from SEC and CFTC. Purpose of group is to “ensure collaboration between regulators and the private sector” to foster innovation. Under terms of bill, Congress is to create working group within 90-day period from date of bill’s passing, with overarching goal to clarify when SEC has jurisdiction over digital assets and when CFTC has final say.

Project Development

  • Miners have raised Ethereum’s gas limit to almost 15 million for first time in bid to relieve transaction congestion. Before increase, Ethereum’s gas limit was set at 12.5 million until Vitalik Buterin suggested raising it last week in light of recent code optimizations activated on network. This is seventh time in Ethereum’s history that miners have voted to increase gas limit. 
  • Trading tech firm X-Margin and custody provider Fireblocks working to standardize fragmented state of lending and borrowing of digital assets for institutional trading. First users of institutional credit sourcing platform are Celsius and crypto hedge fund Dunamis Trading. X-Margin Credit system allows fund’s risk profile to be made available based on all positions it has across venues using anonymous data thanks to zero-knowledge proofs, so lender is not privy to whole trading strategy.
  • Signature Bank announced as leading financial institution for Circle’s USDC reserve deposits. As part of partnership, Circle will be integrated into Signature’s blockchain-based real-time payments platform, Signet, which will allow for future integrations of Circle products and services within bank.
  • Citi’s “Future of Money” report stated Diem could become white label central bank digital currency provider, serving as infrastructure layer on top of that provided by public sector via CBDCs. Diem white paper states it is “open to having a discussion with any central bank [that] would be interested in adding [its] currency as a stablecoin on [Diem’s] network.”
  • Tether launched on Hermez Network, an Ethereum scalability solution based on zk-rollup concept, in hopes to alleviate pressure on Ethereum gas fees, where Tether contract is consistently among highest gas users. Hermez provides Ethereum-native alternative to Tron and can currently be accessed using MetaMask.
  • API3, a data oracle service, entered into 10-year development partnership with Open Bank Project to merge over 400 banking APIs with blockchain smart contracts, Web 3.0 applications and DeFi. API3’s “Airnode” infrastructure adds blockchain and decentralized apps into fintech’s mix of Web 2.0 and mobile applications that use Open Bank. 
  • Conflux, a public blockchain endorsed by Shanghainese government, launching cross-chain bridge to facilitate easier operations among Binance, OKEx and Huobi as well as Ethereum. Cross-chain bridge called ShuttleFlow will enable digital asset swaps between Conflux network, Ethereum, Binance Smart Chain, Huobi ECO Chain and OKex Chain.

Institutional

  • Galaxy Digital reportedly in advanced discussions to buy BitGo, the crypto custody specialist. BitGo was reported to have been in acquisition talks with PayPal last year, but no deal was reached even though PayPal offered as much as $750 million in cash. Details of deal are unclear at this stage, but traditional financial firm is alleged to be involved alongside Galaxy.
  • Purpose Investments and CI Global Asset Management both received approval in Canada to launch ETF that offers exposure to Ether. Purpose Ether ETF and CI Galaxy Ethereum ETF will list on Toronto Stock Exchange.
  • WeWork announced it is accepting cryptocurrency as form of payment and Coinbase will be first member company to use cryptocurrency as payment for membership. WeWork said it will also hold currency on balance sheet and pay landlords and third-party partners in cryptocurrencies using Coinbase. 
  • Baillie Gifford, a U.K. asset manager with $445.3 billion in assets under management, invested $100 million in Blockchain.com, one of Baillie Gifford’s first investments in crypto space.
  • BitGo expanded custodian’s insurance program by a further $600 million for a total of over $700 million in insurance coverage for cryptocurrency, including the original $100 million in cover for all customers using its platform. BitGo also offering clients ability to top up insurance by purchasing their own dedicated limits. BitGo’s crypto insurance is sourced from the Lloyd’s of London market.
  • First Foundation, the publicly traded company that counts a bank and financial advisory firm among its subsidiaries, made undisclosed strategic investment in NYDIG. First Foundation will also work with investment firm to provide clients with bitcoin-related products.
  • RIT Capital Partners, formerly known as Rothschild Investment Trust, acquired interest in Kraken, according to note to investors that announced investment but did not mention size nor amount paid.
  • Morgan Stanley’s FS NYDIG Select Bitcoin Fund LP raised $29.4 million from 322 investors in first 14 days, according to regulatory documents. Average investment in Morgan Stanley’s new bitcoin fund was around $91,000.
  • NYDIG has bought commercial lender Arctos Capital, which provides financing solutions to bitcoin miners and other crypto firms, to extend reach across institutional Bitcoin landscape. Terms of deal were not disclosed.
  • Digital asset manager 3iQ Corp aims to raise over $200 million in proceeds from dual listing of 3iQ Coinshares Bitcoin ETF in Dubai, with listing on Nasdaq Dubai exchange expected. 3iQ’s ETF is first cryptocurrency fund to go public in Middle East and company received regulatory approval for dual listing earlier this week.

Exchanges

  • Former top banking regulator Brian Brooks set to become CEO of Binance.US, according to Wall Street Journal report stating Brooks will join crypto exchange on May 1. Brooks, a former Coinbase executive, was recently acting head of Office of the Comptroller of the Currency under the Trump administration. He will replace Catherine Coley, current CEO of Binance.US.
  • Coinbase will list Tether’s USDT on professional trading platform Coinbase Pro, allowing investors to deposit dollar-pegged stablecoin and begin trading next week. USDT is listed on Kraken and Binance.US exchanges, but Coinbase is subject to closer regulatory scrutiny, having gone public last week on Nasdaq.
  • Binance has attracted attention of regulators for selling “stock tokens” designed to track performance of shares in companies like Coinbase and Tesla. U.K. Financial Conduct Authority and German regulator BaFIN did not confirm whether investigation into tokens was underway, but said if “tokens… (might) represent securities and are subject to the obligation to publish a prospectus.” Binance says products are compliant with European Union’s Mifid II markets rules and BaFin’s banking regulations.

Fundraising

  • Dapper Labs is allegedly raising more money at new valuation of more than $7.5 billion. Reports say new round is being led by Coatue Management, which led previous round.
  • Aleo announced $28 million fundraising round led by a16z with participation from Placeholder VC, Galaxy Digital, Variant Fund and Coinbase Ventures, among others. Aleo web platform leverages zero-knowledge proofs to keep privacy at core of whatever apps are developed. Funding accompanied by launch of Aleo’s Developer Preview II, a line of new tools for developers to build on Aleo ahead of public launch of network.
  • Digital Asset Holdings raised $120 million in Series D funding round from 7Ridge and Eldridge. Digital Asset aiming to expand team by 50% this year and introduce new interoperability protocol. Firm’s core product, the open-source DAML smart contract language, works on both blockchains and centralized databases for synchronizing data, with clients including ASX, BNP Paribas, and Hong Kong Exchanges and Clearing, among others.

Mining

  • DMG Blockchain Solutions purchased 3,600 bitcoin mining machines, and expects order to push hashrate to over 500 PH/s. DMG will receive first shipments of ASIC miners August, with final batch coming next August.
  • Canaan Creative to supply 11,760 Bitcoin mining machines to Mawson Infrastructure Group Inc., formerly known as Wize Pharma, shipping and installing A1246 ASIC AvalonMiners for Mawson Infrastructure throughout 2021.

Defi / NFT

  • Sotheby’s first NFT sale of works by pseudonymous artist Pak fetched $16.8 million over three-day drop. Notable pieces in Pak collection included “The Pixel,” an NFT consisting of single pixel that sold for $1.36 million.
  • LVMH, Prada and Cartier unveiled Aura Blockchain Consortium, a collective effort to give shoppers a level of assurance that products being purchased are authentic. LVMH enlisted full-time blockchain team under Aura codename to develop cryptographic provenance platform for luxury market. Team worked with ConsenSys on project. Hublot, Bvlgari and Louis Vuitton are already active on platform.
  • EasyFi, a DeFi Polygon Network-powered protocol, reported suffering hack of over $80 million. Blog post by CEO Ankitt Gaur said hacker transferred out 2.98 million EASY tokens, worth total of around $75 million. Also removed was $6 million from liquidity pools in dai and tether. Private keys to network admin MetaMask account had been compromised, but EasyFi smart contracts were not exploited. Guar also confirmed plans for hard fork to recover funds are in works.

Things to Watch This Week

  • Bitcoin April 30th Futures / Options Expiry
    • The upcoming expiry for Bitcoin options towards the end of the week bears watching, as several of the past expirations saw a precipitous drop in the price of Bitcoin leading up to the expiry date. Since December, we’ve seen declines ranging from 18% to 31% in the days leading up to each expiration period at the end of each month. In the case of April, however, we saw the decline happen much earlier than expected with the previous weekend’s drop in the market followed by a continuation in the middle of last week. This sets us up for what should be an interesting end of month, as we’ll be monitoring whether the cycle happened earlier than expected this month, or if the pattern will repeat and we see a third wave of selling as the week goes on.  
  • Bitcoin Hashrate and Upcoming Difficulty Adjustment
    • The recent issues in China which led to a drop in hashrate due to miners being taken offline has seemingly passed, with the hashrate of Bitcoin recovering to nearly where it stood before the issues were brought to light. One thing that should be noted is that this upcoming weekend, we’ll have a hashrate difficulty adjustment that currently has last week’s drastic decline in hashrate factored into its adjustment, with the expected difficulty adjustment currently reading somewhere between -13% to -15%. While there is still plenty of time for this estimate to come down, it will be important to keep an eye on this throughout the week as it would mark the largest negative adjustment in the hashrate since November of 2020.   
    • Wu Blockchain@WuBlockchain
      Breaking: Li Bo, deputy governor of the Central Bank of China, said that crypto assets such as Bitcoin should be used as investment tools or alternative investments. This is the first time that the Chinese government has recognized the asset value of cryptocurrencies.

      Li Bo said that crypto assets are an investment option. It is not a currency in itself, but an alternative investment product. China is studying regulatory policies. 

      Libo also said that for stablecoins issued by private companies, stricter supervision than Bitcoin is required.
      READ MORE

      Mustafa Yilham@MustafaYilham
      Due to an incident in Xinjiang, China, Bitcoin’s Hashrate dropped by an estimated 20-25% from April 15-16th. What did we learn from this? How could this effect the future of Bitcoin? Here are some thoughts:

      Background: Bixin Group manage about 300mw/hour, which accounts for 2.5% of Bitcoin network. Large portion of our mining facility was in Xinjiang due to dry season in China & >80% of them went offline in Xinjiang last week.

      On April 10th, 2021 there was a water leakage at a coal mining facility in Xinjiang. Both Central & local government acted very quickly, and tried their best to minimize the loss and ensure the safety of the workers.

      The central government also demanded a through investigations to ensure such accidents are prevented in future, and part of it was temporarily stoping the operations at coal mining sites. Xinjiang grid is currently powered by coal thermal energy at 56.6%.

      How does this affect Bitcoin? Right now in China, it’s still dry season, so the majority of the mining operation >80% are still taking place in Xinjiang region. We currently estimate about 20-25% network Hashrate was affected as those mining machines went off line.
      READ MORE

      Arthur@Arthur_0x
      Dan McArdle@robustus
      For 10+ years now, it was rational to view Bitcoin as having a binary outcome: ~0 or moon. Well, here we are: $1T+ market-cap is the moon. Where from here? Who knows, but it’s probably not binary anymore. Now it’s a matter of degrees between here & other store of value assets.
      Charles Edwards@caprioleio
      Only 50% of the biggest banks in the US are bullish #Bitcoin. Still early.

      Willy Woo@woonomic
      This revisit of lower price has created incredibly strong price validation for Bitcoin about $1T cap. 14% of the supply last moved above $1T cap. This is a key line in the sand imprinted into BTC’s price discovery, an area of immense support.
      Image

      Anyone thinking we are going into a prolong price correction needs to know about the rate of new users coming into the network per day. We’re in the middle of a bull market with a hockey stick of new adoption, especially in the last 2 weeks.

      Image

      Coins continue to move to very strong holders (the Rick Astleys of this world). And moving at all-time-high rates.

      Image

      Lots of bearishness from technical traders the last few days. Meanwhile fundamentals are stellar, we’re very close to the bottom, if it hasn’t already been put in.

      Ryan Watkins@RyanWatkins_
      Ethereum settled $1.5 trillion in transactions in Q1 2021. That’s more than it’s previous 7 quarters combined.

      Prices may do whatever they want in the short-term, but the consistent growth in usage is undeniable. Blockchains will eat the world.

      SpartanBlack@SpartanBlack_1
      0/ I am hopeful that under new SEC Chairman Gary Gensler, the amended safe harbor rules championed by SEC comm. Hester Peirce will get approved. If it happens, crypto startups in the US will no longer be hamstrung by the somewhat restrictive Howey Test.

      1/ The proposal affords projects a grace period to attain full decentralization. This is a reasonable approach and was already being adopted by a number of crypto projects to a certain extent.

      2/ However, formalizing it will send a strong signal to the market that the SEC is pro-innovation, a step change in the approach the institution has taken to crypto startups which has always been an enforcement first approach.

      3/ This will help make it easier and less costly for US-based startups to innovate in this space, leveling the playing field vs crypto startups around the world. Coupled with the abundance of risk capital, this could accelerate the pace of crypto innovation-entrepreneurship.

      4/ If the US adopts this initiative, regulators around the world will likely have to counter with more accommodative policies to support their own startup ecosystems, creating a virtuous feedback loop.

      5/ In anticipation of this likely development, we are ramping up our dry powder for investing in early stage crypto startups by 2-3X. Let’s go!

      PancakeSwap  #BSC@PancakeSwap
      Over the last 24 hours:
      Only the #PancakeSwap router = 2M transactions
      The whole of Ethereum yesterday = 1.55M transactions
      The craziest part? Looks like things are just getting started.

      Raoul Pal@RaoulGMI
      To be brutally honest, I stare at the chart of ETH/BTC and I see an enormous rounded bottom with potentially huge breakout just above….

      When you price anything up in DeFi, NFT, community tokens or even metaverse worlds, everything is basically priced in ETH, including designers time etc. ETH is rapidly becoming the currency of the digital world and BTC is the pristine collateral and base layer.

      The ETH space is growing at 100% YoY (vs 50% YOY for BTC) and it is attracting a massive proportion of the developer talent and applications too.

      At this point in the risk cycle and with ETH 2.0 coming (cheaper fees and less supply), I’m struggling to not sell all my BTC to move my entire core position to ETH. To be clear – I’m a massive BTC bull, but I think ETH is the better asset allocation for performance right now.

      Again, this is no attack on the SoV properties etc of BTC but overtime, ETH has outperformed since inception, which is a non-deniable fact and soon it will probably surpass its ATH vs BTC too

      Adam Cochran@adamscochran
      1/25 The story of insurance is one of the most overlooked and underrated signs in this space of a huge potential breakout. But it’s a bull signal that seems underwhelming if you’ve never been an operator.

      2/25 Back in 2014, I worked at a, now defunct, Canadian Bitcoin exchange and we wanted to insure our assets. While our average user didn’t care, we were starting to onboard corporate accounts and VIP clients for the first time and this is something they were interested in.

      3/25 What we soon realized was, there wasn’t a lot of insurance for covering general deposit assets. Most banks and other lenders depend on FDIC (or CDIC in Canada) which is the Federal Deposit Insurance Corporation.

      4/25 FDIC covers your bank deposits up to $100k per account. And, most banks have cleverly created multi-bank holding companies, where if your account had $200k in it, they’d hold $100k and actually open an other account on your behalf at another bank to hold the next $100k

      5/25 This program through Certificate of Deposit Account Registry Services (CDARS) allows most financial institutions to cover up to $20M for a single holder.

      6/25 Then under Gramm-Leach-Bliley (GLB) Financial Modernization Act of 1999 this concept of “sweep accounts” came about that allowed financial institutions to provide FDIC insured deposit accounts as a backend service.

      7/25 For example, when you deposit into a Robinhood account, until you purchase a stock, then your funds are likely insured by a bank accounts FDIC. Afterwards they are insured by the Securities Investor Protection Corporation (SIPC) which strictly insures held investments.

      8/25 So this means that all the financial, fintech and fintech companies are covered by either federal or non-profit collective based insurance programs. So most private insurance companies don’t have departments, policies or programs that cover deposited assets.
      READ MORE

      Square Crypto@sqcrypto
      If bitcoin needs anything, it’s more white papers. In this one, @Square and @ARKInvest team up to argue for bitcoin as a key driver of renewable energy’s future:
      squ.re/BCEI-whitepaper

      Hate reading? Here’s the nutshell version:

      Solar and wind produce cheaper energy than fossil fuels. This should make them ubiquitous, but they’re held back by an obvious flaw: they produce too much energy when demand is low and not enough when it’s high. Batteries could fix this, but alone aren’t economical enough.

      What can fix this problem is an ecosystem where solar/wind, batteries, and bitcoin mining co-exist to form a green grid that runs almost exclusively on renewable energy. Not only is this doable, it is doable without jeopardizing the sector’s profitability.

      For much more info about how this would work, check out the white paper link and ARK’s comprehensive open-source model and assumptions:

      OKEx Insights@OKExInsights
      Looking back at the #Bitcoin market in Q1, the institutional momentum is obvious.
      For more in-depth analysis, read our on-chain research report on retail vs institutional investment in $BTC in Q1>
      bit.ly/3ak9Ur8

      Lucas Vogelsang@lucasvo
      1/ Today for the first time ever a DeFi protocol financed a Real World Asset: @MakerDAO minted its first 35,913 $DAI backed by real estate. What does this mean for Maker & DeFi?
      Read on  coindesk.com/maker-price-ma…

      2/ New Silver has a pool that investors can invest in by buying DROP tokens that earn interest on the underlying assets. DROP is an accepted collateral type on Maker and @NewSilverLend originated a loan with DAI coming directly out of the Maker vault. ethtx.info/mainnet/0x2185…

      3/ Maker gave New Silver a 5M Debt Ceiling. New Silver will be able mint more DAI as it originates more loans. This is huge not just for New Silver, but also for Maker & DeFi as a whole. Why?

      4/ Real World Assets make DeFi safer and more scalable: they add uncorrelated and massively scalable collateral to our ecosystem. They solve the issue of peg instability during large crypto market moves with their stability and low correlation.

      5/ It also means that now DeFi not only provides liquidity to people who want to trade crypto-native assets but to *anyone* in the world.
      Learn how DeFi will eat CeFi: medium.com/centrifuge/def…