Top Stories of Last Week

Regulatory

  • FBI and local officials arrested three individuals behind Twitter hack. Florida resident Graham Clark was charged with organized fraud, communications fraud, fraudulent use of personal information and access to computer or electronic devices without authority. Federal officials also charging Nima Fazeli and Mason John Sheppard with aiding in intentional access of protected computer and conspiracy to commit wire fraud and money laundering.
  • Group of state-run commercial banks in China reportedly conducting large-scale internal testing of digital wallet designed for digital yuan. Banks are testing wallet application to transfer money and make payments in China’s CBDC.
  • Sberbank, the largest bank in Russia, considering possibility of issuing its own stablecoin that could be pegged one-to-one to Russian ruble. Potential stablecoin could be used for settlements involving other digital financial assets and is in accordance with recently passed crypto law.
  • Basler Kantonalbank, a government-owned commercial bank in Switzerland, planning to launch cryptocurrency services through banking subsidiary Bank Cler, which will allow customers to trade and store cryptocurrencies.

Project Development

  • Goldman Sachs appointed Matthew McDermott as new digital asset global head and confirmed they are exploring whether to launch own digital asset, possibly a stablecoin. McDermott hired Oli Harris as head of strategy last month, who was instrumental in JPMorgan’s blockchain, Quorum, as well as settlement coin, JPMCoin. Also stated Goldman might consider collaborating with JPM and Facebook on digital asset initiatives.
  • Business intelligence company MicroStrategy CEO Michael Saylor said company will invest $250 million of excess cash in bitcoin, gold and other alternative assets over next 12 months in new capital allocation strategy to hedge against USD inflation.
  • Grayscale Ethereum Trust filed to become SEC-reporting company, with the filing currently under review. Ethereum Trust currently has 1.9 million ETH in its possession, valued at approximately $746 million.
  • Counsel from Selendy & Gay PLLC and Roche Cyrulnik Freedman LLP filed letter to NY court saying they had undertaken exhaustive efforts to find Jarrad Hope and Carl Bennetts, co-founders of Status, and that investors are concerned they may attempt to disappear.
  • Ethereum Classic suffered second 51% attack in a week after more than 4,000 blocks were reorganized in recent case. Mining pool Ethermine’s parent entity Bitfly and Binance first reported reorganization, and currently unclear how much attacker has made. Previous attack happened between July 29 and August 1.
  • Attackers exploited vulnerability in Opyn ETH Put contract to walk away with more than $370,000, but estimated amount stolen may change. Attackers used flash loans to buy Ethereum Put oTokens from Uniswap, then reportedly chose USDC as collateral and exercised trading option. 

Exchanges

  • Huobi Group announced launch of Huobi DeFi Labs, a research and incubation platform focused on defi applications and projects, stating a commitment to allocate tens of millions of dollars to initial investment fund. Initiative will be led by CIO Sharlyn Wu, who previously led blockchain department at China Merchant Bank International.

Fundraising

  • Dapper Labs announced new $12 million funding round for new blockchain Flow, which was built to address challenges it was facing in launching and building products on Ethereum. Round included several NBA players as well as Coinbase Ventures, Andreessen Horowitz and Union Square Ventures.
  • Decentralized crypto exchange IDEX raised $2.5 million in seed funding ahead of IDEX 2.0 launch, led by G1 Ventures and Borderless Capital, with participation from Collider Ventures and Gnosis.
  • Crowd-equity platform Republic raised $16 million through sale of Republic Note security token. Firm secured commitments of $11 million through Regulation D offering and additional $5 million from non-accredited investors was committed through Regulation A+ offering that has yet to be approved. 
  • Cryptocurrency and security token exchange INX planned IPO, originally slated for Q2 2020, is now expected to take place before end of year, and offer of 130 million INX tokens now priced at $0.90 each, putting maximum raise at $117 million, down from initial $130 million company hoped to raise in initial prospectus.
  • Crypto venture capital firm Electric Capital closed second fund at $110 million, of which 90% said to be institutional capital. New fund allegedly includes multiple university endowments and will invest in startup equity and/or crypto tokens.
  • Infinite Fleet, developed by Samson Mow’s Pixelmatic, raised $3.1 million through private security token offering led by Charlie Lee, Adam Back, Heisenberg Capital founder Max Keiser and others.

Things to Watch This Week

  • Bitcoin Hashrate and Difficulty
    • Although the next Bitcoin difficulty adjustment scheduled for tomorrow is estimated to be an increase of ~1.3%, a good amount of attention should be paid to the hashrate of Bitcoin in general. With the recent double attack on Ethereum Classic serving as a clear reminder of how important hashrate is to Proof of Work protocols, the health of the Bitcoin mining industry needs to be checked at all times. With an increase in competition leading to a longer period of time needed to recoup investment, the potential dangers of flooding in China due to an unusually long rainy season, and the drama that currently surrounds Bitmain and its two co-founders, any shift in mining could have a major impact on the price of Bitcoin. 
  • Traditional Markets
    • In the same light, traditional markets are also facing some critical moments, with the recent news of Trump possibly banning both Tik Tok and Wechat, coupled with the continuous delay for the U.S.’ fifth coronavirus relief bill. Sudden resolutions to these issues could result in significant price movement for both traditional markets and crypto, so we’ll be keeping an eye on updates throughout the week.
    • Jane Tang 唐家婕 @ccjanetang

      Breaking: President Trump signs executive order on #TikTok and #WeChat

      Paul Mozur 孟建国  @paulmozur

      Incredible to see this unfolding. To me WeChat is a much bigger deal. TikTok was made because the Great Firewall cut China off, but WeChat is one of the few apps that actually spans the filters and links communities within and outside China. Of course there will be workarounds…

      If you’re not up on WeChat, here’s a video. It’s an incredible product. It pushed Silicon Valley to rethink features in their apps. It’s also a direct data conduit accessible by China’s internet police and a state-controlled filter bubble in its own right. nytimes.com/video/technolo…
       

      The business implications are also interesting. Most major American cos in China use WeChat for marketing, ads, after sales services etc. Seems they would have to stop. China blocks Facebook/Twitter, but allows its firms and media to use those platforms to advertise abroad.

      Tencent is also invested all over the place. It has stakes in gaming companies that make League of Legends, Clash of Clans, Fortnite, and Activision Blizzard itself. It also has a stake in SnapChat. Would these have to be undone?

      And finally culturally…WeChat links the Chinese diaspora to their relatives in China. There’s few other options because Beijing blocks int’l messaging apps. This will make it much harder for exchange students to call home and immigrants to talk to parents in China.
      Caitlin Long @CaitlinLong_

      The land grab by traditional banks entering #crypto has officially begun. July 22 = the OCC news + Visa’s blog post endorsing #bitcoin & stablecoins as valuable payment tech, & now Goldman breaks news that it has a team headed by a former #repo trader. 
      cnbc.com/2020/08/06/gol…

      1/ MORE ANALYSIS-Goldman’s new head of #digitalassets is a #repo trader based in LONDON. This is significant bc UK law basically has no limits on #rehypothecation. To be clear I’m not worried abt #bitcoin–as a system it’s immune to WallSt’s leverage games twitter.com/CaitlinLong_/s…

      2/ That doesn’t mean its price won’t be impacted tho–bc #rehypothecation fulfills real demand w/ artificially created supply & thereby suppresses price, all else equal. Rehypothecation works as long as there’s a lender of last resort. But #bitcoin has no lender of last resort!

      3/ So, how many times could a #bitcoin be rehypothecated? In UK there’s basically no limit bc the broker/dealer takes outright title to the customer’s asset. This is why Lehman transferred so many of its assets to its UK subsidiary from its US subsidiary. kramerlevin.com/en/perspective…

      4/ Details on all this stuff really matter, folks. Same goes for Goldman considering issuing a #stablecoin. Think it would (1) actually be backed 100% by risk-free assets that (2) will not be rehypothecated and (3) will be ring-fenced from a bankruptcy (“bankruptcy-remote”)?

      5/ Very hard (but not impossible) to achieve under this legal/regulatory structure, even if they wanted to. It’s DANGEROUS to put a finite-quantity, volatile asset that has no lender of last resort onto a leveraged balance sheet, & then to leverage that asset. Big potential.

      6/ This is why the #Wyoming #SPDI charter is non-lending, no #rehypothecation, 100% reserve + has legal clarity. #goodreasons So…grab bc big banks are in #crypto. More liquidity but also more of the bad kind of financialization. Let’s hope the risk ppl have eyes wide open.

      Wilson Withiam@WilsonWithiam

      A parallel DeFi ecosystem is quietly rising up on Cosmos. And projects like Band, Kava, Terra, & THORChain provide many of the critical building blocks to do so. @RyanWatkins_ and I unpacked what may be the first ecosystem with traction beyond Ethereum. 1/

      Despite the similarities, these Cosmos-based chains have market capitalizations that are significantly lower when compared to their Ethereum counterparts

      These projects could make Cosmos a viable outlet for investors seeking the next hot DeFi opportunity or users seeking shelter from Ethereum’s high fees But how does the Cosmos Hub itself stack up to Ethereum?

      Wolf@IamCryptoWolf

      $ETH broke out a 2-years accumulation range. Exactly as $BTC did back in Oct 2015.

      Mo@MorganTBennett

      1/ Updated chart on the F/I metric. Context: twitter.com/MorganTBennett…

       

      2/ With the exception of $ETH and $BTC, the outlook seems dire for all PoW #blockchains in the short to medium term.

      3/ And before someone writes that #Bitcoin seems to be doing well because F/I has been going up recently, not so fast. The security of $BTC has been on a continuous decline. We cannot rely on hashrate, but need to look at the security budget in relation to the market cap:

      4/ A large vault needs more security than a piggy bank. @MessariCrypto uses the “attack appeal” metric, which is essentially the inverse of the security budget normalized by market cap. High attack appeal = less secure against a capable rational attacker.

      5/ Summary: Except #Ethereum, the security of all PoW blockchains is getting weaker and weaker. This is an empirical fact (cf. the attack on $ETC this week).

      6/ When pounded by double-spend attacks, the price of those coins won’t go to zero, but you’ll still lose all your money. Merchants won’t accept payments and exchanges will just delist them one after another until there’s no exit left.

      Kevin Rooke@kerooke
      Unbelievable! Square did $875 million of Bitcoin revenue during Q2 2020. That’s almost 3x the volume of Q1 2020, and 25x more than Q1 2018 when Bitcoin buying went live on the Cash App.

      Image
       

      opyn@opyn_

      Here is an overview of the incident affecting ETH Put contracts. No other contracts are affected. ~371k USDC was lost. We worked with @samczsun to whitehack, securing ~439k USDC. Affected users, please see below. Full post-mortem coming in next few days. medium.com/opyn/opyn-eth-…

      Affected users, please join Discord (tiny.cc/opyndiscord) ETH Put buyers: please ping on Discord to redeem your Put option for 20% above Deribit market price ETH Put sellers: please join Discord for updates – we’re working on a plan to mitigate impact for ETH Put sellers

      The security of the Opyn protocol has always been & continues to be our highest priority. We have let our users down and will work tirelessly to rebuild your trust. Please let us know if you have any feedback or qs. You can reach us on tiny.cc/opyndiscord + feel free to DM us

      Update: Working with @samczsun we were able to whitehack an additional 132,995 USDC

      Genesis@GenesisTrading

      Today, Genesis released our Q2 Digital Asset Market Report, providing a detailed look at our record Q2 with $7.5B in trades and new loan originations.
      Read the full report here: genesistrading.com/wp-content/upl…

      Mason Nystrom@masonnystrom

      DeFi is having a year, but NFTs (non-fungible tokens) are also growing in popularity. NFTs have especially grown in the digital art niche. SuperRare – a leading digital art marketplace – started 2020 with $344,000 in platform sales volume which has quadrupled to over $1.6m.

      NFTs present a useful mechanism for preserving the scarcity and verifiability of rare artworks. However, there is an even stronger value proposition provided SuperRare’s tokenized artwork – royalty fees.

      For primary sales, there is a 15% commission and creators receive 85%. More importantly, SuperRare is appealing to artists because creators receive a 3% commission for all secondary sales. SuperRare’s royalty fee feature allows artists to capitalize on their growth over time.

      SuperRare collectors from 178 countries have earned over $350k in secondary sales demonstrating a vibrant post-auction market. Read the full piece for stats regarding artists, collectors, and SuperRare’s growing two-sided art marketplace: messari.io/article/the-cu…

      Small correction: SuperRare’s royalty fee is *10% for artists* and not 3% as originally stated. Welcome to a future with fewer starving artists.

      Alex Krüger@krugermacro

      Bitcoin holders by type as percentage of 21 million, using data from Glassnode , Coinmetrics and Chainanalysis.

       

      For the color blind

      Exchanges Balance (Glassnode) 13%
      Miners Balance (Glassnode) 9%
      Lost Coins (Coinmetrics) 7%
      Darknet Markets (Chainanalysis) 3%
      Other Illicit (Chainanalysis) 1%
      Other Holders 56%
      To Be Mined 12%