Top Stories of Last Week

Regulatory

  • New York Attorney General’s office settled with Bitfinex over inquiry into whether cryptocurrency exchange sought to cover up loss of $850 million in customer and corporate funds held by a payment processor. NYAG’s office announced settlement, formally ending inquiry that kicked off in April 2019. Under terms of settlement, Bitfinex and Tether will admit no wrongdoing but will pay $18.5 million and provide quarterly reports describing composition of Tether’s reserves for next two years. NYAG will bring no charges as part of settlement.
  • Treasury Secretary Janet Yellen issued warning about dangers that bitcoin poses both to investors and public. Yellen said there remain important questions about legitimacy and stability. “I don’t think that bitcoin … is widely used as a transaction mechanism,” she said. “To the extent it is used I fear it’s often for illicit finance. It’s an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering.”
  • Hong Kong Monetary Authority and Bank of Thailand announced central banks of China and United Arab Emirates are joining for project looking to use blockchain tech for regional payments called “Multiple Central Bank Digital Currency Bridge” (m-CBDC). Project will explore capabilities of distributed ledger technology through development of PoC prototype exploring possibilities of DLT and CBDCs in facilitating cross-border, multi-currency, real-time payments.
  • Lawsuit against on-chain liquidity protocol Bancor alleging unregistered security offerings worth US$216 mil has been tossed by NY judge. Lawsuit alleged investors had been misled by false statements and omissions leading them to conclude tokens issued by Bancor were in fact securities and subject to U.S. law.
  • Morocco’s central bank, Bank-Al-Maghrib, is investigating benefits of launching a central bank digital currency. BAM has launched exploratory committee to investigate pros and cons of CBDC four years after banning cryptocurrencies.
  • TD Ameritrade’s former chief of digital assets and distributed ledger Sunayna Tuteja has been hired by Fed as Chief Innovation Officer. Tuteja played major role in getting brokerage to view Bitcoin as another asset class. During her time at TD Ameritrade, she led investment into ErisX. 
  • MYbank and WeBank, institutions backed by Ant Group and Tencent respectively, reportedly set to join ongoing trial of digital yuan. Digital wallets from two private banks will be added to PBOC’s digital yuan app alongside those from six state-owned banks already participating. MYbank is already helping research and development on central bank digital currency.

Project Development

  • Ethereum scaling solution Optimism will launch mainnet this coming month after announcing $25 million Series A investment from Andreessen Horowitz that closed in November.

Institutional

  • MicroStrategy announced purchase of another $1.026 billion in bitcoin. Firm bought 19,452 BTC at average price of $52,765 per coin. It now holds 90,531 BTC worth $4.78 billion.
  • Square purchased additional $170 million of bitcoin, adding to amount it purchased in October. Company added 3,318 BTC to treasury for a per bitcoin purchase price of $51,235.70, adding to 4,709 BTC it purchased in October 2020 which were worth $50 million at the time. Currently, that investment is worth $224 million.
  • CI Global Asset Management, a subsidiary of firm overseeing more than $230 billion in assets, filed preliminary prospectus for CI Galaxy Bitcoin ETF (BTCX), which would be managed by CI and advised by Galaxy Digital. Two firms previously partnered on CI Galaxy Bitcoin Fund, a closed-end investment product.
  • Crypto services firm BCB Group launched BCB Treasury, a custody and reporting service aimed at chief financial officers. BCB Group partner Ben Sebley said early conversations about Bitcoin were mainly involving U.S. fintech firms, but last month spread to Europe and now includes mid-sized and large-cap companies in every industry and also very high-net-worth individuals.
  • BNY Mellon allegedly working with Fireblocks as part of plans to hold bitcoin and other crypto assets on clients’ behalf. Fireblocks and BNY Mellon declined to comment. Sources said Fireblocks is also about to complete another round of financing, after closing a $30 million Series B in November of last year. BNY Mellon’s digital assets custody platform will go live later this year.
  • Stablecoin issuer and crypto exchange Paxos applying to become clearing firm with SEC. If approved, Paxos would become one of just a handful of clearing firms in U.S., joining Depository Trust Company and Options Clearing Corporation.
  • CoinShares made 3,364,403 shares available for investment by individual and institutional investors ahead of planned public offering, equating to roughly 151m Swedish Krona ($18 mil). Offering gives company valuation of around $341 million prior to offering. CoinShares will begin trading on Nasdaq First North Growth Market on March 11 under ticker “COIN”.

Exchanges

  • Coinbase Form S-1 has been published by SEC, clearing way for its direct listing on Nasdaq. Publication of Coinbase’s S-1 provides first public view of financial performance and how it intends to use funds it raises. Coinbase generated net income of $322.3 million in 2020, after incurring net loss of $30.4 million in 2019. Additionally, claim to have $1 billion of cash on hand and $90 billion of crypto assets on its platform, representing 11.1% share of total crypto market. Coinbase also confirmed it is using Goldman Sachs, J.P. Morgan Securities and Citigroup to assist in listing.

Mining

  • Bitcoin mining firm Northern Data planning to list in U.S. in order to raise up to $500 million. Northern Data is in talks with Credit Suisse over listing, which could take place later this year, according to Bloomberg report. Firm owns world’s largest cryptocurrency mining facility in Rockdale, Texas, which has planned capacity of 1 gigawatt by end of 2021.

Fundraising

  • Crypto custody firm Anchorage raised $80 million Series C funding round, led by GIC, Andreessen Horowitz, Blockchain Capital, Lux and Indico. Anchorage is distinguished as first crypto native to receive federal banking charter from Office of the Comptroller of the Currency. Anchorage said it plans to help corporations add crypto to balance sheets and treasuries and scale lending business.
  • Kraken reportedly in talks to raise new capital in move that could see company’s valuation more than double from $4 billion to around $10 billion. Discussions with Fidelity, Tribe Capital and General Atlantic to raise an unknown sum are being reported by Bloomberg.
  • Sorare, a blockchain-based soccer gaming platform, raised $50 million led by Benchmark, Accel Partners, Alexis Ohanian, Gary Vaynerchuk and Barcelona striker Antoine Griezmann. Sorare’s total funding stands at $60 million. Sorare is planning to continue growing ecosystem, including launching mobile application and onboarding top 20 football leagues.
  • Bitcoin brokerage River Financial raised $17.3 million in equity sale. Firm reported 34 backers in filing. River’s equity filing comes as Bitcoin-only brokerage embarks on hiring push across compliance, client acquisition and engineering. 
  • Bitcoin payments platform Bottlepay announced it secured £11 million ($15.5 million) in seed funding round, which included Alan Howard; “present and former” Goldman Sachs partners; VC firm FinTech Collective; NYDIG; and Phil Doye. Bottlepay app offers international payments in bitcoin and fiat currencies in real time. Users can make micropayments via messages on Twitter, Reddit, Discord.

DEFI/NFT

  • 1inch team revealed it ported 10 million 1INCH tokens to BSC to be used as liquidity bridge between Ethereum and BSC and will seed 1inch ecosystem on BSC, including 1inch Aggregation Protocol and 1inch Liquidity Protocol. 1inch co-founder Sergej Kunz cited rising popularity and lower gas costs for expansion.
  • CoinShares coming to market with DeFi token meant for institutional investors called CoinShares Gold and Cryptoassets Index Lite. CGI token was built in cooperation with Index Coop, the team behind DeFi Pulse Index, and Imperial College of London. CGI token consists of two equally weighted wrapped crypto assets, WBTC and WETH, and firm’s wrapped gold token, wDGLD.
  • Mike Winkelmann, aka Beeple, made NFT history with “Crossroads” netting $6.6 million on secondary market via Nifty Gateway. Originally purchased for $66,666.60 on Nov 1, the new owner, who chose to remain anonymous, paid almost 100 times more, breaking price record for single NFT sale.

Things to Watch This Week

  • Bitcoin Miner Outflow
    • Miner Outflow, a metric provided by Cryptoquant, provides a rough picture into the amount of Bitcoin that is sent from all miners’ wallets, and can serve as an indication as to when miners are increasing their usual amount of profit taking to fund operations. As can be seen, a spike occurred on the 25th and another relatively high level of outflow was recorded on the 26th. These levels of outflow nearly match the levels of outflow seen at the end of last month, when we experienced our last significant correction. Levels seem to be decreasing for the time being, but it will be important to keep an eye on this metric this week to see if the bottom is in for now or if we’re to continue falling to new lows and under a significant support level at $42,000.    
  • GBTC Discount
    • This past week’s sell-off also brought about an unusual occurrence for Grayscale’s GBTC. Historically, the shares of GBTC have traded at a premium to the price of Bitcoin. However, this past week, the premium turned into a discount, dropping to as low as -3.77% on the 25th before rebounding slightly to -2.66% on the 26th. For reference, the premium reached levels as high as 82% in 2018 and had settled into a general range of 20-30% throughout 2019 and 2020. Speculation for the shrinking premium ranges from claims of less demand for Bitcoin to increased competition with several other options for institutions to invest into Bitcoin emerging in the past few months. Nevertheless, the premium/discount of GBTC is an important measure that will be monitored throughout the week once data has been updated to reflect current levels.    
    • Mira Christanto@asiahodl
      Is your balance sheet ready for the rest of the year? #Bitcoin
      Charles Edwards@caprioleio
      All the dollars that exist in the world wont be worth enough to buy a single Bitcoin in time to come. The Big Short’s Michael Burry is anticipating US Dollar hyperinflation. In Germany it played our slowly, slowly, then went exponential in 1923.

      Cassandra @michaeljburry
      “all the marks that existed in the world in the summer of 1922 were not worth enough, by November of 1923, to buy a single newspaper or a tram ticket. That was the spectacular part of the collapse, but most of the real loss in money wealth had been suffered much earlier.”
      READ MORE
      Mason Nystrom@masonnystrom
      .@nonfungibles dropped an amazing NFT 2020 report recently and I want to highly some of the awesome charts along with some personal commentary. A long (but worth it if you’re just scrolling anyway) thread on what you need to know about the current state of NFTs. 1/

      2/The overall Ethereum NFT (ERC 721s only) market capitalization currently sits around $338 million and IMO will easily double if not quadruple in 2021.
      READ MORE
      John Street Capital@JohnStCapital
      With @coinbase equity trading at $100B its valued more than $CME$ICE$CBOE, & $NDAQ. Are they an exchange or a way to get exposure to $BTC with operational leverage? $MSTR upsized a $600M convert to $1.05B 0% coupon; 50% prem; markets are paying up for “scarcity value” twitter.com/TheBlock__/sta…
      Mira Christanto@asiahodl
      1/ DeFi exploits are slowing but the $ size has been increasing. $ALPHA lost $38m last week – what does that imply ? Does losing -$285 million matter? We dive into the impact of exploits on Price & TVL

      2/ We list all the exploits vs TVL and price below. Since the DeFi summer, protocols’ expected loss to hacks or failures = 0.1%. The Exploit Amount / TVL is much higher = 9%. However, protocols are punished, losing -40% (average) of TVL in 24 hours.
      READ MORE

      Hasu @hasufl
      In this post, @gakonst and I explore different ways the upcoming EIP-1559 activation could play out. Although it may seem counterintuitive, we hypothesize that the best strategy for miners is to support the proposal.
      insights.deribit.com/market-researc…

      Mo@MorganTBennett
      Great post. I would add that supporting EIP-1559 is even more in the interest of miners as it prevents economic abstraction. Block subsidy and MEV is so high, there is really no need for any concessions to miners.

      John Street Capital@JohnStCapital
      0/ $SQ had 36M monthly transacting active customers in Dec + 50% YoY. They are showing P2P network effects at scale with a CAC <$5/sh & +50% P2P tx YoY. To put that in perspective a retail checking account can cost a legacy bank $350-$1,500; a brokerage platform $750-$1,000.

      1/ Cash App continues to see users find utility in the broader platform (which $PYPL is looking to emulate). Customer adoption beyond P2P increased across all products & new customers adopt products like Cash Card and $BTC within their first month at a higher rate.

      2/ Gross profit per monthly transacting active customer reached $41 in the fourth quarter, +70% YoY. $BTC has been a big growth driver. In ’20 more than 3M users bought or sold BTC & in January ’21, more than 1M customers purchased BTC for the first time.
      READ MORE

      fastackl@fastackl
      The USDT peg has held for YEARS despite nonstop FUD & repeated government attempts to break it. NYAG’s $USDT lawsuit is over. And the peg is still holding The market has spoken. Those trying to snuff out innovation to ensconce the status quo will be left behind. Full stop  
      twitter.com/NewYorkStateAG…

      1/They are not shut down. They just can’t operate in NY, which many firms like Kraken for example have chosen not to do anyway (too painful). Tether operates globally over the internet so it’s pretty meaningless. Just means things like redeeming for NY residents is a no go
      READ MORE

      Kathryn Haun@katie_haun
      “Although a work in progress with all the growing pains and rough edges that implies, DeFi’s promises of democratization, open access, transparency, predictability, and systemic resilience are alluring”
      2/ Appreciate the balanced sentiment in @HesterPeirce speech that regulators (and regulations) shouldn’t be “used to block new firms from coming into the industry with fresh, new ways of doing things” while mindful that regulators have an important place in the digital economy

      Hester Peirce  @HesterPeirce
      Some thoughts on regulating in the digital economy:
      sec.gov/news/speech/pe…

      John Street Capital@JohnStCapital
      0/ The @coinbase S-1 is out. In ’20 they had 2.8M monthly transaction users / 43M verified users. LTD they’ve conducted $456B of trading volume & as of 12/31/20 they had $90B of assets on the platform. 2020 revenue was $1.27B with $527M of Adj EBITDA
      Image
      1/ Their various platforms enable 7,000 institutions & 115,000 ecosystem partners in over 100 countries to participate in the cryptoeconomy. To date 90% of their retail users have found them via word of mouth. 96% of their net revenue has been derived from transactions

      2/ Their media quarterly traded volume has increased from $17 billion to $21 billion to $38 billion in 2018-2019-2020.

      3/ In terms of their corporate B/S they own $48.9M of $USDC, $130.1M of $BTC / $23.8M of $ETH & $34M of other crypto assets (as of 12/31/20 since that time ETH is +125% & BTC is +75%)

      5/ They have 2 years of historical financials which fails to show how the business performs throughout market cycles. They do provide a small glimpse into ’18 showing monthly transacting users which in 3Q18-1Q19 was <1.0M & assets on the platform both of which were cut in 1/2.

      Image
      6/ Looking at Coinbase vs. Incumbent exchanges at the $100B valuation it was settling in secondary transactions its greater than $ICE $NDAQ $CME & $CBOE yet smaller than all of them on topline (except $CBOE) & EBITDA (with much quicker growth due to $BTC appreciation).
      Image
      7/ This will be viewed as a way for investors to get exposure not just to $BTC but the crytpoasset class more broadly. They should use this currency to be acquisitive (e.g., buy $CBOE for <10% of equity and it’d be 100%+ accretive to EBITDA & provide them a range of licenses)

      balajis.com@balajis
      The defi matrix As each asset class goes on-chain, it can be stored in a digital wallet. And it can be traded against other such assets. Not just cryptocurrencies, but national digital currencies, personal tokens, etc. We’re about to enter an age of global monetary competition.

      The defi matrix is the table of all pair wise trades. It’s the fiat/stablecoin pairs, the fiat/crypto pairs, the crypto/crypto pairs, and much more besides. Uniswap-style automatic market making for everything. Every possession you have, constantly marked to market by ~2040.
      READ MORE

      CryptoWhale@CryptoWhale
      JUST IN: U.S. stimulus checks could unleash a $170 billion wave of fresh retail inflows to the stock market, according to Deutsche Bank strategists. A survey showed 37% of retail investors planned to put their stimulus cash directly into equities.