Top Stories of Last Week

Regulatory

  • FINRA settled with Robinhood on $70 million in penalties for “supervisory failures” in variety of services. Fine is highest penalty FINRA has levied against any firm, ordering Robinhood to pay $57 million in fines and $12.6 million in restitution with interest. Robinhood has neither admitted nor denied charges but rather “consented to the entry of FINRA’s findings.”
  • Eric Rosengren, president of Federal Reserve Bank of Boston, listed Tether among “financial stability challenges” the U.S. central bank is watching. Rosengren included stablecoin among what he termed “new disruptors” to short-term credit markets, saying “I do worry that the stablecoin market that is currently, pretty much unregulated as it grows and becomes a more important sector of our economy, that we need to take seriously what happens when people run from these type of instruments very quickly.”
  • Financial Action Task Force stated majority of countries have yet to put in place requirements for firms that handle cryptocurrencies during its second 12-month review of progress on crypto regulation. So far, 58 out of 128 reporting jurisdictions have implemented revised standards. Of those, 52 are regulating VASPs and six are prohibiting operation of VASPs. FATF also said draft guidance on DeFi and stablecoins received so much feedback that organization won’t make VASP rules final until next plenary meeting in October.
  • Verkhovna Rada, the governing body of Ukraine, passed law regulating payment methods that officially puts yet-to-be-launched electronic hryvnia (Ukraine’s CBDC) on par with cash, bank accounts and electronic payments.

Project Development

  • Crypto.com announced it will partner with Formula 1 in racing series this year as new global and inaugural partner for 2021 Sprint series. Agreement reported to be $100 million, with exchange becoming racing series’ official cryptocurrency sponsor and NFT partner.
  • DeFi firm Compound Labs announced Compound Treasury in cooperation with Fireblocks and Circle, which lets neobanks and fintech firms send dollars that are converted into USDC to be deployed on Compound for guaranteed interest rate of 4%. Compound Treasury will work like savings account, where users can get in and out when they want with no commitments to lock up for certain period.

Institutional

  • Soros Fund Management reportedly trading Bitcoin as part of broader exploration of digital assets. Dawn Fitzpatrick, chief investment officer for Soros Fund Management, allegedly gave green light to trade Bitcoin and possibly other cryptocurrencies in last few weeks.
  • Point72 Asset Management reportedly searching for “head of crypto” as firm gears up to enter crypto sector. 
  • NYDIG and NCR announced partnership that will make crypto purchases available to 650 banks and credit unions. Initiative in response to demand from NCR banking clients, whose 24 million customers will now be able to access crypto trading through banking apps with NYDIG providing custody.
  • Deutsche Börse Group agreed to buy two-thirds stake in Crypto Finance AG for more than $108.6 million, allowing it to offer custody and other crypto-related services to institutional and professional clients.
  • TP ICAP launching cryptocurrency trading platform with Fidelity Investments and Standard Chartered, scheduled for launch in second half of 2021 and will initially offer trading exclusively for Bitcoin, with other digital assets like Ether to be added at later stage.
  • Morgan Stanley purchased 28,289 shares of Grayscale Bitcoin Trust through Europe Opportunity Fund, according to SEC filing.
  • Ricardo Salinas Pliego said he is working to make his bank first in Mexico to accept cryptocurrency. Mexican billionaire said “me and (Banco Azteca) are working to be the first bank in Mexico to accept #Bitcoin.”
  • ARK Investment Management partnering with investment product firm 21Shares in submitting “ARK 21Shares Bitcoin ETF” application for approval by SEC.

Exchanges

  • Strike announced it would charge only around 0.3% for brokering BTC trades in 48 states and other U.S. jurisdictions. 0.3% fee will only cover spread charged by market-making firms supplying Bitcoin.
  • Coinbase announced plans to launch crypto app store offering third-party developed products. Also debuting Coinbase crypto savings account that yields 4% APY by lending out USDC. 
  • Financial Conduct Authority warned Binance shouldn’t be operating in U.K., saying Binance Markets Limited isn’t allowed to undertake any regulated activities without prior written approval. Further, FCA said no other entity in Binance Group “holds any form of UK authorisation, registration or licence to conduct regulated activity in U.K.”  Also, Financial Services Agency issued warning that Binance is not registered to do business in Japan. Lastly, Binance closed operations for Ontario-based users after allegedly failing to comply with Ontario securities laws.
  • Tom Brady and Gisele Bündchen will each take equity stake in FTX Trading Ltd via deal that makes Brady exchange ambassador and Bündchen FTX’s environmental & social initiatives adviser.

Fundraising

  • Mercado Bitcoin raised $200 mil in Series B round from SoftBank Latin America Fund. Investment round grants parent company 2TM Group $2.1 bil valuation.
  • Animoca Brands finalized $138.8 million capital raise through second tranche of $50 million. Notable investors included Blue Pool Capital, Coinbase Ventures, Gobi Partners, Korea Investment Partners, Liberty City Ventures and Samsung Venture Investment Corp.
  • Calaxy, Spencer Dinwiddie’s token-based app for creators, raised $7.5 million from Animoca Brands, Red Beard Ventures, ArkStream Capital, NGC Ventures and Genesis Block Ventures.
  • Mintable, an NFT marketplace backed by Mark Cuban, raised $13 million in series A funding round from Ripple, along with Animoca Brands, Metapurse, Jon Oringer, the founder and executive chairman of Shutterstock, and Doug Band, a founding partner of investment bank Teneo.
  • Valkyrie Investments raised $10 million in Series A funding found from Precept Capital Management, XBTO, 10X Capital and UTXO Management.
  • Nansen, a DeFi-native crypto tracer, raised $12 million in Series A funding round led by Andreessen Horowitz, with Skyfall Ventures, Coinbase Ventures, imToken Ventures, Mechanism Capital and QCP Capital also participating.

Mining

  • Hive Blockchain Technologies Ltd announced $66 million purchase of GPUs after joining Nvidia Partner Network Cloud Service Provider program. Joining Nvidia Partner Network will give Hive access to Nvidia’s ecosystem, partners, customers and industry expertise.
  • Bitcoin mining firm TeraWulf ordered 30,000 Antminer S19j Pro machines from Bitmain, with order cost estimated at nearly $100 million. Bitmain said it would deliver 30,000 machines to TeraWulf from January to June 2022. Machines are expected to increase TeraWulf’s total hashrate by three EH/s.
  • Blockware raised $25 million to purchase 14,000 mining rigs over next two years, which Blockware sourced from both Bitmain and open market. Company will use 8,000 rigs to build new mining facility in Paducah, Ky., and will sell 6,000 rigs to other U.S. Bitcoin mining operations.
  • Hut 8 Mining announced purchase of 11,090 new mining machines for $44 million. Machines are MicroBT M30S, M30S+ and M31S models and are expected to be delivered in October and fully deployed by December, pushing Hut 8’s hashrate to 2.5 EH/s.

Things to Watch This Week

  • Ethereum Deployment of London Upgrade on Final Testnet
    • This week will bring the final testnet deployment of the London upgrade on Ethereum, with the Rinkeby testnet launching on July 7th. So far, no issues have emerged with the upgrades handled late last month on Ethereum’s Goerli and Kovan testnets. This week should also contain the announcement of the chosen upgrade block for Ethereum’s mainnet, with the current estimates calling for an August 4th date for the hard fork. With Ethereum leading the way in this slight upturn of the market, it will be important to monitor this situation as it unfolds, as news of the developments that surround the hard fork should have an effect on Ethereum as well as Defi projects. Speaking of Defi, it’s now estimated that over 23% of all mined ETH is currently deployed in smart contracts, with a total of 23 million+ ETH valued at roughly $50 billion staked. With 6 million ETH committed to the Eth2 deposit contract and over 9 million ETH in various Defi protocols, the momentum for Ethereum could ride on positive implementation of EIP-1559 leading the charge in the London upgrade.   
  • Binance Regulatory Developments
    • A close eye should also be kept on news regarding Binance’s various regulatory developments this week. The past few weeks have seen financial regulators take action or give warning on Binance in the U.K., Japan, Singapore, Canada, Thailand, and the Cayman Islands that leave some concerned that the exchange’s troubles are far from over. The regulatory concerns vary from non-compliance to criminal negligence and operating without a license, and some speculation is beginning to surface that a coordinated effort is being dealt by these nations to make an example of Binance’s longstanding position as the leading cryptocurrency exchange. Although comments from Binance suggest that concerns are overblown, we will keep a close eye on updates to see if the scrutiny increases or not.     
    • Travis Kling@Travis_Kling
      June 2021 brought the most aggressive sovereign assault on #Bitcoin ever. That is not hyperbole, that is fact. Check this timeline- 25 discrete events in 30 days and I’m sure I missed a couple. A massive concerted effort from China. Yet here we are, making blocks & trading $33k.
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      Γiskantes (Γ, Γ)@Fiskantes
      Oof this is some heavy machine gun fire into Eth 2.0 and MEV…while I don’t think stuff is as bleak as Alex describes, there are centralizing forces at scale – similar to those that are inevitably centralizing Bitcoin PoW ASIC manufacturing and mining.

      I guess pointing fingers another way is not the proper answer this deserves and twitter prolly is not a good medium for that anyway but I expect a lot of takes on this, will be interesting

      FWIW centralizing forces will exist in every economical system on scale and no, free market doesn’t solve this. Some of them can be mitigated with engineering decisions (e.g. capping blocksize limit, opensourcing flashbots)…but its a fight that needs to be consciously fought

      Alex B.@bergealex4
      Holy fuck is Ethereum broken. EVERY design decisions they’ve taken for ETH2 carries absolutely irresolvable centralizing forces. Think staking is bad enough already? The underbelly of MEV is absolutely monstrous.

      Staking derivates network effect  
      Liquid staking protocol network effect  
      MEV sequencer network effect  
      EVERY component compounds into MASSIVE centralizing forces

      Somebody explain to me how this does not inevitably devolves into SINGLE staking protocol’s DAO (Hello LIDO!) controlling >80% of the validation because of the inherent network effect of their derivative (stETH) and their ability to trump MEV variance and extract > competitors!?

      Some smart cookies know exactly what is going on and are acting accordingly. When it’s all said and done, ETH validators will be hand picked by @a16z@paradigm and friends. There is NO alternative. Writing’s on the wall
      READ MORE

      Jay_OKEX_CEO@JayHao8
      That’s so far how the #bitcoin market has gone through the first half of 2021. Can’t wait for a more thriving second half!

      Wu Blockchain@WuBlockchain
      USDT did not issue additional issuance in June, and its share of stablecoins fell to about 60%, which was a 15% drop from the beginning of the year. No additional issuance of USDT in the past month is relatively rare in its history.

      There may be the following reasons: cold market demand decreases; USDT’s own mortgage assets are not enough; USDC, BUSD and other stable currencies are playing an increasing role in DeFi.

      Molly@bigmagicdao
      Worst Q2 ever
      DonAlt@CryptoDonAlt
      BTC up
      Alts get bought, new alts get created
      Gains are concentrated in alt land because retail likes to go nuts there
      Retail gets fucked by rug pulls and infinite selling
      Interest in crypto decreases
      BTC drops
      I kinda get why maxis hate altcoins so much tbh

      Dragonfly Capital@dragonfly_cap
      ETH as an asset has a complex narrative and we have yet to see a comprehensive analysis of its value. Our latest research presents an honest attempt to understand ETH’s valuation in 10 years and how we will get there
       medium.com/dragonfly-rese…

      1/ One of the oldest models to value ETH is via the MV=PQ model, which regards Ethereum as an economy and the total network value as GDP. However, this line of thinking eventually leads one to believe that ETH’s growth is limited as a replaceable commodity w/ high turn-over rate

      2/ In reality, Ethereum is far from being easily replaced. The flourish of DeFi has generated an extremely strong network and lock-in effect. Meanwhile, the upcoming upgrades incl. Layer 2’s, EIP-1559, and Eth 2.0 also promise highly competitive throughput and scalable tx cost

      3/ The alternative valuation framework we propose here conceptualizes ETH from three perspectives: 1) ETH as a consumable commodity 2) as a capital asset 3) as a monetary asset
      READ MORE

      Colin Harper @AsILayHodling
      Roughly 70 EH/s of hashrate has gone offline since China’s crackdown. Where is this hashrate going to go, how will it get there, and what does this mean for Bitcoin’s mining landscape? (10/10) on my research for @hashrateindex, summarized:
      bitcoinmagazine.com/business/china…

      China’s ban orphaned at least 1 million ASICs (!!!!), and their teams are scrambling to find new homes for them. But first they have to find: 1. Cheap power 2. Warehouse/rack space to house the machines 3. Teams to manage the machines/build space 4. A way to ship the machines

      Finding power is (relatively) easy (e.g., Bitmain has scouted out thousands of MW in the US). Rack space, tho, is scarce, and we’ll need to build more before all this hashrate finds a home. And as @wsfoxley breaks down here, shipping is very pricey rn compassmining.io/education/cost…

      So moving will be costly and some miners will sell their equipment instead, especially if they don’t have the connections to find a new farm. We can already see the affect of this selling on the ASIC resale market, with S9s and S19 Pros down roughly 40% in US and Chinese markets

      For those with connections, some are opting to build new rack space (or new farms entirely), while others have found racks at co-location facilities. In the US, a farm may costs roughly $120k/MW to build (not including real estate), while hosting can be $200k/MW + all in.

      We expect China’s exiled hashrate to settle:
      -30-40% in the United States
      -25-30% in Central Asia/CIS
      -10-15% in Latin America
      -5-10% in Canada
      -5-10% in the EU
      -10-15% stays offline
      Additionally, we estimate that American mining pools will manage 40 EH/s by the start of 2022

      Other predictions:
      -Profitability boost for non-China miners
      -Low ASIC values in interim
      -New BTC/mining laws as industry moves to new locales and govts respond to China ban with own laws
      -Miners migrate to pools in own country to reduce counterpary risk with Chinese pools
      READ MORE

      Ryan Watkins@RyanWatkins_
      In coming weeks it is very likely USDT’s share of the stablecoin supply on Ethereum will fall below 50% for the first time. USDC is quickly emerging as the dominant stablecoin on Ethereum in large part due to its growing role in DeFi. 1/

      Over 50% of the USDC supply now sit in smart contracts – equivalent to ~$12.5 billion. Although this percentage is not as high as DAI, USDC leads by a wide margin in dollar terms and has become the preferred stablecoin in DeFi for now.

      Unsurprisingly lending protocols MakerDAO, Compound, and Aave are the largest consumers of USDC, holding ~23% of the USDC supply. USDC in MakerDAO is primarily used to support the DAI peg via the Peg Stabilization Module. USDC in Compound and Aave is deposited to earn yield.
      READ MORE

      Jason Choi @mrjasonchoi
      Will regulations end up killing DeFi? A thread

      1/ As someone not based in US, keeping track of the alphabet soup of regulators (SEC, CFTC, IRS, FinCEN) can be daunting. That’s because unlike China, there’s no comprehensive, unifying stance issued by one entity.
      insights.deribit.com/market-researc…

      2/ Over the past 12-24 months, individuals within different regulatory bodies in the US have offered various comments and draft regulations on DeFi. Following is my rough summary of notable comments.

       

      Jeff Dorman, CFA@jdorman81
      Everyone is convinced that we’ve entered a digital assets bear market! But we asked industry leaders, funds & traders what the bear thesis is, and there isn’t a lot of substance. In this week’s “That’s our Two Satoshis” via @arca, we debunk each one:
      ar.ca/blog/crypto-ma…

      Bear theses that we refute include (1-5):
      1) CCP regime change is intent on killing digital assets
      2)Massive regulatory pressure from the US
      3) The Fed will be tapering soon and that is bad for risk assets
      4) Retail momentum and interest is dead
      5) Lack of institutional interest

      Bear theses that we refute include (6-10)
      6) ESG concerns
      7) Tether, Celsius, BlockFi, Binance risk
      8) Microstrategy is going to be a forced seller of Bitcoin
      9) Grayscale (GBTC) unlocks are going to crush the market
      10) Digital asset fundamentals are deteriorating

      Lyn Alden@LynAldenContact
      Bears focusing on Tether’s impact on bitcoin over the past year would have probably done better to focus on the Grayscale neutral arbitrage trade instead. When new competition resulted in the market taking away GBTC’s premium to NAV, the biggest bitcoin buyer stopped buying.

      In other words, part of the run up in the second half of 2020 was due to the Grayscale neutral arbitrage trade, sucking in a ton of bitcoin. When ETFs and other new ways to access bitcoin made GBTC less unique, the premium went away, so the neutral arb trade went away.

      Then of course after the biggest buyer vanished, add retail investors pouring into altcoins to euphoric levels, Elon’s ESG backtracking, leveraged traders getting liquidated on the correction, momentum traders stepping away, etc.

      Caitlin Long @CaitlinLong_
      1/ HOLY COW–the Fed today, for the first time, explicitly called out tether–by name–as a risk to financial stability (namely, to short-term credit markets.) Here it is, in the Fed’s own words & charts:
      https://bostonfed.org/news-and-events/speeches/2021/official-monetary-and-financial-institutions-forum-fed-week-financial-stability-session.aspx…
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      2/ And here’s an interview with Boston Fed president Rosengren after his speech today, where @YahooFinance asked him about tether, part 1:
      https://finance.yahoo.com/news/boston-fed-president-eric-rosengren-yahoo-finance-transcript-june-2021-194630532.html…

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      3/ And here’s part 2. Again, every single USD ultimately clears thru the Fed, which means the Fed has jurisdiction over USD #stablecoins. It matters that the Fed is saying this. Caveat emptor, folks.

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