Top Stories of Last Week

Regulatory

  • Gary Gensler met with Senate Banking Committee at hearing, which is considering his nomination to SEC. “I’m neither a maximalist nor a minimalist but I do believe [blockchain is] a catalyst for change,” he said. Gensler’s background suggests he is both pro-crypto and pro-regulation and hearing didn’t provide many clues as to whether industry will perceive him as friendly or overzealous on regulation. Gensler struck balance between emphasizing regulating suspicious behavior as well as encouraging new innovations.
  • NY State Attorney General Letitia James published statement saying investing in digital assets is not prudent, coming after her office released alert to investors of risks involved in cryptocurrency markets. Memo includes risks such as “underlying value is highly subjective and unpredictable,” “increased risk of market manipulation,” and potential difficulties in cashing out of investments.
  • Arthur Hayes, founder and former CEO of BitMEX, could surrender to U.S. authorities next month. Jessica Greenwood, an assistant U.S. attorney for Southern District of NY, told federal judge in court transcript that her team had been in talks with Hayes’ lawyers about surrendering to law enforcement officials. Hayes is currently in Singapore and discussed with counsel how to arrange for voluntary surrender, appearing within United States in Hawaii during initial stages of legal process as part of proposed bail package.
  • SEC Division of Examinations published blueprint for investment managers and institutions on how Division will inspect handling of digital asset securities moving forward. Investment advisors should be aware of risks associated with forks and airdrops, and Division will be reviewing advisors’ fulfillment of fiduciary duty with respect to investment advice. Continuity plans for private keys and guidance around AML considerations were also heavily emphasized.
  • Digital asset financial services firm BitGo received approval from NYDFS for New York Trust Charter. BitGo plans to hold crypto funds in state and offer custody as service to New York-based financial institutions.
  • Former CFTC Chairman Heath Tarbert announced he will officially depart federal regulatory agency Friday. His tenure as chairman included classification of ether as commodity, launch of ether futures contracts and expansion of regulated crypto derivative products. Tarbert previously said his 18-month term would end once President Joe Biden took office. Biden has not yet nominated permanent replacement but Chris Brummer is said to be in lead for position.

Project Development

  • OLB Group, an e-commerce merchant service provider, allowed more than 8,500 merchants to be able to accept Bitcoin, Ethereum, USDC and DAI at point-of-sale through company’s OmniSoft business mgmt platform. Payments processed through SecurePay, a payment gateway that authenticates transaction, converts crypto to U.S. dollars and approves final sale.
  • Chiliz, a platform providing fan tokens in partnership with sports clubs, plans to spend $50 million on U.S. expansion with opening of new office in New York and launch of fan tokens for U.S. sports leagues. Growth plans involve launching Fan Tokens with leading franchises from five major U.S. sports leagues. Firm has so far partnered with 23 sporting and eSports organizations.
  • Insurance broker Aon embarked on pilot with Nayms, an insurtech platform that allows cryptocurrency holders to provide decentralized insurance cover against losses due to hacks or buggy software. Also involved in project are Relm Insurance and Teller Finance.

Institutional

  • PayPal said to be in process of buying Curv, a technology firm that powers secure storage of cryptocurrency. Reports say Curv being sold for between $200 million and $300 million. PayPal allegedly turned attention to Curv after talks to buy BitGo fell through last year. PayPal reportedly offered $750 million for BitGo.
  • Goldman Sachs reportedly relaunched cryptocurrency trading desk after three-year hiatus and plans to once again support bitcoin futures trading. Report stated service will resume in mid-March and may see Goldman attempt to stage Bitcoin exchange-traded fund. It will be part of Goldman’s U.S. Global Markets division.
  • CBOE officially filed to list shares of VanEck’s bitcoin ETF. CBOE filed Form 19b-4, formally announcing intention to list and trade shares of VanEck Bitcoin Trust. Form kicks off legal review period that could lead to first bitcoin ETF in U.S. SEC must acknowledge it is reviewing application before first 45-day clock begins. Within 45 days, SEC has to approve or disapprove application, or extend review period.
  • Huobi asset management subsidiary secured approval from Hong Kong Securities and Futures Commission to launch cryptocurrency asset management portfolio. Huobi Asset Management is now looking to launch three cryptocurrency asset funds following approval by SFC. Huobi’s planned crypto asset management fund will include both Bitcoin and Ether.
  • MicroStrategy announced purchase of additional 328 BTC for $15 million in cash. To date, MicroStrategy holds 90,859 BTC with average purchase price of $24,063 and total worth around $4.38 billion.
  • Preliminary prospectus for ETH ETF has been filed by Evolve Funds Group in Canada. Firm said it has filed with Canadian securities regulators for ETF that, if approved, would give investors exposure to ether. 
  • Hedge-fund manager Marc Lasry and former U.S. CFTC Christopher Giancarlo have taken stakes in crypto-asset and blockchain investment firm BlockTower Capital. Financial terms weren’t disclosed.

Exchanges

  • Coinbase’s S-1 filing hinted at possible token issuance in future, with exchange documenting they may raise additional capital to support business growth in form of blockchain token that could be tied to customer reward or loyalty programs. Mention of blockchain token in risk disclosure sections doesn’t mean Coinbase has concrete plans for such launch, but inclusion suggests some degree of consideration took place in area other exchanges have pursued.
  • Charles Schwab looking for partner to allow it to offer digital asset trading to clients and is reportedly considering several different digital asset companies to white-label services, with potential launch end of this year.
  • Gemini launched dedicated service for fund managers including bitcoin ETF providers called Gemini Fund Solutions, which provides wealth managers with trade execution, clearing, custody, and other capital market services on a single platform.
  • Binance joining Ribbit Capital, Union Square Ventures and Marc Andreessen as backers of Multicoin Capital. Amount of investment not disclosed.

Mining

  • Inner Mongolia Development and Reform Commission posted draft plan to force cryptocurrency mining projects to close by April. Region aims to reduce emissions per unit of gross domestic product by 3% this year, with goal to constrain growth in energy consumption to about 1.9% in 2021.
  • Mining company Bitfarms entered agreement to buy 48,000 MicroBT mining machines as part of major growth plan. Expected to increase Bitfarms’ hashing capacity to 8.0 exahashes from present 1.0. Shipments slated to begin January 2022 with final batch arriving in December.

Fundraising

  • Cryptocurrency tax automation firm TaxBit raised $100 million in Series A funding round led by Paradigm, Tiger Global, Tyler and Cameron Winklevoss, PayPal Ventures and CoinBase Ventures.
  • Cryptocurrency trading firm BCB Group raised $4.5 million in funding round co-led by North Island Ventures and Blockchain.com Ventures, with participation from Pantera, L1 Digital and Pack Capital. Funds to be used to attain more licenses and also make push into Switzerland and Singapore.
  • Crypto.com launching $200 million fund dedicated to investing in crypto startups called Crypto.com Capital. Firm has earmarked $200 million for venture arm to invest in crypto startups and projects at seed and Series A stages, with investments of between $100,000 and $3 million at seed stage and between $3 million and $10 million at Series A.

Defi

  • Defi project Meerkat Finance claimed it was drained of $31 million in crypto assets. Meerkat Finance team announced its smart contract vault had been compromised. DeFi project was drained of 13.96 million BUSD and 73,653 BNB, adding up to over $31 million in total. However, suspicions of exit scam are being discussed, as disappearance of Meerkat’s website and Twitter profile are being investigated.
  • Crypto insurance startup Unslashed Finance raised $2 million seed funding round from Lemniscap, P2P Capital, Bitscale Capital and ChainLayer. Unslashed designs decentralized insurance products that players in crypto industry can purchase to cover various risks they might encounter.

Things to Watch This Week

  • $1.9 Trillion Covid 19 Relief Package
    • With the passing of the 2nd Covid 19 Relief Package by the Senate this weekend, positive sentiment has seemingly returned for both traditional markets as well as crypto markets. With the measure reaching the House this week, a potential signing of the bill by President Joe Biden will take place soon, and along with it, a flood of funds that will possibly boost the stock market much like the first package did last year. It should also provide a lift to cryptocurrencies, given that funds are likely to trickle into nearly all markets. However, the notion of $1.9 trillion being printed will also boost the narrative of Bitcoin as a safe haven from continuous money printing by the Fed and inflation. This, coupled with a steady decline in Bitcoin miner flows to exchanges from the prior month (as can be seen in Market Movement charts below) could be the fuel crypto markets need to propel Bitcoin past the $52,000 resistance we’re currently battling and towards our all-time-high mark of $58,000 and beyond. 
  • Ethereum “London” Hard Fork
    • Ethereum also gained a boost this weekend from news that the London Hard Fork is to take place in the month of July. In the update, Ethereum Improvement Proposal 1559 will be included along with at least five other EIPs. 
    • EIP 1559 is a proposed change to Ethereum’s fee market. The proposal provides UX, economic and security benefits to Ethereum. UX benefits include generally quicker transaction inclusion and better transaction fee estimation. Economic benefits stem from the burning of the BASE FEE as part of every transaction, so sustained demand for Ethereum block space will create deflationary pressure on the supply of ETH. Lastly, security benefits are due to miners having less incentive to perform near-head re-orgs, where miners perform small re-orgs of the chain to capture high-paying transactions into one of their blocks rather than let a competing miner pocket the fees.
    • Although application creators and users have shown a great deal of support for this EIP, miners and mining pools have understandably been gathering in opposition to the proposal, with over 60% of the network’s hash power now against EIP 1559. This week could bring us news of the actions that miners might take against the upcoming fork and whether it will potentially lead to some turmoil as we approach July. Although the possibility of a contentious hard fork are present, many believe it will be too detrimental to miners for them to consider, and they will grudgingly accept EIP 1559, with perhaps a few adjustments made to satisfy miners’ alternative proposals. 
    • Nevertheless, EIP 1559 is a necessary step for Ethereum to take to confront the issue of rising gas fees plaguing Ethereum-based applications. Between layer 2 scaling solutions and EIP 1559, Ethereum may have plugged enough holes in the dam in order to buy some time before Ethereum 2.0. With other chains gaining steam in Defi, it was imperative for Ethereum to re-establish themselves as the primary market for not only Defi, but for all app developers who are increasingly being lured away by chains promising faster and cheaper transactions like Polkadot and Cardano.  
    • Chris Dixon  @cdixon
      NFTs and a Thousand True Fans
      a16z.com/2021/02/27/nft…

      Jason Choi@mrjasonchoi
      Beautiful summary of why NFTs are important. As some may know I’m a bit of a skeptic still Here are some of my current thoughts. Hope to get educated!

      READ MORE
      Willy Woo@woonomic
      Bitcoin’s monetary velocity is now higher than USD M1. M1 is the USD held in short term accounts for buying stuff; none of it is moving. BTC’s making a joke out of it. BTC is moving more than the money we have for spending. Nevermind BTC is for long term investment.
      Travis Kling@Travis_Kling
      Welp, crypto. You did it again. The pace of positive newsflow continues to be simply astonishing. February brought several of the most impactful events *ever* for crypto. Bring on March!
      Jim Bianco@biancoresearch
      My opinion of bitcoin. Bullish! A lot more upside. What about the Paul Singer’s that want to say “I told you so?” 5 times bitcoin correct 70% or more. 5 times Singer gloated and said it. 5 times it made a new high. Will likely happen again. My bet is not this pullback (1/x)

      READ MORE

      CaseBitcoin@case4bitcoin
      Bitcoin’s 10-year Compound Annual Growth Rate (CAGR) is unmatched in financial history. 1/
      Image

      2/ CAGR takes an asset’s ROI between two dates, and works out the average compounded annual return. For bitcoin over the past decade, this works out to 196.72%

      3/ This is an unheard-of number. This means that bitcoin has returned almost 200% (so nearly tripled your money), every single year for 10 years, *compounded*. In raw ROI terms, that works out to 5.2 *million* % return over the decade.

      4/ For comparison, TSLA’s CAGR is “off the charts” by normal standards at 63.8%, but is dwarfed by bitcoin. The best performing funds in history, over their best 10yrs, are high teens or low 20s % CAGR.

      5/ Ok, but bitcoin was tiny 10yrs ago, and maybe 10yrs happens to be a cherry-picked timeframe… Nope. Bitcoin’s CAGR dwarfs other benchmarks over ANY multi-year period in the past decade:

      Image
      Daniel S. Loeb@DanielSLoeb1
      I’ve been doing a deep dive into crypto lately. It is a real test of being intellectually open to new and controversial ideas. Culturally I compare bridging the crypto world with the old as akin to finding a portal @chbetween two distinct worlds in the multiverse.

      @cdixon is a brilliant mind and I enjoyed this article as an art collector and investor.

      Also, maintaining healthy skepticism while also deepening one’s understanding requires one to engage in what Steve Jobs (and Fitzgerald before him) described as requisite for a superior intellect: “to maintain two opposed ideas in ones mind and retain the ability to function“

      Another conflict to overcome is the idea that being late to the crypto party will inevitably lead to one taking the sucker seat at a high stakes poker table versus this still being early days in what is just now being adopted in the mainstream.

      0xRafi@0xRafi
      1/ As the @optimismPBC team has dropped news that their mainnet launch has been brought forward, I thought it would be useful to go through what the Optimism ETH Layer 2 solution is, how it works, and what it means for #Ethereum

      2/ The reason for all the excitement is that L2 solutions such as Optimism will help increase Ethereum’s throughput (tx per second), decrease latency (how long a tx takes to be confirmed) and greatly reduce gas fees. All without losing the security of the Ethereum mainnet.

      3/ This is the main difference between “side-chain only” solutions (such as @0xPolygon or @xdaichain) and actual Layer 2 solutions. Side-chain solutions have their own consensus mechanism and security, and do not benefit from ETH’s Layer 1 security, while L2 solutions do.
      READ MORE

      Mira Christanto@asiahodl
      Institutons lucky enough to be able to buy #Bitcoin aren’t selling because they have $2.9 trillion in uncalled capital waiting to be deployed. That’s the size of the *entire* private market in 2011
      Mason Nystrom@masonnystrom
      The @BitwiseInvest DeFi index fund brought in $32.5 million in sales over the past two weeks, according to CoinDesk. .@YoungCryptoPM breaks down the new Bitwise DeFi index and discusses why it might be a product that institutional investors prefer.
      messari.io/article/defi-e…
      Arthur Hayes@CryptoHayes
      “Pumping Iron” is my treatise on inflation and why the perfect portfolio is long crypto + long interest rates. Grab a drank and snuggle in, for mentally stimulating discussion on the end of the Bretton Woods / Petrodollar regime.
      bit.ly/3bfRF73