Top Stories of Last Week

Regulatory

  • India will propose law banning cryptocurrencies, fining anyone trading in country or even holding such digital assets, according to Reuters report speaking with senior government official. Bill would criminalise possession, issuance, mining, trading and transferring crypto-assets, and would give holders of cryptocurrencies up to six months to liquidate, after which penalties will be levied.
  • Kentucky’s state legislature gave final approval to two proposed bills that would introduce energy and tax breaks for crypto mining operations. House Bill 230 passes to Governor Andy Beshear for final approval. Under proposed law, sales tax obligations from electricity purchased for crypto mining purposes will be removed.
  • Digital assets trade association CryptoUK has called on U.K. Chancellor of the Exchequer Rishi Sunak to act over delays for startups registering for FCA Money Laundering Registration for crypto-asset businesses. CryptoUK Chairman Ian Taylor says U.K. is “missing out on a major opportunity” as crypto companies trying to sign up under new regulatory regime experience an “arduous process” and with most of group’s members having received little or no response from FCA. So far, only four out of 200 applications have received a decision, claimed Taylor, adding, “For some, more than eight months have elapsed without a single response from the regulator.”

Project Development

  • EIP-3368 emerged amid opposition from miners to EIP-1559, advocating that block rewards be increased to 3 Ether and then reduced to 1 Ether over two years following 1559’s implementation to ease impact of Ethereum’s transition to Proof-of-Stake on miners. Ethereum developer Tim Beiko shared EIP-3368, encouraging debate over proposal within Ethereum community. While Beiko emphasized 3368 “is not accepted” or “scheduled for a fork” yet, developer described proposal as “most tangible thing to come out of miner conversations in past few weeks.”
  • U.K.-based payments platform Bottlepay, which allows users to send Bitcoin via Twitter, announced full launch after leaving beta mode. Bottlepay aiming to disrupt payments space by enabling real-time cross-border transfers of both fiat money and cryptocurrencies. Bottlepay plans on extending service to Reddit, Discord, Twitch, Telegram and Mastodon in coming months.
  • Euro-backed stablecoin EUR-L has been developed through partnership between Lugh Company and crypto trading platform Coinhouse. Stablecoin will be anchored to euro reserves held in account with Societe Generale. PwC France & Maghreb is providing attestations of backing on monthly basis. Stablecoin has been presented to French regulatory authorities.
  • Rapper Post Malone’s concert streaming service, AUX Live, will begin minting Fyooz-based NFTs on March 18 with a series of NFTs meant to memorialize concert experiences. Collectible pieces by crypto artist Fvckrender and others also grant their holders access to exclusive events.

Institutional

  • Morgan Stanley reportedly issued internal memo saying they are providing select clients with access to three funds that provide bitcoin exposure in direct response to Morgan Stanley clients’ demand. Two funds from Galaxy Digital and other is joint effort from FS Investments and NYDIG. Investment firms need at least $5 million at bank and accounts have to be at least 6 months old to qualify. Funds will likely be open to clients as early as next month.
  • Visa CEO Al Kelly said company is working on ways to support purchase of Bitcoin using Visa credentials along with working with Bitcoin wallets to allow Bitcoin to be translated into fiat currency. He added that enabling conversion of cryptocurrency into fiat would enable 70 million merchants to accept BTC as payment method, and that Visa is working with around 35 “players.”
  • Valkyrie Digital Assets filed Form N1-A for Valkyrie Innovative Balance Sheet ETF with SEC in partnership with KKM Financial, which is acting as investment advisor to fund, and institutional asset manager SEI, acting as distributor of fund. Proposed ETF would invest majority of capital into companies that have bitcoin on their balance sheets or are otherwise connected to the cryptocurrency. Valkyrie defined Bitcoin ecosystem as Bitcoin network and “bitcoin trading platforms, miners, custodians, digital wallet providers, companies that facilitate payments and provide other technology, equipment or services in ecosystem.”
  • SEC acknowledged VanEck’s 19b-4 Form for BTC ETF application, formally kicking off 45-day window to make initial decision on proposal. If approved, ETF would be first Bitcoin exchange-traded product in U.S. Industry pundits believe agency may finally be ready to approve one under incoming Chair Gary Gensler.
  • eToro announced merger with special purpose acquisition company FinTech Acquisition Corp. V, with combined entity having implied equity value of about $10.4 billion. Deal includes $250 million in gross proceeds from FinTech V’s cash in trust from fully committed private placement in public equity at $10 per share that will close at same time as merger. eToro Group Ltd. will be listed on Nasdaq.
  • Software firm Meitu announced new crypto currency investments through subsidiary Miracle Vision, buying another 16,000 ETH valued at around $28.4 million and 386 BTC valued at approximately $21.6 million. Company now has $50.4 million in ether and $39.5 million in bitcoin.

Exchanges

  • Binance allegedly being investigated by CFTC to determine if U.S. residents traded derivatives on exchange in violation of U.S. rules. However, Binance hasn’t been accused of any wrongdoing and CFTC may not bring enforcement action, according to Bloomberg report. Binance founder and CEO, Changpeng Zhao, called report “FUD” on social media. 
  • Coinbase filed amended S-1 form, disclosing it has registered about 115 million shares for direct listing on Nasdaq. Revised form doesn’t yet mention date Coinbase’s shares will get listed. Coinbase also highlighted SEC’s lawsuit against Ripple in revised form and said such regulatory actions could ultimately impact operating and financial results.

Fundraising

  • Bitpanda closed $170 million funding round to further firm’s international growth. Latest Series B funding round was led by Valar Ventures and DST Global. Valar previously led $52 million Series A round in September 2020. New funding round has raised company’s valuation to $1.2 billion.
  • Fireblocks raised $133 million Series C round led by Coatue, Ribbit and Stripes. BNY Mellon and SVB Capital participated as strategic investors in the round.
  • Investment platform Republic raised $36 million in Series A funding round led by Galaxy Interactive, a division of Galaxy Digital. Republic is crowd-equity platform aiming to provide greater access to investment opportunities in startups, real estate, gaming and crypto. Round included participation from Tribe Capital, Motley Fool Ventures and Broadhaven Ventures.
  • DeFi lending protocol Alchemix said it completed $4.9 million funding raise led by CMS, Alameda Research and Immutable Capital, among others. Alchemix said it sold investors protocol’s native ALCX tokens at $700 per token.
  • Decentralized derivatives trading protocol Vega closed $5 million funding round from Arrington Capital, Coinbase Ventures, Cumberland DRW, ParaFi Capital, Signum Capital, CMT Digital, CMS Holdings, Three Commas, GSR, SevenX Ventures, ZeePrime Capital and more.
  • NFT marketplace OpenSea announced $23 million fundraise led by Andreessen Horowitz.
  • Tally raised $1.5 million from Notation Capital, Castle Island Ventures, 1kx, Lemniscap and others. Firm looks to build easy-to-use governance dashboard for Defi protocols.
  • Maple Finance closed $1.4 million funding round led by Framework Ventures and Polychain Capital to further develop and launch first undercollateralized lending market with stable rates in April.

Defi

  • Social token platform Roll suffered hot wallet breach, resulting in hackers draining at least 3,000 ETH worth $5.7 million. Digital asset management platform MyCrypto first reported that hacker may have compromised private keys for Roll’s hot wallet, allowing them to transfer funds from users’ accounts at will. Roll responded that hacker had stolen and liquidated large number of tokens, and that withdrawals had been suspended across platform. Roll launched $500,000 fund to help creators and their communities affected by incident.
  • $80 million deal between DeFi project Reef Finance, a multi-chain liquidity provider, and Alameda Research unraveled due to “doubts around Alameda’s long-term interest in being a strategic investor,” said Reef CEO. Reef first offered 20% discount on tokens. However, after large portion of initial token set was immediately transferred to Binance, presumably to be sold, a Twitter war erupted with allegations and threats of legal action being considered.

Things to Watch This Week

  • Bitcoin March 26th Futures / Options Expiry
    • Towards the end of this week, we’ll encounter both the CME Futures expiration of March (BTCH21) contracts as well as the expiration of options contracts with a notional value of total open interest currently sitting at just over $5.7 billion. Analysts have pointed to this approaching quarterly expiry date for options being more than any other recent expiry period, suggesting we may notice a consequential change in the price of Bitcoin due to this amount of liquidity in the derivatives market reaching a culmination. It will be important to keep an eye on this expiration and the direction markets take as we get closer to March 26th.
  • FinCEN Crypto Wallet Rule Resolution Nearing 
    • This coming weekend will also bring with it the end of the public comment period for the FinCEN Crypto Wallet Rule proposal, originally proposed in December by ex-Treasury Secretary Steven Mnuchin as he exited his post. These proposed rules would require registered crypto exchanges in the U.S. to verify the identity of people using unhosted wallets for transactions of more than $3,000 and report on all crypto transactions of more than $10,000. Several crypto advocacy groups have referred to the proposal as “a grave threat to personal privacy, Fourth Amendment rights against warrantless search, as well as a substantial threat to continued responsible innovation.” Although a ruling won’t likely happen within this month, any development on this front must be monitored throughout the week, as notice of any resolution forthcoming will likely cause an increase in volatility in the price of Bitcoin. 
  • FATF Guidance for Virtual Assets and VASPs
    • Lastly, this past weekend brought us news of the FATF clarifying the definitions of Virtual Assets and Virtual Asset Service Providers, particularly in regards to Defi and NFTs. Along with the notice that decentralized exchanges, platforms or apps may be VASPs under the FATF definition, it was also stated that some NFTs may be VAs due to secondary markets that enable the exchange of value. A comment period has been opened until April 20 for stakeholders to respond, but any further updates should be watched closely throughout the week to see if NFT markets will be cooled down due to this development. 
    • Tim Beiko | timbeiko.eth@TimBeiko

      Coming out of my twitter break to share this: miners’ “counter proposal” to 1559 is EIP-3368, which would raise the block reward to 3 ETH and lower it to 1 ETH over ~2 years. @BitsBeTrippin should present it at the next AllCoreDevs.

      https://ethereum-magicians.org/t/eip-3368-block-reward-increase-w-decay-for-next-two-years/5550

      The most effective way to share your opinion on this is EthMagicians, much more so than Twitter. Given the criticism that this stuff only gets publicized too late, hopefully this can help.

      To be clear, this EIP is not accepted/scheduled for a fork/etc. yet. It’s only been proposed and seems like the most tangible thing to come out of miner conversations in the past few weeks. If you want a high leverage way to engage, now is the time, on

      Eric Wall  @ercwl
      What if the bidders in the beeple auction weren’t bidding for the NFT but bidding to win the “most expensive NFT auction”

      Essentially you’re not buying an NFT, you’re buying a spot on this list and all the media attention from the confusion that comes with it

      Adam Cochran@AdamScochran
      1/29 Some thoughts on the $REEF debacle that I think are an important lesson for any founder in the space.

      2/29 Disclaimer: I know the Alameda guys really well and have financial ties. That said, I’ve also shared plenty of criticism with @SBF_Alameda when I think something isn’t working on their products or approach. So far he doesn’t hate me for it.

      3/29 I think $REEF can be boiled down to a case of Hanlon’s Razor. “Never attribute to malice what can equally be explained by ignorance”
      READ MORE

      Ray Dalio@RayDalio
      Most worry about whether their assets are going up or down in value; they rarely worry about whether their currency is going up or down. Think about it. (1/3)

      Right now how worried are you about your currency declining relative to how worried you are about how your stocks or your other assets are doing? If you are like most people, you are not nearly as aware of your currency risk and you need to be. (2/3)

      To read more, see linkedin.com/pulse/changing… (3/3)

      Ari Paul @AriDavidPaul
      Quick thoughts on bitcoin risk and return – since late 2016, I’ve been “all-in crypto.” I’ve had 90% of my investable assets in cryptocurrencies, bet my career on crypto in mid 2017. I basically just had enough outside of crypto (in USD and gold) to sleep easy. /1

      2/ this was an extremely aggressive allocation reflecting my conviction that bitcoin and cryptocurrency more generally offered an exceptional and extremely rare asymmetric return profile. I thought a 100x+ was quite likely in 2016, making the risk of 85%+ losses tolerable.

      3/ as time goes on, bitcoin and crypto generally offer weakening asymmetry imo. While BTC may still provide a 100x, for that to happen today, BTC would need to achieve a $100 trillion market cap, about 13x that of gold, and reflecting about 1/4 of total global wealth.

      4/ While this could happen (and some even argue that it’s inevitable), to me it’s a minority case. Of course, it’s not 100x or nothing; a 10x return is still amazing asymmetric upside. Even achieving that may require bitcoin’s toughest tests yet – state actors and a test of PoW

      5/ today, I view a “reasonable” success case for bitcoin as another 10x, which will mean BTC has achieved success as “digital gold.” Similarly, for most other cryptocurrencies (including defi), another 10x is sustainable only with major success in achieving widespread product fit

      6/ Both bitcoin and many other crypto assets still provide very attractive upside relative to risk, imo. But not *as* attractive as its been in the past. For me, this will mean looking to cut exposure at the end of this bull run to a long-term allocation of <=50% to crypto.

      7/ The long-term goal of BTC is to be money – at maturity BTC should offer ~0% real returns. As it gets closer to maturity, it should cease to be an extremely compelling investment and truly become a way of simply storing wealth.

      8/ My guess is that towards the end of this bull run, BTC may still be an unsually good investment, but likely not quite so head and shoulders above alternatives. At that point, portfolio diversification will again make sense.

      Dan Morehead@dan_pantera
      Bitcoin could hit $115,212 in Aug 2021 based on the change in the stock-to-flow ratio across each halving.
      Image

      Documenting Bitcoin @DocumentingBTC
      CEO of NYDIG, “In the next week, you’ll see gamechanging milestones for #bitcoin adoption in the financial landscape” 

      Source: onthebrink-podcast.com/nydig/

      Alex Krüger@krugermacro
      Stimulus checks coming. Surveys indicate somewhere between $100 billion and $20 billion could go into equities (yes, that’s a wide range), half as much into crypto. $10 billion in crypto inflows should have a significant impact on prices.

      Jonty Wareing@jonty
      Out of curiosity I dug into how NFT’s actually reference the media you’re “buying” and my eyebrows are now orbiting the moon

      Short version: The NFT token you bought either points to a URL on the internet, or an IPFS hash. In most circumstances it references an IPFS gateway on the internet run by the startup you bought the NFT from. Oh, and that URL is not the media. That URL is a JSON metadata file

      In short: Right now NFT’s are built on an absolute house of cards constructed by the people selling them. It is likely that _every_ NFT sold so far will be broken within a decade. Will that make them worthless? Hard to say
      READ MORE

      Camila Russo@CamiRusso
      Interesting piece @jdorman81!
      Point 1: BTC beating traditional assets
      Wall St selling bad BTC alternatives
      NFTs/DeFi beating BTC
      Wall St selling no* DeFi/NFT alternatives

      Point 2: @BlockFi is an undercover hedge fund vs @AaveAave transparent & on chain
      READ MOREbit.ly/2OWOWa2

      Z@SplitCapital
      The image looks similar but the magnitude is very different. Short-term speculators are sloshing capital around but longer-term players still accumulating. This is where you get blown out on running a correlation trade on these two.

      The most obvious way these shorter-term correlations break will be when a larger player (HF, AM, Bank, or Corp) buys up spot on the open market and pushes against the algos on derivatives, trading on corr. This will snap their delta and force hedging in the opposite way.

      Alex Krüger @krugermacro
      Great post on the state of the stocks-bitcoin correlation.
      For a fuller picture overlay
      – Bitcoin
      – Bonds (TLT)
      – Nasdaq (QQQ)
      – Small Caps (IWM)
      – the S&P (SPY), and
      – the Dow (DIA).


      Spiking long rates (= crashing bonds) are a major driver bringing tech stocks down. Tech pushes the S&P down (as it is tech heavy). This pushes other indices down (via risk sentiment & correlation monkeys), as well as bitcoin.

      That doesn’t mean all stocks or bitcoin have to go down on larger time frames. The Dow for example has been making new all time highs regardless, thanks to being banking and energy heavy (banks benefit from a steeper curve).

      Small caps have been outperforming as well (as they benefit from reopening and fiscal stimulus). And bitcoin has been doing great thanks to heavy inflows (widespread worldwide adoption is very real).

      Can think of the impact of rising rates as a major headwind for prices, causing a parallel shift. This shift does not *have to* bring everything crashing down. It becomes most relevant when rates go vertical (during extreme intraday moves panic strikes and correlations pop).

      That said every time I see long rates continuing higher a loud voice inside me says “oh crap, here we go again”.