Top Stories of Last Week

Regulatory

  • Government of India may form panel of experts to examine regulating cryptocurrencies, according to Economic Times report. Committee’s remit would be to suggest ways of regulating crypto as digital assets rather than currency. Prevailing view is that proposals for blanket ban are now outdated, although discussions are at early stage and no formal decisions have been made.
  • U.S. Department of the Treasury calling for businesses that receive transfers of more than $10,000 in crypto to report to Internal Revenue Service. Requirement is on par with transfers of $10,000 and more in U.S. dollars, but report highlighted virtual currencies and cash as potential ways to hide income from government.
  • SEC Chief Gary Gensler said federal financial regulators should “be ready to bring cases” against bad actors in crypto and other emerging technologies, highlighting investor protection and regulators should be ready to pursue deceptive private funds, accounting fraud, insider trading and other potential regulatory pitfalls.
  • Acting Comptroller Michael Hsu told House Financial Services Committee in hearing that he had spoken with fellow regulators Randal Quarles, vice chair at Federal Reserve, and Jelena McWilliams, chairwoman of FDIC, about forming interagency policy team to examine cryptocurrency sector. Work could include creating legal definition for what cryptocurrency is in U.S.
  • Sir Jon Cunliffe, deputy governor of Bank of England, said it “looks probable” that United Kingdom’s central bank will issue digital currency if public money is to survive growing expansion of private alternatives during speech to Official Monetary and Financial Institutions Forum, a central bank think tank. Cunliffe also said Bank of England would publish discussion paper on public policy implications of any shift to new forms of digital cash in next few months.
  • Lawmakers in Nebraska adopted and passed bill to final stage that will allow state banks to offer cryptocurrency services. Legislature called LB 649 aims to adopt Nebraska Financial Innovation Act and create crypto asset depository institutions, while providing for charter, operation, supervision, and regulation of institutions.

Project Development

  • Futu Holdings Ltd., the Chinese brokerage app and Robinhood rival, plans to offer cryptocurrency trading to “international clients” later this year. Senior Vice President Robin Li Xu said Tencent-backed trading firm has begun applying for “digital currency–related licenses” in U.S., Singapore and Hong Kong. Xu said feature should launch in second half of 2021.

Institutional

  • BlockFi incorrectly deposited excessive amounts of Bitcoin to users’ accounts as part of March promotional giveaway, in which qualifying clients were eligible for Bitcoin reward bonus if they traded certain volume during promotional period. BlockFi tweeted there was issue and some participants might see inaccurate bonus displayed on transaction balance. Some users withdrew erroneous bitcoin rewards and emails threatening legal action have allegedly gone out.
  • Robinhood Markets LLC will reveal initial public offering filings as soon as next week, according to Bloomberg report. Timing and details could change even though platform’s plans are at “advanced” stage.
  • Wells Fargo’s wealth and investment management division reportedly will soon be rolling out actively managed crypto strategy, which has been in development for months and is likely to be available to qualified investors around mid-June, according to Darrell Cronk, president of Wells Fargo Investment Institute.
  • Bank of America joined Paxos Settlement Service, a platform that uses blockchain technology to achieve same-day settlement of stock trades. Bank joins Credit Suisse and Nomura Holdings on Paxos Trust’s network, and will offer service to clients if approved as clearing agency.
  • MicroStrategy bought another 229 BTC for $10 million in cash. Purchase was for an average price of $43,663 per bitcoin. MicroStrategy now holds 92,079 BTC bought for total of $2.251 billion at average price of $24,450 per Bitcoin.
  • Ark Investment reported holdings of 639,069 shares in Grayscale’s Ethereum Trust for Q1, currently worth roughly $20.9 million. 
  • Saxo Markets, the digital investing subsidiary of Danish bank Saxo, launched service enabling trading of Bitcoin, Ethereum and Litecoin against euro, U.S. dollar and Japanese yen, initially for Saxo Markets’ clients in Singapore and Australia. Rollout to other key markets will follow in coming weeks.
  • White Star Capital, a tech-focused venture capital firm, closed $50 million fund dedicated to investing in blockchain firms and cryptocurrency networks. Round led by Bpifrance and Ubisoft, and marks White Star’s first specialized blockchain and digital assets fund.

Exchanges

  • Coinbase in reportedly in process of acquiring asset management firm Osprey Funds, although talks allegedly at high level and informal at this stage. Osprey Funds declined to comment. Also announced first quarter earnings report showing revenue and net income skyrocketed on boom in crypto prices and corresponding interest from investors. Results largely matched estimates that Coinbase delivered a week before public debut. Company’s net profit for quarter was over $771 million, more than fourfold Q4 2020′s figure of $177 million.
  • FTX and Blockfolio announced users now allowed to fund accounts with USDC stablecoin after plugging into Circle’s payments infrastructure. Users can settle bank transfers and credit card transactions in dollar-pegged crypto, as FTX and Blockfolio are now “USDC native,” which means token is built into their systems.

Fundraising

  • Figure Technologies raised $200 million in Series D funding round that values company at $3.2 billion. Investment was led by 10T Holdings and Morgan Creek Capital Management and included contributions from Digital Capital Management, DST Global and Digital Currency Group. Figure uses its own blockchain, Provenance, as marketplace for loans and mortgages, capital table management, fund management, banking and payments.
  • Cryptocurrency custody firm Copper raised $50 million in Series B funding, co-led by Dawn Capital and Target Global, and included Illuminate Financial Management, as well as existing investors LocalGlobe and MMC Ventures.
  • DeversiFi, a DeFi trading platform, raised $5 million in funding round led by ParaFi. Defiance Capital, Lightspeed Venture Partners, Blockchain.com Ventures, Delphi Ventures, Fenbushi Capital, OKEx and others also took part. DeversiFi’s aim is to help scale layer 2 trading on Ethereum network. 
  • Vertalo, a start-up that helps issue and manage digital securities, raised $5 million in Series A funding round from Coinbase, Tezos Foundation, Wedbush Capital and others. Company helps to digitize assets from real estate to equity in form of security tokens, relying primarily on Tezos and Ethereum blockchains.

Defi / NFT

  • Dapper Labs being sued for allegedly selling NFTs as unregistered securities. Allegations filed by lead plaintiff Jeeun Friel in Supreme Court of New York. Documents claim NBA Top Shot moments are securities because value increases with success of project, and therefore should be registered with SEC. Company also said to have used control of NBA Top Shot to prevent investors from withdrawing funds for “months on end,” ensuring money stays on platform “propping up” value.
  • Zapper, the DeFi dashboard, raised $15 million in Series A round led by Framework Ventures. round was joined by Sound Ventures, Mark Cuban, ParaFi Capital, Scalar Capital, Spartan Group, DeFiance Capital, Long Hash, Sino Global, among others. Zapper boasts 150,000 monthly active users and recently crossed $3 billion in total transacted volume watermark.
  • Venus Protocol faced liquidations of over $200 million due to possible price manipulation of native XVS token. Venus occurred bad debt of more than $95 million in form of 2,000 Bitcoin and 5,700 Ether, which Venus won’t be able to collect dues from users. Venus Protocol founder Joselito Lizarondo claimed “the protocol worked as intended” and no funds were lost, and that Venus would use grant program and “utilize XVS” to cover shortfall.
  • PancakeBunny suffered exploit that allowed hacker to make off with more than $200 million worth of crypto assets. Protocol was subject to flash loan attack from external actor, who borrowed BNB before manipulating asset’s price and dumping it on platform’s BUNNY/BNB market. BUNNY/BNB was only pool to be drained by hacker, making off with 697,000 BUNNY and 114,000 BNB.

Other

  • Vitalik Buterin burned 90% of his Shiba Inu coin holdings, an amount worth $6.7 billion. Trove of over 410 trillion tokens was sent to dead blockchain address, taking them out of circulation. Buterin had been gifted half of SHIB’s total supply in what appeared to be a marketing stunt.

Things to Watch This Week

  • Bitcoin Hashrate
    • Last week’s news that China would crack down on Bitcoin mining delivered a blow to the crypto industry that was already reeling from weak market conditions and other headlines that contributed to last week’s sell-off. However, the Chinese government stopped short of saying there would be an outright ban and also did not elaborate on the measures involved nor the scale of crackdown that would be enforced on miners. This week, it will be important to keep an eye on the hashrate of Bitcoin to get a pulse on the reaction that miners are having towards this statement and just how much processing power is being taken out of the picture. Recent estimates had Chinese mining capacity accounting for anywhere from 50-60% of the worldwide capacity, although some argued that current figures had decreased to under 50% due to mining center diversification picking up globally. Regardless, it is unclear just how much capacity in China will be allowed to or will even want to continue operating going forward, and thus it is hard to quantify the potential downside impact that these events will have on Bitcoin mining. Monitoring Bitcoin’s hashrate could give us a better idea as we lead up to the next difficulty adjustment at the end of this week, which could see a rather large shift given how events unfold over the next few days.      
  • Bitcoin May 28th Futures / Options Expiry  
    • Roughly $1.6 billion dollars in open interest will be expiring in Bitcoin options contracts this week, along with another $180 million in open interest on Bitcoin futures for the same date. Open interest in both futures and options has dropped significantly from the all-time high levels seen earlier this spring, so the potential effects of this expiry period will be somewhat dampened. Nevertheless, although the market drop of last week that seemed to continue throughout the weekend released much of the pressure that expiry periods normally would have, the month-end expiry periods typically generate a good amount of action and should be watched closely as we approach the date.  
    • CL@CL207
      1/7 so price is same as 2 days ago, but the bitcoin futures open interest literally got wiped in half let me explain (simplest possible) how this means we just had the most significant weak hands > strong hands transfer in probably since march 12 2020

      2/7 so we know that day, approx 3.5B longs were liquidated on coin margined futures, and approx 1.5B longs were liquidated on stablecoin margined futures what happens when someone longs? the market maker takes the other side of the trade, but are they actually short? no ofc not

      3/7 market makers dont have balls to not be almost always near delta neutral, otherwise they’re not making markets, they’re just directionally betting. so they back up their shorts, either by purchasing spot, or purchasing other derivatives exposure

      4/7 sometimes, theres hedge/short demand hitting the market maker too, so the market maker can sell their shorts back to them, but generally in crypto, its long biased, and thus market maker hold spot as collateral to their shorts

      5/7 so spot coins got bought up by the MM, at the demand of leverage, does that sounds like strong hands to you? ofc not, leverage longs are the weakest possible hands, they not only see their PNL all day and get scared if it turns red, they’re also vulnerable to liquidation

      6/7 and during a long liquidation heavy move, the MM constantly get hit by longs closing, so now they have to close their shorts against them (to provide liquidity) while selling spot (to remain neutral) to unwind this entire process

      7/7 and so why are we back to the same price if all these spot coins got sold? because they all got bought up by spot buyers with real cash instead of leverage, which are stronger hands these coins have now transferred from short term leverage speculators to real cash buyers

      Brett Winton @wintonARK
      Previously, we demonstrated how bitcoin minting could allow solar + battery systems to economically scale to provide a larger share of grid energy. As expected (in this update) the result holds across different historical bitcoin pricing/hash timeframes

      Sam Korus @skorusARK
      1/ @wintonARK@yassineARK, and I just posted an incremental update to ARK’s open-source Solar+Battery+Bitcoin mining model, which now allows one to test how the system would have performed in historic Bitcoin bull and bear markets. github.com/ARKInvest/Sola…

      Elon Musk  @elonmusk
      I agree that this *can* be done over time, but recent extreme energy usage growth could not possibly have been done so fast with renewables. This question is easily resolved if the top 10 hashing orgs just post audited numbers of renewable energy vs not.

      Bitcoin hashing (aka mining) energy usage is starting to exceed that of medium-sized countries. Almost impossible for small hashers to succeed without those massive economies of scale.

      BTC Sessions  @BTCsessions
      I think you may be looking at this from the perspective of sacrificing base layer decentralization and security for transaction throughput, whereas lightning network scales to millions of tx/s without sacrificing the former. Do you discount the notion of a layered approach?

      Elon Musk@elonmusk
      Achieving truly decentralized finance – power to the people – is a noble & important goal. Layer count depends on projected bandwidth & compute, both rising rapidly, which means single layer network can carry all human transactions in future imo. For now, Lightning is needed.
      READ MORE

      Caitlin Long   @CaitlinLong_
      1/ IT’S CLEAR a US #crypto regulatory crackdown is starting but I’m optimistic bc most of the major players/agencies have spoken already & the policy is taking shape: it’s “pay taxes, comply w/ laws & don’t take shortcuts, & we’ll enable the innovation.” It’s NOT a “#bitcoin ban”

      2/ A clear chronology: * Fed releases pymt system access guidelines (5/5) * SEC warns abt #bitcoin futures (5/11) * Binance IRS/DOJ story in Bloomberg (5/13) * IRS article in WSJ=warning to pay taxes (5/14) * FDIC ice thaws–it issues its first RFI (5/17) …continued…

      3/ …continuing: * OCC says reviewing all prior #crypto bank actions (5/18) * Senate Banking Chairman warns OCC to clamp down on trust bank charters (5/19) * Treasury Sec Yellen announces big IRS tax compliance push (5/20) * Fed’s Powell plans paper on payment innovation (5/20)

      4/ Spot pattern? News almost every day. Theme=COMPLIANCE – it’s “pay taxes, comply w/ laws & don’t take shortcuts,” NOT a ban – nothing yet from FinCEN, CFTC or FTC (& nothing on #stablecoins), but pretty much all other DC regulators have now spoken. – “no shortcuts” part=OCC…

      5/ …OCC: no more shortcuts to bank charter/Fed access + doing a full review of prior OCC #crypto actions. Net-net, for now this could pause big banks’ activity that was coming in #bitcoin – #Wyoming #SPDI banks were designed to comply w/ all of these announcements so prob OK

      6/ SUMMARY: It may not yet be over, but the pattern is pretty clear: it’s a compliance crackdown for sure, but path for “responsible innovation” in US does seem to remain open.

      7/ I MISSED THIS PART EARLIER–the Fed fired a warning shot about #stablecoins today, from Jay Powell himself. It’s consistent w/ the theme–comply w/ laws & don’t take shortcuts (i.e., get fully regulated as a bank & pay the full regulatory freight): federalreserve.gov/mediacenter/fi…

      Andrew Køng @Rewkang
      Network utility of Bitcoin and Ethereum have not materially changed since last week 40k $BTC & 2.8k $ETH would have been considered cheap a week ago, and I consider them cheap today Value is not based in historical fundamentals, but of the present and future

      I had to remind myself of this during the March 2020 crash when DeFi was sprouting and Ethereum network activity was just taking off Retaining conviction paid massive rewards. I tend to think the same stays true after this correction.

      Zhu Su@zhusu
      Reminder that Raoul Pal 1.0 sold everything before the Bitcoin hard fork in 2017 bc he was scared
      Prob a bunch of macro guys have just had their RP 1.0 moment the last couple weeks bc of the ESG fud
      Max pain is swiftly much much higher

      Sam Trabucco @AlamedaTrabucco
      Well. Crypto’s crashed quite a bit in the past few days, leading up to a GIANT crash (BTC touched sub-$30k!) a few hours ago. It’s ticked back up somewhat since, and started bouncing around a bit. What happened? A thread about lemons and lemonade.

      The narrative in the winter was clear: institutions were getting into crypto and that’s why crypto rallied so much. This mostly happened in BTC, but the other coins mostly had a beta to BTC so they all rallied some, too. Simple enough.

      More recently, the rumors turned to ETH. Now, institutions were getting into ETH, too! And some other coins, but at least for the past couple weeks, the ETH rally was The Big Thing happening (ignoring DOGE). Look at that ETH/BTC over-performance! BTC dominance was at a local min.

      Many alts reached all-time highs — some for these more fundamental reasons, and some from Elon-related hysteria. Which coins are rallying isn’t all that matters, though, and understanding reasons for the buying isn’t enough, either. We need to go deeper.

      I saw a TON of speculation that the rallies (especially the ETH rallies) were low-leverage and spot-driven, and therefore “more organic” somehow. An important implication of that is that, in the event of a downturn, there’d be relatively few liquidations.

      This narrative was super wrong, though — and it was possible to know that. How? Well, this narrative has basically been true zero times in the past 3ish years — you can tell from the fact that all the volume is in derivatives or spot where the exchange allows leverage.

      Philip Gradwell@philip_gradwell
      Prices are  but how bad is it? It’s the 5th 25%+ 7 day BTC price fall since 2017, but BTC exchange inflows are low compared to past falls, at 412k BTC in last 3 days compared to 412k on just 13 Mar 2020. Pressure is from sellers already on exchanges likely retail & liquidations

      Investor whales bought the dip, adding 34k bitcoin on Tuesday and Wednesday, 18 and 19 May, after reducing their holdings by as much as 51k bitcoin in the last two weeks. This is a stronger whale response than in March 2020
      READ MORE

      Ryan Watkins@RyanWatkins_
      In just two weeks Uniswap V3 has become the largest DEX on Ethereum next to Uniswap V2. At its current pace of growth it will likely surpass V2 in volume by end of month. And the most impressive part about it, is V3 is doing so with a fraction of the capital. 1/

      Yesterday Uniswap V3 reached 81% of the volume as Uniswap V2. This is all without liquidity incentives, passive LP managers, or even its soon to come layer-2 deployment.
      READ MORE

      QCP Capital @QCPCapital
      𝗤𝗖𝗣 𝗠𝗮𝗿𝗸𝗲𝘁 𝗨𝗽𝗱𝗮𝘁𝗲 𝟭𝟵 𝗠𝗮𝘆 1/ We cannot stress enough the importance of holding 40k on a closing basis in BTC for all Crypto. Following our identification of the trend change earlier in the month we’re now seeing Wave 3 take us from 58k to under 40k handle now

      2/ In market cap terms this move has shed $400bn taking us back to the Fib handle that led the breakout in Feb. 𝗢𝘂𝗿 𝗽𝗿𝗲𝗳𝗲𝗿𝗿𝗲𝗱 𝗪𝗮𝘃𝗲 𝗰𝗼𝘂𝗻𝘁 𝗶𝘀 𝗻𝗼𝘄 𝘁𝗵𝗶𝘀:

      3/ —𝟭. That this Wave 3 ends at 40k on month-end (possible stop hunt extension now as far as 36k intra-month) & we get a bounce for Wave 4 back up towards 50k first and possible 54k.

      4/ —𝟮. This Wave 4 will be driven by a dovish Fed policy mistake into the mid-June FOMC where they continue underplaying the decades-high inflation print and prescribe more easy money on the context of global risks from a resurgent international Covid wave.

      5/ —𝟯. This bull-trap Wave 4 will also be marked by a sharp increase in retail leverage as they chase the new perceived bull cycle.
      READ MORE

      Rafael Schultze-Kraft@n3ocortex
      Investors becoming more fearful – #Bitcoin Net Unrealized Profit/Loss (NUPL) drops into the “anxiety” zone for the first time since October as unrealized gains fall below 50%. glassno.de/3fttu6e

      jefflau.eth@_jefflau
      There’s been a lot of discussion on Ethereum Layer 2s vs plasma/sidechains as scaling solutions. After doing some reading on the matter, I’d like to write my thread on what rollups are fundamentally and how they help scaling. A long thread :

      Rollups are a family of scaling solutions that increase the scalability of Ethereum by roughly 100x. This is done by “rolling up” transactions into batches. And we use compression to reduce the amount of information we need to store in these batches.

      These batches create scalability because they are not using Ethereum for any computation, just as a data storage system. A rollup submits a new batch of transactions with a state root. These transactions can be downloaded and run to compute and confirm it matches the state root
      READ MORE