Top Stories of Last Week

Regulatory

  • SEC Chairman Gary Gensler said cryptocurrency market needs more investor protection in U.S., including possible regulations for crypto exchanges, in first public hearing since becoming head of securities regulator. Also suggested Congress could take role in bringing greater regulatory clarity, particularly around exchanges. 
  • U.S. federal court authorized Internal Revenue Service to begin serving John Doe summons on Kraken and subsidiaries to seek those who have conducted at least $20,000 in crypto transactions on platform. Kraken’s subsidiaries and parent company Payward Ventures are being asked to produce records identifying U.S. taxpayers who “may have failed to comply with internal revenue laws.”
  • New bill in NY state legislature seeks to place three-year moratorium on crypto mining pending environmental review by state. The bill, from state Sen. Kevin S. Parker, would lift moratorium only for mining facilities that “will not adversely affect” NY’s carbon-cutting benchmarks. If passed, bill would empower state inspectors to evaluate impact mining facilities have on environment.
  • NYDFS granted Standard Custody a trust charter, allowing it to provide custody services for digital assets in New York. Standard Custody is 30th such entity to receive approval through financial regulator. Standard Custody is subsidiary of California-based PolySign.

Project Development

  • Bitcoin’s Taproot update finally began Speedy Trial, kicking off first phase of activation for upgrade. Miners who wish to adopt upgrade can signal support by including special data in blocks called “signal bit.” If 90% of blocks mined during this difficulty period include Taproot signal bit, then upgrade is “locked in” for activation in November of this year and for Taproot to be live on Bitcoin’s blockchain.
  • Nokia announced blockchain-based marketplace as-a-service to facilitate sharing of data and AI models called Nokia Data Marketplace, which aims to provide enterprises and communication service providers ability to access trusted datasets and improve business decision making.
  • Blockchain.com acquired Artificial Intelligence Exchange, a developer of AI negotiating and matching engine for OTC trading. Acquisition to help drive growth of Blockchain.com’s institutional offering.
  • WallStreetBets community working with blockchain and fintech experts to create exchange-traded portfolios to “fight back against corrupt institutions and to end dependence on them altogether.” Portfolios will be governed under decentralized autonomous organization (DAO) community consensus within which dapp’s own $WSB token will allow holders to vote on various issues.
  • Digital Dollar Project kicked off handful of pilot projects to test how Federal Reserve-issued CBDC may operate, with its intention to launch first five pilot projects within next year evaluating different aspects of digital dollar. Digital Dollar Foundation formed last year by Accenture and former CFTC Chair J. Christopher Giancarlo will evaluate whether and how digital dollar would benefit individuals and businesses in real-world scenarios.

Institutional

  • Galaxy Digital agreed to buy crypto custody specialist BitGo for $1.2 billion in stock and cash. Under terms of deal, BitGo shareholders will get 33.8 million of newly issued shares of Galaxy Digital common stock and about $265 million in cash, giving it transaction value of about $1.2 billion based on Galaxy Digital’s closing share price. Galaxy also said it will “undergo a domestication process” on intended path to U.S. listing later this year.
  • Goldman Sachs offering investors access to non-deliverable forwards, a derivative tied to Bitcoin’s price that pays out in cash. Bank will protect itself from volatility by buying and selling Bitcoin futures in block trades through CME Group, using Cumberland DRW as trading partner.
  • VanEck launched thematic ETF in Europe that offers exposure to companies in cryptocurrency and blockchain. VanEck Vectors Digital Assets Equity UCITS ETF to be listed on London Stock Exchange and Deutsche Boerse under ticker DAPP, which will track MVIS Global Digital Assets Equity Index made up of companies that generate at least 50% of revenue from digital assets or have 50% of assets invested in direct digital asset holdings or projects.
  • eBay looking at crypto as payments option, according to CEO Jamie Iannone in CNBC interview. Iannone cited crypto as one form of new payment rails eBay is considering but did not give specifics and also said no immediate plans. He also said eBay is looking at how to get into NFT game.
  • PayPal reportedly exploring launch of stablecoin, with rumors that company has made rounds among some of industry’s stablecoin protocol developers, suggesting they may be leaning towards working with third-party company. Ava Labs, the team behind Avalanche blockchain, allegedly one of organizations that has held talks with PayPal over stablecoin development. 
  • Chicago Mercantile Exchange launched “Micro Bitcoin” futures product. At one-tenth size of one Bitcoin, micro Bitcoin futures will provide broad array of market participants to gain Bitcoin exposure. Already executed first block trade of 140 lots for Genesis Trading and XBTO.
  • S&P Dow Jones Indices launched first three cryptocurrency indexes, with carry ticker symbols SPBTC, SPETH and SPCMC, a “MegaCap” combo of the two. Document stated trio launched using partner firm Lukka Prime’s “Fair Market Value Pricing” methodology to render asset’s price in points, not dollars.
  • Digital Currency Group said it authorized purchase of up to $750 million worth of shares of Grayscale Bitcoin Trust, up from original $250 million. DCG said it had already purchased $193.5 million GBTC shares as of April 30.
  • Mogo, a digital payments/fintech company, said it bought about 146 ether at average price of $2,780 as part of plan to allocate up to 5% of its cash and investment portfolio to cryptocurrencies. Mogo also said it’s already purchased about 18 Bitcoins to date at average price of $33,083.
  • MercadoLibre disclosed $7.8 million Bitcoin purchase in earnings report stating purchase happened last quarter and was part of treasury strategy.
  • Charlie Munger, vice chairman of Berkshire Hathaway, said Bitcoin “too volatile” to be considered global medium of exchange while speaking at annual meeting. “Of course I hate the Bitcoin success,” Munger said. “I think I should say modestly that I think the whole damn development is disgusting and contrary to the interests of civilization,” he continued.

Exchanges

  • Digital Currency Group made strategic investment in South Korean blockchain company Streami, the operator of crypto exchange Gopax. Investment deal also sets up partnership between Streami and Genesis, a digital-asset lender and DCG subsidiary, to offer savings products.
  • Coinbase agreed to buy data analytics platform Skew to beef up offerings to institutional clients. Financial terms weren’t disclosed, but deal is expected to close in second quarter. Platform will be integrated into Coinbase Prime, providing real-time data analytics to institutional clients.

Fundraising

  • Genies raised $65 million in Series B led by Bond Capital with participation from Dapper Labs, Polychain, Coinbase Ventures, Hashkey and others. Funding will be used to build Genies avatar system and expand digital goods and NFT marketplace on Dapper Labs’ Flow blockchain. Dapper Labs will launch “secondary digital products market” with Genies later this year. 
  • a16z assembling third crypto venture fund, according to report in Financial Times stating company is looking to pull in between $800 million and $1 billion for new fund. If completed, fund would double the $515 million fund a16z last raised for crypto investments, and comes in wake of Coinbase public listing, in which a16z cashed out $449.2 million in COIN stock during Nasdaq debut.
  • Multicoin Capital secured funding for another $100 million in second fund backed by undisclosed institutional liquidity providers and crypto founders. Multicoin also elevated Matt Shapiro, Mable Jiang and communications director John Robert Reed to partner.   
  • Bitski, a non-fungible token platform, raised $19 million in Series A funding from investors including Jay-Z and Andreessen Horowitz. Describing itself as “Shopify for NFTs,” Bitski aims to provide an easy platform for brands, game developers and consumers to create, buy and sell digital goods. Serena Williams and Ari Emanuel also listed among investors who participated in round.
  • Crypto data firm Coin Metrics raised $15 million in equity round led by Goldman Sachs. Castle Island Ventures, Highland Capital Partners, Fidelity Investments, Avon Ventures, Acrew Ventures, Morningside Group, BlockFi, Warburg Series Investments and others also participated. Company said plans to accelerate growth and boost product offerings with latest financing round. Goldman Global Head of Digital Assets Mathew McDermott is also joining company’s board.
  • Paradigm and DJ 3LAU involved in $7.6 million funding round for NFT social network Showtime, which aspires to offer new ways of investing in creators.

Defi / NFT

  • Spartan Protocol exploited due to “a flawed liquidity share calculation” in protocol, resulting in loss of more than $30 million. Attacker used $61 million in BNB to overcome pools via as yet unknown economic exploit path to remove roughly $3 million in funds from pools. Attack on Spartan Protocol makes it sixth biggest monetary exploit in DeFi history.

Other

  • New York Giants locked down NFL’s first corporate cryptocurrency partnership with Grayscale Investments. Grayscale is now “Official Digital Currency Asset Management Partner of the New York Giants.” Under terms of deal, Grayscale will provide “educational seminars on cryptocurrencies for Giants personnel each year.”
  • Crypto.com will sponsor final of Italy’s soccer cup competition, Coppa Italia, taking place May 19 between Atalanta and Juventus. Partnership with Lega Serie A is first such agreement between professional soccer league and crypto platform.

Things to Watch This Week

  • Bitcoin Mid-month Cycle
    • Since January, a trend has emerged that sees the price of Bitcoin reach an all-time high at some point in the middle of the month before a significant drop in price as we get closer to the end of the month, which many attribute to the monthly expirations in Bitcoin futures and options. As we approach the middle of May and we witness strength in market sentiment returning to Bitcoin, we’ll be monitoring to see if the same pattern has a chance of repeating itself. While it would take a great deal of price appreciation for Bitcoin to reach another all-time high in May, it is not out of the realm of possibility for an event or piece of news to push Bitcoin significantly higher. While that item is not apparent at the moment, we’ll be keeping an eye on developments to see if the market catalyst we’re expecting presents itself, or if May is the first month of 2021 to break this mid-month cycle and Bitcoin simply continues to trade in its current range of $50-60k.      
  • Bitcoin Taproot Upgrade Proposal
    • Although the Taproot upgrade for Bitcoin is unanimously supported, the process by which it is activated into Bitcoin, known as a “Speedy Trial,” is a situation that needs to be monitored. Miners are given a series of two-week blocks in which to signal support for Taproot, and if 90% of processed blocks signal support, the upgrade would get locked in for activation in November. However, with this signaling round more than halfway completed, it is unlikely for the 90% threshold to be reached. Should the next two-week window of signaling opportunity also be unsuccessful, the network tries again and again until Aug. 11. If by that date 90% has not been achieved, Taproot will not be activated. While it is likely that miners might not have been prepared during this signaling round and it is expected for the proposal to eventually be activated, it is still an on-going event that could gain more of a narrative should we not achieve the signaling support in the next period or two going forward. It also highlights the interesting yet complicated process of upgrading Bitcoin’s technology and is thus worth keeping an eye on.
    • Rafael Schultze-Kraft@n3ocortex
      1/ Unprecedented capital inflows into #Bitcoin as measured by realized capitalization. Over the past 6 months, realized cap has surged a whopping $250 billion – an increase of ~200%. Healthy bull market. 
      Image

      2/ In the past weeks, realized cap has been increasing steeper relative to market cap, leading to a decline of MVRV – despite a “flat” #Bitcoin price. MVRV-Z at this price level in February: 7.6 MVRV-Z today: 4.4 MVRV-Z at previous cycle tops: 10+ 

      Image

      3/ For comparison: the entire #Bitcoin market cap was only $250 billion half a year ago – the same amount Rcap has increased since then. Realized cap is now as high as market cap 5 months ago, in mid December ($370B). 

      Image
       
       

      Travis Kling@Travis_Kling
      It’s easy to lose track w/ everything else going on in crypto, but pretty wild that #Bitcoin has been consolidating for three months. Let the record show there’s basically zero chance this consolidation period is indicative of a broader top. That’s just not what those look like.
      Image

      Further support of that thesis from the man himself @Pladizow

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      kain.eth@kaiynne
      One thing I love about crypto is how fast the consensus view on a subject can shift. The lack of gatekeepers means new ideas can be injected into the market very efficiently. Take this example, back in 17/18 it was considered insane to have a protocol produce cashflows.

      Almost every project was twisting themselves into knots to avoid seeming to produce protocol revenue. The subtle tweak we introduced into Havven was to only produce cashflow to those who did work in the protocol.

      Previously the idea was that revenue either had to be hidden with buy backs and burns or other schemes or avoided altogether.

      Cut to a few years later and almost every protocol produces revenue and cashflow for “active” participants and nothing for passive holders. So now we have far better metrics by which to compare the success of projects.

      In less than two years we went from this is crazy and at super high risk of regulatory interference to actually this is fine as it requires active participation to receive protocol output.

      Of course there were other projects around in 2018 that had similar mechanisms but Havven was by far the most brazen about challenging the status quo at the time. And in spite of us having very little awareness in the ETH community the concept was superior and won out.

      Frank Chaparro@fintechfrank
      Wow. Square hauled in $3.51 billion in bitcoin revenue during 2021’s first quarter.

      Adam Cochran@adamscochran
      1/24 Why I’m holding $ETH. A primer on investing strategy. AKA – Why Warren Buffet is still probably a better investor than you despite his stance on crypto, and what you can learn from it:

      16/24 And this is where we come back to crypto. While something like $BTC has to be sold to capture the value, assets like $ETH (and some DeFi assets) benefit from things like staking or yield allowing them to capture value over time as cash.

      17/24 This means as they appreciate in value, the staking returns on them against your initial cost basis are actually many times higher than the current cost basis. But you don’t pay tax on the earned principle by staking.

      18/24 So people keep asking me what price I’m selling $ETH at, and my answer is – I’m not. I agree with people like @iamDCinvestor who have been a big proponent of the idea that real wealth in $ETH is captured from staking yield, not sales.
      READ MORE

      Coiner-Yadox @Yodaskk
      Thread on several Models / indicators / On Chain Analysis Part 4
      Update at $btc=57k, May 2020

      Taking support on NVT like previous cycles

      Conclusion: Some over heating signs start to appear, but overall it seems we are at the equivalent of q2/q3 2017, and that there is still 3-6 months of bull market and at least a last leg up imo
      READ MORE

      Jon Syu @jonsyu
      I’m seeing a lot of people FOMO quit their jobs to join “crypto”, probably out of some over-romanticized view of what goes on in these projects. Let me illuminate you about what actually happens: \

      1. You have an earnest team that believes in decentralization as a theory, but realize that it’s impossible to build any project of complexity without extreme centralization for long periods of time, potentially some parts indefinitely.

      2. You aim to build a community, but in reality 90% of your telegram/discord are scammers and people asking why price is going down/accusations that you and your entire team should go to jail.

      3. You want to decentralize governance, but only a handful wants to participate in governance. Doesn’t change people from getting royally pissed at governance decisions despite not doing a single ounce of work.

      4. You realize that most of the “influencer” network of crypto is actually a cartel of individuals who all know each other and collude in pumping the same bags. They all cost around $20k-30k for a review, btw.
      READ MORE

      Ryan Watkins@RyanWatkins_
      DeFi is an existential threat to every financial institution on the planet. It may still feel like a toy at the scale it’s at today, but with time DeFi will bring about a complete upheaval in the fabric of the global financial system. Embrace it.

      If you’re working in finance and continue to ignore DeFi, you will end up shocked when you wake up one day and DeFi suddenly levels the whole game.

      Qiao Wang@QwQiao
      BTC dominance is now at ~45%, and is probably heading lower. Combination of reasons:
      – success of Ethereum and other smart contract crypto-commodities
      – proliferation of crypto-equities
      – froth
      Also goes to show how meaningless this metric has become over time.
      NYDIG@NYDIG_BTC
      Very excited to announce our partnership with @FISGlobal as #Bitcoin becomes more integrated with banking services. Our collective solution will help bridge the gap in accessibility to Bitcoin.
      bwnews.pr/3eRQJ9S
      Hans HODL @hansthered
      People have been asking for a long time, how will banks and #Bitcoin interoperate. For better or worse (not your keys, not your coins), here it is. I think it’s going to be a process, but what a milestone this is!
      Charles Edwards@caprioleio
      The 40% risk free Bitcoin basis trade wont last forever. The opportunity has been compressed by institutions by around 50% on CME this year already. Crypto native platforms will be next.
      Deribit@DeribitExchange
      Deribit’s April institutional newsletter is out  April has been a record month with over $98B in turnover. $41.3B was options turn-over and $23.8B came from $ETH instruments.  
      Check the full newsletter here: 6378067.hs-sites.com/deribit-instit…

      Mira Christanto@asiahodl
      There’s been some debate if this bull market is over. As an indicator, keep an eye out for yields. For DeFi, if yields are low (not worth the risk) and $ETH is skyrocketing, it could mean that traders are unwinding their positions.

      Personally, I think this bull market still has legs

      Joseph Lubin@ethereumJoseph
      If you’re new to #Ethereum and want to understand the #DeFi and #NFT economy being built, here’s a great visual primer.  
      DeFi assets  
      Stablecoins  
      NFTs  
      Regulation
      And a lot more.
      consensys.net/reports/defi-r…

      Tuur Demeester@TuurDemeester
      Why I think Bitcoin is evolving towards Reserve Asset status:  
      10yr track record  
      Highest security  
      Stable & growing protocol stack  
      Institutional adoption  
      High & improving privacy  
      Politically neutral  
      User sovereignty  
      Virtuous liquidity cycle

      And, of course:  
      Finite supply  
      Predictable monetary policy

      Mo@MorganTBennett
      Finally, #Ethereum fee revenue vs. market cap is now spot-on.

      It took a one-year rally for $ETH price to finally match Ethereum fee rev. Bottom line: ETH—the token—benefits from the economic activity on Ethereum. It always has.
      Prediction: this value capture will be put on steroids with #EIP1559 and L2 scaling.
      twitter.com/MorganTBennett…

      Alex Krüger@krugermacro
      Why I’m still bullish crypto. Theres’ more on the way. Apple Pay. Samsung Pay. Paypal has seen a sharp increase in user engagement thanks to crypto. More fintechs are coming! The corporations domino has barely started. Sovereign wealth funds come next. And more asset managers.

      Inflows into bitcoin and stablecoins to equalize yields will continue to be massive. Yields in the meantime are about zero outside of crypto. Real yields are negative! That means cash is trash, and in look for a better home.

      For as long as long rates stay controlled, the macro will be very supportive. And the likes of the Fed and the ECB are highly motivated to keep long rates low. Or everything goes to hell.

      Then you have CBDCs, which are *the* next big thing. CBDCs will allow central banks to further digitize the economy, and run ledgers and smart contracts. This will make interaction with public blockchains easy, and will push people in search of a less intrusive state to crypto.

      Crypto is undergoing a multi-year bull market. A macro cycle. Don’t need a chart or a model to understand why the upwards trend remains intact, just vision, understanding of economics, and common sense.

      As far as the short term goes, notice how the market got ultra bearish recently, after levered longs blew up. The rally that proceeded was spot driven. Much of the market is either flat or short. If price dips, they’ll be looking to close shorts. If price pops, they’ll stop out.

      This is the first time price is approaching 60K without the market unsustainably overheated. Right before the Coinbase IPO quarterly basis hit 51% annualized. Meaning you could secure that yield without market risk. That is now 24%. The rinsing of leverage was extremely healthy.