Welcome to the inaugural Mint Digital Assets Journal (#mdj).
#mdj is a weekly journal covering developments within the global digital assets industry.
EXECUTIVE SUMMARY
Having traded in a narrow range, both BTC & ETH plunged sharply down after Powell’s hawkish comments at Jackson Hole symposium. (read weekly market action)
Backwardation in front months in both BTC & ETH. Rising demand for crypto borrowing despite winter. Increasing investments in crypto security firms. Rising marketing spend but little growth in new customers. (read macro news in digital assets industry)
USDC down; USDT up. Varied handling of Tornado Cash linked freeze impacting top stablecoin issuers. USDN getting de-pegged similar to UST episode. Stablecoin issuers have amassed $80B of short term US debt. (read key developments in stable coins)
DTCC to launch private blockchain to speed up trade settlement. Uniswap eyes NFT financialization. Coinbase to offer liquid staking ahead of Ethereum merge. (read digital assets company news & updates)
Metaverse Avatar creator raises $56M. Hidden Road Partners - crypto prime broker - completes $50M funding round. Mastercard ties up with Binance to enable access at 90 million stores. Thirdweb gets Katie Haun’s backing at $160M valuation. (read mergers, acquisitions & partnerships in digital assets)
South Korea may levy 50% gift-tax on air-drops. India’s Coinswitch Kuber being investigated by ED for FEMA contraventions. (read more in digital assets regulatory updates)
WEEKLY MARKET ACTION
The past week, BTC stayed uncharacteristically stable in price, trading between $21k and 22k levels.
After the Jackson Hole announcement by the Fed, BTC prices declined sharply going down 6%.
Majority of the trading activity during the week was concentrated around $21,300. BTC currently trades at a key psychological support of $20k.
ETH saw large gains through the week as its price peaked at $1,700 on Thursday.
On Friday ETH also crashed along with BTC retracing all gains and dropping further down to the support at $1,500.
The $1,500 support was challenged on Saturday but managed to maintain. ETH saw trading activity between $1,600 and $1,700 implying that the drop from $1,600 to $1,500 was rapid.
TOP CRYPTO ASSETS PERFORMANCE
STABLECOINS MARKET CAPITALISATION
CRYPTO AND EQUITY MARKET SENTIMENTS
KEY HIGHLIGHTS IN DIGITAL ASSETS INDUSTRY MACRO NEWS
Assets with holding cost (such as insurance, custody & financing) typically exhibit Contango term structure. BTC derivatives typically trade at a premium to the spot price. However, last Monday, CME's front month BTC futures traded at their sharpest discount at an annualized rate of -3.36%.
As reported by CoinDesk, the discount could potentially be attributed to ProShares rolling August futures into later contracts. Intriguingly, such extreme discounts have not appeared during previous rolls. Discount could be a symptom of worsening liquidity or de-risking.
One million dollars. That's the reward on offer for finding “critical bugs” on the Ethereum network before the merge. Crypto Slate reported that Ethereum Foundation has quadrupled the rewards. Ethereum merge is expected to initiate on 6/Sep and complete sometime between 10th and 20th Sep.
ETH in backwardation. Pricing anomaly? May be not. Traders are pricing weakening of sentiments and value following the merge. As reported by CoinDesk, backwardation might be a result of ETH hedging positions by holders as they try to collect potential airdrop of ETH Proof of Work. Futures are likely revert into contango as traders unwind shorts after the Merge.
Crypto Winter. Be it may, the demand for borrowing continues to rise. Lending platforms have raised rates reflecting higher borrowing demand and limited liquidity in the lending market. The Block reports that further rate increases could be seen as ETH merge speculation continues. Crypto.com, Nexo, BlockFi, and Gemini have all raised borrowing rates.
Many retail NFT holders have lost their shirt and more. However, Coin Telegraph reports that iconic brands including Nike, Gucci have made $260M off NFT sales. Nike’s NFT projects have raked in $185M with volumes in secondary market approaching $1.3B. D&G, Tiffany’s, Gucci, and Adidas are other companies that have benefited from NFT sales.
So far this year, USD 2 billion have been stolen by hackers. Industry response? Develop deeper sophistication in security. That's precisely what's happening. Nearly $257 million (up from $185M last year) have been invested in Crypto Security and Audit firms as reported by Bloomberg.
Decentralised? Really? Hetzner Online, a data center operator on which ~15% of ETH nodes and 33% of Solana nodes operate says staking is not permitted. In a news article on Crypto Slate, cloud hosting concentration raises concerns about the centralization of ETH & other chains.
Tens of millions of dollars in marketing. Lots of new customers then? Not much is the finding as per a survey by Pew Research Center as reported in Washington Post.
KEY DEVELOPMENTS IN STABLE COINS
UDSC down; USDT up. Percentage of USDC held by major wallet addresses dropped to its lowest point in almost two years.
USDC’s market cap shrunk after its issuer Circle decided to freeze tokens held by addresses linked to Tornado Cash as reported by Coin Telegraph.
Meanwhile, The Block published that Tether would not be freezing addresses linked to Tornado Cash mixer until instructed to do so by law enforcement or regulators.
Waves backed stablecoin USDN fell from its USD peg to 91 cents as liquidity drops. The situation is quite similar to the collapse of Terra-Luna as reported on Coin Desk.
Stablecoin issuers such as Tether and Circle have accumulated significant share in the US Treasury market, outperforming major traditional finance players such as Berkshire Hathaway.
Various stablecoin providers collectively held $80 billion worth of short-term U.S. government debt as of May 2022 as reported in Coin Telegraph.
Stablecoin issuers have also outperformed offshore money market funds (MMF) and prime market MMFs in terms of their Treasury-bill investment proportion, according to the data.
TOP DIGITAL ASSETS COMPANY NEWS AND UPDATES
Fei Protocol founder proposes ghosting Tribe DAO following hack repayment while Beanstalk relaunches (forbesindia.com)
After facing an attack on its DeFi platform which took $80M, Fei protocol, have revealed plans to offset the damage by withdrawing participation from Tribe DAO.
There are also reports of plans to shut down Tribe DAO operations and send back a total of $157 million to token holders and victims of a recent hack.
BendDAO Proposes Emergency Changes During Liquidity Crisis (Blockworks)
BendDAO is a lending platform that allows users to borrow ETH against NFTs. A large number of blue chip NFTs on the platform are now close to liquidation point as NFT floor prices crater raising fears of a mass liquidation event.
A new proposal seeks to change liquidation parameters in order to offset the crisis.
Tornado Cash Was the Key Laundering Tool for NFT Scams, Elliptic Says (Bloomberg)
Tornado Cash was the preferred tool for laundering illicit proceeds from nonfungible token scams prior to the ban.
The mixer “was the source of $137.6 million of crypto-assets processed by NFT marketplaces and the laundering tool of choice for 52% of NFT scam proceeds before being sanctioned,”
Wall Street Giant DTCC Launches Private Blockchain Platform to Settle Trades More Quickly (Coindesk)
DTCC began live testing of a private blockchain to see whether it's up to the challenge of clearing and settling transactions in the world's largest equities market.
The Project Ion platform now processes more than 100,000 trades per day on average, and almost 160,000 on peak days.
Uniswap eyes NFT financialization, in talks with lending protocols (Cointelegraph)
Crypto exchange Uniswap is engaged in talks with multiple nonfungible token (NFT) lending protocols.
Uniswap’s goal for these talks and potential collaborations with lending protocols is NFT financialization.
Over the last few months, Uniswap has made big steps toward including NFT activity in its service offerings through its acquisition of NFT marketplace Genie.
Canadian Crypto Marketplace WonderFi Files for Nasdaq Listing (Coindesk)
Crypto marketplace WonderFi applied to list on Nasdaq less than two months after the stock started trading under the symbol WNDR on the Toronto Stock Exchange.
The company seeks to boost its international appeal by making its shares available to wider group of investors.
Crypto Exchange Coinbase to Offer Liquid Staking Token Before Ethereum Merge (Coin Desk)
Coinbase announced that they would be launching their own liquid staking token called cbETH that will represent staked Ethereum and can be sold or used as collateral.
They also announced the launch of nano ETH futures on their derivatives platform for retail traders sized at 1/10th of an ETH.
Co-CEO of Crypto Trading Firm Alameda Research Sam Trabucco Steps Down (Coindesk)
Sam Trabucco, the co-CEO of crypto trading firm Alameda Research, is stepping down from his leadership role and becoming an adviser.
Fellow co-CEO Caroline Ellison will remain as the company’s sole CEO.
Uniswap Foundation becomes reality after 86M votes in favor (Cointelegraph)
Plan for a new Uniswap Foundation has just become reality after their proposal received over 99% of the votes from Uniswap (UNI) holders.
The foundation aims to streamline Uniswap’s Grant Program (UPG) and reduce friction in the protocol’s governance system.
Compound v3 "Comet" launched with support for single borrowing model (Crypto Slate)
The third iteration of Compound called “Comet” will support single interest-bearing assets and comes with UI upgrades.
New model allows users to borrow a single interest-earning asset starting with USDC.
“While you won’t earn interest on collateral anymore, you will be able to borrow more; with less risk of liquidation and lower liquidation penalities; while spending less on gas,’ said founder Robert Leshner.
MERGERS, ACQUISITIONS & PARTNERSHIPS IN DIGITAL ASSETS
Hidden Road Backed By Crypto Giants, Wall Street’s First Industry Entry (Bloomberg)
Hidden Road Partners, a prime brokerage focused on digital assets and foreign exchange, completed a $50 million funding round last month that included Citadel Securities, as well as the investment arms of cryptocurrency exchanges FTX and Coinbase
The startup that aims to ease Wall Street’s entry into crypto trading by tackling counterparty risks and conflicts of interest.
Metaverse Avatar Creator Ready Player Me Raises $56M in Series B led by a16z (Coin Desk)
Ready Player Me, an Estonian company that creates avatars in the metaverse, has raised $56 million in a Series B funding round led by Andreessen Horowitz's crypto and gaming funds.
Investors also include Twitch co-founder Justin Kan, Roblox co-founder David Baszucki, and Kevin Hart’s Hartbeat Ventures, among others.
MakerDAO Opens $100M DAI Loan to Huntingdon Valley Bank (Block Works)
MakerDAO has officially connected its native stablecoin DAI to traditional finance through a partnership with Huntingdon Valley Bank (HVB) by formally offering them 100M DAI.
HVB sought the DAI to support the growth of existing businesses and investments in March, when it formally submitted a MakerDAO onboarding application
In return, MakerDAO will be able to diversify its counterparty risks and generate yields from its DAI holdings via HVB’s bond managers.
Mastercard ties up with Binance to enable payments in crypto at 90 million stores (yourstory.com)
Mastercard is partnering with Binance to enable crypto payments in 90 million stores that support Mastercard payments.
Previously on August 4, Binance and Mastercard announced their partnership to launch a prepaid card in Argentina.
China's Ant Group to Work With Malaysian Investment Bank Kenanga on Crypto 'SuperApp' (Coin Desk)
Chinese technology company Ant Group is working with Kenanga Investment Bank on Malaysia's first "SuperApp".
This will include crypto trading, e-wallets and portfolio management.
SBI Holdings terminates previously unknown deal with BitRiver (The Block)
SBI Holdings has quietly terminated its deal with sanctioned Russian crypto miner BitRiver and has withdrawn operations from Russia.
SBI is now the second firm after Compass Mining known to cut ties with BitRiver following US sanctions
Crypto ATM Operator Bitcoin Depot to List on Nasdaq in $885M SPAC Deal (Coin Desk)
Bitcoin Depot, the world's largest operator of crypto ATMs, plans to go public with a listing on Nasdaq by merging SPAC GSR II Meteora at an estimated value of $885 million.
Bitcoin Depot operates 7000 ATMs in US and Canada.
Siam Commercial Bank Scraps $500M Purchase of Stake in Thailand’s Largest Crypto Exchange (Coin Desk)
Siam Commercial Bank scrapped plans to purchase a 51% stake for $500M in the crypto exchange Bitkub.
The reason for termination was reported as uncertainty around unresolved issues raised by the Securities and Exchange Commission, Thailand.
Crypto Developer Platform Thirdweb Gets Katie Haun's Backing at $160M Valuation (Coin Desk)
Thirdweb, a platform for Web3 app developers, raised $24 million in a Series A round at a $160 million valuation. The funding was led by Haun Ventures.
Thirdweb offers pre-built, audited smart contracts that serve as a quick-start guide for developers who want to create and safely deploy applications to blockchains then manage the related analytics.
NFT Investor Animoca Brands' Japan Unit Raises $45M at $500 Pre-Money Valuation (Coin Desk)
Animoca Brands Japan has raised $45M to secure local licenses and pursue investments with a pre-money evaluation of $500M.
The investment came in equal parts from parent Animoca Brands and MUFG.
DIGITAL ASSETS REGULATORY UPDATES
South Korea may levy up to 50% 'gift tax' on crypto airdrops under current law (cryptoslate.com)
South Korean officials have interpreted existing laws to mean crypto airdrops may be subject to “gift tax”
Although, the government will not impose taxes on capital gains from digital assets until 2025, the proposed interpretation excludes airdrops from this classification.
Australia to Map Crypto Tokens as Part of Regulatory Ramp-Up (Bloomberg)
Australia's new government will begin a review of how cryptocurrency assets are managed, with a view toward keeping practices up to date and protecting consumers.
Treasury will prioritize ‘token mapping’ work in 2022, which will help identify how crypto assets and related services should be regulated.
It’s Over 9,000: Crypto Mining Rigs Seized in Iran This Year (blockworks.co)
Iran has confiscated more than 9,400 crypto mining rigs over the past five months, all while the country has grappled with power blackouts over the summer.
Most of that figure stems from a large haul in June, when Iranian police discovered an illegal mining farm and seized 7,000 units.
This comes after a recent report that Iran purchased foreign goods worth $10M using Bitcoin.
Binance helping Philippines on crypto regulation despite contentions with SEC (cryptoslate.com)
Binance is helping the Philippines government formulate crypto regulations despite The Philippines SEC warning users in early August against investing with Binance.
The Committee on banks, financial institutions, and currencies met with Binance and the Fintech Alliance Philippines in a Senate hearing to discuss policies to regulate fintech and cryptocurrencies, according to the report.
Afghan police close down cryptocurrency exchanges to enforce central bank ban: Report (cointelegraph.com)
Afghanistan has closed down several crypto exchanges operating in the country in order to enforce their central bank’s ban on crypto trading.
Crypto usage had soared in Afghanistan after the takeover by the Taliban.
Crypto Exchange CoinSwitch Kuber Searched by Indian Authorities (coindesk.com)
India's Enforcement Directorate (ED) is currently searching the premises of Indian crypto exchange CoinSwitch Kuber.
"We are looking into multiple possible contraventions under FEMA and other entities that are connected to it," said an official.
This comes after similar raids were conducted on WazirX and Vauld.
Japan might be lowering tax burdens on crypto startups in 2023 (cryptoslate.com)
The Japanese Government indicated a possibility of reducing the tax burdens on crypto startups with the 2023 tax reform to prevent startups from leaving the county to set up their businesses.
Currently, corporations that hold crypto are taxed at a rate of 30% for all their gains from digital assets, while individual investors can be taxed up to 55%.
SEC delays decision on VanEck's latest bitcoin ETF application (theblock.co)
The SEC delayed a decision on a bitcoin ETF application from VanEck. VanEck’s last attempt to score approval for a spot bitcoin ETF was denied in November.
Grayscale has also been attempting to set up a spot Bitcoin ETF, however their application was rejected in June following which they filed a lawsuit.
Crypto accounts for most foreign exchange violations in South Korea (theblock.co)
About 75% of violations of the country’s Foreign Exchange Transactions Act so far this year involved crypto accounting for about 1.5 trillion won ($1.1 billion).
These illegal transactions termed as Hwanchigi have also been linked to the exploitation of Kimchi premiums.
Singapore's Central Bank Asks Crypto Firms to Submit Business Data: Report (coindesk.com)
MAS announced that they would require digital asset firms to submit information about their business activities, this comes a month after they asked firms to submit counterparty information and token holdings.
MAS is looking to bring in stronger safeguards to protect retail customers.
Disclaimer
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Trading and investment in any financial products are exposed to risk. There are no such thing as risk-free returns. This material has been published for general education purposes only. It does not address specific investment or risk management objectives, financial situation, or needs of any person.
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