Friday, 1 July 2022

Market Summary

Market Summary 1 July 2022

Bitcoin Price: US$  19,942.21 (-0.90%)
Ethereum Price: US$ 1,071.01 (-2.65 %) 

 

Arbitrum Odyssey Paused, All About Airdrops, Crypto Gaming and the Creator Economy

  • On 29 Jun, Arbitrum Odyssey was paused by the Arbitrum team (Offchain Labs) to soothe high congestion and high gas fees. Arbitrum Odyssey is a user acquisition event launched on Jun 21. The recent spike in activity was due to users completing tasks for NFT airdrops and speculators hoping to receive unconfirmed airdrops using Arbitrum.
  • At its peak congestion, token swap fees on Arbitrum were more expensive than Ethereum. At one point, swap token fees were $6.65 on Arbitrum, while Ethereum swap token fees were $3.80.
  • In the first round of Arbitrum Odyssey, daily transactions on Arbitrum increased 253%, from 96,005 to 243,907 before the pause on 29 Jun.
  • Over the same period, daily transaction fees on Arbitrum progressively increased 1899%, from $26,272 to $478,143.
  • Arbitrum Odyssey Week 2 is set to resume when Nitro is launched (exact date TBD). Nitro should improve network throughput and reduce average costs incurred on Arbitrum even further.

 

NFTs to appear on Facebook, cross-post with Instagram as Meta Web3 expansion continues

  • Facebook will support nonfungible tokens (NFTs) with a “digital collectibles” tab on creators’ timelines to display their work. Meta technical program manager Navdeep Singh displayed screenshots of NFTs and a creator’s page Thursday on Twitter. 
  • A spokesperson for Meta, the parent company of Facebook, told TechCrunch the same day that the rollout of NFTs on Facebook would be gradual, beginning with select creators in the United States. Eventually, NFT creators will be able to cross-post between Facebook and Instagram, another Meta property. Instagram is also testing NFTs in its Spark AR augmented reality platform.
  • Instagram expanded its NFT trial from the U.S. to international users last week. The app allows NFTs minted on Ethereum and Polygon to be displayed, with other NFTs from Solana and Flow planned as well.
  • Meta announced in May that it was beginning tests of NFTs on Instagram, with Facebook to follow suit “soon,” according to CEO Mark Zuckerberg. Other Meta-owned apps, such as WhatsApp and Facebook Messenger, will get NFT display capabilities eventually, he added.

 

US lawmakers say crypto industry has a ‘tech bro’ problem hurting innovation

  • According to some United States lawmakers in the House Financial Services Committee, the lack of diversity in the financial technology space could be hurting many companies’ bottom lines.
  • In a Thursday virtual hearing on “Combatting Tech Bro Culture,” U.S. lawmakers and witnesses discussed how women and people of color were underrepresented in leadership positions in the financial technology industry, including crypto firms. Massachusetts Representative Stephen Lynch cited data that only 2% of venture capital funding went to firms in which the founders were women, while only 1% went to those with black founders, and 1.8% for Latinx.
  • According to Lynch and some on the committee, this trend suggested an “old boys club” culture in companies including those involved with cryptocurrencies, in which many of those in leadership positions were white men. They claimed that many firms seemingly less deserving of funding were able to bring in money more easily due in part to relationships between leadership.
  • “While lack of diversity is a trend in almost every industry that venture capitalists invest in, it is particularly troubling in the fintech space,” said Lynch. “The largest fintechs, including digital banks, payment processors, and cryptocurrency providers, actually market their products to women and people of color. Yet when we look at the founders and leadership teams, they clearly do not reflect the communities that they claim to serve.”

 

Coinbase providing customer geolocation data to ICE: Report

  • A new report has indicated that crypto exchange Coinbase has provided Immigration and Customs Enforcement (ICE) agents with a “suite of features” intended for tracking the company’s customers. According to the report, ICE has been granted access to an intelligence-gathering application, called Coinbase Tracer, that provides a variety of forensic data tracking capabilities.
  • U.S. Immigration and Customs Enforcement is an government agency under the Department of Homeland Security. The primary purpose of ICE is to protect the country from cross-border crime and illegal immigration.
  • Coinbase Tracer’s intent is to assist ICE with tracing malicious and fraudulent transactions on blockchains. According to The Intercept, the tool will allow ICE agents to “connect addresses to real-world entities.”
  • An additional email released by the Freedom of Information Act has shown that ICE wasn’t required to agree to an End User License Agreement with Coinbase. An End User License Agreement is used to describe what users can and cannot do with a company’s software products. Purportedly, this means ICE is free to use the data tracking tool as it wishes with minimal restrictions.
  • When Coinbase was questioned about these developments, spokesperson Natasha LaBranche merely supplied a link to the company’s website with verbiage addressing the issue. The link on the Coinbase website states “Coinbase Tracer sources its information from public sources and does not make use of Coinbase user data.” The Coinbase spokesperson did not provide information regarding limitations on Coinbase Tracer’s use by ICE.

 

FTX on the verge of purchasing BlockFi in $25M fire sale: Report

  • Cryptocurrency exchange FTX is close to purchasing digital asset lender BlockFi’s remaining assets for $25 million, according to CNBC.
  • According to sources close to the matter, BlockFi’s equity investors were wiped out and are now writing their positions off at a loss. In addition, the FTX deal could take multiple months to close, opening up the possibility that the price tag could shift over that period. In June 2021, BlockFi had a reported valuation of $5 billion.
  • Earlier this year, BlockFi had over 1 million clients, over $10 billion in assets and deposits, and had distributed more than $700 million in crypto rewards and interest. However, BlockFi’s fortunes quickly soured after it reportedly became a major creditor of the now troubled hedge fund Three Arrow Capital, also known as 3AC. As a result, it was forced to liquidate 3AC’s positions amounting to $1.33 billion, likely at a severe loss as the bear market intensified in June. 
  • The situation was exacerbated by 3AC posting collateral for the loan in $400 million worth of Grayscale Bitcoin Investment Trust (GBTC) shares, which often trade at a discount or premium to spot Bitcoin (BTC) prices. At the time of liquidation, GBTC shares were trading at a 34% discount to the net asset value of its Bitcoin holdings, which plunged further as BlockFi began closing the position.

Infamous North Korean hacker group identified as suspect for $100M Harmony attack

  • The Lazarus Group, a well-known North Korean hacking syndicate, has been identified as the primary suspect in the recent attack that saw $100 million stolen from the Harmony protocol. 
  • According to a new report published Thursday by blockchain analysis firm Elliptic, the manner in which Harmony’s Horizon bridge was hacked and the way in which the stolen digital assets were consequently laundered bears a striking resemblance to other Lazarus Group attacks.
  • “There are strong indications that North Korea’s Lazarus Group may be responsible for this theft, based on the nature of the hack and the subsequent laundering of the stolen funds.”
  • Additionally, Elliptic outlined exactly how the heist was executed, noting that The Lazarus Group targeted the login credentials of Harmony employees in the Asia Pacific region to breach the protocol’s security system. After gaining control of the protocol, the hackers deployed automated laundering programs that moved the stolen assets late at night.
  • Elliptic also noted that the hackers have already transferred over 40% of the $100 million to Tornado Mixer, an Ethereum-based “mixing service” that obscures transaction data and makes it extremely difficult for investigators to trace the movement of funds.

 

Coinbase seeking aggressive European expansion amid crypto winter

  • Coinbase is expanding its operations into various countries in Europe amid a “crypto winter.” Despite laying off numerous employees and rescinding job offers, Coinbase’s vice president Nana Murugesan revealed intentions to register in Italy, Spain, France and the Netherlands.
  • In Switzerland, the United States-based cryptocurrency exchange has already hired its first employees and is already licensed to trade cryptocurrencies in the United Kingdom, Ireland and Germany.
  • In an interview on June 29, Murugesan stated that the firm is now looking to expand into Europe. Furthermore, amid the cryptocurrency market slump, the company is also open to acquisitions in the region.
  • He feels that it’s the ideal moment to expand into other countries because many crypto-focused businesses are having cash shortages and bankruptcy risks. The crypto market crash has wiped out almost $2 trillion from the overall market value. Currently, the market capitalization is approximately $900 billion, owing to the liquidity crisis, which has forced Three Arrows Capital and Celsius Network to almost shut down. He stated that:
  • “When we entered U.K. and Europe, this was actually during the last big bear market in 2015–2016.”

 

Russian central bank exec is OK with crypto mining under one condition

  • Kirill Pronin, head of the Russian Central Bank (CBR)’s department of financial technologies, acknowledged the possibility of crypto mining legalization under certain conditions. A public acknowledgment like this makes a rare case, as the CBR continues to lead the battle against the efforts to legalize crypto in the country. 
  • The executive expressed his views on mining at the Saint-Petersburg International Legal Forum on Wednesday, June 29. During the session, dedicated to cryptocurrencies, Pronin revealed that CBR doesn’t take the same kind of hardline position on mining as it does in the case of general crypto legalization:
  • “Despite the fact that we are speaking up consistently for the prohibition of cryptocurrencies’ turnover […] the discussion regarding mining’ legalization is possible.”
  • However, Pronin named several conditions that, according to him, make this discussion possible. He insisted that the mined assets should be sold strictly abroad and in exchange for fiat money:

 

80,000 Bitcoin millionaires wiped out in the great crypto crash of 2022

  • More than 80,000 Bitcoin (BTC) investors have had their millionaire status revoked due to the crypto market downturn, but lower prices mean the number of whole coiners is growing. 
  • Back on Nov. 12, just days after Bitcoin hit a new all-time high of around $69,000, a total of 108,886 BTC addresses reported a balance greater than $1 million, according to data from BitInfoCharts.
  • Fast forward to the present day, with the price of Bitcoin struggling to hold above $20,000, a mere 26,284 addresses are reported to contain holdings valued at upward of $1 million, meaning that the number of paper millionaires has declined by more than 75% throughout the last nine months.
  • The dramatic decline in the price of the flagship cryptocurrency has also impacted the number of whales — those who boast a Bitcoin wallet worth more than $10 million. While there were 10,587 addresses with a minimum cash value of $10 million in Nov. last year, just 4,342 hold the same status today, a decline of 58%.

 

Contagion: Genesis faces huge losses, BlockFi’s $1B loan, Celsius’s risky model

  • A leaked investor call from Morgan Creek Digital suggests BlockFi liquidated 3AC for $1 billion, while Celsius reportedly maintained a highly risky assets-to-equity ratio last year that may have caused its recent liquidity woes.
  • It’s been another day of watching the ripples of contagion spread through the crypto market.
  • With Three Arrows Capital (3AC) being ordered into liquidation by a British court, details have also emerged on Thursday of BlockFi liquidating a $1 billion loan to 3AC, and the fallout from the insolvency was partly to blame for lending firm and market maker Genesis Trading facing losses of “a few hundred million dollars.”
  • Withdrawals remain suspended at the possibly insolvent lending and borrowing platform Celsius, which was revealed to have had a highly risky 19 to 1 assets-to-equity ratio before it ran into liquidity troubles this year.
  • Digital Currency Group’s market maker and lending firm Genesis Trading is reportedly facing losses in the hundreds of millions, according to sources reported by DCG publication Coin Desk.
  • The losses relate in part to the company’s exposure to 3AC and the crypto lender Babel Finance. Genesis is putting a brave face on the losses and still has hope of receiving partial repayments, with other losses offset by hedging. CEO Michael Moro said the firm had mitigated losses with “a large counterparty who failed to meet a margin call to us:”
  • “We sold collateral, hedged our downside, and moved on. Our business continues to operate normally and we are meeting all of our clients’ needs.”

 

After 8 years dumping billions of XRP, Jed McCaleb’s stack runs out in weeks

  • Former Ripple Labs founder Jed McCaleb is nearing the end of his eight-year Ripple (XRP) dump marathon, with only 81.53 million XRP, worth $26.55 million at the time of writing, remaining in his wallet’s balance.
  • According to Jed Balance, a website tracking his XRP holdings, McCaleb’s wallet name “tacostand” has been shedding an average of 4.06 million XRP over the last month but has ramped up daily transfers to 7.34 million XRP, worth $2.39 million, since Sunday.
  • At the current rate of selling, his wallet may be depleted within the next two to three weeks, to the delight of the crypto community.

 

CoinFlex CEO says withdrawals unlikely to resume on Thursday

  • CoinFlex CEO Mark Lamb said more time was needed before the exchange can reopen its platform for user withdrawals.
  • Crypto exchange CoinFlex is “unlikely” to resume withdrawals on Thursday as it had originally hoped, according to its CEO Mark Lamb, as the company continues to search for buyers of its $47 million bad debt. 
  • Speaking to CNBC on Wednesday, Lamb said that more time was needed before it could reopen the platform for withdrawals, stating:
  • “We will need more time. And it’s unlikely that withdrawals will be re-enabled tomorrow.”

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