Thursday, 1 September 2022

Market Summary

Market Summary 1 September 2022

Bitcoin Price: US$ 20,050.02 (+1.20%)
Ethereum Price: US$ 1,554.10 (+1.94%) 


Arbitrum Ecosystem Tokens Decline From Historic Rally Ahead of Nitro Upgrade

  • FBI asks DeFi investors to do their own research, check for code audits, and beware of open sourced code.
  • Sei Network announces $5 million funding round, led by Multicoin Capital.
  • OptiFi, an options trading protocol on Solana, accidentally shuts down and locks $661k in user funds forever.
  • Arbitrum developers announce the launch of Nitro upgrade set for today, August 31st.
  • Compound Finance freezes ETH money market due to code error while updating its Chainlink price feeds.
  • Tokens issued by Arbitrum ecosystem projects have been on a historic rally over the past two months. However, the uptrend seems to have ended three weeks ago.
  • Since the beginning of July, token prices have increased between 2-5x to hit all-time highs during the week of August 8-13th. However, prices have declined up to 58% since then.
  • The best performer during the bull run has been Cap Finance, a leveraged trading platform. The CAP token increased by 539% to hit an all-time high on August 8th.
  • The best performer after the bull run ended has been GMX, also a leveraged trading platform. The project’s GMX token has declined only 4% since hitting an all-time high on August 10th.
  • Arbitrum launched the Odyssey program on June 21st to incentivize activity by issuing NFTs to participating users. The following week, Odyssey was paused as too many transactions caused higher than normal gas fees.
  • With today’s Nitro upgrade, Arbitrum is expected to significantly increase capacity and make transactions consistently cheaper. The network is also expected to resume Odyssey after today’s upgrade.
  • Multisigs have become a critical piece of infrastructure for facilitating trustless collaboration for asset management and smart contract management alike.
  • Over the past few years, Gnosis’ multisig solution has come to dominate this sector, with the term “multisig” becoming almost synonymous with Gnosis Safe. As of now, Gnosis Safe contracts secure $39.5B worth of crypto assets.
  • The growth of Gnosis Safe has been meteoric. Dune Analytics data shows that users have created 91k+ Safes since the protocol went live in 2019.


Crypto Twitter shares security concerns regarding Meta’s recent NFT integration news

  • On Aug 29, Facebook and Instagram’s parent company Meta announced that its users will now be able to post digital collectibles and Non-Fungible Tokens, or NFTs, across both platforms by simply connecting their digital wallets to either site
  • While Meta’s announcement may have seemed to some like a mass adoption win for some digital asset enthusiasts, not all members of Crypto Twitter were thrilled by the news.
  • Skeptical users took to social media to express concerns surrounding the security and privacy of the data disclosed when digital wallets are connected to these social media platforms.
  • Twitter user and Web 3 community member NPC-Picac tweeted, “I don’t think entrusting digital collectibles to connect to “Meta” is in any way smart”
  • Another Crypto Twitter community member, CryptoBartender, raised concerns about what Meta could possibly do with the data they access from digital wallets, tweeting, “So they can figure out which wallets are yours and keep tabs on you and your crypto activities?”


US Federal Reserve discussion paper takes cold, hard look at DeFi, gives it mixed review

  • There are more than 1,400 DApps in operation and their number is growing rapidly, according to a United States Federal Reserve Board discussion paper dated in June but released on Aug. 30. Ethereum is their biggest host with 470, or 31%, of them. Those decentralized finance (DeFi) products represent a very small share of the global financial system, but may still pose risks to financial stability, the authors said.
  • The cumulative gross value of DeFi products ranged from $78 billion to $224 billion at the beginning of the second quarter of 2022, depending on how DeFi was defined, the paper said. Those figures have fallen dramatically since then, as the crypto winter descended. At the same time, technological developments are improving DeFi’s processing capacity. The authors speculate that wholesale investors are the biggest DeFi users.
  • The bulk of the paper was devoted to the risks and benefits the authors perceive in DeFi. Cryptocurrency volatility inhibits DeFi’s growth, and risks to the broader financial system are small at present, the authors said, but:
  • “The ability to build large leveraged positions and to conceal trades to some extent, combined with the novelty of the financial products allowing such leverage, have been common elements in the history of financial crises of the past century.”


Mt. Gox trustee releases repayment procedures update

  • Mt. Gox trustee Nobuaki Kobayashi released updated information on Wednesday regarding the rehabilitation plan for creditors of the long-defunct crypto exchange. According to the file, the restriction reference period starts on September 15. During the phase, “the assignment, transfer or succession, provision as collateral, or disposition by other means of rehabilitation claims are prohibited.”
  • Kobayashi confirmed that creditors have until September 15 to submit claims regarding funds lost when the early crypto exchange collapsed in 2014:
  • “During the Assignment, etc. Restriction Reference Period, the Rehabilitation Trustee will cease accepting applications for claim transfer procedures through the Rehabilitation Claim Filing System.”
  • The document is unclear about the deadline for the restriction period but confirms that it will be followed by the first entire repayment to creditors, as outlined in the Rehabilitation Plan approved by roughly 99% of the eligible users affected by the case.
  • The file also stated that if a notice of transfer is submitted during the restriction period, the trustee may be unable to determine whom to repay:
  • “This may result in rehabilitation creditors being unable to receive their preferred Repayments, the Repayment date being delayed significantly compared to other rehabilitation creditors, or at worst, the Repayment amount may be deposited with the Tokyo Legal Affairs Bureau in accordance with laws and regulations.”


Buterin and Armstrong reflect on proof-of-stake shift as Ethereum Merge nears

  • Ethereum co-founder Vitalik Buterin and Coinbase CEO Brian Armstrong believe that a gradual mind shift and important community contributions led to their backing of Ethereum’s upcoming move from a proof-of-work (PoW) to aproof-of-stake (PoS) consensus.
  • The two industry titans joined Coinbase protocol specialist Viktor Bunin on the Around the Block podcast for an enlightening discussion centered on The Merge, which is set to take place in mid-September 2022.
  • Buterin reflected on his history of considering proof-of-stake as a potential consensus mechanism for the Ethereum blockchain, which was initially met with skepticism due to a number of unsolved problems that made it seemingly unviable.
  • According to the Ethereum co-founder, one of the project’s first blog posts in 2014 proposed an algorithm called slasher, which introduced the concept wherein a node would be penalized for voting for contradicting actions:
  • “This was my attempt at making inroads in solving what proof-of-stake critics call the “nothing-at-stake” problem. In proof-of-work if you want to build on top of two blocks you have to do double the work but in proof-of-stake you can just sign as many things as you want.”


Ethereum miner balance reaches four-year high weeks before the Merge

  • The Ethereum Merge is slated for Sept. 15, which will see the Ethereum blockchain move from its current proof-of-work (PoW) mining consensus to proof-of-stake (PoS).
  • The Merge is being touted as one of the biggest upgrades for the Ethereum blockchain as it would help the network move to a more energy-efficient way of verifying transactions and eliminate PoW mining completely. With the Merge date approaching, Ether (ETH) miner’s balance has touched a new four-year high.
  • According to Oklink data, the balance of Ethereum miner addresses exceeded 260,000 ETH with a total of 261,848 ETH valued at over $415 million at the current price. Miner accumulation reached a new four-year high with similar levels seen last in April 2018.
  • The miners’ growing accumulation of ETH has been attributed to a few factors, the first being the anticipation of a price surge in the wake of the key upgrade. While many pundits have called the Merge a “buy the rumor and sell the news” kind of event, the miners’ accumulation indicates a growing bullish sentiment.


ETH products grow in August as BTC products dip: CryptoCompare report

  • Ethereum investment products increased by 2.36% to $6.81 billion in assets under management (AUM) throughout August, outperforming Bitcoin products which saw a 7.16% drop off to $17.4 billion. 
  • The figures were contained in a new report by CryptoCompare.
  • This was also reflected in the Bitcoin (BTC) and Ether (ETH) product trading volumes, with Grayscale’s most notable Bitcoin product, GBTC, experiencing a 24.4% drop in volume while its Ethereum product, GETH, actually increased by 23.2%. CryptoCompare’s report suggested that the highly anticipated Ethereum Merge was the cause behind the change in trading volumes:
  • “Indeed, even at a more granular level, no Bitcoin products covered in this report saw AUM or volume gains in the month of August. We could be seeing interest move away from Bitcoin in the short term, as Ethereum-based products hold the attention with the much-anticipated merge on the horizon.”


Largest Ether mining pool Ethermine opens new ETH staking service

  • Ahead of the rapidly approaching Ethereum Merge on Sept. 15, Ethermine, the world’s largest Ether (ETH) mining pool has unveiled a new staking pool for users. Notably, however, it is not available to United States miners
  • The new service, offered via Bitfly, enables Ethermine members to collectively stake their ETH and earn interest on top of their deposits. As little as 0.1 ETH, or $159 at the time of writing, is required to enter. However, the smaller the holding, the greater the fee. The platform is currently offering stakers an annual ETH interest rate of 4.43%.
  • At the time of writing, 393 ETH, worth roughly $626,000 at current prices, has been invested into Ethermine’s new pool.
  • Staking pools such as these hold significance, as they offer competitive interest rates and lower barriers of entry than solo staking as node operators, which requires at least 32 ETH, or around $51,000, to operate a node. In comparison to Ethermine’s interest rate, staking via the Ethpool on Bitfly as a node operator garners an annual interest rate of 4.6%.

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