Wednesday, 10 August 2022

Market Summary

Market Summary 10 August 2022

Bitcoin Price: US$ 23,149.95 (-2.77%)
Ethereum Price: US$ 1,702.76 (-4.18%) 

 

Optimism Overtakes Arbitrum, Complete Guide to Rollups

  • Notable celebrities‘ addresses received ETH from sanctioned Tornado Cash wallets. List includes Jimmy Fallon, Shaquille O’Neal, Dave Chappelle and others.
  • Circle froze $75,000 of USDC linked to addresses sanctioned by the US Office of Foreign Assets Control.
  • Infura and Alchemy, crypto infrastructure providers, blocked RPC requests to Tornado Cash, preventing users from accessing the application.
  • FTX and Circle confirmed they will only support the Proof-of-Stake version of Ethereum after the final Merge.
  • FTX and Reddit announced a partnership to tokenize community points using Arbitrum.
  • On August 6, the total value locked (TVL) on Optimism overtook the TVL on Arbitrum for the first time.
  • We saw a drastic increase of 78% within two days as TVL rose from $555 million on August 4 to $992 million on August 6. Currently, the TVL stands at $1.1 billion.
  • Almost all of the increase in TVL can be attributed to the launch of OP incentives on Aave v3. The protocol is set to distribute 5m OP tokens to users of its Optimism money markets over the course of 90 days.
  • The TVL on Aave v3 increased by over 1,400% since the launch of OP incentives on August 4. Over the following two days, over 85k ETH worth of assets were bridged from Ethereum to Optimism.
  • The price of OP actually led the drastic rise in TVL, increasing by 72% over the last week of July.
  • On August 31, Arbitrum is launching Nitro, an upgrade to decrease gas costs and increase transaction speeds. Soon after, Arbitrum plans to resume the Odyssey event, which can serve as a potential catalyst to reverse this trend.
  • Current rollups settle to Ethereum where they have a smart contract deployed on the base layer. As rollups decentralize and smart contracts become battle-tested, these rollups could scale Ethereum and approach the same level of security.
  • You can also build rollups on top of these rollups, so-called “L3s.” These potentially offer even higher scale and customizability.
  • Sovereign rollups are another option – they post data to a base layer like Ethereum or Celestia but then choose not to rely on it for settlement.
  • Enshrined rollups would be years away, but Ethereum may be able to upgrade its own settlement layer to a zkEVM someday. It could even deploy many parallel instances.
  • Even more speculative – enshrining a rollup in Celestia someday could make sense. It gives Celestia a way to bridge its token to other rollups and back in a trust-minimized way. It could capture additional value by subsidizing Celestia’s security budget. It could serve as a settlement layer for other rollups.
  • Value accrual is important for the economic security of a base layer asset. This means capturing fees and other forms of MEV. Understanding how value will flow in the modular stack is critical to design.

 

Bitcoin drops to support as looming CPI print shakes up crypto and stock markets

  • Crypto and equities markets took a bit of a tumble on Aug. 9 as traders grew a bit skittish ahead of tomorrow’s Consumer Price Index (CPI) report. The details of the print will shine a light on whether the Federal Reserve’s aggressive interest hikes are effective in tamping runaway inflation and it could have an impact on the size of future hikes. 
  • Earlier in the week, Tesla CEO Elon Musk suggested that July data will reflect the United States reaching peak inflation and that any recession will be “mild to moderate.” Right now, the consensus is that July data will be lower than the record-breaking 9.1% figure seen in June. The price of energy commodities (oil, natural gas) noticeably decreased in July and the Fed is hopeful that the previous back-to-back 0.75 basis-point hikes will combat soaring prices in other parts of the economy.
  • As is custom, Bitcoin (BTC), Ethereum (ETH) and most altcoins pulled back as traders de-risk ahead of the CPI print. BTC price dropped as low as $22,800, while Ether corrected to $1,670. The rationale that traders are sheltering in stablecoins is sensible, but from a technical analysis point of view, the Aug. 9 pullback is simply a lower support test after the most recent support-resistance flip of the past week, and large-cap assets like ETH and BTC continue to trade within their multi-week ranges.

 

Alchemy and Infura block access to Tornado Cash as Vitalik Buterin weighs in on debate

  • According to Twitter user @0xdev0, on Monday, Web3 development platform Alchemy and Infura.io blocked remote procedure call (RPC) requests to cryptocurrency mixer Tornado Cash, preventing users from accessing the applications. The day prior, the U.S. Treasury placed 44 smart contract addresses linked to Tornado Cash in the Specially Designated Nationals and Blocked Persons (SDN) list. U.S. persons and entities are prohibited from blockchain or business interactions with Tornado Cash under t sanctions, with the possibility of criminal liabilities for violations.
  • The move came after the U.S. Treasury alleged individuals and groups had used the privacy protocol to launder more than $7 billion worth of crypto since 2019, including the $455 million stolen by the North Korea-affiliated Lazarus Group. Almost immediately after the announcement, stablecoin issuer Circle froze USD Coin funds held within Tornado Cash’s smart contracts. Meanwhile, programming repository GitHub took down the project’s main page and blocked developer access.
  • Vitalik Buterin, the co-founder of Ethereum, claimed that he used Tornado Cash to donate to Ukraine. The intent, as told by Buterin, was to protect the financial privacy of the recipients so that their enemy, the Russian government, would not have full details of the transaction.

 

Bitcoin dominance hits 6-month lows as metric proclaims new ‘alt season’

  • Bitcoin (BTC) is facing fresh competition from altcoins this month as data shows that — technically — it is already “alt season.”
  • Figures from CoinMarketCap and TradingView show that BTC currently makes up around 41% of the overall crypto market capitalization — its lowest since the start of 2022.
  • The case for altcoin bets is further bolstered by a dedicated metric tasked with calling “altseason” — a period where altcoins outshine Bitcoin as investments.
  • With a normalized score of 94/100, the Altcoin Season Index is currently flashing its most convincing altseason reading since June 2021.
  • The closer to zero the score is, the more the metric favors Bitcoin over altcoins. Alt season is called once “75% of the Top 50 coins performed better than Bitcoin over the last season,” its description explains, adding that a “season” equates to the past 90 days.

 

What the fork? Ethereum’s potential forked ETHW token is trading under $100

  • An Ethereum fork token that does not yet exist, dubbed ETHW, is trading under $100 across several crypto exchanges after debuting at $30. 
  • ETHW is the native asset to the ETHPoW chain. ETHPoW, for now, is a possible new chain backed by proof-of-work (PoW) miners as the original chain switches to a proof-of-stake (PoS) consensus in September’s “Merge” event.
  • Meanwhile, the proof-of-stake version ETHS is trading at around $1,600 or the difference between the ETH price and the ETHW price. 
  • As a result of this potential chain split, anyone holding a certain number of the original chain’s Ether (ETH) will automatically receive an equal amount of ETHW tokens. Such speculations have prompted some exchanges to list ETHW for trading in advance.
  • For instance, Poloniex announced support for both ETHW, as well as ETHS, the PoS chain token, listed for trading against Ether.
  • Crypto exchange MEXC Global and Gate.io have also listed ETHW and ETHS on its platform. Concurrently, OKX CEO Jay Hao has committed that they would list the newly forked Ethereum coins if there is “sufficient demand” for them among traders.
  • On the other hand, Ethereum co-founder Vitalik Buterin called fork supporters “a couple of outsiders” that own crypto exchanges and “want to make a quick buck.”
  • He reasserted that Ethereum miners already have a PoW alternative in Ethereum Classic, the original version of Ethereum, noting that it has “a superior community and superior product for people pro-proof-of-work.” 

 

The Reserve Bank of Australia to explore use cases for CBDC

  • The Reserve Bank of Australia weighs in the central bank digital currencies (CBDCs) race to explore use cases for a CBDC in the country. It will collaborate with the Digital Finance Cooperative Research Centre (DFCRC) on a respective research project. 
  • As stated in an announcement on Tuesday, the joint project of the Reserve Bank and DFCRC will focus on “innovative use cases and business models” that could be supported by the issuance of a CBDC. The technological, legal and regulatory considerations will also be assessed in the project’s course.
  • The pilot will last about a year and take the form of the CBDC operating in a ring-fenced environment. Industry stakeholders will be invited to develop specific use cases, which The Bank and the DFCRC will then evaluate. The selected cases will participate in the pilot, resulting in a special report.

 

BitMEX former executive pleads guilty to violating the Bank Secrecy Act

  • Another top executive joins three co-founders of the crypto exchange BitMEX, pleading guilty in the United States District Court for the Southern District of New York. The court case under the headline U.S. v. Hayes et al. goes on for two years, with BitMEX management being indicted for violating the U.S. Bank Secrecy Act. 
  • According to the Wall Street Journal, on Monday, a one-time head of business development at BitMEX, Gregory Dwyer, admitted his guilt in violating the Bank Secrecy Act in court. As part of a plea deal, Dwyer would pay a $150,000 fine.
  • As Manhattan Attorney Damian Williams commented on this development:
  • “Today’s plea reflects that employees with management authority at cryptocurrency exchanges, no less than the founders of such exchanges, cannot willfully disregard their obligations under the Bank Secrecy Act.” 
  • All the founders that Williams mentions have already pleaded guilty earlier. Former CEO Arthur Hayes and one of the co-founders, Ben Delo, admitted their guilt on Februar 24, 2022, while the third co-founder, Samuel Reed entered a plea two weeks later. 
  • Hayes was sentenced to two years probation, Delo received 30 months of probation, and Reed is facing up to five years in prison. Reed alone agreed to pay a $10 million fine; the same sum would be jointly paid by Hayes and Delo.

 

Institutions flocking to Ethereum for 7 straight weeks as Merge nears: Report

  • Institutional investors are piling into Ether- (ETH)-based digital asset funds, which have recorded seven straight weeks of positive inflows, according to the latest CoinShares report. 
  • Said inflows reached $16.3 million last week, adding to a total of $159 million in inflows over the last seven weeks.
  • CoinShares Head of Research James Butterfill on Monday said the rise in market sentiment for Ethereum-focused products is largely due to “greater clarity” relating to the upcoming Merge, which is set for Sep. 19, with Butterfill stating: 
  • “We believe this turn-around in investor sentiment is due to greater clarity on the timing of The Merge where Ethereum shifts from proof-of-work to proof-of-stake.”

 

Glassnode: On-chain analysis regarding Ethereum at Youtube.

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