Wednesday, 13 July 2022

Market Summary

Market Summary 13 July 2022

Bitcoin Price: US$ 19,328.75  (-3.18%)
Ethereum Price: US$ 1,038.58 (-5.27%) 


BTC Outflows Hit ATH, Aave Decides to $GHO, Curve’s Resiliency in an Evolving Market

  • Since the start of 2020, BTC outflows from exchanges have far outpaced BTC inflows, with a sharp increase between June and July 2022.
  • On June 26th, we saw the largest outflow of BTC, with 153k BTC (worth approximately $3.2 billion) scurrying for an exit from centralized exchanges. Presumably, these withdrawals were to eliminate custody risk after multiple centralized brokers and lenders halted client withdrawals and filed for bankruptcy.
  • On June 12th, Celsius announced that it had paused all withdrawals, swaps, and transfers while allegations of client fund mismanagement made headlines. One month after the announcement, withdrawals from Celsius remain frozen. Meanwhile, former Celsius employee @0x b1 filed a lawsuit against Celsius, alleging a failure in risk management and accounting practices.
  • On July 1st, Voyager Digital temporarily paused all withdrawals and trading activity before filing for Chapter 11 bankruptcy protection on July 5th. Voyager Digital had previously announced that its exposure to the insolvent Three Arrows Capital (3AC) consists of 15,250 BTC and $350 million USDC.
  • Cosmos has decided to bring liquid staking and defi to the Cosmos Hub with Interchain Security. To do this, they are using 150k ATOM from the community pool to fund applications looking to leverage this new feature. They are allocating 50k ATOM for developing the DeFi Hub and 100k ATOM for projects launching on the DeFi Hub or their own consumer chain. At a high level, this should help facilitate consumer chains to launch on Cosmos as they can offload bootstrapping security to the Cosmos Hub validator set.
  • Lido is voting on a proposal to cap the insurance fund and redirect revenues to the DAO treasury. The DAOs insurance fund currently receives half of the 10% protocol fee that Lido leverages. The insurance fund currently holds 4565 stETH, and the proposal estimates it would hold around 5500 stETH once the cap goes live along its proposed timeline. Any revenue beyond that will then begin flowing to the DAO treasury.
  • Mstable is going through a significant restructuring process utilizing four separate snapshot votes. The first has already passed, with the community currently voting on two more (TDP 45 and TDP 46), with another forthcoming. The first vote gave the team the mandate to go forward with the restructuring. It also consolidates its asset management and treasury subDAOs, and created a Builder subDAO dedicated to developing new products. The two live votes propose an election process for multi-sig members and consolidates the ‘Grants’ and ‘Community subDAOs’ into a single Ecosystem DAO. Restructuring could signal some level of distress in a DAO, no different than a business. This is purely speculative on our part, but restructuring efforts is something that readers should consider when assessing DAOs.
  • Merit Circle has also voted to restructure its DAO. This proposal formalizes the relationship between the $MC Purpose Trust, Merit Circle Limited, MCDAO Ltd, and Orange Pill Ltd. Orange Pill is a contracted company with no ownership in the DAO, which will carry out the day-to-day operations.
  • Osmosis has recently passed two proposals that should reduce the amount of OSMO emitted by the protocol. Proposal 273 reduces emissions to small ‘Other’ pools, leading to a minor (.28%) reduction in token emissions. Meanwhile, proposal 274 reduces OSMO emissions to ‘Minor’ and ‘Other’ pools by 9% and redirects them to the community pool.
  • One of Curve’s key features is its StableSwap invariant design, which allows for more efficient trading when it comes to pegged assets relative to a constant product AMM.
  • Trading efficiency is achieved by reducing price slippage with the use of an “amplification coefficient” (A) to the constant product equation. The use of leverage with A is dynamic and provides either:
  • Infinite leverage when there is a large price divergence between asset x and y, or
  • Zero leverage when the price is 1 to 1 (essentially functioning like a constant product AMM).


Nervos Network (CKB) price posts double-digit gain after Godwoken layer 2 launch

  • Positive price movement during bear markets are notoriously hard to come by due to the non-stop FUD of media and lackadaisical interest from crypto investors.
  • One crypto that managed to flash green on June 12 is the Nervos Network (CKB), an open blockchain protocol designed for universally accessible decentralized applications (DApps).
  • Three reasons for the positive gains for the Nervos Network include the launch of the network’s layer-2 (L2) solution Godwoken, the integration of the Celer c-Bridge within the Godwoken protocol and the launch of a new nonfungible token (NFT) marketplace on the Nervos mainnet.
  • Godwoken is an Ethereum (ETH) Virtual Machine (EVM)-compatible Optimistic rollup that allows projects building across the various sectors of the market to easily create and port their DApps to the Nervos Network.
  • The addition of EVM compatibility also makes it possible for any project launched on Godwoken to be instantly interoperable with other EVM chains, which can help increase their reach and grow their user-base.


Multicoin Capital raises $430M for new crypto startup fund

  • Prominent crypto investor Multicoin Capital has launched a new venture fund valued at $430 million, further demonstrating venture capital’s growing interest in the blockchain economy amid the bear market. 
  • Multicoin’s Venture Fund III will invest between $500,000 and $25 million in early-stage companies across various crypto- and blockchain-focused industries, the company announced Tuesday. It’s also willing to invest values of up to $100 million or greater for later-stage projects with an established brand and market presence.


French central bank head announces Phase 2 of wholesale digital euro project

  • The first phase of experiments with a wholesale digital euro has been completed, and Phase 2 experiments will begin this year, Banque de France governor François Villeroy de Galhau said Tuesday. Four or five new experiments are expected to be launched. 
  • Speaking at the Paris Europlace International Finance Forum, the French central banker summed up the European Union’s achievements in crypto-asset regulation under the French presidency, mentioning the Transfer Fund Regulation (Travel Rule) and Markets in Crypto-Assets (MiCA), specifically.
  • The Eurosystem is looking at the scope and design of a digital euro central bank digital currency (CBDC). The main rationale for a retail digital euro is to maintain the role of central bank money in the economy even as it is “threatened by the digital revolution,” Villeroy de Galhau continued. He spoke in favor of maximum intermediation in the design, noting that intermediaries have more experience than central banks with customer relations and Know Your Customer/Anti-Money Laundering (KYC/AML) measures. He said:
  • “I believe that the Eurosystem should not have the role of managing digital euro holdings: the Banque de France closed its last private customer accounts over 20 years ago, and does not intend to reopen any.”


Sri Lanka central bank reiterates crypto warning following protestors seizing president’s residence

  • Amid economic and political turmoil, the Central Bank of Sri Lanka, or CBSL, has warned the public against crypto purchases due to the lack of regulatory oversight.
  • In a Tuesday notice, the CBSL said it has not authorized or licensed any company in Sri Lanka to offer crypto-related services, including exchanges, initial coin offerings and mining. The central bank said the warning was in response to “recent developments in relation to virtual currency usage,” likely referring to the market downturn and significant volatility in the prices of cryptocurrencies like Bitcoin (BTC).
  • Virtual currencies “… are considered as unregulated financial instruments and have no regulatory oversight or safeguards relating to their usage in Sri Lanka,” said the CBSL. “The public is therefore warned of the possible exposure to significant financial, operational, legal and security related risks as well as customer protection concerns posed to the users by investments in VCs.”
  • The announcement came amid inflation in Sri Lanka reaching more than 54% in June as the SBSL bank raised interest rates to 15.5%. According to data from the central bank, inflation is roughly 45% at the time of publication, affecting the cost of living for the 22 million people living in Sri Lanka.


Blockchain-based games see an uptick in users despite bear market conditions

    • Bear markets are always tough, but one of the positives is they clear the clutter and this allows legitimate projects to stand out. 
    • While most investors are focused on the latest centralized finance (CeFi) and decentralized finances (DeFi) scandal, the blockchain gaming sector has quietly weathered the storm better than other niches of the market.
  • All sectors of the market have experienced a noticeable decline in active users, but the gaming sector has proven to be the most resilient at retaining users as the bear market intensified.
  • With a current count of 173.17 million, the number of gaming-related transactions is significantly higher than any other sector of the market, with the second closest sector being decentralized finance with 8.86 million.
  • As for which protocols contribute the most to the transaction count, WAX, Hive, BNB Smart Chain (BSC), Solana (SOL) and Ronin are the most active, led by WAX with a current transaction count of 158.23 million.
  • Data shows that users are specifically drawn to WAX and Binance Smart Chain, which saw 2.94 million and 2.49 million users.


Animoca Brands raises $75M to advance ‘open metaverse’ concept

  • Blockchain gaming and venture studio Animoca Brands has closed another strategic funding round, giving the company additional resources to expand its acquisition targets in the metaverse sector. 
  • The company announced Tuesday that it has closed a $75.32 million funding round at a pre-money valuation of $5.9 billion backed by Liberty City Ventures, Kingsway Capital, Alpha Wave Ventures, 19T, SG Spring Limited Partnership Fund and others. The raise represents the “second tranche” of funding following a $358.8 million raise in January that was supported by venture giants Sequoia China, Winklevoss Capital, ParaFi Capital and 10T Holdings.
  • Animoca said the new capital will fund strategic acquisitions, product development and intellectual property licenses as it looks to advance the so-called “open metaverse” concept. The company said it plans to continue using blockchain technology, including nonfungible tokens (NFTs), decentralized finance and GameFi, to promote digital property rights.


3AC co-founder returns to Twitter, blames liquidators for “baiting”

  • Su Zhu, co-founder of Singapore-based crypto venture capital firm Three Arrows Capital (3AC), returned to Twitter after nearly a month of inactivity. In another cryptic tweet, he blamed liquidators for baiting them with respect to StarkWare tokens.
  • The tweet with attached mail from legal counsel claimed that Starkware equity had a token warrant that expired on July 5 and that the liquidator didn’t exercise the warrant, resulting in the loss of Starkware tokens. Zhu blamed liquidators for not using the Starkware tokens and claimed they baited the firm to use information in court.
  • The cryptic tweet from the co-founder comes days after 3AC filed for a Chapter 15 bankruptcy in a New York court after it failed to meet several margin calls from its lenders. The rumors about the firm’s insolvency began in June and later, a British Virgin Islands court-ordered liquidation of 3AC funds.

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