Thursday, 13 October 2022

Market Summary

Market Summary 13 October 2022

Bitcoin Price: US$19,155.53 (+0.50%)
Ethereum Price: US$ 1,294.44 (+1.12%) 


ETH Turns Deflationary as Users Rush to Mint XEN Tokens

  • Solana-based Mango Markets is exploited for $100M. The hacker is proposing to return a portion of the stolen funds on the DAO’s forum.
  • Crypto exchange Bittrex to pay $29M in fines to the US Treasury for facilitating trades from sanctioned jurisdictions like Syria or Crimea.
  • Greyscale argues the SEC’s actions of approving ETFs based on BTC futures but not spot BTC are discriminatory. Elsewhere, the SEC rejects WisdomTree‘s spot BTC ETF.
  • The SEC is investigating Yuga Labs, creator of Bored Ape Yacht Club NFTs, over whether sales of its digital assets violated federal law.
  • The BNB Smart Chain plans to perform a hard fork to fix an exploit that drained an estimated $100M from the blockchain last week.
  • Over the past 4 days, a total of 11.2K ETH has been burned as users rush to interact with a recently launched project. As a result, ETH has turned deflationary since the protocol has only minted a total of 6.5K ETH over the same period.
  • The mysterious new project appears to be the XEN token launched by the “Fair Crypto Foundation.” The project’s website states that it was founded by Jack Levin, an early engineer at Google.
  • Users can mint the token for free by paying the gas fee and then stake the token to earn an APY of 20%. The project claims that 582K wallets have minted the token but only 1K wallets have staked the token (representing 3.5% of the supply).
  • More importantly, users have spent a total of 4.1K ETH to interact with the XEN token contract. At one point since the token’s launch, the contract accounted for more than 48% of the gas used on Ethereum.
  • Since the Merge, ETH has remained inflationary due to low levels of on-chain activity and gas fees. However, the rush to mint XEN tokens has led to increased on-chain activity, turning ETH deflationary.
  • To be sure, ETH’s total supply is still up by 7.7K ETH since the Merge, meaning that there is still some way to go before ETH can be called a deflationary asset.
  • However, many have pointed to the deflation caused by the XEN token as evidence that a sustained increase in on-chain activity during the next bull market can lead to massive deflation in ETH.
  • Chicken bonds were recently launched on the back of Liquity to act as a yield aggregator for LUSD depositors while helping to retain the LUSD peg.
  • Holders can bond their LUSD, and receive bLUSD after the bonding time. The acquired bLUSD can be thought of as LUSD (principal) + future yield. The LUSD deposited into chicken bonds is sent to the Liquity’s Stability Pool and LUSD’s Curve pools to earn yields.
  • LUSD bonders can exit the bonding stage at any time to “chicken out” and receive their principal LUSD back at no loss. If they exit early, they also receive no yield.
  • LUSD bonders can remain bonded and “chicken in” to earn boosted yields aggregated from the Stability Pool and Curve. There will be a trading market for the bLUSD-LUSD pair to allow users to exit positions even after they “chicken in.”
  • In theory, bLUSD should never trade below 1 LUSD, or it’ll be arbitraged through the redemption of 1 LUSD per 1 bLUSD.
  • If LUSD is above $1, move LUSD from the Stability Pool to Curve and reduce LUSD price by essentially “selling” LUSD for the other Curve pool counterparts.
  • If LUSD is below $1, move LUSD from Curve to the Stability Pool and increase LUSD price by essentially “buying” LUSD using the other Curve pool counterparts.
  • Participants will also receive a “chicken out” or “chicken in” dynamic NFT designed by Luchadores with a rising floor price due to bLUSD.


BNB Chain Upgrade Restores Cross-Chain Transfers Following Binance Bridge Hack

  • BNB Smart Chain successfully deployed an upgraded version of its network, resolving several cross-chain issues following the multi-million dollar bridge hack last week. 
  • “All relevant funds stuck in cross-chain transfers will now have arrived in your target wallet or source,” said BNB Chain on Wednesday. “Transfers between BNB Beacon Chain and BNB Smart Chain are now functioning normally.”
  • According to Binance, the upgrade had no effect on the trade of Binance Smart Chain tokens at the exchange but required deposits and withdrawals of those tokens to be temporarily paused. 


Binance Accused of Filing Inaccurate Financials by UK Subsidiary Shareholder

  • Cryptocurrency exchange Binance is facing criticism from a co-owner of its U.K. subsidiary for allegedly misrepresenting the shareholder’s ownership stake in official company filings.
  • Binance Digital Limited, a U.K. subsidiary of the global trading plaform, filed “grossly inaccurate” financial statements, according to directors of Dimplx, a shareholder of Binance Digital. The Financial Times reported this development first.
  • “Binance Digital’s turnover, assets, liabilities, including potential tax liabilities, net profits, nature of operations and/or related party transactions,” were not accurately represented, Dimplx directors said in an annual report filed on Sept. 28 with the U.K. companies registrar.


US Consumer Price Index for September Could Provide Push for Bitcoin to Break Out of Its Recent Range

  • A U.S. inflation report due Thursday might be the catalyst that finally snaps bitcoin (BTC) out of an unusually long spell of uncharacteristically low price volatility, analysts say.
  • The Labor Department on Thursday is expected to report that the core consumer price index (CPI) accelerated to a year-on-year pace of 6.5% in September, from August’s 6.3%, according to FactSet. This “core” inflation rate strips out the impact of volatile food and energy prices; the “headline” CPI, which includes food and energy items, is already running hot above 8%.
  • A core CPI of 6.5% would be the highest in four decades – helping to explain the alarm among Federal Reserve officials who have been attempting to restore price stability by tightening monetary policy – and in the process, putting downward pressure on prices of risky assets from stocks to cryptocurrencies.
  • Analysts at the big U.S. bank JPMorgan say a too-hot CPI would put equities at risk of a 5% tumble.
  • Depending on the CPI number, both equities and risk assets like cryptocurrencies could move either 3% up or down, according to Florian Giovannacci, head of trading for Covario.


Offchain Labs Acquires Ethereum Consensus Client Prysmatic Labs

  • Ethereum smart contract scaling solution developer Offchain Labs has acquired Prysmatic Labs, a core force behind the architecture of the Merge.
  • Offchain Labs — the leading Ethereum consensus client now powering the blockchain’s proof-of-stake validation system — is also behind Arbitrum One, a market-leading layer-2 secure scaling solution for decentralized application development on Ethereum. The company was co-founded by Princeton professor Ed Felten and Ph.D. students Steven Goldfeder and Harry Kalodner.
  • Goldfeder told Blockworks acquisition talks began about a year ago but only gathered steam in recent months. The purchase would bring the Offchain Labs team to roughly 60 employees.
  • “From a values perspective but also from our fascination with the technical problems here and our desire to solve these problems, it just felt like a very natural decision,” Goldfeder said. “We’re just increasing our capacity by joining forces.”


Bitcoin Mining Reserves Are at a 12-Year Low—Here’s Why

  • The amount of Bitcoin held in reserve by mining companies has fallen to lows not seen since February 2010, according to blockchain analytics firm IntoTheBlock. And that’s been true for most of this year.
  • As of Wednesday afternoon, Bitcoin miners have 1.91 million BTC in their wallets, according to IntoTheBlock. Bitcoin miner reserves have been above the 2 million BTC mark—first surpassed on February 19, 2010—for only 46 days since the start of 2022. This illustrates the impact of miners selling their Bitcoin throughout the year, at times selling more in a month than they mined, to compensate for profits that have dwindled as the market has suffered.


IMF’s Georgieva Warns Central Banks to Hoard Reserves, Follow Fed Hikes

  • Washington D.C. – The head of the International Monetary Fund said Wednesday that central banks should refrain from currency interventions, instead suggesting that they use interest-rate raises as the preferred tool for combating foreign-exchange weakness versus the dollar.
  • “Do not waste your reserves to protect your currency,” IMF Managing Director Kristalina Georgieva said during an on-stage discussion at the organization’s annual meeting in Washington D.C. “When your currency is depreciating because of this mismatch of fundamentals, if you throw your reserves to defend it, the only thing you’ll get out of it is a weak position for the future.”
  • Emerging-market currencies have been roiled by a strengthening dollar as the Federal Reserve raises interest rates to combat rising consumer prices in the U.S. Because so many countries are dependent on imports, higher local prices for international goods – often denominated in dollars – have triggered bouts of inflation around the world. A stronger dollar also makes it harder for emerging-market countries to repay dollar-denominated debt, since taxes are usually assessed in the local currency.


Crypto Investment Product Firm 21Shares Launches Bitcoin ETP in Middle East

  • Crypto investment product firm 21Shares has launched a physical bitcoin exchange-traded-product (ETP) in the Middle East that is set to be listed on the Nasdaq Dubai.
  • 21Shares has continued to expand globally, and its newly formed parent company recently raised $25 million at a $2 billion valuation. The firm now offers over 46 products listed across 12 exchanges in seven different countries.
  • “The UAE, and broader [Gulf Cooperation Council], is a market of significant strategic importance to our business, and we are excited about the opportunity this market opens to us,” Sherif El-Haddad, who joined the firm in August as Middle East head, said in a statement.


Morgan Stanley Says Crypto Ecosystem Is Becoming Less Decentralized

  • The crypto ecosystem is becoming less decentralized, Morgan Stanley (MS) said in a research report on Wednesday.
  • The underlying blockchains themselves may be decentralized, but as crypto regulation develops the need to run a large part of the blockchain on a single or small group of cloud providers becomes a potential risk, the report said.
  • The report said 65% of Ethereum’s nodes are cloud hosted, and half of these use Amazon Web Services (AWS). If certain service providers decide to censor some participants or crypto products or if there are lengthy server outages, this could become a problem.
  • The crypto ecosystem has evolved “with many applications, code, services and companies feeding into the underlying decentralized blockchains,” which Morgan Stanley says is causing some parts of the ecosystem to become less decentralized and more dependent on individual services.
  • The bank says this isn’t surprising as “centralization is a natural evolution of the financialization of cryptocurrency markets,” although it does bring new challenges.

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