Friday, 14 October 2022

Market Summary

Market Summary 14 October 2022

Bitcoin Price: US$19,375.13 (+1.15%)
Ethereum Price: US$ 1,190.00 (-0.57%) 


OpenSea Weekly Volume Hits New 2022 Low

  • Coin Center sues the U.S. Treasury over Tornado Cash sanctions.
  • Uniswap Labs raises $165 million in Series B funding led by Polychain Capital.
  • Stablecoin issuer, Tether replaces commercial paper holdings with U.S. treasury bills.
  • Coinsquare becomes first Canadian crypto exchange to receive IIROC registration.
  • 21Shares launches a physical bitcoin ETP that will be listed on the Nasdaq Dubai.
  • OpenSea is down bad this week as the NFT marketplace has done only $70M of trading volume over the previous seven days. OpenSea saw just $6.2M of trading volume yesterday, represeting the lowest daily volume in 2022 so far.
  • According to Google Trends, search interest for the term “NFT” peaked in Jan. 2022 and has seen a steady decline ever since. This week, search interest for “NFT” declined to just 11% of what it was  during the Jan. 2022 peak.
  • While the loss of interest in NFTs has been a major factor in the declining volume on OpenSea, the rise of other NFT marketplaces such as LooksRare and X2Y2 is also a contributing factor.
  • Specifically, X2Y2 has introduced token incentives and optional royalty payments on certain NFT collections. This allows X2Y2 to compete against other marketplaces and divert some trading volume away from OpenSea.
  • To be sure, OpenSea is still a major player in this space. The marketplace has introduced additional analytical features for traders and expanded to Solana in March, Arbitrum in September, and Avalanche this month.
  • Immutable X is an Ethereum layer 2 for NFTs and a popular scaling solution for what many consider to be the next generation of crypto games such as Illuvium, Ember Sword, and Guild of Guardians.
  • The Immutable ecosystem is underpinned by the IMX token, for which the dominant use cases are to bootstrap and govern the network and serve as a medium of exchange.
  • Since IMX is not used for gas fees, the token’s value accrual is heavily dependent on volume and user acquisition.
  • Immutable plans to facilitate this by eliminating order book fragmentation, incentivizing usage, and aggressively pursuing up-and-coming blockchain games.
  • This is undoubtedly beneficial for the end user, who isn’t bogged down by exorbitant transaction fees and can interact with many games within the same ecosystem.
  • However, it presents a tenuous value accrual mechanism for the token, which is extremely reliant on heavy volume.
  • So far, IMX has achieved $257M in total volume and has 33.5K holders. This is no small feat. However, a long-term token holder can do three things: (i) Stake IMX to earn more IMX, (ii) Pay for NFTs with IMX, and (iii) Participate in governance.
  • However, you can pay for NFTs with many different currencies on the IMX marketplace — there is no need to hold the IMX token specifically.
  • Additionally, governance is highly underutilized for many crypto projects, and this is no different for IMX where governance proposals rarely involve over 30 participants.
  • So that leaves us with staking. IMX has a total volume of $263M. With 0.4% (20% of 2%) of volume over 1.5 years, stakers have received a proportionate share of ~$1M.
  • Here, it’s worth noting that staking is currently being supplemented by ecosystem tokens to incentivize users. This comparison is also a little unfair. After all, Immutable X is a fledgling network that has been steadily proliferating since its inception.
  • On the upside, it has marquee crypto games such as Illuvium, Guild of Guardians, and Ember Sword building on its platform and are planning to launch their games within the following year.


Decentralized exchange protocol Uniswap V3 is deploying on zkSync 2.0

  • A governance proposal that would deploy Uniswap V3 on zkSync 2.0 passed earlier today with overwhelming support.
  • This deployment means Uniswap V3 will be available for users to trade on after zkSync launches on Oct. 28. Uniswap V3 holds the largest share of Decentralized Exchange (DEX) volume, according to The Block Research’s data. 
  • Matter Labs, the parent company of zkSync, put forward the proposal, in partnership with FranklinDAO, formerly known as the Penn Blockchain Club.
  • Almost 100% of voters supported the proposal. Out of approximately 41.3 million votes cast, only 120 were against the deployment.
  • The goal of this deployment is to support Uniswap’s cross-chain expansion into multiple blockchain ecosystems, according to the proposal. It further outlined that the deployment of Uniswap V3 will onboard new users and increase user activity on Uniswap, due to the cheaper fees and the security guarantees it gets from zkSync.


Bitcoin Sinks After US CPI Report Shows Inflation Hotter Than Expected

  • U.S. consumer prices in September slowed from the prior month, the Labor Department reported Thursday, but the inflation rate was still faster than what economists had predicted.
  • Bitcoin (BTC) tumbled nearly 3% in the minutes after the report to its lowest level since Sept. 21. As of press time, the largest cryptocurrency by market value was changing hands at around $18,400. Crypto traders track monthly inflation figures closely, because the Federal Reserve’s efforts to temper soaring inflation have pushed down prices for financial assets seen as risky, from stocks to bitcoin.
  • The Consumer Price Index report – the most widely watched gauge to track inflationary pressure in the U.S. – rose 8.2% in September from the same month a year ago, slightly higher than the 8.1% forecasted by economists. The index rose 0.4% from August.
  • The “core” CPI, which strips out volatile energy and food prices and is more closely watched by investors and policymakers because it’s seen as a more steady indicator of underlying price pressures, rose 0.6%, the same pace as it rose in August, well exceeding expectations. The core CPI rose 6.6% from a year ago to its highest level in four decades.


Ether Becomes Deflationary for First Time Since the Merge: Coinbase

  • Ether (ETH) reached a “post-Merge milestone” this week as it became deflationary for the first time since the Ethereum blockchain switched to proof-of-stake (PoS), crypto exchange Coinbase (COIN) said in a report Thursday.
  • It became deflationary as more ether was burned verifying transactions than was created in the same period, which led to a reduction of 0.13% in supply over the last week, equivalent to about 4,000 tokens, the note said.
  • The rate of new ether creation has fallen by nearly 90% since the Merge, the note added.


UK Passes Bill That Could See Trade Documents Stored Using Blockchain

  • The U.K. government has passed a bill that could see it adopt blockchain technology as a way to store documents.
  • A press release published by the government outlines its intention to become “paperless” when dealing with official documents.
  • The Electronic Trade Documents Bill, which was approved in the House of Lords on Wednesday, will make electronic documentation legally recognized in a move that should reduce carbon emissions.
  • The decision furthers the U.K.’s goal to become a crypto and blockchain hub following endorsements from several members of parliament and most recently from Richard Fuller, economic secretary to the Treasury.


Tether eliminates commercial paper from reserves

  • Stablecoin issuer Tether has eliminated commercial paper from its reserves and says it has also increased its direct exposure to U.S. Treasuries by more than $10 billion in the last quarter.
  • The move has eliminated more than $30 billion of commercial paper without any losses, the company said in a series of tweets. 
  • “This is evidence of our commitment to back our tokens with the most secure, liquid reserves in the market,” Tether wrote in a tweet. A spokesperson directed The Block to a blog post announcing the news.
  • Tether has said for months that it was planning to improve the quality of its reserves, in part by reducing the amount of commercial paper it holds. Tether claims its tokens are pegged one-to-one with a matching fiat currency, and are backed by the company’s reserves.


Uniswap Labs Valued at $1.6B After $165M Funding Round

  • Uniswap Labs has closed a $165 million Series B funding round, one of the largest amounts of money secured by any company in decentralized finance. 
  • The raise, led by Polychain Capital, brings the protocol’s total valuation to $1.66 billion, sources familiar with the matter confirmed with Blockworks. Andreessen Horowitz, Paradigm, SV Angel and Variant also participated in the round. 
  • In a blog post published on Thursday, Uniswap founder Hayden Adams said that he could never have imagined in 2018 when he first built the protocol that it would one day support $1.2 trillion in trading volume to date.
  • “It has grown and evolved in ways I never imagined…and has become critical public infrastructure for exchanging digital value,” he wrote.


Developers disclose major vulnerability in all IBC-enabled chains on Cosmos

  • Developers have disclosed a critical software vulnerability within all Cosmos blockchains that run the inter-blockchain communication protocol (IBC), the network’s cross-chain messaging and bridge protocol.
  • The developers discovered the security issue during a software audit of the Cosmos network in light of the $100 million bridge hack on BNB Chain, a blockchain that uses Cosmos software under its hood, Cosmos co-founder Ethan Buchman wrote in a blog update on the project’s community forum on Thursday.
  • “Members of the core Cosmos and Osmosis teams have been extensively auditing IBC in the aftermath of the BSC exploit. We have discovered a critical security vulnerability that impacts all IBC-enabled Cosmos chains, for all versions of IBC,” Buchman said.
  • To fix its vulnerability, all of the IBC-enabled Cosmos blockchains will have to deploy a public security patch planned for release at 10 a.m. EDT on Friday, Buchman said, adding that validators of various Cosmos chains may halt their networks during the Friday upgrade.


Binance Burns as Many BNB Tokens as Hacker Minted From Thin Air

  • Binance today completed its 21st quarterly burn of BNB tokens, effectively compensating for the losses incurred from its bridge hack last week.
  • BNB is the native cryptocurrency of the BNB Chain, formerly known as the Binance Smart Chain, which is a competitor to Ethereum. A “burn” is when tokens are permanently removed from a cryptocurrency’s supply, and is generally used as a measure against inflation. Today’s burn took 2,065,152.42 BNB, worth over $549 million at current prices, off the market. 
  • By comparison, an exploit of the BNB Chain bridge last week netted the attacker exactly 2,000,000 BNB, conjured out of thin air using artificial withdrawal proofs. The net value of the stolen BNB was worth roughly $566 million at the time.


Beeple Building Physical Studio to Bring NFTs Into the Real World

  • Mike “Beeple” Winkelmann made headlines last year with his record-breaking $69.3 million sale of NFT artwork at a Christie’s auction, and followed that up with a Time magazine cover and “The Tonight Show” appearances. Now he’s aiming to bring the NFT world to even more people by establishing a real-world studio that will host exhibitions.
  • Today, Beeple shared a video showing the construction of his sizable new studio in Charleston, South Carolina, which appears to be set in an overhauled warehouse. In the video, we see the first steps as workers tear down walls and develop the space within the future Beeple Studios.
  • In a tweet thread, Beeple wrote that the space will be an “outlet for not just my artwork, but the entire digital art/NFT community,” with plans to host exhibitions and find unique ways to display NFT artwork for real-world patrons to view on-site.

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