Market Summary

Bitcoin Price: US$ 17,803.15 (+0.16%)
Ethereum Price: US$ 1,307.44 (-1.00%) 

Binance Sees USD Outflows of $5B as Users Withdraw Funds

• Over the past two days, the total value in the on-chain wallets of Binance has decreased from $65B to $60B as the exchange saw more than $5B of USD outflows. This is the largest outflow since the exchange shared its addresses on Nov. 11, 2022.
• Yesterday, Binance paused USDC withdrawals, stating that the process involves going through a bank in New York which had not yet opened for the day. The exchange resumed USDC withdrawals later in the day.
• As the U.S. Congress holds hearings over the FTX collapse, concerns regarding Binance have been growing, leading to an increase in withdrawals. Notably, market maker Jump Trading has redeemed $106M in BUSD over the past week.
• Binance published a proof-of-reserves report on Dec. 7, 2022, stating that the exchange held more assets than client deposits at a 101% collateralization ratio. However, the report does not seem to have reassured the market.
• Since the FTX collapse in November, users have increasingly lost trust in centralized institutions in crypto. While it is unlikely that Binance will share the same fate as FTX, it is prudent to hold your funds in a non-custodial wallet instead.

Monthly Chartbook – Uncertainty Post-FTX Collapse

• Digging in a bit deeper, the month of November also saw historic decreases in CEX holdings. In the last 30 days alone, BTC held on CEXs has fallen 8%, with ETH seeing an 11% fall (roughly 185k BTC and 2.6M ETH).
• The percentage decline in November marks the third-largest monthly decline in BTC’s history and the fifth-largest in ETH’s, with both percentage declines being the largest ones since 2017.
• For nearly the entire month of November, BTC’s price was beneath this historical floor price, which currently sits at ~$16.9k (estimates based on research from Capriole Investments Limited).
• Historically speaking, this rarely occurs. In fact, the Covid capitulation in March 2020 marked the most recent occurrence prior to 2022. The month of November also saw the longest period of time BTC traded below its electrical cost since January 2017.
• BTC miners continue to foot electrical costs that exceed the revenue generated from mining operations. That’s just raw electrical expenses, however.
• When other expenses are factored in, such as hardware, bandwidth, wages, rent, insurance, etc., the level of pressure continues to mount on miners. This has led to several miner bankruptcies so far this year.

The Year Ahead for Infrastructure

Bull v Bear – FOMC Special – 14th Dec  – (Video from Delphi Digital)

• Bull v Bear is our new premium macro livestream with analysis from Head of Research, Kevin Kelly and Market Associate, Jason Pagoulatos. They cover the charts of the week, the main market talking points and give their bullish or bearish takes on upcoming events. Every episode, the Bull or Bear emerges victorious.

1. Australia Moves to Tighten Safety Around Crypto in 2023

• The Australian government has promised to establish a framework for the licensing and regulation of crypto service providers in 2023, the nation’s Treasury announced on Wednesday.
• The move is part of a plan to modernize Australia’s financial system and comes in the wake of the FTX collapse that forced the management of its Australian entities to hand over control to licensed insolvency practitioners who independently assess the financial situation.
• Developing appropriate custody and licensing settings to safeguard consumers will be part of the next steps the government takes, the announcement said.
• “Unfortunately, our regulatory architecture has not kept pace with changes in the market,” said the joint release by Australia’s Treasurer Jim Chalmers and Assistant Treasurer and Minister for Financial Services Stephen Jones. “In many areas, the previous government sat on its hands. In other areas, it made announcements but didn’t deliver.”
• Significantly, the government will assess which tokens or “digital assets should be regulated by financial services laws” as part of its ongoing “token mapping” work. In August, Australia’s Treasury announced it would prioritize token mapping work, which involves uncovering the characteristics of all digital asset tokens in Australia including charting the type of crypto asset, its underlying code and any other defining technological feature.
• The framework for the licensing and regulation of crypto service providers will be part of “a strategic plan for the payments system” of Australia set to be released in the first quarter of 2023 for which a consultation paper was released simultaneously. The consultation paper invites feedback till Feb. 6, 2023, and touches upon various aspects of the crypto eco system including digital wallets, stablecoins, crypto assets and central bank digital currencies.

Gemini reports third-party phishing campaign that affected some customer data

• Crypto exchange Gemini said Wednesday that a phishing campaign led to the collection of some customer email addresses and partial phone numbers.
• “Some Gemini customers have recently been the target of phishing campaigns that we believe are the result of an incident at a third-party vendor,” the company said in a statement. 
• No account information or systems were impacted, and all customer accounts remain secure, Gemini said. 

Bitcoin, Ethereum Drop Sharply After Fed Signals More Interest Rate Hikes to Come

• The price of Bitcoin nosedived today—along with U.S. stocks—on news that the Federal Reserve approved a smaller interest-rate hike than previous ones this year, but signaled plans to keep raising rates next year to combat high inflation.
• The Fed has this year upped interest rates 0.75 percentage points four times in order to get inflation—currently at a 40-year high in the U.S.—under control. This time the U.S. central bank upped rates by 0.50 percentage points.
• This announcement showed investors that despite the smaller rate hike, the Fed may still keep up its aggressive monetary policy in 2023. 

MetaMask Launches PayPal Integration for Ethereum Purchases

• MetaMask has added a PayPal integration to its software wallet, allowing U.S. users to purchase Ethereum directly from its mobile app. While the feature is not yet available to all U.S. users, MetaMask plans to slowly roll out the feature “in the coming weeks.”
• According to the announcement, the PayPal integration will only be available through the MetaMask mobile app. The MetaMask browser extension already offers U.S. users the ability to purchase cryptocurrency directly from their wallet through CoinbasePay, Transak, MoonPay, or Wyre.
• “This integration with PayPal will allow our U.S. users to not just buy crypto seamlessly through MetaMask, but also to easily explore the Web3 ecosystem,” Santos said.

Crypto Lending Platform Maple Finance Unveils Major Overhaul, Stops Lending on Solana

• Blockchain-based lending platform Maple Finance unveiled Wednesday a major protocol overhaul in an attempt to improve on shortcomings highlighted by a spate of recent loan defaults.
• Maple is a credit marketplace where institutional borrowers can take out undercollateralized loans from credit pools and investors can provide liquidity to earn a yield on deposits. Each credit pool has a delegate, a financial firm that underwrites the loans and runs due diligence on borrowers.
• According to Maple’s blog post, the upgraded version, called Maple 2.0, includes improvements on the withdrawal request process, introducing an option to schedule and prorate withdrawals.
• It also eliminates the lockup period on new deposits, which previously led to smart contract auditing platform Sherlock losing $4 million.
• MPL is up 6.9% in the past 24 hours on the news, per data by price tracking site CoinGecko, outperforming the wider crypto markets. The CoinDesk Market Index (CMI) is up 1.15%.

WisdomTree launches nine new blockchain-enabled funds

• The New York-based asset manager Wisdom tree has launched nine new blockchain-enabled funds. 
• These nine funds are effective with the U.S. SEC and come ahead of WisdomTrees digital wallet, slated to launch in the first quarter of 2023, according to a company release. The nine bring WisdomTree’s total digital funds up to 10. The firm’s first digital fund, the WisdomTree Short-Term Treasury Digital Fund, was approved by regulators in September of this year.
• “We believe that blockchain-enabled finance has the potential to improve the investor experience through enhanced liquidity, transparency and standardization, which we aim to achieve over time, and these nine digital funds are setting the foundation as we seek to bridge the gap between traditional finance and digital finance today,” said WisdomTree Head of Digital Assets Will Peck in a company statement.

A Snapshot of the 2023 Regulatory Landscape

• • Regulators will litigate. Regulators have long litigated the bad apples in crypto. In 2022, the U.S. Securities and Exchange Commission (SEC) sued Kim Kardashian for shilling ethereumMax during the 2021 bull market, as well as a number of other high-profile celebrities. The Treasury Department settled with BitPay over letting people in sanctioned countries, including North Korea and Iran, use its platform, and in March 2022, the DOH launched a taskforce to enforce sanctions against Russia.

• Policymakers and regulators will mull new laws. Preventing another FTX-style collapse is at the forefront of every government body’s mind. In the U.K., the deputy governor of the Bank of England called on Britain to “continue to bring these activities and entities within regulation.” New regulation, he said, would ensure that new stablecoins “meet standards equivalent to those expected of commercial bank money.” In the U.S., Treasury Secretary Janet Yellen has called for customer funds to be segregated from company assets.

• Stablecoin legislation. The Biden administration’s report on stablecoins earlier this year proposed stablecoin regulation as well as the possibility of a digital dollar. 2023 could finally see some movement in a key stablecoin bill. Rep. Patrick McHenry (R-N.C.), one of the sponsors of the bill, which would allow the Federal Reserve to license stablecoin issuers, described it as a “pretty ugly baby” because of the competing disputes, chiefly about who should regulate stablecoin issuers.

• Europe will implement landmark crypto regulation – with a catch. The European Union has charged ahead of the pack, and next year will continue to push through the Markets in Crypto-Assets (MiCA) Regulation. Law firm Akin Gump called the legislation “one of the first attempts globally at comprehensive regulation of cryptocurrency markets.”