Tuesday, 20 December 2022

Market Summary

Market Summary 20 December 2022

Bitcoin Price: US$ 16,438.88 (-1.79%)
Ethereum Price: US$ 1,167.82 (-1.29%) 


FIL Loses $466M in Market Cap, Drops 36% Within 15 Minutes

  • On Dec. 17, 2022, FIL token price dropped by 36% within 15 minutes as it lost ~$466M of market capitalization. Since then, the price is up 26% from the local bottom of $2.41.
  • Filecoin has a linear unlock of 11.1M FIL tokens (worth $33M at current prices) during the month of December. Currently, only 17% of FIL’s token supply is in circulation. 
  • Even though it is unlikely that a mere 0.6% supply expansion can lead to such drastic price action, the lack of liquidity for FIL can exacerbate any market moves.
  • Many market participants are speculating that FIL price crashed as part of a broader leg down in tokens related to DCG’s Grayscale. However, the firm does not own enough tokens to justify such price action, according to coinglass.
  • As liquidity dries up and volatility decreases, it becomes increasingly important to understand the implications of token unlocks on price movements. 


NFT Debrief – December 2022

  • NFT sales volume in most major marketplaces has been flat month-over-month, reaching a new low in November. OpenSea transacted $242.2M in November compared to $295.8M in October, representing an 18% decrease over the previous month. There were notable developments in the broader NFT ecosystem, however:
    • NFTs are live on Uniswap, allowing users to trade NFTs across major marketplaces to find more listings and better prices. As part of the launch, Uniswap also airdropped ~$5M USDC to historical Genie users while offering gas rebates to the first 22,000 buyers on the platform.
    • OpenSea continues its aggressive cross-chain expansion, with plans to launch its marketplace on BNB Chain by the end of the year.
  • Ethereum continues to see the vast majority of NFT sales transactions, representing >78% of NFT trades.
  • Solana is holding on to second place, with >13% sales volume share despite the FTX/Alameda fallout. The Solana ecosystem saw over 70.5% of TVL flow out over a 30-day period.
  • ImmutableX is third, but largely due to wash trading in the Gods Unchained collection, which is incentivized by ImmutableX’s daily trading rewards. For more information, see our in-depth report on ImmutableX.


Kazakhstan Tightens Regulation for Miners, Looks to Develop Broader Crypto Industry

  • Kazakh legislators approved a bill last week that will introduce corporate tax for bitcoin miners as well as restrictions for the industry’s energy consumption nationwide.
  • The law, dubbed “On Regulating Digital Assets in Kazakhstan,” was one of three pieces of crypto-related legislation approved by the country’s lower house, known as the Mazhilis, last Thursday, according to the parliament website. The bill now heads to the Senate for discussion and another round of voting. The legislation came to the table only in recent months, but the central Asian nation had been struggling with power shortages since at least fall 2021.
  • If the Senate also approves the bill, the president has to sign it for it to become law. The Senate might vote on amendments, in which case the bill will be sent back to the Mazhilis.
  • Kazakhstan saw a massive influx of crypto miners from neighboring China after Beijing banned the industry in May 2021. At that time China was the world’s largest bitcoin mining hub.


How Institutional Investors Are Handling the Crypto Crash

  • Bitcoin is down approximately 63% in value since this time last year and the industry is on fire after the catastrophic bankruptcy of FTX, which came just six months after the $25 billion collapse of one of DeFi’s most popular projects, Terra.
  • Now, traditional investors are retreating from crypto and licking their wounds. Major investors in FTX such as asset manager BlackRock, which participated in the exchange’s  meme-laden $420.69 million funding round, got sorely burned – as did the Ontario Teacher’s Pension Plan fund, which has written off its $95 million investment in FTX. Crypto-friendly hedge funds are limiting their exposure, too. A June 2022 survey (pre-FTX) from PWC on crypto hedge funds found that while hedge funds increased their assets under management by 8% on the year to $4.1 billion, they reduced their exposure to the market. Over half invested less than 1% of their holdings in crypto.
  • Some institutional investors have given up on crypto altogether. The asset class “will not find a home in institutional asset allocation,” Hani Redha, a portfolio manager at London’s Pinebridge Investments, told Bloomberg last month. “There was a period when it was being considered as a potential asset class that every investor should have in their strategic asset allocation and that’s off the table entirely.”
  • After institutional investors backed out, the ProShares Bitcoin ETF, once a popular vehicle with moneyed financial companies, quickly became the sixth-worst-performing exchange-traded fund of all time, according to the Financial Times. Net inflows of $1.8 billion in its first year trickled out after bitcoin’s price crashed, and its holdings stood at just over $500 million as of Nov. 21, 2022.
  • “We’ve seen funds nosedive right out of the gate in this manner, but rarely do they attract so much in assets so soon after launching like [this] did,” Jeffrey Ptak, chief ratings officer at Morningstar Research Services, told the FT.
  • JPMorgan analysts predict a wave of deleveraging, marked by a “cascade of margin calls,” to follow the collapse of FTX. (Those same analysts, led by Nikolaos Panigirtzoglou, once said that bitcoin could reach $146,000 if it replaced gold as a safe haven asset. Panigirtzoglou now thinks that it could hit as low as $13,000.) Singaporean crypto hedge fund QCP Capital predicted that token prices will fall further, and that crypto markets have diverged from their correlation with traditional markets, having tracked the commodities market since 2017.


Crypto Markets Today: Binance.US to Buy Voyager Digital’s Assets; Bitcoin Slides Into the Red

  • Voyager Digital, the bankrupt crypto lender, said Monday Binance.US has agreed to buy its assets for $1.022 billion.
  • The bid represents the fair market value of Voyager’s cryptocurrency portfolio, which has a current market value of around $1.002 billion, and an additional consideration of $20 million in incremental value.
  • Voyager said in the statement, “The Binance.US bid aims to return crypto to customers in kind, in accordance with court-approved disbursements and platform capabilities.”
  • Binance CEO Changpeng “CZ” Zhao had said last month that his exchange’s U.S. wing would be making a fresh bid for Voyager Digital. CoinDesk had earlier reported that Binance was preparing a bid for the bankrupt crypto lender’s assets.
  • Binance.US will make a good faith deposit of $10 million and will reimburse Voyager for certain expenses up to $15 million. Voyager will also seek the approval of the bankruptcy court at a hearing on Jan. 5, 2023.


Binance Losing Auditing Partner Mazars Leaves Crypto Questions Unanswered

  • In the aftermath of cryptocurrency exchange FTX’s collapse last month, questions have swirled throughout the industry about whether other large players’ finances can be trusted. With professional auditors now abruptly exiting the space, those questions may keep lingering.
  • Binance, the largest crypto exchange by trading volume, sought to tamp down worries raised by rival FTX’s rapid descent into bankruptcy court by announcing it would release proof-of-reserves data. While not conventional audits, such reports describe how much crypto an exchange is holding – an attempt to allay fears about the whereabouts of customers’ money.
  • The Binance proof-of-reserves report did come out – only to be withdrawn Friday when the auditing firm it had hired, Mazars, announced it was no longer working with crypto firms. Mazars had also been working with Crypto.com and KuCoin.
  • Mazars was one of a few auditors (along with Grant Thornton and BDO) working with unregulated and private companies in the crypto industry to assure transparency. Now even the French auditor has cold feet.
  • “I’m quite surprised the public and regulators are finally discovering that their favorite centralized exchanges [CEX] have incredibly complicated layers of corporate structures and, as we’re finding out, un-auditable books,” said Joseph Collement, general counsel at Bitcoin.com.


Boris Johnson’s Brother Quits as Binance Adviser

  • Jo Johnson, brother of former U.K. prime minister Boris Johnson, resigned from the advisory board of crypto exchange Binance exchange last week reports London’s Telegraph.
  • Johnson had joined as an adviser at a Binance subsidiary in September, according to the report.
  • His exit comes as Binance – the world’s largest crypto exchange by trading volume – continues to struggle to win regulatory approval to launch operations in the U.K., and deal with last week’s Reuters report that the U.S. Department of Justice is mulling criminal charges against the exchange over money-laundering violations.
  • “I stepped down from the advisory board last week and have no role with it [or] any related entity,” Johnson told The Telegraph.


Sushi DAO votes to send all fees to treasury but it was a fight between whales

  • Two large entities effectively decided the Sushi DAO vote to direct all fees generated by the SushiSwap decentralized exchange to the protocol’s treasury.
  • The move will mean that sushi token holders will no longer receive rewards from trading fees on the exchange for a year or so, with the fees going to the project’s treasury. The reasoning is that the entity behind SushiSwap needs more funding in the short term while it improves its long-term plan for sustainability.
  • GoldenChain, the digital investment arm of venture capital outfit Golden Tree, and a wallet closely tied to crypto trading firm Cumberland were the two entities. Together, they contributed 10 million sushipowah tokens — the Sushi DAO governance token — to push through the vote, according to data from the Snapshot voting page. Their combined voting power accounted for 91% of the 11 million tokens that were cast in support of the plan.
  • Those not in support cast 7.5 million sushipowah tokens, amounting to 41% of all votes in the pool. It should also be noted that 85% of these votes came from three wallets. They contributed 2.9 million, 2.4 million, and 1.1 million sushipowah tokens, respectively.
  • In total, these five large entities — voting both for and against — controlled 88.5% of all votes. This leaves little more than 10% of the vote to the remaining 774 wallets that also participated, albeit with little influence.


Binance Finalizes Acquisition of Indonesian Crypto Trading Firm Tokocrypto

  • Binance has finalized its acquisition of Tokocrypto, according to a press release sent to CoinDesk Indonesia.
  • “Tokocrypto came from our brainchild more than four years ago. I am very proud to see every growth, slogan and contribution the company has made to advance Indonesia’s digital economy,” Pang Xue Kai, CEO and co-founder of Tokocrypto, said in the release.
  • “This decision was made after careful consideration. We decided that the best step for Tokocrypto going forward is to utilize Binance’s capabilities to build a further physical trading platform for crypto assets.”
  • Binance has always been a majority shareholder of the company, Binance CEO Changpeng “CZ” Zhao confirmed in a tweet, but this move “[injects] more cash and increased our shareholding.”
  • Kai will be stepping down from his position as part of the acquisition but will remain on the board.
  • Tokocrypto is the first crypto asset trader in Indonesia that is regulated by Bappebti, the country’s commodity regulator. The company confirmed that the Tokocrypto branding will remain the same.


Grayscale Will Explore Returning Portion of Investor Capital if SEC Refuses Spot Bitcoin ETF

  • Grayscale Investments is exploring options to return a portion of capital of its flagship Grayscale Bitcoin (GBTC) product if the Securities and Exchange Commission (SEC) refuses to approve its spot bitcoin exchange-traded fund (ETF), the firm said in an investor letter.
  • One option is to offer tender for up to 20% of outstanding GBTC shares, which are currently trading at a 49% discount to net asset value (NAV), the letter said.
  • Grayscale has been knocked back multiple times in its mission to convert its bitcoin trust into an ETF, with the SEC citing a lack of regulatory oversight in a brief earlier this month.
  • The letter by Grayscale Chief Executive Michael Sonnenshein attempted to ease concerns among shareholders after a turbulent month across the crypto industry following the collapse of FTX, one of the largest exchanges.

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