Monday, 25 April 2022

Market Summary

Market Summary 25 April 2022

Bitcoin Price: US$ 39,450.13 (-0.64 %)
Ethereum Price: US$ 2,921.00 (-0.41%)

 

Charting Price Clues, Liquidity, & Market Musings

  • Anyone who’s hung around the cryptoverse long enough – or had to cough up money this week to pay taxes on last year’s gains – knows there’s material differences in how countries regulate crypto assets. The longstanding gorilla in the room for many has been the SEC, whose primary job is to regulate securities markets and “protect investors” from dubious activities like market manipulation, fraud, etc.
  • But even highly-regulated markets like public equities suffer from their fair share of pitfalls. Just look at the performance of many overly hyped IPOs recently, which have seen their stock prices crater despite all the pre-public enthusiasm surrounding them. The Renaissance IPO ETF, which tracks a portfolio of the largest, most liquid, newly-listed US IPOs, is down over 35% YTD. Makes ETH’s 18% decline this year a bit easier to swallow.
  • Part of this underperformance is a function of unfavorable market conditions, no doubt. But the same could be said for any market, especially one like crypto that’s still in its infancy. No matter how rigorous the pre-IPO process is, there’s always going to be risk that a company fails or can’t execute on its vision or has to pivot their entire strategy because what they’re doing simply isn’t working. Just because a company chooses the traditional path to go public doesn’t “protect” average investors from aping into hyped up names with serious downside price risk.
  • The dollar’s latest move is starting to get more attention as investors continue grappling with tons of macro uncertainty. Where the dollar heads from here can have a material impact of the direction of asset prices, so it’s only natural people are paying it serious attention.
  • We tend to see a similar trend with global GDP expansion/contraction and the US dollar. During global recessions, the dollar tends to strengthen as investors de-risk in favor of safer alternatives. Ironically, one of the biggest threats to global economic growth is a stronger USD, which creates a bit of a circular dilemma if the dollar rises too far too fast.
  • “ApeCoin & the death of staking” dropped this morning on Cobie’s Substack. It was a fantastic write up on some of the challenges with $APE’s current economics, specifically the purpose of its staking mechanism. The questions Cobie raised can also apply to other DAOs or protocols as the piece touches on key topics like the purpose of token rewards and incentive programs, governance, and when paying for certain contributions to a DAO/protocol make sense.
  • This raises a really important point; the very concept of “staking” has expanded to include any action where holders lockup their tokens in exchange for future rewards, regardless of whether that action adds any real value to the network or community. Staking for the sake of staking shouldn’t be the end game. The ApeCoin DAO is sitting on a multi-billion dollar war chest that it could instead use to incentivize active contributors that help grow its network like third party devs building app integrations or internally funded initiatives that solve existing problems for NFT users (Cobie also rattles off a few examples to get the gears turning).

 

NY Sen. Thomas proposes to criminalize rug pulls and other crypto frauds

  • New York State Senator Kevin Thomas introduced a new bill amendment request to establish certain offenses related to rug pulls and other frauds related to virtual token distribution, misuse of private keys and hidden interests in crypto projects.
  • The bill drafted by Senator Thomas, Senate Bill S8839, calls for defining, penalizing and criminalizing frauds specifically targeted at developers and projects that intend to dupe crypto investors.
  • Through the bill, Thomas seeks to provide prosecutors with a clear legal framework against crypto crimes that align with the spirit of the blockchain while combatting fraud. It calls for a law amendment that will imply rug pull charges on developers that sell “more than 10% of such tokens within five years from the date of last sale of such tokens.”
  • Private key fraud involves disclosing or misusing another person’s private keys without prior affirmative consent. The bill also seeks to charge developers with fraudulent failure to disclose an interest in digital tokens that don’t publicly disclose personal crypto holdings on the landing page of the primary website.

 

Here is why Germany is ranked the most crypto-friendly country

  • Germany has risen to the top spot of Coincub’s guide to the most crypto-friendly countries in Q1 2022. The European country allows its long-term domestic savings industry to utilize crypto investments, supported by its zero-tax policy on long-term capital gains from crypto, and its number of Bitcoin and Ethereum nodes is second only to the United States.
  • In 2019, Germany was the first country to adopt a blockchain strategy to harness the technology’s potential for advancing digital transformation and to help make it an attractive hub for the development of blockchain, Web3 and metaverse applications in fintech, climate tech, business and govtech, including Germany’s digital identities project.
  • As of the end of 2021, approximately 2.6% of Germans have used cryptocurrency. And according to a recent report from KuCoin, 44% percent of Germans are motivated to invest in crypto.
  • Germany is among the top 10 countries for crypto mining and is home to the European Union’s largest mining company, Northern Data — which is powered almost entirely by renewable energy. Crypto mining is taxable as a business.

 

Increased adoption of Metaverse NFTs will power the next NFT growth cycle

  • Metaverses and blue-chip nonfungible tokens (NFTs) are the driving forces behind the dramatic growth in the NFT market. Projects like the Bored Apes, Crypto Punks, Azuki, Clone X and Doodles collections have steadily attracted collectors’ interest in the past year. As a result, these NFT projects have helped the NFT market achieve a growth rate of over 20,000% and a sales volume of approximately $17 billion.
  • For an industry that once occupied a tiny sliver of attention within the crypto/blockchain world, it’s clear that NFTs are here to stay despite earlier critiques of their ephemeral nature. However, given the recent lull in the NFT markets, investors and collectors alike are now seeking new frontiers where they can capitalize on the innovative application of NFT technology in different use cases.

 

The Metaverse needs to keep an eye on privacy to avoid Meta’s mistakes

  • Metaverse skeptics fear the prospect of unprotected data and large-scale user surveillance on a scale never seen before. Ironically, the largest company pushing the Metaverse, Meta (previously known as Facebook), has faced its own fair share of privacy scandals in the internet’s current iteration, culminating in Mark Zuckerberg being infamously hauled before the United States Congress to answer for Facebook’s inability to combat hate speech and data privacy violations.
  • In a U.S. Senate committee hearing, whistleblower Frances Haugen accused Meta of prioritizing “profit over the well-being of children and all users” when it came to creating manipulative algorithms that tap behavioral data to persuade users into spending more time on the platform.
  • The controversy hasn’t weakened Facebook’s popularity, but the public zeitgeist against surveillance offers lessons for Metaverse developers looking to fix many of Web2’s problems. The fledgling space can implement systems that give users full transparency on how the systems collect and utilize user data, as well as what data is collected. By emphasizing privacy and assuring users that their data won’t be used against them, smaller Metaverse companies gain a unique selling point and even an edge over any Big Tech company looking to move into the Metaverse, including Meta.
  • Metaverse avatars are a conglomeration of all issues relating to privacy in the digital realm. As a user’s gateway to all Metaverse interactions, they can also offer platforms a lot of personal data to collect, especially if their tech stack involves biometric data, like tracking users’ facial features and expressions for the avatar’s own emotes.

 

Binance pushes back against report exchange supplied customer data to Russian government

  • Major crypto exchange Binance challenged the accuracy of a report, which stated one of its regional heads agreed to supply Russia’s financial intelligence unit with customer data potentially related to donations for anti-corruption and anti-Putin activist Alexei Navalny.
  • Reuters reported on Friday that Binance’s head of Eastern Europe and Russia Gleb Kostarev met with officials from Russia’s Rosfinmonitoring, a financial monitoring service linked to the country’s Federal Security Service, or FSB, in April 2021. Kostarev reportedly agreed to a request from the government body to turn over certain user data — including names and addresses — later telling an associate he didn’t have “much of a choice” in the matter. However, another unnamed crypto exchange reportedly did not agree to provide client data to Rosfinmonitoring due to concerns about how the information would be used as well as the unit’s ties to the FSB.
  • However, in a Friday blog post, Binance hinted that the report gave a “false narrative” that provided “just enough balance possible to try to avoid a legal complaint.” The firm said it was “categorically false” that it shared user data with “Russian FSB controlled agencies and Russian regulators,” and had stopped working in Russia following the country’s invasion of Ukraine on Feb. 24. 
  • “Today, any government or law enforcement agency in the world can request user data from Binance as long as it is accompanied by the proper legal authority. Russia is no different […] Binance has not entered into any form of unusual agreement with the Russian government that differs from any other jurisdiction.”

 

Binance recovers $5.8M in funds connected to Ronin bridge exploit

  • Via a Twitter post on Friday, Changpeng Zhao, CEO of Binance, said that the cryptocurrency exchange recovered $5.8 million spread over 86 accounts in digital assets moved to the exchange by Lazarus Group. Last month, the North Korean cyber-criminal group allegedly stole 173,600 Ether (ETH) and 25.5 million USD Coin (USDC), worth over $600 million at the time, belonging to Axie Infinity’s Ronin bridge. 
  • As of Friday, the wallet address associated with the Ronin has around $280 million in digital assets remaining. Blockchain forensics company Elliptic recently uncovered that the hackers have been sending the money to centralized exchanges and cryptocurrency trail-mixer decentralized application, or DApp, Tornado Cash. In addition, it appears the hackers also swapped the stolen USDC for Ethereum on decentralized exchanges, or DEXs. 
  • Possibly in response to alleged acts of money laundering, Uniswap DEX announced it was screening addresses that might be associated with moving “hacked or stolen funds” based on intelligence provided by TRM Labs.
  • Similarly, via Chainalysis, Tornado Cash is blocking wallets linked to illicit activity from accessing its DApp.

 

Polygon launches ‘Supernet’ chains, pledges $100M to Web3 developers

  • Ethereum scaling solution Polygon has launched a new network for Web3 development, pledging $100 million to early users who can help fast-track adoption. 
  • The Polygon Supernet chain gives developers the ability to build their projects in a customizable environment without hosting or operational costs, the company announced Friday. Developers will be able to deploy their projects on either a Supernet Sovereign Chain or Supernet Shared Security Chain — the former is managed by a single validator, which reduces maintenance costs, whereas the latter offers an easier path to decentralization with professional validators staking Polygon (MATIC) tokens to validate the network.
  • Although supernets rely on Polygon Edge, a development framework for projects that want to create and deploy their own blockchains, they go beyond the platform’s initial scope by offering more security and decentralization features. To further the adoption of supernets, Polygon plans to allocate $100 million to developers who want to build on the network.
  • Polygon co-founder Sandeep Nailwal said supernets will help advance his protocol’s goal of bringing “mass adoption to Web3,” adding that such developments are key to achieving widescale blockchain adoption.

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