Friday, 3 June 2022

Market Summary

Market Summary 3 June 2022

Bitcoin Price: US$ 30,452.62  (+2.17%)
Ethereum Price: US$ 1,834.08 (+0.89%) 

 

Optimism Overdrive

  • With Optimism’s $OP token launch, the L2’s activity has spiked to new highs. This pushed the total ETH Gas spent on L2 settlement to the highest it has ever been.
  • On June 1st, Optimism took up the largest share of gas spending, representing 68% of total L2 gas spending. Daily transactions hit 487K, a significant increase from its prior daily rates of 50-90K transactions per day.
  • It is likely that the bump upward is temporary and is expected to slow down as users finish claiming their $OP tokens on Optimism. However, the launch of Velodrome might continue to garner traction as capital bridges toward Optimism to yield farm.

 

OpenSea ‘insider trading’ could see NFTs labeled securities: Former SEC lawyer

  • Former Securities and Exchange Commission lawyer Alma Angotti says this week’s news about an OpenSea employee being charged with insider trading could open the doors to non-fungible tokens being labeled as securities. 
  • On Wednesday, in a first for the industry, prosecutors in Manhattan charged former OpenSea product manager Nathaniel Chastain with insider trading.
  • The U.S. Attorney’s Office for the Southern District of New York said the exact charges were “wire fraud and money laundering in connection with a scheme to commit insider trading.” Until now, the phrase “insider trading” has not been used in regard to cryptocurrency and typically refers to insider trading of securities.
  • Angotti was once an enforcement official at the SEC, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network, and the Financial Industry Regulatory Authority. She is now a partner at a consulting firm called Guidehouse. She told TechCrunch:
  • “It could very well be a security under the Howey Test — if you’re buying a piece of an NFT and hoping the price will go up so you make money from it, that’s not very different [from securities].”

 

After record growth, VC crypto investments decline 38% in May

  • This short-term decline in investments can be correlated to the recent market correction, which made Bitcoin (BTC) and other major cryptocurrencies lose 50% or more of their value.
  • According to new data released by Dove Metrics, total venture capital investment in crypto declined 38.2% over the past month, from $6.8 billion in April to $4.7 billion in May, while surging 97.8% since last year.
  • Data on investment distribution showed infrastructure companies received 21% of the pie, while decentralized finance (DeFi) startups accounted for 14%. Centralized finance (CeFi) and nonfungible token (NFT) projects each accounted for 13%. 
  • This goes to show that venture capital funds might be playing safe by investing in core technologies that actually bring innovation to the crypto space, instead of riskier projects.

 

CFTC sues Gemini claiming crypto exchange lied in futures contract evaluation

  • The United States Commodity Futures Trading Commission (CFTC) filed suit against Gemini Trust Co. in the U.S. Southern District Court of New York on Thursday. The CFTC claimed in the civil suit that Gemini made false or misleading statements to the CFTC in 2017 during in-person meetings and in documents, violating the Commodity Exchange Act and other regulations. 
  • The agency was making an evaluation of the potential self-certification of a Bitcoin (BTC) futures contract to be based on the spot Bitcoin price determined by an auction held on Gemini’s digital asset trading platform.
  • The CFTC was considering whether the proposed Bitcoin futures contract would be susceptible to manipulation. The proposed Bitcoin futures contract would have been among the first digital asset futures contracts listed.
  • Gemini is the cryptocurrency trading platform founded by brothers Cameron and Tyler Winklevoss. It announced staff cuts Thursday and is preparing to lay off 10% of its workers due to the crypto market downturn. 
  • The CFTC said in a statement that it is seeking disgorgement of ill-gotten gains, monetary penalties and injunctions relating to registration and trading and against further violations of the Commodity Exchange Act. 

 

Balancer launches on Ethereum L2 network Optimism

  • Automated market maker and decentralized finance (DeFi) protocol Balancer has officially deployed on Optimism, the highly touted Ethereum layer-2 scaling solution, in a move designed to enhance user functionality by increasing scalability and reducing fees. 
  • Balancer’s Optimism deployment was carried out in conjunction with Beethoven X, a decentralized investment platform on the Fantom Network that forked from Balancer v2. Together, both teams are said to have developed a decentralized exchange that is set to compete in the Optimism ecosystem.
  • Balancer Labs CEO Fernando Martinelli said his project’s Optimism deployment reflects the belief that layer-2 scaling solutions will be effective in reducing transaction fees and network congestion. 
  • Optimism is a layer-2 scaling solution designed to bring faster and lower-cost transactions to Ethereum. The network is said to support all decentralized applications on Ethereum via Optimistic Rollups, a scaling solution that operates in parallel with the main Ethereum chain.
  • Currently, Optimism has over $320 million in total value locked (TVL) on its chain from 38 projects, according to industry data. Its TVL peaked north of $510 million in late April. It currently ranks 19th in overall network value. 

 

Coinbase chief legal officer responds to SEC disclosure FUD

  • As fears surrounding the Coinbase exchange run wild, Paul Grewal, the chief legal officer of Coinbase, assured customers that their funds are safe within the exchange. 
  • In an SEC disclosure made by Coinbase back in May, certain parts of the document mentioned that in the case of bankruptcy, crypto-assets held in custody on behalf of its customers may be “subject to bankruptcy proceedings” and that customers may become “unsecured creditors” in the process.
  • The disclosure was thrust into the limelight right after Coinbase reported its losses in the first quarter of 2022 amounting to $430 million and showed a decrease in revenue of 27% in comparison to the last year. To make matters worse, the news trended right when Coinbase’s junk bonds also began to go down in value.
  • As sentiments that the company may go bankrupt circulated on social media, Coinbase’s chief legal officer clarified and explained the situation in a blog post published Thursday.

 

US energy company opens crypto mining facility in Middle East to use stranded natural gas

  • As the heated up discussion around the ethical aspects of using fossil fuels in crypto mining remains one of the key topics for the industry, an unexpected partnership between a Denver-based mining company and the government of a gas-rich Middle Eastern country sets a horizon for a positive role of crypto in cutting the fossil fuels waste. 
  • On Wednesday, June 1, Bloomberg reported that Crusoe Energy, an operator repurposing wasted fuel energy to the computational power of crypto mining, would start its work in Oman, a nation that exports 21% of its gas production and seeks zero gas flaring by 2030.
  • The American company will open an office in the capital city of Muscat, and install its equipment for capturing gas waste at well sites. It already held a workshop with Oman’s largest energy producers, OQ SAOC and Petroleum Development Oman. The first pilot project will be launched by the end of this year or in early 2023, according to Crusoe’s CEO Chase Lochmiller.
  • The government of Oman’s interest in the partnership is driven by an aim to cut the country’s gas flaring — burning off the excessive flammable gas in the process of extraction. Together with Algeria, Iraq, Lybia, Egypt and Saudi Arabia, Oman accounts for 90% of flaring in the Arab region, while the region itself accounts for 38% of global flaring. In 2018, by the UN’s Economic and Social Commission for Western Asia estimate, 10% of all the gas consumption in Oman went for flaring.

 

Investors’ perception of crypto is changing for the better: Economist survey

  • A report published by The Economist paints a bright future for cryptocurrency adoption, with survey respondents anticipating growing demand in the near future.
  • Economist Impact published the findings of its “Digimentality Report,” delving into consumer trust in digital payments and the stumbling blocks that have hampered the digitization of basic monetary functions. The data obtained provide food for thought and perspective, as it compares trends from previous surveys on the subject carried out in 2020 and 2021.
  • Information was gleaned from a consumer survey completed by 3,000 consumers in early 2022, with half of the respondents living in developed economies including the United States, United Kingdom, France, South Korea, Australia and Singapore. The other half were respondents hailing from developing countries including Brazil, Turkey, Vietnam, South Africa and the Philippines.
  • Around 75% of the participants had a tertiary education or higher and had used a variety of digital payments methods to pay for goods or services. The latter part of the survey involved 150 institutional investors and corporate treasury management respondents — giving insight into the attitude of the wider conventional financial system on the subject.
  • A key takeaway was the prevailing sentiment from investors who agreed that open-source cryptocurrencies like Bitcoin (BTC) or Ether (ETH) are useful as diversifiers in a portfolio or treasury account.
  • Eighty-five percent of respondents held this view, while nine in 10 institutional investors and corporate treasury survey takers indicated that demand for all cryptocurrencies, including CBDCs and enterprise blockchains, has increased over the past three years.

 

South Korean government becomes an early investor in the Metaverse

  • South Korea, a nation known for its strict crypto regulatory stance, is betting big on the Metaverse. The government will invest over 223.7 billion won ($177.1 million) directly in various Metaverse projects.
  • The decision to invest in nascent Metaverse tech makes South Korea one of the first national governments to do so. The investment came under the “Digital New Deal” program set up to invest in emerging technologies.
  • The program is headed by South Korea’s Ministry of Science and Information and Communication Technology led by Lim Hyesook, who called the metaverse “an uncharted digital continent with indefinite potential,” indicating the government’s interest in taking the lead in the Metaverse tech.
  • The national fund would be first utilized to build a metropolitan level metaverse platform, which would allow citizens to access various government schemes and services virtually, reported CNBC.

 

Bitcoin daily mining revenue slumped in May to eleven-month low

  • Bitcoin (BTC) mining revenue and profitability have continued to slide along with the asset’s price this year as the crypto winter deepens.
  • May has been one of the worst months for Bitcoin miners in the past year as revenue and profitability continue to tank. Bitcoin daily mining revenue tanked as much as 27% in May, according to data from Ycharts sourcing data from Blockchain.com.
  • On May 1, the analytics provider reported daily revenue of $40.57 million for BTC miners, but by the end of the month, it had fallen to $29.37 million. Daily mining revenue hit an eleven-month low of $22.43 million on May 24.
  • Daily mining revenue spiked to a peak of around $80 million in April 2021 but has since fallen 62% to current levels.
  • High hash rates but low profitability may suggest that there is a far greater level of competition in the Bitcoin mining sector than seen previously. In earlier bear markets, miners have powered down their rigs as the asset price dropped and the operations became temporarily unprofitable.
  • Additionally, miners to exchange flows have just hit a four-month high, according to Glassnode, suggesting that they may be making preparations to sell some to cover the falling revenue.

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