Wednesday, 30 November 2022

Market Summary

Market Summary 30 November 2022

Bitcoin Price: US$ 16,442.53 (+1.42%)
Ethereum Price: US$ 1,216.49 (+4..17%) 

 

The Current State of Crypto Insurance

  • The emergence of DeFi opened up yield-generating opportunities across many protocols. But as protocols gained traction and saw increasing deposits to smart contracts, this created lucrative opportunities for hackers and exploiters.
  • Hackers spot flaws within the protocol architecture or smart contracts and find ways to extract value from these faults. Since the start of DeFi summer in 2020, the amount of stolen funds has only been increasing. In 2022 alone, $2.7B worth of funds were lost to hacks, representing a 63% increase from last year.
  • As crypto adoption increases, it’s important for protocols and their users to safeguard against exploits. Audits and code reviews are the first and most obvious step – but they don’t imply a 0% chance of being exploited. How do protocols and users protect themselves from these exploits? As in the case of TradFi, insurance might be the answer.
  • Insurance protocols provide coverage on select DeFi protocols. This allows users of those protocols to insure certain risks. There are two main types of coverage that insurance protocols offer:
  • Smart Contract Vulnerabilities: This covers the underlying smart contracts of the protocols. In the event of a malfunction, hack, or exploit of the smart contract, which causes a user to lose their funds, it will allow for a claim for the covered amount.
  • Depeg Risk: This covers stablecoins. In the event of a depeg to a certain degree, it will allow for a claim for the covered amount.
  • Coverage Purchaser (DeFi User): A DeFi user deposits funds into a DeFi protocol to earn yields. To remove their risk of smart contract exploits, the user goes to an insurance protocol and purchases coverage for the DeFi protocol. They pay a small premium, usually lower than the yield they earn from yield farming. When an exploit happens, the user can file a claim with relevant evidence. Once approved, the user is paid the covered amount.
  • Coverage Issuer (Insurance Protocol): An insurance protocol offers coverage for select protocols or stablecoins. Users can buy coverage by paying a premium. Unlike traditional insurance, where the counterparty is the insurance company, insurance protocols allow other users to underwrite deposits – and these deposits act as the counterparty. The underwriter deposits will then earn yields from premiums alongside token incentives. When an exploit happens and the user files a claim, the claim assessors will vote to approve or reject the claim. Anyone can become a claim assessor by staking the insurance protocol’s native token. Once approved, coverage payout is paid to the buyer. If rejected, there will not be a payout. Claim assessors are also rewarded for voting in fees or token incentives after the settlement of the claim.
  • Continue on Delphi…

 

MATIC and BNB Outperform in the Wake of FTX Fallout

  • The sudden collapse of FTX has spurred significant price action among layer-1 and related tokens. Notably, only MATIC and BNB have seen an increase in price since the beginning of October.
  • While MATIC is up 6% over that time frame, BNB is up only 3%. Many related tokens have seen a decrease in price since then. While SOL is down -60% over that time frame, NEAR is down by -55%.
  • MATIC outperformed the group even before the FTX collapse and this trend has continued since then. MATIC also had the largest post-collapse price bounce, with a 41% increase off its lows.
  • BNB, the other outperformer, has made notable gains in the past week. On Nov. 19, BNB was down -10% since the beginning of October but has since rallied up to 5% in the same time frame.
  • The underperformance of SOL is largely due to the significant investments held by FTX and Alameda in the ecosystem. FTX also participated in a $350M fundraising round for NEAR in April 2022.

 

Brazil’s long-awaited crypto bill inches to the finish line after seven years

  • After a series of legislative twists and turns spanning seven years, Brazil’s long-awaited crypto bill could finally reach the president’s desk.
  • Brazil’s Chamber of Deputies voted on Tuesday to pass on a crypto regulation bill to Brazil’s president, Jair Bolsonaro, whose term ends on Dec. 31 to make way for the return of Luiz Inácio Lula da Silva.
  • The crypto regulation is to define digital assets and their service providers, as well as help guard against money laundering and fraud. The bill gained momentum after Brazil’s Senate approved a version of it in April, but slowed in the past few months as it sat in the Chamber of Deputies awaiting a decision after several points in the Senate version were stripped out.

 

Jack Dorsey’s TBD Is Looking to Trademark ‘Web5’ to Deter Its Misuse

  • TBD, the bitcoin-focused subsidiary of Dorsey’s Block (SQ), is looking to trademark the Web5 name to prevent confusion over the meaning of the term and deter others from using it loosely.
  • “We’ve recently noticed that the term ‘Web5’ is being applied to products and services diametrically opposed to the tenets of Web5 that we set out,” TBD said in a tweet on Tuesday.
  • “We therefore decided to seek protection for ‘Web5,’ which will allow us to prevent confusion about the meaning of ‘Web5’ and ensure that the term is used as intended – to refer to a truly open, decentralized layer for the new internet,” the tweet added.
  • Web5 was announced this year during CoinDesk’s Consensus Festival in Austin where TBD explained that “Web5 brings decentralized identity and data storage to individuals’ applications.” It will let developers focus on “creating delightful user experiences, while returning ownership of data and identity to individuals.”
  • TBD envisioned Web5, a word that combines Web2 and Web3, to be “a public tool for good” which will be open to everyone and will build the next iteration of the internet. Although, a copyright or trademark of the term, which deters others to use it, seems to be opposite of an idea of a true decentralized internet.

 

DeFi Giants Aave, Compound Freeze Markets and Cap Loans to Mitigate Risks

  • DeFi protocols Aave and Compound have implemented new safety measures in light of the ongoing turmoil in crypto markets.
  • On Sunday, Aave executed a proposal to freeze the markets for 17 different assets in the Aave V2 lending pool on the Ethereum network, including the Yearn.Finance (YFI), Curve DAO (CRV), Gemini Dollar (GUSD), Maker (MKR), and 1inch (1INCH) tokens.
  • “DeFi protocols are being battle tested and it highlights how communities can implement new parameters to enhance risk mitigation factors in volatile market environments that are moving fast,” Aave founder and CEO Stani Kulechov told Decrypt. “It’s been fascinating to watch the DeFi community discuss, propose, vote and implement new parameters—with incredible transparency—to adapt and safeguard the protocol. This is what DeFi is all about.” 
  • Despite the timing, neither proposal is a reaction to the most recent news to rock markets: BlockFi filing for bankruptcy on Monday, after weeks of speculation that it would have to do so after FTX’s collapse at the start of November. The Aave and Compound proposals were created last week and have a lot more to do with eliminating ways for traders to manipulate markets and trigger a short squeeze.

 

FTSE Russell to introduce 8 new digital asset indexes

  • Data and analytics firm FTSE Russell, which is owned by the London Stock Exchange Group, is rolling out a market cap index series covering the investable digital asset market.
  • It includes eight indices from large to micro cap, and monitors data and hundreds of exchanges constantly in order to “define the investable universe.”
  • “Transparency in this asset class becomes more important than ever,” said Arne Staal, CEO at FTSE Russell. “FTSE Russell has taken a measured approach to this frontier investment space and has built a rigorous and transparent framework, underpinned by robust governance and comprehensive data to meet investor needs, both where they are now and as they prepare for change in this market.”
  • The company said that its asset and exchange vetting is a cornerstone of the new digital asset indices, as “unlike more established markets, price sourcing is more difficult” in the digital asset market.

 

Crypto Markets Today: Huobi’s HT Token Climbs After Exchange Discloses Airdrop

  • Huobi Global’s HT token jumped after the cryptocurrency exchange said it would airdrop a new digital token to be issued by the Caribbean island nation of Dominica.
  • Huobi said the new “Dominica coin,” or DMC, will be issued “in due time” on Huobi Prime, the exchange’s exclusive token offering platform. Users can complete their identity verification on Huobi with Dominica digital identification documents, according to a statement.
  • The HT token was up 15% over the last 24 hours to $7.12 at the time of publication. It’s up 40% over the past seven days.
  • The deal is noteworthy partly because of its connections to crypto billionaire Justin Sun. The Dominica tokens are set to be launched on Sun’s Tron blockchain, and Sun recently acknowledged holding “tens of millions” of HT.
  • Last month, Huobi named Sun as the first member of a new global advisory board that is responsible for guiding the exchange’s strategic layout and development.

 

Ethereum Founder Vitalik Buterin Calls Governance Token Speculation ‘Pathological’

  • Vitalik Buterin has taken a controversial stance on governance tokens, arguing that governance is not a good reason for such tokens to be treated as “valuable.”
  • “The notion of ‘governance rights’ as a narrative for why a token should be valuable is pathological,” Buterin wrote on Twitter Tuesday. “You’re literally saying, ‘I’m buying $X because later on someone might buy it from me and a bunch of other people to twist the protocol toward their special interests.’”
  • On the Ethereum network, governance tokens are a type of ERC-20 token typically issued by a DAO or decentralized community to be used as digital voting chips for various community proposals. The more tokens a person holds, the more voting power they have.
  • Buterin’s stance expresses an anxiety around governance tokens being hoarded or sold for profit so that entities could effectively control protocols, a move that goes against the principle of decentralization. He’s also against speculating on the perceived future value of a governance token. 

 

FTX, Alameda Owe BlockFi More Than $1 Billion: Court Hearing

  • During the first day hearing for BlockFi’s bankruptcy proceedings, the company revealed that FTX and Alameda Research owe it more than $1 billion—$671 million on a now-defaulted loan to Alameda and $355 million in funds frozen on the company’s crypto exchange.
  • BlockFi, a New Jersey-based crypto lender, filed its petition for Chapter 11 bankruptcy protection on Monday after weeks of speculation that it would no longer be able to operate in the wake of FTX filing for bankruptcy on November 11. 
  • BlockFi had a lot of exposure to FTX after it received a $400 million line of credit in July—a deal that the company’s legal team said on Tuesday was approved by 89% of its shareholders. BlockFi needed the lifeline because of lingering turmoil from the collapse of Terra’s algorithmic stablecoin, TerraUSD (UST), in May.

 

Binance, Coinbase Among Crypto Firms Questioned by US Senator After FTX Mess

  • Binance.US and Coinbase (COIN) are on a list of crypto companies questioned this week by the chairman of the U.S. Senate Finance Committee about how they protect the investors using their services in light of the widespread damage caused by the fall of FTX.
  • Sen. Ron Wyden (D-Ore.) sent letters to six CEOs of prominent cryptocurrency firms – including Bitfinex, Gemini, Kraken and KuCoin – asking them to explain their structures, whether they separate customers’ assets from their own and how they guard against market manipulation and internal conflicts of interest.
  • “As Congress considers much-needed regulations for the crypto industry, I will focus on the clear need for consumer protections along the lines of the assurances that have long existed for customers of banks, credit unions and securities brokers,” Wyden said in the letters. “If these protections had been in place before the failure of FTX, far fewer retail investors would be facing precipitous financial harm today.”
  • The letters – dated Nov. 28 – request balance-sheet information and explanations for the companies’ reserves, including whether they’re audited. While it’s unlikely the companies – most of them private and a couple of them based overseas – will provide detailed financial data, the requests underline Democratic lawmakers’ possible approach to the industry as the next session of Congress gets rolling in about a month.

 

BlockFi has $355 million in digital assets ‘frozen’ on FTX 

  • Troubled crypto lender BlockFi has $355 million in digital assets frozen on FTX’s platform, the company said in court.
  • BlockFi attorney Joshua Sussberg also shared new details about how closely intertwined BlockFi’s finances were with FTX and the company’s sister trading firm, Alameda Research.
  • “In addition to the loan arrangement, and the $275 million that was drawn, BlockFi acted as a lender to Alameda, which is an FTX trading subsidiary, and they also had crypto on the FTX platform,” Sussberg said in court. “Specifically, BlockFi had $671 million in outstanding loans that are defaulted to Alameda and $355 million in digital assets that, unfortunately, are now frozen on the FTX platform.”

 

Coinbase Wallet to End Support for Bitcoin Cash, Ethereum Classic, Ripple’s XRP and Stellar’s XLM

  • Coinbase Wallet will no longer support the native tokens associated with Bitcoin Cash (BCH), Ethereum Classic (ETC), Ripple’s XRP Ledger (XRP) and Stellar (XLM), effective Dec.5, according to an update on the crypto exchange’s website.
  • The assets will no longer be supported on Dec. 5, although users with balances will be able to withdraw after that date with a recovery phrase.
  • Coinbase cited “low usage” as a reason for delisting the four coins, all of which rose to sizable prominence in the 2017 cryptocurrency bull market.

 

OpenSea Adds Support for BNB Chain NFTs

  • BNB Chain will integrate its non-fungible tokens (NFT) onto OpenSea’s Seaport protocol by the end of the year.
  • The move will enable multiple creator payouts, collection management and other benefits for BNB Chain creators looking to list and sell digital collectibles on OpenSea’s marketplace.
  • “The integration will bring a large number of creators into the wider ecosystem, as well as empower the creators and NFT initiatives inside the BNB Chain ecosystem,” said Gwendolyn Regina, investment director at BNB Chain, one of the largest blockchains by daily active users.

 

India to Test Digital Rupee in 4 Cities With 4 Banks

  • The Reserve Bank of India will start testing its retail central bank digital currency (CBDC), the digital rupee, in Mumbai, New Delhi, Bengaluru and Bhubaneswar with the initial participation of four banks, including the State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank, the central bank announced Tuesday.
  • Later, the pilot program will extend to nine more cities and another four institutions will join, the RBI said.
  • The testing will be conducted with a select group of customers and merchants, and the CBDC will be issued in the same denominations now used for notes and coins. Payments to merchants will be made using QR codes, and, like cash, the digital rupee won’t earn any interest.
  • The decision to start the pilot Dec. 1 was announced in October. Finance Minister Nirmala Sitharaman had revealed plans to issue a digital rupee in the financial year ending in 2023 during her budget speech in February. India’s fiscal year ends on Feb. 28.

 

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