Wednesday, 4 January 2023

Market Summary

Market Summary 4 January 2023

Bitcoin Price: US$ 16,675.18(+0.01%)
Ethereum Price: US$ 1,214.55 (+0.05%) 

 

Arbitrum TVL Holds Steady While Others Bleed

  • Since the start of November, the Total Value Locked (TVL) on Arbitrum has remained unchanged while all other blockchains have suffered significant damages.
  • TVL on Ethereum is down -28%, Polygon is down -19%, and Fantom is down -17%. Solana was the worst hit with TVL down -77%. In comparison, the market price for ETH is down -23%, MATIC is down -11%, FTM is down -18%, and SOL is down -65%.
  • TVL measures the value stored on-chain for a particular blockchain. When much of the on-chain value is due to the underlying token, TVL changes are highly correlated to price changes of token.
  • Arbitrum’s TVL may have remained unchanged due to users farming a potential future airdrop. Users may interact with leading protocols on Arbitrum to increase the amount of ARBI they may potentially receive once the token launches.

 

Real-World Assets in Decentralized Finance

    • Many protocols are pushing the space forward by tokenizing things like home ownership, commodities, loans, etc. This report will focus on credit-financing protocols that integrate RWAs as collateral, as well as study the traction they have amassed so far. For clarity, we define RWA credit-financing protocols as those which are in the business of obtaining financing on-chain by pledging RWA off-chain as collateral. As such, we exclude protocols that are primarily issuing uncollateralized loans (such as Maple, TrueFi, and Clearpool) from the scope of this report.
    • Furthermore, the growth cycles of these undercollateralized lending protocols are entirely intertwined with crypto markets — since borrowers are mostly funds or market makers whose investment strategies rely on crypto markets.
  • Goldfinch
    • Moving back to RWA credit protocols, the largest RWA financing name in the market is currently Goldfinch — a protocol that helps real businesses access crypto lending markets without having to post crypto collateral. Instead, loans are fully collateralized off-chain with assets and income. 
  • Centrifuge
  • The next-largest RWA credit-financing protocol after Goldfinch is Centrifuge. Centrifuge aims to bring structured credit onto the blockchain, allowing investors to earn yields backed by tokenized RWAs. Centrifuge has been around much longer than Goldfinch and provides a much larger service than credit financing alone. Other than loan origination, they are also a platform to tokenize assets on-chain.
  • Centrifuge’s Tinlake pool, in particular, brings real-world businesses (asset originators) that finance real-world assets — such as invoices, mortgages, or streaming royalties — on-chain. They do this by tokenizing their financial assets into NFTs and using these NFTs as collateral in their Tinlake pool.
  • The future of asset tokenization looks bright. We expect to see RWAs being tokenized in greater quantities as the benefits become more evident. In particular, if the high interest rate environment is prolonged, protocols like Maker may see the benefit of allocating some exposure to treasuries and investment-grade corporate bonds, both of which are traditionally seen as safe havens for investors during bear markets.
  • We also foresee different types of assets being tokenized on-chain, and for asset tokenization to expand further than lending protocols. Other than real-world credit being used as collateral to back stablecoins, we’ve seen foreign currencies and government bonds tokenized this year. More recently, the central bank of Singapore conducted foreign exchange and government-bond transactions against liquidity pools comprised of tokenized Singaporean government securities bonds, Japanese government bonds, the Japanese Yen, and the Singapore Dollar using Aave and Polygon. These pilot tests successfully proved to offer lower transaction costs and be more efficient than typical clearing and settlement intermediaries.

 

Core Scientific will cut power to 37,000 Celsius miners: Bloomberg

  • Core Scientific will cut off power to 37,000 mining rigs for which Celsius still owes payment, the two now-bankrupt companies agreed. Bloomberg first reported the news. 
  • The agreement marks the end of a dispute that has been ongoing since last October, when Core said it would seek a resolution on the matter in court.
  • Celsius owes Core $7.8 million related to power costs for the miners through November 2022, according to court documents.
  • Core itself filed for bankruptcy protection in December, due in part to Celsius’ bankruptcy filing and subsequent nonpayment as well as insufficient cash flow to manage its debts.

 

U.S. regulators issue post-FTX collapse crypto warning to banks

  • U.S. banking regulators remain skeptical of banks holding digital assets. 
  • The Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. put out a joint statement that reminded banks of their safety and soundness obligations and outlined risks they see in the cryptocurrency sector. Though the statement noted that banks aren’t prohibited from doing business with companies that operate within the law, the regulators raised several red flags for those hoping to dive deeper into crypto-related activities. 
  • The list highlighted risks that include the potential for fraud, scams and deceptive practices, in addition to the susceptibility of stablecoins to bank runs.  The statement also named issues such as uncertain redemption rights and unknown custody practices at crypto businesses as areas of concern.
  • “Based on the agencies’ current understanding and experience to date, the agencies believe that issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public, and/or decentralized network, or similar system is highly likely to be inconsistent with safe and sound banking practices,” the agencies wrote. “Given the significant risks highlighted by recent failures of several large crypto-asset companies, the agencies continue to take a careful and cautious approach related to current or proposed crypto-asset-related activities and exposures at each banking organization.”

 

Bitcoin mining difficulty down 3.6% while revenue pops 0.9% in December

  • Bitcoin mining difficulty is down 3.6%, following a winter storm that led a number of miners to power down.
  • The update was posted in the early hours of Tuesday, according to BTC.com.
  • Difficulty refers to the complexity of the computational process behind mining, and it adjusts roughly every two weeks (or every 2,016 blocks) based on the average block time.
  • The estimated global network hashrate fell from 245 EH/s after the last update down to 222 EH/s last Wednesday and back up to 256 EH/s, according to data from The Block.

 

Solana Exec Says Platform Still Gaining New Users Despite FTX’s Collapse

  • The washout of crypto exchange FTX hasn’t kept the Solana network from attracting users and developers, according to Austin Federa, head of strategy and communications at the Solana Foundation.
  • Federa told CoinDesk TV’s “First Mover” Tuesday the network has seen an increase in on-chain activity despite the FTX contagion.
  • “What you’ve seen is real staying power for both users and developers to build on the network,” Federa said.

 

Heatbit Is the First Space Heater That Mines Bitcoin, Founder Says

  • ‘Tis the season to be freezing, but in the cold, dark winter, Heatbit says its innovative space heaters can warm a room the size of a small studio apartment while mining enough bitcoin to offset at least a portion of a homeowner’s monthly electric bill.
  • The two-year-old startup introduced its sleek, multi-colored heaters – about the size of an extra large PC computer tower – earlier this year. So far, it has sold nearly 1,000 units globally, but it has been encouraged enough to begin planning a wider roll-out.
  • “Is it a gold mine? Does it make a lot of money quickly? No, definitely not,” said Alex Busarov, co-founder of Heatbit, during a CoinDesk interview. “Is it something that’s going to be quietly mining some [satoshis] for you? Well yeah, at some point it’s gonna pay off.”
  • Heatbit looks like other high-end heaters. But integrated circuits inside the device quietly process bitcoin transactions and perform trillions of calculations per second. That activity not only generates bitcoin rewards (courtesy of bitcoin mining pool, Nicehash), but also heat.
  • That heat, according to the official Heatbit site, is enough to warm 500 square feet of space. The kicker is, if you run the heater 24 hours a day at a bitcoin price of $20,000, the device will put $30 back into your pocket every month to help cover your electricity bill. Given the jump in energy costs last year, that capability may offer consumers some incentive.

 

Bernstein Says Crypto Exchange Binance Not Likely to Fail

  • Binance is solvent, liquid and stable, which is evident in the exchange’s more than $55 billion in verifiable cold wallet addresses, Bernstein said in a research report Monday.
  • The crypto exchange can also “pass the test of withdrawals” as it did when $6 billion of customer funds were withdrawn on Dec. 13, the report said.
  • “Binance’s undisputed market leadership has not been an accident – it has a long history of doing right by the customer,” the report added, noting that the exchange has made customers whole through hacks and regulatory challenges. The exchange now accounts for about 75% of the global crypto trading market.
  • Bernstein says Binance faces two challenges. First, it has an offshore holding company based out of the Cayman Islands, which means it must take “progressive steps moving towards an on-shore structure,” even at the cost of short-term business.
  • Second, following the demise of crypto exchange FTX, it is now a “virtual monopoly in global crypto trading.” While it can’t do much about its monopolistic position, competition may now emerge from decentralized exchanges, as traders could diversify their activities toward self-custody and decentralized trading platforms.
  • Binance will continue to seek licenses across multiple jurisdictions. It has obtained licenses from 14 countries so far, including France, Italy, Spain and Canada, the note added.

 

Solana’s SOL Token Surges 20% as Dog Coin Bonk Fires Up Community Interest

  • Solana’s SOL has surged about 20% in the past 24 hours even as larger cryptocurrencies like bitcoin (BTC) and ether (ETH) barely moved, as a decision by newly launched shiba inu-themed token Bonk (BONK) to do a large airdrop generated interest in the Solana community.
  • SOL leapt back above $13 on Tuesday following nearly nine straight days of losses that saw them trade at just over $8 on Friday. Selling pressure had resulted from Solana’s close links to Sam Bankman-Fried, the disgraced founder of crypto exchange FTX, who faces charges of fraud and misappropriation of client funds.
  • The recent price surge has liquidated some $6.7 million of short positions, according to Coinglass. This is the largest short liquidation since the collapse of FTX exchange and the subsequent market crash in November. Funding rates for SOL perpetual swaps are deeply negative, per Coinglass data, suggesting traders are bearish and betting for the token’s price to drop, also known as shorting.
  • The Bonk airdrop – amounting to 50% of its token supply – likely drove massive community interest. Some 20% of the total airdrop supply is going to Solana NFT collections – comprising 297,000 individual NFTs – and 10% to Solana-focused artists and collectors. Airdrops refer to an unsolicited distribution of a cryptocurrency token or coin, usually for free, to numerous wallet addresses and are generally used as a tactic to gain users.

 

Ethereum’s Upcoming Shanghai Upgrade Powers Lido DAO, SWISE, RPL Tokens Higher

  • While bitcoin (BTC) and ether (ETH) remain in stasis, governance tokens of liquid staking platforms, which allow users to retain liquidity of their tokens even though they are locked in a blockchain network, are rallying.
  • Lido DAO or LDO, the governance token of the Lido decentralized autonomous organization, has jumped 19% in the past seven days, with prices reaching a one-and-a-half-month high of $1.30 early Tuesday, according to data source CoinGecko. Liquid staking protocol StakeWise’s SWISE token has surged over 70% in a week, while Rocket Pool’s RPL has gained almost 10%.
  • The rally follows Ethereum developers’ Dec. 8 announcement that the network’s next hard fork, or backward-incompatible software upgrade, will take place in March. The upgrade, known as Shanghai, will include code allowing withdrawals of ether staked in the Beacon Chain since December 2020, finally giving participants a timeline for reclaiming their ether.
  • “Most recently, liquid staking derivatives [tokens] have had a nice uptrend. This is thanks to the Shanghai upgrade expected in a few months, which will enable withdrawals of staked ETH,” pseudonymous analyst CroissantEth tweeted. “As withdrawals are enabled, many believe more users will stake their ETH.”

 

2022 Crypto Attacks Were Least in December, With $62M Lost in Heists, Certik Says

  • Crypto market participants had few reasons to cheer in the last month of 2022 – with a low attack and theft figure among one of them.
  • December saw $62 million worth of tokens stolen, scammed, or attacked, making it the least harmful month in 2022 in terms of money lost to nefarious activities. In contrast, CertiK recorded over $595 million worth of crypto-based attacks in November.
  • The year, overall, saw over $3.7 billion lost to various attacks, hacks and scams – making 2022 the worst year in the market’s history so far. Attackers gained over $3.2 billion in 2021. But 2022 was off to an even rockier start with a $325 million exploit of popular cross-chain service Wormhole, which was followed by a $625 million attack on Axie Infinity’s Ronin bridge, and then a $200 million exploit of the Nomad bridge.
  • Helio Protocol’s $15 million attack and Defrost Finance’s $12 million alleged rug pull were the top attacks in December. A rug pull refers to a developer or creator promoting a project, such as a new token or NFT release, and then disappearing with investor money.
  • Flash loan attacks saw over $7.6 million impacted, with a single attack on crypto project Lodestar accounting for $6.5 million of this figure. Four other projects saw similar attacks with amounts ranging from $50,000 to $300,000.

 

Gemini users file class-action request against Genesis and DCG

  • Three users of Crypto exchange Gemini’s Earn program have reportedly filed a request for class-action arbitration against Genesis Global Capital and Digital Currency Group.
  • The request, which is not to be confused with a class-action lawsuit, comes weeks after the Winklevoss-founded exchange suspended Earn redemptions — a direct consequence of Genesis freezing withdrawals.
  • The three claimants allege that the terms of Gemini Earn’s master agreement were broken when Genesis purportedly failed to disclose — and later concealed — its insolvency in the summer. 
  • They also allege that Genesis worked with its parent company, Digital Currency Group, to hide its insolvency by exchanging $2.3 billion in debt owed by collapsed crypto hedge fund Three Arrows Capital for a $1.1 billion promissory note due in a decade.
  • Furthermore, the claimants believe Genesis’ master agreement creates the unregistered sale of securities.

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