Tuesday, 4 October 2022

Market Summary

Market Summary 4 October 2022

Bitcoin Price: US$19,629.08 (+3.00%)
Ethereum Price: US$ 1,323.09 (+3.63%) 

 

GBTC Discount Reaches Highest Mark Ever

  • Kim Kardashian is charged $1.26m in penalties for unlawfully promoting crypto securities.
  • NYDIG raises $720m from 59 investors for an institutional BTC fund.
  • BitMEX expects to launch an exchange token in 2022.
  • Celsius founder, Alex Mashinsky, is suspected of withdrawing $10m ahead of the bankruptcy filing.
  • CME Group files a proposal to offer derivatives trading directly to customers.
  • GBTC is a financial instrument that functions as a pseudo-ETF for “paper” bitcoin. It was created to give investors exposure to BTC through traditional mediums, without the inherent risks of owning spot BTC such as self-custody, unclear regulation, and tax laws.
  • After launching in 2013, GBTC has grown to become the largest BTC fund in existence. Today, the fund manages a staggering 3.3% of BTC’s circulating supply or 635,240 BTC (worth roughly $12b).
  • Historically, GBTC has traded at an average premium of 20% over spot BTC prices since 2015. However, this premium has turned into an average discount of -19% over spot BTC prices over the past 19 months.
  • As of Sept 29th, GBTC traded at the largest discount in its history with a mark of -36%. Some suggest that the increasing discount illustrates subsiding institutional interest in Bitcoin, while others point to a wider offering of ETFs or alternative vehicles for BTC investment.
  • If the SEC approves Graycale’s request to turn the fund into an ETF, the discount could be erased rather quickly. As for now, it remains clear that investor interest in purchasing ~$12.5k BTC (priced with -36% discount through GTBC) remains at all-time lows.

 

Solana NFT Ecosystem’s September Growth Rivals Ethereum

  • Solana kicked off October with an hours-long service interruption — the blockchain’s 12th such outage in 2022 — an especially sour note, especially after a month of surging NFT mints and daily volumes rivaling Ethereum.
  • Solana’s market share of the total trading volume rose from 7% to 24% in the last six weeks, according to Delphi Digital.
  • Solana in September posted higher daily trades volumes than Ethereum. The number of unique buyers increased by 34% month over month, according to data from Dune Analytics.
  • Ethereum NFT volume may have decreased since April, but the newly-converted proof-of-stake blockchain is still the top dog when it comes to NFT sales. It houses — by far — the most blue-chip collections, including Bored Ape Yacht Club and Crypto Punks.
  • “One thing to keep in mind is that USD value is still far higher on Ethereum,” Blockworks Research Analyst Sam Martin said. “Project creators can wash trade on Solana to artificially pump volume due to low transaction fees, whereas on Ethereum, that would be far more expensive.” 
  • Solana’s less-than-$200 trades and lower gas fees have enabled “more interaction and participation” than the Ethereum network, analytics platform Nansen reported. 

 

Judge allows CFTC to serve Ooki DAO members through help chat box

  • A judge in the Northern District of California will let the Commodity Futures Trading Commission serve Ooki DAO members through online forums. 
  • U.S. District Judge William Orrick granted a motion today allowing the regulator to serve the summons and complaint through the decentralized autonomous organization’s help chat box in addition to a notice posted on the affiliated online forum.
  • “Because the Commission provided the documents in this manner on September 22, 2022, the Court holds that the Commission effectively served the Ooki DAO on that date,” says the order.
  • The CFTC sued Ooki DAO last month in a first-of-its-kind action. The lawsuit was filed alongside a settlement agreement with bZx protocol developers over alleged failure to register with the regulator. The protocol transferred ownership to Ooki DAO in 2021 as part of a decentralization effort, which the CFTC contends also puts the DAO and its governance token holders on the hook for failing to register. Now, the court says the CFTC has effectively served summons to those holders in the form of posting to its chat box and notice board. 

 

OpenSea employee accused of fraud wants to subpoena the NFT marketplace

  • Nathaniel Chastain, the former OpenSea product manager accused of fraud through front-running the posting of different non-fungible tokens to prominent positions in the marketplace, is making three new moves in his defense, according to recent court filings.
  • Chastain wants to subpoena OpenSea, his former employer, and claims the Federal Bureau of Investigation violated his fourth and fifth amendment rights in their search of Chastain’s home, and is trying to strike the term “insider trading” from the case.
  • Chastain wants the court to subpoena OpenSea for documents on whether the information Chastain allegedly used to turn a profit is considered “property” of OpenSea. The wire fraud charge contends that Chastain defrauded his employer when he allegedly used the private information of which NFTs would be listed on the homepage.
  • The subpoena Chastain wants would include documents into whether OpenSea executives were aware of Chastain’s alleged activities. Chastain’s defense team hopes to receive Slack messages between Chastain and other employees, documents or communications mentioning OpenSea’s employee and confidentiality policies, documents or communications the company shared with the government, and any documents or communications in which OpenSea CEO Devin Finzer and co-founder Alex Atallah referenced Chastain. 

 

UK Shuts Down Temporary Crypto Company Licensing Program

  • Last week, digital trading app Revolut registered with the U.K.’s top financial regulator, bringing to an end the “temporary registration regime” (TRR), a program that allowed crypto companies to operate in the country while they are waiting for full regulatory approval.
  • Revolut was the only company from the five that were left on the list to qualify for full registration. Crypto firms seeking to operate in the U.K. must now go through a full registration process with the Financial Conduct Authority, the country’s primary financial regulator, a spokesperson from the FCA said.
  • Crypto firms, however, have been complaining about the FCA’s delays in processing applications. Those delays led to some companies dropping out of the process last year.
  • “If a firm is able to satisfy us that it meets the conditions for registration, we will register them,” the FCA said in an email to CoinDesk. “It’s a two-way street, so the time it takes to register a firm, and whether they’re registered at all, depends on the quality of the information provided to us. Thirty-eight firms have successfully done so.”

 

NYDIG’s institutional bitcoin fund has raised $719.9 million to date

  •  bitcoin fund launched by digital investment services firm NYDIG has raised $719.9 million to date. 
  • NYDIG Institutional Bitcoin Fund LP has raised the funds from a total of 59 investors, according to a filing with the Securities and Exchange Commission. The filing was made on Friday and shows an increase of just over $28 million in investments since the last raise in 2021, when investments reached $691 million.
  • The fund has one less investor since the 2021 raise, where the filing registered 60 investors. 
  • The fund was first registered with the SEC in 2018, raising $31 million from three investors before raising an additional $54 million from six investors in 2019. NYDIG was valued at over $7 billion last December, with the firm saying at the time that it would use the funds to expand its institutional-grade bitcoin platform including support for Lightning network payments, smart contracts, and asset tokenization.

 

Grayscale Takes Over Key Role for Bitcoin Trust, Other Products From Genesis

  • Crypto asset management firm Grayscale Investments, which offers the world’s biggest bitcoin (BTC) trust, is bringing a key administrative role for all of its products in-house through a newly created broker-dealer unit.
  • The company will now act as the authorized participant for the products through its Grayscale Securities subsidiary, the firm announced Monday. That means it will now be responsible for creating new shares of the trust and selling them to investors. Previously, Grayscale outsourced that role to Genesis Global Trading. (Grayscale, Genesis and CoinDesk all share the same parent company: Digital Currency Group.)
  • The change “creates efficiency but doesn’t fundamentally change the Grayscale business,” Grayscale CEO Michael Sonnenshein said in an interview. “What it’s doing is bringing a capability in-house to the Grayscale organization while continuing to adhere to any financial rules and regulations.”
  • Genesis will still handle buying the cryptocurrencies underlying Grayscale’s trusts, and there are currently no plans to add any liquidity providers beyond Genesis, Sonnenshein said.
  • “The way that we’ve structured all of those kinds of agreements is we can and, at some point, will perhaps access more liquidity providers,” he said. “Today, Genesis remains our sole liquidity provider and we’ve had nothing but a positive relationship with them, going back to 2013, so I can’t see a need to expand.”

 

Citi Says Decentralized Crypto Exchanges Are Gaining Market Share From Centralized Peers

  • Decentralized cryptocurrency exchanges (DEXs) have grown faster than centralized exchanges (CEXs) over the past two years, Citigroup (C) said in a research report Thursday. The gap is likely to widen as users move away from centralized platforms to avoid their more onerous know-your-customer procedures.
  • DEXs are blockchain-based apps that coordinate large-scale trading of digital assets between many users by using automated algorithms, instead of the traditional approach of acting as a financial intermediary between buyers and sellers.
  • DEXs offer distributed revenue, like dividends, to token holders and the ability to self-custody funds, the report said. Once the trading rewards are included, these exchanges have comparatively lower fees than platforms such as Coinbase Pro, Citi added.

 

U.S. Treasury bills now make up more than half of Tether’s reserves

  • U.S. Treasury bills account for 58.1% of stablecoin issuer Tether’s reserves, the firm’s CTO, Paolo Ardoino, said on Monday.
  • Throughout 2022, Tether has repeatedly made it known that it plans to improve the quality of its reserves, in part, by reducing the amount of commercial paper held in its reserves. As of September 30, it reduced its commercial paper holdings to less than $50 million, Ardoino tweeted. Tether’s U.S. Treasury bill holdings are up over 14% from June 30 to last Friday.
  • Tether previously shared its plans to reduce commercial paper holdings amid the Terra crisis in May — at the time it had commercial paper holdings of $19.9 billion. This amount was brought down by more than 58% by August 19, when Tether’s disclosures showed commercial paper holdings of $8.5 billion.

 

Glassnode

  • Global equity and bond markets continue to tread challenging ground, with growing evidence of stress developing in sovereign debt and currency markets this week. Of particular note was the dislocation experienced in the United Kingdom Gilt market, where bond yields soared, the British pound fell to all-time-lows against the US Dollar, and the Bank of England reestablished quantitative easing to reliquify markets.
  • Amidst such extremes, Bitcoin prices have remained notably stable, consolidating within an increasingly narrow range between $19,921 and $20,239. Such quiet periods are very uncommon for Bitcoin, with semblance to both pre-crash November 2018, but equally to pre-rally March 2019.
  • Despite severe price drawdowns, and global macro turmoil, Bitcoin hashrate has remarkably pushed to yet another all-time high this week. We last covered the stress developing in the Bitcoin Mining sector back in June (see WoC 23, and WoC 25).

  • As the bear market rages on, Bitcoin hashrate has reached a new all-time-high of 242 Exahash per second. To give an analogy for scale, this is equivalent to all 7.753 Billion people on earth, each completing a SHA-256 hash calculation approximately 30 Billion times every second. These are extraordinarily large numbers.

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