“Bank of America has launched digital assets research coverage nearly three months after forming a crypto group. Digital assets are a $2 trillion market with 200 million users, according to a Bank of America press release, and the sector is “too large to ignore.”
We believe crypto-based digital assets could form an entirely new asset class.
Bitcoin is important with a market value of ~$900bn, but the digital asset ecosystem is so much more: tokens that act like operating systems, decentralized applications (DApps) without middlemen, stablecoins pegged to fiat currencies, central bank digital currencies (CBDCs) to replace national currencies, and non-fungible tokens (NFTs) enabling connections between creators and fans.
Bank of America noted that venture capital investments in digital assets and blockchain technology surpassed $17 billion in the first half of 2021, “dwarfing” the $5.5 billion from the same period last year.
This creates a new generation of companies for digital assets trading, offerings and new applications across industries, including finance, supply chain, gaming and social media. And yet we’re still in the early innings.”
“The cryptocurrency is up about 15% over the past week as traders appear to be exiting short positions. Analysts are waiting for the U.S. Securities and Exchange Commission (SEC) to approve a bitcoin exchange-traded product (ETF), which could happen in a matter of weeks.
It would open the floodgates for institutional adoption and hopefully result in a spot-backed ETF being approved in the not-so-distant future, which would allow ordinary people to include the asset easily.”
“The working group published not one but three new reports on Thursday exploring customer needs, technological design alternatives and financial stability implications of a general purpose or “retail” CBDC – meaning a digital currency issued directly by a central bank – that would coexist with private payment systems.
The prevailing fear is that the use of any CBDC would require a shift of funds out of bank deposits and into digital cash. Should CBDCs rapidly replace bank deposits, they could reduce banks’ ability to lend, leading to instability in the financial system. But if it happens slowly, with enough time for banks to adjust, the report says the effects of such a shift would be manageable.
The report lays out a number of design options that could help control CBDC take-up and the crowding out of banks including setting holding and transactional limits on CBDCs, and considering different ways of remuneration. For example, a CBDC can be non-interest bearing like cash, in which case it would seem less attractive.“
“Polygon’s count of unique daily addresses active either as sender or receiver rose to a record high of 566,516 on Saturday, surpassing Ethereum for the first time. Non-fungible tokens (NFT) adoption and gaming have fueled the growth in Polygon’s user base.
Since July, traders on Polygon OpenSea [the NFT marketplace] have multiplied 45.5x, and NFTs sold by 17.5x. Second, gaming is taking off. Arc8 is one example, achieving 104K DAU [daily active users] days after launch.”
“Trading volume has been trending upward on the marketplace over the last week following wider declines throughout much of September. Leading the charge this time around are pixel-based toad avatars, which are suddenly coveted by collectors. To date, the collection has yielded $88 million worth of trading.
Despite some recent doom-and-gloom chatter around the declining market, OpenSea’s final numbers actually weren’t far off of August’s, with more than $3 billion between both Ethereum and Polygon-based sales.”
“The current, dominant economic regime in the U.S. is nominally capitalist, but in practice, it is something far afield. Government actors and the unelected Federal Reserve have long been in the business of picking and choosing winners in the market – sometimes directly. Regulation is often treated as a moat for powerful incumbents. If crypto is the Wild West, then traditional finance is the protectionism, cronyism and decadence of early modern Western Europe.
By comparison, crypto is a textbook example of “free enterprise.” It is a global financial architecture that anyone with internet access can use. It runs 24/7, it’s liquid, and it has winners and losers determined by the rules of the game.
When liquidity crises happen, people get liquidated. Businesses go bankrupt. Exchanges go down. People lose in proportion to the risks they take. Those are market forces functioning according to the rules.
There’s a case to be made that crypto ought to and can stand independent of the current economic system. As The Economist wrote recently, the state’s role in markets is to guarantee property rights. Crypto is a grand experiment with conceding that turf to blockchains. Taking ownership of your keys means taking on associated risks.
“Pure” capitalism promises something ruthless, but sticks to its own rules. Too bad it’s never been tried. Not even in the Wild West.”
“The core problem with the TradFi money stack is that all of its components require participants in the system to trust a centralized entity. Someone or some institution must be trusted to keep the ledger, to issue the currency, to coordinate the conversion of short-term savings into longer-term loans and to certify people’s rights to property.
That trust imperative implies that the centralized entity has the capacity to act in its own interests against those of the users of the system. For that reason, society has developed a complex nexus of laws, regulations, accounting and auditing procedures to provide people with the confidence they need to use these services. All of that adds friction to our transactions and, ultimately, burdens the economy with massive costs.
This is where the decentralizing, disintermediating promise of cryptocurrencies, blockchains, digital assets and smart contracts comes in. These technologies are coming together to forge a decentralized version of the money stack. Here’s how it maps out:
Ledger = blockchains like Bitcoin and Ethereum
Currency = bitcoin the currency, ether and/or other cryptocurrency payment vehicles
“Investors can make double-digit returns via weekly ether or bitcoin “covered call” strategies offered by decentralized finance (DeFi) asset management platforms, including Ribbon Finance and StakeDAO. All you have to do is deposit coins in “strategy vaults” designed to automate the trade.
A popular traditional market strategy, “covered calls” involve selling out-of-the-money (OTM) call options, or those with strike prices above the current market level, while owning the underlying asset. It is typically seen as a neutral to bullish strategy, because the upside is capped.
At press time, projected yields from Stake DAO’s ETH and BTC covered call strategies were 31% and 32%, respectively, while Ribbon Finance’s ETH covered call offered a 12% yield. Check that versus the cash-and-carry trades executed on Binance, the world’s largest centralized crypto exchange by volume: Traders would earn just 5%.
With Stake DAO and Ribbon Finance, the strategy is automated. Users deposit their coins, wrapped ETH (wETH) or wrapped BTC (wBTC), into the strategy vaults, which take care of the complexities, like selecting the appropriate strike price for selling the weekly option.
These structured products open doors for the retail crowd to participate and earn yield from the otherwise complex options market, dominated mainly by sophisticated traders and institutions with ample capital and experience.
The emergence of this new category of offerings in the crypto options marketplace provides yet another example of how blockchain-industry developers are engineering cryptocurrency projects to replicate the structured-finance alchemy pioneered by Wall Street, and in some cases taking it to the next level.”
“As DeFi matures, it is becoming increasingly clear that [liquidity mining] incentives are not a viable long-term strategy for networks. The goal should always be to bootstrap and accrue long-term defensible value, rather than perpetually pay high interest on mercenary capital.
Olympus flipped this model on its head. While we started with liquidity incentives at launch, we used them (as they should be used) as a short-lived bootstrapping mechanism. LP incentives allowed us to build up a large liquidity pool quickly, but it was never a long term strategy. Bonds are.
Bonds are a mechanism by which the protocol itself can trade its native token in exchange for assets. Instead of renting liquidity from third parties, it purchases them outright. Once the bond is created, the protocol owns those assets.
Olympus has found enormous success through bonds. Within the first six months, the protocol has amassed over $150 million in assets. This is higher than many protocol’s TVL, and it will never have to pay another dime for them. Not only that, most of these assets are productive; instead of costing the protocol money, they make the protocol money.
Through bonds, protocols can accumulate the crucial infrastructural liquidity that they generally service via liquidity mining. Instead of renting that liquidity (often at astronomical interest rates), they simply purchase it, turning a value-draining perpetual expense into revenue-producing assets that facilitate the functionality of the rest of the platform.”
“In September, bitcoin dominance was 42%. That’s the lowest it’s been at that point in the year in any of the previous four years. While Ethereum’s share was higher in the most recent September than at any time in the series since 2017, the share for all other blockchains was the highest of any of the last five Septembers.
BTC losing dominance does not imply that it is losing, especially as it continues to cement itself as a sound money and global monetary network. Waning dominance for bitcoin more accurately suggests that there is money flowing into other projects with different use cases.”
“Mozilla Foundation, which develops the Firefox browser and is usually a half-decent supporter of internet privacy and security, filed an objection in early September to the working draft of a new DID standard being developed by the collaborative W3C foundation.
Coin Center, in an open letter this week, characterized those objections in part as “transparently irrelevant,” and more broadly warned that ‘a promising effort to standardize Decentralized Identifiers (DIDs) at the W3C is being waylaid by the objections of centralized digital identity providers.‘The new standard would potentially disrupt centralized digital identity providers such as Google and Facebook.
Among other benefits, this is a much more secure and private model than the Facebook or Google logins which currently dominate identity verification on the web. That’s in part because service providers could limit the data they see or collect based on their security risk level or specific qualification requirements.
The Mozilla objection … dedicates the vast majority of its critique to the putative environmental costs of proof-of-work mining. This is transparently irrelevant to the W3C DID standardization process.
It is especially strange since the current DID draft standard does not even mention PoW mining, according to Coin Center, and can accommodate many data architectures. Coin Center characterizes Mozilla’s statement as “scare tactics and hyperbole,” and it is certainly a strange and off-putting position from an organization that is usually quite intellectually honest.”
“One approach that has been growing in popularity lately is what we’re calling “Airdrop scams”. A typical airdrop scam involves minting a new malicious token, sending it to user accounts, and relying on users investigating what this mysterious token is to phish those users.
These tokens however do not behave like normal tokens, and when those users try to swap them, they throw an error, which directs the user to a phishing site for help, where they are phished.”
“The Nigerian Federal High Court joins the growing list of regulators across the globe to approve the rollout of a central bank digital currency (CBDC) as a legal tender. Named eNaira, the digital currency will be issued by the central bank and supported by a homegrown eNaira wallet.
The official eNaira website says that the digital version of the Nigerian naira will be made available universally, stating “anybody can hold it.” While eNaira will continue to circulate alongside its fiat counterpart, it is marketed as a faster, cheaper and more secure option for monetary transactions.
It is important to note that the move to introduce digital naira also coincides with the falling value of the nation’s fiat currency, currently standing at its lowest point since 2003.”
“In a proposal on Thursday on MakerDAO’s governance forums, French multinational banking giant Société Générale (SocGen) submitted an application for the decentralized finance (DeFi) lending platform to accept on-chain bond tokens issued by the bank as collateral for a stablecoin DAI loan.
The loan would be for up to $20 million in DAI – likely the largest step towards institutional adoption of DeFi to date. SocGen has been a leader in experimenting with blockchain assets for years, having issued bond-backed tokens on the Ethereum blockchain as far back as 2019.
In April, Maker made headlines by issuing a $38,000 loan to finance a real-world mortgage and has been exploring other real-world options in collaboration with Tinlake and Centrifuge.
This is the next logical step in MakerDAO’s mission to integrate the crypto and real-world economies. This collateral should be seen as step one of what is next to come. Integrating all publicly traded bonds and providing repo. Quite a huge market.
The tokens that SocGen has submitted for application as collateral were issued in 2020, have a fixed rate of 0%, and mature in 2025. They sport a AAA rating from rating agencies Moody’s and Fitch. Both the bond tokens and DAI are recognized under French law.”
“Bitcoin is pushing higher despite classic risk-off action in traditional markets. The cryptocurrency’s resilience has raised investors’ hopes for a stellar rally in October. Reduced probability of a regulatory clampdown on crypto markets seems to be cushioning bitcoin from the instability of traditional markets.
October is a seasonally bullish period, and bitcoin’s recent stability amid stock market losses and China’s blanket ban on virtual currency businesses is reminiscent of the cryptocurrency’s resilience in the face of the negative news seen just before the beginning of the bull run from $10,000 in September and October 2020.
It remains to be seen if history will repeat itself. While rising inflation expectations across the globe and falling real or inflation-adjusted bond yields are supportive of a renewed bull run, the Fed’s impending taper – or scaling back – of stimulus may slow down the ascent.
Data released early today showed eurozone inflation rose 3.4% on an annual basis in September, hitting the highest reading since September 2008.”
“The reported recommendation is part of a Treasury-led presidential advisory group’s upcoming stablecoin report. First announced in July, the report is now expected to be released in late October.
A senior administration official confirmed to CoinDesk that the report is accurate and that the federal government is looking at two different pathways. The first is the congressional pathway outlined by the WSJ, though the official did not provide specifics. The second is through the Financial Stability Oversight Council (FSOC), a panel of regulators tasked with monitoring potential risks to the financial system.
In a floor speech on Wednesday, pro-crypto Sen. Cynthia Lummis (R-Wyo.) called for regular audits of stablecoin issuers and expressed concern with the lack of transparency of major issuers’ reserve backings.
A number of stablecoin issuers are in the process of, or have stated intentions to, obtain bank-like regulatory status. Circle said in August it wants to be a national crypto bank; Paxos, which issues USDP (formerly PAX) and BUSD in partnership with Binance, got a conditional banking charter in April.
Today’s news reports about the potential recommendations from the President’s Working Group on Financial Markets (PWG) is encouraging, as the time has come to address the risks and seize the significant opportunities of dollar digital currencies like USD Coin (USDC).”
“The BIS’ latest CBDC report refers to joint efforts with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the United States Federal Reserve, Sveriges Riksbank and the Swiss National Bank to explore a retail CBDC.
The central banks participating in the report agreed that any CBDC ecosystem would involve the public and private sectors in a balance to provide ‘desired policy outcomes and enable innovation that meets users’ evolving payment needs.’
A theme that cuts through almost every consideration is interoperability. Domestic interoperability would be key to ensuring a CBDC system coexists with other national payment systems and contributes to broader accessibility, resilience and diversity.”
“Robert Leshner today tweeted asking that users who erroneously received large amounts of COMP tokens due to a bug return it to the Compound Timelock, or it would be ‘reported as income to the IRS, and most of you are doxxed.’
Perhaps unsurprisingly, the tone of Leshner’s tweet didn’t go down too well with the DeFi community.
Julien Bouteloup, a member of the core team at automated market maker Curve Finance, argued that Leshner’s comment ‘sounds like Compound has been gathering personal data about its users & willing to dox’ them all if they don’t return the fund earned at the casino.’ ‘Code is law. Unless we fuck up. Then we call the IRS on you,’ ironically noted Blockstream CSO Samson Mow.
Leshner later admitted that his comments about doxxing and the IRS were “a bone-headed tweet/approach” and he appreciates the community’s “ridicule and support.” Meanwhile, Compound Labs has published a new proposal to temporarily disable COMP rewards, although voting won’t start until tomorrow.”
“Following the approval by El Salvador’s congress for the adoption of bitcoin as legal tender in June, Bukele said he had instructed state-owned geothermal electric company LaGeo to allow bitcoin miners to tap the country’s volcanic resources.
With 20 “potentially active” volcanoes, which account for almost 22% of the country’s energy supply, El Salvador’s harnessing of geothermal energy could provide an answer to the hunt for a reliable clean energy source to power bitcoin mining.
This is officially the first bitcoin mining the volcanode.”
“U.S. Federal Reserve Chairman Jerome Powell said he does not intend to ban cryptocurrencies, but said stablecoins need greater regulatory oversight. Powell made the comments in a two-hour long House Financial Services Committee meeting on Thursday.
When asked by Budd directly whether or not he intended to “ban or limit the use of cryptocurrencies,” Powell’s response was a resounding “No.”
[I have] no intention to ban them.
When asked about earlier comments he had made about CBDCs replacing private crypto, Powell said he’d “misspoken.”“
“Visa has proposed a platform to enable interoperability between central bank digital currencies (CBDCs) and other stablecoins. The “universal payments channel” (UPC) aims to allow the cryptocurrencies to be transferred between different blockchain networks.
The UPC technology can play an important role between private stablecoins and public CBDCs by providing permissioned access for whitelisted stablecoins to be interoperable with CBDCs.
The UPC protocol will allow payments through an entity known as the “UPC Hub,” which would be a trusted gateway to read the state of two ledgers.”
“Canadian exchange-traded funds (ETF) provider Evolve Funds Group has launched the country’s first multi-crypto ETF on the Toronto Stock Exchange, the Evolve Cryptocurrencies ETF. Trading under the tickers ETC, the Evolve Cryptocurrencies ETF will initially invest in Bitcoin ETF (“EBIT”) and Ether ETF (“ETHR”).
Even though these two cryptocurrencies are somewhat correlated to each other, they’ve had different return profiles. Such diversified funds allow investors to dampen some of that volatility and hopefully capitalize on the cryptocurrency that’s significantly outperforming the other.”
“Compound erroneously paid out millions in liquidity mining rewards following an update to one of its smart contracts. In one transaction, $27 million was claimed. The botched payout sums indicate a flaw in the comptroller contract, which disburses the COMP liquidity mining rewards, possibly related to a recent upgrade.
Compound acknowledged the exploit on its official Twitter handle and said no user funds are at risk.
There are no admin controls or community tools to disable the COMP distribution; any changes to the protocol require a 7-day governance process to make their way into production. Labs, and members of the community, are evaluating potential steps to patch the COMP distribution.”
“A three-way race involving Gelato, Keep3r and Chainlink to corner the massive automation market is gaining speed.
The raise comes at a time where teams are just beginning to scratch the surface of smart contract automation – a key piece of blockchain plumbing that has the potential to be a massive market, and what Orth describes as the Google Cloud of Web 3.
Rather than you building every bot from scratch for every single specific use case out there in Web 3, and there are millions, we just built a general-purpose protocol and and network that you can plug into and you can automate any function you want without having to build this infrastructure.
“TikTok has announced a collection of non-fungible tokens (NFTs) featuring contributions from Grimes, Lil Nas X, Bella Poarch and more. Called “TikTok Top Moments,” the collection is the social media app’s first whole-hog foray into the world of blockchain-based digital collectibles.
The idea is to pair TikTok creators with artists in the crypto space. The NFTs also represent a partnership with Immutable, a layer 2 network built on top of Ethereum.”
“As of September 29, the decentralized exchange aggregator 1inch has begun geofencing U.S. IP addresses. Such geofencing is notoriously simple to circumvent using VPNs. The move aims to pave the way for a new product to launch in the U.S.
Series B funding will be used for the development and launch of the 1inch Pro product which is specifically designed for the US market and for global institutional investors in accordance with all the regulatory requirements.”
“The Terra blockchain has completed Columbus-5, a hotly anticipated upgrade that is expected to make the system work more seamlessly with other cryptocurrency networks. The easy transfer of assets across networks stems from Terra now being able to use the Inter-Blockchain Communication (IBC) standard, which eases the exchange of data among all the networks that adopt it.
At least 10 other blockchains have integrated IBC, the most famous of them being Cosmos, which was built with interoperability in mind. Terra’s compatibility with other systems is set to further improve in the coming weeks, when yet another “bridge” protocol, Wormhole V2, is fully connected to the chain.
Interoperability means products built on Terra, such as the Anchor lending system and Mirror protocol for tokenizing stocks like Tesla and Apple, can now accept coins from other chains as collateral.“
“The pilot program aims to give 1,300 participating households a one-time payment of $120 that they can use to pay for low-cost internet for one year. To fund those payments, the mayor’s Office of Technology and Innovation will install 20 Helium-compatible hotspots with volunteer residents and small businesses. The hotspots will mine HNT tokens for six months.
Helium aims to provide wireless connectivity that doesn’t rely on centralized wireless carriers. Instead, it seeks to build a global peer-to-peer network of nodes that power internet-of-things (IoT) devices. The network includes more than 200,000 nodes.”
“Iranian authorities have conducted many raids on crypto miners in abandoned factories, homes and small businesses — nothing quite as high profile as the country’s largest stock exchange.
The TSE reportedly initially denied the existence of the miners, saying the equipment was part of a research project. However, executive deputy director Beheshti-Sarsht later said the company should be held accountable for its actions.”