Token Chronicle - Week 2 December 2024

Top cryptos

Meme of the week

Market update: We saw a significant correction last Monday with $1.5 billion liquidated, but the market has rebounded well since then with reassuring figures on U.S. inflation (a further rate cut is expected soon). BTC reached a new ATH around $107K and could push even higher in the coming days. We'll see how the market reacts next.

Main points this week:

International:

1. Russia: A State Duma deputy proposes the creation of a strategic Bitcoin (BTC) reserve. In recent weeks, several major private groups, public institutions, and states are considering creating a strategic Bitcoin reserve. Russia, increasingly involved in cryptocurrencies and blockchain, is no exception. To support his proposal, Anton Tkachev noted that “due to current geopolitical instability, traditional currencies like the yen, yuan, euro, and dollar are subject to volatility, inflation, and sanctions, threatening Russia's financial stability.”

2. "Inevitable" – China might already be accumulating Bitcoin (BTC), says Changpeng Zhao: A Bitcoin reserve in China is “inevitable,” according to the former Binance CEO. Changpeng Zhao believes his home country may already be accumulating cryptocurrency. While he resides in Singapore, Zhao, born in China, was questioned about China's Bitcoin plans during the Bitcoin MENA conference yesterday, speaking as an industry expert.

3. IMF issues an ultimatum to El Salvador: The country must change its “Bitcoin law” and make cryptocurrency non-mandatory to secure a loan. Nayib Bukele might be forced to compromise on a key policy. Since 2021, El Salvador’s merchants have been required to accept Bitcoin payments under the "Bitcoin law." However, the stakes are too high to ignore: the country urgently needs the $2 billion loan, with a GDP of $37.7 billion in 2024. It is likely the government will yield to IMF demands for financing.

4. Moody's downgrades France’s credit rating amid political crisis: The verdict is in—France’s rating has been downgraded by Moody’s. Hours after François Bayrou’s appointment as Prime Minister, Moody’s lowered France’s rating from Aa2 to Aa3. The agency cited political fragmentation preventing swift budget stabilization as the reason. Credit rating downgrades influence markets, increasing caution toward unstable economies. This morning, the CAC 40 opened 0.71% lower amid ongoing political turmoil.

Regulation/Justice/Cyber:

1. Pump.fun faces difficulties as the UK shuts its doors: Following the banning of its “live” feature, Pump.fun is struggling. The platform has faced numerous controversies since its launch less than a year ago, particularly over its “livefeeds,” which were flooded with illegal or violent content. A widely discussed incident involved a memecoin promoter setting himself on fire to draw attention to his token. Other creators also threatened violent acts to promote cryptocurrencies. After removing livefeeds in November, Pump.fun’s revenues collapsed. With the upcoming MiCA regulations impacting memecoins in Europe, the platform’s glory days may be ending amid tighter regulatory scrutiny.

2. Coinbase accuses the FDIC of discouraging crypto-related activities: Coinbase claims the Federal Deposit Insurance Corporation (FDIC) pressured U.S. banks to avoid crypto. The exchange publicly shared evidence, including a letter from the FDIC to an American bank stating, “We respectfully request you suspend all activity related to crypto assets.” Coinbase’s Paul Grewal describes this as part of “Operation Choke Point 2.0,” a regulatory campaign to unlawfully prevent banks from engaging with cryptocurrencies.

3. Ripple receives approval to issue RLUSD stablecoin: Although Ripple announced the launch of RLUSD for December 4, the New York Department of Financial Services (NYDFS) took its time approving the issuance of the dollar-backed stablecoin. Ripple has secured partnerships with exchanges, including Uphold, Bitstamp, Bitso, MoonPay, Independent Reserve, CoinMENA, and Bullish, where RLUSD will soon be listed.

4. FTX retrieves political donations to repay creditors: As part of its reorganization plan, set to compensate most creditors in the coming months, FTX recovered $14.5 million from political action committees (PACs). These funds represent partial returns of donations made by FTX executives.

5. BiT Global, close to Justin Sun, sues Coinbase: For weeks, Coinbase users have lost access to Wrapped Bitcoin (wBTC) after the platform delisted it. BiT Global, a key player in the wBTC ecosystem, accuses Coinbase of anti-competitive practices.

6. SEC considers Bitcoin and Ethereum combo ETF amid ETF race. NYSE Arca and Bitwise propose a dual BTC-ETH ETF, with the SEC inviting public input. Competitors like Grayscale and Hashdex are also racing to launch crypto index funds, signaling a shift toward broader adoption. Trump's incoming presidency and Gensler's departure add momentum to the push.

7. Hong Kong moves forward with stablecoin regulation. The Financial Services and Treasury Bureau (FSTB) has introduced the Stablecoins Bill, setting a regulatory framework for stablecoin issuers targeting Hong Kong retail investors. Overseen by the HKMA, the rules cover licensing, capital reserves, AML/CFT compliance, and transparency. The first reading in the Legislative Council is scheduled for December 18.

Traditional Finance:

1. Goldman Sachs considers Bitcoin (BTC) and Ether (ETH) trading: Goldman Sachs may soon enter cryptocurrency trading, according to its CEO, David Solomon, who clarified the bank’s stance on Bitcoin and Ether.

2. BNP Paribas, supported by Banque de France, executes tokenized asset trades on blockchain: BNP Paribas tested large-scale payment solutions for tokenized assets with backing from central banks, including Banque de France. The European System invited institutions to explore settlement benefits of central bank digital currencies (CBDCs) and cash on distributed ledgers (DLT). BNP Paribas believes digital assets offer technological advancements and capital market opportunities, citing blockchain programmability for efficient, instant settlements. Payment tools tested include Banque de France’s DLT solution, Deutsche Bundesbank’s Trigger solution, and Banca d’Italia’s TIPS Hash-Link.

3. Société Générale - FORGE conducts groundbreaking blockchain repo operation with Banque de France: Société Générale - FORGE and Banque de France announced a blockchain-based repo (Sale and Repurchase Agreement). In such agreements, one party exchanges collateral like bonds for liquidity with a buyback promise. Banque de France’s DL3S blockchain leverages IBM’s HyperLedger Fabric technology.

4. MicroStrategy joins Nasdaq-100: Following a strong rise in its stock price throughout 2024, MicroStrategy has been added to the Nasdaq-100 index.

5. BlackRock, with $11.5T in assets, recommends a 1-2% Bitcoin allocation in multi-asset portfolios. The firm compared Bitcoin's risk profile to the "magnificent 7" mega-cap tech stocks, noting a small allocation balances returns and risk. In 60/40 portfolios, Bitcoin aligns with these stocks' risk contributions. Exceeding 2% could sharply increase overall portfolio risk, BlackRock cautioned. This is the first time the firm has specified a percentage, driven by high client interest.

Adoption:

1. Amazon shareholders urge BTC purchase: In a letter, Amazon shareholders argued for the company to buy Bitcoin (BTC), citing MicroStrategy’s stock outperforming Amazon’s by 537% in a year due to its Bitcoin holdings. They also criticized inflation measurement through the Consumer Price Index (CPI), suggesting Amazon’s bonds fail to hedge inflation. Shareholders proposed allocating 5% of Amazon’s $585 billion in assets (~$29.25 billion) to BTC, which would equal 1.5% of Bitcoin’s market cap or 297,000 BTC.

2. Microsoft shareholders reject Bitcoin reserve proposal: At its annual meeting, Microsoft confirmed shareholders voted against evaluating Bitcoin holdings on its balance sheet. Proposed by the National Center for Public Policy Research (NCPPR), the resolution suggested investing 1% of company assets in BTC. Microsoft’s board argued the proposal was unjustified, stating, “Microsoft has robust processes to manage and diversify its corporate treasury for long-term shareholder benefit.”

3. MARA Holdings buys over $1 billion in Bitcoin (BTC): MARA Holdings joins companies creating strategic Bitcoin reserves, raising funds to purchase significant BTC holdings. Simultaneously, MARA announced it doubled its hashrate in 2024, achieving its goal of 50 exahash set earlier this year.

4. Travala’s AVA surges 300% after the announcement of a Bitcoin (BTC) reserve by the travel agency: While Travala surpassed $100 million in revenue, the cryptocurrency-enabled travel booking site announced a strategic reserve in Bitcoin (BTC) and AVA tokens. Following this, AVA rose by over 300%.

5. MicroStrategy acquired 21,550 BTC for $2.1 billion between Dec. 2-8, at an average price of $98,783 per bitcoin. Funded through the sale of 5.42 million company shares, this brings its total BTC holdings to 423,650, with an average cost of $60,324 per coin. The firm has now invested $25.6 billion in bitcoin, marking its fifth straight week of large purchases. During this time, bitcoin's price has risen 40%, while MicroStrategy's stock has climbed 20%.

6. Crypto miners are increasingly adopting an accumulation strategy similar to MicroStrategy's, according to a JPMorgan report. This shift stems from profitability pressures due to April's Bitcoin halving and rising hashrates. Analysts noted that miners like MARA Holdings are hoarding bitcoin or diversifying into AI and high-performance computing sectors. MARA, now holding 35,000 BTC worth $3.5 billion, ranks as the second-largest public company by bitcoin holdings. The strategy, termed "BTC yield," mirrors MicroStrategy's approach to counter these challenges.

7. Bitcoin miner Riot Platforms acquired 5,117 BTC for $510M between Dec. 10-12, increasing its holdings to 16,728 BTC ($1.7B). Purchases averaged $99,669 per BTC, funded by a note offering and cash reserves. Despite a $154.4M Q3 loss, Riot targets a 2025 hash rate of 46.7 EH/s.

   Tech:

   1. Google unveils a new quantum computer chip with unimaginable computing speed: On Monday, Google presented its new quantum chip named Willow, whose computing speed far exceeds the best supercomputers in the world. The company compared its performance against Frontier, one of the fastest supercomputers to date. In just 5 minutes, Willow completed a calculation that Frontier would take an estimated 10^25 years to solve, a timeframe that translates to 1,000 quadrillion years.

   2. Polygon Labs introduces Plonky3, claiming it as the fastest proving system for zero-knowledge rollups. Described as the "engine" of zkVMs, Plonky3 generates proofs summarizing off-chain transactions for Ethereum, cutting computing time and costs. Released in July, it builds on Plonky2 with improved speed and flexibility, boosting ZK rollup competitiveness.

   3. Ethena has launched USDtb, a stablecoin backed by BlackRock’s tokenized BUIDL fund, providing a reserve-backed model compared to its derivative-based USDe. USDtb holds 90% of reserves in BUIDL and 10% in stablecoins for liquidity and redemptions. Designed as a safe haven for USDe during market disruptions, it aims to reduce risk from negative funding rates. USDtb was submitted for Spark’s Tokenization Grand Prix, potentially unlocking $1 billion in liquidity and driving broader adoption if selected.

   Partnerships and Fundraising:

   1. Binance and stablecoin issuer Circle announce a strategic partnership on USDC: As part of the collaboration, USDC is expected to gain prominence on the exchange at multiple levels. While short-term effects are not yet measurable, this partnership could help USDC close part of the gap with Tether’s USDT. With a market capitalization of $40.85 billion, this marks a 10% growth over the last 30 days.

   2. Crypto.com partners with Deutsche Bank to conquer Asia-Pacific markets: By joining forces with Deutsche Bank, Crypto.com aims to fulfill several ambitions. The exchange, which unveiled its roadmap for 2025, is increasingly looking to diversify its service and product portfolio by expanding into traditional finance alongside cryptocurrencies.

   3. Bitstack: The Bitcoin savings app raises €5 million to realize its ambitions: Bitstack has reached a new milestone with a €5 million funding round. Already a leader in France, the Bitcoin savings app aims to reinvent banking services with innovative features. The funding round was led by Stillmark, with participation from Serena, Plug and Play, Y Combinator, Founders Future, and STATION F. This capital injection comes a year and a half after Bitstack’s previous fundraising in April 2023, when the French company raised €2 million from various investment funds.

   4. World Liberty Financial: The Trump family’s crypto project invests in ETH, LINK, and AAVE: In just over a month, Republican Donald Trump will take the reins of the United States again, bringing a likely easing of cryptocurrency regulations. World Liberty Financial (WLFI), the project led by his sons, is beginning to make strategic moves by acquiring ETH, LINK, and AAVE tokens. These purchases are not merely for show but likely part of a broader strategy. Chainlink, known for its oracles and cross-chain infrastructure, has become a key partner of WLFI by providing its infrastructure. Recent investments of $1 million in LINK tokens further strengthen this partnership. Another central player is the Aave protocol, a pillar of DeFi, with which WLFI will soon launch a dedicated instance on Ethereum. This initiative, already approved by WLFI’s governance community, will enable lending and borrowing of assets such as ETH, Wrapped Bitcoin (WBTC), and stablecoins (USDT, USDC), while redistributing part of the revenues to liquidity providers.

   5. Bitcoin investment app Relai raises $12M in Series A, led by Ego Death Capital, valuing the firm at $72M. The app has facilitated $650M in bitcoin investments since 2020, including $450M this year, with plans to hit $1B by 2025. Relai employs 40 staff and aims to double its workforce in 2024, focusing on product, marketing, and compliance.

   6. Step Finance has acquired Moose Capital to bring tokenized stock trading of companies like Nvidia and Tesla to Solana, targeting a Q1 2025 launch. The acquisition includes regulatory licenses, with the product rebranded as Remora Markets for KYC-verified clients outside the U.S. and EU. Step Finance seeks to tap into the $14B real-world asset market, leveraging Solana's speed and scalability. Tokenized stocks have faced challenges due to regulatory uncertainty, but co-founder George Harrap sees growing demand and political shifts improving prospects.

   7. Avalanche has raised $250M in a locked token sale led by Galaxy Digital, Dragonfly, and ParaFi Capital to support its Avalanche9000 upgrade. The upgrade, set for a Dec. 16 mainnet launch, aims to slash blockchain deployment costs by 99.9% and transaction costs by 25x. Over 500 Layer 1 chains are in development across gaming, tokenization, payments, and institutional sectors. Projects like DeFi Kingdoms and Lamina1 are already building on Avalanche. The firm previously secured $230M in a similar token sale in 2021.

   8. MegaLabs, the developer of MegaETH, raised $10 million in just under three minutes on the angel investor platform Echo, marking Echo's largest sale yet. Over 3,200 investors from 94 countries participated. Initially targeting $4.2 million, MegaLabs increased its raise due to overwhelming demand, securing an additional $5.8 million in just 70 seconds, co-founder Shuyao Kong said. The funding, structured as equity plus token warrants at a "9-figure" valuation, follows a $20 million seed round in June. The funds will support community growth and ecosystem development as MegaLabs prepares to launch MegaETH's public testnet and mainnet—a real-time, Ethereum-compatible blockchain.

   9. The Polygon community is discussing a proposal to allocate over $1 billion in stablecoin reserves from its PoS Chain bridge with Ethereum for yield generation. Developed by Allez Labs in collaboration with Morpho and Yearn, the plan aims to reduce the estimated $70 million annual opportunity cost of idle reserves. The proposal suggests deploying stablecoins like DAI, USDC, and USDT into ERC-4626 vaults, with Allez Labs managing risk. Community input will be gathered via forums, and the plan will be reviewed by Polygon's Protocol Governance Council.

Focus: WHAT DOES GOOGLE'S QUANTUM COMPUTING CHIP MEAN FOR BITCOIN?

Google’s new quantum computing chip could mean bitcoin (BTC) is finished.

That was the sentiment for some on Monday as the internet giant unveiled Willow, a quantum supercomputer that can perform certain computational tasks in just five minutes that would take classical supercomputers an astronomical amount of time—specifically, 10 septillion years (or one followed by 24 zeroes; a trillion trillion).

10,000,000,000,000,000,000,000,000. Such an amount of time is greater than the existence of the entire universe at 13.8 billion years.

In superficial theory, such a powerful computer could mean no passwords are safe, encrypted messages are intercepted, nuclear weapons codes are found out, and almost anything can be unlocked by brute-forcing combinations of numbers and letters.

But it isn’t all doom and gloom yet.

While quantum computing does indeed pose significant threats to current security systems, it's not a master key to the universe, at least not right now. And there is no looming threat to Bitcoin, either.

Quantum computing leverages the principles of quantum mechanics, using quantum bits or qubits instead of traditional bits. Unlike bits which represent either a 0 or 1, qubits can represent both 0 and 1 simultaneously due to quantum phenomena like superposition and entanglement. This allows quantum computers to perform multiple calculations at once, potentially solving problems that are currently intractable for classical computers. Willow uses 105 qubits and demonstrates an exponential error reduction as the number of qubits increases. This is a critical step towards building a practical, large-scale quantum computer, said Google CEO Sundar Pichai.

Bitcoin uses algorithms like SHA-256 for mining and ECDSA for signatures, which might be vulnerable to quantum decryption. And the short answer is that quantum computers, even advanced ones like Google's Willow, do not possess the scale or error correction capabilities needed to immediately decrypt widely used encryption methods like RSA, ECC (used in Bitcoin transactions), or AES (used in securing data).

If quantum computers like Willow reach a scale where they can easily factor in large numbers, they could potentially break these encryption schemes, compromising wallet security and transaction integrity. That would require quantum computers with millions or even billions of “qubits” with extremely low error rates, far beyond the current technology.

“Google claims to have demonstrated 'below threshold' error correcting capabilities with their latest quantum chip,” said Chris Osborn, founder at Solana ecosystem project Dialect, in a post on X (formerly Twitter). "'Below threshold' is industry jargon for turning physical qubits, which are noisy, s*itty quantum bits that are basically useless, into logical qubits, which are multi-qubit abstractions that correct for errors & let you actually perform real computation.” he added.

It takes roughly 5,000 logical qubits "to run Shor's algorithm to break encryption. In other words, millions of physical qubits are needed to break encryption. Google's chip today: 105 physical qubits,” Osborn noted.

Until then, cryptocurrencies (and other sectors) have time to develop quantum-resistant algorithms.

Disclaimer: The information disclosed here does not constitute an investment advice ; it is for informational purposes only and does not constitute investment advice. You should do your own research while investing in crypto and only invest money you are ready to lose.