Token Chronicle - Week 2 September 2024

Top cryptos

Meme of the week

Quick bites:

• Travala partners with Skyscanner to integrate over 2.2 million hotels in 230 countries into its travel platform. Users can now book accommodation using more than 100 cryptocurrencies, including BTC and SOL.

• FriendTech developers revoked ownership of its smart contracts, pausing the platform and suspending all future development. Since this announcement, the FRIEND token has dropped by 23.9%.

• TEPCO, Japan's largest electricity company, is using its surplus energy to mine Bitcoin.

• Coinbase drops to the 500th spot in the U.S. mobile app rankings.

• More than 1,000 institutions hold BTC through spot ETFs. Eric Balchunas remarked that this is exceptional, as a typical ETF is usually held by only a few institutions.

• Fractal Bitcoin, backed by Unisat and Block Space Force, launched its mainnet, providing a scalability solution for Bitcoin using the Core codebase. It offers block confirmations in under 30 seconds, with a 20x increased capacity per layer. The new FB token is introduced with a supply of 210M.

• Ether.fi launches Ether.fi Cash, a blockchain-based credit card allowing users to spend fiat while using cryptocurrencies as collateral. In partnership with Scroll, the card promises improved transaction efficiency and crypto rewards.

• Japanese company Metaplanet takes another big step by purchasing $2 million in Bitcoin, bringing its total holdings to 398.8 $BTC. With $26 million in Bitcoin reserves, Metaplanet adopts a treasury strategy similar to MicroStrategy.

• U.S. inflation drops to 2.5%, marking the lowest annual inflation rate since March 2021. The first interest rate cut since 2020 could happen next week.

• eToro reached an agreement with the SEC and will cease trading activities for almost all cryptocurrencies.

• Grayscale launches two new products on SUI and XRP.

• MicroStrategy makes new massive investments.

Market update: This week, we saw a good recovery following BTC's drop to $53K, with a return to $60K before falling today to $58K. The U.S. Consumer Price Index (CPI) increased by 2.5% in August, marking the smallest annual rise since February 2021. Bitcoin briefly dipped before rebounding above $58,000, partly due to expectations of a rate cut by the Federal Reserve. This rate cut could potentially boost the market. This week, there are three potential rate cuts: Wednesday in the U.S., Thursday in the UK, and Friday in Japan (with the latter two possibly influenced by the U.S. decision). September is traditionally not a strong month for markets, but we will see if the U.S. rate cut can act as a catalyst and kickstart growth.

Main points this week:

Investments and Partnerships:

1. Tether (USDT) has invested over $100 million in the agricultural sector: After investing in various sectors such as green energy, artificial intelligence (AI), gold, and cryptocurrency mining, Tether revealed it has become one of the main shareholders of a large agricultural group. A financial report indicated that Tether targeted Adecoagro, an agricultural company from South America.

2. PayPal and Venmo now support Ethereum Name Service (ENS), allowing U.S. users to send cryptocurrencies using easy-to-remember names like alice.eth. This integration simplifies transactions and reduces errors by linking ENS names to wallet addresses.

3. TRON, Tether, and TRM Labs join forces to launch the T3 financial crime unit, freezing over $12 million in stolen $USDT. This proactive initiative aims to combat illicit activities on the TRON blockchain and protect the crypto ecosystem.

4. Sony Bank partners with Soneium to launch a yen-backed stablecoin! This initiative aims to reduce transaction costs and improve financial efficiency, potentially transforming Japan's digital financial landscape. Comprehensive trials will ensure full regulatory compliance.

5. DRiP, a creator platform based on Solana, raised $8 million in seed funding from NFX, Coinbase Ventures, and Progression (founded by former TikTok executives). DRiP aims to compete with YouTube and Instagram by establishing direct connections between creators and fans while offering better remuneration.

6. BBVA Switzerland added Circle’s USDC stablecoin to its catalog on Monday. This complements the bank’s existing offerings of BTC and ETH since 2021. Nearly a year ago, BBVA also partnered with Metaco to delegate asset custody.

7. With the purchase of 7 production sites in Tennessee, Bitcoin (BTC) mining giant CleanSpark is set to increase its computing power by 22%. About three months ago, CleanSpark marked a significant development milestone with the acquisition of GRIID, one of its competitors. This week, the company takes another step forward with the acquisition of 7 production sites in Tennessee, for a total investment of $27.5 million.

Technology:

1. Polygon Labs unveiled a new chip optimized for zero-knowledge cryptography, developed with Fabric for its AggLayer solution. This follows Fabric’s $33 million Series A funding round, with $5 million invested by Polygon into VPU-based servers to enhance ZK proof generation.

2. Since the launch of its testnet, Sonic, the blockchain set to succeed Fantom (FTM), has shown promising performance. In just a few days, Sonic demonstrated scalability, with early results indicating that it takes less than half a second to create a new block, which is finalized in just over 0.7 seconds.

3. Monero: A leak from Chainalysis suggests that the blockchain may be traceable. Monero, often regarded as the privacy benchmark in the crypto world, might be more traceable than previously thought. A leaked video from Chainalysis reveals that the company has been tracking XMR transactions since 2021 using methods that exploit malicious nodes. Monero, known for its privacy, has been a replacement for BTC on many dark markets and has been removed from most exchanges. The attack via malicious nodes isn’t the only threat to Monero’s privacy. Its ring signatures mechanism, which conceals transaction origins by mixing the true input with random ones, also has flaws. Poor selection of random inputs (mixins) can expose sensitive information, and temporal or statistical attacks can reduce transaction anonymity.

4. After being recognized as a highly scalable blockchain, Solana may soon welcome Layer 2s into its ecosystem. However, this term is not widely accepted within the Solana community, which has traditionally mocked Ethereum for its reliance on Layer 2s. The fragmentation of liquidity on Ethereum and the 99% reduction in fees since the Dencun upgrade in March, which introduced proto-danksharding, highlights these challenges.

5. Lightspark offers an instant payment solution for businesses using the Lightning Network. By leveraging a standard that unifies wallet addresses and bank accounts, and utilizing the Lightning Network, Lightspark introduces its new instant payment service for US businesses. Lightspark Extend is built on the Lightning Network, a decentralized layer built on top of the Bitcoin (BTC) network that enables instant peer-to-peer payments with almost no fees. Lightspark offers very low fees, around 0.15% per transaction. For Lightspark, the launch of Extend is "a step closer to its goal of making instant Bitcoin payments more accessible to both businesses and individuals." This solution integrates with wallets, exchanges, and bank accounts using the Universal Money Addresses (UMA) standard imagined by Lightspark.

Regulation:

1. €13 billion in reparations: Apple loses its battle in the Irish antitrust lawsuit. The European Commission confirmed the amount that Apple must pay in the case initiated 7 years ago in Ireland for anti-competitive practices. The head of the competition authority, Margrethe Vestager, launched this high-profile case in 2016, highlighting that Ireland gave illegal benefits to Apple to attract the tech giant.

2. In the UK, the Financial Conduct Authority (FCA) prosecuted a man for illegally operating cryptocurrency ATMs. The FCA emphasizes the requirement for registration to offer such services, citing regulations in place since 2017.

3. Gary Gensler targeted by a Congressional investigation — The SEC may have filtered its hires based on candidates' political affiliations. On Monday, several House Committee leaders informed Gary Gensler that the Securities and Exchange Commission (SEC) and he are under investigation regarding their hiring policies. If proven true, this would violate the 1978 Civil Service Reform Act. The SEC must provide a series of documents and communications related to recruitments since April 17, 2021, by September 24.

4. The UK unveiled a new bill that would further regulate the crypto ecosystem. If adopted, Bitcoin (BTC) and cryptocurrencies, in general, would benefit from better legal protection due to important clarifications in the current law. If passed, the vast majority of tokens, including Bitcoin (BTC) and Ether (ETH), would be classified as "personal property." This bill, focused on digital asset ownership, would also apply to non-fungible tokens (NFTs), clarifying their legal status.

Let’s talk about: Metaplex, infrastructure protocol on Solana:

In recent months, several major crypto funds, including Pantera Capital, ParaFi Capital, and others, have acquired a significant number of Metaplex (MPLX) tokens from Wave Digital Assets. These tokens originally belonged to the FTX estate, which had held a substantial 72.6 million MPLX tokens. According to sources, the FTX estate has sold 62.6 million of these tokens privately over the past five months, leaving only 7.5 million tokens to be sold, all of which will be unlocked by September 19.

Metaplex is a protocol built on the Solana blockchain, facilitating the creation of digital assets, including fungible and non-fungible tokens (NFTs). Since its launch in 2021, Metaplex has reportedly supported the minting of over 550 million assets across 55 million unique wallets. The platform's standards have been adopted by leading projects such as Helium, Tiplink, and Driphaus, among others, covering various use cases like DePINs, payments, messaging, and the creator economy.

James Ho, co-founder and managing partner at Modular Capital, shared that Metaplex generated 70,000 SOL worth of fees in 2024, which is equivalent to an annualized revenue of $13-14 million. This, along with its suite of infrastructure for creators and token issuers, positions Metaplex for a promising future. Modular Capital bought around 700,000 MPLX tokens at $0.21 per token in April, which was at a 25-30% discount. Currently, MPLX is valued at $0.25, giving the protocol a fully diluted valuation of $245 million.

Ryan Watkins, co-founder of Syncracy Capital, emphasized the importance of Metaplex as "critical infrastructure for the Solana digital asset economy," noting that they purchased $1.4 million worth of MPLX at $0.20, a 40% discount at the time. Other funds, including Pantera Capital, ParaFi Capital, and Theia Blockchain, have also made similar purchases, with Pantera and ParaFi co-leading the MPLX acquisition.

Pantera’s portfolio manager, Cosmo Jiang, highlighted that Metaplex aligns with Pantera’s long-term investment strategy by focusing on protocols with strong product-market fit and value accrual potential. While Stephen Hess, director at the Metaplex Foundation, did not provide specific details, he emphasized that the new strategic token holders would contribute significantly to the protocol’s growth.

This sale of MPLX tokens from the FTX estate follows a trend, with VC firms also purchasing discounted Solana tokens earlier this year. The FTX estate has sold the majority of its assets, though $376 million in remaining assets still exist, including illiquid or defunct tokens such as its FTT holdings, valued at around $325 million at current prices.

Understanding interest rates: As three rate cutes might be announced this week (US, UK and Japan), let’s review the basics here:

Interest rates, a key aspect of traditional finance, are the cost of borrowing money or the reward for lending it. Central banks, like the Federal Reserve, set these rates, influencing everything from individual loans to corporate borrowing. Higher interest rates make loans more expensive, which can curb spending and slow economic growth, while lower rates encourage borrowing and investment. This dynamic plays a significant role in both traditional and crypto markets.

In crypto, interest rates can generate market activity in several ways. As crypto lending platforms grow, they introduce the familiar concept of interest to a broader audience. This could attract traditional investors who might find comfort in applying familiar financial principles to digital assets. In addition, crypto holders could be incentivized to lend their assets, earning interest and thus contributing to the liquidity and flow of cryptocurrencies.

The impact of high versus low interest rates can also extend to crypto markets. Just like in traditional finance, high interest rates may limit borrowing activity in crypto, while low rates could encourage more loans and investments, driving up demand. This dynamic could make the crypto ecosystem more integrated with global financial markets, as interest rates bridge the gap between digital assets and more familiar financial structures.

Crypto lending platforms offer a relatively new avenue for earning interest, and the concept of borrowing and lending in the digital space continues to evolve. As interest rates become more significant in crypto, they could pave the way for greater market engagement and liquidity, making the sector more accessible and appealing to a wider range of investors.

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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.