Token Chronicle - Week 3 September 2024

Top cryptos

Meme of the week

Quick bites:

• BHP warns that the rise of AI could worsen the looming copper shortage. Copper is essential for industries aiming for carbon neutrality, but with slowing production, AI-powered data centers are expected to increase copper demand by 1% to 7% by 2050.

• The Fed lowers its benchmark rates by 50 basis points, the first cut in over four years.

• Animoca Brands is considering an IPO, with the final decision on timing depending on market conditions and other factors. Chairman Yat Siu hinted that Hong Kong is a strong candidate for the listing location, given the company’s headquarters there. The audit process is ongoing.

• BitGo will launch the USDS, a dollar-backed stablecoin, next year! Unlike others, it will reward institutions providing liquidity and be backed by Treasury bills, repurchase agreements, and cash. CEO Mike Belshe highlights a more open and fair system.

• Thailand's SEC is encouraging the adoption of investment tokens for financing with new measures aimed at improving liquidity. 🚀 The plan includes easing licenses for mutual and private funds to invest in digital assets, as well as overhauling criteria for brokers, dealers, and advisors.

• Bitcoin surged by over 6% following the 50 basis point rate cut by the U.S. Federal Reserve. The yen's weakness against the U.S. dollar also supported the rally, as a strong dollar favors risky trades like bitcoin. Stable interest rates from the Bank of Japan reinforce this trend.

• U.S. Senator Cynthia Lummis (R-WY) believes Congress will finalize crypto legislation by the end of the year, stressing the urgency of catching up with Europe. Discussions are ongoing with the Senate Agriculture Committee to establish a bipartisan framework.

• Crypto VCs have raised over $2.2 billion in new capital this year, according to PitchBook, with $500 million raised in recent weeks. Notable raises include ParaFi Capital ($120M), Borderless Capital ($100M), Hack VC ($77M), and Robot Ventures ($75M). Dragonfly Capital is aiming for $500M.

Market update: We did see a 50bp rate cut in the U.S. this week, and the Bank of Japan did not implement a new cut; this is a very positive sign for the market and for risk/tech assets in general. We remain cautious, however, and are closely monitoring the state of the U.S. economy with new data expected this week. With this rate cut, BTC tested $64K and remains stable around $62-63K at the moment; we also saw a nice recovery in ALTs, though they remain relatively low compared to March prices (we'll need to wait for the bull run for a breakout). ETH remains quite low compared to BTC, but many experts and ecosystem members (there were plenty of comments to this effect at Token2049 in Singapore) expect a strong rebound soon.

Main points this week:

Litigation/Regulation:

1. FTX: Sam Bankman-Fried (SBF) claims to have been "presumed guilty before even being charged." As SBF appeals his 25-year prison sentence, his lawyer, Alexandra Shapiro, has released a legal brief vigorously defending her client.

2. Coinbase is facing accusations of manipulating Bitcoin’s price, circulating on social media. Brian Armstrong, the company’s CEO, denied these allegations, emphasizing the transparency of Coinbase’s audits. Rumors suggest that Coinbase might be issuing "I owe you" (IOU) tokens.

3. The SEC "regrets" creating confusion around the nature of certain cryptocurrencies. Could this be an admission of mistakes? A note filed in the lawsuit against Binance indicates that the American financial regulator may indeed have some regrets. This acknowledgment comes at a time when SEC Chairman Gary Gensler is facing mounting pressure.

4. After serving a 4-month prison sentence, former Binance CEO Changpeng Zhao is expected to be released soon.

5. Two U.S. Republican representatives find the legal status of airdrops unclear. They are urging SEC Chairman Gary Gensler to provide a clear and concise answer. "By creating a hostile regulatory environment, including statements on airdrops in various situations and increasing warnings and measures against the crypto industry, the SEC is interfering and preventing U.S. citizens from shaping the next iteration of the Internet."

Partnerships/Funding:

1. Circle, the issuer of the USDC stablecoin, has signed a partnership with Sony to leverage its new Layer 2, Soneium. Circle aims to be the primary bridge to the dollar on this layer, utilizing its "Bridged USDC Standard," allowing developers on Layer 2s to use USDC for payments, bridging to the dollar.

2. Just over a year after launching its mainnet, Sui is set to integrate USDC, the second-largest stablecoin by market capitalization. This move highlights Sui’s rapid ecosystem growth and Circle’s commitment to expanding stablecoin availability. Sui becomes the 16th blockchain to host USDC.

International:

1. Donald Trump survived an assassination attempt while playing golf at his West Palm Beach course. The shooter, armed with an AK-47, was apprehended 65 kilometers away from the golf course.

2. Bhutan has emerged as a significant player in the Bitcoin ecosystem, with reserves estimated at $750 million, representing about a quarter of its GDP. These reserves come from mining, unlike the U.S. and formerly Germany, which acquired Bitcoin through seizures in criminal cases.

3. Australia has taken its time to study the use cases, benefits, and drawbacks of central bank digital currencies (CBDCs). Following its analysis, the Reserve Bank of Australia (RBA) has decided to focus on developing a wholesale CBDC, intended for a limited number of entities such as financial institutions. This contrasts with retail CBDCs used for payments or legal tender in everyday transactions, like China’s digital yuan or Russia’s digital ruble.

4. The Norwegian city of Hadsel recently forced the shutdown of a Bitcoin mining farm, leading to an unexpected 20% increase in electricity bills. This reveals the positive impact Bitcoin miners can have on the energy industry by utilizing wasted energy sources, reducing CO2 emissions, and monetizing surplus energy from renewable power plants, supporting long-term viability and sustainability.

5. Louisiana becomes the first U.S. state to accept on-chain Bitcoin payments via the Lightning Network and USDC. This marks a major step forward in the adoption of Bitcoin and cryptocurrencies for public services, offering citizens more freedom and flexibility.

6. U.S. Elections: A pro-crypto group is working closely with Kamala Harris to distance her from Gary Gensler. According to Anthony Scaramucci, founder of Skybridge Capital, several pro-crypto figures have gathered to support Harris's presidential campaign, with their main goal being to steer her crypto stance away from that of SEC Chairman Gary Gensler.

7. In Germany, the Federal Criminal Police Office (BKA) shut down 47 cryptocurrency and fiat exchanges hosted in the country. These platforms shared a common characteristic: they operated without KYC verification, allowing anonymous trading. German authorities believe this facilitated money laundering and cybercrime activities.

Tech:

1. This week, Google Cloud announced the launch of a new Remote Procedure Call (RPC) service for Web3 app developers. An RPC is a crucial part of a blockchain, allowing applications to communicate with the network. These services offer financial and time-saving advantages when launching an app, eliminating the need to host one’s own node.

2. Pyth Network unveils Oracle Integrity Staking (OIS), securing price feeds for a safer DeFi ecosystem. With the rise of DeFi applications and Web3 capital markets, the reliability and security of data have become critical for smart contract developers and investors. Pyth’s OIS initiative aims to enhance the safety and reliability of Pyth’s price feeds while offering economic incentives to network participants.

3. Worldcoin is testing a new facial recognition technology for its World App. This feature strengthens security by ensuring only verified users access the app. With 15 million users, Worldcoin seeks to boost trust despite past privacy concerns.

4. Ethereum’s Pectra upgrade has been split into two! Developers decided to divide this massive hard fork to minimize risks and simplify the process. The first part is still slated for early 2025, ensuring a smoother transition for the network.

Institutional:

1. Amid growing uncertainty over U.S. debt, BlackRock is positioning Bitcoin as a safe-haven asset. According to a recent report by the world’s largest asset manager, Bitcoin offers a diversification solution during a debt crisis and the instabilities that may follow. BlackRock also published a study titled “Bitcoin, a Unique Diversifier,” promoting BTC as a protective asset against debt crises. The report highlights Bitcoin as a distinct asset from traditional financial instruments, with a low long-term correlation to stocks and bonds.

2. Revolut, the British fintech company known for its online banking services, is reportedly close to issuing its own stablecoin.

3. SIX Group, a private company owned by approximately 120 Swiss banks, is planning to launch a cryptocurrency exchange in Europe. SIX operates key financial infrastructures, including the Swiss Stock Exchange (SIX Swiss Exchange) and the Spanish Stock Exchange (BME). The group aims to leverage its reputation and Swiss regulations to create a crypto exchange that would attract large institutional investors.

4. The EUR CoinVertible (EURCV) stablecoin, issued by Société Générale – FORGE, the bank’s digital assets division, will soon be deployed on the Solana blockchain. This integration will enable faster, more efficient, and cheaper transactions. By distributing EURCV on Solana, FORGE aims to enhance the performance of its stablecoin while offering new features.

5. The SEC has approved the Nasdaq’s proposal to trade options on BlackRock’s Bitcoin spot ETF. Options allow traders to buy or sell an asset at a specified price and date. For example, if a trader buys an option to purchase BTC at $63,000 on September 30 and it reaches $65,000 by that time, they would profit by exercising the option. According to Bloomberg ETF analyst Eric Balchunas, the SEC is expected to approve options for other ETFs as well, though further approval is still required from the Office of the Comptroller of the Currency (OCC) and the Commodity Futures Trading Commission (CFTC).

6. DBS Bank is set to introduce OTC crypto options and structured notes for institutional clients in Q4 2024! These products, offering exposure to Bitcoin and Ethereum, will help investors hedge against volatility and expand DBS’s growing digital asset services.

7. BlackRock, Microsoft, and Abu Dhabi’s MGX have joined forces to launch the "Global AI Infrastructure Investment Partnership." This fund aims to boost AI data centers and energy infrastructure, with a target of up to $100 billion in investments.

8. Crypto Finance, a subsidiary of Deutsche Boerse, has partnered with Commerzbank to offer crypto trading services to corporate clients in Germany! This follows a similar agreement with Zürcher Kantonalbank. Commerzbank will handle custody, initially focusing on Bitcoin and Ether.

Let’s talk about: Potential Solana competitors: Aptos and Sui Solana’s New Challengers: Aptos and SUI

As Solana continues to make strides in the blockchain space, it now faces rising competition from two major contenders: Aptos and SUI. These newer blockchains have been developed with more efficient and secure programming languages, positioning themselves as serious rivals to Solana’s dominance. The question now is whether these "Solana killers" can replicate Solana’s explosive rise and establish themselves as the next big players in the crypto ecosystem. With high stakes and significant innovation, the race is on.

The Origins of Aptos and SUI

The story of Aptos and SUI begins with Meta’s (formerly Facebook) ambitious plans to create a global payment network through its Diem blockchain and Novi digital wallet. Launched in 2019, this project aimed to revolutionize global payments but faced significant regulatory hurdles. By January 2022, both Diem and Novi were shut down. However, the research and expertise behind these projects didn’t go to waste.

Former leaders from Diem and Novi took what they learned and channeled it into two new projects: Aptos and SUI. Aptos was built to continue Diem’s legacy, while Mysten Labs, founded by former Novi team members, created something new with the SUI blockchain. Today, both Aptos and SUI are positioning themselves to challenge Solana’s dominance in the space.

Teams Behind Aptos and SUI

SUI

SUI is the creation of Mysten Labs, founded in 2021 by former Novi leads Evan Cheng, Adeniyi Abiodun, Sam Blackshear, George Danezis, and Kostas Chalkias. This team brings deep expertise in software compilers, programming safety, distributed systems, cryptography, and cloud computing, having worked at companies like Apple, Oracle, and Facebook. Notably, co-founder Evan Cheng received the ACM Software System Award for his work on LLVM, a technology widely used by Apple and Google.

Aptos

Aptos Labs, founded in December 2021 and launched in February 2022, was co-founded by Mo Shaikh and Avery Ching, both former leads at Novi. Shaikh previously led strategic partnerships at Novi and ConsenSys, while Ching was a key engineer on Novi and has a background in supercomputing. The Aptos founding team includes PhDs, engineers, and designers, many of whom were also involved in Diem or Novi, giving them a strong foundation in blockchain technology.

Both teams share a common history at Meta and are highly specialized in blockchain, cryptography, and distributed systems, making them uniquely positioned to build something innovative in the space.

Funding and Valuation

Both Aptos and SUI have attracted significant investor interest, raising large amounts of funding that indicate strong confidence in their potential to compete with Solana.

SUI

In December 2021, Mysten Labs raised $36M in a Series A round led by a16z. By September 2022, they had secured an additional $300M in a Series B round, with FTX Ventures leading the investment. In total, SUI has raised over $330M, achieving a valuation of more than $2 billion.

Aptos

Aptos Labs has also raised substantial funds, securing $200M in March 2022, followed by another $150M in July of the same year. Backed by investors like a16z, Multicoin Capital, and Binance Labs, Aptos has raised a total of $400M, reaching a valuation of $2 billion.

The Showdown: Can Aptos and SUI Rival Solana?

While both Aptos and SUI are backed by experienced teams and deep pockets, the real test will be whether they can challenge Solana’s position in the blockchain space. With their focus on security, efficiency, and scalability, Aptos and SUI are well-equipped to give Solana a run for its money. However, the outcome remains to be seen, as these blockchains must now prove they can grow and attract users at the same pace Solana did during its rise.

The competition is fierce, and the stakes are high.

The Intersection of Traditional Banking and Blockchain Technology

As the financial landscape evolves, traditional banks are increasingly recognizing the potential of blockchain and decentralized finance (DeFi) to enhance their services and attract new clients. While some speculate that DeFi models might replace traditional banking, the reality is more nuanced. Current market infrastructures and regulatory safeguards are essential for managing institutional liquidity and protecting customers. Instead of viewing these two worlds as oppositional, a more fruitful approach is to explore how they can mutually reinforce each other.

Expanding Product Offerings

Many banks are realizing that cryptocurrency is more than just an emerging asset class; it represents a strategic opportunity to diversify their product offerings. By introducing crypto-related services, banks can appeal to a new generation of crypto-savvy clients. This includes services like staking-as-a-service, which allows banks to leverage their trusted infrastructure to provide customers with new revenue streams. By partnering with the right technology providers, banks can cater to both institutional and retail investors, enhancing their competitive edge.

Tokenization and Blockchain Settlement

Another promising use case for banks lies in tokenization—the process of creating digital representations of real-world assets. This not only opens up new revenue opportunities but also unlocks markets that have previously been inaccessible. Additionally, banks can enhance their operational efficiency through blockchain-powered settlement networks. These systems can help banks meet the T+1 settlement standard, addressing a significant challenge faced by many financial institutions today.

Building Trust in a Volatile Market

In a crypto market often characterized by instability and a lack of regulatory oversight, banks can leverage their inherent trustworthiness. The collapse of platforms like FTX in 2022 underscored the value of stability, prompting many investors to seek refuge in regulated financial entities. As regulations around cryptocurrency continue to develop, it’s likely that more investors will move their funds to institutions they perceive as safe, even if it comes with higher fees.

The Emergence of CeDeFi

Looking ahead, a hybrid model known as CeDeFi—combining decentralized finance's innovative technologies with the regulatory compliance of traditional finance—may emerge as the standard for future financial systems. This model would allow banks to harness the flexibility and efficiency of DeFi while providing the safeguards necessary for institutional clients. Financial institutions that successfully bridge these two worlds will be well-positioned to capitalize on the exciting opportunities presented by this evolving landscape.

In summary, as banks adapt to the rise of blockchain and DeFi, they have the chance to redefine their roles within the financial ecosystem. By acting swiftly and strategically, banks can ensure they remain relevant and competitive in a rapidly changing world.

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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.