Exploring the Crypto Landscape

05.15.2023

Market Overview: 

Crypto Roundup

Crypto Market Overview:

Over the past couple days (from May 15th), crypto markets have been experiencing low volatility as investors eagerly await upcoming US macro data and listen to 14 Federal Reserve speakers scheduled for this week. Traders remain cautious and are closely monitoring market indicators.

Bitcoin (BTC):

According to CryptoNews, the Bitcoin network has been steadily making progress in resolving its congestion issues. After reaching an all-time high of over 500,000 unconfirmed transactions on May 7, there has been notable improvement. Currently, 184 blocks need to be cleared to process the majority of transactions that are still stuck in the network’s mempool.

Bitcoin-Ether Correlation:

The correlation between Bitcoin and Ether has dipped below 80% for the first time in 18 months (according to prices taken from Coinbase). This suggests a potential decoupling of the two major cryptocurrencies, indicating that their price movements may become less correlated in the future.

Ethereum (ETH):

Developers of Ethereum have released patches to address recent beacon chain finality issues. These updates aim to enhance the overall stability and reliability of the Ethereum network.

Crypto Startup Funding:

According to Blockworks Research, in the past week, crypto startups collectively raised approximately $56 million across 13 companies through various funding rounds. This indicates continued investor interest and support for innovative projects in the crypto space.

Liquid Staking Derivatives (LSDs):

Liquid staking derivatives have seen significant growth, with over 440,000 Ethereum added in just two weeks (according to Arkham Intelligence). We believe this reflects this reflects the increasing popularity of staking as a means to earn passive income and participate in blockchain networks.

Bitcoin Cash (BCH):

The price of Bitcoin Cash has rallied ahead of a mainnet upgrade, scheduled to go live at noon UTC on Monday. This upgrade will enable developers to issue tokens on top of the network, among other enhancements.

Other Developments:

• Bitcoin addresses holding 1 BTC or more have reached one million, according to Glassnode data.
• The US Secret Service has announced a Reddit AMA (Ask Me Anything) session on crypto, providing an opportunity for users to engage with the agency and discuss relevant topics.
• The US Department of Justice’s Crypto Enforcement Director has pledged a crackdown on illicit behavior on cryptocurrency exchanges.
• Finance Ministers from the G-7 countries are discussing crypto regulation ahead of the upcoming Japan Summit.
• From the Shiba Inu team, the burn rate of the Shiba Inu token (SHIB) has surged by 60% as the new Twitter CEO has shown interest in this meme coin.

NFT Market News:

NFT Royalties: The Ongoing Debate around Equity and Fairness in NFT Marketplaces

NFT marketplaces have ushered in a new era for creators’ intellectual property protection and royalty earnings. However, the subject of NFT creator royalties has become a point of contention, sparking debates around fair compensation for artists and creators.

Creator royalties are proceeds the original NFT creator earns from subsequent sales after the primary sale. These royalties are primarily enforced via mechanisms in the NFT’s smart contract or by the marketplaces from which the NFTs are sold. Typically, these royalties, ranging from 2-10% of a sale, provide a perpetual income stream for creators. 

Through 2022, royalties were a consistent feature on most platforms. However, the scenario began to change as some platforms like Sudoswap started opposing creators’ royalties and enabling users to bypass the intended royalties of the creator. The debate around royalties then intensified, with marketplaces caught between safeguarding creators’ interests and meeting the demands of market participants for low-fee trades. This tension escalated into a rivalry between marketplaces like Opensea and Blur, with the Blur offering reduced transaction fees and an optional royalty system. This system proved to be preferential by the market as Blur quickly gained market share from Opensea. Faced with this competition, even staunch proponents of royalties like Opensea acquiesced and made royalties optional.

Many creators have expressed concerns about these changes, as royalties have been a significant source of income. As of now, the future of royalties remains uncertain, with marketplaces, creators, and collectors all pulling in different directions. As a result, many NFT projects are migrating to creator-centric platforms that offer more flexible and protective models for royalties. 

Latest News:

WELCOME FRIENDS: Hundreds of institutions and prominent individuals have invested directly in crypto, adopted the value thesis, or started building technology to support digital assets since Wave started tracking these developments in late 2020. Now the rise of the Metaverse, Decentralized Finance (DeFi), Non-Fungible Tokens (NFTs), and Decentralized Autonomous Organizations (DAOs) is driving mainstream adoption of blockchain technologies everywhere we look. We’re continuing to keep track of it every week here:

• EY has started an Ethereum-based platform for enterprises to track their carbon emissions and carbon credit traceability. The EY OpsChain ESG made the announcement at the firm’s Global Blockchain Summit in London. The platform is now available in beta version on the EY Blockchain SaaS platform.
• MetaMask has started rolling out Ether purchases via PayPal for users in the United States.
•  A new blockchain network aimed at financial institutions is in the works from a conglomerate of participants in the finance and tech space, including the likes of Microsoft and Goldman Sachs. According to the announcement on May 9, the Canton Network will be a privacy-enabled interoperable blockchain network aimed at those working with institutional assets. It will allow the synchronization of financial markets that were “previously siloed.” The network will begin testing its capabilities in July, which include extensive privacy controls and the ability to achieve the scale and performance needed by major financial institutions. Participants in the network currently include BNP Paribas, Cboe Global Markets, Digital Asset, Paxos, Microsoft, Goldman Sachs, Deloitte and others. Cathy Clay, executive vice president of Cboe Global Markets — one of the partners in the project — said that, when leveraged, blockchain technology can potentially “unlock” new opportunities in the market.
• Samsung Electronics and the Bank of Korea have joined forces to spearhead research and innovation in offline central bank digital currency (CBDC) technology. The partnership seeks to eliminate internet dependency by ushering in a new era of seamless offline payments. Both entities will conduct joint research aimed at catalyzing the development of a CBDC ecosystem.
• Liechtenstein is planning to add Bitcoin (BTC) as a payment option for government services. Any crypto received as payment will likely be immediately exchanged for Swiss francs, Liechtenstein’s national currency, Prime Minister Daniel Risch explained.

REGULATORY ROUNDUP: We’re living through the era of regulatory recognition of digital assets. The legislation, litigation, and regulation happening today will dictate the entire future of our industry, and we have a historic chance to shape those changes by staying informed and exerting political influence.

• The U.S. Chamber of Commerce, a heavyweight in the business industry representing the interests of more than 3 million organizations, called out the SEC on Thursday in a show of support for Coinbase, slamming the financial watchdog’s regulatory approach toward the digital asset industry. It filed an amicus brief in support of Coinbase, which took the SEC to court last month. The exchange wants a court to force the SEC to respond to its so-called “petition for rulemaking” filed last July, which asks the SEC to propose and adopt rules for digital assets and answer questions related to regulation. The U.S. Chamber of Commerce said, “The SEC has deliberately muddied the waters by claiming sweeping authority over digital assets while deploying a haphazard, enforcement-based approach,” further stating that the “regulatory chaos is by design, not happenstance.”
• A former Coinbase product manager was sentenced to two years in prison for insider trading—the first of its kind in the crypto world. Ishan Wahi, 32, and his associates—including his brother, Nikhil—made over $1.5 million by using inside information to invest in new digital assets just before they were listed by America’s biggest crypto exchange. U.S. Attorney Damian Williams said, “Today’s sentence should send a strong signal to all participants in the cryptocurrency markets that the laws decidedly do apply to them.”
• Binance said it is pulling out of Canada after the country’s regulators turned up the heat on the crypto sector.
• New York State Democrat Latrice Walker introduced Assembly Bill 7024, which seeks to amend the criminal procedure law to authorize the use of dollar-pegged stablecoins as a form of payment for bail bonds.
• U.S. Sen. Ted Cruz (R-Texas), introduced legislation to prohibit the Federal Reserve from developing a direct-to-consumer central bank digital currency which could be used as a financial surveillance tool by the federal government.
• Florida Governor Ron DeSantis signed a bill restricting the use of central bank digital currencies (CBDCs) in the state. The governor urged state lawmakers in March to draft the bill. The new law prohibits the use of a United States federal CBDC “as money within Florida’s Uniform Commercial Code (UCC).” It also bans the use of CBDCs issued by foreign governments and calls on other states to use their commercial codes to institute similar prohibitions.
• United States state legislators in Texas have voted to amend the state’s Bill of Rights and add a provision recognizing the right of individuals to possess, retain and utilize digital currencies. The decision was made on Wednesday, May 10. Bill HJR 146, introduced by State Representative Giovani Capriglione, declares that individuals have the right to use a medium of exchange that is mutually agreed upon, which includes digital currencies, cash, coin, bullion, or scrip, for trading and contracting goods and services, and that this right cannot be violated.
• Marathon Digital, a U.S.-based bitcoin mining firm, disclosed a new subpoena from the U.S. SEC. The firm indicated that the subpoena relates to its mining facility in Hardin, Montana and that the SEC “may be investigating whether or not there may have been any violations of the federal securities law.” Marathon says it is cooperating with the SEC.

Disclaimer: The views and opinions expressed herein are those of the author alone and do not represent Wave Digital Assets LLC or any of its affiliates (collectively, “Wave”). The author and/or Wave may hold investment positions in some of the assets discussed. Nothing in this material or linked information should be interpreted as an offer or recommendation to buy, sell or hold any security or other financial product. This material is not intended to provide accounting, legal or tax advice. Certain information contained herein has been obtained from third-party sources, has not been independently verified and should not be viewed as being endorsed by Wave. Such information is believed to be accurate as of the date of its publication. No representation or warranty is made, express or implied, with respect to the accuracy or completeness, and readers should not place undue reliance on the information contained or linked to herein. Certain statements in this material provide predictions and there is no guarantee that such predictions are currently accurate or will ultimately be realized. Past performance is not indicative of future results.

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