Weekly Update #10
Fidelity releases Bitcoin report as fake ETF news triggers mass liquidations
Major crypto developments for the week:
Fidelity releases Bitcoin report, making the case for Bitcoin as an investment
River releases Bitcoin lightning network report, showing substantial growth from 2021
Caroline Ellison Testifies in SBF/FTX trial
SEC chose to not appeal court’s decision in Grayscale case
Reports of Blackrock ETF approval confirmed false
Binance to stop accepting UK users on October 16th
The rollout of Frax V3 has begun, with sFRAX going live
Arbitrum incentive program closes, worth roughly $40 million for recipients
SocialFi application on Ethereum, Friendtech, adds 2FA to bolster security
SocialFi application on Avalanche Stars Arena exploited for $3 million, but has since secured funding and is set to launch after security audits
Fidelity releases Bitcoin report
While the crypto market was relatively slow on the news/market structure front this, $4.5 trillion asset manager Fidelity released a report titled “Bitcoin First Revisited” walking through their investment case for Bitcoin, particularly relative to other crypto assets. Fidelity is no novice when it comes to digital assets and Bitcoin, with their investment team highlighting the bullish case for Bitcoin as early as 2013. Some of the main points made throughout their recent report include Bitcoin’s superior monetary properties, Bitcoin’s role as an initial entry point for investors to get involved with investing in crypto, and the case for Bitcoin fundamentally solving different issues than other crypto protocols/assets. To read the full report, click here.
River releases Bitcoin lightning report
Another interesting report that came out was from River, a Bitcoin exchange. The report, titled “The lightning network 1,212% in 2 years. Why it’s time to pay attention” highlights some interesting developments on Bitcoin’s layer two scaling solution called the lightning network. One of the most interesting takeaways from the report was that based on River’s findings, they estimate a lower bound of 6.6 million lightning transactions in August of 2021, which only reflects public lightning network capacity; the true number is likely much higher but private capacity is difficult to track. This is a 1,212% increase from August of 2021 based on previous findings from K33 (previously Arcane) Research. (chart shown below)
Another interesting chart from the report was published around the amount of investment that has been poured into lightning network companies, which reached $428 million in 2022, up nearly 10x from the year prior.
The report also includes several other measures of the lightning network’s growth, as well as a full map of the lightning network’s ecosystem. Be sure to check out the full report here.
Caroline Ellison Testifies in SBF/FTX trial
With the trial against disgraced FTX co-founder Sam Bankman-Fried continuing, the long-awaited testimony from Alameda co-CEO Caroline Ellison took place last week. There were several interesting sound-bites from the testimony, including discussion of her role at Alameda, the lack of internal structure of FTX/Alameda, timeline on when alleged use by Alameda of FTX customer funds began, and even details on her relationship with Sam Bankman-Fried. While some of these details may be needed to be taken with a grain of salt given Caroline’s incentive to minimize criminal penalties for her own involvement in the FTX/Alameda activity, it is quite interesting to hear the story of how things unfolded from her perspective. For continued developments on the trial, we encourage Twitter users to check out @innercitypress for real time updates.
SEC chooses not to appeal Grayscale case
In last week’s crypto market update we mentioned that an important deadline to keep an eye on was October 13th, which marked the end of the 45-day window for the SEC to appeal the court’s ruling in favor of Grayscale in their case disputing the SEC’s denial of Grayscale to convert their GBTC closed end trust into a spot Bitcoin ETF. On Friday the 13th it was revealed to Reuters that the SEC would not be appealing the court’s decision. The court is now expected to issue an order detailing how the process will move forward from here, which likely entails instruction to the SEC to revisit Grayscale’s ETF conversion application.
Arbitrum short-term incentive program (STIP) ends, which will award recipients roughly $40 million in ARB tokens
Over the last week numerous 29 crypto protocols in the Arbitrum ecosystem, which is an Ethereum layer two, have applied for the short-term incentive program (STIP); which plans to distribute 50 million ARB tokens worth roughly $40 million to encourage ecosystem development. The voting ended on Thursday, with on-chain derivatives exchange GMX gaining the largest batch of rewards at 12 million ARB, followed by another on-chain exchange, Gains Network, being awarded 7 million ARB.
Claims around Bitcoin spot ETF approval proved to be false, triggering mass liquidations
On the morning of Monday 10/16 the market rallied up over 7% within minutes after a false headline from crypto news outlet Cointelegraph. Shortly after, the headline was disputed by Fox Business journalist Eleanor Terrett, providing a statement from Blackrock confirming that their Bitcoin ETF application is still under review. Shortly after, the false headline was confirmed once again by the SEC. This event triggered over $100 million in liquidations of futures positions in the 45 minutes following, meaning traders were forced to close positions on both the long and short side.
