Weekly Update #8
Ethereum futures ETF goes live as DeFi TVL on Ethereum reaches lowest level since January 2021
Bitcoin posts first positive-returning September in 6 years
Percentage of Bitcoin supply held by long term holder officially reaches all time highs
DeFi TVL on Ethereum reaches lowest level since January 2021
Coinbase launches retail perpetual swap exchange overseas
VanEck launches Ethereum futures ETF
NFT project Pudgy Penguins launches retail collection in Walmart
Hong Kong to tokenize stocks
Three Arrows Capital Co-Founder Su Zhu arrested
Chase UK to block crypto payments starting October 16th
Bitcoin posts first positive-returning September in 6 years
With October now underway, Bitcoin has posted its first positively returning September in 6 years at 3.91% month over month. The table below from Coinglass shows Bitcoin’s returns by month. With the worst month on average now behind us, looking ahead to the final 3 months of the year, seasonality is clearly on the side of bulls.
Coinbase launches retail perpetual swap exchange overseas
After recently filing for an institutional lending platform, Coinbase has continued to make strides throughout the crypto bear market, announcing last Thursday that their Coinbase International Exchange has been granted approval from the Bermuda Monetary Authority to enable perpetual futures for non-US retail customers. This is an interesting development for the firm to diversify its global presence while coming under immense regulatory certainty in the United Sates, including a lawsuit from the SEC. Given perpetual futures are the most liquid tradeable product in the crypto market, this is also an interesting development to watch from a market structure perspective, as Coinbase is arguably one of the few entities that can give Binance, who generates the largest perpetual swap volume globally by far, any real competition. While having multiple major exchanges may fragment liquidity, ultimately more competition in any market place is good for innovation, especially in an industry still as early as crypto.
VanEck preparing to launch Ethereum futures ETF, Grayscale files to convert ETHE into an Ethereum spot ETF
As of the US stock market open on Monday 10/2, VanEck’s Ethereum futures ETF has officially gone live for trading. The vehicle is available for investors to trade on the CBOE under ticker $EFUT (Ethereuem-Futures). While this will offer exposure to Ethereum through the futures market, there is still a gaping hole in the marketplace for both Bitcoin and Ethereum spot ETFs. In its first trading day $ETF did just ~$2 million in trading volume. In addition, while everyone has primarily focused on developments around Bitcoin spot ETFs, on Monday 10/2 Grayscale has filed a 19b-4 to convert their $5 billion Ethereum trust ($ETHE) into an Ethereum spot ETF.
NFT project Pudgy Penguins launch retail collection in Walmart
This week also presented a pretty big development in the world of non-fungible tokens. While NFTs have widely been declared “dead” by mainstream media with floor prices for numerous collections down 80-90% from their 2021 highs, Luca Netz and the Pudgy Penguins team have continued to build out the IP of the collection. On September 26th it was revealed that Pudgy Penguins would be launching a toy collection in 2,000 Walmart stores, which is the world’s largest retailer. The toys have launched with 16 different variations, ranging between $2.99-$11.97. According to Brittany Smith, vice president of merchandising/toys at Walmart U.S., “Pudgy Penguins is bridging the gap between our physical and digital worlds of play for kids in a really engaging way”. This is an exciting step forward for the NFT industry, which has been struggling with the traditional royalty model throughout the bear market.
Hong Kong to tokenize stocks on-chain
Another headline that largely went under-reported from the past week came out of Hong Kong, stating that the region is actively seeking to provide guidance for the tokenization of stocks. According to a speech given by Christina Choi, executive director of investment products of Hong Kong’s Securities and Futures Commission: “Our current thinking is that in principle, primary dealing of tokenized SFC-authorized products would be more appropriate to be allowed first at this stage in view of the nascent state of development of the [virtual asset services platforms] regime in Hong Kong”. This a development worth continuing to watch, as paired with the rise in popularity of RWAs (real world assets on-chain) paints a picture of a potentially increasingly tokenized financial world.
Three Arrows Capital Co-Founder Su Zhu arrested
On September 29th it was revealed that failed hedge fund Co-Founder Su Zhu of Three Arrows Capital was arrested in Singapore. After reaching AUM upward of $10 billion during the peak crypto mania of 2021, Three Arrows Capital came crashing down in 2022 amidst a market wide decline, systemic risk throughout the crypto credit markets, and misleading of crypto lending firms that Three Arrows partook in. On Friday it was announced by liquidators handling the bankruptcy estate 3AC that Zhu was apprehended at Changi Airport in Singapore while trying to travel out of the region. Both Su Zhu and 3AC co-founder Kyle Davies have been sentenced to four months in prison, as Kyle Davies whereabouts remain unknown. The Singaporen Courts ruled against Su Zhu after failing to comply with court orders for him to cooperate with the investigation into creditors’ claims.
Chase UK to block crypto payments starting October 16th
Last week one negative piece of news came out of Europe with Chase UK announcing that the firm would be blocking crypto payments, particularly crypto purchases made with debit cards or wire transfers, effective on October 16th. The firm blasted crypto in a statement about the decision, stating: “fraudsters are increasingly using crypto assets to steal large sums of money from people”. Coinbase’s CEO Brian Armstrong pushed back on the decision on CNBC’s Squawk Box shortly after, stating “I think the government should decide what is allowed and what’s not”. This move from Chase UK signals a continued uphill battle for crypto as an asset class, with its public perception being largely damaged throughout 2022 amidst industry-wide credit contagion that revealed fraud and malpractice amongst some of its largest players.
DeFi TVL Reaches its lowest level since January 2021
Total Value Locked in DeFi, which measures the total amount of assets locked up or staked in DeFi protocols on Ethereum has reached its lowest level in USD terms since January 2021. Down 80% from $109 billion to $21 billion, this marks a continued decline in activity in DeFi and liquidity on-chain. Note that some prefer to look at crypto denominated TVL as opposed to USD (which largely reflects the prices of crypto assets), but regardless this still reflects the market wide decline for DeFi and crypto broadly.
Percentage of Bitcoin Supply Held By Long Term Holders Officially Reaches All Time Highs
After months of waiting, the percentage of Bitcoin’s supply held by long term holders officially reached new all time highs over the last week at 76.09%. Defined based on the statistical likelihood of coins being spent, this means that over 3 out of every 4 Bitcoin in circulation is currently held by on-chain entities have a low likelihood to sell any time soon. This reflects a strong belief from Bitcoin’s core holder base despite the industry-wide blowup in 2022 and macro headwinds. With this being said, it is also worth noting that the less Bitcoin trading on exchanges means that price movements can be exacerbated in both directions, given price is set on the margin.
