1. Market Wrap: Bitcoin Ends Week Notching 14% Gain
The largest cryptocurrency by market capitalization also surpassed $1 trillion again this week.
Bitcoin ended the week performing strong, gaining nearly 14% as regulatory fears faded and sentiment turned bullish in anticipation of a bitcoin futures-backed exchange-traded fund (ETF) in the U.S. by the end of the year.
Over the past 24 hours, bitcoin stayed roughly flat, hovering above $54,000 as of Friday afternoon. The largest cryptocurrency by market capitalization also surpassed $1 trillion again this week.
“We have broken the key point of breakdown level from May, which was around $50K,” wrote Blockware Intelligence in a research report. “In the short term, we are seeing some resistance from this last $56K-$58K area, which is not unexpected as there is a fair amount of overhead supply there from earlier this year.”
Bitcoin briefly broke above $56,000 early Friday, notching its highest level since May, before declining to around $54,000. Some analysts attributed the overall surge to Chinese buyers returning after the market settled after the initial news of China’s crypto ban.
“It appears as if the return of Chinese participants provided some fuel to the recent BTC fire, pushing prices temporarily above $56K overnight,” Armando Aguilar, FundStrat Global Advisors vice president of Digital Asset Strategy, told us. “There was a similar risk-on sentiment in Chinese equity markets, with the Shanghai Composite closing up 0.67% in its first day back trading post-holiday.”
CME open interest also neared a record high on Friday, continuing its upward creep since the start of the week.
“We’re seeing a pickup in spot trading volume, but most activity is in the futures market to build exposure without putting up 100% of capital,” Finxflo’s head of Institutional Sales, Jeff Reed, told us.
Bitcoin (BTC): $54,494, +0.9%
Ether (ETH): $3,617, +0.4%
S&P 500: -0.2%
Gold: $1,758, +0.0%
10-year Treasury yield closed at 1.605%
Optimism over a futures-backed bitcoin ETF
Investors are growing antsy for a futures-backed bitcoin ETF to be approved in the U.S. An ETF would provide an easily accessible way for more retail and institutional investors to get involved in cryptocurrency. Some analysts point to the growing difference between BTC futures and spot prices as evidence of this optimism.
“The basis for CME futures has increased both on an absolute level and on a relative comparison with futures that trade on offshore derivative venues,” NYDIG’s global head of research, Greg Cipolaro, wrote in a research note. “Today the basis premium for futures traded on OKEx versus CME has flipped to a discount as CME futures are now trading at a basis premium for the first time.”
2. White House Considering Executive Order on Crypto Oversight
The order would include the Treasury Department, Commerce Department, National Science Foundation and national security agencies.
The U.S. government may expand its efforts to study and regulate the roughly $2 trillion digital asset sector.
The Biden administration is considering an executive order for federal agencies, which would require them to study the crypto industry and provide recommendations on their oversight, Bloomberg reported Friday, citing unnamed sources.
According to the report, the order would include the Treasury Department, Commerce Department, National Science Foundation and national security agencies. In addition to asking agencies to study different aspects of the industry, the order “would clarify the responsibilities” different agencies have around crypto and blockchain.
Requests for comment sent to the White House, Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) were not immediately returned. The Treasury Department declined to comment.
Federal agencies have already been studying or providing regulatory guidance around the digital asset sector for years. The Office of the Comptroller of the Currency (OCC), SEC and CFTC have issued guidance letters, informal statements and public rulemaking efforts to direct how different aspects of the crypto industry should comply with federal law.
The OCC, Federal Deposit Insurance Corporation (FDIC) and Federal Reserve — three federal bank regulators — formed a “sprint team” to coordinate their work around crypto earlier this year.
According to Bloomberg’s report, one of the executive order’s provisions would coordinate this effort.
The Biden administration has ramped up the U.S. government’s work around crypto in recent months. In September, the Treasury Department’s Office of Foreign Assets Control sanctioned a crypto exchange in a first as part of its response to a spate of ransomware attacks.
The President’s Working Group on Financial Markets is also set to consider a report that would recommend Congress enact legislation to create a special purpose charter for stablecoin issuers, treating these entities akin to banks.
The Federal Reserve, the U.S. central bank, is also set to issue reports on stablecoins — digital asset tokens whose values are pegged to another asset, such as U.S. dollars — and central bank digital currencies (CBDCs).
3. Airdrop Ethics: VC Firm Draws Ire Following $2.5M Ribbon Finance Exploit
The DeFi community has once again found itself embroiled in a debate concerning the nature of on-chain ethics.
On Friday afternoon, decentralized finance (DeFi) users discovered a researcher for Divergence Ventures, a crypto venture firm, was receiving hundreds of ETH from wallets selling recently airdropped RBN tokens — a sign of an airdrop exploit to which Divergence later admitted.
The episode presents the largely unregulated, permissionless DeFi community with yet another chance to debate the nature of fair play in an increasingly powerful, $200 billion ecosystem where the only governance is on-chain rules and some modicum of common sense.
“Airdrops” are a token distribution method that allows users to claim tokens if they’ve completed certain actions or fulfill other parameters, such as having deposited into a vault or participated in a project’s governance.
In Friday’s exploit, the Divergence researcher allegedly used dozens of wallets to fulfill bare-minimum parameters to claim $2.5 million in RBN tokens — an exploit that some have labeled a sybil attack on the distribution.
The crypto community responded with ire, noting that Divergence is an investor in Ribbon and speculating that the researcher may have successfully gamed the distribution using insider information. A Ribbon community manager denied these allegations.
Divergence has since published a tweet thread acknowledging the sybil attack in which it said it “crossed a line” and said it would be “better contributors to the community going forward.”
Divergence also sent the ETH back to the project’s treasury, and the Ribbon community is now debating what to do with the funds.
A Ribbon Finance representative declined to comment. Divergence Ventures did not respond to a request for comment by press time.
The airdrop exploit was first flagged by pseudonymous self-described “ex-academic” Gabagool.eth. In an interview, he said the episode is a prime example of a nascent ecosystem still trying to determine the rules of the jungle.
“There are rules we enforce socially, and this is an important example of that playing out,” Gabagool said. “Divergence responded in a few hours and returned 705 ETH because an anon with a ‘Sopranos’ joke as a name tweeted an analysis? That is the opposite of ‘code is law.’ That’s community law, and I don’t think that’s a bad thing. We’re making up the rules as we go along.”
4. VC Fund NFX Launches Crypto Gaming Seed Fund
The venture capital fund recently lined up $450 million to invest in seed-stage companies.
Venture capital firm NFX has launched a crypto gaming initiative to get pre-seed and seed funds into the hands of founders within nine days.
NFX earlier this week announced it had lined up $450 million to invest in seed-stage companies. General Partner (GP) Morgan Beller teased that the fund would be doing “something cool in gaming.”
NFX put the money into action on Thursday with the launch of six FAST (Founder-friendly, Application-driven, Software-enabled and Transparent) initiatives, which span a number of industries. The group is looking for founders who are “bringing gaming and web3/crypto/NFTs together in new ways,” according to the website.
NFX has made $20 million available for this batch of FASTs, and funds are awarded on a first-come, first-served basis.
Why should founders consider applying for FAST funding instead of pursuing a more traditional round of fundraising? FAST offers “speed and simplicity and the chance to get NFX on your team,” James Currier, NFX co-founder and GP, told us.
The new FAST initiative ties together the gaming backgrounds of two NFX founders, Currier’s early embrace of the crypto industry and the addition of a new GP with deep crypto ties.
Currier previously co-founded and headed social gaming company WonderHill, which merged with Kabam in 2010. NFX co-founder and GP Gigi Levy-Weiss formerly served as the chief executive at online gambling company 888 Holdings and invested in mobile game company Playtika.
Beller, co-creator of Facebook’s Libra (now Diem), joined NFX as a GP in September 2020 and has become increasingly interested in the crypto gaming space.
She tweeted yesterday that gaming will likely be the “gateway drug” that brings the next billion people into the decentralized web.
Asked about the most exciting opportunities in crypto gaming, Beller told that “gaming people are finally coming into web3, so just the quality of games that you’re seeing is going to be higher.”
NFX’s shortlist of future FAST sectors includes decentralized finance (DeFi), and Beller says that might not be the end. “Stay tuned for more crypto and web3 FASTs,” she said.
5. Buzz Around Shiba Inu Is Nowhere Close to Retail Frenzy Seen in May
Web data shows SHIB’s latest rally has yet to catch the attention of the general public.
While shiba inu (SHIB) is on a tear, it may be too early to compare the buzz around the dogecoin-inspired cryptocurrency with the peak retail frenzy observed just ahead of the bull market peak early this year.
At press time, Google Trends, a widely used tool to gauge retail interest in trending topics, is returning a relatively low value of 10 for the search term “how to buy shiba inu” over the past 12 months.
While general interest has picked up slightly with SHIB’s 230% weekly gain, it is nowhere close to the peak of 100 reached on Google Trends in the second week of May. A score of 100 represents peak popularity among the general population — the maximum number of searches observed for a term during a given time frame. It indicates that more and more people are scanning the web for information on the trending topic.
Web data shows SHIB’s latest move higher has yet to catch the attention of retail investors, and further gains may be in the offing.
Google Trends provides access to a mostly unfiltered sample of search requests made to Google and scales these searches on a range of 0 to 100, according to the company. The search value represents the search interest relative to the highest point on the chart for the selected region and time.
Retail investors have a reputation of being the last entrants in the bull run. As such, a Google search value of 100 or peak retail interest often coincides with bull market exhaustion. SHIB’s year-to-date high of 0.0000388 coincided with search value for “how to buy Shiba Inu” reaching 100 in the second week of May.
Rally in programmable blockchain Solana’s SOL token peaked above $200 in the second week of September, with the Google search value for the term “how to buy solana” rising to 100. The cryptocurrency pulled back to $114 in the following days before bouncing to $180 this week.
Bitcoin’s 2017 bull run peaked with the Google search value for the term “bitcoin” rising to 100 in December. Similar web search values were observed in January and April this year, signaling a retail frenzy.
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October 9, 2021