1. Crypto Long & Short: Commerce, Dollarization or Speculation?
Data from services on Bitcoin and Ethereum shows what’s real in crypto adoption stories.
It’s been a complicated week for bitcoin (BTC, -8.33%)’s adoption story. In particular, Michael Saylor and Elon Musk gave more momentum to the idea that bitcoin can be used in commerce: Musk signaled potential for Tesla’s return to accepting bitcoin payments, and Saylor called the Bitcoin network a rail system for the global dollar.
The best bellwether for bitcoin’s use in commerce is the Lightning Network. Briefly, Lightning is a commerce-friendly service that sits on top of Bitcoin. It allows parties to transact quickly and cheaply, verifying their transactions periodically in batches via the more trust-minimized Bitcoin network.
As we noted in last week’s Chain Links, Lightning has been surging this year. As of this Tuesday, the number of bitcoin available for use on its network had increased by 44% since Dec. 31.
That’s something for bitcoin’s potential use in commerce. But we’d be remiss not to consider it next to Bitcoin’s use on another network that is more associated with finance than with commerce — Ethereum.
Wrapped Bitcoin (WBTC (-8.32%)) is an Ethereum-compliant (ERC-20) token that is pegged to the value of bitcoin. The peg is maintained by the custodian BitGo.
The number of bitcoin wrapped on Ethereum has grown faster (67%) over the same period, and it’s a couple orders of magnitude greater than the number of bitcoin committed to the Lightning Network: As of this Tuesday, the supply of WBTC was 188,961. Lightning Network’s bitcoin capacity was 1,523.
In theory, it’s possible that WBTC could be used on commercial applications that accept ERC-20 tokens. In reality, it’s used for decentralized finance (DeFi).
The story of these two charts is clear, at least for now: bitcoin is much more like gold, an investment, than it is like the dollar, a medium of exchange.
Michael Saylor talked about that distinction, describing a world in which citizens of dollarized, bitcoin-adopting countries like El Salvador have digital wallets holding multiple cryptocurrencies: One currency is a stablecoin pegged to the dollar; the other is bitcoin, an investment.
That’s where Saylor departed the text. “It’ll move on Bitcoin rails,” he said, talking about that dollar stablecoin, leading to further dollarization across the world. The possibility of dollarization via stablecoins is real, but as for what rails it will move on, the market has spoken: It’s not Bitcoin, it’s Ethereum.
2. Amber Group Valued at $1B in $100M Funding Round
The crypto financial services firm’s Series B was led by China Renaissance.
Crypto financial services firm Amber Group has raised $100 million in a Series B round led by Chinese investment firm China Renaissance. The firm scored a pre-money valuation of $1 billion, Amber said Sunday.
With operations in Hong Kong, Taipei, Seoul and Vancouver, Amber Group said it plans to use the funding to expand its global operations.
The firm offers algorithmic trading, high-frequency trading and over-the-counter trading to a deep roster of 500 institutional clients, the firm said in April.
At the time, Amber boasted $1 billion in assets under management, though crypto prices have dipped since then.
“We’ve had record months over the past quarter across both client flow and on-exchange market-making volumes,” Amber Group CEO Michael Wu said in a press release. “Our cumulative trading volumes have doubled from $250 billion since the beginning of the year to over $500 billion.”
Participants in the Series B include Tiger Brokers, Tiger Global Management, Arena Holdings, Tru Arrow Partners, Sky9 Capital, DCM Ventures and Gobi Partners.
Existing investors Pantera Capital, Coinbase Ventures and Blockchain.com also joined in.
Amber Group raised a $28 million Series A in early 2020.
3. Bitcoin Fund Holdings Hit Four-Month Low
“BTC held by ETFs and funds are a significant and measurable sample of network demand,” one observer said.
Bitcoin funds have been bleeding coins in the wake of the Federal Reserve’s unexpected hawkish tilt.
Data tracked by ByteTree Asset Management shows the number of coins held by the U.S. and Canadian closed-ended funds and Canadian and European exchange-traded funds (ETFs) fell to 782,558 BTC (-7.78%) (worth $28.72 billion) on Friday, the lowest since Feb. 25.
Holdings have declined by over 15,000 in the past three days alone.
On Wednesday, the Federal Reserve surprised markets with a hawkish turn, bringing forward the timing of its next interest rate hike to 2023.
Since then, most assets, including bitcoin, have faced selling pressure, although the leading cryptocurrency has remained relatively resilient compared to most fiat currencies and gold.
Fund holdings peaked above 815,000 BTC in mid-May, having risen by over 300,000 BTC since October.
The May peak coincided with the bitcoin’s drop from $58,000 to nearly $30,000.
“BTC held by ETFs and funds are a significant and measurable sample of network demand,” ByteTree CIO Charlie Morris told us. “Heavy institutional buying last October led to a price surge which cooled in the second quarter this year.”
4. Real Estate Mogul to Spend $100M on Decentralized Social Networking Protocol
Project Liberty will utilize blockchain technology to build a new type of internet infrastructure aiming to democratize social media data.
Billionaire real estate mogul Frank McCourt will invest $100 million in a project leveraging blockchain technology, attempting to democratize social media data.
According to a report by Bloomberg on Sunday, McCourt’s Project Liberty will focus on the development of a publicly accessible database of people’s social connections.
The hope is to encourage a more egalitarian approach by having social media companies, such as Facebook, draw from a shared place of social data.
5. UK Bank TSB Set to Ban Crypto Buying Due to E-Wallet Scam Concerns
The company is the latest U.K. bank to act to crack down on cyber-crime.
U.K. bank TSB is set to ban its more than 5 million customers from purchasing cryptocurrencies amid concerns over “excessively high” rates of fraud on trading platforms, according to a report in The Times.
According to the report, TSB is planning to block its 5.4 million customers from sending money to trading platforms such as Binance and Kraken on concerns scammers are being allowed to set up e-wallets and steal people’s money because of inadequate security checks.
Binance is reportedly of particular concern to the bank, as about two-thirds of all frauds involving crypto were tied to the Binance platform, the report said. In one 30 day period, 849 TSB savers reported losing funds from Binance accounts, the Times reported.
The report also said the bank claims that Binance “hardly ever” responds to allegations of customer fraud, claims both Binance and Kraken denied, the Times said.
The company is the latest U.K. bank to act to crack down on cyber-crime.
A spokesman for Binance told the Times it takes its responsibility to protect users from fraud “very seriously.”
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