Weekly Attestations #2

Starting with Macro: The major benchmarks gave back a portion of the previous week's gains on a quiet week without any substantial economic releases or drivers of sentiment and a perceived end to short covering by hedge funds and others. Alphabet's shares fell 10% in a week, losing roughly 100 billion in market capitalization after Google's new AI-based chatbot, Bard, underwhelmed in its first public demonstration, raising concerns about Google's dominance in internet search and AI amid competition from rival chatbots like ChatGPT and Perplexity. The yield curve for US Treasuries inverted further, reaching its most extreme level since the early 1980s (a typical tell-tale sign of a recession), as the Fed continues to battle inflation and fears of a recession loom. Similarly, Fed Chair Jerome Powell maintained his stance on disinflation despite mixed market reactions to other Federal Reserve officials' statements and economic data releases.

“We must all suffer from one of two pains: the pain of discipline or the pain of regret. The difference is discipline weighs ounces while regret weighs tons.” - Jim Rohn

What's Going on in Crypto

Crosschains and Hardforks from major players

The BNB Beacon Chain mainnet will be upgraded on Feb. 24, 2023 at 06:00 UTC to fix a critical security issue and enable permissionless validator election mechanism. Aave V3 (after launching V3 on: Polygon, Arbitrum, Optimism, Avalanche, Fantom, and Harmony last March) has finally come to Ethereum, where users have migrated 50% of their capital to take advantage of higher efficiency and yields. Axelar, which offers robust cross-chain capabilities, recently partnered with Circle to enable USDC composability and potentially pave the way for new innovations exploring uses beyond cross-chain bridging such as composable liquidity, cross-chain governance, and cross-chain NFTs.

The Art and Science of NFT’s

Over the past few weeks, the NFT ecosystem has been influenced by two major trends: Bitcoin Ordinals, a new NFT project that stores NFT data in the witness space of Bitcoin blocks, has experienced rapid growth and has sparked debate in the Bitcoin community and the integration of artificial intelligence, which is incorporating ChatGPT and image generation into NFTs, expanding the range of digital content that can be owned and traded. Upstart NFT marketplace Blur continues to beat incumbent OpenSea in NFT activity, fueled by an airdrop scheme and token launch, with a 46% slice of weekly market share compared to OpenSea's 36% and daily trade volume averaging $14.3 million compared to OpenSea's $11.3 million. Blur has a smaller group of dedicated traders processing large amounts, with 33,540 traders over the past week compared to OpenSea's 116,278. That said, inanother sign of renewed optimism in the crypto space, million-dollar NFT sales are back on, with both CryptoPunks and Bored Ape Yacht Club NFTs selling for seven-figure sums.

More on current NFT trends: How Tokenization Is Moving Beyond Art Collectibles To Real-Life Applications

MakerDAO to Challenge Aave in DAI Market

High-ranking members of MakerDAO, one of the industry's largest DeFi protocols and lenders, have announced plans to start a new lending venture, Phoenix Labs, that will compete with Aave's lending efforts in the market for DAI, Maker's widely used stablecoin. Phoenix Labs will launch Spark Protocol, a decentralized lending market, using MakerDAO protocol and DAI. The proposal requests an initial debt ceiling of 200 million DAI from Maker's DAI Direct Deposit Module (D3M) for Spark Protocol. If the proposal is approved, Spark users will be able to mint DAI directly from the D3M. Aave is also developing its own stablecoin, GHO, that may compete with DAI in the future.

Buynance

Binance, the world's largest crypto exchange by trading volume, has acquired a majority stake in South Korean crypto exchange GOPAX. This marks Binance's return to South Korea's market after its affiliate closed in December 2020 due to low usage. No details regarding the terms of the deal have been made public. The investment in GOPAX was made through Binance's Industry Recovery Initiative, which they led and pledged $1 billion to in November, following the FTX collapse.

Andreesen fights the ‘Wormhole’

The community of Uniswap, a leading decentralized cryptocurrency exchange (DEX), voted to deploy to Binance’s BNB blockchain using the Wormhole bridge. The Uniswap DAO (a decentralized autonomous organization) was used to weigh in on protocol changes, and the recent vote ended with 66% in favor and 34% opposed. The main dissenter was Andreesen Horowitz (a16z), Uniswap's largest investor, which had pushed for the use of LayerZero, one of its portfolio companies, as the cross-chain bridge. However, the vote ratified Wormhole as Uniswap’s partner, despite a16z raising concerns about Wormhole's security and the DAO's process for assessing bridge options. The vote has raised questions about a16z's influence within Uniswap's governance system, and the firm deployed all 15 million of its UNI tokens to vote against the current proposal.

Over $200M Injected Into Crypto Companies This Week

This week, 19 Web3 and cryptocurrency startups received a total of $218 million in funding, which is $33 million more than the previous week. Among these startups, gaming and NFT startups received $26 million and DeFi companies received roughly $10 million. Some of the companies that received the most funding include SALT lending, which secured $64.4 million in a Series A, Carbonplace, which secured $45 million from nine banks to connect buyers and sellers to carbon credits, Coincover, which secured $30 million to grow its headcount and improve products, and several others. Some of the other funding news from the week include developer-focused blockchain VRRB, which closed a pre-seed funding round of $1.4 million, self-custody exchange C3, which closed a $6 million seed round, Elementus, a data-driven Web3 company, which received $10 million from ParaFi Capital, Web3 music platform Vault, which secured $4 million in a series A, and Cosmos-based Dymension, which closed a $6.7 million seed round.

Decentralized Exchanges Volume Increases on Whims of Regulation, Scrutiny, and collapse

Decentralized exchanges (DEX) are becoming more popular, with some of the largest players in the DEX sector recording a significant increase in trading volumes. Uniswap, a DEX built on the Ethereum blockchain, leads the way with 50% of total DEX volume, followed by PancakeSwap at 8%. Other DEXes such as Curve and SushiSwap have also seen a rise in trading volumes, with the average increase for all DEXes being 16%. Decentralized exchanges operate on decentralized infrastructure, allowing for direct asset swapping between traders without the need for intermediaries. This popularity has grown due to the recent collapse of centralized exchanges and increasing regulatory scrutiny. Staking and DAO governance participants are turning to DEXes in large numbers as an alternative to centralized routes. However, DEXs must address smart contract vulnerabilities before they can be widely adopted by traditional finance.

Regulatory Updates

For the Fear of Liquid Staking (see below for chart)

Coinbase CEO Brian Armstrong has reported rumors that the U.S. Securities and Exchange Commission (SEC) is considering a ban on retail investors participating in cryptocurrency staking. This income-generating process is central to running proof-of-stake blockchains, such as Ethereum. Armstrong's comments led to a surge in the governance token for the Lido liquid staking platform, LDO. Following the comments, LDO experienced an 11% increase potentially saying: It’s a sign that the market thinks centralized exchanges as staking intermediaries, like Kraken (see SEC Kracks down on Kraken) and Coinbase, should worry, but not the rest of the industry.

Jacob Blish, the head of business development at Lido Finance, said that the enforcement actions by the SEC on decentralized staking platforms may be a net benefit but the outcome is uncertain. He expressed disappointment with the lack of transparency in the decision-making process of the SEC. Blish stated that decentralized staking platforms like Lido act as plumbing in a staking service and offer full control to the users. He mentioned that the biggest risk from the SEC's enforcement action on Kraken is a ban on US citizens participating in staking protocols, which could force contributors to abandon projects. The Lido protocol, which is governed by the LDO token, enables the staking of ether (ETH). This also comes as the protocol  is rolling out several key new upgrades in its latest update with the most notable for various stakers on the platform is the unlocking of Ethereum withdrawals. 

FTX Racks up Legal Fees

FTX has incurred millions of dollars in legal and consulting fees due to its recent bankruptcy, with costs including coordination for its over 100 entities filing for bankruptcy protection, responding to hacks, launching an investigation, and coordinating with liquidators, which has highlighted the expensive wind-down process that could decrease the amount of return for creditors. John Ray, FTX's CEO, has charged the company $694,000 for his work, while Sullivan & Cromwell sent the largest bill of $9.5 million for their work.

SEC Kracks down on Kraken

The SEC has fined the San Francisco-based cryptocurrency exchange Kraken $30 million for violating securities laws by failing to register the offer and sale of their crypto asset staking-as-a-service program, and ordered them to halt staking services for U.S. clients. Kraken has agreed to pay the fine and will still offer staking services for non-U.S. clients through a subsidiary. See similar: Fresh off his release of the Kraken news, Securities and Exchange Commission Chair Gary Gensler sent another warning shot to the crypto industry this morning during an appearance on CNBC: “This really should put everyone on notice in this marketplace whether you call it lend, whether you call it earn, whether you call it yield, whether you offer what’s called an annual percentage yield, APY,” the SEC chief said.

A Seven-member committee to represent unsecured creditors of crypto lender Genesis Global has been formed

A committee has been formed to represent Genesis Global's unsecured creditors as the company navigates bankruptcy. The committee consists of: SOF International, Teddy Andre Amadeo Gorisse (an individual creditor), Digital Finance Group (an investment firm), Richard R. Weston (an individual creditor), Mirana (an investment arm for crypto exchange Bybit), Amelia Alvarez (an individual creditor), and Bitvavo (a crypto exchange). Genesis Global, the lending unit of Digital Currency Group subsidiary Genesis, filed for bankruptcy on January 20th, and the unsecured creditors are owed billions of dollars according to court documents. Some of the largest claims, including one of nearly $500 million, are associated with entities whose identities have been kept confidential. William Harrington, a representative for the U.S. Trustee, appointed the committee according to a February 3rd filing.
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Other Domestic Regulation Updates

• Coinbase Wins Dismissal in Unregistered Securities Case 
• Fed Board Prohibits Member Banks from Holding Cryptoassets as Principal
  

Other International Regulation Updates

• India’s 2023 Budget Retains Restrictive Crypto Tax Rules, Penalties 
• Britain’s Finance Ministry Lays Out Draft Crypto Regulation
• Digital Bank Revolut to Offer Staking to UK, EU Customers
• Privacy Coins To Be Banned in Dubai
• South Korea's Financial Services Commission on Monday published guidelines on which security tokens will qualify for regulation under the country's capital markets rules

Pain & Gain

Misc. Pain

• DeFi Dodges Worst of Crypto Layoffs: Report
• Hermès Beats MetaBirkin NFT Creator in Trademark Lawsuit
• Microsoft Culls Metaverse Team It Created 4 Months Ago
• SEC Commissioner Blasts ‘Paternalistic and Lazy’ SEC
• Crypto Exchanges Made up 84% of Job Cuts Last Month
  

Misc. Gain

• Bitcoin Miners Hut 8, US Bitcoin Corp to Merge in All-Stock Deal
• Dell had joined Hadera’s governing council to “help organizations explore distributed ledger technology.” The governing council already consisted of Google, IBM, LG and more.
• Financial Institutions Are Still Betting on Crypto
• Super Bowl Crypto Ads Lacking, but NFTs Have a Spot
• EigenLayer, an Ethereum restaking protocol, is raising $50 million in Series A funding
• Network Activity on Ethereum Is Up, With Uniswap Leading the Charge 
• After AWS Deal With Ava Labs, Web3 at ‘Inflection Point
• Binance is reportedly leading a consortium of crypto companies to rebuild trust in the industry and provide consultation on regulations, with several unnamed firms from different segments of the crypto industry already onboard
• Crypto protection startup Coincover raises $30 million

Sector Performance Breakdown (7d trend)

Derivatives 13.03%

Data Management 4.49%

Web3 1.3%

Gaming 0.61%

Asset Management 0.19%

Stablecoins -0.32%

Decentralized Exchanges -0.42%

Privacy Coins -0.85%

Interoperability -0.93%

DeFi -2.58%

File Storage -3.31%

Lending -4.2%

Currencies -4.34%

Smart Contract Platforms -4.45%

Exchange Tokens -6.04%

Top Gainers (Market Cap > $100M)

• BinaryX (BNX) +63.445
• Dusk Network (DUSK) +62.87%
• Origintrail (TRAC) +60.85%
• DeFi Kingdoms (JEWEL) +57.05%
• Akash Network (AKT) +53.37%

Top Fundamental Trends

Revenue (7d trend)

• Rook (+179.3%)
• GMX (++170.4%)
• Gearbox (+153.6%)
• Paragons DAO (+145.9%)
• Synthetix (+144.3%)

Earnings (7d trend)

• Abracadabra.money (+2782.3%)
• LooksRare (+376.3%)
• Rarible (+241.7%)
• GMX (+178.1%)
• Radiant Capital (+151.9%)