August 23, 2023

🔮You've Got a Friend in Me, Shiba Tries to Run with the Big Dogs, So Much Coinbase, The Death of Privacy, Liquidations

SEI, Coinbase Futures,Celsius, FTX and Genesis, KYC in Asia

Token Specific News

The Importance of a Solid Friend(.tech) Base

Launched on August 10, friend.tech swiftly became Base's leading app with 7,000 ETH volume in its debut week. It facilitates trading tokenized shares of crypto influencers, priced based on popularity across Twitter and the app. Shareholders gain private chats with influencers. By August 16, friend.tech processed 300,000 transactions from 23,000 users. While lacking documentation and a roadmap, beta testers will receive rewards points for six months. Similar to BitClout (now DeSo), friend.tech enables creator token trading, though BitClout faced ethical and legal concerns despite $100 million investment and 300,000 users. Users earn 5% of share volume, generating $650,000 revenue in a week from $13.25 million volume, surpassing Ethereum's NFT platforms. Despite a post-peak slowdown, upcoming features might revive friend.tech's adoption (and a perp market?!). Ethical concerns surround influencer tokenization, while Base integration offers broad user access. See more: Base Network Sees Activity Soar Past Arbitrum, Optimism Amid Friend.tech Frenzy See similar: Coinbase Gets a Stake in Stablecoin Operator Circle and USDC Adds 6 New Blockchains

Source: Messari

We're a Memecoin We're a Crypto Ecosystem

This week introduced a new blockchain called Shibarium, associated with the Shiba Inu meme coin project attempting to establish legitimacy. Positioned as a Layer 2 blockchain, it focuses on metaverse and NFT applications with high network speeds and reduced transaction costs. Sounds good. Shibarium aims to consolidate various components of the Shiba Inu ecosystem, such as tokens (LEASH and BONES), NFTs, and ShibaSwap. The ecosystem also plans to offer "Shibdentities," enabling users to maintain data control and privacy. However, the Shibarium Bridge, responsible for token transfers between blockchains, is currently malfunctioning, leaving approximately $2.5 million worth of crypto inaccessible. The Shiba Inu team attributed the crash to a surge in transactions and users, promising updates on the situation.

Your Fate Is To Liquidate

The crypto market witnessed a surge in volatility, ending a period of low volatility during the summer. Several crypto assets experienced price fluctuations and ended the week in the red. While there wasn't a specific catalyst for the selloff, concerns about U.S. inflation and the Chinese economy seemed to contribute. U.S. inflation remains above the Federal Reserve's 2% target, prompting worries about further rate hikes. Additionally, concerns about China's struggling post-pandemic recovery added to the market uncertainty. The heightened volatility led to significant liquidations across the crypto industry, with over $1 billion in futures positions liquidated within 24 hours on centralized exchanges. Long and short positions were wiped out due to price swings, particularly impacting long positions. Ethereum's decentralized lending market also experienced over $62 million worth of liquidations, primarily on Compound, contributing to the highest month of lending liquidations seen this year.

Source: The Block

Ethereum Layer-2 Arbitrum Sees Ongoing ‘Influx’ of New Users After ARB Airdrop

Arbitrum, an Ethereum rollup, has seen significant growth with $5.77 billion in assets bridged to its network. Following a highly anticipated airdrop in March, the layer-2 blockchain has experienced strong activity due to consistently higher transaction counts and an influx of new participants. The number of new wallets transacting on the network for the first time has surged, indicating organic activity and even surpassing Ethereum on certain days in Q2. This growth stands in contrast to Optimism, another layer-2 scaling solution for Ethereum, which didn't see a similar rise in activity following its airdrop. The launch of Arbitrum Orbit, a permissionless framework for deploying layer-3 chains, has further boosted user activity and contributed to the thriving ecosystem built by Arbitrum.

EiGains TVL

EigenLayer, a restaking protocol that allows staked ETH to secure protocols beyond Ethereum, removed its staking cap recently, resulting in a surge in Total Value Locked (TVL) from $78.46 million to $236.77 million, a remarkable 202% increase within hours. The protocol now controls 1.20% (99,923 stETH), 3.96% (19,917 rETH), and 1.76% (21,402 cbETH) of stETH, rETH, and cbETH supplies respectively. Future cap adjustments are determined by EigenLayer's multisignatory governance mechanism. This development marks an expansion of the LSTFi concept beyond yield-focused platforms like Pendle Finance, delving into novel areas such as restaking. The ongoing monitoring of the proportion of around $42.6 billion staked ETH in these LSTFi protocols continues.

Source: Dune

Sei It Ain't So

Layer-1 Sei Network has successfully launched its Mainnet beta phase, accompanied by the introduction of its SEI token. Leading exchanges like Binance, Bybit, Huobi, and Kraken listed the token, driving a trading volume of $1.14 billion on its first day, with Upbit and Binance leading the trading volume. Notably, Upbit's listing influenced the token's price, causing it to trade at a premium compared to other exchanges. Sei Network is a Cosmos SDK-based layer-1 blockchain designed for high-frequency trading applications, aiming to provide faster transaction speeds. The project raised $30 million in funding earlier this year, valuing the blockchain at $800 million. Despite the initial excitement, the SEI token faced a dip in value, leading to discussions about its airdrop and allocation issues. See more: Just-Launched Sei Blockchain's New Token Plunges 24% After Airdrop

Source: Twitter

Regulation

Coinbase Receives NFA Approval for Crypto Futures Trading Amid Ongoing Legal Battles

Despite its ongoing legal battles with the SEC, Coinbase has gained approval from the National Futures Association (NFA) to offer eligible US customers access to crypto futures directly from its platforms. Coinbase filed an application to register as a futures commission merchant (FCM) with the NFA in September 2021. The clearance to operate as an FCM allows Coinbase to offer regulated and leveraged crypto futures to its customers. The approval comes as a significant milestone for Coinbase, allowing it to provide customers with more financial options while adhering to regulatory oversight. This move comes amidst Coinbase's legal battle with the SEC, where the regulator accused Coinbase of operating as an unregistered exchange.

Source: Coinalyze

More Coinbase? Coinbase Buys (some) Circle

Coinbase is acquiring a minority stake in Circle Internet Financial and dissolving their Centre Consortium partnership, which governed the USD Coin (USDC) stablecoin. Circle will take full control of the issuance and governance of USDC. Additionally, USDC will be integrated with six new blockchains, bringing the total number of supported blockchains to 15. The specific blockchains were not disclosed, but Circle had previously mentioned plans to add Polkadot, Near, Optimism, and Cosmos in 2023. The stake size acquired by Coinbase was not disclosed, and no cash was exchanged for the stake. The move comes as the stablecoin landscape experiences changes, including PayPal introducing its own stablecoin, PYUSD. Coinbase sees the future of USDC extending beyond crypto trading into areas like foreign exchange and financial inclusion.

New U.S. Federal Reserve Supervision Program Will Address Crypto Activity

Amid U.S. Congress indecision and SEC enforcement actions, the Federal Reserve is shifting its approach to crypto regulation. In a recent press release, the Fed clarified that insured and uninsured banks are under its supervision and can provide safekeeping services for crypto-assets in a secure manner. They introduced a program (SR 23-7) allowing experts in digital assets to collaborate with Fed supervisors to enable banks to engage in digital asset activities. Custodia Bank's application for Fed regulation faced hurdles and lawsuits, highlighting the complexities. Some senators, including Pat Toomey, have called for transparency in the Fed's master account decisions. Custodia, despite challenges, launched a program under the Fed's new approach, marking an early test of this strategy.

The Death of Crypto Privacy: A Celsius Network Bankruptcy Filing Exposed Users' Crypto Wallets

A bankruptcy filing by Celsius Network last year inadvertently revealed data that linked users to their crypto wallets. The filing contained a list of customers' names and internal transactions on the collapsed lending platform. Collaborating with The Block Research and Nansen, it was found that over 15,000 personal crypto wallets owned by Celsius users were identifiable, holding around $900 million worth of cryptocurrency today, which peaked at $3 billion in value. While the initial judge's decision was that the released list of names was not enough to risk identity theft, combining the data with other leaks could expose users to greater privacy and security risks. The analysis focused on four cryptocurrencies: ether (ETH), CEL token, USDC, and USDT on Ethereum. It's an example of the challenge courts face in handling large numbers of retail clients and extensive blockchain data in crypto bankruptcy cases.

Binance Backlash

The price of Binance Coin (BNB) declined to $204 following a Wall Street Journal report about Binance assisting Russians in moving money abroad. The report highlighted that this could contribute to the cryptocurrency exchange's increasing legal challenges in the US, including the ongoing SEC lawsuit. There have been rumors of potential BTC selling at Binance to support BNB, as it's used as collateral for Binance loans. Subsequently, BNB rebounded sharply to $214.

FTX and Genesis Seal the Deal: A Cool $175 Million Making Its Way to Alameda

FTX and Genesis have reached an agreement where Genesis will pay $175 million to Alameda Research, a move aimed at facilitating the confirmation of the Genesis Debtors' chapter 11 reorganization plan. The settlement intends to eliminate the risks, costs, and uncertainties tied to prolonged litigation between FTX Debtors, Genesis Debtors, and GGCI. Genesis has also agreed to waive its claims against FTX, marking a significant step toward resolution. Originally, FTX had filed a claim of nearly $4 billion against Genesis, while Genesis had its own claims against FTX, including $176 million in customer claims. This agreement paves the way for smoother proceedings and benefits for both parties involved.

Singapore Finalizes Regulatory Framework For Stablecoins

Singapore has announced its finalized regulatory framework for stablecoins after incorporating feedback from a public consultation in October. The rules dictate that stablecoins must be backed by the Singaporean dollar or the currency of a G10 member state and impose stringent reporting obligations on issuers. This development intensifies the competition between Singapore and Hong Kong to establish themselves as key hubs for web3 and blockchain initiatives. Hong Kong had previously introduced its own regulations for stablecoin issuers in June.

Navigating the Evolving Regulatory Terrain: Exchanges Elevate KYC Measures in Asia

Several prominent Asian exchanges are revising their terms of service to enhance their know-your-customer (KYC) protocols ahead of upcoming regulatory shifts in the region. Singapore-based Bitget, along with KuCoin and OKX, is updating its KYC measures to align with regulatory requirements, including the Monetary Authority of Singapore's updated guidelines for financial institutions. These exchanges are urging users to update their KYC verification before next month. KuCoin and OKX, both headquartered in Seychelles, are implementing stronger identity verification processes, including document uploads and facial checks. The moves reflect a broader trend of tightening regulatory environments across Asia."

Source: Coingecko

Other Domestic Regulation Updates

Other International Regulation Updates

Pain & Gain

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Important Legal Notices

This reflects the views MJL Capital LLC (“MJL”), but it should in no way be construed to represent financial or investment advice. Nothing in this correspondence is intended to constitute or form part of, and should not be construed as, an issue for sale or subscription of, or solicitation of any offer or invitation to subscribe for, underwrite, or otherwise acquire or dispose of any security, including any interest in any private investment fund managed by MJL. Any such offer may only be made pursuant to a formal confidential private placement memorandum of any such fund, which may be furnished to potential investors upon request and which will contain important information to be considered in connection with any such investment, including risk factors associated with making any investment in any such fund. Further, nothing in this correspondence is, or is intended to be treated as, investment or tax advice. Each recipient should consult their own legal, tax and other professional advisors in connection with investment decisions.

Domenic Salvo

Domenic Salvo is a Managing Partner at MJL Capital, helping lead Portfolio Research and Investor Relations.

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🔮You've Got a Friend in Me, Shiba Tries to Run with the Big Dogs, So Much Coinbase, The Death of Privacy, Liquidations

Token Specific News

The Importance of a Solid Friend(.tech) Base