🔮 ETH Updates, What is AI, NFTs Try To Dig Themselves Out, SEC Subpoena Paypal

Token Specific News

Global Crypto Adoption: Grassroots Enthusiasm in Developing Countries and Institutional Growth in High-Income Regions

The "2023 Geography of Cryptocurrency Report" by Chainalysis reveals a dual adoption pattern in the crypto industry. Lower middle-income countries are driving grassroots crypto adoption, particularly in regions with growing economies. In high-income countries, institutional adoption is on the rise, with North America leading in crypto usage. However, there has been a noticeable drop in DeFi activity despite the region's lead in DeFi transaction volume. Central, Northern, and Western Europe make up the world's second-largest crypto economy, with the UK as a major hub. Eastern Europe has experienced declines in large institutional volume and DeFi activity, while smaller institutions and retail usage remain stable. In Eastern Asia, China's ban on crypto activities has led to usage drops, but Hong Kong may benefit from a softening of China's stance. The Middle East and Africa showcase innovation in regulatory frameworks, with the UAE standing out, and Saudi Arabia leading in year-on-year crypto transaction growth. Sub-Saharan Africa boasts the world's highest Bitcoin transaction volume, while some South American countries, like Argentina and Venezuela, still use crypto as a hedge against economic challenges, including currency devaluation and hyperinflation. Stablecoins, the most widely used crypto asset, have seen a decline globally.

Source: Chainalysis

Searching For Stability on Ethereum

Stablecoin on-chain volumes on Ethereum reached $390.67 billion, the highest since March, with a shift in March after USDC depegged. While on-chain stablecoin volume consistently exceeded $400 billion monthly from February 2021 to March of this year, no month surpassed the $400 billion threshold since April. The depegging of USDC raised concerns in the stablecoin space, and its supply has been shrinking since, dropping from over 41 billion USDC on March 9th to 22.5 billion currently. Despite the decrease, USDC remains the second-largest stablecoin by market capitalization. The rise in on-chain volumes in October was mainly driven by DAI, which experienced its highest on-chain volume month since November 2022 at $112 billion. However, this growth is not entirely organic and is influenced by complex MEV bot transactions. Other stablecoins, like USDT, also saw a modest increase in volume, suggesting a general rise in stablecoin volumes last month.

Source: The Block

ETH Mainnet vs L2

Layer 2 (L2) activity on the Ethereum network has decreased by 32% since reaching a peak of 64.2 transactions per second (TPS) in mid-September. This trend has led to Ethereum's relative dominance increasing to a two-month high. While L2s like Base and ZkSync Era experienced a surge in transaction volumes initially, they have seen a drop of 50% and 85%, respectively, from their record highs. However, L2s have still contributed to a roughly 400% increase in Ethereum's overall throughput without a significant spike in fees. This reduction in L2 activity indicates Ethereum's resurgence in dominance compared to its Layer 2 ecosystem, with daily activity on L2s declining by one-third over the last six weeks.

Kraken Follows Coinbase’s Lead with Plans to Launch Layer 2 Network

Kraken is reportedly exploring the possibility of collaborating with Polygon, Matter Labs, or Nil Foundation to develop its own Layer 2 blockchain, following the footsteps of rival Coinbase, which launched Base, its Layer 2 solution, earlier this year. The move aims to tap into the growing market for Layer 2 solutions and diversify revenue streams. While Kraken has not provided detailed comments on the matter, a spokesperson mentioned the company's continuous efforts to identify and address industry challenges and opportunities. Additionally, Kraken has advertised a job position for a "Senior Cryptography Engineer" involved in designing and implementing Layer-2 solutions. See similar: Binance has released a self-custody Web3 wallet that can be used to interact with the DeFi ecosystem

DeFi Market Update

Bitcoin's dominance in the cryptocurrency market recently reached 51.35%, a level higher than the 38% recorded at the beginning of 2023. This trend contrasts with the declining dominance of decentralized finance (DeFi) tokens, including stETH, LDO, LINK, UNI, and AAVE, which accounted for only 3.77% of the total crypto market cap on November 2nd, the lowest since June 2022. Despite a slight recovery the following day, this decrease reflects an overall decline in DeFi's market share, which peaked at 4.65% in March. The recent rally has been driven by well-known tokens, with Bitcoin's ETF and mainstream news coverage contributing to its popularity among casual investors.

Source: CoinGecko

NFTs Are Back? Sales Jump 32% in October, Led by Ethereum
Despite recent mass layoffs at the OpenSea marketplace, the NFT (Non-Fungible Token) trading volume increased by $99 million in October compared to the previous month, reaching $405 million, breaking a yearlong downward trend. This growth was attributed to warming conditions in the broader digital assets industry, with Bitcoin's price rising above $35,000. Solana also saw significant growth, with its NFT trading volume increasing by 15% and its price surging by 65% in October. However, while NFT trading value improved, the overall number of NFTs sold in October decreased by 5% compared to September, from 3.58 million to 3.4 million.

Source: Twitter

Regulation

SBF Feels The Law

Jury finds SBF guilty on all charges, sentencing set for March 2024. That's about all I have to say.

BTC + ATM = BTM

Bitcoin ATMs (BTMs) are seeing a decline in installations worldwide, reaching their lowest levels since 2021, reflecting a shift in the path of Bitcoin's mass adoption. Research by the Federal Reserve Bank of Kansas City reveals that BTM users often include lower- or middle-income consumers in various categories: cash users who may be unbanked, older and less tech-savvy users, privacy-oriented individuals, and convenience-oriented users. High fees, with a median fee of 16%, combined with a bearish crypto market, have likely contributed to the waning enthusiasm for BTMs. Regulatory scrutiny is also increasing, with concerns about anti-money laundering compliance and the promotion of high-risk services to financially disadvantaged individuals. Despite these challenges, alternative methods like Bitcoin ETFs and established financial platforms are providing new avenues for mass adoption.

Coinbase Enters the Future

Coinbase has introduced crypto futures trading, including "nano" bitcoin and ether contracts, for eligible U.S. retail customers, offering leverage through Coinbase Financial Markets (CFM). These nano futures contracts are tailored for retail traders, featuring smaller contract sizes. Coinbase emphasizes the high risk and potential for substantial losses in futures trading due to leverage and will settle all futures contracts in U.S. dollars. The move follows the company's previous expansion into institutional bitcoin and ether futures contracts after acquiring FairX, a CFTC-regulated futures platform.

Global Powers Sign International Declaration on AI Safety

Global leaders from 29 countries and the European Union convened at Bletchley Park for the AI Safety Summit to address unregulated AI development. They signed the Bletchley Declaration, advocating for responsible, human-centric, and trustworthy AI development. The declaration highlights the importance of collectively identifying AI safety risks, establishing science-based understanding, formulating risk-based policies adapted to individual countries, and fostering international cooperation to tackle global AI risks. U.S. President Joe Biden issued an executive order emphasizing collaborative AI development between government, the private sector, and academia while promoting innovation, protecting workers, and ensuring consumer privacy. Multiple countries, including Australia, France, Germany, Japan, Nigeria, South Korea, Ukraine, Indonesia, and the United Arab Emirates, endorsed the declaration, underscoring the potential benefits and risks associated with AI, particularly generative AI models used for text, images, music, and videos, which have sparked concerns about misinformation, deepfakes, and hate speech.

Crikey, Digital Assets

Australia's Department of the Treasury has introduced a regulatory proposal aimed at bringing digital asset exchanges under existing financial services laws, requiring them to obtain licenses for operation. The proposed regulations would apply to exchanges handling over AUD 1,500 ($946 USD) from a single client or AUD 5 million ($3.15 million USD) collectively. The proposal is open for public comment until December 1, with implementation expected in 2024. See similar: The Bank of England (BOE) will regulate “systemic stablecoins” that are in wide enough circulation to potentially disturb financial stability, while the Financial Conduct Authority (FCA) will oversee the wider crypto sector according to discussion papers published by the two regulators Monday.

SEC Losing a Close PAL

PayPal received a subpoena from the U.S. SEC, requesting documentation about its USD stablecoin, PayPal USD. The subpoena was issued on November 1, 2023, by the SEC Division of Enforcement and seeks the production of documents. PayPal has stated that it is cooperating with the SEC regarding this request.

Other Domestic Regulation Updates

• Retail Investors Can No Longer Mint USDC Directly Through Circle
• So You Want to Short Ethereum? There's an ETF for That
• Custodia Bank debuts segregated custody accounts service

Other International Regulation Updates

• FCA discussion paper advances UK stablecoin framework
• Hong Kong Monetary Authority Calls for More Study on CBDC
• UK Lawmakers Pass Bill to Seize Illicit Crypto
• BitGo Granted German Crypto Custody License by BaFin
• Brazil Tax Authorities: USDT Accounts for 80% of All Crypto Transactions

Pain & Gain

Pain

• A fake Ledger Live app on Microsoft’s app store stole $588K of crypto from users
• Evangelist Roger Ver, previously known as "Bitcoin Jesus," sued a Matrixport subsidiary for $8 million last year
• OpenSea Slashes NFT Marketplace Staff by 50%
• DeFi protocol Onyx suffered a security exploit, resulting in over $2.1 million being drained

Gain

• Nike’s RTFKT NFT collections have generated nearly $1.4B in trading volume
• Tether extends debt financing to Northern Data capped at $610 million
• Maple Finance Launches on Base Network, Targeting Institutional Activity
• Privacy Infrastructure Developer Nym Technologies Gets $300MM+ in Fund Commits
• Security Firm Blockaid Lands $33MM A Round
• Ripple Marks 3 Million NFTs Minted on XRP Ledger