🔮 Bull in the Neighborhood, Blackrock ETH Trust, CEX Volume, Ordinals Update

Token Specific News

OKX and Polygon Launch Ethereum Layer 2 Network X1

OKX, in collaboration with Polygon Labs, has introduced the testnet for its new zero-knowledge Ethereum Layer 2 network, X1, utilizing OKX's platform token OKB for transaction fees. X1, developed with Polygon's Chain Development Kit (CDK), promises high security, scalability, and reduced transaction costs, aligning with the trend of various Layer 2 solutions like Immutable zkEVM, Palm Network, and Astar zkEVM being built with the Polygon CDK.

Nothing Out of the Ordinal to See Here

In mid-October, Bitcoin experienced a significant drop in the 7-day moving average of transactions, reaching the lowest point since January. This decline was closely tied to Ordinals or Bitcoin NFTs, which give a non-fungible aspect to the otherwise fungible currency by examining satoshis in the order they were minted. A spike in Ordinals inscriptions, exceeding 440,000 on September 15th, correlated with the peak in bitcoin transactions. However, the number of inscriptions fell below 50,000 for 20 consecutive days in October, leading to a decline in Bitcoin transactions. The cause of this sharp decrease is not entirely clear, but inscriptions rebounded in November, marking the second-highest day of Ordinals inscriptions on the 4th. Trading volumes of Ordinals also increased, with the week of November 5th recording $72.14 million in NFT volume on Bitcoin. Binance's listing of ORDI, the first-ever BRC-20 token based on the Ordinals concept, contributed to the resurgence, boosting ORDI's price by more than double in the past week. Other BRC-20 tokens, including $SATS, $SHIB, $RATS, and $BTCS, also saw over $1 million in daily volume at least once last week.

Source: The Block

You Got CEX Appeal, Baby!

Centralized exchanges (CEXs) are experiencing a surge in trading volumes since April, with CEXs dominating spot trades and decentralized exchanges (DEXs) hitting yearly lows at 7.8% of total spot volumes. Binance's market share has notably decreased from 56% to 40% within a year, while institutional inflows into traditional finance (TradFi) instruments are increasing, with Bitcoin leading last week's inflows at $227 million, marking the highest 3-month total since Oct-Dec 2021. The derivatives sector, particularly perpetuals, is capturing a significant ratio of total decentralized finance (DeFi) volumes, approaching November 2021 levels in total open interest. The analysis suggests a divergence in market behavior, with CEXs dominating Bitcoin and Solana trading, while DEXs see increased activity in assets beyond the top 10 by market cap. Despite regulatory challenges, institutional interest remains strong, reflected in substantial inflows into traditional crypto products and a maturing market increasingly aligned with Bitcoin, Solana, and various altcoins outperforming.

Source: Messari

Liquid Staking Tokens Transform Stablecoin Landscape, Offering Yield on Staked ETH

A new stablecoin model is gaining traction with the emergence of Liquid Staking Tokens (LST)-backed stablecoins, allowing tokens like Lido's stETH to be used as collateral. Users can deposit supported collateral to mint stablecoins, and the key distinction from fiat-backed stablecoins lies in the ability for users to earn yield from their staked ETH positions. Protocols like Lybra and Prisma are experiencing substantial increases in Total Value Locked (TVL), offering users the opportunity to "own" stablecoins while still benefiting from yield on their ETH positions.

Source: Messari

Regulation

Self Custody From The Guys Who Just Can't Seem to Get Custody Right

Binance has introduced a self-custody crypto wallet within its app, offering millions of users the ability to explore web3 without the complexities of seed phrases or onboarding processes. The wallet enables users to swap tokens across 30 networks, access decentralized apps, and earn yield on digital assets while maintaining self-custody. Binance aims to bridge the gap between centralized and decentralized systems with this integration. The wallet incorporates multi-party computation technology for enhanced security by dividing private keys into three parts at different locations.

UK Goes Full Sherlock on Crypto: Legislation, NFTs, and Tokenized Gold, But DeFi Gets the 'Not Yet, Watson

The UK is rapidly advancing its crypto regulatory framework, with the government aiming to introduce legislation in early 2024. The regulations will encompass crypto assets and activities, subjecting them to the same rules as traditional financial firms. The phased approach will initially focus on fiat-backed stablecoins, with the Bank of England and the Financial Conduct Authority (FCA) outlining some details for stablecoin regulation. Non-fungible tokens (NFTs) resembling artwork or collectibles may remain unregulated, while rules are planned for trading venues seeking a UK presence. The FCA, after establishing crypto advertising standards in October, has released finalized guidance on cryptoasset financial promotions, resulting in 221 flagged non-compliant firms. The National Crime Agency is also bolstering efforts to investigate crypto-related crimes. Meanwhile, broader access to crypto assets is expanding, with PayPal gaining FCA approval as a crypto business, although services are temporarily paused for compliance, and HSBC launched a platform to tokenize gold. Despite these developments, UK and U.S. banks exhibit caution towards decentralized finance (DeFi), with the UK government deeming it premature for regulatory intervention in this area.

The Genesis of a Deal with 3AC

Bankrupt crypto lender Genesis is set to settle $1 billion in claims by defunct crypto hedge fund Three Arrows Capital (3AC) with a payment of $33 million, according to court documents. Three Arrows Capital collapsed in June 2022, marking the beginning of a challenging period in the crypto market. The claims against Genesis relate to transfers made prior to the lender's own bankruptcy in January. The proposed deal, outlined in a filing from November 9, comes after extensive negotiations and seeks approval from a New York bankruptcy court. The agreement would result in Three Arrows Capital receiving a general unsecured claim of $33 million, fully satisfying claims exceeding $1 billion and leading to a mutual release from liability for both parties.

HSBC Partners with Ripple-owned Metaco

HSBC is partnering with Metaco, a Ripple-owned crypto infrastructure firm, to launch an institutional tokenized securities custody service in 2024. This collaboration aims to address the increasing demand for digital asset custody from asset managers and owners, aligning with HSBC's broader blockchain strategy. The new service complements HSBC's existing digital assets issuance platform, HSBC Orion, and a recently launched tokenized gold system. Ripple's acquisition of Metaco for $250 million in May signifies its entry into the institutional crypto custody market, projected to reach nearly $10 trillion by 2030.

Singapore's Central Bank Partners with JPMorgan and Others for Tokenization Use Cases Testing

Singapore's central bank, in collaboration with major traditional-finance players such as JPMorgan, DBS, and BNY Mellon, is testing tokenization use cases. The tests, conducted under Project Guardian, involve exploring bilateral digital asset trades, foreign currency payments, multicurrency clearing and settlement, fund management, and automated portfolio rebalancing. JPMorgan and Apollo have already executed a "proof of concept" demonstrating how asset managers can tokenize funds on the blockchain as part of the broader initiative, which also involves Japan's Financial Services Agency, the U.K's Financial Conduct Authority, and the Swiss Financial Market Supervisory Authority to advance asset tokenization.

BlackRock files Ethereum Trust Entity

BlackRock, the world's largest asset manager, has filed for registration of an iShares Ethereum Trust in Delaware, hinting at a potential expansion into products based on Ethereum. BlackRock, currently awaiting a decision on its spot bitcoin ETF application from the Securities and Exchange Commission (SEC), previously filed for the iShares Bitcoin Trust in June, impacting the market. While the iShares Ethereum Trust filing is not yet on the SEC's website, the pattern observed with the Bitcoin Trust suggests that an application to the SEC could be imminent. In related developments, major trading firms, including Jane Street, Virtu Financial, and Jump Trading, are reportedly in discussions to provide liquidity for BlackRock's proposed spot bitcoin ETF if it receives regulatory approval.

Source: The Block

Other Domestic Regulation Updates

• PayPal Faces SEC Action Related to PYUSD Stablecoin
• Fnality, a firm building tokenized versions of major currencies collateralized by cash held at central banks, has raised $95 million
• Restarting FTX
• IRS 'Raided' by Crypto Investors as Industry Puts Up Fight Against U.S. Tax Proposal
• The Blockchain Association warned that the definition of a broker in a proposed federal tax rule could destroy the U.S. DeFi industry

Other International Regulation Updates

• Hong Kong SFC Issues Requirements for Tokenized Investments
• Five Key Takeaways From Sam Bankman-Fried’s Trial
• FTX looks set to start liquidating SOL
• Thailand’s Kasikorn Bank Buys Majority Stake in Satang Exchange for $103MM
• European Banking Authority has new rules for stablecoin issuer recovery plans

Pain & Gain

Pain

• The PeckShield team has issued an alert regarding a suspected exploit on Poloniex
• Here We Go Again: Pet Rock JPEGs on Bitcoin, Ethereum Sell for Over $100K
• A GROK token inspired by the name of Elon Musk's new AI chatbot has surged in price, up 13,000% over the past week. It's not an official token

Gain

• Disney partners with Dapper Labs on new NFT platform
• Terraform Labs acquires cross-chain data provider as it pursues post-Kwon plans
• The Rocket Pool team shared details about the upcoming Houston Upgrade
• Check Your Wallets: Your NFTs Might Not Be So Worthless Anymore
• Standard Chartered's venture arm and SBI Holdings are forming an investment company with $100 million backing to target crypto startups