Weekly Attestations #5

“The surest way to corrupt a youth is to instruct him to hold in higher esteem those who think alike than those who think differently.” – Friedrich Wilhelm Nietzsche

Token Specific News

LDO leads the charge as Liquid staking replaces DeFi lending as second-largest crypto sector

Lido's governance token, LDO, has surged approximately 200% so far this year, reaching $3.30, the highest it has been since April 2022. One of the reasons for the surge in price is the announcement of Lido's V2 upgrade, which allows stETH holders to directly unstake their original ETH from the platform instead of swapping between ETH and stETH via a DEX. The upgrade also includes a feature called "Turbo mode," allowing Lido's ETH stakers to unstake their ETH much more quickly, taking only about two hours. Lido now manages over 30% of all currently staked ETH, worth $8.7 billion at current prices, which is more than the three largest crypto exchanges (Binance, Kraken, and Coinbase) combined. The upgrade comes after the Ethereum network migrated from proof-of-work to proof-of-stake, and there was initially no way to unstake staked ETH. The Shanghai update in March/April will allow for ETH stakers to easily unstake their ETH and let Lido roll out its V2 upgrade. As a decentralized finance platform, government agencies cannot go after Lido in the same way they can a conventional company like Kraken.

No. 1 DEX Makes a Move as NFT Market Heats Up

Uniswap's NFT marketplace has launched a new feature that allows traders to use any token on the Ethereum blockchain to purchase assets on the platform. This means that Uniswap traders can now purchase NFTs with stablecoins like USDC, meme coins like Shiba Inu or any other Ethereum-based token through a simplified interface. The new Universal Router contract by Uniswap finds the most cost-efficient route to complete a swap from any Ethereum-based token into the required token for the NFT sales, before pushing the crypto to OpenSea's Seaport protocol to finalize the transaction. The new tool is expected to simplify the NFT purchasing process, help users lock in sales they want faster, and reduce the tax implications of NFT trading. Uniswap's broader DeFi platform has about 4.8 million users, but its NFT platform has so far failed to bring in legacy users en masse to its new NFT product. While the latest advancement may improve the user experience, it remains unclear whether it will be enough to drive traffic away from its rivals.

See similar: The largest NFT sell-off of all time happened over the weekend. A well-known crypto whale named Jeffrey Huang sold off over 1,000 NFTs for $18.6M, causing fear, uncertainty, and doubt to spread across the NFT industry. The sell-off included top-tier collections such as BAYC and Azuki, causing the prices of 21 of the top 25 NFT collections to drop by approximately 10%. However, there might be a method to Huang's madness as he is one of the biggest users of Blur, an NFT marketplace that rewards users with tokens based on trading volumes. Huang received 1M BLUR tokens worth $1.3M+, leading to speculation that he and others use Blur to wash trade and farm rewards.

Stocks and Crypto Correlation Shows Signs of Weakening

The connection between US stocks and cryptocurrencies, particularly Bitcoin, has weakened in recent weeks, according to data from IntoTheBlock. A 30-day correlation coefficient measured performance compared to Bitcoin between the Nasdaq 100, S&P 500, and Dow Jones Industrial indices, showing a reading of between -0.1 and -0.3. A coefficient of 1 indicates a strong positive correlation, while -1 suggests a strong negative correlation. Correlation between crypto and US equities had remained close until the collapse of FTX in November, with the correlation recovering to a high in late January. Meanwhile, the number of Bitcoin whales, defined as individuals who hold over 1,000 BTC, has declined to its lowest point in three years, according to Glassnode data.

Blockchain IRL <> Asset Tokenization

Blockchain is gaining traction in the financial industry as an increasing number of companies embrace digital assets through tokenization. Tokenization is the process of representing ownership and rights of assets on a blockchain, and it is happening across several blockchain ecosystems. The traditional model for buying, selling, and trading company shares is archaic and has restrictions that limit the trading of assets to specific market hours and slow settlement times. By tokenizing assets, companies can be traded 24/7 on-chain while allowing investors to trade fractions of the tokenized stock, resulting in lower costs and greater transparency. Bob Ras, co-founder of XRP protocol Sologenic, predicts that the value of tokenized assets could grow to be in the trillions of dollars in the coming decades. Several companies have recently launched asset tokenization projects. Goldman Sachs announced its Digital Asset Platform (DAP) in January, using a private (permissioned) blockchain stack called Canton to enable the issuance, registration, settlement, and custody of digital assets. Hamilton Lane, a global investment manager, announced that some products would be tokenized via the Polygon blockchain, while Hong Kong issued its first tokenized green bond worth $100 million under its Green Bond program using Goldman Sachs’ tokenization protocol. Siemens issued its first digital bond on Polygon, and Swarm Markets launched tradable, DeFi-compatible stocks and bonds on Polygon. The tokenization of assets has huge potential in terms of enhancing transparency, auditability, and efficiency, as well as providing access to people who might not be able to tap into traditional markets.

Regulation

Tinted Silver; how the industries favorite bank continues to fail

Several major crypto companies, including Coinbase, Bitstamp, Gemini, Crypto.com, and Circle, are distancing themselves from Silvergate Bank, a crypto-friendly bank that once served as a critical fiat-currency portal between crypto exchanges and their customers. Silvergate is reeling from losses, job cuts, and a decline in crypto business activity, and its fortunes have worsened further in the past 24 hours. Yesterday, the bank delayed filing its annual report to the SEC, triggering a sharp decline in stock prices. Disclosures about being "less than well-capitalized" and a process of "reevaluating its business" set off a market chain of reaction that continued into Thursday. Silvergate-gate is here, and the crypto-friendly bank might be the next domino to fall. Silvergate's stock plummeted ~60% on Thursday after the bank revealed it won't be able to file its annual report with the SEC by the March 16th deadline. It needs two extra weeks to assess all the damage to its finances caused by 2022's crypto crash and figure out if it can even continue operating for the next 12 months. Silvergate is a so-called "bridge" to crypto, with ~1,600 crypto clients that helped ~80% of all funds flow into and out of the digital asset markets. And if Silvergate fails, it would also deal blows to established financial players like BlackRock, which has a large stake in the crypto bank. Investors withdrew $8.1B from Silvergate after FTX, its client, blew up in November. To cover those withdrawn funds, the bank had to sell off debt at a $718M loss. It revealed a $1B loss for Q4 and a $949M loss for 2022 overall, versus a $76M profit for 2021.

See similar: Kraken Steps Away from Signature Bank Due to Transfer Limitations

Top shot at being a security

A civil case against Dapper Labs, the creator of NBA Top Shot Moments, will proceed after a US district judge rejected the company's request to dismiss it, saying it is "plausible" that its tokenized collectibles may be considered securities. The plaintiffs in the case, a group of NBA Top Shot collectors, have accused Dapper Labs of selling unregistered securities and propping up the market for moments while restricting users from withdrawing funds from the platform. The case could help establish whether non-fungible tokens (NFTs) meet the definition of securities or investment contracts. Dapper Labs' lawyers refuted the suggestion that Top Shot NFTs are securities, arguing that basketball, Pokémon, and baseball cards are not securities. NFTs are hosted on Dapper Labs' Flow blockchain and are traded on a marketplace owned by the company.

Everyone wants a piece of Binance

The Australian Securities and Investments Commission is reviewing Binance's derivatives business. Binance stated that some Australian customers had been incorrectly classified as "Wholesale Investors" and had closed their positions while compensating for any losses. This is the latest regulatory issue for Binance, which halted derivatives trading in Europe in mid-2021 due to regulatory scrutiny.

See more Binance; SEC Triggers Billion-dollar ‘Bank Run’ on Binance’s BUSD: Since Paxos received a Wells notice from the SEC, $4.892 billion BUSD has been burned, averaging $407.7 million daily, according to blockchain data reviewed by Blockworks. BUSD’s circulating supply has shrunk by 26% following the SEC probe, with roughly $11.4 billion BUSD circulating in the market today. Despite the sharp drop in market capitalization, BUSD still remains the third largest stablecoin, following Tether’s USDT which has a market cap of $70 billion and Circle’s USDC which has a market cap of $42 billion. The events could motivate the industry to continue innovating towards decentralized stablecoins.

Stealing from the rich and giving to the poor doesn't always work: Robinhood Faces SEC Investigation

Robinhood Markets, the company behind the popular trading app, has disclosed that it received a subpoena from the US Securities and Exchange Commission (SEC) in December, relating to its cryptocurrency platform operations, custody of digital assets and supported cryptocurrencies. The company, which recently listed on the Nasdaq stock exchange, stated in its SEC filing that it had also received similar requests from the California Attorney General's office. Robinhood currently lists 18 cryptocurrencies on its trading platform, including Bitcoin, Ethereum and Dogecoin. The company has said that it is cooperating with California's investigation, but provided no further details on the matter. The move from the SEC is the latest example of regulators cracking down on the cryptocurrency industry, following the collapse of digital asset exchange FTX last year, which let users buy, sell and bet on the price of a range of cryptocurrencies.

Quiet watchdog IMF weighs in on crypto

The International Monetary Fund (IMF) has expressed its support for more regulation of digital assets, but has also said that it is not ruling out an outright ban on cryptocurrencies if they begin to pose a higher risk to financial stability. Kristalina Georgieva, the managing director of the IMF, stated that the IMF, the Bank for International Settlements, and the Financial Stability Board all consider regulation of the digital money world a top priority. However, if regulation is too slow to materialize and cryptocurrencies become a greater risk to consumers or financial stability, a ban on cryptocurrencies "should not be taken off the table," Georgieva warned. In 2020, the IMF said that regulation of cryptocurrencies "should not be seen as stifling innovation but rather as building trust." Georgieva added that the IMF's first objective is to differentiate between central bank digital currencies that are backed by the state and publicly issued crypto assets and stablecoins.

Other Domestic Regulation Updates

• Banks Should Back Deposits From Crypto Customers With Cash: US Agencies
• Coinbase Suspends Binance Stablecoin, Bowing to SEC
• Former FTX Director Pleads Guilty to Fraud—SEC, CFTC File Civil Charges
• New York Attorney General Sues CoinEx for Failure to Register
• California Dept. of Financial Regulation Launches Crypto Scam Tracker
• US DoJ Indicts Forsage Founders for $340M Smart Contract Ponzi Scheme
  

Other International Regulation Updates

• Crypto Exchanges Have 30 Days To Register With Canadian Regulators
• India's Central Bank Digital Currency Will Act as Alternative to Cryptocurrency
• France’s national legislature approved new registration rules for crypto companies
• Binance is making another attempt at getting a license in Singapore
  

Pain & Gain

Misc. Pain

• Stablecoin Dominance at 9-Month Low After SEC Targets Binance Dollar
• Twitter’s Crypto Ambitions Up in The Air After Senior Exec Exits
• NFT Projects Beware: Top Shots Class Action Could Set Precedent
• Solana To Focus On Stability In 2023 After Repeated Outages
• Ethereum Developers Push Back Shanghai Upgrade to Early April
• Voyager Clients Vote 97% in Favor of $1B Restructuring Plan

Misc. Gain

• Optimism Forges ‘Superchain’ to Challenge Arbitrum for Supremacy in Layer 2 Market
• Yearn Finance’s YFI token surged to its highest level in nearly six months Friday after developers said they will introduce a liquid staking derivatives token.
• Jump Crypto Just Counter-Exploited the Wormhole Hacker for $140 Million
• Coinbase is jumping into the asset management business thanks to its latest M&A deal
• BNB Chain Announces 2023 Roadmap
• Reddit Co-founder Wishes He Bought More Ether in 2014 Presale
• Alchemy Launches Dapp Builder for the Next Billion Web3 Developers
• Crypto Funding: PayPal, Morgan Creek, a16z Lead Major Rounds
• ‘Counter-Exploit’ Claws Back $202M From Hacker
• Wallet Provider Safe Taps Payments Giant Stripe in New Developer Stack Launch
• Visa Reaffirms Crypto Strategy, Mastercard Touts Blockchain

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