December 4, 2024

🔮South Korea and XRP, Exchange Volume Comes Back, Celsius Payouts, Hyperliquids Airdrop

Top Stories

November CEX Volume Hits $2.71 Trillion, Highest in Over Three Years (DEX's Up Too)

The combined monthly trading volume across all centralized exchanges (CEXs) reached $2.71 trillion in November 2024, marking the highest level since May 2021's $4.16 trillion peak. Binance led with $986 billion, maintaining its dominance despite recording a 12% lower volume than in March 2024, when Bitcoin last hit all-time highs. By contrast, exchanges like Bybit, Coinbase, and Upbit saw volume growth compared to March, with Bybit experiencing a 14.6% increase to $213.9 billion. Coinbase and Upbit recorded $175 billion and $234 billion, up 11.7% and 6%, respectively, underscoring their regional dominance. While the total volume remains below 2021's highs, the figures highlight rising retail and institutional engagement as Bitcoin stabilizes near $95,000, drawing renewed attention to the crypto market. Post-election, the sector got a boost when U.S.-based centralized exchanges Coinbase and Robinhood listed large cap memecoins such as PEPE and WIF along with some altcoins. Binance, meanwhile, has been listing two to three memecoins every week. Meanwhile, Memecoin Mania Drives Record Monthly DEX Volume

Source: The Block

The Dominance of Sophisticated Players in DeFi Liquidity Pools

While DeFi aims to democratize finance by replacing traditional market makers with automated liquidity pools, a study by the Bank for International Settlements (BIS) reveals that liquidity provision in DeFi largely mirrors TradFi in favoring sophisticated, well-capitalized participants. Analyzing Uniswap V3's top 250 liquidity pools, which account for 96% of trade volume, BIS found that only 7% of liquidity providers (SLPs) dominate, contributing 65-85% of liquidity and conducting three-quarters of all transactions. These SLPs, with average positions of $3.7 million, significantly outperform retail LPs (RLPs) in profitability and fee earnings, benefitting from economies of scale and superior technological capabilities. In contrast, RLPs, who average $29,000 per position, often experience losses on risk-adjusted days, highlighting the challenges retail participants face in competing within DeFi markets.

NFTs Resurgence Amid Crypto Bull Run: Blue Chips Dominate While Market Seeks Recovery

The NFT market is experiencing a revival, driven by the broader crypto bull run. Market capitalization reached $8.8 billion in December, up 17.3% in a week, while daily trading volume surged nearly 48% in 24 hours. Despite fewer unique buyers, blue-chip collections like CryptoPunks and Bored Ape Yacht Club (BAYC) lead the resurgence. CryptoPunks commanded $49 million in November trading volume, up 392% from October, while BAYC posted a 75.79% weekly gain, with a 21.27 ETH floor price. Emerging collections like Pudgy Penguins also saw notable growth, maintaining a $55,758 floor. Ethereum remains dominant in NFT sales, though Bitcoin-based NFTs saw a 99.44% monthly volume increase. However, the CryptoSlam 500 NFT Index, down 53.77% from its peak, reflects an overall market still seeking to regain its former momentum.

Source: CoinGecko

Ethereum's Beam Chain Proposal Sparks Debate Over Development Pace

Ethereum's development ethos is under scrutiny as excitement builds around Justin Drake's Beam Chain proposal to replace the Beacon Chain, Ethereum's current consensus layer. The proposed Beam Chain aims to modernize Ethereum with advancements like faster block production, zero-knowledge cryptography for quantum resistance, and a lower staking threshold of 1 ETH. However, the projected timeline—beginning in 2026 and concluding in 2029—has drawn criticism amid a rapidly evolving competitive landscape. While Ethereum's careful, long-term strategy has been praised for The Merge's success, rivals like Solana, Sui, and Aptos are gaining traction with higher transaction volumes and innovative features. Critics argue the timeline must be halved to maintain Ethereum's competitive edge in a market increasingly dominated by faster-moving blockchains.

Coinbase's Decision on Celo Migration Draws Community Backlash

Coinbase's announcement to not support Celo's transition from a Layer 1 blockchain to a Layer 2 within Optimism's Superchain ecosystem has sparked criticism from the Celo community. The platform requires users to withdraw funds by January 13, 2025, to avoid losing access, prompting cLabs CEO Marek Olszewski to call the move a setback for Ethereum's Layer 2 scaling roadmap. While some attribute Coinbase's decision to technical, security, and regulatory challenges, others in the community have urged the exchange to reconsider. Coinbase has yet to address these concerns publicly.

Starknet Launches Staking to Boost Security and Decentralization

Starknet, an Ethereum Layer-2 scaling solution, has launched its initial staking phase, allowing STRK token holders to enhance network security and participate in governance. Solo staking is available for those holding at least 20,000 STRK tokens, while smaller holders can delegate their stake to validators. Initially, validators will perform basic tasks, with plans for expanded roles like block creation and validation in the future. StarkWare CEO Eli Ben-Sasson emphasized the importance of a gradual rollout to ensure stability, citing Ethereum’s three-year development of its staking model.

Regulation

XRP Shows Resilience Amid South Korea's Martial Law Shock

XRP demonstrated significant resilience during a volatile week, rebounding strongly despite market disruptions caused by South Korea's brief martial law declaration. South Korea’s critical role in XRP’s trading activity was highlighted, with Upbit rivaling Binance in XRP volume. The South Korean government’s $7 billion liquidity injection to stabilize markets coincided with Ripple's upcoming RLUSD stablecoin approval by the New York Department of Financial Services, sparking speculation about interconnected efforts to reinforce market confidence.

Celsius Distributes $127 Million in Second Bankruptcy Payout

Bankrupt crypto lender Celsius Network has begun its second creditor payout, distributing $127 million in cash or cryptocurrency, bringing the cumulative recovery rate to 60.4% of claims. This follows a $2 billion distribution in January that covered 57.65% of eligible claims. Bitcoin for this round is valued at a weighted average price of $95,836.23. Celsius filed for bankruptcy in 2022 due to a $1.2 billion balance sheet gap. Former CEO Alex Mashinsky, facing multiple fraud charges, could receive up to 115 years in prison if convicted.

Trump Administration Eyes Expanding CFTC Oversight of Crypto

The incoming Trump administration reportedly plans to enhance the Commodity Futures Trading Commission's (CFTC) regulatory authority over cryptocurrencies, signaling a shift toward treating digital assets as commodities. This move could diminish the SEC's influence over the sector, aligning with Trump's pro-crypto campaign promises. The administration is also exploring the creation of a "crypto czar" role, potentially led by former CFTC Chairman Chris Giancarlo, to coordinate crypto policy across agencies and Congress. Additionally, Trump is rumored to be forming a crypto advisory council, comprising industry leaders like Coinbase and Ripple, to guide legislation and regulation. These initiatives reflect a broader push for innovation-friendly digital asset policies under the Trump administration.

Operation Chokepoint 2.0: Tech and Crypto Founders Face Secret Debanking Allegations

Marc Andreessen and other industry leaders have accused the Biden administration of reviving and expanding "Operation Chokepoint," an Obama-era initiative that restricted financial services to controversial industries. Speaking on a podcast, Andreessen alleged over 30 tech founders, particularly from the crypto industry, were debanked without due process in recent years, stifling their operations. Coinbase CEO Brian Armstrong and Elon Musk amplified the claims, calling the actions unethical and politically motivated. Critics argue this financial exclusion targets disfavored tech startups, while similar debanking issues have been reported in the UK and Australia. Regulatory bodies, however, deny evidence of politically motivated account closures.

U.S. Appeals Court Overturns Tornado Cash Sanctions

The U.S. Court of Appeals for the Fifth Circuit has reversed sanctions imposed by the Treasury Department's Office of Foreign Assets Control (OFAC) on Tornado Cash, a blockchain privacy tool, ruling that its smart contracts cannot be classified as property under the International Emergency Economic Powers Act (IEEPA). The court stated that Tornado Cash’s immutable smart contracts are not owned or controlled by any entity, making the sanctions unlawful. The decision follows lawsuits from Tornado Cash users and emphasizes that legislative updates would be required to regulate crypto-mixing tools. Legal experts, including Coinbase's Chief Legal Officer Paul Grewal, hailed the ruling as a victory for the crypto industry, affirming the distinction between open-source technology and its misuse by bad actors.

U.S. Government Transfers Nearly $2 Billion in Seized Silk Road Bitcoin to Coinbase

The U.S. government moved 19,800 Bitcoin, valued at $1.92 billion, from its Silk Road seizure to Coinbase, sparking investor concerns. The Bitcoin, confiscated from convicted fraudster James Zhong, had been manipulated from the Silk Road marketplace in 2012. Blockchain analysis firm Arkham Intelligence flagged the transaction, revealing the funds briefly stopped at another wallet before reaching Coinbase. While such moves often lead to fears of government liquidation, Coinbase Prime now manages and disposes of federal digital assets under contract, suggesting an immediate sale is unlikely. Bitcoin’s price dropped 2% following the transaction, and the event highlights the ongoing legal and market impacts of Silk Road-related Bitcoin holdings.

Other Domestic Regulation Updates

Other International Regulation Updates

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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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