BlackRock BTC ETF Market Maker

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Happy hump day. The Bitcoin white paper was released 15 years ago. We’re forever grateful for our lord and savior Satoshi Nakamoto. It’s rare to see someone who created a $1T asset and has the humility to just walk away.

Putting that aside, the true lord of the crypto world might just be Tether. The firm reports that it holds $72B in US T-Bills, generating $4B in yield for the company per annum. Just incredible.

In Today's Email:

• What Matters: BlackRock’s BTC market maker 👨🏻‍💻

• Case Study: Bad bridging UX 😠

• Governance & Features: Celestia launch 🚀

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WHAT MATTERS

Big Market Makers on Bitcoin ETF Liquidity

State of play: Leading market-making firms including Jane Street, Virtu Financial, and Jump Trading are in discussions with BlackRock to supply liquidity for its highly anticipated Bitcoin ETF.

• In May, Jane Street and Jump Trading scaled back their crypto trading operations amidst the regulatory crackdown on crypto.

• Jane Street wrote that “the bitcoin ecosystem is sufficiently robust to support a US-listed ETP” in a comment letter to SEC on GBTC's conversion proposal.

• Virtu highlighted the potential benefits for US investors from SEC approval of Grayscale's spot bitcoin ETF proposal in their letter to SEC endorsing GBTC's conversion.

The growing optimism that the SEC will approve spot bitcoin ETF also drives the largest crypto funds inflow in 15 months.

• Last week, crypto investment funds experienced $326M of net inflows, the highest weekly influx since July 2022, according to CoinShares.

• Despite being substantial, last week’s $326M inflows rank as only the 21st largest in three years, suggesting continued investor caution.

• Bitcoin funds dominated last week’s inflows, contributing 90% including $15M to short-bitcoin funds.

Why it matters: A spot-based Bitcoin ETF is expected to become highly probable in the upcoming months.

• The approval will mark a significant shift for the crypto industry in terms of the US-regulated products landscape.

For builders and investors: Last week, we highlighted a spot Bitcoin ETF as a key liquidity catalyst. Although it's not approved yet, the anticipation alone is boosting crypto fund inflows, with even larger inflows expected upon approval.

CASE STUDY

The Need for Optimal Consumer UX in Bridging

Credit to @winnielaux_ for the tweet.

State of play: As crypto companies strive for mass adoption, one issue persists: creating an optimal consumer UX that enables non-crypto native users to easily navigate dApps.

@winnielaux_ shared her experience with the complexity of bridging and the process involved:

• Sending MATIC from a CEX to the wallet.

• Sending ETH from a CEX or different wallet to her wallet with y00ts NFT inside for gas fees.

• Bridging MATIC from Ethereum to Polygon once she had enough ETH for gas.

• Using the MATIC for gas fees to transfer her y00ts to the Ethereum mainnet.

• Finally able to send her y00ts.

The process took a crypto native more than 30 minutes.

Non-crypto native users won’t go through the process as the complexity of navigating across 3-4 applications to bridge one NFT is daunting and time-consuming. 

• In a world with multiple blockchain networks, simplifying the bridging process will significantly enhance UX and drive genuine adoption of cryptocurrency for consumers.

• Emerging companies that simplify crypto transactions by offering one-click solutions, allowing users to transact effortlessly across chains or with credit cards are important.

• @winnielaux_ stated that while so much has evolved and changed, an optimal consumer UX is still far away.

What’s next: The winner of the next bull run will be able to onboard non-crypto native users by simplifying crypto transactions, while also addressing the growing frustration of native users with the current system's complexity.

Take a peek at our referral reward at the bottom of this issue. Share this newsletter and receive our list of 100 smart crypto investors' wallet addresses 👇

INSIGHTS

Tether Q3 2023 Attestation: $72B in T-Bills

Tether's Q3 attestation report revealed that 85.7% of its total reserves were held in cash and cash equivalents, marking an all-time high percentage.

• A significant portion of Tether’s reserves consists of US Treasury Bills, accounting for $72.6B in both direct and indirect holdings — this holding is generating Tether’s ~$4B per annum in revenue.

• Tether's portfolio includes $1.7B in bitcoin and $3.1B in gold, with $3.2B of excess reserves.

• Tether's total consolidated assets stand at $86.38B, while its total liabilities are $83.18B, with $83.15B tied to issued digital tokens.

Why it matters: Tether’s goal is to reduce and eventually remove the exposure of secured loans from the reserves.

FEATURES & GOVERNANCE UPDATE

Celestia Goes Live on Mainnet

Celestia, the data availability (DA) blockchain, has successfully launched its modular data availability network with the completion of its mainnet beta deployment.

• Data availability (DA) is the ability of network nodes to access and verify the accuracy of transaction information.

• The rollups in Celestia's mainnet launch will utilize the network as their consensus and DA layer.

• Celestia provides a DA layer that verifies transactions using DA sampling (DAS), eliminating the need to download entire block data.

The Celestia team has commenced its airdrop, allocating 6% of the total circulating supply to eligible participants.

Why it matters: Celestia is a key player in advancing the blockchain scaling intellectual discussion, particularly around modularity.

• If Celestia is able to show the edge of its technology in a real-time environment, it would be encouraging for blockchain scaling.

Other notable feature updates:

• Qi DAO launches V2.

• Zapper launches Chain Chat.

• Polygon launches POL Token.

• Swell launches Super swETH vault.

• Debank launches the Monitor Bots.

• Kava launches a one-click bridge solution.

• Contango launches cPerps to Ethereum and Polygon.

• SSV Network launches an incentivized mainnet program.

• IndexCoop launches the CoinDesk ETH Trend Index (cdETI).

QUICK BITES

• StarkNet hands out 50M STRK tokens.

• Tether reports its Q3 2023 attestation report.

• Turkey plans to toughen law on crypto assets.

• Unibot exploits resulted in $640,000 in losses.

• HashKey launches a retail-focused crypto app.

• Druckenmiller says he should probably own BTC.

• Animoca Brands courts $50M from Saudi’s NEOM.

• Celestia airdrops TIA token as the network goes live.

• SBF trial renews conjecture about Alameda’s Tether ties.

• BlackRock’s BTC ETF draws interest from market makers.

• LastPass hack leads to theft of millions from crypto wallets.

• a16z targets $3.4B mega-funds, with plans for crypto vehicles.

• WalletConnect restricts use in Russia, citing OFAC guidelines.

• Circle stops supporting stablecoin minting for consumer accounts.

• Congressional watchdog says SEC needs lawmaker approval before moving forward with controversial bulletin.

NOTEWORTHY READS & MEME

• Jonah’s read on how to use Twitter to trade.

• Vitalik Buterin’s read on the different types of layer 2s.

• Bartek.eth’s read on understanding TPS relation with AA.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.