Crypto Regains $1.1 Trillion Market Cap

GM, folks 👋🏻 - Happy Monday. Crypto market continued to rally over the weekend. Total market cap reached $1.1 trillion with BTC and ETH reaching $23,000 and $1,650 respectively. In other news, Genesis hearing will start at 2 pm EST today. It claims $5.1B in liabilities 🤦

In Today's Email:

• What Matters: Signature Bank put the brakes on crypto ✋

• Products: 1inch crypto hardware wallet 🔒

• Charts: Bitcoin 2024 halving, NFT trade volume by chain 📊

WHAT MATTERS

Signature Bank Put the Brakes on Crypto

State of play: 🏦 Signature Bank, who is known for being crypto friendly, won’t handle transactions of less than $100,000 for crypto exchange customers. The update was confirmed by Binance, it will be effective as of February 1, 2023.

• Approximately 23% of Signature Bank’s $103 billion (~$20 billion) in total deposits came from the crypto industry. Post the FTX issues, Signature has stated that it aim to reduce the number to $10 billion. FTX deposits in Signature is only 0.1% of the bank’s total deposit, but the relationship still cause Signature’s stock to dump by 20% 📉

What’s next: Banks that conduct significant businesses with the crypto industry will unsurprisingly receive a lot of scrutinies from regulators in the near future. Whether you think regulators have the incumbents’ interest or not, the greed and stupidity of bankrupt crypto conglomerates will be the primary factor of increasing regulation.

Dirty Bubble Media did a great work and posted an investigative article to Signature and Silvergate banks private blockchain networks that has helped numerous crypto firms transact with one another over the past few years. If there’s one area that regulators will be looking at, its these two chains.

Our take: While transparency is necessary and we much rather see transactions between crypto entities conducted on a public blockchain like Ethereum, overregulation on US-based banks will only push crypto businesses banking integration offshore, which will create additional risks for customers due to weaker rules of law and vague rules 🏝️

For builders: Banking relationship is a critical aspect that crypto-native products haven’t solved. You can pay your employees in stablecoins and operate 100% digitally, but your employees need to convert these stablecoins into their respective local currencies in order to eat and pay rent. The entities who’re handling these are centralized exchange and FIAT off-ramp providers, which all require banking relationships 🤝

For investors: Finding a crypto native way to solve the banking relationship problem will be the next multi-billion dollar business. If a product can reduce the level of trust and centralization that one needs to put on legacy banking institutions while providing similar level of services to end users, it will become a key infrastructure company for the future of crypto and web3 in general.

PRODUCTS OF THE WEEK

1inch Network Hardware Wallet

1inch Network Hardware Wallet: Decentralized exchange (DEX) aggregator 1inch Network is expanding its ecosystem of products by launching its own hardware wallet. Backed by the 1inch Foundation, the crypto hardware wallet will support multiple chains and is in its final stages of development.

• The 1inch wallet will support multiple seed phrases and transparent transaction signing. It will support NFTs and decentralized applications (not just DEXs), as well as staking.

• The 1inch ecosystem already include its DEX aggregator and mobile apps. It’s vertically integrating to own more stack of its end-users experience. Users can now trade and store their crypto assets all under the 1inch ecosystem.

Other cool products:

• ChainVine, a referrals software for web3 business.

• NFT Claim API, a set of APIs for NFT experiences.

• Uniblock, a blockchain toolkit (APIs, SDKs, and no-code tools).

• Noxx, a payroll and compliance tool for pseudonymous talents.

• Neopets Meta, a web3 remake of the classic Neopets game.

• Paper Checkout, a user-friendly NFT FIAT checkout tool.

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Bitcoin Supply and 2024 Halving

Let’s take a step back and take a look at some metrics on Bitcoin, the father of cryptocurrency. The infamous halving, whereby the supply generation of Bitcoin is cut in half, is going to happen in 2024. It’s an event that happens every four years and help contribute to the argument that Bitcoin is a digital gold 🧈

• Currently, 90% of Bitcoin has been mined. There are approximately 19.2 million Bitcoin in circulation with a maximum supply of 21 million. The halving in 2024 will decrease Bitcoin block reward generation from 6.25 BTC every 10 minutes to 3.125 BTC. Because of this, we need 118 more years to mine the remaining ~1.8 million Bitcoin 🤯

Our take: Like it or not, Bitcoin trades like a commodity. Supplies and demands greatly affected the way the asset class move, akin to gold, or even nickel. The downside is that there’s no real “use-case” for Bitcoin other than being a diversification tool in your portfolio. Sure you might use it to send money with some degree of anonymity or for cross-border transactions, but stablecoins are quickly replacing that use-case.

To watch: Miners profitability dynamics, old wealthy Bitcoin wallets, but most importantly Bitcoin-based smart contract. What makes Ethereum unique is that it taps into the narrative of web3.0, a building block for the next generation of the internet. Projects like Stacks and Jack Dorsey’s Bitcoin project is aiming to develop such solutions 👨‍💻

• As Bitcoin supply decreases because of the halving, prices need to keep up, or energy costs need to go down, for miners to continue operate. Without miners, Bitcoin’s security will be weakened. However, we can’t guarantee that the price will always go up nor can we guarantee that the energy cost will be cheap enough. The alternative is using Bitcoin to develop smart contracts and decentralized applications.

NFT Trade Volume by Blockchain

A report by ConsenSys showed that Ethereum still dominate NFT trading by volume, followed by Solana. The other blockchains combined, still only make up a fraction of NFT trading volume, even when those chains are focusing on NFT or the Metaverse 🤓

State of Play: NFT trading volume has stayed relatively consistent in the past six months, ranging around $150M. NFT trades like a beta exposure to Bitcoin and Ethereum, and crypto assets in general trade like a beta to the S&P. However, we’re seeing some NFT projects expanding their brands to include real-life products 🐧, which might make the asset class unique by the next cycle.

Our take: Liquidity is king. Ethereum has a total value locked (TVL) of $28.9 billion, making up approximately 60% of the entire on-chain crypto ecosystem. Other blockchains need to organically find new traders in order to ramp up their trading activities, which isn’t an easy thing to do in the current market environment. Ethereum also benefits from new NFT trading infrastructure such as the SudoSwap protocol, which created a Uniswap-like platform to trade NFTs.

QUICK BITES

• Genesis claims $5.1B in liabilities, hearing starts Monday

• Feds seized $700M of FTX assets.

• Ransomware declining crypto revenue.

• Cumberland & Mirana Ventures commented on Genesis bankruptcy.

• SEC charges Mango Markets exploiter.

• Moody downgrades Coinbase stock.

• Sullivan & Cromwell approved to represent FTX

• Binance sets sights on CoinDesk sale.

• Signature Bank limits crypto-related transactions sizes.

• Fantom launches ecosystem vault, a decentralized grants funding solution.

MEME & NOTEWORTHY READS

• Token Unlock’s thread on 2022 recap report.

• Aiko’s article on sandbox, simulation game, and full chain game engine.

• Matti’s (Zee Prime Capital) article on reflexivity and imitation (part 3).

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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.