TradFi Giants Crypto Push

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Good Morning,

Crypto markets recovered above $1.1 trillion market cap. ETH/BTC ratio worsened as Bitcoin dominance hit 50% for the first time in a while. Let’s promise to not do the laser eyes profile picture this time. Please.

In Today's Email:

• What Matters: TradFi giants enter crypto 🏦

• Case Study: Paradigm Reth node 🖥️

• Governance & Features: Frax L2 and buyback 🔥

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WHAT MATTERS

TradFi Giants Enter Crypto

State of play: TradFi giants are seeking to enter the crypto space amid US regulatory crackdown. Some of the big names are proposing Spot Bitcoin ETFs, applying for digital assets custodian licenses, or launching their own exchanges.

BlackRock's iShares filed paperwork last week to the SEC for the formation of a Spot Bitcoin (BTC) ETF.

• The SEC has approved some futures-based bitcoin ETFs but rejected spot bitcoin ETF proposals from Grayscale, VanEck, and WisdomTree.

• Blackrock is the world's largest asset manager $10T+ in AUM and possibly has sufficient political power to match that of the SEC.

Deutsche Bank is applying for digital asset license with Germany’s financial regulator, BaFin.

• The license will enable Deutsche Bank to offer custody services for digital assets, including cryptocurrencies.

• Deutsche Bank has been considering the introduction of digital asset custody services since late 2020.

Fidelity Digital Assets, Charles Schwab and Citadel Securities backed crypto exchange called EDX Markets just went live in the US.

• The creation of EDX was announced in September 2022 with investments from Fidelity, Schwab, Paradigm, Sequoia Capital and Citadel.

• EDX’s launch comes with a new round of capital from Miami International Holdings, DV Crypto and GTS among others.

• EDX only offers four tokens (BTC, ETH, LTC, and BCH) partly because of the unclear regulatory landscape in the US.

Why it matters: Simply shows that crypto isn’t dead. The asset class is here to stay.

For builders and investors: Find pockets of customer need where you can come in and establish a great business.

• There are numerous components of the crypto markets. Even with unlimited resources, these firms can’t do everything by themselves.

• Startups that can strategically serve both web3 and TradFi giants will be rewarded handsomely.

CASE STUDY

Paradigm’s Ethereum Node

State of play: Paradigm is releasing Reth, a new Ethereum execution node written in Rust that aims to enhance ETH's accessibility, stability, and client diversity while creating a robust ecosystem of tools for EVM developers and users.

• Reth has <2TB database size at block 17.4M of storage.

• Reth is able to Bootstrapping the chain from genesis to block 17.4M in 50 hours.

• Retch can reliably tracks the tip without falling behind under heavy RPC load.

Reth’s alpha release also includes a new SDK for building EVM-centric infrastructure such as: MEV Builder, P2P Sentries, Indexers, and ERC4337 UserOp mempool.

Our take: More options surrounding node options and other core infrastructure (client diversity, etc.) related to an underlying blockchain is always a positive thing.

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INSIGHTS

crvUSD $200M Debt Ceiling

Curve Finance is working on a proposal to accept Wrapped Ether (WETH) as a collateral to mint crvUSD.

• The debt ceiling for the new collateral will be set $200M.

• The proposal is set to pass.

• Curve continues its push to expand the dominance of its stablecoin, crvUSD — one of the reason is because stablecoin is one of the easiest DeFi product to monetize.

FEATURES & GOVERNANCE UPDATE

Frax L2 Network + Buyback and Burn

Frax Finance announced its plan to launch an L2 called “Fraxchain”. The network is expected be launched by the end of 2023. It will focus on becoming a smart contract platform for DeFi projects.

• Fraxchain essentially represents the culmination of the entire Frax ecosystem.

• Fraxchain will be a rollup model L2.

• The network will employ the use of the Frax stablecoin and Frax Ether, Frax's liquid staking derivative, for transaction fees.

Frax already has multiple DeFi products (DEX, lending, stablecoin, etc.). This L2 will combine them all under one ecosystem.

Ouroboros Capital is proposing for Frax to do buyback and burn program.

• The proposal suggests utilizing $20M from the protocol to conduct a buyback and burn of its own FXS tokens.

• The aim of the buyback and burn is to enhance the token's value, which has significantly declined in the past six months.

Why it matters: Frax decision to do buyback and burn plus creating its own L2 is further proof that everything in DeFi will be vertically integrated.

• The buyback and burn program is also the only way to "accrue value" without attracting regulatory scrutiny.

Other notable feature updates:

• EigenLayer’s Mainnet goes live.

• Ambient DEX goes live.

• DLN Exchange goes live.

• Aevo launches Aevo Open Mainnet.

• GMX launches V2.

• Silo launches three new isolated Curve LP lending markets.

QUICK BITES

• UK’s Stablecoin Laws approved by Parliament's Upper House.

• Citadel, Schwab backed crypto exchange starts operation.

• Deutsche Bank applies for Germany’s crypto license.

• FTX paid $120M+ in advisor fees over the past 3 months.

• Japanese Exchanges pushing for looser margin trading rules.

• Fidelity rumored to be making a massive crypto push soon.

• Binance deregisters in UK amid regulatory woes.

• Binance integrates Bitcoin Lightning Network.

• Bitcoin's dominance rises above 50%.

• Etherscan adds ChatGPT to untangle smart contracts with AI.

MEME & NOTEWORTHY READS

• Vitalik Buterin’s read on cross-L2 for wallets and other use cases.

• New Order’s read on making Bitcoin fun again.

• Tether’s read on what they shared with the NYAG.

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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.