SPIRIT Blockchain – Weekly Wrap-up

Insights

• February 25, 2023

Weekly Wrap-up

Here’s what happened in blockchain and crypto this week. Bitcoin and cryptoassets slid across the board on Friday amid weaker equities and a hotter-than-expected inflation report. After hitting a new annual high last week, BTC was rejected at the critical $25,000 threshold. This morning, US stocks sold off on the release of January’s Personal Consumption Expenditures (PCE) report which showed a higher-than-expected +5.4% yoy growth for headline PCE and +4.7% core PCE. The report is the Fed’s most closely watched inflation measure. Earlier this week, the Fed released its February FOMC minutes which reiterated its conviction to raise interest rates and keep rates higher for longer, suggesting inflation could persist longer than expected. After regulatory headlines dominated crypto news for two consecutive weeks, earnings of publicly-listed crypto companies such as Block, Coinbase and Hive were in the spotlight over the past four days. On the deals front, crypto experienced one of the busiest weeks ever in terms of fundraising and M&A transaction announcements.
On Tuesday, Coinbase (COIN) reported fourth-quarter earnings that beat expectations thanks to higher-than-expected USDC interest income through its relationship with Circle. The company’s 4Q net revenue came in at $605 million vs. expectations of $588 million, up 5% from the $590 million in the third quarter. Coinbase’s adjusted loss of $2.46 per share also beat estimates. Transaction volume fell by 12% quarter over quarter (qoq) to $322 million on lower overall trading volume. Subscription and service revenues increased by 34% qoq to $283 million in Q4. The latter division thus accounted for nearly 50% of overall revenue in Q4, mostly thanks to the $162.2 in interest income.

JPMorgan released a Coinbase research report on the same day and raised its price target to $57 from $52. The bank’s analysts wrote that “Coinbase is well positioned to deliver notable year-on-year improvement in EBITDA at current expense levels with the marked improvement in overall crypto volumes in 2023 thus far combined with somewhat better than anticipated costs cutting going into 1Q23”.

The world’s second largest crypto exchange used part of its quarterly earnings report to contrast itself with competitors that have fallen under increased regulatory scrutiny over business practices or even collapsed. The company considers itself in a strong regulatory position despite the “disjointed” US approach.

Two days after its corporate earnings, Coinbase made headlines after unveiling its own Ethereum Layer 2 (L2) scaling network called Base at ETHDenver. Base is built on Optimism’s open-source OP stack. Optimism’s rollup deployment is one of many promising L2 smart contract platforms to scale Ethereum. Coinbase also announced that it will become a core developer of the software stack. Optimism’s OP token price soared following the news. The network’s native token has been one of the best-performing cryptoassets this year amid gains to the tune of 230% YTD. Ethereum founder Vitalik Buterin considers rollups the key Ethereum scalability solution for the foreseeable future. Rollups have seen significant momentum in recent weeks. Arbitrum is currently the biggest rollup in terms of ecosystem size, total value locked (TVL) and user activity. This week, the L2 network hit a milestone after itsurpassed Ethereum L1 in daily transactions, increasing Arbitrum’s dominance as the leading rollup.

Market Overview

The global cryptoasset market capitalization currently amounts to $1.11 trillion – down from $1.16 trillion on Friday last week, with bitcoin accounting for 40.2%. Among the Top 30 cryptoassets by market cap, Filecoin (FIL) outperformed for a second consecutive week, gaining roughly 30.7% over the week. During the same period, the price of bitcoin (BTC) decreased by 2.6% to $23,138 while the price of ether (ETH) fell by 3% to $1,596. The total value locked (TVL) in DeFi is sitting at roughly $48.7 billion – with Ethereum (excluding Layer 2s) accounting for more than 58.5% of TVL.

This Week’s Headlines

IMF statement on crypto assets says growing adaptation warrants a “coordinated response” from member countries
Ban of self-hosted wallets is avoided in new draft of EU’s anti-money laundering bill
Euro-backed stablecoin Euro Coin (EUROC) set to trade on Coinbase
Hong Kong plans to lift ban on retail crypto trading amid backing from Beijing, Bloomberg reports
SEC and New York regulators push back on Binance.US‘s plans to acquire crypto lender Voyager
Sam Bankman-Fried faces new criminal charges including conspiracy to commit bank fraud
Crypto hedge fund Galois Capital shuts after getting caught up in FTX saga, FT reports
Moody’s downgrades the ratings of Silvergate Capital and its bank subsidiary Silvergate Bank
Block‘s Q4 Cash App bitcoin revenues drop by 7% qoq to $1.83 billion
Trading platform eToro gains New York BitLicense
Microsoft’s Azure partners with Web3 infrastructure provider Ankr to offer blockchain node service
NFT platform OpenSea makes changes to fees after losing market share to Blur
Spotify starts testing ways to access music via NFTs
Manuscript of Snow Crash – the book that coined the term “metaverse” – to be auctioned by Sotheby’s

Notable Deals and Fundraising

Galaxy Digital closes $44 million acquisition of self-custody platform GK8
Bitcoin mining firm Luxor acquires Bitcoin NFT trading platform OrdinalHub
Bitcoin mining consulting firm Sabre56 raises $35 million to build 150MW of hosting sites
Crypto financial services company BCB Group targets valuation of $200 million in new fundraising effort
Multichain wallet Blocto closes a Series A funding round at a valuation of $80 million
Houseparty co-founder’s HNT Labs raises $25.5 million in a Series A round for Ethereum “town square” protocol Towns
Chaos Labs raises $20 million in a seed round led by Galaxy Digital and PayPal
User privacy Web3 dapp ecosystem Beldex raises $25 million
Indian Web3 gaming studio Kratos raises $20 million seed round at a $150 million valuation
Zero knowledge (ZK) infrastructure startup Polyhedra Network raises $10 million
Web3 game Worldwide Webb raises $10 million in a Series A from Pantera Capital
Huma Finance raises $8.3 million to enable DeFi borrowing against future income
Web3 data platform Sentio raises $6.4 million at a $32 million valuation
Solana-based crypto payments platform TipLink raises $6 million in seed funding
Kaito AI raises $5.3 million to build ChatGPT-powered search engine for crypto
DeFi yield startup Affine Protocol raises $5.1 million in a seed round
Blockchain infrastructure provider Gateway.fm raises $4.6 million
Blockchain indexing startup Superchain raises $4 million in a seed round
ZK dark pool startup Renegade raises $3.4 million
Tech startup 3RM raises $3 million to build Web3 client relationship tools
Gaming firm Curio Research raises $2.9 million in seed funding
ConstitutionDAO members raise $2.8 million for multi-signature wallet Den
Decentralized database developer Polybase raises $2 million in pre-seed funding
Animoca Brands invests in EthSign to back its new product TokenTable
ConsenSys acquires easy-to-use blockchain notification tool Hal
NFT project 0N1 Force bought out by group including former Binance, YGG executives