SPIRIT Blockchain – Weekly Wrap-up

Insights

• April 8, 2023

Weekly Wrap-up

Here’s what happened in blockchain and crypto this week.

Crypto markets wrapped up a relatively uneventful week – at least when compared to the major regulatory headlines of recent weeks. Prices of cryptoassets continue to hold up well and are currently consolidating within a narrow price range. The price of ether has hit its highest level since August ahead of next week’s Ethereum Shapella upgrade which will allow users to withdraw their deposits from the protocol’s staking contract. After being largely uncorrelated to gold in 2022, bitcoin’s correlation to the precious metal rose to about 50% – the strongest connection in more than one year. Conversely, bitcoin’s correlation to US equities has weakened, suggesting that the cryptoasset is increasingly perceived as a store of value again. In traditional markets, both equities and bonds had a strong week on the back of rising US recession probabilities, a contraction in bank lending and more challenging labor market conditions which in turn has led to investors expecting future interest rates to decline faster. On Friday, US non-farm payrolls in March came in at a weaker-than-expected 236k suggesting a cooling in labor demand.

On Thursday, the US Treasury Department published its first “Illicit Finance Risk Assessment of Decentralized Finance” report focused specifically on DeFi. The comprehensive 42-pages piece covers areas such as DeFi market structure, illicit finance threats, vulnerabilities and mitigation measures, among other things. The US body warns of criminals using DeFi protocols but acknowledges that money launderers and terrorists typically prefer fiat currencies over crypto and that illicit finance via DeFi and crypto remains small in comparison to activities conducted with government-issued or fiat currency.

The report highlights that many DeFi apps fail to comply with the US anti-money laundering and countering the financing of terrorism (AML/CFT) rules and were therefore being exploited by crooks. The authors conclude that criminals use DeFi services to profit from illicit activity, in particular ransomware, theft, scams, drug trafficking, and proliferation finance. To address the risks, the US Treasury Department recommends to strengthen U.S. AML/CFT supervision of virtual asset activities, assess possible enhancements, continue to engage with foreign partners and continue research, private sector engagement to support understanding of developments in the DeFi ecosystem.

Market Overview

The global cryptoasset market capitalization currently amounts to $1.22 trillion – slightly down from the $1.23 trillion on Friday last week, with bitcoin accounting for 44.1%. Among the Top 30 cryptoassets by market cap, Dogecoin (DOGE) outperformed (see story below), gaining more than 8% over the week. The price of bitcoin (BTC) was little changed at around $28,000 and the price of ether (ETH) rose by 2.4% to $1,867. The total value locked (TVL) in DeFi is sitting at roughly $50.6 billion – with Ethereum (excluding Layer 2s) accounting for more than 59% of TVL.

This Week’s Headlines

Bitcoin peer-to-peer trading platform Paxful to shut down amid “key staff departures”
Binance Australia‘s derivatives license cancelled following request by exchange
Spot market volume on Uniswap hit $71.6 billion in March – 45% higher than Coinbase‘s, according to data from The Block Research
Arbitrum Foundation offers crypto governance concessions after ARB holder uproar
Bitcoin difficulty and hash rate hit new all-time highs as miner revenue increases
Bitstamp launches new lending product across crypto-friendly markets
Brazilian investment Bank BTG Pactual unveils dollar-backed stablecoin
Decentralized derivatives exchange dYdX to end support for Canadian users, cites regulatory environment
3AC founders launch new crypto exchange OPNX
MicroStrategy acquires an additional 1,045 bitcoin worth around $29.3 million
Euler says all “recoverable funds” stolen in recent $200 million hack have been returned
Dogecoin skyrockets after Twitter replaces its blue bird logo to a Shiba Inu dog
OpenSea Pro overtakes rival Blur in transactions share amid a surge in volumes and new addresses

Notable Deals and Fundraising

Blockchain interoperability protocol LayerZero raises $120 million in Series B funding at a $3 billion valuation
Trio of Canadian Crypto Exchanges – WonderFi, Coinsquare and CoinSmart – confirms plans to merge
Manifold Finance acquires Cream Finance’s validator set, builds its own Ethereum liquid staking protocol
DeFi platform M^ZERO raises $22.5 million in a seed round
Multichain liquidity and data gateway provider Li.Fi raises $17.5 million in a Series A fundraise
DWF Labs invests $16 million in RACA to spur Web3 gaming ecosystem
Dragonfly invests $10 million in derivatives exchange Bitget
DeFi hub Nibiru Chain raises $8.5 million at a $100 million valuation in a seed funding round
Modular blockchain Astria raises $5.5 million to develop its shared sequencer network
Blockchain data indexing platform Satsuma raises $5 million in a seed round
Deribit‘s parent company Sentillia leads $4.4 million seed funding round into Dutch crypto exchange Finst
Web3 co-ownership platform Lore raises $4 million in a strategic round
Crypto payroll company Franklin closes $2.9 million seed round
Gaming-focused venture capital firm Bitkraft raises $220.6 million for its second “token fund”
Delphi Digital’s Delphi Labs raises $13.5 million for Web3 accelerator
Re7 Capital and Republic Crypto launch RxR Opportunities Fund, a $100 million fund for investing in liquid tokens