Bitcoin registered gains to the tune of 4% this week and holds up well despite recent headwinds for risk assets. Although BTC ended the third quarter 11% lower, it is up 63.3% on a year-to-date basis, far outperforming returns of other asset classes. In crypto derivatives, the collective approval and release of a number of ETH futures ETFs in the US this week encountered a lukewarm reception a failed to boost the price of ETH. Meanwhile, there has been growing concern about the impact that rising US bond yields are having on long-duration assets like equities and crypto. This week, investors continued to sell US Treasuries on net, sending borrowing costs higher. Both 2-year and 10-year Treasury yields continued to edge higher, reaching 5.16% and 4.8%, respectively. Meanwhile, the US economy appears to remain resilient, with the unemployment rate holding steady at 3.8% in September and given a surprise increase in non-farm payrolls. However, the hotter-than-expected US jobs report could nudge the Fed toward raising interest rates again in November or December. Higher rates have also been weighing on stablecoin yields and supply volumes. US Treasury yields now exceed both stablecoins yields on lending platforms like Aave and the staking reward rate of ETH which has dropped to below 4%. Elsewhere, the much-awaited trial of Sam Bankman-Fried has began in New York this week.
Demand for US ETH futures ETFs turned out to be lackluster in week one after the SEC collectively approved 9 ETFs on October 3. The six funds that traded this week by Bitwise, ProShares, and VanEck took in less than $20 million in combined assets against the backdrop of an overall low investor appetite for risk assets. On Monday, the top pure ETH futures ETFs had an aggregate volume of less than US$1.5 million in trading volumes. This compares with more than $1 billion on the first day in BITO’s BTC futures-linked ETF in October 2021, according to Bloomberg data. By the end of this week, the VanEck Ethereum Strategy ETF (EFUT) stood at assets of about $8 million. The ProShares Ether Strategy ETF (EETH) had roughly $6 million, while Bitwise’s pure ethers futures fund (AETH) had not yet reached $1 million in assets. The low flow and trading volumes are likely related to the current market cycle but also to the fact that Ethereum is not as well understood as Bitcoin by the broader US investor community.
The trial of former FTX CEO Sam Bankman-Fried (SBF) kicked off in earnest Wednesday with lawyers from both sides delivering their opening statements. SBF’s criminal trial heated up on Thursday as former friends and allies took the witness stand. On Friday, former FTX CTO and co-founder Gary Wang alleged that on days when a loss for FTX might have occurred, that loss was shifted over to Alameda. Wang told the court that an $8 billion hole existed at the heart of FTX’s balance sheet, with sister company Alameda Research on the hook for the loan. SBF, according to Wang, was well aware of this debt when he tweeted “FTX is fine. Assets are fine.” less than a week before FTX declared bankruptcy. The prosecution sought to use Wang’s testimony to demonstrate that many of SBF’s public statements about the solvency of FTX, as well as risk exposure since the exchange launched, were lies. Caroline Ellison, former CEO of Alameda, is scheduled to testify on Tuesday.
According to a recent WSJ piece, prosecutors said that FTX employees found Alameda’s secret backdoor months before the exchange’s collapse. Moreover, FTX allowed Alameda to have a negative balance of up to $65 billion, the WSJ reported. On the same day that SBF’s trial began, Michael Lewis’ released its new book on FTX, “Going Infinite”, which centers on the rise and fall of SBF and the failure of FTX. The book was not well-received by large parts of the crypto community which criticized it for its portrayal of a “cute and quirky” genius who was just misunderstood, while presenting a deeply biased account of events. Goldentree’s Avi Felman tweeted that “I am immediately struck by the fact Michael Lewis clearly didn’t interact with anyone outside of the immediate FTX family.”
Market Overview
The global cryptoasset market capitalization currently amounts to roughly $1.13 trillion – compared with $1.11 trillion last week, with bitcoin accounting for more than 48%. Among the Top 30 cryptoassets by market cap, Avalanche (AVAX) outperformed, gaining about 17% over the week. The price of bitcoin (BTC) rose by 3.7% to $27,965 while the price of ether (ETH) fell by 2.1% to $1,640. The total value locked (TVL) in DeFi is sitting at roughly $38.5 billion, with Ethereum (excluding Layer 2s) currently accounting for about 54% of TVL.
This Week’s Headlines
- US judge Torres rejects the SEC’s motion for an interlocutory appeal in Ripple case
- Vitalik Buterin contemplates Ethereum staking changes in technical blog post
- Ethereum supply starts to grow again as gas prices plummet
- Ex-Celsius CEO Mashinsky’s fraud trial set for September 2024, Bloomberg reports
- UBS taps Ethereum to pilot tokenized money market fund
- Fixed rate-focused DeFi project Yield Protocol to wind down
- Sui Foundation reallocates 117 million SUI from external market makers to support growth initiatives
- Crypto hardware wallet manufacturer Ledger reduces its workforce by 12% amid “macroeconomic headwinds”
- Chainalysis lays off 15% of staff, plans to focus on public sector
- Bored Ape Yacht Club creator Yuga Labs cuts employees, focuses on metaverse extension amid restructuring
Notable Deals and Fundraising
- Kraken acquires Dutch crypto broker Coin Meester BV (BCM)
- Web3 loyalty app Blackbird raises $24 million Series A round
- Web3 social platform Phaver raises $7 million in seed funding
- Solana-based Convergence RFQ raises token round at valuation of $30 million
- Ostium Labs raises $3.5 million to bring DEX perpetual swaps to oil and gold
- Crypto-focused investment firm Deus X Capital announces launch with $1 billion in assets and capital
- Hong Kong crypto firm CMCC Global launches $100 million fund aimed at Asian crypto startups
- Crypto VC funding falls to 3-year lows, according to Messari report
