SPIRIT Blockchain – Weekly Wrap-up

Insights

• April 1, 2023

Weekly Wrap-up

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

US equities ended the week on a strong note on the back of gains in tech stocks. The Nasdaq recorded its best quarter since 2020 and is up 17% year-to-date. Despite its strong start to the year, the index’s gains pale in comparison with bitcoin, which is up more than 71% this year. Bitcoin’s correlation with the Nasdaq 100 is at its lowest level since 2021 which shows that the cryptoasset’s tendency to move in the same direction as the stock market has diminished. Meanwhile, it was another eventful week for the crypto industry. After cracking down on US crypto companies and banks during the past weeks, the US probably took its most forceful move yet on offshore crypto exchange Binance Holdings Ltd. and its chief executive officer Changpeng Zhao (“CZ”). Unsurprisingly, Binance’s BNB token underperformed this week, falling by 3% over the week while BTC and ETH registered gains. The outcome of the CFTC’s lawsuit could have significant implications for the industry, particularly for exchanges that operate in the US without registering with regulators. In macroeconomic headlines, eurozone consumer price inflation hit a record high in March amid core CPI data of 5.7%, suggesting more ECB rate hikes over the next months. In contrast, the US Personal Consumption Expenditures (PCE) inflation data – the Fed’s favorite inflation gauge – came in below expectations which indicates ongoing disinflation.

Binance, the world’s largest cryptocurrency exchange, is being sued by the Commodity Futures Trading Commission (CFTC) for allegedly violating federal laws by not registering its exchange in the United States. The CFTC filed a complaint against Binance and its CEO Changpeng “CZ” Zhao on Monday in a Chicago federal court. The complaint alleges that Binance has “taken a calculated, phased approach to increase its United States presence despite publicly stating its purported intent to ‘block’ or ‘restrict’ customers located in the United States from accessing its platform.” Binance, Zhao, and former Chief Compliance Officer Samuel Lim are accused of ignoring requirements and undermining Binance’s ineffective compliance program.

According to the CFTC, Binance earned $63 million in fees from derivatives transactions, and approximately 16% of its accounts were held by customers located in the United States in August 2020, citing Binance documents obtained by the agency. The CFTC also accused Binance of hiding links to China for multiple years, despite claims it had removed its business from the country in late 2017, according to a report by the Financial Times. The report also revealed that top executives, including CEO CZ, instructed employees to hide its presence in the country. The charges of the regulator against Binance also highlight the work of its former chief compliance officer, Samuel Lim (from 2018 to 2022). Lim faces civil charges of undermining Binance’s compliance program and conducting activities to evade rules designed to prevent illicit financial activity.

Interestingly, the CFTC referred to BTC, ETH and LTC as “commodities”. The agency claimed in its suit that Binance engaged in transactions with “digital assets that are commodities including bitcoin (BTC), ether (ETH), and litecoin (LTC) for persons in the United States.” Unlike the SEC, which has repeatedly claimed that ETH is a security given its proof-of-stake (PoS) staking feature, the CFTC continues to categorize the cryptoasset as a commodity. For example, CFTC Chair Rostin Behnam stated his opinion that ETH and stablecoins were commodities as recently as March 8 in a Senate hearing. Meanwhile, blockchain analytics firm Nansen reported that investors have withdrawn more than $1.6 billion of cryptoassets from Binance since it was sued by the U.S. CFTC on Monday.

Market Overview

The global cryptoasset market capitalization currently amounts to $1.23 trillion – slightly up from the $1.19 billion on Friday last week, with bitcoin accounting for 44.5%. Among the Top 30 cryptoassets by market cap, Stellar (XLM) outperformed, gaining 21.7% over the week. The price of bitcoin (BTC) increased by about 3.1% $28,435 and the price of ether (ETH) rose by 4.4% to $1,828. The total value locked (TVL) in DeFi is sitting at roughly $49.8 billion – with Ethereum (excluding Layer 2s) accounting for more than 59% of TVL.

This Week’s Headlines

Ethereum core developers confirm April 12 date for Shapella – the upgrade that will enable staked ETH withdrawals
Crypto exchange Bittrex to wind down U.S. operations next month
SEC’s Gensler insists clear rules for crypto market “already exist”
Sam Bankman-Fried accused of bribing one or more Chinese officials with $40 million
Crypto investment firm Galaxy Digital reports a net loss of $1 billion for the financial year 2022
MicroStrategy buys another $150 million of bitcoin, prepays Silvergate loan
Bitcoin miners report highest monthly revenues since May
Polygon Labs unveils zkEVM Layer 2 to help scale Ethereum
Euler Finance hacker returns 58,737 ether worth about $102 million
BNB chain-based exchange Safemoon’s liquidity pair compromised in $8.9 million hack
Gucci and Bored Ape Yacht Club creator Yuga Labs kick off Metaverse Fashion Week with a partnership announcement
Disney nixes its metaverse team as part of a wider round of layoffs, the WSJ reports

Notable Deals and Fundraising

Crypto hardware wallet make Ledger raises about $100 million at a valuation of $1.4 billion, Bloomberg reports
Ethereum restaking protocol EigenLayer closes $50 million Series A round
Fetch.ai raises $40 million in new funding at a $250 million valuation
Orderly Network raises fresh funding at a flat token valuation of $200 million in a SAFT round
Decentralized autonomous organization Hydra Ventures raises $10 million to back investment DAO
Crypto infrastructure startup Conduit raises a $7 million seed funding round led by Paradigm
Aptos blockchain-based protocol Econia Labs raises $6.5 million in a seed round
Solana-based derivatives protocol Cega raises $5 million to expand on Ethereum
Web3 social platform So-Col unveils $4.5 million in new funding
Metaverse construction firm LandVault extends Series B with $3 million raise