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SPIRIT Blockchain – Weekly Wrap-up 9/9/2022

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

After dropping to its lowest level since mid-June earlier this week, bitcoin bounced back on Friday. BTC has now gained more than 11% since its multi-month low on Wednesday. The recent bitcoin price weakness is also reflected in the ETH/BTC ratio which hit its highest level since late 2021 on the back of the ongoing ETH outperformance. With only one week to go before the Merge, investors have cheered the optimism surrounding the Ethereum 2.0 upgrade, piling into ETH and ETH-based funds. On the U.S. regulatory front, a slew of news around the White House, the Fed and the SEC made headlines this week with potentially far-reaching implications for Bitcoin mining, stablecoins and a large number of cryptoassets as unregistered securities. Overall, the crypto industry is likely to benefit from these developments, not least because they provide more regulatory clarity and guidance.
 

A new White House report titled “Climate and Energy Implications of Crypto-Assets in the United States” encouraged a broad policy push to reduce greenhouse gas emissions and urged the use of clean energy by U.S. crypto mining companies. The report which was mandated by executive order earlier this year suggested potentially restrictive measures should such efforts fail to reduce the crypto mining industry’s environmental impact. 

Elsewhere, Fed Chair Jerome Powell called for stablecoin legislation during a conference appearance on Thursday. “We don’t want to stand in the way of appropriate innovation […] But we think that something like that which is purporting to be money would need to be appropriately regulated,” Powell said. The Fed Chair also addressed the possibility of a digital dollar during his 40-minute interview at the Cato Institute conference, stressing that the central bank is evaluating whether to issue a central bank digital currency (CBDC), and weighing issues like privacy.

Powell also reiterated the central bank’s mission to quickly bring down inflation. “The longer inflation remains well above target, the greater the risk the public does begin to see higher inflation as the norm,” Powell said. Federal Reserve Vice Chair Lael Brainard also struck a combative toneregarding stablecoins during a speech on Wednesday. She warned that cryptoassets bear similar risks to traditional finance, but will need new regulations for situations not covered by existing laws. Brainard suggested that there will be a lot more of such tokens created by the private sector in the future, calling into question if the central bank should issue its own CBDC. 

At a legal conference in Washington on Thursday, SEC Chair Gary Gensler reiterated the agency’s stance that most digital assets look like securities. “Of the nearly 10,000 tokens in the crypto market, I believe the vast majority are securities” Gensler said. He added that most crypto tokens are investment contracts under the “Howey test“, referring to the 1946 legal test to determine whether an asset meets the definition of a security under U.S. law. The SEC Chair also cautioned that stablecoins could fall under the category of unregistered securities. Interestingly, he also stated that he supports handing the Commodity Futures Trading Commission (CFTC) the power to “oversee and regulate crypto non-security tokens and related intermediaries” such as Bitcoin.

Market Overview

The global cryptoasset market capitalization currently amounts to $1.08 trillion –  up from $1.04 trillion since Friday last week, with bitcoin accounting for 37.2%. Among the Top 30 cryptoassets by market cap, Cosmos (ATOM) outperformed, gaining roughly 24.5% over the week. During the same period, the price of bitcoin (BTC) increased by 4.2% to $21,075 while the price of ether (ETH) rose by 7.4% to $1,705. The total value locked (TVL) in DeFi sits at $59.4 billion – down from $60.4 billion last week – with Ethereum accounting for about 59% of TVL.

This Week’s Headlines

  • Coinbase backs lawsuit aimed at U.S. Treasury’s Tornado Cash sanctions
  • Three senior executives are said to leaving BlockFi as the firm irons out a deal with FTX.US
  • Bitcoin miner CleanSpark buys 10,000 Bitmain S19j Pro ASICs at a ‘significantly discounted’ price of $28 million
  • Marathon Digital energizes 25,000 miners in August, adds 2.5 EH/s in hashrate
  • Chainalysis and US law enforcement recover $30 million from North Korea-linked Ronin exploit
  • Bankrupt crypto lender Voyager Digital to hold asset auction next week
  • Ethereum Classic hits all-time high hash rate ahead of the Merge but its total hashrate remains small
  • Fed research arm publishes papers on DeFi and financial stability ramifications of digital assets
  • Franklin Templeton launches metaverse ETFfor European investors

 

Notable Deals and Fundraising

  • Former Meta executives new firm Mysten Labsraises $300 million at a $2 billion valuation, led by FTX Ventures
  • Fuel Labs raises $80 million for modular execution layer
  • Former Revolut employees raise $78 million for Web3 energy startup
  • 21Shares parent company raises $25 million at $2 billion valuation
  • Web3 data platform Spice AI closes $13.5 million seed round
  • Gaming firm Gameplay Galaxy raises $12.8 million in seed funding
  • Crypto startup Slide raises $12.3 million to connect users to Web3 apps
  • Web3 wallet Omni raises $11 million in seed funding at a $50 million valuation
  • DeFi investing platform Credix raises $11 million in Series A round
  • NFT software company Dust Labs raises a $7 million funding round
  • Crypto regtech firm VerifyVASP raises $5 million at a $100 million valuation
  • Hubble Protocol raises $5 million in a strategic round led by Multicoin

  • Asset manager Brevan Howard reveals details about its new $1 billion crypto hedge fund
  • Venture capital firm MetaWeb raises $30 million for early stage crypto startups

 

Manuel Trojovsky, Head of Crypto Investments & Research

 

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