SPIRIT Blockchain – Weekly Wrap-up

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

After the successful completion of the Merge last week – Ethereum’s much-awaited transition from Proof-of-Work to Proof-of-Stake and probably one of the most important events in crypto so far – both investors and developers set their eyes on network and price performance. As for ETH inflation, annual token supply change has dropped significantly in line with expectations from 3.8% to 0.20% after the Merge, according to data from ultrasound.money. While there were no critical bugs or incidents following the event, with the exception of the slashing of a validator, Ethereum’s September 15 upgrade couldn’t fix is the state of the markets.

Instead, exogenous factors, i.e. the global macro and rates picture, have arguably dominated price action this year. The Fed’s hawkish tone at its September 21 press conference during which Fed Chair Jerome Powell said “The FOMC is strongly resolved to bring inflation down to 2%, and we will keep at it until the job is done” spooked markets. The central bank’s 75bp hike last week signaled a slightly more hawkish stance than what markets had priced in. The revised “dot plot” now suggests Fed board members are expecting to hike rates to 4.625% in 2023, up from the 3.75% they were projecting at the June meeting. Hence, it is not surprising that ETH couldn’t buck the trend in equities and risk assets which look set to end the weak lower. 

From a relative price performance, it also doesn’t come as a surprise that ETH underperformed other cryptoassets this week. During the weeks leading up to the Merge, ETH rallied both in USD terms and vs. other cryptoassets, as market participants were positioning themselves for a “buy the rumor, sell the news” trade in anticipation of the event. For example, the ETH/BTC ratio – a widely watched pair among traders that indicates the relative strength of each of the cryptoassets – peaked at 0.085 BTC about one week prior to the event, rising to the highest level since December 2021. The ratio has since fallen to 0.067 BTC – its lowest level since the end of July – as ETH has trailed behind BTC. Cryptoasset traders will continue to keep an eye on the ratio in the coming months and years regarding a potential “flippening”, i.e. ETH surpassing BTC in terms of market capitalization. The ETH/BTC ratio topped 0.1 in June 2017 and January 2018, but for the flippening to materialize, it would need to hit roughly 0.16 BTC based on the current circulating supply of both cryptoassets. 

Market Overview

The global cryptoasset market capitalization dropped further this week, currently amounting to $956 billion –  down from $990 billion since Friday last week, with bitcoin accounting for 37.4%. Among the Top 30 cryptoassets by market cap, XRP outperformed, gaining 49.3% over the week. During the same period, the price of bitcoin (BTC) decreased by 5.1% to $18,695 while the price of ether (ETH) fell by 12.7% to $1,285 after “the Merge”. The total value locked (TVL) in DeFi sits at $54.3 billion – up from $53.9 billion last week – with Ethereum accounting for about 58% of TVL.

This Week’s Headlines

• Nasdaq to launch an institutional crypto custody service, report

• Bitcoin mining data center firm Compute Northhas filed for Chapter 11 bankruptcy
• Kraken CEO Jesse Powell steps down to focus on crypto “industry advocacy”
• Market making firm Wintermute suffers $160 million hack, experts blame “vanity address” vulnerability
• Binance and FTX make top bids for bankrupt lender Voyager, WSJ reports
• New U.S. legislation would put two-year ban on algorithmic stablecoins
• Coinbase denies proprietary trading allegations of recent WSJ report
• JPMorgan CEO Jamie Dimon calls crypto tokens, Bitcoin “decentralized ponzi schemes”
• CFTC files lawsuit against bZx‘s decentralized autonomous organization
• Ethereum’s new ETH issuance drops by 95% following the Merge
• Cardano‘s five-day Vasil hard fork process is underway
• NFT marketplace OpenSea to support Ethereum rollup Arbitrum

Notable Deals and Fundraising

• FTX plans to raise up to $1 billion at its $32 billion valuation, CNBC reports

• Fraud detection platform Sardine raises $51.5 million from Visa and others
• Renewable energy-focused Layer 1 blockchain GRNGrid raises $50 million

• Automated crypto trading startup 3Commasraises $37 million

• Crypto analytics company Messari raises $35 million in a Series B round
• Metaverse firm Hadean raises $30 million from Fortnite developer and others
• DeFi bug bounty platform Immunefi raises $24 million in Series A
• Web3 developer platform Hyperlane raises $18.5 million
• Open-source utility Lit Protocol raises $13 million in new funding
• Web3 finance platform Integral closes $8.5m round
• NFT gaming studio Vulcan Forged raises $8 million in Series A round
• Web3 accounting software Tres raises $7.6 million in seed funding
• Grand Theft Auto creator backs Random Games in $7.6 million round
• MEV infrastructure provider Skip raises $6.5 million
• Nilos raises $5.2 million to build a crypto treasury platform for businesses
• Block Green raises $3.7 million from Peter Thiel‘s Founders Fund
• Japanese banking giant Nomura launches new crypto venture fund
• Icebreaker Finance, Maple launch $300 million lending fund for bitcoin miners

Manuel Trojovsky, Head of Crypto Investments & Research

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