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SPIRIT Blockchain – Weekly Wrap-up 10/7/2022

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

Risk assets look set to end the week on a weaker note amid a historic low in the U.S. unemployment rate, leaving the Federal Reserve on track to deliver yet another aggressive interest-rate hike. Major cryptocurrencies ended the week little changed despite one of the largest exploits in crypto history. Earlier this week, a bridge used in Binance’s BNB Chain was hit by a hack to the tune of $570 million of which $100 million was ultimately siphoned by the attacker (see story below). Bridges are tools that allow users to to transfer cryptoassets from one blockchain to another. Criminals have increasingly targeted them, with at least $2 billion stolen in more than 13 different hacks, according to Chainalysis data. Meanwhile, Bitcoin’s hashrate continues to soar, putting more pressure on miners. 
 
On the upside, concerns surrounding a potential fallout from the highly leveraged investment bank Credit Suisse turned out to be somewhat overblown despite a sharp widening in the bank’s credit default swap (CDS) spreads. The bank’s CDS  – which indicate the cost of insuring against a potential default – had hit records highs while the lender’s share price tumbled to new all-time lows reflecting grave concerns among investors. Today, Credit Suisse’s CDS spreads recovered (i.e. tightened) after the Swiss lender said it would buy back up to $3 billion of debt. Last weekend, rumors that the bank may face solvency issues were hitting the headlines. 
 
Meanwhile, the Bitcoin mining industry is gearing up for another large jump in network difficulty as Bitcoin’s hashrate continues to hit new all-time highs. This is currently resulting in average Bitcoin block times of less than 9 minutes, with difficulty shaping up to jump by 12% on Monday which would translate to the largest increase since May 2021. In recent weeks, miners have been squeezed by the rapidly growing hash rate as well as by the weakness in the price of Bitcoin which continues to hover below $20,000. This has led to a massive reduction in miner revenues and margin compression since costs have also risen in many places in light of higher electricity prices. As for debt servicing, the lack of cash flow generation and the difficult funding backdrop has also had knock-on effects for large hosting providers such as Compute North which recently filed for Chapter 11 bankruptcy. Compute North’s CFO said in a corresponding court filing that the firm “has been unable to maintain sufficient liquidity to bring planned projects in development online and pay all of its obligations on a current basis.”
 
Despite the current headwinds, miners continue to raise new capital and bring more rigs online. This week, Argo Blockchain raised $27 million to ease liquidity  pressures while a new Grayscale venture (the parent of Bitcoin mining pool Foundry) was set up to capture bear market opportunities in Bitcoin mining. Another new firm, solar-powered Bitcoin miner Aspen Creek raised $8 million in a Series A funding in a round led by Galaxy Digital and others (see headline below). Elsewhere, CleanSpark grew its hash rate by 21% in September and bitcoin mined by 13.4% while also acquiring thousands of machines at discounted prices. Similarly, Riot Blockchain grew its hash rate in September by roughly 16.7% compared to the previous month. 

 

Market Overview

The global cryptoasset market capitalization currently amounts to $983 billion –  down from $992 billion since Friday last week, with bitcoin accounting for 38%. Among the Top 30 cryptoassets by market cap, Polygon (MATIC) outperformed, gaining 9.5% over the week. During the same period, the price of bitcoin (BTC) decreased slightly by 0.3% to $19,519 while the price of ether (ETH) also dropped moderately by 0.4% to $1,330. The total value locked (TVL) in DeFi sits at $55 billion – largely unchanged from the $55.3 billion last week – with Ethereum accounting for about 57.8% of TVL.

 

This Week’s Headlines

 

Notable Deals and Fundraising

  • Crypto lender Ledn to acquire Canadian fund manager Arxnovum
  • Bitcoin miner Argo Blockchain raises $27 million to improve its liquidity position, shares drop 15%

  • Mining firm Greenidge Generation to raise up to $22.8 million in a stock offer

  • Asset management firm

    GoldenTree discloses $5.2 million investment in SushiSwap
  • Web3 data startup Golden raises $40 million in a Series B round led by a16z
  • Blockchain game developer Horizon raises $40 million in Series A round
  • Crypto banking platform Juno raises $18 million in Series A funding
  • DeFi investment discovery and risk assessment platform Exponential raises $14 million in a seed round
  • Web3 hospitality platform Blackbird raises $11 million in a seed round
  • Solar-powered Bitcoin miner Aspen Creek raises $8 million
  • Avalanche collectibles trading platform MynaSwap raises $6 million at a $50 million valuation
  • Institutional-grade digital asset management startup xalts raises $6 million from Citi Ventures and others
  • Web3 infrastructure startup Scale3 Labs raises $5.3 million in seed funding
  • NFT utility tracking startup Lasso Labs raises $4.2 million
  • Decentralized music platform Stems raises $4 million pre-seed round
  • Singapore Web3 firm Suberra raises $2.7 million from Spartan Capital and others
  • Bitcoin investment firm NYDIG raises $720 million for digital asset fund, CEO Gutmann Departs

 

Manuel Trojovsky, Head of Crypto Investments & Research

 

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