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SPIRIT Blockchain – Weekly Wrap-up 10/14/2022

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

It has been another volatile week across global markets. Cryptoassets briefly tumbled on Thursday, with Bitcoin dropping to $18,370, amid a 40-year high in the U.S. core CPI reading. However, stocks and crypto staged a remarkable comeback later on in yesterday’s session, erasing most of the losses experienced earlier this week. After recovering by more than 4% from its Wednesday lows, the S&P 500’s choppy week continued on Friday, with US equities paring some of Thursday’s gains. Meanwhile, the ETH/BTC cross ratio continued to trend lower this week, hitting a multi-month low at 0.066 yesterday despite a reduction in ETH supply for the first time since the Merge. 
 
US core inflation, which excludes food and energy, rose by 6.6% yoy in September while headline inflation came in at a hot 8.2% yoy, slightly higher than expected. While the elevated levels of inflation are to a large extent attributable to the energy sector, US natural gas prices have now tumbled for eight consecutive weeks – the longest string of weekly losses since 2001 as mild weather and record production ease fears of a winter supply crunch. Elsewhere, the International Monetary Fund (IMF) slashed its global growth outlookto just 2.7% for 2023, warning the world economy is headed for “stormy waters”.
 
Given the hot CPI readings, the market is now pricing in a near 100% probability of a 75 basis points rate hike by the Fed in Novemberwhile some market participants are also expecting to see another 75 basis points in December. Meanwhile, the 10-year US Treasury yield surpassed 4% for the first time since 2008 while the US 2-year note rose to 4.5%, its highest level since 2007. In the U.S. housing sector, the average 30-year fixed mortgage rate is approaching 7% for the first time since 2002. 
 
Despite the smooth Ethereum Merge, the blockchain’s token has recently underperformed many other cryptoassets, with ETH shedding more than 20% in dollar terms following the highly anticipated event. This week, weekly ETH supply growth turned deflationary for first time ever (see also story below). A recent Coinbase report shed some light on staking rewards, supply growth and maximal extractable value (MEV). Staking rewards have increased from 4.5% APR to 5.8% after the Merge (for users running their own nodes) while the rate of ETH issuance has decreased post Merge from 4.5% yoy to just 0.45% yoy – or even 0.17% yoy after including burned ETH. 

 

Market Overview

The global cryptoasset market capitalization currently amounts to $965 billion –  down from $983 billion since Friday last week, with bitcoin accounting for 38.4%. Among the Top 30 cryptoassets by market cap, Quant (QNT) outperformed, gaining 21.6% over the week. During the same period, the price of bitcoin (BTC) decreased  by 3.0% to $19,335 while the price of ether (ETH) dropped by 3.2% to $1,307. The total value locked (TVL) in DeFi sits at $53.8 billion – down from the $55 billion last week – with Ethereum accounting for about 57.8% of TVL.

 

This Week’s Headlines

 

Notable Deals and Fundraising

  • Binance Pool launches $500 million fund to provide loans to Bitcoin miners

  • Uniswap Labs raises $165 million in a Series B round at a $1.66 billion valuation led by Polychain

  • Bitcoin miner Crusoe Energy Systems acquires Great American Mining

  • Aribitrum‘s Offchain Labs has acquired Ethereum software company Prysmatic Labs

  • Step secures $300 million in debt funding, launches crypto investment service

  • London-based crypto custody firm Copper raises $196 million in Series C round

  • Blockchain developer platform Tatum raises $42 million in funding

  • Blockchain indexer Nxyz raises $40 million in a Series A round led by Paradigm

  • Singapore-based crypto investment app Pillow raises $18 million

  • Web3 developer platform SettleMint raises €16 million, expands to Japan

  • Former Terra developer raises $15 million for Eclipse, a Solana-based cross-chain rollup

  • Mining hardware startup Fabric Systems raises $13 million to develop new liquid-cooled ASIC

  • Bitcoin miner TeraWulf raises $9.5 million in equity and draws $7.5 million from an existing loan

  • DeFi platform Zerion raises $12.3 million in an effort to disrupt the crypto wallet landscape

  • NFT debt and financing firm MetaStreet raises $10 million in funding from Dragonfly, OpenSea and others

  • Enterprise crypto wallet startup Pine Street Labs raises $6 million

  • DeFi startup Arch raises $5 million in a seed round co-led by Digital Currency Group and SoftBank spinoff Upload Ventures

  • NFT startup Otterspace raises $3.7 million to reduce financialization in Web3

  • BlockTower launches $150 million venture fund backed by BPI France and Mass Mutual

 

Manuel Trojovsky, Head of Crypto Investments & Research

 

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