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In brief. Crypto media space has been very busy with the FTX collapse these last two weeks, and considering the scale of the defunct exchange’s mismanagement, this will continue.
However, crypto industry is going forward 🚀
In this Newsletter we have gathered some important news from the crypto space, which might have escaped your attention recently:
📌 Trust Wallet launched its browser extension ($TWT +100% since the FTX crash) and Nexo announced a “smart” non-custodial wallet;
📌 Cardano released a privacy blockchain and is set to launch a stablecoin in early 2023;
📌 Sui, another blockchain project from ex-Meta developers (not those from Aptos), has launched its testnet;
📌 Solana isn’t doing so well ($SOL -58%), mostly because of its ties with FTX and rising competition from other blockchains;
📌 Times are hard for Bitcoin miners, but they still do not capitulate: a widely expected difficulty decrease did not happen last night;
📌 El Salvador’s President pledged to buy 1 BTC per day;
📌 OFAC redesignated Tornado Cash as entity, backpedalling on its earlier decision to sanction its smart contracts;
📌 While the Capitol Hill is all over the FTX failure, the New York Fed started a 12-week CBDC trial.
FTX has reminded crypto users around the world about the importance of self-custody.
Hardware wallets like Ledger and Trezor are registering all-time high sales, while software wallets try to seize the momentum and gain market share.
Trust Wallet, acquired in 2019 by Binance, is a good example. Already the biggest non-custodial mobile wallet used by almost 60 million people, last week Trust Wallet released a much-anticipated browser extension for desktop. With a little help from CZ twitter and the current self-custody trend, Trust Wallet’s token $TWT has gained +72% since November 12.
CeFi lender NEXO announced a soon launch of its first non-custodial smart wallet. The Nexo Wallet will stand out from its competitors with an easy NFT and ENS (Ethereum Name Service) integration, allowing to “utilize the benefits of their self-governed Web3 profile”.
IOG, the company behind Cardano, made not one, but two important announcements last week.
It will be releasing a new privacy-focused blockchain called Midnight, which will be deployed as a sidechain to Cardano and deliver zero-knowledge proof smart contracts. The project sounds promising, especially taking into account that already existing privacy blockchains like Monero or Zcash mostly act as currencies and not smart contract platforms.
Midnight is set to bring programmability to a privacy blockchain, but its developers should tread carefully with the regulators, who are not very fond of privacy in general. A recently leaked draft of a European AML bill shared by Coindesk suggested that some EU regulators would like to ban all privacy coins altogether.
Another announcement made by Charles Hoskinson, IOG CEO, was about the launch of the first Cardano-based stablecoin in early 2023. Named USDA, the dollar-pegged stablecoin will help Cardano develop its ecosystem. $ADA price failed to react and followed the overall market slump (-21% since November 8).
The new blockchain Sui, a brainchild of former Meta engineers, launched its first testnet last week. Sui is a PoS blockchain and a direct competitor to the somewhat controversial Aptos, also created by ex-Meta devs and using the same language called Move.
Mysten Labs, the company behind Sui, was lucky with timing: its September funding round of $300 million was led by FTX Ventures 😬
Another PoS blockchain has found itself in danger. Solana had close ties with FTX, which was one of its investors and active participants in its NFT and DeFi (namely the DEX platform Serum, $SRM) sectors. The Solana Foundation has lost some $190 million in $FTT and $SRM, but the reputation damage might be much bigger and it is now being felt across its whole ecosystem. Learn more about Solana troubles here.
$SOL price has lost 57% since November 8th.
One could say that the first blockchain, still the most decentralized and independent in the crypto space, should have benefited from FTX and its contagion across the CeFi and PoS blockchains. In fact, it is highly likely it will. However, in the short-term Bitcoin (-13% since the crash) is suffering alongside the whole crypto industry, and as the suffering persists, the miners are expected to capitulate ⛏️
Despite falling $BTC price, Bitcoin mining difficulty (adjusted approximately every two weeks) has been steadily rising since the beginning of 2022, meaning that it was increasingly harder (= more expensive) to add new blocks to the blockchain and create new bitcoin. It also means that the Bitcoin network is at its highest levels of security.
For some time already, some Bitcoin miners are been forced to sell more than 100% of their mined BTC supply to cover operational costs, dipping into their reserves, which are now at a 10-months low (source: Glassnode). For example, Bitfarms’ Q3 report showed that the miner sold 2’595 BTC, while minting only 1’515 BTC. At the same time, the percentage of miners revenue from fees is rising, recently reaching a 16-months high.
This is not a sustainable practice, and some miners will be eventually forced to put their activity on hold. This will decrease the hashrate and cause Bitcoin protocol to adjust the difficulty downwards, making it less expensive to mine.
The difficulty is adjusted approximately every two weeks, and Bitcoin is currently near its all-time high level. Last night was widely expected to see a decrease, but this did not happen. If else, the difficulty has slightly risen, which means that miners aren’t ready to throw in the towel yet.
Miner capitulation has been a historic marker for the market bottom, after which the price is usually set to increase.
The FTX collapse showed clearly that there wasn’t enough customer protection in the CeFi sector. In the EU, the CeFi activity will fall under the MiCA law, but the US still has to work on it.
While every major US politician has called for a better regulation of the “crypto ecosystem” and “crypto markets”, the lawmaking process promises to be interesting: SBF had close ties with the Democratic Party and President Biden (SBF was the second donor to his campaign after Bloomberg), while the CEO of Alameda is reportedly linked to the SEC’s head Gary Gensler (who repeatedly failed to produce a clear regulatory regime for crypto firms).
This, together with Binance CEO CZ’s repeatedly accusing SBF of conducting a shady lobbying in Washington DC, will make for a Netflix-worthy legal drama 🍿
⚖️ An important event has somewhat gone unnoticed: OFAC has changed its sanctions on Tornado Cash from sanctioning the smart contract to sanctioning the entity around its original creators. This was an important step, which showed that the US Treasury is not ready to overtly hinder the freedom of speech (of which computer code is part).
In the meantime, the US sticks its CBDC plans: the New York Fed has launched a 12-week trial with some big banks like BNY Mellon, Citi, U.S. Bank and Wells Fargo, which will be be issuing tokens and settling transactions through simulated Fed reserves.