US funds are craving BTC
US funds are craving BTC
US institutions want to get in on the crypto frenzy, while FRAX and BNB unveil their layer-2 solutions to the public.
Welcome to Stay on-chain! During the past few days we witnessed an impressive rally, with BTC rising more than 20%. Today we analyze the phenomena, dissecting what might have caused it — hint: it has to do with the world’s largest asset manager filing for a Bitcoin ETF.
If you haven't subscribed yet or if this email has been forwarded to you, subscribe below and don't miss out on the next issue of the newsletter!
In today’s issue:
Weekly market performance
Crypto news round-up
Upcoming catalysts
Where is the money flowing?
One tool you should try
Further readings
Institutional interest in Bitcoin is booming in the US — is that good news?
It’s gold bitcoin rush again. Blackrock, the world’s largest asset manager (just $10 Trillion, pennies uh?), has filed for a Bitcoin spot ETF at the SEC.
An ETF, standing for Exchange Traded Fund, is an investment that can be traded on the stock exchange (just like a share) while it tracks the underlying asset(s) price — in this case, bitcoin. The bitcoins backing the ETF would be held in custody by Coinbase.
But hey, why would TradFi giants lobby in favor of BTC? That’s easy pal. They like to make money, and collecting fees through an ETF that garners public attention is a fantastic way to do so.
Many institutions have seen their filings rejected: Grayscale, 21Shares, and Cathie Wood’s Ark investment are just a few. Many argue this time things will be different.. because well, it’s Blackrock — besides, the fund has put in additional efforts to mollify SEC’s concerns regarding possible market manipulation of the ETF.
During the following days, other institutions started flooding the SEC inbox with their own BTC ETF filings. Namely, Invesco ($1.4T AUM) and WisdomTree ($93B), both reapplying after seeing their first filing rejected.
BTC has been seeing a steady uptrend in the past days, rising 23% in the past 7 days — but the presence of massive institutions might pose significant risks for the Bitcoin network.
Sure, being able to buy an ETF representing bitcoin helps foster mass adoption — making it easier for, say pension funds, to own and justify a diversification of their balance sheet in cryptocurrencies through a U.S. registered instrument, rather than on some shady crypto exchange located in the Cayman Islands.
On the other hand, huge risks of centralization and manipulation arise. Buying the ETF you wouldn’t be the custodian of your BTC, but rather Blackrock or other funds would handle them on your behalf. You would be exposed to BTC’s price action, without benefiting from its censorship-resistant security model that can only be achieved by self-custodying the coins you buy on your own wallet.
Reading between the lines, Blackrock specifies that in the case of a hard fork (an upgrade of the Bitcoin network) they will determine at their own discretion which network should be considered the appropriate one going forward. It’s noteworthy to mention that when a network forks, coins are doubled. You keep the existing balance on the ‘old’ network, and get the exact same amount on the ‘new’ network — this happened to Ethereum as well when transitioning from Proof-of-Work to Proof-of-Stake, with the former still being traded. By acting maliciously, the fund could easily pursue its own interests and make bank from its investors.
Those are just speculations, and filings have yet to be approved by US regulators. But the trade-off would be striking, with many arguing that short-term benefits (i.e. the start of another bull run) would not outweigh long-term risks (i.e. BTC supply centralization into governments hands).
Stay safe and stake sats, fellows.
ZachXBT raises over $1M after being sued by MachiBigBrother
ZachXBT, an independent blockchain investigator, found himself at the center of a defamation lawsuit filed by MachiBigBrother (also known as Jeffrey Huang), an NFT trader. MachiBigBrother, filed a lawsuit against ZachXBT for allegedly defaming him with the accusation of embezzling millions of dollars in crypto.
In response, ZachXBT reached out to the crypto community, appealing for support in raising $1 million to cover his legal costs. The crypto community responded with overwhelming support, contributing funds exceeding $500,000 in just 24 hours. The call for assistance received support also from notable entities such as Binance, CertiK, and Justin Sun. Contributions, mostly in stablecoins, streamed in from hundreds of sources.
EDX Markets - a Citadel, Fidelity and Charles Schwab backed exchange
A new crypto exchange called EDX Markets, backed by Citadel Securities, Fidelity Digital Assets, and Charles Schwab Corp., has officially launched. Unlike exchanges like Coinbase and Binance, EDX operates on a "non-custodial" model, partnering with a third-party custodian to avoid holding clients' digital assets during trading. With the Coinbase and Binance lawsuit, SEC Chair Gary Gensler has criticized their lack of separation between different business aspects, potentially leading to conflicts of interest. The EDX’s CEO Jamil Nazarali believes that regulators expect crypto exchanges to be separated from broker-dealer functions, presenting an opportunity for EDX to thrive by adopting rules and investor protections from traditional finance. With investments from Paradigm, Sequoia Capital, Virtu Financial and many others, EDX plans to launch EDX Clearing for trade settlements later this year.
Fun fact: Crypto’s full of hustlers. Some went as far as registering Binance copycats in Nigeria to sell them the right to use the name if the exchange ever wants to expand there. The Nigerian government warned the company to stop seeking investments in Nigeria before registering itself, only to discover it wasn’t really Binance.
Frax Finance plans to launch its L2
Frax Finance, the protocol behind the FRAX stablecoin and the frxETH liquid staking derivative, plans to launch its own layer-2 blockchain called Fraxchain by the end of 2023. Fraxchain, an EMV-compatible layer-2 solution, will combine optimistic rollup architecture and zero-knowledge proofs, with frxETH and FRAX serving as its gas token. The launch of Fraxchain will facilitate faster transaction finality and decentralized sequencer capabilities, along with the potential implementation of an EIP-1559-like mechanism for burning transaction fees. VeFXS, a token that rewards long-term holders, will play a crucial role in the ecosystem, offering additional benefits such as a bribe market for sequencers. Through its strategic holdings of CRV and CVX, Frax Finance has been able to establish deep liquidity and attractive incentives for its products.
BNBchain unveils its Layer-2 solution opBNB
BNBchain (chain long supported by Binance) unveiled opBNB on June 19 — a layer-2 solution set to run on top of the existing BNBchain network. The network is based on Optimistic Rollups (similar to Optimism), and aims to foster increased security and scalability of the BNBchain network. Developers boast incredible numbers, claiming the chain will be able to reach 4,000 transactions per second (TPS) costing as low as $0.005 each, making it an appealing solution for gaming, collectibles, and decentralized exchanges. there was no shortage of criticism, however, with some questioning its usefulness in a world already filled to the brim with similar blockchains.
Layer-3 gaming-focused Blockchain XAI set to launch on Arbitrum — link
There’s a proposal to increase the ETH validator cap from 32 to 2,048 ETH — link
Starting July 1st Celsius will convert $215M in altcoins to ETH and BTC — link
Elon Musk and Mark Zuckerberg agreed to fight in a cage match — what a time to be alive folks.
Maverick Protocol, DeFi infrastructure startup, raises $9M — link
Neutron Raises $10M to develop Smart Contracts on Cosmos — link
Tapioca DAO, an Omnichain Money Market raised $6M— link
Dtcpay, a Singapore-based payments startup, raised $16.5M — link
Exponential.fi is a DeFi platform that offers a range of financial services and investment opportunities. It leverages smart contracts on the Ethereum blockchain to provide users with access to various DeFi protocols, including lending, borrowing, and yield farming. It aims to help users find the best-yielding opportunities in DeFi with the lowest risk.
Exponential.fi features the "Rate My Wallet" tool, which assists users in assessing the risk level associated with their wallet. By analyzing the wallet's holdings and their distribution across different protocols and yield strategies, the tool calculates a risk score that indicates the potential volatility or vulnerability of the portfolio. This information enables users to make informed decisions about their investment strategies and manage their crypto assets more effectively.
An insight into Polygon 2.0 — link
Artur Hayes’ latest piece — link
An incredible amount of research material by The Daily Ape — link
If you found this Leaks edition valuable, why not share it with a friend?
Forward this email—it's the best gift you can give us!
Thank you for reading and see you on Sunday with a special Dive!
🐳 Feeling generous? Fund this newsletter and the degens behind it:
0x6480474717045771Ecf6561331458dcbA6229C75 (EVM)
1AXaP7Qe9cGzW6oYYs5xLfEgGHb3UppHjn (BTC)
Powered by Unibo Fintech Society.
Disclosure: Authors may own crypto assets named in this newsletter. Stay on-chain is meant for informational purposes only. It is not meant to serve as investment advice. Please consult your investment, tax, or legal advisor before making investment decisions.