Round Tripping
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tl;dr: SEC dealt blows in Ripple & Grayscale cases, SOL’s strength, fake spot approval shows R/R clearly favors upside & a price floor exists, & whose willingly selling here?
BTC dominance 51% | ETH dominance 16% | DeFi TVL $37B |
Total Crypto Market Cap $1.12T | Stablecoin Supply $124B |
After another quiet weekend in crypto, the market, along with social media and every group chat, exploded Monday morning when Cointelegraph tweeted the below erroneous “headline”.
Before correcting their mistake and eventually deleting the tweet, Cointelegraph decided the appropriate course of action was to edit *their own market moving headline* to include “reportedly” at the end. Of course, seconds after their tweet was sent, the damage was already done as BTC teleported 2k higher resulting in over $100M worth of liquidations.
As you can see, before official confirmation, the market began to sniff out that the “report” was absolute bullshit because no reputable publication had also reported the news and the original “report” came from cointelegraph of all “media companies”. So, BTC quickly retraced the entire move back to 27.7k before slowly and methodically climbing 4% higher to 28.8k and eventually settling around 28.4k.
Two weeks ago, I wrote, “while there are of course still hurdles (FTX/Celsius sales, Binance x DOJ case, potential US government sales), the path for upwards expansion in the short, mid and long term clearly outweighs the one-time hurdles listed above…we’re now likely ~3 months away from the first ever spot BTC ETF approval, ~7 months away from the BTC halving and potentially ~12-14 months away from spot a spot ETH ETF approval. Does anyone really want to be selling coins at these prices? The time to be structurally bearish has come and gone.”
Well, if there was any doubt about that statement it would appear as if the blunder from cointelegraph today made the demand for BTC, and subsequently the rest of crypto, abundantly clear. As mentioned, on that tweet BTC instantly repriced gaining ~10% in a brief 7 minutes. Witnessing today’s outcome, the question of who is selling at these prices becomes even more important.
We’re now ~6 months away from the BTC halving and less than 3 months away from what various Bloomberg ETF analysts are calling a 90% chance of spot BTC ETF approval *and* have a test run of it’s effects showing an instant 10% gain. Today’s move showed exactly how out of position the broad market is for the actual ETF approval and places immense short-term pressure on anyone who was wanting to allocate to BTC and the broad crypto markets ahead of the upcoming catalysts. What’s the market’s reaction and actual follow through going to be on the day of approval? If you know something has a catalyst to send it 10-20% higher in the next ~3 months, what forces you to sell? How much can you buy before the event? What percent gain between now and then is necessary to think the false confirmation of an instant 10% gain has been effectively priced in? 10-20% higher from the current levels? More?
While I wish I had the exact answers to all of the above questions, unfortunately I don’t but I can guarantee every fund and market participant is currently evaluating a similar thought process themselves. The potential one-time sell pressures I previously outlined of course remain, but today proved that a catalyst ~3 months away has massive price appreciation awaiting it and a broad swath of the market is currently sidelined and/or not positioned as heavily as they’d like to be. To be clear, I don’t think we just magically grind upwards everyday until approval but I think it’s once again clear that current risk reward severely benefits buying at the current prices and a pseudo floor price was established today. Oh, it also helps when the CEO of the world’s largest asset manager who is waiting for his spot BTC ETF to be approved is on TV talking about crypto as a “flight to quality” asset class.
If all of that wasn’t enough to convince you of crypto’s current R/R favoring buyers, we also received two pieces of incredibly good regulatory news. First, the SEC was dealt another blow last week as Judge Analisa Torres rejected the SEC’s bid to appeal the agency’s loss in the Ripple case. There’s now an April 2024 trial date for “other issues that still need resolution” and the SEC could appeal the overall case after it concludes. Regardless of a down the line appeal, Ripple’s win remains great for the crypto industry in the current environment and weakens the SEC’s arguments.
In addition to Ripple’s win, the SEC also tucked their tails on the Grayscale case as they confirmed that would not be appealing the court’s ruling. As a quick, dulled down refresher, Grayscale was suing the SEC regarding their stance that the approval of futures ETFs for BTC should allow spot BTC ETF approval and that the SEC’s previous spot denials were not logically justified. Since that announcement on Friday evening, the discount of Grayscale’s GBTC to NAV has continued to climb and now sits at ~14% as an eventual ETF conversion is seen as “inevitable”.
The GBTC discount is rapidly closing signaling imminent spot ETF approval (~3 months), the SEC was dealt two recent blows from the courts reinforcing their overreach, a ludicrous unconfirmed BTC spot approval tweet signaled how offsides and/or sidelined most market participants are for upward expansion, recent ETH futures ETF approval indicates spot approval is within reach and the halving is ~6 months away. If there was any doubt left, it’s time to pay attention again and make sure you’re properly allocated ahead of the turn to 2024, anon.
Other notable developments of the past two weeks include:
Solana v1.16 — chain successfully completes v1.16 upgrade enabling “Confidential Transfers” & improved ZK capabilities with encrypted SPL token transactions, v1.16 also increases EVM compatibility & reduces validator hardware requirements
Instadapp introduces Fluid — planned for a phased launch starting in January, Fluid’s key innovation is the Liquidity Layer which “blends the best of UNI, AAVE, COMP, MKR, & CRV”. Fluid’s first 3 launches will include lending, vault & DEX protocols that are capital efficient through unified liquidity, read more here.
RWA tokenizer Backed issues the first tokenized security on Base, “blB01” tokens track a short-term iShares US treasury bond ETF
THORSwap (RUNE) — RUNE announced that due to “potential movement of illicit funds through THORChain and, specifically, THORSwap, they’ve temporarily transitioned the THORSwap interface into “maintenance mode”. The move comes as the FTX hacker has accelerated swapping ETH for BTC & WuBlockchain reports that “over the past four months, more than 50% of funds converted from ETH to BTC via THORSwap routers were stolen funds.” On Monday, THORSwap relaunched their swapping function adding “some extra guardrails in place to help prevent the flow of illicit funds” behind the scenes.
LDO — usual debates about it’s share of ETH staking have raged in recent weeks with Vitalik briefly touching on Lido in his recent Enshrinement article and everyone in the ETH ecosystem continuing to argue and wax poetic about the potential harms and potential need for self-limiting. While the conversation is massively important, tbh I can’t currently be bothered to write extended thoughts on it as it’s incredibly tiresome to me.
SOL Overhang — while much has been made of the sell pressure coming to SOL, the FTX Estate stakes 5.5M SOL worth ~$125M bringing the total active stake on Solana to a new ATH; as I wrote last week, SOL continues to show impressive strength in the broad market and more importantly against both BTC and ETH
SBF’s Trial Begins — while I’m sure everyone has been following along, somehow ole Sammy boy has been portrayed as even more clinically insane than what was previously though possible highlighted by: reaching out to Thai prostitutes to access and bribe the Chinese government, thinking he could be President of the U.S. & his desire to raise funds from Saudi Crown Prince MBS
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funding:
CMCC Global, Hong-Kong-based venture fund, raises $100M for new fund
Reinvent Technology Partners raises $33M Series A led by a16z Crypto; Reinvent is a blank check company aiming to merge with a “tech” company & take it public
Blackbird, restaurant loyalty tokenization app, raises $24M Series A
Membrane Labs, trading and lending platform, raises $20M Series A
MEXC Ventures invests “eight-figures” in TON, announces strategic partnership
Fireblocks acquires tokenization firm BlockFold for $10M
Cicada, non-custodial crypto lender, raises $9.7M pre-seed
Phaver, crypto social media platform, raises $7M seed
REPUBLIK, crypto content creation platform, raises $6M seed
Parsec, onchain analytics platform, raises $4M seed extension round; s/o to all the Parsec homies, congrats on the well deserved raise!!
Verisoul, user authentication company, raises $3.25M seed
Neutral, tokenized carbon/renewable energy credits platform, raises $3.2M
L1 Advisors, onchain asset management, raises $1.6M pre-seed
news:
Grayscale files with SEC to convert the Grayscale Ethereum Trust (ETHE) to a spot ETH ETF; SEC declines to appeal Grayscale’s ETF structure win
Federal judge rejects SEC’s bid to appeal its loss in the Ripple (XRP) case
Metamask partners with Stripe to enable US users to easily on-ramp fiat
Alchemy, node infra company, acquires subgraph indexing company Satsuma
Armada live on SOL; tooling “that revolutionizes how tokens are launched & managed, giving DAOs & project treasuries the power to seamlessly unlock: initial token distribution, liquidity, price discovery, protocol reward management & more”
Coinbase granted full regulatory license in Singapore
GSR, crypto market maker, secured “in-principle approval from Singapore for a Major Payment Institution license”
Grocery Store chain Trader Joe’s sues DeFi platform Trader Joe for trademark infringement
Magic Eden launches tokenized digital collectibles, first drop will include 100 tokenized, physically backed and redeemable Pokemon cards on October 18th
tokens & protocols:
SOL — completes v1.16 upgrade, brings enhanced ZK proof capabilities to SOL
RLB — Rollbit buyback & burns are now entirely onchain
XRP — now fully licensed to provide digital payment token services in Singapore
RUNE — relaunches swapping function with added illicit funds guardrails
FXS — launches sFRAX, FRAX can be staked to earn T-Bill yield (APY of ~6.7%)
RDNT — omnichain money market will launch on ETH “the week of Oct. 15th”
GMX — secures largest ARB grant, receives ~$10M worth of ARB for incentives
Scroll — zkEVM L2 is live, produces genesis block on mainnet
Armada — token liquidity management protocol is live on SOL
BTRFLY — launches Pirex ETH (pxETH) on testnet, paves way for Dinero launch
StarkWare — delays first unlocks of STRK token to April 2024
zkUniswap — 0xfuturistic introduces zkUniswap: a first-of-its-kind zkAMM
Xion — L1 chain using USDC as gas token launches public testnet
around the ecosystem:
Gaby Goldberg’s writing on the never ending apps vs. infrastructure debate
21Shares releases 7 new Dune Dashboards on RWA tokenization
Nosleepjon outlines his view on the future of scaling wars in The Twin Suns Thesis
Vitalik on all things Ethereum enshrinement
0xsmac is finally back with his list of “good stuff i read this week”
tweets:
Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions.