Market Roundup: Emerging Blockchain Trends in a World Eyeing the U.S. Debt Ceiling

Written by BTSE

May 19, 2023

BTSE Market Roundup

Welcome to the latest edition of our Market Roundup, where we cover the highlights of the past week in the rapidly evolving world of blockchain and decentralized technologies.

Token Prices

(as of 1:30 AM UTC, May 19, 2023)

Cryptocurrencies with the highest market caps traded relatively flat for much of the week, with a sector-wide rally as we approached Friday. In particular, Litecoin (LTC) was up 13% since a week ago, partly driven by traders seeking alternatives to Bitcoin, which faced a surge in transaction fees — up to 200 times the normal rate — due to the use of inscriptions and the BRC-20 token standard.

Looking ahead, Litecoin will have a halving event in August, meaning rewards for mining new coins will be cut by 50%. Since May 1, there has been a rapid climb in the number of active addresses for Litecoin. Meanwhile, the Litecoin Foundation shared a chart of the number of daily Litecoin transactions with a similar upward trajectory. 

One factor that may soon impact the crypto market is the debt ceiling showdown in the United States. Traditional finance is always affected by the recurrence of US lawmakers debating whether to raise the debt ceiling, which is the goal of fiscal conservatives as their objective is to reduce spending.

The US may default on debt on June 1. Depending on how the standoff goes, the development could favor cryptocurrencies, in particular bitcoin. If fewer US Treasuries become available, their prices will increase while yields fall. Investors may move their liquidity to other types of assets, such as cryptocurrencies, leading to a higher value.

With that said, it is unknown what the outcome of the US debt ceiling standoff will be, and a deal could be reached before the end of May.

 

Web3 News

 

  • In a remarkable development for the world’s second-largest cryptocurrency, Ethereum (ETH) has achieved a significant milestone. The number of non-zero addresses on the Ethereum network has skyrocketed, reaching an unprecedented all-time high of 99,051,889. Non-zero addresses refer to unique accounts on the Ethereum blockchain that hold at least some amount of ETH. The sharp increase in these addresses indicates a rising number of users actively participating in the Ethereum ecosystem.

 

  • According to a recent study by Goldman Sachs, 32% of family offices have exposure to digital assets, NFTs, or DeFi, while 26% have invested specifically in cryptocurrencies. The study also found that the primary motivation for investing in the crypto space is the belief in the power of blockchain technology. Another study by KPMG China and Aspen Digital found that nearly 60% of family offices and high-net-worth individuals from Hong Kong and Singapore have invested in digital assets, with Bitcoin and Ether being the most popular.

 

  •  Worldcoin, a crypto project led by OpenAI CEO Sam Altman, is reportedly in advanced talks for a new financing round worth around US$100 million. The project aims to create a global digital currency that is distributed to everyone in a fair and equitable manner, using a proof-of-personhood protocol that involves a biometric scan of the recipient’s irises. Worldcoin’s previous investment round included funding from venture capital firms Andreessen Horowitz and Khosla Ventures, bringing the project’s valuation to US$3 billion. The project is still in beta but is reportedly preparing for an official launch in the next six weeks.

 

  • Axie Infinity, the non-fungible token (NFT) project, is launching its card game, Axie Infinity: Origins, on the Apple App Store in popular markets across Latin America and Asia. The game, which includes free non-NFT “starter” characters, was previously available in limited regions on the Google Play store and the company’s Mavis Hub. Additionally, Sky Mavis, the creator of Axie Infinity, is launching Mavis Market, a curated NFT marketplace powered by the company’s native Ronin blockchain. The company plans to continue global expansion through Google and Apple mobile users. Its token, $AXS, can be purchased on BTSE.

 

  • The European Union has approved the Markets in Crypto Assets (MiCA) regulation, which aims to harmonize all cryptocurrency laws among the 27 EU member states and require identification for all crypto transactions in the region. The law will put pressure on countries like the United States and the UK, and companies that want to trade, safeguard, and issue crypto and stablecoins in EU states will need to obtain a license. The MiCA law is set to be rolled out in 2024. The regulation was delayed several times before receiving final approval.

 

  • Hong Kong-based OSL Asset Management has received a license from the chief securities regulator allowing it to invest in blockchain technology and artificial intelligence. The firm plans to create a new fund in the coming months to invest in novel technologies, with blockchain, AI, and Web3 technologies taking center stage. OSLASM intends to onboard institutional investors into its client base. Hong Kong’s government has been pushing for a clearer regulatory framework for digital asset service providers, and over 80 firms have inquired into the possibility of setting up shops in the region.

 

  • China has launched a new national blockchain research center endorsed by the Ministry of Science and Technology, with the aim of training 500,000 blockchain professionals and establishing a nationwide blockchain network that will connect existing blockchains in the country and promote cross-chain development. The center will work closely with universities, tech companies, and research institutes to further the development of the country’s blockchain and Web3 industries. The center also aims to separate blockchain technology from its cryptocurrency use cases. Meanwhile, numerous Chinese digital asset firms have relocated operations from mainland China to Hong Kong, which has cultivated a hospitable climate for cryptocurrency businesses.

 

Crypto Tech

 

  • Hardware crypto wallet manufacturer Ledger has faced criticism for an update that allows its devices to send coded parts of users’ seed phrases to others. The update, aimed at helping users recover their seed phrases, has been criticized for potentially opening up security vulnerabilities by creating a communication channel between the device and the outside. However, Ledger maintains that the feature is opt-in and that the encrypted shards of the key are shared with just three centralized entities, which are secure. Critics have previously urged Ledger to open-source its firmware to prove that it hasn’t enabled a backdoor. 

    Further context can be found in this tweet thread by Mudit Gupta, the chief information security officer of Polygon Labs.

 

  • In a move that could fundamentally improve the usability of crypto and Web3 wallets, several Web3 companies are developing innovative technologies to balance user convenience and security. By aiming to eliminate the need for seed words and private keys, these developments could make crypto wallets as easy to use as email accounts. Companies like Magic, Dfns, and Web3Auth are introducing different wallet infrastructure solutions. Magic, for example, uses an Amazon Web Services Hardware Security Module to store an encrypted copy of the private key, while users authenticate via email tokens. Web3Auth uses multiparty computation to split private keys into shares for recovery purposes. Lastly, Dfns offers an MPC key management network that allows the creation of passwordless and seedless wallets.

 

Stories You Might Have Missed

 

  • Do Kown, co-founder of Terraform Labs, has been granted bail of €400,000 (US$436,000) by a court in Montenegro. Kwon was arrested in March for attempting to leave the country on a fake passport. Kwon is facing legal difficulties in Korea and the US related to TerraUSD’s collapse, including an arrest warrant in Korea and civil charges from the SEC.

 

  • US crypto firms are eyeing Bermuda as a friendlier regulatory environment as the country’s watchdogs crack down on the industry. Bermuda has licensed companies such as Circle and Block since it established a digital asset framework in 2018. Coinbase is the latest to obtain a monetary license to operate there, prompting speculation that Bermuda could become a new hub for US crypto companies. The renewed interest in crypto frameworks outside of the US is a reaction to the country’s key regulators cracking down on crypto firms, and Congress moving slowly to establish new rules for the industry.

 

  • Dogecoin has reached a new high of 719,000 daily transactions thanks to the newly created DRC-20 standard, allowing for meme coins on the Dogecoin network. Users have created their own tokens, similar to NFTs, called “Doginals.” However, the craze may be short-lived as the risk of “under-engineering” and lack of actual function may lead to it dying off quickly. Despite the volatility, transaction volumes are surpassing Bitcoin and the meme coin trend is reaching new heights.

 

  • Tether, the issuer of the USDT stablecoin, has announced that it will allocate up to 15% of its net realized operating profits towards purchasing bitcoin, which it will hold itself. The company will focus solely on utilizing the profits it has actually realized, rather than any unrealized capital gains, and aims to enhance transparency and provide a clearer view of the company’s performance and capital allocation strategy. The move reflects a broader trend of institutional and retail investors incorporating Bitcoin into their investment strategies. Tether’s reserves currently contain approximately US$1.5 billion worth of bitcoin.

 


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Note: BTSE Blog contents are intended solely to provide varying insights and perspectives. Unless otherwise noted, they do not represent the views of BTSE and should in no way be treated as investment advice. Markets are volatile, and trading brings rewards and risks. Trade with caution.

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