Is Donald Trump Insulating Bitcoin’s Price From The Tech Stock Slide?

Since the market opened yesterday, the S&P500 has lost 1.8%, the tech-heavy Nasdaq-100 is down 3.0% and tech darling Nvidia (NVDA) has bled 5.3%.

Normally, bitcoin follows stocks (especially tech stocks) on their daily moves, but this time, as of writing, bitcoin (BTC) is up 0.5%. What gives?

BTC looking strong in face of falling stock prices on Tuesday (TradingView)

It’s a small window of time, sure, but in a week where we are seeing Mt. Gox-related selling pressure and underwhelming spot ether ETF inflows, it’s surprising how well bitcoin has held today, considering especially how it usually moves.

Market commentators have long pointed out that Bitcoin is just a tech stock given its strong correlation to them. Bitcoin optimists, myself included, have been preaching about the impending decoupling when bitcoin sheds all asset correlations and becomes an uncorrelated macro asset that belongs in every balanced portfolio. But it hasn’t always seemed that way.

Narrative drives the day-to-day market moves, so what narrative does Bitcoin have that the stock market doesn’t have right now?

Donald Trump.

Donald Trump is not speaking at the biggest Stock Market Conference this week; mainstream investors aren’t eagerly awaiting what the former U.S. President might say on Nvidia; there are no rumors that a Nasdaq-100 strategic reserve will be announced.

But Trump is speaking at the Bitcoin Conference this week; bitcoin supporters are eagerly awaiting what the former U.S. President might say in a Saturday speech there; there are rumors that he’ll announce a Bitcoin strategic reserve.

It appears that, absent any other strong narratives, Trump is insulating bitcoin from the price action of tech stocks. Trump may be making a bid for the U.S. presidency and perhaps he deserves a new title: bitcoin’s decoupler-in-chief.

Whatever happens Saturday, Trump’s speech is shaping up to potentially be a “sell the event” event, as some market analysts have predicted. Trump could say or claim any number of things about bitcoin during his speech; who knows what. What’s for sure, though, is that his words will have wide sweeping effects on the crypto market.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.

Edited by Benjamin Schiller.

The Evolving Efficiency of Bitcoin Markets

Despite rapid growth and increasing attention from investors and regulators, cryptocurrency markets remain largely inefficient. Although the market has become more efficient over time, studies show that even large-cap cryptocurrencies do not always fully reflect available information, leading to significant inefficiencies.

Reasons Behind Crypto Market Inefficiencies

Several factors contribute to persistent inefficiencies in cryptocurrency markets:

  1. Low Liquidity: Compared to traditional financial markets, crypto markets have lower liquidity, making them more susceptible to large price swings and manipulation.
  2. Regulatory Uncertainty: Inconsistent and evolving regulations across different jurisdictions create uncertainty, impacting investor behavior and market stability.
  3. Market Fragmentation: Numerous exchanges with varying prices and trading volumes lead to inefficient price discovery and arbitrage opportunities.
  4. Speculative Behavior: A significant portion of crypto trading is driven by speculation rather than fundamental value, leading to volatility and inefficiency.

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Mental Biases in Crypto Investing

Unlike stocks, which can be analyzed based on well-established valuation methodologies, cryptocurrencies tend to be less driven by fundamentals in the short- to medium-term. Since much of the value derived from cryptocurrencies is based on future assumptions, the asset class is susceptible to large swings based on market sentiment and liquidity. Empirical studies show that cryptocurrency investing is closely associated with speculation and mental biases. Here are some prominent biases in crypto-investing:

  1. Overconfidence Bias: Investors often overestimate their knowledge and predictive abilities, leading to excessive trading and risk-taking.
  2. Herding Behavior: The tendency of investors to follow the crowd can result in buying into cryptocurrencies when prices are rising, and selling when prices are falling, contributing to market bubbles and crashes.
  3. Anchoring: Investors may fixate on specific price points, such as all-time highs, and make decisions based on these anchors rather than considering broader market conditions.
  4. Loss Aversion: The fear of losses can cause investors to hold onto losing investments for too long or sell winning investments too early.

Leveraging Inefficiencies with a Systematic Momentum Index

Technical analysis can work if assets do not behave in a random-walk fashion. A systematic momentum index can effectively capitalize on market inefficiencies while mitigating the psychological biases that plague individual investors. Here’s how:

Exploiting Market Inefficiencies: By systematically analyzing price trends and momentum, the index can identify and exploit inefficiencies in the market. This approach is grounded in the observation that assets with strong recent performance tend to continue performing well in the short term.

Overcoming Psychological Hurdles: A systematic approach helps to avoid common biases such as momentum chasing and loss aversion. Instead of following the herd, a momentum index relies on objective data to make investment decisions. This reduces the emotional impact of market fluctuations on investment choices.

Added Value for Investors

For the average investor, a systematic momentum index offers several benefits:

  1. Consistency: By adhering to a rules-based approach, the index ensures consistent investment decisions, reducing the impact of human error and emotional bias.
  2. Risk Management: The systematic nature of the index allows for better risk management through predefined entry and exit points, improving overall portfolio stability.
  3. Enhanced Returns: By taking advantage of market inefficiencies and avoiding common psychological pitfalls, a momentum index has the potential to generate superior returns compared to a purely passive investment strategy.

In conclusion, while cryptocurrency markets are inherently inefficient due to various structural and behavioral factors, these inefficiencies present opportunities for systematic investment strategies. A momentum index not only leverages these opportunities but also helps investors overcome the cognitive biases that often lead to suboptimal investment decisions. By doing so, it offers a valuable tool for navigating the volatile and rapidly evolving world of digital assets.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.

Edited by Benjamin Schiller.

Dispersion Is Defining the Current Crypto Market

One of the most interesting features of the current crypto markets is the elevated level of dispersion, or range of returns across different parts of the market.

In today’s liquid markets, sectors focused on infrastructure and technology have significantly outperformed more consumer-oriented categories like gaming, metaverse, and entertainment-related tokens.

CoinDesk sector indices’ performance since November 2021 (the peak of the last bull market) reveals this trend.

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The “range” value, which shows the difference between the maximum and minimum cumulative returns at each point in time, highlights the level of dispersion. Dispersion started high in the fourth quarter of 2021 due to a surge in culture and entertainment-related developments. It then dropped in 2022 as the market collapsed, correlations rose, and assets largely traded in sync.

However, dispersion has been rising since 2023, picking up meaningfully in the fourth quarter of last year, with Currencies and Smart Contract Platforms (infrastructure) breaking away from the rest of the market. In 2024, dispersion is at a high over this period, with tokens in the Culture & Entertainment sector continuing to draw down, while BTC, ETH, and other smart contract platform tokens are outperforming.

Take a few examples to illustrate this last point. The overall market’s current maximum drawdown (using the CoinDesk Market Index) was -33% over this period. Compare that to some of the largest consumer tokens in the Gaming and Culture & Entertainment sectors, including Axie Infinity (game), Decentraland and The Sandbox (metaverses), and Apecoin (token associated with the NFT collection Bored Ape Yacht Club). These tokens’ maximum drawdowns were -96%, -94%, -96%, and -96% respectively. They have not participated in the market’s recovery this cycle.

Growth of $1: Crypto market vs select consumer tokens

Another way to view dispersion is through the rolling 30-day average of the daily standard deviation of returns across the CoinDesk sector indices. Since the fourth quarter of last year, sector dispersion has mostly been above average. This elevated level of dispersion indicates that the market is no longer moving in unison, and individual sectors are experiencing different growth trajectories based on their underlying fundamentals and investor interest.

Moving 30 Day Average of Sector Dispersion

To delve deeper, we examine the number of billion-dollar-valued tokens in each sector (sectors are defined by Hack VC) as of five years ago compared to today. In 2019, Currencies dominated the market: BTC and BTC competitors. Today, half of the tokens are in the infrastructure sector (layer 1 and layer 2 blockchains). This sector has seen massive growth over the past five-plus years. We also see new sectors emerging. AI, for example, is a relatively new part of the market that brings together two of the most exciting emerging technologies: crypto and AI. While there is a lot of hype and promise, real benefits exist today. In the next five years, we expect additional sectors and sub-sectors will emerge.

Comparing the percentage of Tokens Worth over $1B in Valuation

This dispersion and development of new sectors over time is positive for active managers. It indicates growing market sophistication, with value being rewarded and fundamentals becoming increasingly important. Dispersion also offers significant opportunities for generating alpha. It makes it easier for active managers with alpha to outperform the market, though it also increases the risk of underperformance without a strong strategy.

In this environment, investors must be more selective and knowledgeable about the sectors and projects they invest in. Active management becomes crucial as the market rewards those who can identify and capitalize on trends. These markets are also particularly favorable for investors with a deep understanding of technological advancements and the ability to discern long-term value from short-term hype.

Disclosure

The information herein is for general information purposes only and does not, and is not intended to, constitute investment advice and should not be used in the evaluation of any investment decision. Such information should not be relied upon for accounting, legal, tax, business, investment, or other relevant advice. You should consult your own advisers, including your own counsel, for accounting, legal, tax, business, investment, or other relevant advice, including with respect to anything discussed herein.

This article reflects the current opinions of the author(s) and is not made on behalf of Hack VC or its affiliates, including any funds managed by Hack VC, and does not necessarily reflect the opinions of Hack VC, its affiliates, including its general partner affiliates, or any other individuals associated with Hack VC. Certain information contained herein has been obtained from published sources and/or prepared by third parties and in certain cases has not been updated through the date hereof. While such sources are believed to be reliable, neither Hack VC, its affiliates, including its general partner affiliates, or any other individuals associated with Hack VC are making representations as to their accuracy or completeness, and they should not be relied on as such or be the basis for an accounting, legal, tax, business, investment, or other decision. The information herein does not purport to be complete and is subject to change and Hack VC does not have any obligation to update such information or make any notification if such information becomes inaccurate.

Past performance is not necessarily indicative of future results. Any forward-looking statements made herein are based on certain assumptions and analyses made by the author in light of her experience and perception of historical trends, current conditions, and expected future developments, as well as other factors she believes are appropriate under the circumstances. Such statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict.

Edited by Benjamin Schiller.

The Protocol: Ethereum ETFs Aren’t Blockchain, but Buyers Ape In

We’re headed to the Bitcoin Nashville conference this week and looking forward to a lot of deep discussions about building on the original blockchain – as well as hearing what former President Donald Trump has to say. (We understand the security will be quite tight.) I’ll be moderating a panel at a side event examining how Bitcoin DeFi scales. We’re aiming to get some good photos for next week’s issue.

This week:

  • Ethereum spot ETFs haul in net $107M on first day – with big (Grayscale) asterisk.
  • Recap of the $230M WazirX hack.
  • Feature: Alkimiya – an Ethereum-based protocol to hedge Bitcoin fees.
  • $80M+ of blockchain project fundraisings: Caldera, Bitlayer Labs, NPC Labs, Zivoe, Chainbase, Allium Labs

Network news

The blockchain sleuth ZachXBT posted a visual of his early efforts to trace the flow of funds after the WazirX hack. (ZackXBT/X)

ETH ETF LAUNCH: Newly approved spot Ethereum ETFs started trading on Tuesday, hauling in a net $107 million of fresh investment – including $484.1 million of outflows from the Grayscale Ethereum Trust (ETHE), and $590.9 million of inflows into vehicles launched by managers including BlackRock, Fidelity and Bitwise. While analysts have predicted a far-lower uptake for the new funds than bitcoin spot ETFs that started trading about six months ago, Bloomberg analyst James Seyffart described the first day of trading for the Ethereum ETFs as “very solid.”

BOOTY OR BOUNTY? A $230 million exploit of the Indian crypto exchange WazirX got blockchain sleuths pointing fingers at North Korea-linked hackers, and various parties blaming each other for the security lapse. The funds were allegedly stolen from a WazirX multisignature wallet, or “multisig“– one that requires two or more private keys to execute a transaction. “Despite us taking all necessary steps to protect the customer assets, the cyber attackers appear to have possibly breached such security features, and the theft occurred,” the exchange wrote in a preliminary report. WazirX identified the multisig wallet’s provider as crypto custody firm Liminal in a follow-up post, hours after the initial confirmation. It later deleted the post, and Liminal said in a blog post that “there is no breach in Liminal’s infrastructure, wallets and assets.” The loot included shiba inu (SHIB) tokens along with ETH, MATIC, PEPE and USDT. A gallows-humor-meets-geekdom moment arrived when blockchain records appeared to show that the exploiter had created a token called “WazirX Hacker Sends His Regards.” The exchange filed a police complaint, and the matter is under investigation. But as of Friday, tokens on WazirX were trading at deep discounts to their prices on other global crypto exchanges, a sign of immense local selling pressure. Earlier this week WazirX announced that it would pay a bounty of as much as $23 million, or 10%, to the hacker in exchange for the return of the funds. On a running blog post chronicling the incident day-by-day, WazirX updated that it’s now “actively contacting projects associated with the stolen tokens to seek their support in the recovery process.” One poster on X responded by noting that the looter had apparently already “converted almost all of the stolen crypto to ETH,” inquiring, “Don’t you think it’s too late?

‘COPYCAT WEBSITE’ Decentralized crypto-exchange giant dYdX said Tuesday that the website for dYdX v3, an older version of its trading platform, was “compromised,” and warned users against visiting dydx.exchange until further notice. “The attacker has taken over the v3 domain (dydx.exchange), and deployed a copycat website that when users connect their wallets to it, it asks them to approve via PERMIT2 transaction to steal their most valuable token,” a member of dYdX’s community team said in the project’s Discord server. The attack did not appear to impact funds traders already have on dYdX, as only the web domain, and not the underlying smart contracts, appear to be being targeted, according to statements in dYdX’s Discord server. The larger dYdX v4 venue (which last week saw $6 billion in trading volume) was said to be unaffected.

  • Vitalik Buterin argued against supporting candidates just based on their “pro-crypto” stances.
  • Ryan Selkis stepped down as CEO of Messari, the crypto data and research firm he co-founded, following a series of inflammatory tweets about politics, civil war and his desire for an immigrant to get expelled from the country.
  • With U.S. Vice President Kamala Harris securing widespread endorsements as the presumptive replacement for Joe Biden atop the Democratic 2024 presidential ticket, crypto lobbyists are scrambling to assess whether she might look for a “reset” in policies toward digital-asset regulation. (Her memecoin soared to an all-time high, fwiw.)

Ethereum-Based Protocol Alkimiya Creates Market for Hedging Bitcoin Fees

Akimiya founder and CEO Leo Zhang

Akimiya founder and CEO Leo Zhang (Alkimiya)

Blockchain protocol Alkimiya launched, introducing a tool that allows users to hedge against volatile Bitcoin transaction fee rates.

The hardest part might be getting hardline bitcoiners – sometimes known as “maximalists” or “maxis” – to use the new protocol, since it’s built atop the Ethereum blockchain. Target users for the platform, described as a “blockspace markets protocol,” could include traders, mining pools and foundations.

“While we recognize that Bitcoin maxis may initially hesitate to use an Ethereum-based solution, our primary focus is on creating the most robust and efficient marketplace for trading Bitcoin transaction fees,” Alkimiya founder and CEO Leo Zhang said in an email interview with CoinDesk.

There may be little doubt about the usefulness of a solution like Alkimiya’s: In April, when Casey Rodarmor’s Runes protocol for minting fungible tokens atop Bitcoin went live, the Bitcoin network fee rate shot up to $125 per transaction from $4.80.

Protocol Village

Top picks of the past week from our Protocol Village column, highlighting key blockchain tech upgrades and news.

Ephemera Kit

Ephemera Kit (Inscribing Atlantis)

1. Inscribing Atlantis, led by Hell Money podcast co-host Erin Redwing, announced that its “Ephemera” auction will be launching for the first time at the Bitcoin Nashville conference, and will run from July 18 through Bitcoin block height 854,784 (approx. Aug. 2). According to the team: “This project ties Bitcoin block time to astronomical time by inscribing planetary ephemeris data on satoshis (the smallest unit of Bitcoin) from the exact moment they were mined. Through Ephemera, participants can select dates they want to memorialize on Bitcoin, creating a unique digital archaeological record. This initiative explores the concept of Deep Time, aiming to leave a lasting legacy by linking our digital age with the cosmos.” The planetary data is inscribed using Bitcoin’s Ordinals protocol, created by the independent Bitcoin developer Casey Rodarmor, who is Redwing’s fellow co-host on Hell Money. “It’s basically my gamified way of trying to get people to participate in my community archeological project,” Redwing told CoinDesk in an email.

2. Hemi Labs announced the Hemi Network, “a modular layer-2 blockchain network focused on delivering superior scaling, security, and interoperability between Bitcoin and Ethereum.” According to the team: “Hemi Labs was co-founded by early Bitcoin core developer Jeff Garzik and blockchain security pioneer Max Sanchez, who was the principal developer behind Hemi’s unique method for inheriting Bitcoin’s unique security characteristics – the Proof-of-Proof (“PoP”) consensus protocol.”

3. Avail, a blockchain “data availability” project spun out of Polygon in early 2023 that has raised $75 million of funding, is finally launching. The project’s main network was set to go live on Tuesday, along with a native token, AVAIL, according to a press release. “The launch of Avail DA marks the first step in Avail’s mission to give developers the tools they need to boost blockchain scalability, enhance liquidity and provide seamless usability across any blockchain ecosystem,” according to a press release.

4. Lightning Labs announced the release of Taproot Assets on Bitcoin’s Lightning Network, claiming to be the “first multi-asset Lightning protocol on mainnet.” According to a blog post by Lightning Labs’ Ryan Gentry: “With this release, assets can be minted on bitcoin and sent via the Lightning Network instantly for low fees. As such, we now have the ability to make bitcoin and Lightning multi-asset networks in a scalable manner anchored in bitcoin’s security and decentralization. This step forward will give users access to the world’s currencies on an open, interoperable payments network while routing through bitcoin liquidity, making bitcoin the global routing network for the internet of money.”

5. Base, the layer-2 network backed by the publicly traded crypto exchange Coinbase, said that fault proofs are now live on the Base Sepolia testnet. According to a blog post: “Today’s launch paves the way for bringing fault proofs securely to mainnet, and completing other milestones to reach Stage 1 decentralization… In Stage 1 decentralization, or ‘limited training wheels,’ the chain state is verified with fault proofs but there is an override mechanism that can act in the event of a bug. The override mechanism requires consensus from both chain operators and a designated number of external stakeholders, which reduces the dependence on chain operators alone.”

Money Center

Fundraisings

  • Caldera, a “rollup-as-a-service” platform that helps developers quickly spin up layer-2 blockchains, has closed a $15 million Series A funding round led by Peter Thiel’s Founders Fund. CEO Matt Katz said in an interview with CoinDesk that the new funds will help him expand Caldera’s 15-person team so they can build out the Metalayer, an interoperability ecosystem meant to simplify the process of launching applications across multiple blockchains. The fundraise was led by Founders Fund, with participation from Dragonfly, Sequoia Capital, Arkstream Capital, Lattice.
  • NPC Labs, a developer looking to build a GameFi ecosystem on the Base protocol, has closed an $18 million funding round led by Pantera Capital.
  • Zivoe, a real-world asset credit protocol atop Ethereum, raised $8.35 million in their last round, aiming to broaden credit access by connecting blockchain liquidity with real-world borrowers, according to the team.
  • Data platform Allium Labs, which provides enterprise-grade blockchain data to companies like Visa, Stripe and Uniswap Foundation, has raised $16.5 million in a Series A funding round, it announced Thursday.

Data and Tokens

  • Nov. 10: OP_NEXT Bitcoin scaling conference, Boston.

Edited by Bradley Keoun.

Coinbase Asset Management Plans Tokenized Money-Market Fund, a Hot Area After BlackRock’s BUIDL Success: Sources

  • Coinbase Asset Management is creating a tokenized money-market fund, according to four people familiar with the plan.
  • Tokenization of real-world assets is a hot corner of crypto. BlackRock’s tokenized U.S. Treasuries fund quickly grabbed $500 million of assets this year.
  • Philippines Taps Blockchain
  • BlackRock CEO Predicts Tokenization Is the Future of Markets

    BlackRock CEO Predicts Tokenization Is the Future of Markets
  • Tokenization on Public Blockchains Democratizes Access: Securitize CEO

    Tokenization on Public Blockchains Democratizes Access: Securitize CEO
  • Bitcoin Bounces Back Above $20K

    Bitcoin Bounces Back Above $20K

The asset management arm of U.S.-listed cryptocurrency exchange Coinbase (COIN) is creating a tokenized money-market fund, jumping into one of the hottest crypto-powered corners of finance, according to four people familiar with the plan.

Tokenization, or representing ownership of real-world assets (RWAs) through blockchain-based products, has become one of the big trends in crypto of late. BlackRock, the world’s biggest asset manager, introduced a fund called BUIDL that holds U.S. Treasuries. That fund quickly hit $500 million of assets following its introduction in March.

For investors, tokenized funds provide numerous potential benefits, including the transparency provided by blockchain-linked assets and the possibility of greater liquidity. For issuers, there are efficiency gains.

For Coinbase Asset Management specifically, this would represent an expansion of the company’s already publicly known attempt to break into the tokenization space. In December, the company received in-principle approval from an Abu Dhabi regulator to start tokenizing traditional assets on Base, the exchange’s Ethereum scaling network.

Two of the people familiar with the matter said Coinbase Asset Management has been working with Bermuda-based Apex Group to help facilitate its tokenized fund. Apex services over $3 trillion of assets across custody, administration, depositary and managed funds.

In March 2023, Coinbase acquired One River Digital Asset Management, which led to the creation of Coinbase Asset Management.

Coinbase declined to comment. Apex Group did not comment by publication time.

Edited by Nick Baker.

Bitstamp to Start Distributing Mt. Gox Proceeds on Thursday.

Mt. Gox customers will start receiving payouts from the defunct crypto exchange on Thursday, some 10 years after the exchange succumbed to a hack.

The funds in bitcoin (BTC), ether (ETH) and bitcoin cash (BCH) were received from the Mt. Gox trustees today, crypto exchange Bitstamp said in an email.

  • DCG Reaches In-Principle Deal With Genesis Creditors
  • Crypto Custodian Prime Trust Files for Bankruptcy

    Crypto Custodian Prime Trust Files for Bankruptcy
  • Celsius Can Start Converting Altcoins to Bitcoin, Ether as of July 1, Judge Says

    Celsius Can Start Converting Altcoins to Bitcoin, Ether as of July 1, Judge Says
  • FTX’s Bankruptcy Fees on Track to Be 'Very Expensive', Court Examiner Says

    FTX’s Bankruptcy Fees on Track to Be ‘Very Expensive’, Court Examiner Says

U.K. customers will not be included in the first set of distributions, Bitstamp said.

Bitcoin Rewards App Fold Eyes Nasdaq Listing Via $365M SPAC Deal

  • Fold offers a cashback debit card which provides bitcoin rewards instead of traditional rewards one would expect from other products.
  • The company is aiming to go public through a merger with SPAC Emerald Acquisition.

Bitcoin rewards app Fold is planning a public listing on Nasdaq through a merger with special-purpose acquisition company (SPAC) Emerald Acquisition Corp. (EMLD).

  • SEC’s Gensler Was ‘Consistent’ Despite Being ‘Fried Like a Chicken’ Before the Senate: Kevin O’Leary
  • Bitcion Mining Is 'Real Estate' Play: Kevin O'Leary

    Bitcion Mining Is ‘Real Estate’ Play: Kevin O’Leary
  • Kevin O'Leary on Institutional Demand for Spot ETH ETFs

    Kevin O’Leary on Institutional Demand for Spot ETH ETFs
  • What's Kevin O'Leary's Best Investment Ever?

    What’s Kevin O’Leary’s Best Investment Ever?

New York-based Fold offers a cashback debit card which provides bitcoin rewards instead of traditional rewards one would expect from other related products. Fold’s cards have processed over $2 billion in volume and distributed more than $45 million worth of rewards, according to an announcement on Wednesday.

The transaction, which has been unanimously approved by the boards of both firms, will have a pre-money equity valuation of $365 million. The post-transaction entity will also have more than 1,000 BTC ($67 million) on its balance sheet.

Fold has not yet disclosed the expected closing of the merger nor the ticker it will trader under on Nasdaq.

SPACs were a popular way for crypto firms to attain public listings during the last bull cycle. However, the onset of the crypto winter in 2022 saw several muted SPACs cancelled.

It is unclear as yet whether this bull cycle will see more of such deals come to fruition. Bitcoin financial services firm Swan cancelled its SPAC plans on Monday, amid a reorganization which also saw it discontinued its managed mining unit and cut staff across several units.

Edited by Stephen Alpher.

CoinDesk 20 Performance Update: XRP and NEAR Help Push Index Upward

CoinDesk Indices presents its daily market update, highlighting the performance of leaders and laggards in the CoinDesk 20 Index.

The CoinDesk 20 is currently trading at 2303.85, up 1.4% (+31.42) since yesterday’s close.

Sixteen of 20 assets are trading higher.

Leaders: XRP (+5.6%) and NEAR (+3.3%).

Laggards: ETC (-2.0%) and UNI (-1.6%).

9am CoinDesk 20 Update for 2024-07-24 - laggards

The CoinDesk 20 is a broad-based index traded on multiple platforms in several regions globally.

Edited by Stephen Alpher.

Dakota Emerges From Stealth to Provide Bank-Like Services to Crypto Depositors

  • Dakota will offer returns based on lending through decentralized finance protocols to overcome the drawbacks of centralized lenders.
  • The company was founded by former Airbnb, Anchorage and Coinbase executives.
  • It is aimed at businesses, which will pay a monthly fee.
  • SEC’s Gensler Was ‘Consistent’ Despite Being ‘Fried Like a Chicken’ Before the Senate: Kevin O’Leary
  • Bitcion Mining Is 'Real Estate' Play: Kevin O'Leary

    Bitcion Mining Is ‘Real Estate’ Play: Kevin O’Leary
  • Kevin O'Leary on Institutional Demand for Spot ETH ETFs

    Kevin O’Leary on Institutional Demand for Spot ETH ETFs
  • What's Kevin O'Leary's Best Investment Ever?

    What’s Kevin O’Leary’s Best Investment Ever?

Dakota, which describes itself as a crypto bank that is attempting to right the wrongs of centralized lenders such as Celsius and BlockFi, emerged from stealth on Wednesday.

The company, which was founded by a group of former Airbnb, Anchorage and Coinbase Custody executives, offers treasury management, lending and payment services to businesses that pay a monthly fee and gain access to a platform that allows them to lend out their deposited crypto across a selection of decentralized finance (DeFi) protocols.

The model differs from earlier, centralized crypto lenders such as Celsius Network, which filed for bankruptcy in July 2022, and BlockFi, which followed suit four months later, said CEO Ryan Bozarth. In those cases, the companies stood at the center of the process: receiving deposits, lending them out and taking a fee from the interest payment.

At Dakota, the clients make the lending decision and choose which decentralized finance (DeFi) protocol they wish to use. The monthly fee ranges between $150 and $1,500, and clients who choose to lend their deposits can earn returns of up to 9%. Stablecoin holders will receive a yield based on U.S. Treasuries.

“The biggest difference for us is that we only lend out through DeFi protocols and so there is no centralized lending,” Bozarth, who was previously the CEO at Coinbase Custody, said in an interview. “DeFi protocols there is, admittedly, some risk with that, but it’s at least a transparent risk, it’s smart contract risk.”

While Dakota appears to be a novel idea that is solving a problem, the crypto industry is still tending to the scars earned during the collapse of companies including Celsius, BlockFi and FTX.

Celsius filed for bankruptcy in July 2022 despite having $12 billion in assets under management two months prior. The company’s plight was caused by setting an overambitious yield of 17%, which led the firm to use newer and riskier blockchains like Terra. The eventual bankruptcy, like BlockFi’s, left hundreds of thousands of creditors in the dark over whether their deposited funds would ever be returned.

With DeFi, there’s a greater degree of transparency, Bozarth said, pointing to DeFi lending protocol Aave.

“If you look at the last downturn, [Aave] performed perfectly as everyone knew there was nothing to negotiate with, you will be liquidated if you hit this marker and so they worked phenomenally well whereas centralized lenders did not.”

Dakota also caters to the fiat currency market dollar transfers, deposits and withdrawals. These services are designed for treasury-management purposes, with all dollars deposited to the platform being backed by U.S. Treasuries.

One of the largest hurdles for U.S.-based crypto firms is building a product that can comply with varying levels of regulation across jurisdictions. Last year Coinbase (COIN) had to roll out an offshore sector of its company due to restrictions in the U.S.

Dakota’s dollar-based services typically require money transmitter licenses (MTL) in every state. The company will bypass that in the U.S. by using a third party that has an MTL where needed. In Europe, it plans to secure a Virtual Asset Service Provider License (VASP) and each region will have its own regulatory and compliance requirements, some of which will be built in-house by Dakota and third parties will be used for the rest.

Edited by Sheldon Reback.

Rollup-in-a-Box Startup Caldera Raises $15M From Peter Thiel’s Venture Fund

Caldera, a “rollup-as-a-service” platform that helps developers quickly spin up layer-2 blockchains, has closed a $15 million Series A funding round led by Peter Thiel’s Founders Fund.

CEO Matt Katz said in an interview with CoinDesk that the new funds will help him expand Caldera’s 15-person team so they can build out the Metalayer, an interoperability ecosystem meant to simplify the process of launching applications across multiple blockchains.

Today, Caldera provides a simple interface for launching layer-2 “rollup” chains that record data to Ethereum but offer quicker and cheaper transactions. The Caldera product suite plugs into popular rollup-building frameworks like those from Arbitrum, Optimism and Polygon; developers can select a rollup ecosystem and then swap out components to support whatever use case they’re building for.

“Many blockchain projects face growing challenges in deploying and maintaining rollups due to the high costs, slow processes and risks associated with hiring protocol and site reliability engineers,” Caldera explained in a statement. “Caldera solves this by enabling projects to deploy a rollup with a single click, eliminating the need for an in-house engineering team.”

Caldera’s Series A round included participation from Dragonfly, Sequoia Capital, Arkstream Capital and Lattice. It brings the total funding of the firm, which was founded in 2022, to $25 million.

The new fundraising comes amid a period of rapid expansion for Ethereum’s layer-2 ecosystem, with rollup chains rapidly outpacing the layer-1 Ethereum chain in terms of overall network activity. “Everybody’s launching a chain right now,” said Katz.

Builders have raced to respond to the demand from Ethereum’s layer-2 boom: Early rollup teams, like those behind the popular Arbitrum and Optimism chains, have released readymade templates for developers to build their own interoperable blockchains. New “data availability” layers, like Celestia and EigenDA, have emerged to warehouse the massive troves of transaction data generated by all the new blockchains.

More recently, as liquidity has become fragmented between myriad disparate layer-2 ecosystems, Polygon’s AggLayer and the Elastic Chain from zkSync have launched to help capital flow more efficiently between different networks.

Katz says Caldera and its new Metalayer initiative are designed to complement the growing world of layer-2 infrastructure components rather than compete with them head-on.

“If you’re developing for multi-chain, you’re developing for a million individual chains all at the same time,” he explained. “We want Metalayer to be an entry point for folks who are developing apps and developing infrastructure to basically get deployed onto all Caldera chains – and hopefully all rollups on Ethereum – at the same time.”

Crypto Exchange D8X to Bring Tool for Trading Polymarket Contracts With Leverage

  • Decentralized exchange D8X is working on building a perps market that will allow users to trade Polymarket contracts with leverage.
  • D8X estimates that this will launch on mainnet in August.

D8X, a decentralized exchange (DEX) for crypto perpetuals said it’s working on bringing leverage to Polymarket’s prediction markets.

D8X launched on Polygon’s zkEVM, a zero-knowledge (ZK) rollup scaling solution, in January this year after closing a $1.5 million pre-seed round in August 2023. It then expanded to OKX’s X Layer in May and Arbitrum in June.

In an interview with CoinDesk, D8X co-founder Caspar Sauter explained that the system works through a mechanism that fetches spot prices from Polymarket using oracles, similar to traditional perpetual contract approaches, which use commodities prices.

An example of trading a prediction market on D8X’s trading platform (D8X)

Sauter believes leverage is important in prediction markets because it enhances trading efficiency and potential gains.

Leverage helps with risk management by allowing traders to hedge their positions more effectively.

Sauter explains that leverage enables users to “temporarily hatch away uncertainty” by taking positions that offset their existing bets, marrying their prediction market bets to existing crypto positions.

For example, if a trader holds a long position on a prediction market and becomes uncertain about the outcome, they can open a short position with leverage to mitigate potential losses.

“You can use that for risk management purposes, which is also the key use case of these types of products in traditional finance.”

The wide availability of leverage has been a prior concern in crypto markets. In 2021, most major crypto exchanges pledged to reduce the leverage available, with many moving it down from 100x to 20x.

Sauter explained that with D8X, the maximum leverage available depends on the state of the market. This approach, he said, prevents destabilization by ensuring that leverage limits are in line with current market dynamics, thereby maintaining stability and preventing any single trader from disproportionately affecting liquidity.

After all, derivative markets are orders of magnitude larger than spot markets, Sauter says that introducing leverage could enhance market efficiency rather than deplete liquidity.

But for all this talk of market efficiency, in the end, leverage lets Polymarket’s core traders, those with conviction, have a higher return on their beliefs, which is something that the market has been asking for.

“You can use less capital to make a potential larger gain compared to what you can do on the spot side,” he said. “People that like to bet, and like to bet hard.”

D8X doesn’t have an exact date for a mainnet launch of leveraged prediction market trading, but Sauter said they are targeting August.

Edited by Parikshit Mishra.

Riot Platforms’ Acquisition of Block Mining Makes Sense, JPMorgan Says

  • Riot’s acquisition of rival bitcoin miner Block Mining makes sense, the report said.
  • JPMorgan noted that Riot will have the second-largest capacity of the U.S.-listed bitcoin miners.
  • The bank has an overweight rating on Riot stock with a $12 price target.

Riot Platform’s (RIOT) acquisition of rival bitcoin {{BTC}} miner Block Mining makes sense because it diversifies the company’s power supply and increases its capacity to over 2 gigawatts (GW), JPMorgan (JPM) said in a research report on Wednesday.

Riot will have the second-largest capacity among U.S. listed bitcoin miners following the acquisition, and the deal also “serves as the latest appraisal of undeveloped power assets,” analysts Reginald Smith and Charles Pearce wrote.

Still, the announcement is surprising, given the expansion potential at Riot’s Corsicana site in Texas, the report said.

The Block Mining acquisition is not the company’s only attempt at M&A in recent months. Riot recently dropped a proposal to buy peer Bitfarms (BITF) and is looking to overhaul that target’s board before engaging in further takeover attempts.

JPMorgan notes that the Block Mining deal will add 1 exahash per second (EH/s) to Riot’s hashrate, a measure of its computational power, and may contribute up to 16 EH/s by the end of 2025. The hashrate is a proxy for competition in the industry and mining difficulty.

The bank has an overweight rating on Riot shares with a $12 price target. Riot was trading 0.5% higher at $11.65 in early trading on Wednesday.

Broker Bernstein said Riot was best suited to consolidate the bitcoin mining sector, in a report in May.

Edited by Sheldon Reback.

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