Circle research

Weekly Crypto Recap 2/1-2/7

Know & go

  • Top story of the week: Abra will provide users the ability to gain synthetic exposure to traditional assets via bitcoin.
  • Three things to know: (1) The lightning torch has been passed to over 150 people in over 38 countries, including Jack Dorsey (2) Over $250 million in loans was originated on open lending protocols in 2018 (3) Facebook acquired its first blockchain startup, Chainspace.
  • Chart of the week: This week, we looked at 30D transaction counts on certain open finance applications (custom underlying data provided by Mosaic.io). Top three dapps by 30D transaction count were KEY, LRC, and DAI.
  • Market snapshot: Total crypto market capitalization is around $116 billion at press time, up 1.7% w/w. BTC is trading at $3505 (up slightly w/w), ETH is at $112 (down 1.2% w/w). BVOL (the rolling 30-day annualized Bitcoin volatility as calculated by BitMEX) is 39%, the lowest so far this year, vs. 43% last week.
    (As of 2/8 11:10AM ET)

Weekly market snapshot

Chart of the week

diagram

This week, Mosaic provided data that allowed us to determine 30D transaction count on certain “open finance” projects. The top open finance apps by transaction count are KEY, LRC, and DAI.

Top Story

Abra to provide exposure to stocks via bitcoin

This week, Abra announced that users in 155 countries will soon be able to use bitcoin to gain synthetic exposure to the price movements of 50 traditional assets such as stocks (incl. Apple, Facebook, Google and Amazon), commodities, and indexes and ETFs via crypto-collateralized contracts. This is the same process Abra uses to give users exposure to 30 crypto assets and 50 fiat currencies. The minimum investment size is $5, allowing for fractional ownership of different assets.

Abra's crypto-collateralized contracts peg the value of whatever asset the user chooses, to bitcoin held in the contract. This means, if the price of the underlying asset goes up, the amount of bitcoin in the contract will go up to reflect the new price, and vice versa if the price goes down, essentially creating a synthetic asset on the back end. Users must first deposit fiat into the wallet, which is automatically converted to the equivalent amount of bitcoin, which they can use to gain exposure to traditional assets. As users don't own the underlying assets, Abra claims it is not subject to the same regulatory requirements as other fintech investing apps, though The Block reports that the offering could be deemed a derivative by regulators.

Abra takes on the risk of the value of the underlying asset rising relative to the price of bitcoin. Abra has a "proprietary automated hedging system" specific to each asset that eliminates investment risk so that customers can always be made whole. Abra's CEO told Forbes that their hedging system successfully hedged away all price risk for all crypto asset and fiat currency transactions worth hundreds of millions of dollars last year. If all else fails, Abra said it has insurance as back up. Another feature is that Abra is non-custodial. Abra does not hold users' private keys, which means it does not have access to user funds.

In the official blog post, Bill Barhydt, the CEO, said his vision "was to create a single smartphone app that would eventually offer any financial service to any person in the world". Through this functionality, people who don't have access to broker-dealers or banking services can get synthetic exposure to traditional markets.

In other news

  • In 2018, over $250 million worth of loans and borrows was routed through open lending protocols, Compound, Dharma, dYdX and MakerDAO. Source. Separately, Celsius Network lent out $600 million in fiat since it launched in July 2018. Source.
  • Crypto twitter is currently engaged in the passing of the "Lightning torch" that started with twitter user hodlonaut. The premise is that each person who receives the lightning payment, adds 10,000 satoshis and passes it on to the next person, creating a "LN trust chain". This week, Matt Odell passed the torch to Jack Dorsey, who accepted it and passed it on to Elizabeth Stark. Source.
  • People have been receiving emails from a fake account posing as Bakkt, claiming the platform is launching on March 12 and raising another $50 million. A link redirects readers to a website to contribute. The real Bakkt has not set a concrete launch date and responded by saying it would not send out correspondences like that. Source.
  • Binance DEX built on top of Binance Chain is expected to go live in the next few weeks. Binance Chain is an implementation of Cosmos' Tendermint, though it has taken out certain features (like smart contract functionality) to allow for greater throughput. Projects will be able to run token sales on Binance Chain and raise funds in BNB, which will be converted from an ERC-20 token to the native token on Binance Chain. Source.
  • Coinbase users in the EU or a European Free Trade Association country can now withdraw their fiat to PayPal instantly for free. Coinbase rolled out fiat withdrawals to PayPal in the US last month. Source.
  • Lolli launched a new partnership with Gap brands that allows users shopping online at Gap merchants to earn rewards in bitcoin. Source.
  • Airswap partnered with Wyre to allow people to convert fiat to crypto (ETH) within their wallet without ever having to deposit funds on a centralized exchange. Source.
  • Zcash announced in a blog post that a counterfeiting vulnerability discovered by a cryptographer of the Zcash Foundation in March 2018 was remedied in the October 2018 Sapling upgrade. Zcash believes that no one else was aware of the vulnerability. Source.

Crypto funding

  • Facebook acquired its first blockchain startup, Chainspace, which is described as a sharded smart contracts platform that is programming language agnostic and offers privacy features through zero knowledge tech. Source.
  • Kraken acquired London-based Crypto Facilities, the first company to list futures on Bitcoin, Ethereum, Bitcoin Cash, Litecoin, and Ripple. The CME also uses Crypto Facilities as its index provider to calculate the CME CF Bitcoin reference rate. Source.
  • Dharma raised $7 million in a Series A round led by Green Visor Capital, including Polychain, Passport, Y Combinator, and Coinbase Ventures to build Lever, a platform to facilitate p2p crypto lending. There are apparently 400 firms on waitlist to use the platform. Source.
  • IDEO CoLab announced a new program to invest in and co-create with early stage distributed web startups. Source.

Global regulatory roundup

  • Venezuela published new legislation requiring crypto service providers (exchanges, miners, etc.) to register with Sunacrip, the country's crypto regulatory body, or face penalties or shut downs for non-compliance. Source.
  • In an interview, SEC commissioner Robert J. Jackson said he thinks an ETF could eventually satisfy the standards the SEC lays out regarding market surveillance, fraud, and manipulation. Source.
  • The Isle of Man has created a regulatory sandbox for high quality crypto and blockchain focused companies to test their platforms. Source.

What we’re reading

What we’re listening to

Circle in the news

CENTRE released the first ever State of USDC report highlighting that over 5.5 billion USDC has been transferred on-chain since launching in late-September.

Where we’ll be in February

  • M-1 Blockchain Asset Management Conference, 2/7-2/8, Zug, CH
  • FTAHK Launch of Hong Kong Blockchain Ecosystem Map, 2/15, Hong Kong
  • Oppenheimer Blockchain Summit, 2/20, New York, NY
  • FSDC Practitioner Speaker Series, 2/26, Hong Kong
  • WorldBoston Great Decisions: Cyber Conflicts and Geopolitics, 2/27, Boston

If you have any thoughts or questions, please reach out at [email protected].

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