Circle research

Weekly Crypto Recap 1/25-1/31

Know & go

  • Top story of the week: Wrapped BTC (WBTC) went live on the Ethereum mainnet this week.
  • Three things to know: (1) Fidelity Digital Assets could launch its Bitcoin custody solution in March (2) The CBOE re-submitted VanEck/SolidX Bitcoin ETF proposed rule change (3) TokenSoft launched its beta enterprise custody solution for security tokens and cryptocurrencies.
  • Chart of the week: This week, we looked at median daily active addresses (over 30D) on certain open finance applications (custom underlying data provided by Mosaic.io).
  • Market snapshot: Total crypto market capitalization is around $114 billion at press time, down 4.6% w/w. BTC is trading at $3479 (down 3% w/w), ETH is at $107 (down 7.7% w/w). BVOL (the rolling 30-day annualized Bitcoin volatility as calculated by BitMEX) is 43%, the lowest so far this year, vs. 49% last week.
    (As of 2/1 10:30AM ET)

Weekly market snapshot

diagram diagram diagram diagram diagram diagram diagram diagram

This week, Mosaic provided us with data that allowed us to determine the median daily active addresses (over 30 days) on certain “open finance” projects. The most popular open finance app by median active address count is MakerDAO's DAI.

Chart sources: coinmarketcap.com, coinmetrics.io, mvis-indices.com/indices/digital-assets

Top Story

WBTC goes live

Wrapped BTC (WBTC) went live on the Ethereum mainnet on January 30, 2019. WBTC is an ERC-20 token backed by an equivalent amount of bitcoin reserves, held in a cold storage vault. WBTC has a similar design to fiat backed coins and its BTC reserves can also be verified on-chain. WBTC was announced and jointly created by BitGo (the custodian that holds the reserves), Kyber Network (decentralized exchange) and REN (decentralized dark pool).

The motivation behind WBTC was to bring Bitcoin's liquidity to Ethereum-based DEXs and financial dApps and make it easy for wallets, exchanges, and payment services providers to access BTC without connecting to two separate blockchains.

In order to receive WBTC, users must undergo a KYC/AML process performed by a "merchant". The user then sends BTC to the merchant, who sends the BTC to the custodian, who sends the equivalent amount of WBTC to the Wrapped Token Contract, which the merchant finally sends to the user.

The merchant initiates the minting (creation) and burning (redemption) process and the custodian (BitGo) performs the function. BitGo also holds the equivalent amount of BTC backing WBTC in circulation in cold storage.

In WBTC jargon, “merchants” are entities that initiate the process of minting and burning tokens. Starting off, the eight “merchants” that will be able to perform this function consist of Airswap, Dharma, Ethfinex, GOPAX, Kyber Network, Prycto, REN, and Set Protocol.

According to the official website, the WBTC project currently has 26 total community members (many of which are in ethereum’s "open finance" ecosystem). There is also a WBTC DAO that will govern WBTC membership via a multi-signature contract. At the time of writing, 72 WBTC (worth ~$250K at the time of writing) has been minted.

In other news

  • Fidelity Digital Assets' Bitcoin custody solution is slated to launch in March 2019. Ether custody could be next. Source.
  • According to a TechCrunch report, Facebook has been paying users to track their phone and web activity using a "Facebook Research" app. The app gives them access to private messages, media shared on messaging apps, browsing history, and location data. Apple has since shut down the app on iOS devices but it continues to run on Android. Source.
  • Seven crypto exchanges including Gemini and SBI Virtual currency have passed the test required to use Nasdaq's proprietary surveillance technology that the exchange uses to ensure it is free from fraud and manipulation. The others have not been publicized. Source.
  • Genesis originated $1 billion in cumulative loans over 10 months, with $500 million originated in 4Q18 alone. Source.
  • Binance partnered with Simplex to allow users to buy crypto, specifically bitcoin, ether, litecoin and XRP, with credit cards. However, credit card companies could pose limitations. Source.
  • TokenSoft launched the beta version of an enterprise custody solution for security tokens and cryptocurrencies. Source.

Crypto funding

  • Multicoin led a $2.5 million seed round in The Graph, a company that makes it easy for users to access blockchain data using GraphQL (open source Facebook software). Other participants include Compound VC, CoinFund, DTC and Kilowatt. Source.
  • Healthcare firm Agenus announced that it is launching a $100 million security token offering (BEST) that entitles investors to a portion of potential future US sales. Source.
  • BitTorrent raised $7 million in an ICO conducted on Binance Launchpad in less than 15 minutes. Source.
  • Staked raised $4.5 million in a seed round led by Pantera Capital. Source.
  • Veil acquired Predictions.Global, a website that tracks Augur markets. Source.

Global regulatory roundup

  • The CBOE has submitted the VanEck/SolidX Bitcoin ETF proposed rule change again this week. Source.
  • Kik plans to challenge an SEC enforcement action that the token it sold in an ICO in 2017 (KIN) is a security. Source.
  • According to Coindesk, Iran could ban the use of unapproved cryptocurrencies as a means of payment according to a report titled "Obligations and Rules Regarding Cryptocurrencies". Source.
  • Saudi Arabia and the UAE jointly launched a digital currency trial aimed at improving the settlement of payments between the two countries. Source.

What we’re reading

What we’re listening to

Circle in the news

  • The Block’s Mike Dudas interviewed Circle CEO, Jeremy Allaire, during the World Economic Forum in Davos, Switzerland to discuss the company’s growth over the past few years and how the firm is positioning itself going into 2019.
  • ICYMI, we released our first Crypto Retrospective report last week, reviewing last year's top stories, market performance, and critical blockchain and token data insights. The report also analyzes key crypto trends for 2019 including stablecoins, security tokens, open finance and institutional crypto.
  • Three new companies joined the USDC ecosystem, Securitize, DizPay, and Nitrogen.

Where we’ll be in February

  • M-1 Blockchain Asset Management Conference, 2/7-2/8, Zug, CH
  • 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].

Disclosures

Reports, market insights, and other information (“Information”) provided by Circle Internet Financial Limited (“Circle”) or its affiliates have been prepared solely for informative purposes and should not be the basis for making investment decisions or be construed as a recommendation to engage in investment transactions or be taken to suggest an investment strategy in respect of any financial instruments or the issuers thereof. Information has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research under the Market Abuse Regulation (EU) No 596/2014. Information provided is not related to the provision of advisory services regarding investment, tax, legal, financial, accounting, consulting or any other related services and is not a recommendation to buy, sell, or hold any asset. Information is based on sources considered to be reliable, but not guaranteed, to be accurate or complete. Any opinions or estimates expressed herein reflect a judgment made as of the date of publication, and are subject to change without notice. Trading and investing in digital assets involves significant risks including price volatility and illiquidity and may not be suitable for all investors. Circle and its affiliates trade and hold positions in digital assets and may now or in the future trade or hold a position in an asset that is the subject of Information provided. As a result, Circle or its affiliates may be subject to certain conflicts of interest in connection with the provision of Information. Circle will not be liable whatsoever for any direct or consequential loss arising from the use of this Information.