Circle research

Weekly Crypto Recap 10/26-11/1

Know & go

  • This week, we celebrated the 10th anniversary of the Bitcoin whitepaper (10/31). Go read it here if you haven’t already.
  • Three things to know: (1) Regulators around the world made moves on crypto regulation (2) Bitcoin volumes hit a YTD low, accompanied by continued declines in volatility, and (3) more crypto companies (Starkware and Dapper Labs) raised funds in traditional equity rounds.
  • Total crypto market is down 1.4% w/w. 64 of the top 100 by market cap are trading up in the last 24 hours. BTC volatility continues to remain low - .BVOL (the rolling 30-day annualized volatility as calculated by Bitmex) fell below 25% on 10/27 and is now at 23.3%.

Weekly market snapshot

diagram diagram diagram diagram diagram diagram

Chart sources: coinmarketcap.com, sifrdata.com, Circle

Top Stories

Regulators around the world commented and made progress on crypto regulation this week. Here are some highlights.

Global. This week, Global Digital Finance (GDF), based in London, New York, and Hong Kong, announced that Circle, Coinbase, ConsenSys, DLA Piper, Diginex, Hogan Lovells, and R3 have joined as founding members. GDF is an industry body that aims to serve as a global self regulatory authority, provide the industry with a robust set of standards to follow, and grow membership of firms who want to follow the Code of Conduct. In light of the GDF news this week, Messari provided some great commentary on the difficulties in regulating the crypto industry.

United Kingdom. The cryptoasset task force led by the Financial Conduct Authority in the UK published a report identifying key risks related to cryptoassets, including harm to consumers, market integrity, use of cryptoassets for illicit activity, and potential future threats to financial stability. To mitigate these risks, the taskforce will provide guidance on (1) which cryptoassets do and don’t fall within the regulatory jurisdiction by 2018 (2) whether laws need to be extended to include cryptoassets that currently fall outside the regulatory perimeter by 2018 (3) the potential prohibition on the sale of crypto derivatives to retail consumers by 1Q19 (4) whether and how exchange tokens, providers, and wallets should be regulated (5) how to address illicit activities and implement robust KYC/AML requirements.

Hong Kong. The Securities and Futures Commission (SFC) in Hong Kong issued regulation on cryptoasset funds and exchanges. Funds with over 10% invested in cryptoassets will need to acquire a license. Crypto exchanges will be required to join a “sandbox” that will be monitored by the SFC as crypto exchanges probably don’t meet current conventional exchange requirements. Additionally, only professional investors (with at least $1.02 million according to Hong Kong law) will be allowed to participate for now. Source.

South Korea A South Korean district court ruled against a bank (Nonghyup) for blocking transactions into a crypto exchange (Coinis) based solely on the Financial Services Commission (FSC) guidelines. Source. Earlier this week, the chairman of South Korea’s FSC said crypto exchanges shouldn’t face banking obstacles if they have adequate KYC/AML checks in place. In November, the government is expected to make a decision on whether to maintain or repeal the country’s ICO ban, which has been in place since September 2017. Source.

In other news

  • Grayscale published a report showing that inflows in 3Q18 were $81 million, 33% higher than 2Q18, and $330 million YTD, bringing its total customer assets to $1.5 billion. 70% of the inflows were from institutional investors (hedge funds, pensions, endowments) and the remaining 30% were mostly from high net worth individuals or family offices. 73% of inflows in 3Q18 were into Grayscale’s Bitcoin product. Grayscale offers nine total crypto products. Source.
  • BTC and ETH trading volume was down 12% and 30% respectively in October vs. September. Source.
  • StarkWare, the company that developed zk-STARKs, secured a $30 million Series A funding round from Paradigm, Sequoia, Multicoin, Intel Capital, DVCV, Wing, Consensys, Atomico, Coinbase Ventures, Collaborative Fund, Scalar Capital, Semantic Ventures, Pantera, and Floodgate. Source. We had the chance to learn about zk-STARKs at Web3 Summit last week and provide brief takeaways here.
  • Dapper Labs (company behind Cryptokitties) raised $15 million from Venrock, Google Ventures, Samsung, Andreessen Horowitz. Source.
  • Bitstamp has been acquired by an Luxembourg based investment firm, NXMH that also owns South Korean exchange, Korbit. Source.
  • Consensys acquired asteroid mining company, Planetary Resources. Source.
  • Binance froze accounts that received over 93,000 ETH because they are believed to be linked to the controversial World Services Exchange (WEX) in Russia. There have now been 35 police reports filed against WEX. Source.
  • Goldman Sachs could be preparing to trade a bitcoin derivative based on futures, called a non-deliverable forward, which they announced earlier this year. Source.
  • The ZCash Company activated ZCash Sapling via a hard fork this week, which introduces improved performance and shielded addresses. Source. In other news, Parity is partnering with non-profit Zcash Foundation to build the first zcash node software not built or operated by the company. Source.
  • Ethereum’s MetaMask released a mobile client at Devcon4 this week. Source.
  • In a tweet thread, Nathaniel Whittemore compiled a solid list of essays on Bitcoin and how it has evolved.
  • Katie Haun tweets about putting ownership of digital goods (i.e. like skins in Fortnite) in the hands of consumers.

What we’re reading

  • Bitcoin, Cryptocurrencies, and Blockchain. James Faucette from Morgan Stanley’s Equity Research department published a report summarizing the last six months in crypto. Notably, he believes that Bitcoin is and has been an “institutional asset class” for a year and highlighted that crypto assets under management (at hedge funds, VC firms, and PE firms) is currently $7.1 billion. According to the report, existing challenges include regulatory uncertainty, lack of regulated custodians, and lack of large financial institutions.
  • Mapping out bitcoin’s supply chain. The Block walks us through the bitcoin supply chain, or the movement of bitcoin from when it’s mined till it’s spent. Source.
  • 10-Takeaways from recent French guidance on Blockchain and the GDPR. Bitcoin Magazine published an op-ed highlighting takeaways from the guidance on GDPR in regards to blockchain from CNIL in France, which was the first EU member state to release official guidance on the relation between GDPR and blockchain.
  • How to “break into” crypto. Preethi Kasireddy shares a post on how to “break into” crypto. She says, “there is an opportunity for anyone who is passionate and dedicated to become as much “an expert” as anyone else in the space.

What we’re listening to

Circle in the news

  • Circle joins Global Digital Finance (GDF) industry body for developing global crypto standards around money handling, risk management, interaction with customers and regulators, and market practice. Source.
  • USDC Ecosystem Spotlight - twelve new companies are joining the USDC ecosystem and Circle is removing fees for the redemption of USDC.
  • Leading Japan-based exchange, Liquid, to list USDC. Initial trading pairs will be against BTC and ETH.
  • In honor of Bitcoin’s 10th birthday, Circle published results of a 2000+ person survey on Bitcoin and Satoshi Nakamoto.

Where we’ll be in October

  • Hong Kong FinTech Week - Hong Kong, 10/30-11/2
  • DevCon 4 - Prague, Czech Republic, 10/30-11/2
  • Xconomy XCON, Cambridge, MA, 11/4-11/6
  • CFA Society of NY Emerging Technologies Conference, New York, NY, 11/5
  • The World Blockchain Forum, New York, NY, 11/8-11/9
  • ISDA Technology Forum, New York, NY, 11/8
  • Singapore FinTech Festival 2018, Singapore, 11/12-11/16
  • MIT Enterprise Forum, New York, NY, 11/13
  • COSIMO Verbatim Summit, Boston, MA, 11/13
  • Finance Magnates London Summit, Boston, MA, 11/13-11/14
  • Benzinga FinTech Summit, San Francisco, CA, 11/14
  • BV Ventures, SG Innovate & Swiss Chamber of Commerce, Singapore, 11/15
  • Profit & Loss Hong Kong 2018, Hong Kong, 11/15
  • MIT CFO Summit, Newton, MA, 11/15
  • Dots Ventures, London, UK, 11/15
  • Consensus Invest, New York, NY, 11/27
  • MJAC Crypto Compare Blockchain Summit, London, UK, 11/30

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.