Prizmabet

Bitcoin Price Rally Puts Focus on Futures Spread That Underscores Need for Spot ETFs

Observers call for spot-based bitcoin ETF as the bull market raises cost of pre-expiry rollover of positions for futures-based ETFs.

Bitcoin’in (BTC) son rallisi, vadeli işlem ve vadeli işlem tabanlı borsa yatırım fonları (ETF’ler) tüccarlarını madeni para sahiplerine göre dezavantajlı duruma getiren bir piyasa özelliğiyle ilgili endişeleri yeniden canlandırdı.

Kripto para birimi geçen ayın sonlarında 31.000 doları aşarak bir yılın en yüksek seviyesine ulaştı. Yükselişle birlikte, Chicago-Mercantile Exchange (CME) listesinde yer alan Temmuz vadeli işlem sözleşmesi fiyatları ile artık süresi dolmuş (o zamanki ön ay) Haziran vadeli işlem sözleşmesi fiyatları arasındaki fark, boğa piyasasından bu yana en yüksek boşluk olan yaklaşık 500$’a patladı. TradingView grafik platformundan alınan verilere göre 2021’in son günleri.

The sharp widening of the spread, or the so-called steepening of the contango, has grabbed eyeballs in the crypto market. The spread raises the cost of pre-expiry futures rollover, or shifting of bullish long positions from front-month to next-month contracts, and affects the performance of the futures-based products offered by ProShares, VanEck and others. Observers, therefore, said the prevailing excitement about a potential launch of a spot-based ETF is justified.

Futures have an expiry date, which mandates the rollover of positions ahead of the settlement. When the spread between the front-month and the next-month contract widens, rollovers are characterized by traders selling the expiring contract at a low price and entering the new one at a high price (the exact opposite of buy low and sell high), inadvertently bleeding money.

“We were not surprised to see the level of contango in the bitcoin futures market expand over the past week. The CME Bitcoin Futures Market has historically traded in relatively sharp contango during bull market periods, particularly when people are excited about future events (like an eventual spot bitcoin ETF approval). This level of contango will certainly impact [futures-based ETF] investors,” Matthew Hougan, chief investment officer at crypto index fund and ETF provider Bitwise Asset Management, said in an email.

“This generally points to why a spot bitcoin ETF would be superior for most investors vs. a futures-based ETF. People just want to own bitcoin, safely, with no ifs, ands, or buts. A spot-based ETF would achieve that goal,” Hougan added.

The U.S.-based futures ETFs invest in CME-listed bitcoin futures.

The spot-ETF rally

Last month, bigwigs from traditional finance like BlackRock (BLK), Invesco (IVZ), Fidelity, and others filed spot-based bitcoin ETF applications with the U.S. Securities and Exchange Commission (SEC). Bitcoin rallied nearly 12% in June.

A spot-based ETF, if approved, will be like SPDR Gold Trust ETF, which owns gold bars. The product will allow investors to hold their positions indefinitely while eliminating the rollover cost associated with futures ETFs and bypassing complexities involved with storing the cryptocurrency in a wallet. Besides, the spot-based ETF will track bitcoin’s spot price more closely than futures-based ETFs.

In other words, the spot-based ETF will be a better investment avenue than futures-based products like ProShares’ Bitcoin Strategy ETF, which have underperformed the cryptocurrency this year. ProShares’ futures-based ETF, which debuted in October 2021, is the world’s largest and most actively-traded futures-based ETF.

While BTC has gained 88% this year, shares in ProShares’ ETF, trading on NYSE under the ticker BITO, are up only 56%. That’s notable a loss of upside for BITO investors. BITO bled more than bitcoin during the 2022 bear market.

“We might expect underperformance vs. holding spot BTC. The cost of carry emphasizes that futures-based ETFs incorporate the effects of either contango, where holders experience lagging performance or backwardation, where holders experience outperformance. This emphasizes that there is a cost to investors to restricting them to just a derivatives-based ETF,” Ryan Kim, Head of Derivatives at institutional crypto derivatives platform FalconX, said.

“The dynamic does contribute to the excitement over spot-based ETFs,” Kim added.

The situation is unlikely to improve if bitcoin continues to rally, brining more buyers to the derivatives market and keeping futures premiums elevated across the different expiries.

As of Wednesday, the basis in bitcoin and ether CME futures or the difference between futures and spot prices was notably higher at the front end (30-day and 60-day) of the futures curve.

“For context, the 30-day annualized BTC basis just hit 19%, which is the highest value since October 2021, when BTC was trading at above $60,000,” Kim said. “The 30- and 60-day futures are the preferred vehicles for many investors, and more so for bitcoin than for ether.”

Ravi Doshi, co-head of trading at Genesis Global Trading, expressed a similar opinion, saying, “the bullish market sentiment has driven up the front-end CME futures basis.”

Doshi’ye göre, vadeli işlem ETF’lerinin uzun vadeli pozisyonlarını Haziran sözleşmesinden Temmuz’a çevirmesi gerektiğinden ve “spreaddeki likidite eksikliği, Temmuz sözleşmesinde vadeli işlem ETF sahiplerine mal olan geçici olarak %23’lük bir yıllık baza yol açtığından, durum geçen hafta daha da kötüleşti. canım.”

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EU Metaverse Strategy Set to Examine Privacy, Competition and Rights

A policy paper next week won’t set legislative rules – but could point the way ahead on some key Web3 issues.

The European Commission’s metaverse strategy due next week is delayed and won’t have real teeth – but there are real policy concerns about how virtual worlds will cope with policy issues like property rights, technological standards and privacy.

First announced by Commission President Ursula von der Leyen as part of an annual address made back in September, a policy paper on virtual worlds has been put off as long as it could be. EU commissioners are due to agree to it next Tuesday; any later and they’d be running into preparations for the next edition of the State of the EU speech.

The commission has previously suggested the proposal won’t be legislative, discussing the policy issues rather than proposing a formal bill – but it might point the way towards stronger action in future.

The metaverse strategy is “the start of something, it sets the agenda,” said Patrick Grady, editor of Brussels-based website and research initiative Metaverse EU. “Once the machine gets moving it doesn’t really stop.”

Grady, who also leads the technology practice at consultancy Fourtold, points to the commission’s 2018 strategy on Artificial Intelligence – which, though it did little more than promise a stakeholder alliance and reinterpreted liability rules, proved the portent of more to come, and an AI bill followed in 2021.

That brings risks as well as opportunities. A clear regulatory framework is often welcomed by the industry, but EU rules in areas such as AI have proved controversial. The example of the bloc’s recent Data Act – nominally concerned with governing information gathered by connected objects like cars or fridges, but which some Web3 proponents worry could effectively make smart contracts illegal – shows there’s always the chance of unintended consequences.

European values

The commission has said the metaverse will need to embed “European values” – with officials specifying topics like discrimination, safety and data controls. A blog by Commissioner Thierry Breton, and a subsequent consultation from the commission, hinted at a more immediate EU fear – that Web3, like its predecessor, could be dominated by big players that squash competition.

That may include some familiar faces. Facebook has rebranded itself Meta (META) as it pivots towards a more immersive experience, and Apple’s (AAPL) move into the space could prove transformative.

At an April hearing, Meta’s EU Public Policy Director Aleksandra Kozik was cross-questioned by lawmakers interested in topics ranging from the impact of the technology on jobs, discrimination, and abuse by organized crime.

“The metaverse is not one single product that will be built by one company,” Kozik told members of the European Parliament’s Legal Affairs Committee. “It is a constellation of platforms, technologies and products that will be built by many different stakeholders, by companies big and small.”

The commission may be skeptical of such analogies, given that it has often taken Meta to task for trying to be the brightest, if not the only, star in its firmament. Grammar might offer a clue as to the EU executive’s real thinking, Grady points out.

As with the internet, the whole point of the metaverse is that it’s a single unfragmented space – “siloed metaverses is almost the situation the EU’s trying to avoid,” Grady said.

Yet the commission’s own paper is about virtual worlds, plural – suggesting Meta’s might be one of several separate walled gardens – while Breton talks about both the metaverse, and about different metaverses.

One solution is to ensure that developers like Meta work within common international standards. But, as Grady points out, the EU’s own antitrust rules can sometimes stand in the way, since any grouping of supposed competitors is liable to be treated as a cartel.

Rights

Some in the digital sector see an opportunity in whatever the commission might announce.

“Virtual worlds are increasingly part of a modern, digital industry and this is where Europe excels, so we’d like to see a strategy that aims to support this,” a spokesperson for lobby group DigitalEurope told CoinDesk in an emailed statement, citing possibilities like cheaper online job training, and virtual factories and power grids.

But there’s plenty more legal quandaries raised by the metaverse – including basic rights.

“Personal property interests in virtual worlds are radically undermined” by the fine print in online terms and conditions, Joshua Fairfield, a law professor at Washington and Lee University, told lawmakers back in April. “The metaverse end-user license agreement beats the United States Constitution, because it acts under this concept of consent to replace many of the social rules that we take for granted.”

How to deal with those fundamental problems remains hotly debated – and, in particular, whether the metaverse is really so new that it needs its own rulebook.

“The metaverse is not being built in a regulatory vacuum,” Meta said in its response to the EU’s consultation, citing existing online laws that continue to apply. “To the extent that any novel or unique issues arise over time as the metaverse continues to evolve, we call upon the Commission to address any emerging legislative gaps on a case-by-case basis, using evidence-based policy development.”

For others, virtual worlds are a step change, given how much they rely on potentially invasive technology such as headsets and glasses.

Extended reality tech “poses substantial risks to human rights” and “could continue the march towards ever-more-invasive sensitive data collection and ubiquitous surveillance” by governments and corporations, even going into people’s thoughts and emotions, said a consultation response by online rights activists the Electronic Frontier Foundation.

Does any of this matter for your average crypto fan? It likely will do, if the predictions of the commission’s own Joint Research Centre come true.

“Blockchain and cryptocurrencies are likely to be the technological building blocks of a decentralized infrastructure” that underpins the metaverse, a JRC report published Monday said.

That will be music to the ears of those who believe online virtual worlds require a radically different way of thinking than the centralized structures that came to dominate Web2. It also means metaverse regulation carries a risk for the crypto sphere.

Inverse Correlations, FOMC Action, and a Possible Spot Bitcoin Trust

Bitcoin and ether end the week higher, following the announcement of BlackRock’s Bitcoin trust application.

FOMC oran kararları, TradFi ayrışması ve bitcoin spot ETF tekliflerinin olduğu bir hafta, BTC ve ETH haftayı sırasıyla %0,88 ve %1,75 performansıyla tamamladı.

Beş CoinDesk Piyasa Endeksi (CMI) sektörü arasında Dijitalleştirme, son yedi günde genel olarak %1,4’lük bir gösterila başı çekti. Akıllı Platform Sözleşme bölümü, aynı dönemde %4,4 düşüşle tümünü takip etti.

Galxe’de (GAL) %14’lük bir dizi ve Braintrust’ta (BTRST) %2,2’lik bir dizi, Digitization’ın yükseliş hamlesini hızlandırdı. GAL koleksiyonunun tarihinde %10,6 artarken, BTRST yıl bazında %35 düştü.

GAL, 20 günlük hareketli ortalamasının %3,3 altında kalıyor ve mevcut Göreceli Güç Endeksi (RSI) değeri 44,06. RSI’sinin yönü, GAL fiyatlarındaki %21’lik artışa göre 10 Haziran’dan bu yana %69 artan bir yükseliş anlamına geliyor.

DeFi names Maker (MKR), Uniswap (UNI), and TruFi (TRU) also had strong weeks, rising 8.1%, 7.8%, and 7.5%, respectively.

Boba Network (BOBA), a Smart Contract Platform asset, was the week’s laggard, falling 5.5%.

Bitcoin and ether continued a recent decoupling from traditional finance, as their correlations with the S&P 500, Nasdaq and the Dow Jones Industrial Average (DJIA) trended negative.

BlackRock possibilities

The week’s most interesting development was BlackRock’s application to the Securities Exchange Commission (SEC) for a bitcoin spot exchange-traded fund (ETF).

Those well-steeped in the nuances of SEC applications will highlight that the application is technically for a “trust” and not a ETF.

Still, as BlackRock’s iShares Bitcoin Trust application is set to hold the asset as a commodity, it will operate in the same manner as existing commodity-based ETFs.

If approved, the ETF will offer exposure to retail investors via a third party, with the ability to enter and/or exit positions intraday.

The application’s timing coincides with an SEC crackdown on the industry, including last week’s lawsuits against crypto exchange giants Binance and Coinbase.

Given the SEC’s rejection of all prior spot BTC applications, and the perception of an agency that is hostile to digital assets markets, investors will be eager to see how it decides on the BlackRock filing.

With $9 trillion in assets under management, BlackRock is the largest asset manager in the world. Some observers may consider the application an endorsement of the asset class, as it will create a potentially sizable bitcoin buyer.

An approval would also cast doubts on previous rejections and likely spur a new wave of applications.

Since the announcement of BlackRock’s application, BTC is up approximately 4.5%.

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EU to issue ‘warning’ to countries supporting Russia in next sanction package, VDL says

The next round of EU sanctions against Russia aims to close loopholes and crack down on circumvention and could target companies and countries that help Russia acquire sanctioned goods.

An intense diplomatic week is starting for the EU on Tuesday with the bloc determined to put support for Ukraine and sanctions against Russia at the centre of discussions.

The first summit of the week will be in Reykjavik, Iceland where the leaders of 46 members of the Council of Europe will convene. The leaders of France, Germany, Italy and the heads of the European Commission and Council will then head to Hiroshima, Japan, for a G7 leaders’ summit. The latter two will then hop over to Seoul for an EU-South Korea summit.

Ursula von der Leyen, the president of the European Commission, told reporters on Monday that the main underlying message the EU will be keen to push is the bloc’s united determination to support Ukraine for as long as it takes as it fights Russia’s invasion and to ensure Moscow is held accountable for the war and the atrocities committed.

At the G7 summit, where the US, UK, Canada and Japan, also sit at the table, the EU wants members to take stock of the packages of sanctions already rolled out against Russia as well as those in the making.

EU countries are currently negotiating an 11th round of sanctions aimed at closing loopholes and tackling circumvention. The new measures will allow the bloc to target companies and countries that are believed to help Russia evade the penalties.

One of the worries is that some third countries have been importing sanctioned EU goods and then exporting them to Russia, thus allowing Moscow to acquire dual-use technology that can be used by the military despite the bloc’s export ban.

Von der Leyen said of the planned measure that “it’s basically a warning that we are serious about our sanction that we could ban these goods from going to that third country if there is clear evidence that this is a circumvention of sanctions and deliverable deliveries to Russia.”

She also said the proposed raft of sanctions could extend the list of EU products banned from transiting via Russia.

“We see that there is a discrepancy between what starts in the European Union, transits Russia and then ends up in the third country. And therefore, we are discussing as a deterrent the question of whether there should be such a transit ban. There are several watch points within the mechanism to make sure that it is justified,” she added.

But the EU knows it also needs to focus on outreach, Michel said, in particular with developing countries to not only strengthen ties but also explain the sanctions against Russia.

This will be primarily addressed at the G7 summit where eight other nations — Australia, Brazil, Comoros, India, Indonesia, South Korea, the Cook Islands, and Vietnam — have also been invited.

Some countries in the Global South have repeated the Russian narrative that the West is endangering global food security despite the fact Russian agrifood products have not been sanctioned and can therefore be exported worldwide and transit through the EU.

“We will discuss openly and frankly about why we are convinced these sanctions are necessary and justified. Russian propaganda is built on lies and conspiracy. We are fighting back with the facts and figures,” Michel told reporters.

“Developing and emerging countries have expressed concerns that the G7 is focusing too much on Ukraine and not paying enough attention to their needs and priorities. And we have heard their concerns. We want to build strong partnerships with developing and emerging countries in ways that are mutually beneficial.

China will be the other main topic as the EU and other Western allies seek to “de-risk” by reducing economic dependencies on Beijing. The EU wants for instance to toughen its arsenal to ensure key infrastructure and technologies remain under European control with the deployment of an outbound investment screening or advanced export controls.

Finally, the green transition and the need to accelerate the rollout of clean tech should also be on the agenda of the various summits.

Bitcoin, Crypto Prices Brace for Downturn in Coming Liquidity Shock, Observers Say

Improving liquidity conditions so far this year have lifted risk assets such as cryptocurrencies, but the trend is poised to turn once the U.S. debt ceiling is lifted and the Treasury along with the Fed resume tightening, analysts say.

Crypto markets are bracing for a downturn as liquidity tightening resumes after the U.S. debt ceiling is lifted, observers said.

The replenishment of the U.S. Treasury general account and the Federal Reserve (Fed) winding down its balance sheet will remove hundreds of billions of dollars from the financial system, weighing on cryptocurrency prices in the coming months.

Thawing liquidity conditions earlier this year helped lift the prices of risk assets, including equities and digital assets. The market-wide crypto rally propelled bitcoin (BTC), the largest cryptocurrency by market capitalization, to as high as $31,000 before turning into a meme coin speculative frenzy reminiscent of the sugar rush near bull market tops.

The trend, however, is set to turn once U.S. lawmakers approve raising the government’s ability to issue new debt, putting pressure on risky investments.

First, the U.S. Treasury will have to refill its almost completely depleted Treasury General Account (TGA), which means replenishing some $500 billion of cash from the financial system.

“This is likely to especially hit risk assets as they tend to be more sensitive to liquidity conditions than safer plays such as bonds and many groups of equities,” macro analyst Noelle Acheson said.

“The Treasury drawing down its account at the Fed was one of the tailwinds for the market earlier this year, as money that would normally just sit there was put into the economy in the form of government expenditures,” Acheson explained.

“Now, the reverse is likely to happen: the government needs to replenish that account balance by issuing debt which will draw liquidity out of the market and back into the Treasury’s account.”

Refilling the general account coincides with the Fed continuing its quantitative tightening campaign, briefly interrupted in March due to the regional banking crisis, to reduce its bloated balance sheet from propping up the economy during the pandemic.

Macro analyst Lyn Alden called this a “negative double-whammy for liquidity” in a market report.

“The attractiveness of many large liquidity-driven equities is lackluster for the next few months unless or until we get more clarity on forward liquidity conditions,” Alden said. “This is an environment where an investor should know what they own, be prepared for volatility and avoid excessive leverage.”

The debt ceiling resolution bill – if passed in its current form – will also contribute to the negative impact on liquidity, according to Tom Dunleavy, founder of Dunleavy Investment Research.

Some key points of the deal such as curbing non-defense funding, clawing back unspent pandemic relief funds and resuming student loan payments will constrain the available money left for consumers to invest, he explained in a tweet. “Liquidity is going to be very net negative,” Dunleavy added.

The U.S. House of Representatives is poised to vote on raising the debt ceiling Wednesday evening.

Tightening liquidity conditions, decreasing probability of the Fed cutting interest rates this year and the present trading environment with depressed volatility and volumes make crypto markets ripe for a shock, institutional trading platform FalconX wrote in a newsletter.

“This macro scenario (…) makes me believe we could be in a calm-before-the-storm moment for crypto,” David Lawant, head of research at FalconX, said.

Indian Crypto Exchanges Are in Survival Mode, Trying to Extend Their Runways

CoinDCX, CoinSwitch, WazirX and other Indian firms CoinDesk spoke to think they’ll survive the ongoing bear market – here’s how.

Indian crypto exchanges are in survival mode, cutting costs wherever possible, re-negotiating partner contracts, suspending employee pay-hikes, conducting lay-offs, exploring new revenue models and rebranding themselves, all in an effort to extend their financial runways – when they run out of money.

CoinDesk spoke to employees and senior executives at six prominent Indian crypto platforms – CoinDCX, CoinSwitch, WazirX, BuyUCoin, ZebPay and Giottus. Several of these exchanges said their runways range from 21 months to four years, which can, if true, likely take them into the next bull market. CoinSwitch and ZebPay did not share their financial runway timelines.

The survival of India’s crypto exchanges has been a concern since Feb. 1, 2022, when the nation announced stiff taxes – a 30% tax on crypto profits and the more controversial 1% tax deducted at source (TDS) on all transactions. At the time, local industry leaders said they had entered a “period of pain” but that “ultimately, technology always emerges, it always wins.”

Signs of a crypto “brain drain” emerged within weeks. Ten days after the taxes were implemented, crypto trading volumes plummeted, in some cases more than 70%. India’s government then imposed a “shadow ban,” which saw local payment processors cut off banking access to crypto exchanges.

Four months into the imposition of the 30% tax, the industry’s advocacy body was disbanded and enforcement agencies were investigating at least 10 crypto exchanges for allegedly assisting foreign firms launder money via crypto. Soon, the world took note and global industry leaders such as Binance CEO Changpeng ‘CZ’ Zhao claimed India’s taxes would probably “kill the industry” in the country.

By 2023, data revealed crypto traffic in the nation continued its nosedive and that Indians had moved more than $3.8 billion in trading volume from local to international crypto exchanges.

India, as president of the Group of 20 (G-20) in 2023, has prioritized framing globally coordinated rules for the crypto sector. As a result, experts say, it needed to align with the guidelines of the global standard setter, the Financial Action Task Force (FATF) on virtual assets by including Indian crypto business under anti-money laundering rules.

This move, which adds some legitimacy to the sector by way of setting up regulatory oversight, has fueled a little optimism among Indian exchanges on the local industry’s longevity, even if the nation doesn’t change its tax regime, according to several industry officials. But they don’t have an answer to what happens if the tax regime stays the same – and are taking various steps to guard against such a scenario.

CoinDCX

Indian crypto exchange CoinDCX is weathering the storm by diversifying and banking on its recent series D funding of $135 million.

“We have a runway of four years,” under present conditions, said Neeraj Khandelwal, co-founder of CoinDCX and Okto. “Our biggest bet is on our Okto Wallet. We believe DeFi [decentralized finance] will offer 10X value eventually as only 6.5 million DeFi customers exist, while there are 400 million crypto investors.”

CoinDCX has been leading engagement with lawmakers through the industry’s policy advocacy body, Khandelwal said, exemplified by a recent event, and has emerged as a major player in the Indian crypto industry after recent setbacks faced by WazirX, who ostensibly led the industry in policy engagement before CoinDCX.

Its strategy, Khandelwal says, is “investing heavily in innovation and technology,” including hiring in the space “even now” as we “never overhired.”

WazirX

WazirX, India’s biggest exchange by trading volume until recently, continues to survive despite a tumultuous year.

The exchange’s future seemed uncertain when its founder Nischal Shetty moved from India to Dubai to focus on a new project late last year. Later, Indian agencies that were investigating local crypto exchanges raided properties tied to a director of WazirX. Shortly after, Binance CEO Zhao and Shetty were involved in a public spat over who truly controls the exchange – a quarrel that continues to this day.

The events have seen the exchange lay off 40% of its staff. Yet, the exchange has a 21-month runway, said an employee who was not authorized to speak publicly about the company. “But employees who deserve pay hikes won’t be getting them,” he said.

WazirX’s survival strategy is to renegotiate contracts with partners including software vendors, the person said. Unlike some other exchanges, WazirX will not be diversifying. It will stay focused on crypto.

“That’s what the founders enshrined into us,” the person said. “The idea is to survive because [the] Bitcoin halving is going to happen in May 2024 when, we hope, a bull run will come. By then, if things don’t break, we should be around to see it.” The Bitcoin halving is when the total number of bitcoin that miners can potentially win is halved. This happens roughly every four years.

WazirX also plans to “keep chipping away at costs constantly to extend the runway” and capitalize on its 15 million registered users to attract lucrative partnerships, like a recent one with tax solutions provider TaxNodes.

CoinSwitch

CoinSwitch shed “Kuber” from its previous name, CoinSwitch Kuber, and pivoted from being a crypto exchange to a crypto investment platform.

This occurred as India’s taxes, the crypto winter and the ire of Indian agencies all hit the platform hard. CoinSwitch properties were raided by Indian agencies in August 2022.

“CoinSwitch has always been conscious of its expenses,” said Ashish Singhal, the company’s co-founder and CEO. “Today, we are proudly serving more than 19 million registered users, and are excited to grow and evolve with them by providing them with a diverse range of investment options, including fixed deposits (FD), mutual funds, Indian stocks, and more.”

Without giving a timeline on its runway, Singhal said “our healthy runway gives us enough ammunition to invest in our long-term vision – to be a one-stop wealth-tech destination for Indians.”

Singhal also said his company has “strengthened its leadership team by hiring industry experts,” presumably to navigate regulators, even if he added that the recent step to bring crypto businesses under anti-money laundering rules was a “significant positive advancement.”

ZebPay

One of India’s first crypto exchanges, ZebPay, also refused to share a timeline on its runway. But Chief Revenue Officer Nirmal Ranga said it had support from an unnamed subsidiary in Singapore, in the event it loses customers, the bear market extends or things generally go from bad to worse.

“Our internal revenue strategy is to increase the lending value of our customers and concentrate on user growth,” Ranga said. “We are also trying to create interest for institutional investment.”

Given ZebPay’s team has seen crypto’s early up and down cycles, it follows two ways to survive – “use profits made during previous bull runs or use funds from marketing partnerships or investors,” Ranga said. Like WazirX, ZebPay also has a partnership with TaxNodes.

BuyUCoin

Another early player in the Indian crypto space, BuyUCoin, said its runway extends until early 2025.

“By the end of 2024, we will see a good bull run,” said Atulya Bhatt, its co-founder. “Crypto is a seasonal market and every four years bitcoin goes up and down. It will take 10 years for crypto to become completely sustainable.”

Nevertheless, BuyUCoin had to lay off 10% of its 100 people workforce, Bhatt said. At the same time, BuyUCoin has set up sister companies in Estonia and Singapore as part of a global expansion plan.

“Since we have never raised funds, we can now, given interest from partners across the globe,” he said.

Giottus

After FTX’s implosion, crypto entities scrambled to publish proof of reserves. Giottus, a lesser-known Indian exchange recognized for its staking service and multilingual options in the country, said it would provide customers with proof of reserves, while rivals remained silent.

“We have a two-year runway under the current conditions,” said Vikram Subburaj, Giottus’ co-founder and CEO. “Our focus is completely on bringing in operational excellence, building your products right, drastically cutting marketing and acquisition expenses, and reducing perceived risks associated with exchanges.”

In terms of employees, Subburaj said Giottus had a compact marketing team even during bull runs and like others, it partnered with TaxNodes to improve operational support.

Stablecoins Are the ‘Glue’ Between the Real Economy and Blockchain: Binance Japan General Manager

Binance Japan may be still “a long way off” its business and activities being properly understood and in gaining regulatory acceptance, said the exchange’s Tsuyoshi Chino.

The general manager of Binance Japan described stablecoins as the “glue” between the real economy and the blockchain in an interview with CoinDesk Japan.

Tsuyoshi Chino, speaking ahead of Binance’s re-entry into Japan via its acquisition of regulated crypto exchange Sakura Exchange BitCoin, described how volatility of crypto prices may lead to profit opportunities but will not help stimulate broader demand for cryptoassets.

“We believe that stablecoins will serve as the glue between the real economy, the blockchain economy, and the Binance ecosystem,” Chino said. “When you do something stably, price fluctuations become noise.”

Stablecoins are pegged to the value of traditional assets, usually fiat currencies such as the U.S. dollar, and therefore are designed to be free of the price swings that often afflict cryptocurrencies like bitcoin (BTC).

Rival crypto exchanges Coinbase (COIN) and Kraken have both withdrawn from the Japanese market in the last six months, citing “market conditions” as the reason.

Chino said crypto winter may be hampering the traditional model of a crypto exchange business, given how lower valuations and trading volume will diminish revenue from fees. He said that Binance’s vision for “economic freedom” through crypto and blockchain technology supersedes the exchange business model and the present market conditions.

“The ecosystem has many facets,” he said. “For example, we will provide various services from a different angle to finance, and we will also provide various IP (intellectual property) contents in the form of Web3.”

Binance’s move back into Japan next month will come two years after the exchange received warning from the country’s Financial Services Agency (FSA) that it was operating there without permission.

Chino described how one of the keys to gain regulatory acceptance in Japan is ensuring understanding of how its products work in order to gain trust, something he admits may be a challenge.

“We are confident about our product and technology, but we are still a long way off in terms of whether the company Binance and its activities are properly understood,” he said.

Tether Says It Will Buy Bitcoin for Stablecoin Reserves Using Realized Profits #prizmabet

The company, which issues the $82 billion USDT stablecoin, reported $1.48 billion of net profits in 2023 Q1 and revealed $1.5 billion in BTC holdings.

Stablecoin issuer Tether will regularly buy bitcoin (BTC) for its stablecoin reserves using a portion of its profits starting this month as part of a new investment strategy focused on the largest cryptocurrency by market capitalization, the firm announced on Wednesday.

Tether said it will allocate up to about 15% of the realized profits from investments – excluding any unrealized price appreciation of its reserve assets – to purchase BTC and will add the tokens to the reserve surplus.

The company will custody the BTC stash on its own, without using any third-party custodians, according to the statement.

The development comes after Tether, the company behind the largest stablecoin on the market, the $82 billion USDT, revealed last week that it holds $1.5 billion of BTC and $3.4 billion of gold among the assets that backs the value of USDT and its smaller stablecoins. Some 85% of the reserves are held in cash and cash-like assets such as U.S. Treasury bonds, according to its 2023 Q1 attestation.

Stablecoins, now a $131 billion asset class, have become a crucial building block of the cryptocurrency infrastructure, facilitating trading and transactions between government-issued fiat money and digital tokens by keeping their price anchored to an external asset, usually to the U.S. dollar.

BTC investments

The firm’s BTC purchase campaign aims to strengthen and diversify the stablecoin reserves, while capitalizing on its price appreciation as an investment, the press release said.

“Bitcoin has continually proven its resilience and has emerged as a long-term store of value with substantial growth potential,” Paolo Ardoino, chief technology officer of Tether, said in a statement. “Our investment in bitcoin is not only a way to enhance the performance of our portfolio, but it is also a method of aligning ourselves with a transformative technology.”

The company said it will exclusively utilize realized profits from its investment operations for buying BTC, disregarding unrealized capital gains. It means that the firm considers “only the tangible gains from its operations,” consisting of the difference between the purchase price and net proceeds from an asset sale or, in case of maturing assets such as Treasury bills, between the purchase price and the reimbursed amount, per the statement.

Tether said that it also focuses on developing communication systems, energy and bitcoin mining infrastructure among its smaller investments.

For years, Tether has been criticized within the crypto industry for its lack of transparency about its reserves and controversial investment decisions.

However, the firm’s flagship token USDT emerged as a safe haven in March as the U.S. regional banking crisis hit Circle’s USDC, the second largest stablecoin. The sudden implosion of Silicon Valley Bank (SVB) left a part of USDC’s cash reserves frozen at the bank over a weekend, and several stablecoins lost their dollar peg temporarily in a knock-on effect.

Tether came out of the calamity as a clear winner by maintaining its price stability due to its perceived disconnection from U.S-based banks, being incorporated in the British Virgin Islands and Hong Kong. USDT’s circulation has grown 24% this year while most rivals have suffered significant outflows.

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Edited by Parikshit Mishra.

CeFi Exchanges Helped Mass Crypto Adoption. DeFi Will Further It

Centralized exchanges will continue to serve as a first step into crypto but decentralized exchanges will further the future of financial systems, panelists say at Consensus.

Centralized exchanges (CeFi) have helped early adoption of crypto by the masses, but have suffered from many recent failures. In the long term, decentralized exchanges (DeFi) will strengthen the backbone of future financial systems, panelists said on stage at “DeFi vs. CeFi: A Distinction With a Difference” at CoinDesk’s Consensus 2023 conference in Austin.

Read full coverage of Consensus 2023 here.

The main hurdle of mass adoption of crypto has been the complexity of the technology for average users, which is why centralized exchanges, such as Coinbase (COIN) has been able act as an early on-ramp into crypto for many people jumping from the traditional fiat economy into digital assets.

“If my grandparents wanted to buy bitcoin, are they going to download Metamask, figure out how to hold their own keys and all that? Probably not,” said Nathan Cha, marketing lead at crypto derivative exchange dYdX during the panel.

However, the lack of transparency in a CeFi exchange is what eventually led to failures such as the spectacular collapse of FTX last fall. When a customer uses a centralized exchange, money goes into a wallet but everything behind that is controlled by an entity that isn’t transparent and is not using blockchain infrastructure, said Sidney Powell, CEO of crypto lender Maple Finance, using BlockFi and Celsius as an example.

“Effectively, it was a private ledger,” Powell said. However, that’s not the case for DeFi as there is more transparency in how the money is being stored and moved. “If you contrast that with, like, DeFi lending, whether it’s Aave, Compound or Maple, you can see the movement of funds at all times and it’s always controlled using Solidity and using smart contracts,” he added.

“The core difference [between CeFi and DeFi] is … self custody but more than that, from a technology perspective, it’s the use of smart contracts and a blockchain to actually operate the business,” Powell said.

However, that doesn’t mean that there will be a mass adoption of DeFi ecosystem anytime soon as CeFi will still likely be the main avenue, in the short-term, for traditional finance customers and older users to adopt the digital assets.

Also the regulatory environment that the current financial market has integrates well with the CeFi model, said panelist Salman Banaei, head of policy at Uniswap Labs. “CeFi has an advantage in the sense that their business model, with clear control persons, is reflected in kind of the regulatory infrastructure that we currently have,” he said, noting that this makes it an easier transition for CeFi to fit into securities or commodities or banking laws.

DeFi, on the other hand, has a disadvantage on that front, as it relies on open-source protocol which reduces “control surface area” from a regulations perspective, Banaei added.

However, in the longer term, this will change, he said. Over time, the role of CeFi won’t change drastically from what it is right now, whereas DeFi will eventually become the main infrastructure for the future of the financial system, Banaei said.

Down the line, “DeFi kind of becomes the backbone for a new economy, while CeFi kind of plays – continues to play – that kind of on-ramp role into this much richer DeFi-based environment,” Banaei added.

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Edited by Jeanhee Kim.

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SushiSwap to Propose Tokenomics Changes to Promote Uniswap v3 Adoption #prizmabet

Changes to the protocol’s “Chef” contracts are intended to make the protocol more decentralized and secure.

SushiSwap, a decentralized exchange (DEX), is one step closer to adopting a new tokenomics model that will promote its adoption of Uniswap version three (v3).

The model will probably go to a community-wide vote in late May, Head Chef Jared Grey told CoinDesk. The changes, if approved, will include overhauling the protocol’s “Chef” contracts to improve the code that underpins its activities following a multimillion-dollar hack earlier this month.

“V3 helps us make tokenomics more efficient [and] vice versa. With v3’s improved capital efficiency and improved and sustainable tokenomics, we will scale growth across our more than 30 supported networks,” Grey said.

The changes will also increase decentralization, improving the protocol’s security, Grey told CoinDesk.

The exchange is attempting to beef up security in the wake of the exploit, which drained $3.3 million from the platform’s wallets earlier this month. The hack exploited a vulnerability in SushiSwap’s Route Processor 2, a smart contract component that aims to execute trades more efficiently while boosting liquidity provisions. Some funds have since been recovered.

SushiSwap has patched the bug, and has stealthily introduced version three (v3) of its router on some networks to support Uniswap v3 adoption, Grey tweeted. The router will launch on more networks soon.

SushiSwap’s team also plans to roll out a series of changes to the protocol’s interface that aim to facilitate cross-chain swapping, according to Grey’s tweets.

The sushiswap (SUSHI) token is trading at $1.08, up 5.4% in the past day, CoinGecko data shows. The price has increased by roughly the same percentage over the past month.

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Edited by Sheldon Reback.