The latest price moves in crypto markets in context for May 17, 2023.
This article originally appeared in First Mover, CoinDesk’s daily newsletter putting the latest moves in crypto markets in context. Subscribe to get it in your inbox every day.
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Blockchain-based play-to-earn project Axie Infinity’s native cryptocurrency AXS ralliedafter the company’s card-based strategy game debuted on the Apple app store. AXS surged over 12% from $7.16 to $8.04 on the news, becoming the top gainer on CoinDesk Indices’ leaderboard. The game will initially launch in the Apple store across Latin America and Asia. Bitcoin traded down on Wednesday, struggling to hold the $27,000 mark as investors keep a close eye on developments around raising of the debt ceiling in the U.S. The world’s largest cryptocurrency by market value has lost 9% over the past month.
Crypto companies fleeing U.S. regulatory uncertainty have been offered a welcome in France, by officials boasting a regulatory framework that offers relative predictability. The European Union member already boasts around 74 registered crypto companies. “In France, we are proud to be pioneers,” said Benoît de Juvigny, Secretary General of the Autorité des marchés financiers (AMF), noting his country’s crypto service asset provider regime – known as PSAN – was passed in 2019, “If American players want to benefit, in the very short term, from the French regime, and from the start of 2025 from European arrangements, clearly they are welcome,” he added. “We have good relations and discussions with our U.S. counterparts.”
Using distributed ledger technology (DLT) in securities markets could create savings north of $100 billion per year, a report produced by a major traditional-finance lobby group has said. In a paper published Tuesday evening, the Global Financial Markets Association (GFMA) called for regulators to allow the technology that underpins crypto to aid collateral management, asset tokenization and sovereign bond markets.“ Distributed ledger technology holds promise for driving growth and innovation,” said Adam Farkas, Chief Executive of GFMA, whose affiliates in the U.S., Europe and Asia count major players such as JPMorgan Chase, HSBC and Nomura among their members.
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The trend has the potential to disrupt the huge rallies bitcoin and ether have seen this year.
After pepecoin (PEPE) took just weeks to go from zero to a nearly $2 billion valuation and produce almost-instant millionaires, envious crypto investors are prowling for the next get-rich-quick meme coin.
Anyone doing so is ignoring the fact that the shocking magnitude of PEPE’s controversial rise is rare. Digital assets that have very little – or no – fundamental value like dogecoin (DOGE) or Shiba Inu (SHIB) pop out of the ether every couple of years. But finding the next PEPE is next to impossible; every winner is surrounded by the ashes of many failures. (And, also, PEPE’s market cap has crashed to less than $650 million, according to CoinGecko.)
That doesn’t stop people from trying. For some, that means simply copying whatever early PEPE investors have put their money into next. On-chain data makes this easy. Wallets holding a large amount of tokens can be tracked on sites like DeBank.
Over the course of last weekend, several newly issued meme tokens surpassed PEPE in trading volume. This flurry of activity was down to whale watchers, people who buy assets based off what large wallets are doing.
One wallet that holds over $4 million worth of PEPE purchased a meme coin called HARAM – a token plagued with xenophobic imagery – at 22:22 UTC on Saturday. The market cap skyrocketed from $200,000 to $5 million in the next 4 hours, and 24-hour volume subsequently hit $20 million on Sunday.
This wasn’t the only example. Bizarrely named meme tokens like RIBBIT, BOB, JEFF and WEN all experienced massive spikes in volume over the weekend. Amid this rush into meme coins, overall volume on Uniswap’s decentralized exchange surged to $150 million an hour at numerous points on Saturday, way up from the typical $16 million to $30 million, according to Dune Analytics.
Pepe/USD chart (dextools)
As attention switches to meme coins, other sectors like decentralized finance (DeFi) are beginning to suffer. The total value locked (TVL) on DeFi protocols has slumped from $53 billion to $47 billion in the past 30-days, and while some of this can be attributed to a crypto market correction, outflows from platforms like Agility LSD, which has seen $500 million in outflows, could demonstrate a waning of interest.
(Dextools)
And then there’s the question of whether some meme coins have nefarious intentions. There are hundreds of new ones listed every day and a quick glance at DEXTool’s “live new pairs” section suggests an increasing trend of rug pulls, where token creators either dump their tokens on new investors or alter the code to make it so investors can’t sell.
While a select few investors might strike the jackpot and make substantial returns, the odds aren’t in their favor. Bigger picture, the meme coin trend has essentially created a black hole that sucks liquidity out of the market, creating a potential impediment for other cryptocurrencies like bitcoin (BTC) or ether (ETH).
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Following an impressive start to the year, BTC and ETH have hit stubborn levels of resistance at $30,000 and $2,000, respectively, amid what’s been dubbed S**tcoin Spring.
Many respondents said they are put off by the complexity and cost of on-chain trading.
The many pains of using decentralized finance (DeFi) protocols may be stopping occasional crypto users from experimenting with on-chain services, according to a survey conducted by Uniswap Labs.
In a poll of 1,860 “U.S. retail users,” the company supporting the popular DeFi token trading platform called Uniswap found that many respondents are put off by the complexity and cost of on-chain trading.
The survey indicates permissionless DeFi trading still has a ways to go if it is to succeed in mass adoption. In order to trade on a service such as Uniswap, crypto users must have a wallet, sufficient ether (ETH) to execute and a willingness to pay sometimes-exorbitant gas fees. And that’s if they understand what they’re doing to begin with.
There’s only so much a DeFi service can do about easing fees and self-custody, though. Uniswap Labs said it conducted the survey to get a better understanding of its customers and is committed to increasing educational resources that target these people who currently use centralized services.
“The entire industry now must work to help educate users about how to use DeFi and the benefits of self-custody. These resources can have a measurable impact in helping users build their knowledge base and grow their confidence,” Uniswap Labs wrote in a blog post.
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The assets include a loan portfolio, mining rigs and infrastrsucture and cryptocurrency worth as much as $2 billion.
A consortium named Fahrenheit, which includes venture capital firm Arrington Capital and miner U.S. Bitcoin Corp, is the lead bidder in the auction for bankrupt lender Celsius’s $2 billion of assets, according to a Wednesday hearing.
NovaWulf, an investment firm which was founded by the duo behind bitcoin miner TeraWulf (WULF), was the original bidder, known as the stalking horse, which set base terms for the auction. The process could be wrapped up as soon as this week.
The assets include Celsius’s mining unit, its loan portfolio, staked cryptocurrency, and other alternative investments, according to court filings.
Fahrneheit is backed by Arrington Capital, U.S. Veri Mining Group, Inc. (known as U.S. Bitcoin Corp.), investment firm Proof Group Capital Management, former Algogrand CEO Steven Kokinos, and investment banker Ravi Kaza. It is formalized as a limited liability company.
Coinbase (COIN) is also involved in the bid, said Michael Arrington, founder of the synonymus VC firm, in a now-deleted tweet reported by Fortune. Arrington is also the founder of tech media site TechCrunch and information platform Crunchbase.
The two bids share similarities. Crucially, Fahrenheit plans to issue equity for the assets that will be managed under the new company, whereas Novawulf planned to tokenize the shares on the Providence blockchain.
“Our bid not structured as a simple asset purchase. We are proposing that the assets be placed into a new company and is run with the sole goal of growing those assets to make stakeholders whole,” Arrington said in a tweet announcing the Fahrenheit project.
Another bid was made by another consortium which includes Van Eck Absolute Return Advisers Corporation, decentralized finance firm Küresel X Digital and Gemini Trust Company.
Judge Martin Glenn expressed concerns that the process might hit a “regulatory roadblock” and compared it to Voyager, another crypto firm that went bankrupt last year. The Celsius kanunî team sought to reassure the judge, citing ongoing discussions with regulatory authorities.
A sale of $1 billion of Voyager’s assets to Binance was abruptly terminated following pushback from regulators.
Proof Group’s Managing Director Noah Jessop has also invested in bankrupt bitcoin miner Core Scientific (CORZ), according to his Twitter bio, which is both in its own Chapter 11 bankruptcy and in a dispute with Celsius.
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A standardized ETH staking benchmark could unleash a new generation of financial products that appeal to TradFi.
In any industry, standardization drives scale. Ethereum’s transition last year to proof of stake (PoS) unlocked an exciting opportunity to create a benchmark that tracks staking yields, which could serve as the basis for financial products that track this rate.
Under PoS, Ethereum block validators, also known as stakers, lock up a portion of their ether (ETH) as collateral to participate in the network’s consensus mechanism. In return for their participation, stakers earn rewards in the form of new protocol emissions and transaction fees.
To fully achieve the promise of this innovation, a standardized benchmark can be produced by capturing and publishing the daily, annualized mean of on-chain rewards across all validators. It would be difficult to manipulate because of the inherent transparency, replicability and immutability of the blockchain – in contrast, say, to the infamously manipulated LIBOR benchmark that powered traditional finance (TradFi) credit markets for years.
Based on a preliminary analysis of how such a benchmark would behave,
average protocol emissions appear to trend downward as new validators come online. But it’s clear that the rate skyrockets with material increases to network activity resulting from a flight to safety (FTX’s insolvency) or new network activity (the recent PEPE göğüs coin frenzy).
A standardized ETH staking rate will provide immediate utility as:
As a benchmark, an ETH staking rate would work similarly to traditional instruments like overnight index swap (OIS) rates – delivering reference rate utility to market participants. From new crypto-native Sharpe ratios to pricing benchmarks, a standardized ETH staking rate can be used to discount future cash flows – letting investors better assess the present value of their investments in the Ethereum ecosystem.
(CoinDesk)
A standard staking rate would form the underpinning of an important new tool for risk transfer. Interest among natural hedgers, especially validators, and prospective speculators will result in the inevitable formation of a forward curve resulting in swaps, futures and other derivatives. Basis swaps with traditional rates or cross-currency swaps with fiat currencies could provide an interesting new crypto rate onramp, while also allowing structured products to proliferate.
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A new staking rate could unlock the next generation of financial products while serving as a building block of Ethereum’s monetary policy. As such, CESR represents an important development in the evolution of the Ethereum ecosystem and a new frontier for innovation in the world of decentralized finance and beyond.
NOTE: CoinFund recently announced that it had partnered with CoinDesk Indices to launch CESR, a composite ether staking rate.
Circle’s reserve fund has ditched Treasury bills that mature beyond May 31, rotating assets to cash and overnight repurchase agreements instead, a company spokesperson said.
Stablecoin issuer Circle Internet Financial is rebalancing the reserves backing the $30 billion USD Coin (USDC) as it braces for the risk of a U.S. government debt default.
The Circle Reserve Fund, managed by global investment management giant BlackRock, added $8.7 billion in overnight repurchase (repo) agreements to the portfolio as of May 16, according to the fund’s website. The so-called tri-party repo agreements involve banking giants such as BNP Paribas, Goldman Sachs, Barclays and Royal Bank of Canada.
Overnight repo transactions are effectively short-term collateralized loans. The borrower is selling a security – in this case, U.S. Treasurys – for cash, and agrees to buy back the collateral the next day for a slightly higher price. What’s really happening, though, is that big institutional investors with cash to spare are parking that with Wall Street dealers that need funding.
“While this plan has been underway for many months, the inclusion of these highly liquid assets also provides additional protection for the USDC reserve in the unlikely event of a U.S. debt default,” a Circle spokesperson emailed in a note.
Assets in the Circle Reserve Fund as of May 16 (BlackRock)
Circle is doing this as U.S. lawmakers are locked in discussions with President Joe Biden’s administration over raising the government’s ability to issue new debt, also known as the debt ceiling. Treasury Secretary Janet Yellen said that the Treasury Department is set to run out of cash by early June unless the debt limit is raised.
As part of the preparations, Circle’s fund ditched Treasurys that mature beyond the end of this month as of May 10, with rotating the assets into cash or government repo transactions instead, the Circle spokesperson said. The collateral for any such repo transactions exclude securities maturing within three days, the spokesperson added.
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“We don’t want to carry exposure through a potential breach of the ability of the U.S. government to pay its debts,” Jeremy Allaire, chief executive officer of Circle, said last week in an interview with Politico.
The conversation was initiated to promote more decentralization within the dYdX ecosystem ahead of its v4 upgrade.
DYdX, the decentralized platform known for its perpetuals contracts, is now discussing the creation of more subDAOs to make management of the ecosystem even more decentralized.
A post from Fox Labs Digital, an Australian-based marketing agency, suggested divvying up oversight responsibilities to several smaller decentralized autonomous organizations (DAOs).
The discussion of going beyond the current two current subDAOS – one for dYdX’s grants program and the other for its operational activities – comes as the dYdX community is preparing to upgrade on the Cosmos blockchain to its fourth version (v4). The goal is to make dYdX “a fully decentralized version of the protocol,” according to a blog post.
Moreover, according to a different governance post by the dYdX Foundation, an independent not-for-profit organization aimed at fostering decentralized governance, the operations subDAO is set to expire on June 19. With the imminent launch of v4 and the expiration of its operations subDAO, the “dYdX ecosystem is approaching a critical juncture,” the foundation said.
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Fox Labs in the governance post said, “This is not just about shaping the future of dYdX but also about building a model for how a decentralized trading platform can operate effectively and inclusively.”
SubDAOs are groups of contributors within the dYdX DAO “that each work on core functional areas of the dYdX protocol and are ultimately accountable to the dYdX community,” per the dYdX Foundation.
Technical factors suggest ether’s bounce could pause at current levels.
After having declined more than 15% relative to bitcoin (BTC) in the first four months of the year, ether (ETH) over the past two weeks has narrowed its underperformance to 11%.
The recent move has come despite muted price movements for the two cryptos and amid low volume, with bitcoin trading action 25% below its 20-day moving average and ether 33% below. Bullish ETH investors likely may be anchored to its now persistently deflationary status, with token supplies contracting by 240,000 since September.
A look at relative rotation graphs (RRG) shows both bitcoin and ether currently trailing traditional finance in performance and momentum over the most recent 10 days.
Relative Rotation Graphs display the relative strength and momentum of assets to a central benchmark. In this instance, the S&P 500 serves as the benchmark, while the Nasdaq 100 and Russell 2000 also serve as analogs. The most recent RRG shows BTC and ETH falling into a lagging quadrant relative to all three indices.
For context, lagging assets within RRG’s are underperforming on the basis of both performance and momentum.
A technical look at the ETH/BTC chart shows momentum increasing alongside the improved performance, with the Relative Strength Index (RSI) up 13.6..
A look back at historical RSI levels implies that prices may stall however. Since 2015, the ETH/BTC RSI has fallen between 52 and 54 approximately 112 times, with average 30 day performance of just .002%. The data highlights bitcoin’s tendency to outperform ether historically. The ETH/BTC pair is currently trading 40% below its 2018 maximum of $0.11.
An additional 2% move higher would push ETH/BTC past the upper range of its Bollinger Bands, amplifying its recent ascent. Recent history would dictate however that the pair would be likely to revert back to its 20 day moving average of $0.07
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Grayscale announced last month that the SEC suggested FIL might be a security.
The U.S. Securities and Exchange Commission (SEC) asked Grayscale to withdraw its application to launch a Filecoin (FIL) Trust product, the asset manager revealed Wednesday.
Grayscale said in a press release that it had received a comment letter from the federal securities regulator saying FIL “meets the definition of a security.”
“The SEC staff requested that Grayscale seek withdrawal of the registration statement promptly,” Grayscale said. “Grayscale does not believe that FIL is a security under the federal securities laws and intends to respond promptly to the SEC staff with an explanation of the legal basis for Grayscale’s position. Grayscale cannot predict whether the SEC staff will be persuaded that Grayscale’s position is correct, and if not, whether it may become necessary for Grayscale to seek accommodations that would enable the Trust to register under the Investment Company Act of 1940 or, alternatively, seek dissolution of the Trust.”
Grayscale is a subsidiary of Digital Currency Group, CoinDesk’s parent company.
An SEC spokesperson declined to comment when asked if the agency could comment on FIL last month.
Grayscale said in a public filing in April that the SEC Divisions of Corporation Finance and Enforcement had reached out at the time “concerning [Grayscale’s] securities law analysis of FIL.
Grayscale “acknowledges that FIL may currently be a security, based on the facts as they exist today, or may in the future be found by the SEC or a federal court to be a security under the federal securities laws, notwithstanding [Grayscale’s] prior conclusion,” the company said at the time.
FIL’s price dropped nearly 3% (15 cents) on the news of the filing, before rebounding slightly and trading at $4.51 at press time, according to CoinGecko.
The back-and-forth reflects SEC staffers’ growing scrutiny of crypto tokens and their status under U.S. securities law. SEC Chair Gary Gensler has repeatedly said that most cryptocurrencies are securities, a stance that fundamentally differs with that of the crypto industry, including Grayscale.
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Issuers of securities have to register with the SEC and provide regular disclosures. The SEC has been cracking down on cryptocurrencies, especially projects which raised funds through initial coin offerings (ICOs), since 2017, forcing many of these projects to refund investors or shut down. Filecoin raised $200 million via an ICO.
Grayscale has previously made similar disclosures to its April Filecoin Trust disclosure related to its trust products for Stellar’s XLM, Zcash’s ZEC and Horizen’s ZEN.
The agreement offers Talos clients connectivity to Coinbase Prime for spot liquidity and custody services.
Talos, a crypto trading platform for institutional investors, is working with Coinbase Prime to expand access to digital assets for customers of both firms.
With rising demand from institutional investors for more secure and efficient trading platforms, the agreement offers Talos clients access to Coinbase Prime for spot liquidity and custody services, according to a press release. Coinbase Prime, which is typically used by institutional investors, is an integrated system that offers users offline storage and advanced trading.
The pact will also give Coinbase Prime clients access to Talos’s trading and connectivity products, according to the press release.
With institutional investors pushing further into crypto, demand for more sophisticated means of trading, investing and managing the digital asset has ramped up. Last week financial institutions T. Rowe Price, WisdomTree and Wellington Management joined layer 1 blockchain Avalanche’s Evergreen subnet to make execution and settlements more efficient. Last month, Nasdaq said it is aiming to debut its crypto custody services by the end of the second quarter.
“We’ve seen consistently growing demand, despite recent market conditions, for high-performance digital asset trading platforms as institutional investors continue to build for long-term participation in this emerging asset class,” Anton Katz, co-founder of Talos, told CoinDesk in an interview.
Katz added that unlike retail investors, institutional firms entering the space require trading platforms with a much higher standard for safety and reliability along with more efficient means of trading that matches what they’re accustomed to in the traditional financial (TradFi) world.
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Talos raised $105 million in a Series B funding round last May that included investments from U.S. financial services giants Citigroup (C), Wells Fargo (WFC) and BNY Mellon (BK). The crypto trading platform offers institutional investors a “full trade lifecycle” which includes liquidity aggregation, trading, analytics and settlement through a single point of access, according to the statement.
