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  • Writer's pictureBlockstone Capital

Blockstone Capital Weekly Digest: Friday 2 June 2023

Updated: Jun 20, 2023

Markets remain fairly muted following the passage of the debt ceiling deal approved in the House of Representatives that brings Washington closer to averting a historic default. Over recent weeks, this looming crisis has weighed heavily on all risk assets, resulting in sluggish trading activity. Bitcoin stepped into June below $27K and ETH at $1.8K. A bright spot in the markets this past week has been Ripple. XRP is up by 12% in the past seven days, bringing the coin to $0.51. Another notable gainer in the higher market cap assets is Solana, which is up about 10% for the week.


Reflecting on May, trading volumes on CEXs fell to $424bn, the lowest figure since October 2020, marking a stark contrast to the volumes we witnessed in May 2022 ($1.4T) and May 2021 ($4.25T). This sluggish trading activity can be attributed to the withdrawal of large trading firms and a shift toward DEXs, coupled with lower volatility.


This month, we will closely monitor the effects of a more crypto-friendly Asian market. Hong Kong's recent decision to open up crypto trading to retail traders coupled with China's release of the Web3 White Paper, and other notable developments from the region, could be the catalyst for a much-need revitalisation of the digital asset market.


Regards,

Carl, Vegard and Yev


Binance is reportedly considering letting institutional clients hold their trading collateral at a bank as a way to reduce counterparty risk


As per Bloomberg, Binance is seeking to reduce counterparty risk through an innovative new proposal which would allow some institutional clients to secure their collateral outside of the exchange.


According to the report’s four sources, the proposal would enable customers to use bank deposits as collateral for margin trading in spot and derivatives. Possible intermediaries named in anonymous sources include Swiss-based FlowBank and Liechtenstein-based Bank Frick, though at this time, both financial institutions have declined to comment.


While the proposed arrangement may undergo revisions, one interpretation of the proposal entails clients' cash being held at the bank through a tri-party agreement, while Binance lends them with stablecoins to use as collateral for margin trading. The cash deposited in the bank could potentially be invested in money-market funds, enabling clients to earn interest and offset borrowing costs.


The report is fuelling the narrative that crypto firms continue to seek banking solutions outside the US, flocking instead to destinations such as Switzerland or Luxembourg. It's no secret that Binance is grappling with the loss of its banking relationships partners amid mounting regulatory pressure. DefiLlama data shows that over the past month, customers withdrew a net $1.8bn worth of crypto assets from the exchange (amounting to an equivalent of 3.3% of its total deposits). According to the data, a staggering $13.2bn has left the exchange since last November.


In the aftermath of FTX, CEXs continue to face heightened scrutiny over counterparty risk. Additionally, off-exchange settlement solutions are rapidly gaining traction among institutional traders. If the Bloomberg report is indeed accurate, this innovative proposal positions Binance at the forefront of efforts to mitigate counterparty risk and enhance transparency.


USDT reaches ATH – surpasses previous market cap high of $83.2bn


Though digital asset trading volumes are at multi-year lows amid challenging market conditions, one company stands above the fray in dramatic fashion: Tether.


Yesterday, USDT’s total circulating supply reached a new high above $83.2bn, even though the overall stablecoin market is shrinking. The asset’s new all-time-high represents a jump of 25% from about $66bn at the start of the year, as per DefiLlama data. On both CEXs and DEXs, daily USDT volume averaged around $7bn in May, according to Kaiko Data.


In terms of stablecoin market share, USDT has a 64% share of the $130bn industry. The supply of the second-largest stablecoin, Circle’s USDC, is nearly three times smaller than USDT. Since the start of 2022, USDC has seen its supply fall by more than 35% to almost $29bn.


Tether's long-standing presence as one of the first stablecoins in the market and its continued dominance in stablecoin market share demonstrate the trust and confidence placed in its stability and reliability. The stablecoin issuer’s latest attestation showed a net profit of $1.48bn during the first quarter – a portion of which will be used to buy Bitcoin to add to its reserves.


With a robust financial standing, Tether appears eager to make strategic investments to strengthen its position as a global leader among digital asset firms. This week, the firm stretched its tentacles wider within the crypto ecosystem with its investment in renewable energy production for bitcoin mining in Uruguay. Separately – The Block yesterday reported that bitcoin mining revenue reached $916.6m in May – a 13.7% month-over-month increase…


Additionally, Tether said on Wednesday it is expanding its presence in the Republic of Georgia through a strategic investment in the payment processing company, CityPay.io. Both deals (which came within a span of a week) signal Tether’s intentions to expand its geographic footprint and diversify beyond the stablecoin sector.


TradFi giant TP ICAP launches digital asset marketplace


TP ICAP, the largest global interdealer-broker, has debuted its Fusion Digital Assets platform marketplace for spot crypto trading, approximately seven months after having received approval from the FCA.


The platform offers a more familiar infrastructure for qualified investors than vertically-integrated exchanges that combine their exchange and custody functions to create potential conflicts of interest.


The Fusion Digital Assets platform supports trades for USD in BTC and ETH, though TP ICAP has hinted at the potential for broadening its asset portfolio in the future. The firm onboarded several industry stakeholders as partners and clients for the launch of Fusion Digital, which include Fidelity Digital Assets, Flow Traders, XBTO Global and DLT Finance.


TradFi firms have taken a varied approach to the digital asset space following last year’s wave of collapses, with some banks bowing out from the space. Yet, corporations and major payments firms, such as Visa, have sustained their engagement and interest in this space.


TP ICAP is one of 41 crypto-related companies currently registered with Britain’s financial regulator. As a leading market infrastructure and liquidity provider, we are confident that the firm will play a leading role in the step towards forging a stronger, more professional crypto industry that will open doors to greater institutional adoption of digital assets.


Roundup of other key developments

  • Gemini to soon operate in the UAE. More

  • AML rules for digital assets to come into effect in UAE. More

  • HK-based First Digital Group unveils USD stablecoin, FDUSD. More

  • Bybit departs the Canadian crypto market. More

  • Crypto​.com joins ranks of licensed payment institutions in Singapore. More

  • Binance to block privacy coins in four European countries. More

  • Binance plans a new round of layoffs amid increased regulatory scrutiny. More

  • Chainalysis acquires real-time crypto data firm Transpose. More

  • Avalanche hits 1m monthly active users for the first time. More

  • Jimbos Protocol offers $800K bounty to the public after hacker ignores deal. More

  • Temasek cuts salary of staff responsible for its failed FTX investment. More

  • Investment bank Cowen's digital asset unit is shutting down. More

  • Qredo's revamped self-custody wallet goes live. More

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