Blockstone Capital Weekly Digest: Friday 26 May 2023
Updated: Jun 20
A summary of the most important developments in the digital asset industry, every week
Plenty of key macro events this week as Germany officially slipped into a recession and UK inflation hit a 31-year high. Across the pond, the ongoing US debt ceiling talks and the release of the FOMC meeting, which revealed a lack of consensus among US central bankers regarding further interest rate hikes, did little to boost market confidence.
Digital assets traded mostly in the red over the past seven days, with Bitcoin down approximately 2.3% on the week as it enters its sixth week of stalling below $30K. The asset is currently trading at around $26.3K. Meanwhile, Ethereum is struggling to maintain a foothold at $1.8K and is down about 1.5% for the week.
Focus within the crypto industry has now shifted to the stability of Multichain, the fourth-largest bridge, following a series of transaction issues and disconcerting silence from its team.
Concerns have triggered a substantial sell-off of the project’s asset MULTI, and directed attention to the Fantom ecosystem, which is particularly vulnerable due to Multichain's wrapped tokens making up 35% of its TVL.
With digital asset markets still experiencing PTSD after last year’s succession of bridge incidents, the ongoing Multichain uncertainty highlights the extent to which cross-chain bridges pose a risk for the DeFi space, and the need for new cross-chain infrastructure or solutions to support a multi-chain future.
Carl, Vegard and Yev
Coinbase’s strategic alliance with Bitpanda opens doors to European banks becoming more mature in their crypto interest. Gemini selects Dublin as its European HQ.
The European crypto market has seen several exciting developments this week. Yesterday, Bitpanda, an Austria-based trading platform and the US exchange giant Coinbase announced they are joining forces to help onboard European institutions interested in offering crypto trading to their clients.
Banks, fintechs and institutions throughout Europe will now be able to speed up their crypto go-to-market strategy thanks to Bitpanda’s white-labelled solution, while benefiting from Coinbase’s liquidity and advanced custody infrastructure.
Though US banks were certainly quicker in custodying crypto compared to their European counterparts, research suggests Europe now has the most crypto-friendly banks in the world, by far. With partnerships such as Coinbase-Bitpanda, and the MiCA regulation coming into force next year, the continent’s global lead in the crypto sector could increase even further.
Confidence in the European crypto sector's prospects was echoed by Gemini, which announced today that it has chosen Dublin as its European operations headquarters. Earlier in the week, reports surfaced suggesting that the exchange's founders, the Winklevoss twins, were considering establishing its European headquarters in London.
As today’s announcement confirms, the twins evidently had a change of heart. In a recent interview with The Telegraph,
Tyler Winklevoss said he had reservations about the inconsistent attitude of British lawmakers, referencing a report from last week where members of parliament said crypto should be regulated like gambling. Digital asset investors and firms in the UK have fervently criticised this proposal, denouncing it as ‘backwards step’.
Binance pushes back against Reuters report alleging company commingled funds
In a swift response to a concerning Reuters special report, Binance vehemently denies the allegations that it commingled customer funds with company revenue.
The report, relying on information from unnamed 'former insiders,' claims that the exchange regularly intermixed funds amounting to billions of dollars in accounts held at the now-collapsed Silvergate Bank. However, Reuters added that it 'found no evidence to substantiate the claim that clients' funds were lost or misused.
Patrick Hillmann, Binance's Chief Communications Officer, took to Twitter to dismiss the article, labelling it as "weak" and replete with "conspiracy theories."
While Binance remains steadfast in refuting the allegations, the report emphasises the urgency for stronger internal controls within the digital asset industry to ensure the clear separation of customer funds and company revenues. The practice of commingling has been a cause of huge concern within the industry since the downfall of FTX in November last year. Following those revelations, fears have arisen that this practice may be prevalent across the industry.
If what the article is alleging is true, the potential ramifications would be huge for crypto investors and jeopardise the trust that has been built around the industry in its relatively short life span. That being said, it seems much more information will be necessary to conclude Binance acted inappropriately. We hope this report will lead to a push for heightened transparency among CEXs and the broader crypto asset space.
TradFi hedge fund Hunting Hill Global Capital launches digital asset affiliate
Sophisticated hedge funds in the traditional space continue to integrate digital assets into their offering, despite ongoing challenging marketing conditions.
New filings show that Hunting Hill, a Wall Street traditional hedge fund with around $364m AUM (as of a March filing), is launching a dedicated crypto fund with investment from BaseLayer Ventures, an early-stage venture capital firm.
With an initial AUM of around $20-25m, Hunting Hill Digital (HHD) will be managed by Adam Guren and Sonny Dozier. Its growth strategy will include exploration of opportunities in tokenisation and NFT asset management.
This isn’t Hunting Hill’s first foray into crypto, as the asset manager first moved into digital assets in 2016. By 2021, the firm had about $3.5bn of its balance sheet dedicated to the trading of crypto and their derivatives. However, due to concerns regarding counterparty risk prevalent in the industry, Hunting Hill began to pare back its exposure.
The debut of HHD demonstrates a sentiment reversal, and Hunting Hill’s long-term commitment to the disruptive potential of digital assets. We extend our best wishes to them as they embark on this new endeavour.
Roundup of other key developments
Hotbit exchange halts operations, urges users to withdraw funds. More
Huobi Global ordered to halt operations in Malaysia. More
Circle launches Euro-based stablecoin on Avalanche blockchain. More
Gemini says Genesis parent DCG missed $630m payment. More
Hong Kong greenlights some retail crypto trading. More
Coinbase hits back at SEC with new court filing in ongoing lawsuit. More
OKX targets France as regional hub with plan to hire 100 people. More
Iosco calls for UK to regulate crypto in same way as stocks and bonds. More
Attacker uses malicious proposal to take over Tornado Cash governance. More
Worldcoin raises $115m led by Blockchain Capital. More
Ripple acquires Pantera’s stake in Bitstamp. More
Crypto project DF Fintoch disappears with $32m of funds in likely exit scam. More