Blockstone Capital Weekly Digest: Friday 7 April 2023
Updated: Jun 16
A summary of the most important developments in the digital asset industry, every week
Crypto market sentiment remained positive this week, with ETH crossing the $1.9K price point for the first time since August 2022. It was also revealed that Bitcoin was the best performing asset in Q1 2023, with a YTD performance of nearly 72%, outstripping gains in the S&P 500, Nasdaq 100, and Treasury Bonds by a wide margin.
Currently trading at $27.9K, Bitcoin's market dominance has witnessed a slight pull back of 1.5% over recent days, resting at 45%. Should this downward trend persist, the stage could be set for altcoins to gain ground.
Among the top-tier altcoins, DOGE experienced a remarkable upswing this week, soaring 30% to a four-month high. This surge was thanks to Elon Musk's whimsical decision to swap Twitter's bird emblem for the crypto’s Shiba Inu dog. Dogecoin quickly dived on Thursday after Twitter reverted back to its normal blue bird logo.
As we head into next week, our focus will be on Ethereum’s anticipated Shanghai hard fork – which could bring new institutional and risk-averse money into ETH staking, the launch of Solana Mobile, and the release of CPI figures. From Tuesday onwards, it’ll be an eventful couple of days, so be sure to rest up this holiday weekend.
On behalf of the entire Blockstone Capital team, our warmest wishes for a Chag Pesach Kasher Vesameach to our Jewish subscribers, and a joyful and peaceful Easter to our Christian readers.
Carl, Vegard and Yev
Brazil enters the $133bn stablecoin realm as major investment bank BTG Pactual launches ‘BTG Dol’
Brazil-Based BTG Pactual, one of Latin America's largest investment banks, introduced the world's first bank-issued dollar-backed stablecoin to great fanfare on Tuesday.
Named BTG DOL, the asset was created by the bank’s cryptocurrency platform, Mynt, and runs on the Polygon blockchain.
Backed by USD and issued on a 1:1 basis, the debut of BTG DOL comes amid increased demand from Brazilians to diversify out of the Brazilian Real.
Opening a US bank account, never mind a brokerage account, is notoriously difficult for non-US citizens, meaning this solution from BTG Pactual could be an important step in providing Brazilians easier access to global financial markets.
The debut of BTG Dol might also be a boon for the US dollar at a time when the world’s reserve currency is coming under significant pressure. Several developments in recent weeks point to the gradual decline in the US dollar's dominance.
According to some reports, Russian parliamentarian Mikhailovich Babakov was quoted as saying BRICS nations are developing a new common currency in an effort to challenge the dominance of the US dollar. Last week, Brazil announced that its trade with China will no longer use dollars. China and France completed the first LNG trade settled in yuan, signalling the end of using the US Dollar for these energy trades. Lastly, news that Saudi Arabia is forming a trade alliance with China, Russia, India, Pakistan and four other Central Asian nations to reduce its US dollar dependence, also puts more pressure on the US, and may indicate a shift in the global financial landscape.
A trio of Canadian crypto exchanges confirm plans to merge and become one of the world’s largest, regulated crypto trading platforms
On Tuesday, Canadian crypto exchanges WonderFi (WNDR), Coinsquare and CoinSmart revealed plans to merge. Between them, the three firms have nearly 1.7 million users and more than $600m in assets under custody.
Upon combining sometime by the end of the second quarter, it will create Canada’s largest digital asset trading platform, and position the company to compete against global giants such as Coinbase, Kraken and Binance. Response to the merger has been overwhelmingly positive, with WNDR shares rising more than 40% following the announcement.
In a recent interview with CoinDesk TV, Kevin O'Leary, who is an investor in WonderFi, said consolidation is a necessity to thrive in the current market, stating: “Compliance is expensive and the only way to offset it is scale.”
Recently, Canada has been intensifying regulations on cryptocurrency exchanges. Near the end of February, authorities issued a 30-day ultimatum to all unlicensed crypto exchanges and money service crypto businesses operating in the country. These businesses were given a month to either obtain the necessary licenses or cease their operations.
Uniswap volume beats Coinbase and registers its best month since 2022. Is the CEX-DEX flippening playing out in real time?
For the second consecutive month, trading volumes on Coinbase were eclipsed by decentralised exchange Uniswap, which reported its best month since January 2022.
Uniswap posted volumes of $71.6bn for March - 45% higher than Coinbase $49.4bn – up from $40bn in February. According to DefiLlama data, Uniswap isn’t the only DEX seeing traction. Trading volumes on decentralised exchanges exceeded $133bn in March, marking the third consecutive monthly increase and the highest monthly total since May 2022.
Market observers attribute the growth of DEX trading activity to the continuing spate of regulatory problems facing CEXs. In recent weeks, regulators have sued Binance, sent a wells notice to Coinbase, and shut down Kraken's staking service.
Heightened regulatory uncertainty has prompted Bittrex to wind down its US operations (effective as of 30 April), while Paxful, a US-based crypto exchange with a large presence in Africa, said this week it is shutting down. The firm’s CEO Ray Youssef voiced his frustration with US regulators, commenting: “We’ve been bending over backwards for the past five years to try to comply with the highest standards… The regulators still don’t get it and it’s painful to see.”
If centralised exchanges continue to shut down or face regulatory actions at the rate we have been experiencing in recent months, it is possible that next cycle’s trading activity mostly happens on DEXs. And with Uniswap's V3 license expiring last Saturday, competitors can now replicate its technology, setting the stage for DeFi to capture the opportunities presented by this shifting landscape.
On Monday, PancakeSwap launched its V3 version on BNB and Ethereum, offering improved user experiences while maintaining the efficiency of Uniswap's V3 model. In the five days since it deployed a forked version of V3, PancakeSwap has attracted $148m of liquidity. This promising start indicates a future of even greater competition between DEXs, and users will ultimately benefit from this struggle…
Roundup of other key developments
French investment bank Credit Agricole CIB and Swedish bank SEB join forces to develop a blockchain-based platform for digital bonds. More
Swiss government-owned bank PostFinance to offer customers crypto. More
Liechtenstein’s VP Bank taps Metaco to expand custody and tokenisation services. More
DeFi platform M^ZERO emerges from stealth with $22.5m funding round. More
MicroStrategy adds to massive bitcoin bet, takes total to 140,000 BTC. More
Digital assets platform Bakkt completes $155m deal for Apex Crypto. More
Euler Labs hacker returns all of the recoverable funds. More
Blockchain messaging protocol LayerZero raises $120m, hits $3bn valuation. More
European Central Bank official warns of ‘gaps’ in forthcoming crypto rules. More
Ethereum validator goes rogue, frontruns MEV bots for $25m. More
Arbitrum to break up governance votes after community backlash. More
From Blockstone Capital
Blockstone Capital at the AIM Summit, London
Blockstone Capital at the DigiAssets conference, London
There’s still time to register for TradeTech's DigiAssets conference, taking place on 24-25 May at the Queen Elizabeth II centre in London.
DigiAssets is an institutionally-focused crypto event that is expected to attract more than 400 attendees from the asset management and banking sectors. Representing Blockstone Capital at the event is Carl, who is also part of the event’s stellar-speaker line-up which includes the SEC’s Hester Pierce, Point72’s Michael Ashby, FCA’s Helen Boyd, plus many more. To register, visit this link.