Crypto News Update — August 2021

Your Monthly Brief into the World of Digital Assets

JKL Group

Published in

Coinmonks

11 min readSep 1, 2021

Article by Lesia M.

Bitcoin Overview
Ethereum Overview
- EIP 1559 Upgrade
The Case for Cardano
Solana’s Rally
Governments & Regulation: US and World
Crypto News:
- Exchanges, DeFi & Stablecoins
- Banking / Financial Services
- Payments

BITCOIN OVERVIEW

BTC ended the month of July with a distinct spike in price that many bulls were hoping for after two months of sideways market. This 8-consecutive-days price surge marked the general uptrend for the month of August, some minor corrections of up to 10% happening along the way. End of month BTC is coming close to support levels at USD $47.5K after having tested the psychological resistance level of US $50K on Aug 23rd, a price level which had not been seen since mid-May.

Testing the uptrend’s support levels represents profit taking happening in the market after a 70% surge since July 20th.

During the August uptrend BTC Open Interest grew at a faster pace than the price of the underlying. This signifies opening of new OI positions on the long end given that the funding rate is in the positive territory. At the same time, looking at relatively low and stable funding rate environment and futures spot basis, it seems the market does not yet have the strength to bounce back to meet the resistance levels at $56K. The current return to sideways drift might lead to a further consolidation period extending into the beginning of September.

Source: app.intotheblock.com | JKL Research

Macroeconomic uncertainty with growing tapering concern had an impact on the cryptocurrency markets and will likely extend into the next month ahead of the Fed’s meeting on September 21/22.

ETHEREUM OVERVIEW

London fork finally introduced the long-awaited EIP-1559 upgrade to Ethereum on August 5. EIP-1559 will ensure that a portion of Ethereum’s gas fees will be burnt, with the rest going to miners, thus creating a case for the asset’s scarcity. Given the growing institutional and retail adoption of Ethereum, London upgrade was an important milestone to ensure the cryptocurrency’s future success. This upgrade was priced in in the ETH upwards trend lasting from July 21st through to mid-August.

The price had a steady run breaking 100d MA at $2,550 to shot upwards and peak at $3,378 on August 23rd. In one month between July 20 and August 23 ETH appreciated by more than 96% rallying all the way from $1,720 up to $3,378. ETH is currently in a consolidation period following the overall crypto market, gathering foundation for its next move.

EIP-1559 Detailed

London upgrade finally introduced the long-awaited EIP-1559 upgrade to Ethereum. EIP-1559 will ensure that a portion of Ethereum’s gas fees will be burnt, with the rest going to miners. This upgrade was priced in in the upwards trend lasting from July 21 through to mid-August.

Which impact will EIP-1559 have on the Ethereum network for users?

1. It promises to provide a predictable fee-payment experience creating less cases of massive fee overpayment on the network.

2. The new base-fee burning mechanism will enforce the reduction in ETH issuance decreasing the crypto’s inflation rate.

Ethereum’s fee market today is based on first price auction where fees can fluctuate drastically depending on competing transactions pricing. To solve these issues, EIP-1559 introduces a predictable base-fee mechanism. Coindesk Research report explains this upgrade as follows:

“The base fee is the minimum gas price required for users to send a transaction or complete an operation on Ethereum under EIP 1559. It fluctuates in accordance to how much space is being utilized per block on Ethereum. Ideally, each block on Ethereum would contain a maximum of 15 million gas. However, in times of network congestion, EIP 1559 would allow block sizes to increase up to twice this amount.

These adjustments over the long term are designed to ensure gas usage on Ethereum trends towards an average of roughly 15 million gas per block.”

Since the implementation of the London Hard Fork, Ethereum network has already burned over 150 thousand ETH worth around US $500 million.

THE CASE FOR CARDANO

In the month of August, ADA increased in price by over 110%, rallying from around $1.3 in the beginning of the month to $2.8 by the month’s end. In dollar terms, Cardano has seen the strongest growth in the crypto space, gaining more than US $45 billion in market cap over the course of one month.

So what is Cardano and why is it so special? Launched in 2017, Cardano is the second largest blockchain supporting Smart Contracts functionality, providing a platform for crypto projects and decentralized applications. At the moment of writing, Smart Contracts have not been deployed on Cardano’s blockchain yet, however seem to be imminent according to the developers’ updates. The time schedule is September following the completion of Alonzo hard fork. (Read More)

With the launch of Smart Contracts, Cardano expects to become superior to Ethereum: while the latter is only transitioning to the Proof of Stake protocol, Cardano is already successfully running it. In fact, Cardano is currently the world’s largest proof of stake blockchain by market cap.

One of Cardano’s most obvious advantages is the project’s high degree of decentralization. Cardano’s 3,000 stake pool operators are responsible for 100% of block production. The higher the number of block producers on the network, the higher degree of security they provide making the 51% attack highly unlikely.

The distribution of ADA in circulation is yet another evidence of the project’s preference for decentralization, with only 16% of crypto assets belonging to the team & founders and 84% sitting in the hands of investors.

In the month of August, ADA appreciated by over 110%, rallying from around $1.3 in the beginning of the month to $2.8 by the month’s end.

SOLANA’S RALLY

Solana is the next competitor for dominance in the Smart Contracts space, growing SOL at mind-blowing 224% in the month of August. This price increase added roughly US $24 billion in the crypto’s market capitalization.

Solana is also a relatively new web-scale blockchain designed to provide fast, secure and scalable apps and marketplaces. The focus is the transaction speed, which Solana solves with the Proof of History mechanism. It assigns a time-stamp for each transaction to achieve scalability and high throughput.

Solana is ahead of its closest competitors like Polkadot or Cardano, since the project had already deployed the Smart Contracts functionality and has multiple projects running live on its network. We have seen the benefits of having leading projects in its ecosystem during the August SOL rally following the news of Degenerate Apes — Solana’s NFT project — going viral (Read More), and Audius partnering with TikTok (Read More).

Volatility and Correlations

GOVERNMENTS & REGULATION: US

August has been rich with the US regulators tacking the safety and control in the crypto markets.

On August 3rd SEC chairman Gary Gensler spoke openly about cryptocurrency regulation at the Aspen Security Forum. Gensler highlighted the SEC’s authority in overseeing the crypto market and the need for further rules with regards to crypto exchanges, lending platforms, DeFi and stablecoins. A hot topic for the upcoming future is determining whether a crypto asset is a security and thus must be registered with SEC. (Read More)

A bright note of Gensler’s crypto discussion was his hint to review bitcoin ETF proposals to include bitcoin futures traded on CME. And while hopes for an SEC-regulated bitcoin ETF remain a dream, a bitcoin futures ETF is close to becoming a reality. After this announcement, asset managers rushed to rewrite and file proposals for bitcoin Futures ETFs, including Valkyrie, VanEck, Galaxy Digital, Invesco, ProShares and other. (Read More)

Infrastructure Bill

In the beginning of the month, market’s concern was around the Senate’s Infrastructure Bill narrowing a cryptocurrency tax reporting provision that would raise $28 billion over 10 years.

The Bill has a rather broad and unclear definition of a ‘broker’: it could encompass any entity facilitating crypto transactions (including miners, hardware and software developers) and would make financial reporting and disclosures mandatory for these ‘crypto brokers’. Two amendments were proposed to narrow the scope of provision exempting miners, validators and entities that do not provide custody and trading services. Interesting point is that one of these amendments tried to exempt only proof-of-work validators, which could be interpreted as implicit backing of Bitcoin as opposed to Ethereum. (Read More)

In the end the Senate failed to amend crypto wording in the Bill leaving the new cryptocurrency tax requirements quite controversial. As usual in a bull market, the news was taken with a positive attitude of ‘we lost the battle but not the war’. Market participants claim that Washington expanding tax regulation to crypto is a sign of long-term regulatory acceptance and even support. (Read More)

Other US Regulations

ð Letter from Gary Gensler to Elizabeth Warren Voices Concerns Around Investors’ Protection.
ð SEC Chief Says Most DeFi Project Aren’t Decentralized and must be regulated.
ð US State Department offers up to $10 million in crypto rewards to white hat hackers.
ð Federal Court Orders BitMEX to Pay $100M for Illegally Operating a Cryptocurrency Trading Platform.
ð SEC Charges Poloniex for Operating Unregistered Digital Asset Exchange.
ð City of Miami Unveils Its Own Cryptocurrency ‘MiamiCoin’.

GOVERNMENTS & REGULATION: WORLD

ð FCA Notice Says Binance is Not Capable of Supervision in U.K.
ð All Binance Users are Now Subject to Immediate KYC Verification.
ð Upbit Is First Korean Exchange to Register With Authorities Before September Deadline.
ð El-Salvador Readies Bitcoin Rollout With 200 ATMs for Conversion.
ð Bitcoin Has No Value: People Bank’s Of China Official Announces Further Crackdown.

CRYPTO EXCHANGES, DEFI & STABLECOINS

ð Tether Releases June Attestation Report.
ð Hackers Stole and Returned $600 million in Tockens from Poly Network.
ð Australian crypto users will have access to tax reporting services through Crypto.com.
ð Coinbase is buying $500 million in crypto and investing future profits into a crypto portfolio.
ð More than $90 million in cryptocurrency stolen after top Japanese exchange Liquid is hacked. Soon after hacked exchange secures a $120 million loan from FTX.

INSTITUTIONS

Banking / Financial Services

ð More than half of the world’s top 100 banks have crypto and blockchain exposure.
ð BlackRock invests $384 million in Bitcoin mining firms.
ð Citi considering bitcoin futures trading for some institutional clients.
ð American Bankers Association Publishes Crypto Report.
ð French Asset Manager Melanion Capital Wins Approval to Launch Bitcoin ETF in EU.
ð MassMutual and NYDIG Team Up for a New Partnership.
ð SIMON and NYDIG Partner to Deliver Bitcoin Education and Investments to Financial Professionals.
ð Wells Fargo files for Bitcoin fund.
ð Galaxy Digital files for US Bitcoin Futures ETF.
ð Galaxy Digital partners with Bloomberg for DeFi index.

Payments

ð CryptoPunk NFTs Break Sales as Visa Sparks Buying Frenzy and releases a Paper on NFTs.
ð PayPal launches its cryptocurrency service in the UK.
ð Square’s Cash App Q2 Bitcoin Revenue Rose 200%, Takes $45M Bitcoin Impairment Loss.
ð Venmo to Allow Credit Card Holders to Automatically Buy Crypto with Their Cash Back.

Other

ð AMC to Accept Bitcoin for Tickets and Concessions Later This Year.
ð MicroStrategy Buys $177M More Bitcoin at an Average Price of $45,294.
ð Deloitte’s 2021 Global Blockchain Survey: 76% of Respondents Believe Digital Assets Will Rival or Replace Fiat in 5–10 Years.
ð Second-Largest U.S. Mortgage Lender Will Accept Payment in Bitcoin.

DISCLAIMER

This material is intended for use solely by professional investors (as defined in the Cayman Islands Monetary Authority from time to time). Although information contained in this material has been compiled from sources believed to be reliable, JKL does not represent or warrant the accuracy, completeness or reliability of the information contained in this material.

The contents of this material have not been reviewed by any regulatory authorities. You are advised to exercise caution in relation to the contents of this material. If you have any doubt about any of the contents of this material, you should obtain independent professional advice. Neither JKL nor any of its affiliates, nor any of its or their respective directors, officers, employees, and representatives will accept any responsibility or liability whatsoever for any direct, indirect, or consequential loss arising from the use of or the reliance upon any information contained in this material. This material does not constitute an offer or an invitation to subscribe for or purchase any financial product. It is not intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation to purchase any financial product.

JKL, its affiliates and/or any or its or their respective officers, directors, employees, and representatives may from time to time have a material interest in the product(s) described in this material or in any investment related to the product(s), for their proprietary accounts and/or for accounts under their management, and/or for clients, which may result in a positive or negative influence on the value of the product(s).

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