1. Market update
2. August in a Nutshell
3. Regulators
- When might the spot Bitcoin ETF finally arrive?
4. Crypto Projects
- Are concerns about Worldcoin justified?
5. Mining
6. Institutions
7. September Preview
- Bitcoin performance calendar
- Macroeconomic events
- Crypto events
1. Market update
Bitcoin weakened in August and saw a double-digit percentage drawdown to the $26k level, before partially recovering due to the news of Grayscale’s victory in its lawsuit against the SEC.
As we approach the end of month, Bitcoin is trading slightly below the 200-week moving average, which has served as a significant support and resistance level. A reclaim of the level will be crucial for crypto markets to carry on the bullish momentum that has dominated since the beginning of this year.
Unfavorable macroeconomic factors contributed to weak market conditions. The credit rating of U.S. sovereign debt was downgraded early August by Fitch from AAA to AA+, triggering a selloff in traditional markets and spike in long-term U.S. yields. Subsequently, the FOMC Meeting Minutes were interpreted as hawkish because it reflected that central bank officials still viewed inflation as a threat and are considering further rate hikes to counter the problem. The summary also removed the expectations of a mild recession to occur later this year. As such, the Fed is likely to keep rates higher for an extended period. Market pricing is showing that rate cuts may not come into play before May or June next year.
In China, the property sector debt crisis deteriorated with two prominent firms experiencing increased trouble. Country Garden defaulted on its international bond payments and Evergrande filed U.S. bankruptcy protection. As the crisis worsens, Chinese policymakers nevertheless appear hesitant to introduce major rescue packages. On 21 August, the Chinese one-year loan prime rate was cut by 10 basis points from 3.55% to 3.45%, reducing the burden to most household and corporate loans. But the five-year loan prime rate, which is the peg for most mortgages, was unexpectedly left unchanged at 4.2%.
Looking at crypto-specific news, the second largest decentralized exchange Curve suffered repercussions of the exploit from late July that led to a $61 million loss of funds, as well as a sharp drop in the price of its native CRV tokens. This caused concern during early August as Curve founder Michael Egorov has been using his CRV tokens as collateral to take out loans on other lending protocols like Aave and Abracadabra. If the token price continued to fall, his position could be liquidated, and a death spiral could have occurred to his protocol. This would also bring contagion to the wider decentralized finance (DeFi) ecosystem.
Reacting quickly, Egorov negotiated over-the-counter deals with parties including Justin Sun, DWF Labs and Binance to sell some of his tokens. This allowed him to repay part of his outstanding debt and avert crisis. Yet due to the Curve fiasco, Total Value Locked (TVL) in DeFi further declined to $37.9 billion, which is roughly the same level as at the beginning of this year.
NFT markets continued to slump in August as crypto majors lacked improvement. Bored Ape Yacht Club (BAYC), the leading collection by Yuga Labs, dipped below 23 ETH in floor price before rebounding. Azukis, which suffered from the failure of its new Elementals collection, continued to see a 9.5% drop to a price floor under 4.5 ETH. The NFTGo Blue Chip Index shed 9.0% and 17.4% in ETH and USD terms respectively, underscoring a market-wide decline.
Meanwhile, as an attempt to defend its declining market share, OpenSea announced that it will no longer enforce royalty fees on secondary sales of NFTs. However, art creators and leading crypto figures reacted negatively to this policy change. For instance, Yuga Labs announced that it will block all support for any new or upgradable NFT collections on the platform. Multi-billionaire Mark Cuban, who is also an investor of OpenSea, criticized the move as a huge mistake.
On-chain indicators continue to flash positive and contrarian signs that provide hope for crypto bulls. During the mid-August selloff, weekly Bitcoin taker volume reached an apex that exceeded every period since the beginning of 2022, showing a potential sign of peak disbelief. Also, the short-term Spent Output Profit Ratio (SOPR) rebounded after dropping again below 1.0. When this happened in March and June, it was followed by sharp upward price movement. This leads some to believe that this time will be no different.
2. August in a Nutshell
3. Regulators
When might the spot Bitcoin ETF finally arrive?
As crypto price momentum falters, many are eyeing the potential approval of a spot Bitcoin exchange-traded fund (ETF) to become the next positive catalyst for crypto markets. This leads naturally to the question: when might it finally arrive?
By mid-August, the crypto market began to anticipate a verdict on the Grayscale lawsuit against the U.S. Securities and Exchange Commission (SEC). The asset management firm has previously challenged the regulator’s decision to deny the conversion of its Grayscale Bitcoin Trust (GBTC) into a spot-based ETF. Good news eventually arrived on 29 August when the judiciary finally announced that Grayscale has won the case.
Nevertheless, we must be reminded that the victory does not mean automatic conversion of the GBTC. The court’s ruling only requires the SEC to review Grayscale’s conversion application. Previously, analysts have pointed out that Grayscale may have to resubmit its spot ETF application and go through the full lengthy approval process once again. The SEC also has 45 days to review the court’s decision and could appeal to the full federal appeals court or the Supreme Court.
Bloomberg ETF analyst James Seyffart examines the court documents and notes that they were a “complete and utter rebuke of all the SEC’s spot Bitcoin ETF denial orders”. But as the decision is going back to the SEC, they have a few options moving forward. The easiest choice is simply to approve the GBTC conversion, yet there are also possible ways to go about if they insist to obstruct spot Bitcoin ETFs.
First, the SEC could revoke approval of the existing Bitcoin futures ETFs. Although unlikely, this could be a valid response to the court’s decision. Second, the SEC could find reasons not used before as grounds to reject Grayscale and other outstanding applications. Seyffart speculates that issues surrounding the custody or settlement of Bitcoin, which is not a concern for futures ETFs, could be used as potential arguments.
As we enter the month of September, several deadlines await the SEC to possibly approve, reject or delay the cohort of spot Bitcoin ETF applications led by BlackRock, who remains the most probable candidate to be awarded an approval.
From an optimistic point of view, there are signs that a spot Bitcoin ETF is increasingly likely to happen. The foremost indication is BlackRock, whose filing in June constituted the single factor for Bloomberg analysts to revise spot ETF approval odds significantly from 1% to 50%. Eric Balchunas, also from the Bloomberg team, explained that BlackRock is different from other ETF issuers. As the world’s largest asset manager, they are well connected with the U.S. regulators. It is reasonable to assume that they have done enough research into the matter, including plenty of back-and-forth with government officials, such that they have good conviction about getting an approval. Its ETF application approval rate of 575–1, now very well known, highlights the fund house’s prowess.
In early August, Bloomberg further uplifted the probability of spot Bitcoin ETF approval to 65% (now 75% given Grayscale). The improved conviction stems from a recent interview with SEC Chair Gary Gensler. In a noticeable deflection of tone, Gensler downplayed his role at the Commission during the interview. He emphasized that there are four other commissioners at the agency, implying that the approval or rejection of ETF listings is a majority decision. Then, it is interesting to note that the previous decision was a close vote, where three commissioners voted against a spot Bitcoin ETF, but the remaining two were in favor of it.
In terms of specific dates, Seyffart previously wrote that he is personally looking at a couple dates or periods for which the SEC approval could drop. This could be some period after the Grayscale court decision, with reference to the 45-day review window, when the Commission could decide to approve several applications from the outstanding cohort. Otherwise, it could wait until the final deadline of the ARK 21Shares application, which is 10 January next year.
Top crypto executives are also feeling confident about getting the green light soon. Even before the lawsuit verdict, Grayscale’s Chief Legal Officer Craig Salm predicted that spot ETF approvals could occur in October. Mike Novogratz, CEO at Galaxy Digital, recently claimed that the spot ETF product is likely to be approved over the next four to six months. He said, “Both of our contacts from the Invesco side and from the BlackRock side gets you to think that this is question of when, not if.”
But there are also opinions that suggest otherwise. As several analysts have pointed out, the latest spot ETF applications rely on a surveillance sharing agreement (SSA) with a “regulated market of significant size”. For such agreement, most applicants have specified Coinbase as their surveillance partner. Given that Coinbase has only around 7% of global market share and Binance has more than 60%, it is still arguable whether Coinbase is sizeable enough. This also led to some to theorize that from a strategic perspective, the U.S. might prefer to approve spot Bitcoin ETFs only after attempts to weaken Binance.
Former SEC attorney John Reed Stark takes a step further by predicting that the spot Bitcoin ETF would not be approved over the short-to-mid-term. This is since crypto regulation issues have become increasingly political and partisan, such that the current Democrat-controlled SEC is unlikely to pivot from its hardline anti-crypto stance. That said, an approval is likely provided that a Republican candidate gets elected as U.S. President in 2024.
Regulators: Read More
1–15.08.2023
- Three Arrows Capital Co-Founder Kyle Davies Says He Doesn’t Have to Answer to US Courts (Read More)
- U.S. prosecutors worry Binance charges could cause run on exchange (Read More)
- Hong Kong Officially Opens Crypto Trading to Retail Investors, Grants First Licenses to HashKey, OSL (Read More)
- Hong Kong regulator warns ‘improper practices’ by crypto exchanges can be ‘criminal’ (Read More)
- Fed Starts New Program to Oversee Crypto Activity in U.S. Banks (Read More)
- US SEC delays decision on Cathie Wood’s spot bitcoin ETF (Read More)
- Chinese Filecoin mining firm charged for allegedly orchestrating $83.3 million pyramid scheme (Read More)
- Singapore’s Central Bank Releases Stablecoin Regulatory Framework (Read More)
16–31.08.2023
- CFTC Chair Behnam calls for legislation to help regulate crypto (Read More)
- SEC Set to Greenlight Ether-Futures ETFs in Win for Crypto Industry (Read More)
- Crypto Mixer Tornado Cash Loses Lawsuit Over US Sanctions (Read More)
- Binance, the Biggest Player in Crypto, Is Facing Legal Risks Over Russia (Read More)
- Bitstamp to Stop Ether Staking in U.S. Amid Regulatory Scrutiny (Read More)
- OKX and Bybit remove sanctioned Russian banks from payments list (Read More)
- SEC’s Crypto Dragnet Widens to NFTs in Case With Media Firm (Read More)
- Grayscale scores big court win against SEC over bitcoin ETF (Read More)
4. Crypto Projects
Are concerns about Worldcoin justified?
While the cryptocurrency landscape is ripe for innovation and new ideas, the recent launch of Worldcoin has ignited fervent debate that extends beyond the typical discussions of market dynamics and token utility. At the heart of this discourse is a pressing concern about data privacy and the implications of artificial intelligence (AI) in the realm of digital identity.
Worldcoin is a project that aims to revolutionize the concept of digital identity. Its method? Scanning individuals’ eyeballs to create a unique digital ID. By leveraging iris scanning technology, Worldcoin claims to have the capability of distinguishing genuine human beings from AI entities. This bold approach to identity verification has certainly turned heads, but it has also raised a lot of eyebrows.
With $115 million funding secured and a user base that already surpassed 2 million, it is evident that Worldcoin has captured significant attention and investment. The project’s ecosystem is wide-encompassing, integrating a privacy-centric digital identity system, a native token WLD, and a wallet application that provides users with a suite of decentralized finance (DeFi) services.
However, as with many ground-breaking initiatives, Worldcoin has received considerable criticism and skepticism. The primary concern revolves around the privacy implications of iris scanning, an invasive biometric data collection method by nature. In an era where data breaches and personal information mishandling are rampant, the idea of voluntarily offering one’s iris scan for a proof of digital identity seems counterintuitive and undesirable to many.
Critics argue that while the project’s intentions might be benevolent, the potential for misuse or mishandling of such sensitive data is too significant to ignore. Indeed, Web3 users continue to grapple with issues stemming from smart contract breaches. Setting aside rug pulls and phishing incidents, a staggering $471.43 million[1] was lost due to Web3 security vulnerabilities in the first half of 2023. And this is merely the financial perspective.
Furthermore, there are philosophical and ethical questions associated with differentiating humans and AI through biometric methods. As AI technology continues to advance and blur the boundaries between machine and human capabilities, where do we appropriately draw the lines? More importantly, should we be drawing these lines based on physical attributes?
On the flipside, the Worldcoin team and proponents highlight the project’s commitment to privacy and security.[2] They argue that the iris scanning technology is a means to an end — it is a tool to ensure that the digital identity is genuinely unique and resistant to AI impersonation. By creating a robust and secure digital identity system, Worldcoin could pave the way for more transparent and equitable financial systems, especially in regions where traditional banking infrastructure is lacking. Moreover, it could establish the foundation of a universal basic income (UBI) system in a future age when AI could take over a significant share of today’s human tasks.
Despite Worldcoin’s statements of goodwill, the project has not been immune to regulatory scrutiny. The Argentine Agency for Access to Public Information (AAIP) has initiated an investigation into Worldcoin’s data collection practices within Argentina, focusing on its measures to safeguard user privacy. In the interim, the AAIP has mandated Worldcoin to provide more details about its data processing policy, as well as evidence of its security protocols.
This is also not the only regulatory challenge that Worldcoin is currently facing. The project has also encountered administrative hurdles in Kenya, where its operations were halted, and its storage facilities subjected to police raids. If Worldcoin are to scale and develop into a true force, more scrutiny is nothing but guaranteed.
Crypto Projects: Read More
1–15.08.2023
- ApeCoin Price Sinks to All-Time Low as Bored Ape NFTs Dip Again (Read More)
- Litecoin Undergoes Third ‘Halving,’ in Milestone for 12-Year-Old Blockchain (Read More)
- Looter Behind $61M Curve Hack Starts Returning Assets, Raising Hope for Recovery (Read More)
- Web3 Security Startup Cube3.ai Emerges From Stealth With $8.2M Seed Funding (Read More)
- DeGods Ditch Polygon, Moving y00ts to Ethereum and Returning $3 Million Grant (Read More)
- VC Firm a16z Wades Into Crypto Tech Research with ZK Projects ‘Jolt’ and ‘Lasso’ (Read More)
- Crypto lender Goldfinch faces bumpy road after motorbike company defaults on $5m loan (Read More)
- Sei Mainnet is Live After Testnet Sees More Than 7.5M Wallets Created (Read More)
16–31.08.2023
- Scam Crypto Tokens Proliferate on Blockchain Hatched by Coinbase (Read More)
- $1.79M ETH Stuck on Shiba Inu’s Shibarium Bridge Day After Launching (Read More)
- OpenSea Will Make Creator Royalties Optional for NFT Trades (Read More)
- Friend.tech Becomes Massive Ether Money Machine as NBA Players, FaZe Clan Join In (Read More)
- DAI Stablecoin Surpasses $5B Market Cap on Higher Yield, Lifting Spark Protocol (Read More)
- Base set to receive 118M OP tokens over six years in governance agreement (Read More)
- Pepe confirms former team members stole $15 million from multisig wallet (Read More)
- Balancer Suffers Nearly $1M Exploit as Team Urges Users to Withdraw Funds (Read More)
5. Mining
1–15.08.2023
- Genesis Digital Assets launches three new bitcoin mining data centers in South Carolina (Read More)
- KPMG touts ESG benefits from Bitcoin, counters misperceptions in new report (Read More)
- Handful of public bitcoin miners log modest hashing power gains for July (Read More)
- Largest Crypto Miners Will Benefit Most From Capacity Growth: Bernstein (Read More)
- Jihan Wu’s Bitdeer completes mining facility in Bhutan, gets new rigs to boost capacity (Read More)
- Anchorage, Bitmain to get equity as part of Core Scientific bankruptcy plan (Read More)
- Crypto Mining Gets Its Own Lobbying Voice in Washington (Read More)
- Blockstream Is Betting on Bitcoin Comeback as It Hoards Crypto Mining Rigs (Read More)
16–31.08.2023
- Canaan to debut ‘industry-redefining’ Bitcoin mining product at Sept. 12 gala (Read More)
- Tether CTO Paolo Ardoino says Bitcoin mining needs better analytical tools (Read More)
- Mining 1 BTC in Lebanon is 783x cheaper than Italy: CoinGecko report (Read More)
- Crypto Miners Are Attempting to Diversify Into Other Business Areas: JPMorgan (Read More)
- Renewable energy Bitcoin mining company powers up in Sweden (Read More)
- Bitcoin Mining Startup Raises $13 Million to Turn Trash Into BTC (Read More)
- 16 Bitcoin mining companies have $4.47 billion in losses in a year (Read More)
- Bitcoin Mining Revenue Gauge Nears Record Low as Prices Stagnate (Read More)
6. Institutions
1–15.08.2023
- FTX Plans to Restart Crypto Exchange for International Customers (Read More)
- Race for Ether Futures ETFs Kicks Off With 6 Firms Filing SEC Applications (Read More)
- South Korean Exchange Upbit Surpasses Coinbase, OKX in July Trading Volume to Take №2 Spot for First Time (Read More)
- PayPal pushes deeper into crypto payments with stablecoin launch (Read More)
- Private Equity Giant David Rubenstein Makes the Case for Bitcoin (Read More)
- CoinDesk lays off 45% of editorial staff as it eyes deal to sell company (Read More)
- Visa Tests Way to Make Paying Ethereum Gas Fees Easier (Read More)
- Crypto market maker GSR scales back, CFO and other top executives depart (Read More)
16–31.08.2023
- Coinbase Lands Regulatory Approval to Offer Crypto Futures Trading in US (Read More)
- SpaceX wrote down bitcoin holdings by $373 million: WSJ (Read More)
- Mastercard Deepens Tie to CBDCs as Nations Mull Issuing Digital Currencies (Read More)
- Payment Processor Checkout.com Drops Binance Over Money Laundering, Compliance Concerns (Read More)
- Shopify Customers Can Now Pay In USDC Via Solana Pay (Read More)
- Mastercard, Visa Step Back From Binance Card Partnerships (Read More)
- JPMorgan Sees ‘Limited Downside’ for Crypto Near Term After Bitcoin’s Recent Rout (Read More)
- Robinhood Revealed to Be Third-Largest Bitcoin Holder With $3B in BTC (Read More)
7. September Preview
Market focus in September will again be placed on the upcoming U.S. interest rate decision on 20 September. Fed Chair Jerome Powell said during Jackson Hole that the central bank will “proceed carefully” in a subtle hint that interest rates could be put on hold. U.S. inflation will remain under the spotlight, as base effects from last year have passed and a rebound on a year-on-year basis is plausible.
Elsewhere, we should observe if China implements more aggressive measures to stimulate its economy. These may include fiscal measures and an accelerated devaluation of the Chinese Yuan, which is currently trading at 7.3 to the dollar, a level that they have defended in the past.
Bitcoin performance calendar
September is statistically one of the worst performing months for Bitcoin, considering that it declined eight out of ten times over the past decade, with associated median return of -6.6%.
Macroeconomic events
Crypto events
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