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CONTENTS $2 cryptoweeklymag.com July 2022 | Volume 33
18
12
29
07
Gary Gensler Proposes One Rule Book for Bitcoin and Labels it a Commodity
10
200 Bitcoin, Unmoved Since 2010, Transferred
11
Digital Ruble Project to be Accelerated by Bank of Russia
12
The Crash of LUNA has 'Devastated' Do Kwon
14
Vitalik Buterin Mocks Bitcoin "Stockto-Flow" Model Amid Market Slump
18
Number of Crypto Tokens Reaches High of 20,000 Projects
19
North Korean Hackers have Crypto on Their Minds
20
Bitcoin Miners Selling Crypto at a Discount
24
On-chain Credit Protocols Have Risks and Benefits
26
The Role of Lightning Network as Bitcoin Scales
29
The Recent Crypto Downturn is a Good Thing -Regulators Say
34
What's a Bear Market Anyway?
36
Video of the Week
09
Metaverse Real Estate Going Strong During Crypto Bear Market
CRYPTOWEEKLY CEO | Nathan Hill
LETTER FROM
THE EDITOR
nathan@cryptoweeklymag.com Publisher | Colin Woolley colin@cryptoweeklymag.com Editor | Robert Stone
Welcome to Crypto Weekly
editor@cryptoweeklymag.com Editorial | Anthony Burton editorial@cryptoweeklymag.com Features | Thomas Stokes tom@cryptoweeklymag.com Advertising | Philip Greenwood philip@cryptoweeklymag.com Design | Dilin Divan dilin@cryptoweeklymag.com
Hello, and a warm welcome to the 33rd issue of Crypto Weekly. Crypto Weekly is the brainchild of the guys at CMC, and I am Rob Stone, Editor, and I hope to bring you an informative read on everything crypto, every week of the year. Crypto Weekly Magazine is published by the Crypto Marketing Company 71-75 Shelton Street, Covent Garden, London, United Kingdom, WC2H 9JQ
Another week has gone by and this is our thirty-third issue of Crypto Weekly. I have been mining the search engines for the best stories in the news, current happenings, and the ideas the world is excited about in the cryptosphere. When crypto market cycles end we typically always see them compared to other big financial bubbles, such as the “dotcom” bubble of the late 90’s. This time around has been especially acute because of just how fast the bubble deflated and how big it got in the first place ($3 trillion total). Though, just like how the dotcom bubble didn’t kill the internet, the 2022 crash will not kill crypto. As usual, a lot of stuff has happened in the last week because the music never stops in the crypto sphere and the time keeps rolling on. I hope you all enjoy what we have brought together for you this week. Please let us know your thoughts, and if you would like to see something featured, please do get in touch.
editor@cryptoweeklymag.com
Follow Us Stay Connected Robert Stone Editor
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NEWS
7
Crypto Weekly
Gary Gensler Proposes One Rule Book for Bitcoin and Labels it a Commodity T
he Chairman of the Securities and Exchange Commission (SEC) is reportedly pushing for a one-rule-book approach to crypto asset trading. The Financial Times reports Gary Gensler is in contact with his counterparts at the Commodities Futures Trading Commission (CFTC) to promote security and transparency for investors who trade crypto assets. CFTC is currently drafting a "memorandum of understanding" that would require the SEC to provide information about crypto assets representing commodities to the CFTC. Securities are regulated by the SEC, while the CFTC regulates commodities and derivatives. During an interview on Monday last week, Gary Gensler said Bitcoin was the only cryptocurrency he was prepared to label a commodity rather than a security, publicly. Gensler states, "I am proposing one exchange rule book that protects all trading regardless of the pair - security token versus security token, security token versus commodity token, commodity token versus commodity token." According to Gensler, the rule book would safeguard investors against market manipulation, fraud, and front running. According to Gensler, “the SEC would provide protections for crypto companies' customers amid the plunge in prices of crypto assets.
Having one rule book on an exchange will really help the public by ensuring market integrity. The industry must build some better trust in these markets if it is to progress.” Commodities, as opposed to security coins, have far-reaching implications, since securities cannot be sold to the general public unless the issuer registers with the SEC and adheres to strict disclosure requirements. He told Squawk Box, "The investing public hopes for a return, just like they do with other financial investments." Many of these financial assets, crypto-financial assets,
have the attributes of a security and, as a result, are under the jurisdiction of the SEC. “Bitcoin is a commodity according to my predecessors, and that is the only thing I am going to say… the Commodity Futures Trading Commission regulates commodities, and that is what identifies Bitcoin as a commodity." “We have two great market regulators in this country,” Gensler said. The agencies can collaborate to bring transparency, fairness, and investor protection to the digital asset market. US Senators, Cynthia Lummis of Wyoming and Kirsten Gillibrand of New York, introduced a bill last week that would give the CTFC more power to regulate digital assets since it is assumed most cryptocurrencies are commodities rather than securities. Gensler's proposal comes weeks after the said bill was introduced. Lummis states that, “The US is the global financial leader, and to ensure the next generation of Americans can take part in the economic opportunities of the digital age, it is fundamental to integrate digital assets into existing law and to harness the efficiency, transparency, and risk efficiency of this asset class.”
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July 2022 | Volume 33
8
NEWS Crypto Weekly
One Bitcoin Whale has Nearly $3 Billion in BTC F
ollowing a string of massive transactions earlier this month, the world's largest non-exchange Bitcoin whale, is holding over $2 billion worth of BTC. The whale has added 2,554 Bitcoin since June 14th, according to
crypto data platform BitInfoCharts. During the period of June 14th to June 18th, the whale purchased 1,698 BTC worth $36.62 million. In total, the whale has accumulated 856 BTC worth $17.35 million since then.
Bitcoin is currently worth $21,056. At present, the richest non-exchange Bitcoin whale holds 130,227 BTC, or roughly 0.68% of the current supply. After wallets belonging to Binance and Bitfinex, it is the world's third largest Bitcoin whale. Santiment, a crypto analytics firm, says that the crypto market downturn has increased the number of Bitcoin whales. Santiment says the increase in the number of whales holding more than 10,000 Bitcoins began in February, while the number of addresses holding between 10 and 10,000 Bitcoins began earlier this month. While the market has been suppressed, there has been an increase in the number of large Bitcoin addresses popping up on the network. Addresses with 10 to 10,000 BTC have surged on the drop two weeks ago, and 10,000+ addresses have risen since February.
Tether Shorted After UST Implosion by Hedge Funds and Traders D
espite a bleak market outlook nearly a month after the collapse of the TerraUSD (UST) stablecoin, hedge funds are increasingly shorting the U.S. dollar-pegged stablecoin Tether (USDT), the Wall Street Journal reported on Monday. Genesis Global Trading's Leon Marshall, head of institutional sales, said hedge funds are increasingly interested in shorting Tether. Marshall noted that the positions were worth at least "hundreds of millions of dollars." As a result of UST's multibillion-dollar collapse, short positions increased, according to Genesis. Several prominent crypto lenders and trading funds were affected by the price decline of the algorithmically controlled stablecoin in late May. USDT is being shorted by some funds as the FED raises interest rates to curb 40-year-
July 2022 | Volume 33
high inflation. Others are concerned about the quality of the assets backing Tether, according to the Journal. To quote Tether Global, “stablecoins such as Tether are backed by fiat currencies and other assets including commercial paper, bank deposits, bonds, gold, and cryptocurrencies. Investors have been redeeming huge amounts of USDT since UST's implosion in May, hurting the stablecoin market.” During mid-June, investors pulled $1.7 billion from Tether in one week. CoinGecko data shows that Tether has lost over $20 billion in market capitalization since mid-May. Some companies have previously bet against Tether due to a lack of audited reserves and the opacity surrounding the asset's backing. However, Tether officials have denied the existence of such risks.
Tether stated in June that rumors of its portfolio being backed by Chinese or Asian commercial paper were "completely false" and likely spread by those looking to make "additional profits from an already stressed market." A Tether spokesperson in April said that short sellers are leveraging disinformation to collect management fees from those less knowledgeable.
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NEWS
9
Crypto Weekly
Metaverse Real Estate Going Strong During Crypto Bear Market A
lmost everything in the crypto space is feeling the weight of crypto winter. The interest in art-based NFTs has dwindled, and coin values are down across the board. Due to the general state of the economy, many investors are fleeing to safer harbors. Metaverse real estate remains an excellent investment. The amount being held by the investment community is primarily responsible for the lack of movement. Despite this, interest in Metaverse real estate remains strong. The reason could be that Metaverse real estate represents more than simple buy-and-hold transactions (or even buy-and-flips). Real estate in the Metaverse is, in fact, a business opportunity disguised as real estate.
asset, it eventually fell victim to gravitational pull, just like the rest of the world. However, all is not lost. It's just getting started. Buyers still outnumber sellers. There would be many sellers and some bullish buyers if people were fleeing and hoping for a quick sale.
Metaverse Land is in Short Supply There is simply no land for sale, which is the most important point. The market would experience further declines if the bottom were to fall out, with more listings available for purchase. Not to drive the point home too much harder, but those big
sales that made headlines months ago are still happening regardless of the number of properties out there or the value of these world's coins. This so-called crypto winter would have frozen it solid if the Metaverse were meant to be a flash in the pan. Instead, we're seeing a steady stream of interest and continued project building within these worlds. Getting into Metaverse real estate at this point could represent a massive opportunity for the right buyer. Despite this, there is always a significant risk associated with something as new as this, so please keep that in mind when making investment decisions.
The Bulls are Calling Everyone Over to the Metaverse The Metaverse real estate market, indeed, is in a downturn, but this trend is also a result of the overall slump in the investment market as a whole. Though Metaverse real estate held out for a long time as a virtual
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July 2022 | Volume 33
10
NEWS Crypto Weekly
200 Bitcoin, Unmoved Since 2010, Transferred M
oving Bitcoins from old wallets is always exciting. For the first time, Bitcoins mined during 2010 have moved after being abandoned for 11 years. Their transfer happened on June 24, Friday. These Bitcoins belong to a veteran hodler or someone who forgot about them all this time. According to on-chain researchers, the coins are unlikely to belong to Satoshi Nakamoto, the creator of Bitcoin. Pre-GPU Bitcoins rarely move, it has only happened dozens of times in the past few years. "It's probably not Satoshi," says Antoine Le Calvez, a data engineer at crypto tool CoinMetrics. To date, only 18 such transactions/wallet movements have been observed from Bitcoin mined in 2010 or earlier. At current prices, the stash is worth over $4.8 million and was last touched in May 2010, a few months after Bitcoin was launched. According to this, an early Bitcoin developer, user, or enthusiast mined the asset. The
July 2022 | Volume 33
address of the relevant transaction shows they were "rewards" from a block mined in 2010. Mining two blocks, the user received over 100 BTC (block rewards used to be over 50 BTC each, but now they are only 6.25 BTC). In a nutshell, Bitcoin uses a proof of work mechanism whereby "miners" use their computers to validate the Bitcoin network
and receive "rewards" in return. As a result, that 100 Bitcoin stash was obtained. It happened last time: traders sold their BTC, and rumors of Satoshi Nakamoto resurfacing circulated. Then, things changed. Meanwhile, the crypto industry remains neutral on the wallet movement. The 200 virgin Bitcoins are idle since they were sent to a single address. A single entity was likely responsible for the 2010 block rewards spent in the same block. These 200 Bitcoin transactions suggest that there may be more such coins that we might think are dead but are owned by someone. We could see them move on the network depending on the market cycle.
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NEWS
11
Crypto Weekly
Digital Ruble Project to be Accelerated by Bank of Russia B
y 2023, the full implementation of the new digital ruble will replace national fiat. The Russian Central Bank continues to test and issue the digital ruble. Next April, trials with genuine transactions and users will begin earlier than expected. Bank of Russia will come up with a digital roadmap by next year. Olga Skorobogatova, Russia's First Deputy Chairman, said that the regulator intends to start testing the central bank's digital currency (CBDC) with real clients as early as April 2023, suggesting that these plans have also been adjusted. “A critical year lies ahead for the project,” said Skorobogatova, who elaborated: "We will learn what needs to be tweaked, tweaked, and changed as we test real operations. We will develop a roadmap for introducing the digital ruble in the coming months." Currently, 12 banks are taking part in the pilot, according to Skorobogatova. Three different banks have applied to participate in the trials, and several non-financial organizations have also applied. Olga commented, "It is too early to comment on results from the current stage as the
participants are moving at different speeds. However, more than half of the banks in the pilot group are meeting the deadlines outlined," she added. In the wake of Russia's invasion of Ukraine, Western sanctions have increased the importance of the CBDC project. The central
bank must set up cross-border interactions between the digital ruble and other countries' digital currencies if it wants the Russian financial system to become more autonomous. "I believe that all states, with a sense of respect, will have a national digital currency within three years. And in that case, we will also need cross-border cooperation," Skorobogatova said. "It is essential that we be ready as soon as possible. Moreover, this solves the problem with SWIFT, because, with such integration, SWIFT would no longer be necessary," she replied. The Bank of Russia published a report in October 2020 introducing the digital ruble concept. An initial pilot phase was initiated in January of this year based on the CBDC's prototype platform, which was completed in December 2021. During the trials, the Central Bank of Russia and Russian commercial banks will test various types of payments using the digital ruble, including real estate settlements, reports Izvestia.
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July 2022 | Volume 33
12
NEWS Crypto Weekly
The Crash of LUNA has 'Devastated' Do Kwon A
lexander Osipovich and Jiyoung Sohn of the WSJ recently interviewed Do Kwon about the LUNA and UST fallout. It was Kwon's first interview since Terra collapsed on June 22. Here is a summary description of the interview with a couple of added facts.
by recent events and hopes the families affected are taking care of themselves and those they love. Likewise, he spoke about his confidence, which many deemed cocky, and explained that it resulted from his strong belief in the Terra ecosystem.
“I believe Terraform Labs will rebuild even stronger than it was before,” Kwon told WSJ reporters. Kwon's WSJ interview follows reports that the Securities and Exchange Commission (SEC) is investigating Terraform Labs and the UST collapse.
Mr. Kwon told the reporters that he lost most of his wealth following the crash, but that doesn't bother him too much. "I'm not bothered," Kwon said. "I live a relatively frugal lifestyle," the Terra co-founder added.
"[Terra] is resilient and provides value, so I made confident bets and asserted it with confidence." He added, "I have since lost these bets, but my actions are in line with my words. Failing is different from fraud," said Kwon.
Kwon is also accused of having massive amounts of LUNA in his personal wallet by a whistleblower named Fatman.
However, Kwon apologized for the losses investors suffered from the crash. Kwon said in the interview that he has been devastated
Terra Will Rebuild Stronger than Ever Additionally, Kwon discussed the Terra blockchain and LUNA 2.0, which fell 90% from its all-time high of $18.87 per unit and is now trading at $1.88. According to Kwon, LUNA 2.0 can potentially surpass the LUNA Classic (LUNC) chain someday. A market capitalization of $238 million has been reached by LUNA 2.0 over the past 24 hours, a decrease of 2.6%.
July 2022 | Volume 33
As part of Fatman's accusations, Kwon was also accused of cashing out $2.7 billion before the Terra project collapsed. Still, the Terra co-founder denied cashing out and said the allegations were untrue. There is a lot more out there definitely worth reading about all of this. All you have from me are the basic facts of the case. There are others full of opinions. Some are good opinions, and others are not good. I would go into some of it if I were writing a book, so "do your own due diligence," as they say. Robert Stone
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NEWS
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Crypto Weekly
Binance Launches Crypto Investment Platform for Institutional and VIP Investors
T
he world's largest cryptocurrency exchange, Binance, announced last Thursday that it has launched Binance Institutional, a platform designed specifically for institutional investors and VIPs. The move is part of Binance's efforts "to upgrade its institutional offerings and services." According to the company's website, its services are tailored for institutions of all kinds. Among them are asset managers, brokers,
hedge funds, family offices, proprietary trading firms, liquidity providers, and high-net-worth individuals. Platform services include direct access to OTC liquidity, asset management, custody, and brokerage. Binance CEO Changpeng Zhao (CZ) stated, "brokerage services are well-positioned to help our industry bridge some of the gaps between traditional financial markets and crypto-assets." The VIP program allows users to “get rewarded with more discounts and VIP privileges” as their trading volume climbs up VIP tiers, Binance explained. VIP privileges include fee discounts and higher 24-hour withdrawal limits. There are nine VIP tiers on the exchange. VIPs must have a 30-day trading volume of at least 1 million BUSD and a balance of at least 25 BNB. VIPs at level nine have 30-day trade volumes of at least 5 billion USD and BNB balances of at least 5,500. In the meantime, the Securities and Exchange Commission (SEC) is investigating Binance's BNB token, accusing it of being an unregistered security.
Shopify Takes Crypto and Reveals Range, a Scope of New Features
A
mong the new features, Shopify introduced was the ability for online merchants to create "tokengated" stores designed to encourage fans to hold brand tokens. Consumers and merchants will be able to connect through their crypto wallets with Shopify's new platform.
e-commerce. In 2021, more than 1,700,000 businesses used the platform. In addition, the company recently integrated Strike to enable Lightning Network transactions through its storefronts, which have been available since last year. With the help of popular NFT collections, such as Doodles, Cool Cats, and World of Women, today's announcement was coordinated. Evan Keast, the co-founder of Doodles, said the collaboration with Shopify had "surprised its holders and given the ownership of a Doodle a whole new meaning."
Shopify is releasing a framework that enables merchants to launch "tokengated stores" for which fans can gain access if they possess tokens from the brand in question. To "incentivize" fandom, the company suggested limited-edition merchandise, experiences, and drops. NFTs can now be minted and sold directly from the blockchain and through the company's online store. Twelve NFT minting apps are recommended, with Ethereum, Polygon, Solana, and Flow listed
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as supported blockchains. Additionally, tokengated stores now allow fans of other brands to have access to their products for "big releases" or "special drops." An e-commerce platform and multinational company, Shopify is a global leader in
Customers already had access to beta versions of the upgrades, but now all customers can access them. We are also testing tokengated shops for mobile and instore "tokengated" experiences.
July 2022 | Volume 33
14
NEWS Crypto Weekly
Vitalik Buterin Mocks Bitcoin "Stockto-Flow" Model Amid Market Slump B
uterin is the latest notable industry figure to voice their opinion on the invalidated Bitcoin stock-to-flow model. Last week, he criticized the infamous stock-to-flow Bitcoin model popularized by an investor by the pseudonym PlanB.
forecasting that it would reach $100,000 by December 2021. In March 2019, "PlanB" first described the concept in a blog post. According to the article, a new method of valuing Bitcoin and predicting its price is based on a relationship between its stock
and flow, where stock represents the total amount of existing stockpiles of the asset, and flow represents yearly production. The model predicts Bitcoin's price at $55,000 following its May 2020 halving
After the market invalidated the forecast, the model was criticized for predicting Bitcoin would reach $100,000 by December 2021. Buterin observed that if PlanB's model were applied to Ethereum following its "Merge" upgrade, its price would be a surreal number that does not "exist" in the real world. The inventor of Ethereum, Vitalik Buterin, has described the infamous Bitcoin stockto-flow model as "harmful." He has aimed at the Bitcoin stock-to-flow model that gained popularity throughout the 2021 bull run. He took to Twitter today to criticize the infamous, and now invalidated model, saying that flawed financial models "deserve all the mockery they can get." As Bitcoin led a rally in the crypto market, the stock-to-flow model was famous for Continued...
July 2022 | Volume 33
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event and $100,000 by December 2021, based on a statistically significant relationship between Bitcoin's stock-toflow ratio and its market price. "S2F will be invalidated if we don't reach 100K by December this year; we can not stay at the current levels for the rest of the year," PlanB tweeted in June 2021, only to backtrack on the statement after Bitcoin didn't reach the forecasted level.
Other Critics to the S2F Model Many prominent industry figures have previously criticized the stock-to-flow model and PlanB. Others say that it is not backed by empirical evidence or scientific logic and fails to account for price-influencing factors such as demand. The S2F model has supporters and opponents. Some strongly oppose it. Vitalik Buterin is not the only detractor. The criticism of others has been harsher. Strix Leviathan's Nico Cordeiro described
July 2022 | Volume 33
the model as a chameleon, a term coined by Stanford professor Paul Pleifderer to describe models that make assumptions that aren't proven. "The S2F claims the value of a monetary good (e.g., gold and silver) is determined by its rate of new supply," he said, adding, “that there is no evidence to support this model.” Because of these factors, using the S2F formula to invest in Bitcoin solely because the price would theoretically rise with a scarcer supply isn't the best thing to do. Other factors such as demand, a harsh or accepting regulatory climate, the overall geopolitical environment, etc. - need to be considered as well. The Ethereum founder mocked the model's flawed assumptions in a follow-up tweet, noting that if the model were applied to Ethereum following its conversion to Proofof-Stake, the stock-to-flow ratio would be negative 55, meaning it would take 55 years
for all the crypto tokens to be burned. In response to Buterin's initial tweet, PlanB called out leaders who “play the victim and lay blame on others." Bitcoin's price action has been sluggish for eight months, as the stock-to-flow model is criticized. PlanB's forecast price target for June 2022 is around five times higher than the current price for the top crypto.
Conclusion Since its adoption by the crypto community, the S2F formula and its variant, the Floor Model, have been hotly debated. PlanB's predictions for BTC were sometimes spoton throughout 2021, but others failed consistently. There is disagreement in the crypto community regarding whether or not the S2F ratio provides a reliable metric when investing in cryptocurrencies. In theory, the more a cryptocurrency's supply-to-demand ratio increases, the more valuable that cryptocurrency should become.
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Number of Crypto Tokens Reaches High of 20,000 Projects T
he value of cryptocurrency has plummeted by more than 50% in 2022, but the number of emerging digital currencies continues to grow. On June 26, CoinMarketCap tracked 20,002 cryptocurrencies, marking the first time in history that more than 20,000 cryptocurrencies exist. Through the use of a web archive tool, Finbold has determined that in 2022, the market added 3,765 new cryptocurrencies, a 23% increase. The flagship cryptocurrency, Bitcoin, continues to dominate the market despite the emergence of new tokens, accounting for 42 percent of the market capitalization. One can infer that the new tokens joining the market are hoping to benefit from any rally that might result from the ongoing correction.
July 2022 | Volume 33
Market Likely to Rally Despite the market's capitalization having fallen by over $2 trillion, analysts have predicted the sector will rebound, while pointing out that the current environment is part of maturity. As a whole, the market has been suffering sell-offs for the entirety of 2022, despite glimpses of light recovery. Finbold reports that the market regained 16% of its market cap, attracting over $100 billion in capital inflows. It should be noted that the survival of the 20,000 tokens will largely depend on the utility of the cryptocurrency in question. Crypto markets are maturing, and some digital assets will drop off. As authorities seek to protect investors, the emergence of new assets also
accelerates the regulation debate. Charles Hoskinson, the founder of Cardano (ADA), recommended self-certification to regulate the market. Hoskinson recommends that authorities follow the same model as the Internal Revenue Service to manage crypto.
Impact of Little Regulation In addition, the current lack of regulation contributed to the emergence of cryptocurrencies. Unlike listing stocks, cryptocurrencies do not require a lengthy regulatory process. Even though some of the assets aim to emulate established cryptocurrencies like Bitcoin, new entrants are often motivated by fraudulent motives seeking to take advantage of scattered regulations. The recent crash of Terra (LUNA) stands out as one of several high-profile crypto scams to hit the market recently.
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NEWS
19
Crypto Weekly
North Korean Hackers have Crypto on Their Minds
T
here are troubling security risks associated with cryptocurrency, as well as a market malaise, that has seen the price of Bitcoin fall from $69,000 to around $20,000 today. Over the last few years, there have been dozens of breaches showing that cybercriminals are increasingly interested in cryptocurrencies. One culprit that keeps showing up in many cases is the Lazarus Group, a group of statebacked hackers from North Korea. During the past decade, the regime's hackers have become increasingly sophisticated, stealing an estimated $2 billion in cryptocurrency, according to a new book by Geoff White. “The soft underbelly of the financial system, or the gang, will continue to exploit blockchain targets,” says White, who believes the $2
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billion figure is "vastly understated." In order to support North Korea's regime and nuclear weapons program, Lazarus has generated as much cash as possible for years. During the past decade, its schemes have included sophisticated ATM hacks and ransomware attacks, including the infamous WannaCry cyberattack. With billions of dollars locked up in its various applications, decentralized finance, or DeFi, has become a more lucrative target than banks. While web3 development is still characterized by a move-fast-and-breakthings mentality, this hasn't improved the security of those networks. Neither does the fact that the creation of web3 apps is unusually difficult for programmers, who
can create gaping financial vulnerabilities with simple programming errors.Security website CrytpoSec listed 102 breaches between Jan. 2020 and June 2022, totaling $3.4 billion lost, with hacks of DeFi projects more than doubling in 2021. Crypto networks have been targeted by Lazarus, including a Slovakian exchange in 2020, from which it stole virtual currency worth $5.4 million. According to a Reuters investigation, the hackers then used Binance to launder the funds. Furthermore, they were behind the more than $600 million hack of play-to-earn game Axie Infinity, which if measured by the amount of money stolen, is one of the largest hacks in history. Lazarus was blamed for the attack by the U.S. Treasury Department.
July 2022 | Volume 33
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FEATURE Crypto Weekly
Bitcoin Miners Selling Crypto at a Discount A
plunge in the price of Bitcoins, rising energy costs, and increased competition have forced miners to tap into their cryptocurrency stashes. According to MacroHive, miners have been steadily liquidating their coins on crypto exchanges since June 7, a sign that "miners are increasingly liquidating their coins on exchanges." An analysis by Arcane Research found that several publicly listed Bitcoin miners sold more than 100% of their output in May, as Bitcoin's value plummeted 45%. "Mining profitability declined sharply in May, forcing these companies to increase their sales to more than 100% of their output. The conditions likely worsened in June, so they
may sell even more," said analyst Jaran Mellerud. According to CoinMetrics data, Bitcoin miners collectively own about 800,000 Bitcoins and run networks of computers to validate transactions on the blockchain. Despite Bitcoin's surge in value in 2021, the crypto mining space has experienced rapid growth as a result, but as the number of miners increases, the process has become increasingly difficult. According to Joe Burnett, an analyst at Bitcoin mining firm Blockware Solutions, over the past six months hash rates and mining difficulty have increased while Bitcoin prices have dropped, both of which have negatively
impacted margins for existing miners. The Cambridge Bitcoin Electricity Consumption Index indicates that miners consume more electricity than the Philippines due to high electricity prices. “If you're not at a very low-cost power area, you need to shut down,” said Chris Brendler, senior research analyst at D.A. Davidson. Companies such as Bitfarms, Riot Blockchain, and Core Scientific announced sales, with Bitfarms' CEO stating that, "We no longer handle daily Bitcoin production." Compared to Bitcoin, the Valkyrie Bitcoin Miners ETF fell 59% this quarter, as publicly traded miners were even harder hit. Bitfarms, among others, use the proceeds Continued...
July 2022 | Volume 33
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from their mining operations to negotiate financing agreements and pay for expensive mining equipment. “Mine operators who have already paid two-thirds, or even 70 percent, of the price of these machines would not want to miss the last installments, which makes them desperate for financing,” Brendler said. Given their significant Bitcoin holdings some analysts point to miner sales as another
July 2022 | Volume 33
factor weighing on Bitcoin prices. Those using older and more energy-intensive machines, and without the balance sheet or funding access of publicly listed players, are already struggling. Data from Glassnode showed that Bitcoin's mining difficulty declined by 2.35% this week, suggesting that miners turned off their equipment after the difficulty decreased. Those who are still mining can breathe a sigh of relief. "Bitcoin mining is a zero-sum game. Suppose you can keep running when
others can't. In that case, you have a greater share of the pie," says Charlie Schumacher, spokesperson for Marathon Digital Holdings Inc., the largest publicly listed miner. “Marathon will stop selling Bitcoin in October 2020,” he said. "Bitcoin bottoms have been marked at the end of miner capitulation, which might indicate that miners who can overcome this capitulation have a way out," Burnett said.
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FEATURE Crypto Weekly
On-chain Credit Protocols Have Risks and Benefits D
uring bear markets, real work gets done in the industry. As recently as today, a Bank of England deputy governor said that crypto projects that survive this "crypto winter" could become "tomorrow's Amazon and eBay." The technology did not go under following the dot-com crash, according to Jon Cunliffe
of BoE. Although there are crypto believers, people are still taking jobs at Web3, announcing protocol redesigns, and hiring, even as dollars flow out of the markets.
like a bubble. A variety of yield-generating, blockchain-based platforms offered a range of popular products for recirculating and lending capital.
In order for crypto to become the next Amazon or eBay, it will have to build products that people will want to use. Currently, the industry is incredibly circular - somewhat
Most distressed lending platforms and hedge funds today were caught off guard when their uncollateralized bets lost money when prices dropped. There is a problem with unaccountable speculation as well as the fact that much of crypto's activities never leave the internet. Mark Cuban, the billionaire investor, said, "Companies that were supported by cheap and easy money will cease to exist." When the Federal Reserve adopted a loose monetary policy, cryptocurrency thrived at the extreme end of the risk curve. Due to rising interest rates and an upcoming recession, investors will be wary of crypto's purely digital thesis. Nonetheless, crypto remains a unique opportunity, as Cunliff said. It allows for open innovation and
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Crypto Weekly
invention. Cryptocurrencies are likely to be used for purposes beyond speculation. By bringing more of the outside world into the crypto world - credit-based, unsecured loans - it may offer a safer way to bet. Recently, Defiant, a crypto-focused publication, wrote about the nascent field of crypto-native "credit protocols." These applications "use new methods to set credit ratings for borrowers in the crypto space and release loaning." Crypto-based loans are offered if you reveal your identity, either on-chain or off. A number of credit services such as Centrifuge, Maple Finance, and TrueFi market themselves as "unsecured" loan providers. As tempting as it may seem, this seems to be a replay of the flagrant lending that blew up Celsius and Babel, but the difference is; these tools are trying to tie their offerings to "off-chain assets." Traditionally, credit scores are used to determine if a loan should be granted and at what price. A few firms dominate the
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field, it is consolidating among a few, and it is known for making catastrophic judgment calls. "Decentralized credit scores" – for degens and white gloves like Alameda Research alike – take the classically crypto approach of using "algorithms" to determine credit-worthiness. In theory, this means unbiased and accountable decisions. Various approaches to this problem exist - perhaps including Vitalik Buterin's "soulbound token" which could help establish long-term reputations onchain - and if implemented properly, could help address the backroom trading and rehypothecation that has blown up crypto recently. Some look only at a user's record of onchain transactions, while others look offchain. The problem is multiplied in that many traders and outfits spread their credit history across chains. Some of the most sophisticated options are using artificial intelligence and NFTs to establish a user's identity. For now, over-collateralized loans
are the safest option in DeFi. The MakerDAO stablecoin, for example, requires borrowers to post more crypto than they take out to account for price risk. Maker wants to establish rails for traditional finance, and even suggests a mortgage, so people can invest in the housing market. Some critics say Maker's approach is "capital inefficient" because the collateral it requires sits idly in the bank. Leverage carries risk, which "unsecured lenders" seek to mitigate by requiring know-your-customer documentation and legally binding loan terms. Some companies, like Teller, check a person's credit card history and banking history. In spite of this, except for the recent spate of venture capital funding in unsecured, credit-driven lending protocols, there are few reasons to trust these scores and systems. Research these systems yourself. Unexpectedly, one of the principal risks for crypto lenders - regulation - might be the most straightforward way to establish a trustworthy reputation on-chain.
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FEATURE Crypto Weekly
The Role of Lightning Network as Bitcoin Scales
T
here has been a wave of capitulation among many coins that were put forward as faster, cheaper, or higher throughput alternatives to Bitcoin. "While Bitcoin still has the largest market share, Litecoin is the second most transacted digital currency for payment. Litecoin still serves as a sort of testnet for Bitcoin. By market capitalization, Litecoin (LTC) is the 20th biggest crypto asset. In 2013, it was the second most popular cryptocurrency, but thousands of new cryptocurrencies have emerged since then, making its modest update on Bitcoin (BTC) seem less important, by comparison. Despite the existence of thousands of new coins, Litecoin remains a significant altcoin with a market capitalization of $3.3 billion. At least some commentators are now starting to question whether Litecoin is really 'necessary' as a result of the ongoing crypto winter. There are a variety of views on this question, with Bitcoin developers and supporters arguing that Litecoin is less useful now that Bitcoin has figured out how to scale (via the Lightning Network). By contrast, Litecoin supporters maintain that the altcoin is useful as a platform for testing scaling technologies and that its adoption by payment and investment platforms will ensure its long-term survivability. Continued...
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Is Litecoin superfluous? When Litecoin was first launched in 2011 as a source code fork of Bitcoin, it had a faster block time due to the higher supply cap and different hashing algorithms. Litecoin managed to process a block every 2.5 minutes, while Bitcoin processed a block every ten minutes on average. Essentially, it boasted of being more scalable than Bitcoin. As Bitcoin has made significant advances in recent years, many people within the Bitcoin community believe this boast is no longer valid. In an era when Bitcoin's block size was seen as a limiting factor in its growth, Litecoin and others sold themselves as scaling alternatives, or complements to Bitcoin. Blockchain developers like Ben Woosley and others were working on scaling solutions such as the Lightning Network and Statechains. In response to the sustained success of the Lightning Network, he argues the market has seen a wave of capitulation among many other cryptocurrencies that were put forward as faster, lower cost, or higher throughput alternatives to Bitcoin. In comparison, Bitcoin is only 69% down from its November high of around $69,000, while Litecoin is 88% down from its all-time high of $410 it reached in May 2021. Woosley predicts that the capitulation of altcoins will continue in the coming years, with the growth of layer-one (the base protocol) and layer-two (Lightning Network)
Bitcoin development undermining the case for various altcoins. In the future, Bitcoin will follow the path of competing chains by eliminating their existence, by enabling their most attractive features, using technologies such as Lightning Labs Taro and Federated Chaumian mints, as well as TBD's Web5. The "silver to Bitcoin's gold" was another selling point for Litecoin in its early years. As a result, Litecoin would be a scarce commodity, but not as scarce as Bitcoin since it has a larger supply cap of 84 million coins, compared to 21 million. Many observers have not bought into this argument, as cryptocurrency author Stephen Chow claimed in May that, "Litecoin is dead." The reason is that, since Bitcoin is already a scarce and easily transferable source of value, Litecoin was not a necessity. There are many within the Litecoin camp, however, who argue that it has carved a place for itself as an exchange medium due to its lower fees and greater scalability. Looking at the most commonly used coins for payments, the silver and gold analogy makes a lot of sense. According to Litecoin Foundation Director Jay Milla, Bitcoin still dominates the market, but Litecoin is the second most transacted currency. Bitcoin's average daily transactions are much higher than Litecoin's. Bitcoin processed 296,000 transactions on June 15, while Litecoin processed just over 100,000. Since early 2021, it has averaged over 100,000 transactions per day, with similar altcoins -- such as Dogecoin (DOGE), Bitcoin Cash
(BCH), and Dash (DASH) -- seeing around 80,000, 30,000, and 20,000 transactions each day.
Litecoin Still has Uses Despite Bitcoin developers and holders arguing that Litecoin isn't really needed, it is still performing better than similar cryptocurrencies. Litecoin is considered by many within its community to be a useful testnet for Bitcoin, regardless of its scale of usage. "Developing a truly decentralized currency can be slow. Litecoin's ecosystem is fortunate to still have its creator involved.” Jay Milla, the co-founder of Litecoin, said, "the developers of Litecoin have already implemented a number of improvements that have led to the adoption of Litecoin by Bitcoin." As an example of Litecoin's importance to the wider cryptocurrency ecosystem, Milla points to the altcoin's implementation of SegWit in 2017. "By doing so, transaction signatures could be recorded outside of blocks, which was crucial for the Lightning Network," he says, noting that Litecoin participated in the Lightning Network early on. In recent years, Litecoin has continued to serve as a testnet for promising new cryptocurrency technologies and solutions, including MWEB (Mimblewimble Extension Blocks), which for Milla makes Litecoin "the most widely available cryptocurrency" with improved fungibility and confidentiality. It is easiest to obtain cryptocurrency today without broadcasting how much money you're sending. He added that it is optional: exchanges and wallets can decide whether to implement it or not to. Due to these reasons, Milla and the Litecoin Foundation are confident that Litecoin has a bright future. Additionally, Litecoin's prospects are enhanced by the growing integration of the currency into a variety of platforms. "Litecoin transactions have seen a staggering 352% increase in activity from 2019 to 2021, while Bitcoin has declined," said Milla. Major payment systems such as PayPal and Venmo, as well as trading companies such as Interactive Brokers and Robinhood, have helped make Litecoin more accessible to new users. Nevertheless, according to BitInfoCharts, “BTC had a better year this year.”
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The Recent Crypto Downturn is a Good Thing -Regulators Say A
lthough crypto executives and regulators don't often see eye to eye, they seem to agree that recent crypto market turmoil could prove beneficial, by filtering out unsustainable projects and bad actors. Those were the prevailing sentiments at last week's inaugural Point Zero Forum, an invitation-only gathering of investors and policymakers in Zurich. Currently, cryptocurrency's total market capitalization
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is around $1 trillion, down from a high of $2.7 trillion in October. On Wednesday, Monetary Authority of Singapore managing director Ravi Menon said a bloodbath was going on in the financial sector. Millions of dollars - and companies - are leaving the market. In May, TerraUSD (UST), an algorithmic stablecoin that was once valued at $18 billion, collapsed. Three Arrows Capital, a
hedge fund, revealed it had suffered heavy losses since then, while Celsius Network, a multibillion-dollar crypto lender, suspended withdrawals. Several of the world's top crypto firms, including Coinbase and Gemini in the U.S. and Bitpanda in Europe, have cut their hiring. The departure could be a positive development. "It's not necessarily bad," he said. "It's a great opportunity for a central
July 2022 | Volume 33
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FEATURE Crypto Weekly
Gillibrand (D-N.Y.) have introduced a wideranging bill that would regulate crypto-asset service providers and include disclosure requirements for stablecoin issuers in light of Terra's demise. The European Union's Markets in Crypto Assets (MiCA) Bill, which defines requirements for stablecoin issuers, is making progress in the legislative process. The United Kingdom announced in April to introduce a regulatory package for crypto and regulate stablecoins, under existing payment laws. In Zurich, Agustin Carstens, general manager of the Bank for International Settlements, a central bank-owned financial institution, said blockchain firms and regulators needed to do more to ensure sustainability. Carstens said during a panel discussion on the future of financial services, "The degree of leverage in many of these transactions is totally abnormal." "You cannot defy gravity. You are operating an extremely risky operation. Should anything go wrong, you are likely to crash."
“I Welcome this Downturn” Many attendees welcomed the market crash during a panel on the future of crypto. Crypto.com CEO Kris Marszalek said, "I welcome this downturn." "Now is the time for crypto companies to show how we can be the steady hand, the calming voice during these volatile times, and just deliver real value." Brad Garlinghouse, CEO of Ripple Labs, predicts that most tokens will disappear over time. “This is a clear example of something that was not designed with utility in mind, the founders have left, and it moves based on Elon Musk's comments." Binance CEO Changpeng Zhao emphasized the need for crypto entrepreneurs to have a clear business model. bank or regulator to separate the wheat from the chaff." In his view, the market crash is similar to the dot-com bubble of the 1990s, which led to inflated tech stock valuations in the early 2000s. "Regardless of what happens, crypto technology and finance will continue," Conliffe said.
July 2022 | Volume 33
Regulating Fast-tracking As a result of the recent market meltdown, establishing regulations for this industry has become increasingly urgent. Senators Cynthia Lummis (R-Wyo.) and Kirsten
The industry will take a long time to recover, but "the worst part is probably over," Zhao said during a panel on weathering the storm and the next growth phase. Zhao said, "Incentives are not a sustainable business model. Eventually, you will run out of money and crash."
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HIDDEN GEMS Crypto Weekly
PROJECT 1
cryptopolisgame
CryptopolisGame
A social game where you can collect, earn, win, and display your NFTs while playing and socializing with your friends. The vision of Cryptopolis is to make managing digital assets fun. Cryptopolis strongly believes in the future of crypto gaming. Being able to have fun and make money at the same time is not a utopian dream anymore. It is here. And Cryptopolis wants to make it the most fun for any adult to do so. Play-to-earn is the approach we chose because Cryptopolis believes anyone should be able to acquire Cryptopolis NFT’s. Cryptopolis merges the Sims-like mechanics with room decorating and social interaction. In Cryptopolis your NFT collection and in-game experience get you to the top of the tower. Make real money with the $CPO
PROJECT 2
atsnft.io
tokens by winning wager matches throughout the Tower, buying and selling NFT’s, and winning tournaments. The future of NFT gaming is here. Cryptopolis is free-to-play & play-to-earn. An online social platform with a blockchain back end and an associated cryptocurrency ($CPO) - Cryptopolis has a progression system based on acquiring resources, items (as NFTs), and prestige - Where players connect with each other and perform activities together. But they also compete with each other for in-game standing (prestige) and $CPO in various minigames. Cryptopolis is the first gamified social platform whose users can earn real money by playing and trading NFTs.
Apes Together Strong (ATSNFT)
atsnft
When the initial design of our Ape was being drawn, many important long-term variables were considered. The main goal of this collection was to create something different from what has been depicted in other Ape collections. As this collection was inspired by the movie “Planet of the Apes,” our Ape is extremely detailed for a 2D collection, it is front-facing, and will be the King of the Apes; we are not a copy-cat collection. Beyond that, involving our community has always been a top priority and from the beginning, we have had a dedicated channel that our community can use to collaborate with the artist. We have taken suggestions and illustrated the best ideas into the collection. We continue to work on progressing and refining our ultra apes, our traits, and our backgrounds to make it the best possible artwork for our community. Let it be
July 2022 | Volume 33
CryptopolisGame
atsnft
known that our artwork is created with a 300DPI, which allows for it to be printed without degrading the quality. This will be important if you want to print your unique Ape, especially with the ownership utility arriving post-mint.
Creating an Organic, Cohesive Community-Phase 2 The strength of the community is the single most important aspect of an NFT collection. It allows for a family atmosphere, where everyone will win. WAGMI. As our collection is inspired by the “Planet of the Apes,” we plan to use our community to help our end goal: to take over. Exclusive invitations were given out to form our base community, and bringing in users that have an aligned vision of our future will continue.
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BEGINNERS GUIDE Crypto Weekly
What's a Bear Market Anyway? F
ear grips many investors when they hear the word "bear market." While these deep downturns are unavoidable, they are often relatively brief, especially in comparison to bull markets, when stocks are rising in value. However, bear markets can be profitable too. Whenever securities or commodities continuously fall in value, it is called a "bear market," like the one currently affecting US stocks. A "bull market" is when assets steadily rise over time. Although stock prices are rational, in that they are always fair and based on available information, it is hard for many to resist using emotional terms like "bulls" and "bears," which invoke the "animal spirits" of investing.
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How can you tell when you're in a bear market? A prolonged drop in investment prices characterizes a bear market. It occurs when broad market indices fall by 20% or more from their most recent highs. Bear markets can occur for a market as a whole, such as the Dow Jones. Investors' pessimism and low confidence also mark a bear market. During a bear market, investors ignore any good news and continue selling quickly, driving prices down even further. In the event that investors are bearish on one stock, the sentiment may not affect the market as a whole. Nevertheless, when the market
turns bearish, almost all stocks fall, even if they are reporting good news and growing earnings.
What are the consequences of bear markets? In the 12 years since World War II, there have been three bear markets that did not precede a recession. Taken at face value there is some chance, if not a likelihood, of a recession in the near future when a bear market occurs. Two-thirds of the time, a recession is the result of the market's madness. The recent retiree is especially hard hit, since their nest egg shrinks at the
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BEGINNERS GUIDE Crypto Weekly
uring bear markets, all the companies in an index, such as the S&P 500, fall - but not by the same amount. That's why having a well-diversified portfolio is key same time as they have to withdraw income from it. Bear markets also have a psychological impact on investors, which can lead to a vicious cycle. Investors tend to sell even more when they perceive a bear market, driving prices down further and prolonging the pain. A shrinking economy suggests corporate profits will decline in the near future, so investors sell stocks, causing the market to drop. A bear market could signal more unemployment and tough economic times to come.
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way, you avoid investing all of your money into a stock at its peak (and take advantage of a market dip). Even though bear markets can be frightening, the stock market, and the cryoto markets, have proven they will recover eventually. When buying stocks at a lower price during a bear market, focusing on potential gains rather than losses can be a wise decision. Invest in a Wide Variety of Industries, Projects, or Products In addition to buying stocks or crypto investments at lower prices, diversifying your investment portfolio is another valuable strategy. During bear markets, all the companies in an index, such as the S&P 500, fall - but not by the same amount. That's why having a well-diversified portfolio is key. If you hold a mix of relative winners and losers, you minimize your portfolio's overall losses.
Only Look at the Long Term
Investment Techniques that Work During a Bear Market: Dollar-Cost Averaging
All investors face bear markets, but history shows that you won't have to wait too long for the market to recover. You will likely endure bull markets if you are investing for a long-term goal like retirement.
If you want to invest wisely, you should use a dollar-cost-averaging strategy. Dollarcost averaging is when you gradually invest money over time and in similar amounts. This
Money you need for short-term goals, such as those you hope to achieve within five years, should not be invested in long-term portfolios.
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of the
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NFT
BITCOIN’S Worst Month in a Decade!! (Rock Bottom or Buying Opportunity?)
July 2022 | Volume 33
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