May 23, 2023

May 2023 Sector Alert!

Amberdata understands how difficult it can be to keep up with the rapidly evolving crypto sector we’ve all chosen to help create. ‌Therefore, each month we will share with you what we believe to be the month’s most consequential events, launches, and milestones. ‌If you think there’s something we should include next month, please feel free to let us know.

Binance skates out of Canada

Binance has become the latest crypto exchange to leave Canada. ‌‌Citing new guidance related to stablecoins and investor limits, the world’s largest cryptocurrency exchange believes that operating a crypto exchange business in Canada is now untenable. In a statement released on May 12, 2023, the company said: “Unfortunately, new guidance related to stablecoins and investor limits provided to crypto exchanges makes the Canada market no longer tenable for Binance at this time. We put off this decision as long as we could explore other reasonable avenues to protect our Canadian users, but it has become apparent that there are none.”

Earlier this year, in February, the Canadian Securities Administrators, an umbrella organization of Canada’s provincial and territorial securities regulators, revealed new guidance restricting stablecoin services and making the agency’s custody and margin requirements more stringent. This exit continues Binance’s move away from operations in North America and follows OKX’s and Paxos’ recent exit from America’s northern neighbor.

Coinbase & Gemini go global

Two of the biggest U.S. crypto exchanges, Coinbase and Gemini, have just opened global derivatives futures platforms to get a bigger slice of the non-domestic market. They're now letting customers from around the world trade Bitcoin and Ethereum perpetual futures (futures contracts that roll over forever).

“Perps” as they’re known, first introduced by Bitmex in 2016, have become wildly popular, currently accounting for nearly two-thirds of all crypto trading volume. ‌These moves come amid a deteriorating regulatory environment in the U.S., which could ultimately take a big bite out of both exchanges’ revenue. ‌ Binance, by far the world’s largest crypto exchange generates enormous trading revenue abroad, and Coinbase and Gemini would like to grab their share.

DeFi 2030

On the anniversary of last year’s Terra-induced DeFi implosion, research firm Corporate Insight released a new DeFi study, entitled "DeFi 2030." The report delves into an analysis of the five primary types of DeFi protocols that are expected to significantly impact conventional consumer finance—lending, trading, asset management, payments, and insurance.

Within the study, each DeFi vertical is comprehensively outlined, showcasing its growth and popularity. Furthermore, the report offers insights into potential scenarios for crypto growth during the rest of the decade, exploring various factors that could drive this growth, such as advancements in crypto technology, the speed at which DeFi can integrate real-world assets, and the implications of global political and economic instability. The report concludes by presenting a set of recommendations designed to assist companies in formulating competitive long-term DeFi service strategies.

Franklin Templeton doubles down

According to a recent SEC filing, Franklin Templeton, a global investment firm with $1.4 trillion under management, is planning a second blockchain fund investment. The proposed Blockchain Fund II will be a private equity fund with a minimum investment of $100,000. Franklin Templeton, having recently initiated a money market fund that operates transactions via Stellar and Polygon, is increasingly establishing itself as one of the most substantial traditional finance supporters of cryptocurrencies.

MXR

Apple’s World Wide Developer’s Conference is coming in a few weeks, and you know what that means: cool cheap software and some really expensive hardware. ‌One of those high-priced pieces of hardware seems like it will be Apple’s long-rumored mixed-reality pass-through headset. ‌Called the Reality Pro, and coming nine months after Meta's Meta-Quest Pro, the headset is rumored to be very light, look like a pair of ski goggles, and clock in at a $3,000 price tag. ‌While the cost might make your head spin, the capabilities of nextgen MXR headsets are eye-opening.‌ At NFT.NYC last month, a few artists/developers unveiled NFT-based MXR projects that are rekindling visions of the artistic promise of NFTs and possibly paving the way for an NFT renaissance.

Oortech

Oort, the creator of low-cost innovative, decentralized Web3 data infrastructure built on open-source protocols, made two significant announcements this month. ‌ One is a collaboration with Tencent Cloud. Tencent Cloud will be integrated into the Oort network as a full-node provider, thereby supporting Oort's data services. Tencent Cloud's massive storage and computing capacity will allow Oort to provide additional data services, as well as enhanced privacy and security, to applications deployed on clouds.

The second is a strategic extension investment round and partnership with EMURGO Ventures, an emerging Web3 venture capital fund backed by EMURGO Group, the official commercial arm and a founding entity of the Cardano blockchain. Through its unique approach to storage and data access, Oort has the potential to be a game changer for the entire Web3 ecosystem. The platform enables developers to build apps with data storage and sharing capabilities, which can be accessed in a decentralized and secure manner. This opens up new possibilities for Web3 applications in nearly every sector.

Ordinals

They’re the newest new thing, but what exactly is Bitcoin Ordinals? The Ordinals protocol is a Layer 1 protocol launched in January 2023 that allows satoshis to carry additional data over the blockchain. ‌ Ordinals are then, essentially, de facto NFTs written to the BTC blockchain (although, given the network, they have no smart contract functionality). ‌More specifically, they are satoshis that have been ordered and inscribed with a piece of information, such as text or an image, making them unique.

To some, they’re controversial because they resurface a longtime argument among the BTC community: “Should Bitcoin exist only to process financial transactions?” ‌ To others, however, ordinals are a great innovation that creates value. ‌Either way, they are experiencing explosive growth, with ordinal inscriptions totaling over seven million since January.

Pepe jumps

Love it or hate it, there’s no avoiding Pepe ($PEPE). ‌ Launched in April at a price so small it would fit in Ant-Man’s pocket, the froggy meme coin nonetheless became the fastest-growing ERC-20 token in history, reaching a $1 billion market cap in a bit more than three weeks. ‌It even stayed there for a few days. ‌How did that happen? ‌In part because of a tweet by the world’s most tweeting-est billionaire, which touched off a frenzy of speculation that PEPE would become Coin of The Realm on Twitter if that platform started handling transactions.‌ While there is at the moment no actual hard evidence that Twitter is planning to enable transactions, one can always dream. ‌But if you do, just be aware of meme coin volatility, and don’t let your dream turn into a nightmare.

Rippling across the Atlantic

Payments network Ripple has acquired digital asset custodian and tokenizer, Metaco for an all-cash $250 million, making it one of the largest crypto deals in the past year. ‌Ripple CEO Brad Garlinghouse pointed out that Ripple, which like many crypto firms is facing an increasingly difficult and unclear regulatory environment in the U.S., made the acquisition in part to expand its overseas footprint. ‌He added: “Metaco is a good fit in terms of the strategic opportunity.”‌ No doubt part of Ripple’s deal calculus included the forecast that the institutional crypto custody market is expected to reach $10 trillion within the next ten years.

Via a statement, Metaco’s CEO Adrian Treccani said, “This deal will enable Metaco to leverage Ripple’s scale and market strength to reach our goals and deliver value to our clients at a faster pace.” Founded in Switzerland in 2015, Metaco’s best-known offering is Harmonize, its custody and tokenization infrastructure.

Sotheby’s secondary sales

Sotheby’s announced that it has created a new on-chain secondary marketplace for the purchase of NFTs. ‌They will be selling a rotating slate of curated pieces by some of the most important artists curated by the house’s digital art specialists. ‌ Sales will be made via smart contract within Sotheby's Metaverse, with payment in $ETH or $MATIC. ‌Opening up on the site now are 13 of Sotheby’s most noted digital artists, including IX Shells, Diana Sinclair, and Sam Spratt. ‌

Calling itself “The most trusted and dynamic destination to collect, buy and sell remarkable digital works,” Sotheby’s has been involved with some of the biggest NFT sales in history, including Pak’s $17 million auction in 2021 and the sale of the very first art NFT, minted in 2014, Jennifer and Kevin McCoy’s “Quantum”.

Tethered to Bitcoin

Tether, the issuer of the world’s largest stablecoin (current market cap, $82 billion) announced it would invest up to 15 percent of its earnings in Bitcoin, making purchases on a regular basis. ‌ To give an idea of the size of this, Tether’s Q1/2023 earnings were $1.5 billion USD, so its bitcoin buy this quarter could max out at $222 million USD. ‌Coincidentally, the company reported that its current BTC holdings also amount to $1.5 billion USD, which accounts for approximately two percent of its holdings.

While it may seem unusual for an issuer of stablecoins to partially back its coin with extremely volatile BTC, Tether states that 85 percent of its reserves are held in cash, cash equivalents, and short-term U.S. Treasuries, and it "anticipates that the current and future BTC holdings in its reserves will not exceed the Shareholder Capital Cushion."