Ben Strack

<div id="highlights-block_61ccbbe3dac56" class="highlights">
 <ul>
 <li>Large financial companies will continue looking to buy crypto data providers, stablecoin issuers and digital asset firms focused on payments, an industry watcher says</li>
 <li>Among the largest deals of 2021 — excluding those involving special purpose acquisition companies (SPACs) — was Galaxy Digital’s $1.2 billion purchase of BitGo</li>
 </ul>
 
</div>



Mergers and acquisitions within the crypto sphere are set to heat up in 2022, industry watchers predict, after a year during which traditional financial companies executed buys in the space.



Trends that emerged in 2021 will continue into next year, Ryan McCulloch, an investment banking associate at M&amp;A advisory firm <a href="https://www.architectpartners.com" target="_blank" rel="noreferrer noopener">Architect Partners</a>, said in an interview with Blockworks.&nbsp;



He highlighted <a href="https://www.paypal.com/us/home" target="_blank" rel="noreferrer noopener">PayPal</a>’s buy of Curv, a provider of cloud-based infrastructure for digital asset security. The deal, announced in March, was worth $200 million, according to Architect Partners data.



<blockquote class="wp-block-quote">“The acquisition of digital payment wallets and secure payment wallets is going to be huge, and there’s a continued need for that from the larger institutions,” McCulloch said. “I think most of them are making the decision right now that it’s growing so quickly they need to buy versus build.”</blockquote>



Donald Putnam, a managing partner at investment firm Grail Partners, said that he expects clarity about crypto from regulators, including the US Securities and Exchange Commission (SEC), during the first quarter of 2022, followed by “definitive action” in the second half of the year.&nbsp;



“This paves the way for the next trend to catch fire: the beginning of mainstream infrastructure providers — the global banks and exchanges — to begin buying technology and market share by acquiring the innovators,” Putnam told Blockworks. “That second trend will favor the exchanges and disenfranchise the banks, because of the profitability and [price-to-earnings] ratios of exchanges versus banks.”



<h3>Accelerating M&amp;A&nbsp;</h3>



McCulloch noted that “bridge transactions” — deals between more traditional companies and crypto firms — rapidly accelerated in 2021. Overall, M&amp;A deals involving at least one company in the crypto sector totaled 169, as of mid-December, he added, compared to 59 deals in 2020.



Nike earlier this month <a href="https://news.nike.com/news/nike-acquires-rtfkt" target="_blank" rel="noreferrer noopener">announced its buy</a> of RTFKT, a company that creates virtual products and experiences, including NFTs.&nbsp;



Trading platform Robinhood revealed a day later on Dec. 14 that it would acquire Cove Markets, which it described <a href="https://blog.robinhood.com/news/2021/12/14/robinhood-crypto-welcomes-cove-markets" target="_blank" rel="noreferrer noopener">in an announcement</a> as a cross-exchange trading platform that makes it easier for people to manage their crypto accounts.&nbsp;



<blockquote class="wp-block-quote">“It’s guys like Nike acquiring NFT guys, and it’s Robinhood and huge traditional guys acquiring these crypto companies,” McCulloch said. “That’s really where the value is being created and what’s driving these crazy, crazy prices.”</blockquote>



Among the largest deals of the year — excluding those involving special purpose acquisition companies (SPACs) — was <a href="https://cms.blockworks.co/galaxy-digital-acquires-bitgo-for-1-2b/" target="_blank" rel="noreferrer noopener">Galaxy Digital’s $1.2 billion purchase of BitGo</a>. The purchase of the custodian was executed to establish the digital asset bank as “a one-stop-shop for institutions,” Galaxy CEO Mike Novogratz said in a statement at the time.



The other largest deals of the year, according to Architect Partners data, include <a href="https://cms.blockworks.co/polygon-acquires-mir-in-400m-deal-to-scale-ethereum-and-web3/" target="_blank" rel="noreferrer noopener">Polygon’s buy of Mir</a> ($628 million), <a href="https://ir.northerndata.de/news/adhoc/northern-data-acquires-bitcoin-miner-bitfield-n-v-under-an-up-to-eur-400-million-stock-for-stock-deal-and-issues-new-revenue-guidance-for-2021/" target="_blank" rel="noreferrer noopener">Northern Data’s acquisition of Bitfield</a> ($575 million) and Siam Commercial Bank’s <a href="https://www.scb.co.th/en/about-us/news/nov-2021/scbs-bitkub-online.html" target="_blank" rel="noreferrer noopener">purchase of Bitkub Capital Group Holdings</a> ($537 million).&nbsp;



Though SkyBridge Capital Founder Anthony Scaramucci <a href="https://cms.blockworks.co/are-tradfi-and-crypto-set-for-an-ma-explosion/">previously said</a> he expects that a big bank frustrated by the growth of decentralized finance to buy a crypto firm such as Coinbase, the crypto platform has buying plans of its own.&nbsp;



The firm <a href="https://blog.coinbase.com/coinbase-to-acquire-leading-blockchain-infrastructure-platform-bison-trails-f879654421d6" target="_blank" rel="noreferrer noopener">revealed in January</a> that it would acquire blockchain infrastructure Bison Trails. Emilie Choi, Coinbase’s president and chief operating officer, <a href="https://cms.blockworks.co/coinbase-president-crypto-on-pace-for-1-billion-users-within-5-years/" target="_blank" rel="noreferrer noopener">said earlier this month</a> that the company would look to acquire any “incredible companies” that it sees.



<h3>Other potential M&amp;A trends&nbsp;</h3>



Banks will also look at boosting their capabilities around stablecoins, McCulloch said.&nbsp;



The President’s Working Group on Financial Markets, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency released a <a href="https://home.treasury.gov/system/files/136/StableCoinReport_Nov1_508.pdf" target="_blank" rel="noreferrer noopener">report</a> in November about stablecoins and the need to regulate them.&nbsp;



It recommends that legislation should limit stablecoin issuance to entities that are insured depository institutions, including state and federal banks and savings associations.  



<blockquote class="wp-block-quote">“We’re seeing that stablecoins are going to be partnering with banks or banks are going to be acquiring those stablecoin issuers to enable that,” McCulloch said. “We have a client in that ballpark and I can tell you every single bank is interested.”</blockquote>



Big banks such as Citibank, McCulloch added, produce $12 billion of revenue per year around payments, and such players will look to acquire stablecoin issuers to keep those businesses healthy.&nbsp;&nbsp;



<a href="https://cms.blockworks.co/citi-ceo-fraser-were-building-the-infrastructure-for-retail-real-time-payments/" target="_blank" rel="noreferrer noopener">Citigroup CEO Jane Fraser</a> told Yahoo Finance in October that digital assets would be part of the future of financial services and markets, noting that the company was working to connect clients to wallets and enable corporate clients to accept consumer payments.



Citi also appointed a head of digital assets in November for its institutional client group and <a href="https://cms.blockworks.co/citi-looking-to-fill-100-new-digital-asset-related-roles/" target="_blank" rel="noreferrer noopener">intends to fill up to 100 additional roles</a> to support its digital asset capabilities across the unit.



A Citi spokesperson declined to comment about the company’s potential M&amp;A focuses for 2022.&nbsp;



Traditional financial companies will look to boost their data capabilities in the crypto realm, McCulloch added.



Mastercard <a href="https://cms.blockworks.co/mastercard-to-acquire-crypto-intelligence-company-ciphertrace/" target="_blank" rel="noreferrer noopener">announced in September</a> that it would buy crypto intelligence company CipherTrace, which has provided “blockchain forensics” for about 150 of the largest banks, exchanges, financial institutions and regulators across more than 7,000 cryptocurrency entities.



The following month, Cboe Global Markets <a href="https://ir.cboe.com/news-and-events/2021/10-20-2021/cboe-agrees-acquire-erisx-entering-digital-asset-space-spot-derivatives-and-clearing-platform" target="_blank" rel="noreferrer noopener">agreed to buy ErisX</a>, allowing for its entry to the digital asset spot and derivatives markets, including clearing and settlement. The deal size was $400 million, Architect Partners data shows.&nbsp;



ErisX’s focus throughout development on robust regulatory compliance is a major driver of value to traditional financial players such as Cboe, McCulloch wrote in a research note at the time.



“Those two acquisitions really prove that these large multi-billion-dollar companies need to acquire this space,” McCulloch told Blockworks of the Mastercard and Cboe deals. “&#8230;It’s really interesting to see it play out.”



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What Could Crypto M&A Look Like in 2022?

Shalini Nagarajan

The US Office of the Comptroller of the Currency (OCC) has established a new fintech office to adapt to technological evolutions in banking, including crypto assets.



The Treasury said the office will add to its knowledge of digital assets, fintech partnerships and other emerging technology models that have an impact on OCC-supervised banks. It will also contribute to oversight of partnerships between traditional institutions and fintech firms.



Prashant Bhardwaj, who has worked in several roles across the financial sector for 30 years, has been appointed the new fintech office&#8217;s deputy comptroller and chief financial technology officer. His tenure begins April 10.



“To ensure that the federal banking system is safe, sound, and fair today and well into the future, we need to have a deep understanding of financial technology and the financial technology landscape,” Michael Hsu, acting comptroller of the currency, said in a <a href="https://www.occ.treas.gov/news-issuances/news-releases/2023/nr-occ-2023-31.html" target="_blank" rel="noreferrer noopener">statement</a>. 



The OCC is a department under the Treasury in charge of executing laws relevant to national banks. Some of its powers include supervisory actions against banks, removal of bank directors and rejecting applications for new bank branches.



Hsu has previously urged the crypto industry to introduce stablecoin standards in the same vein as the World Wide Web Consortium and Internet Engineering Task Force’s approaches to guiding the development of the internet.



In December, the OCC reiterated its stance on taking a <a href="https://blockworks.co/news/us-treasury-occ-crypto-problem" target="_blank" rel="noreferrer noopener">cautious approach</a> to crypto, pointing to various events that roiled digital asset markets in 2022. 



One year earlier, Hsu had issued a reminder to federal savings associations and national banks to not participate in “certain cryptocurrency, distributed ledger, and stablecoin activities” without a non-objection notice from their regulatory supervisors.



“The events of this year in the crypto industry have revealed a high degree of interconnectedness between certain crypto participants through a variety of opaque lending and investing arrangements,” the agency said in a semi-annual Risk Perspective report.



Just before his recent retirement, Senator Pat Toomey pushed legislation that would see the OCC <a href="https://blockworks.co/news/lame-duck-senator-leaves-stablecoin-bill-legacy" target="_blank" rel="noreferrer noopener">gain direct oversight</a> of stablecoin issuers by way of a specialized licensing charter.



The agency was among three powerful US financial regulators to express skepticism over financial institutions holding crypto assets in January. Along with the Federal Reserve and the Federal Deposit Insurance Corporation, the OCC <a href="https://www.fdic.gov/news/press-releases/2023/pr23002a.pdf">warned</a> that risks associated with crypto should not spill over into the banking system. 



“Based on the agencies’ current understanding and experience to date, the agencies believe that issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public, and/or decentralized network, or similar system is highly likely to be inconsistent with safe and sound banking practices,” the agency said.



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Fresh OCC ‘Fintech Office’ Tasked With Keeping Up With Crypto

Sebastian Sinclair

SEC Chair Gary Gensler voiced his support of President Joe Biden’s request to fund his agency to the tune of $2.4 billion, claiming the funding would go a long way to taming the “wild west” of the crypto markets.



“I am pleased to support the President’s [financial year] 2024 request of $2.436 billion for the SEC, to put us on a better track for the future,” Gensler said during a House Financial Services subcommittee hearing.



Rapid technological innovation in the financial markets, particularly crypto, has led to misconduct in emerging areas, he added in his <a href="https://docs.house.gov/meetings/AP/AP23/20230329/115576/HHRG-118-AP23-TTF-GenslerG-20230329.pdf" target="_blank" rel="noreferrer noopener">published remarks</a>.



<a href="https://blockworks.co/news/gary-gensler-bait-switch-coinbase">Critics argue</a> the agency, under Gensler, has unfairly targeted the industry, which has led to a series of high-profile enforcement actions through litigation — most recently with crypto exchange Coinbase’s receipt of a <a href="https://blockworks.co/news/sec-serves-coinbase-in-latest-alleged-crypto-securities-violation">Wells notice</a> earlier this month.&nbsp;



The regulator is alleging Coinbase violated US securities through its spot market, staking service, Coinbase Prime and Coinbase Wallet. Weeks prior, rival exchange <a href="https://blockworks.co/news/kraken-settles-sec-crypto-staking-program">Kraken agreed</a> to settle with the SEC for $30 million over similar allegations, without admitting wrongdoing.



The funding, if approved by Congress, would allow the agency to double its headcount, allowing the division handling crypto affairs “to investigate misconduct on a larger scale.”



“Addressing this requires new tools, expertise and resources,” Gensler said. It would also speed up the pace of enforcement investigation through “resolutions.”



The SEC did not immediately respond to a request for comment.



“These additional resources would strengthen the division’s ability to protect American families by addressing risks in the crypto markets, cyber and information security, and the resiliency of critical market infrastructure,” he said.



Crypto is “rife with noncompliance,” Gensler added, seemingly ignoring Coinbase’s accusation it has attempted to engage with the regulator on multiple occasions for a clear path to registration.&nbsp;



“Investors have put hard-earned assets at risk in a highly speculative asset class,” he said.



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Gensler Cheers $2.4B Funding Proposal for SEC in Biden Budget

The world’s largest asset manager, BlackRock, said Thursday it believes the US Federal Reserve would continue its campaign of future rate hikes, despite market expectations of a freeze.



It could mean a volatile road lies ahead for digital assets in the short-term, based on prior performances throughout 2021 and 2022 and present-day announcements from the central bank, experts say.



Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>), which has so far managed to climb a wall of worry in the wake of the Fed’s <a href="https://blockworks.co/tag/interest-rates">aggressive rate hikes</a>, benefited from uncertainty in the banking sector as investors sought to hedge via a <a href="https://blockworks.co/news/institutions-bullish-on-eth-price">flight to quality</a>.&nbsp;



The biggest headwinds now facing the US and global economy are not immediate, Dmitry Lapidus, of crypto-native investment fund Dragonfly, told Blockworks.



The Fed “did a great job bailing the banks out” and the effect on GDP is likely to be exaggerated for the remainder of the year, he said.



“I think they cluster somewhere around Q3/Q4 when excess savings are drawn down and housing data is likely to accelerate to the downside.”



Despite the Fed’s recent dovish stance of easing rate hikes, as evidenced by its 25 basis point rise instead of the previously anticipated 50, market uncertainty still lingers.



Lapidus said for crypto, “it’s tough to decouple” from the macroeconomic environment, with the “pain trade” continuing to be up in all risk assets as long as liquidity was supported.



In the near term, he predicts the trend of higher prices for digital assets to continue.



<h2>Future rate hikes?</h2>



The Federal Reserve will next convene to determine short-term interest rates on May 3, with analysts predicting a split chance between a 25 bps increase or the decision to maintain current rates, data from CME Group’s <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html" target="_blank" rel="noreferrer noopener">FedWatch</a> tool shows.



BlackRock <a href="https://www.bloomberg.com/news/articles/2023-03-28/markets-are-wrong-on-us-rate-cut-bets-blackrock-says" target="_blank" rel="noreferrer noopener">believes</a> the central bank will avoid rate cuts this year and opt to continue curbing inflation, albeit at a less aggressive pace than the year prior. Lapidus agrees, pointing to&nbsp; “stubborn” and “sticky” core inflation, as well as the contained banking crisis. In that world, rates would continue to rise.



Previous hikes show the impact on digital assets has had mixed results, particularly at a time when the industry was dealing with several major bankruptcies and declining valuations.



The two largest drops in bitcoin’s price on rate hike announcements occurred on May 5, 2022 (-7.9%) and June 16 of the same year (-9.6%), taking the federal funds rate from 1.5% to 1.75%. Both came before the larger interest rate hikes of 75 bps in the latter half of 2022.



If the Fed reaccelerates its pace with indications of significantly more rate hikes to come, then the crypto rally will falter, Markus Thielen, Matrixport&#8217;s head of research, told Blockworks.



“The debate about a higher terminal rate would also have negative implications for tech companies and start-ups,” he said.



<h2>Change of pace</h2>



Still, the environment in which digital assets now operate has significantly changed from two years ago, when rates had come off historic lows which sustained a decade of cheap borrowing costs.



The price of bitcoin actually rose about 8% on a rate hike of 75 bps <a href="https://blockworks.co/news/fed-raises-rates-75-basis-points-again">on July 27, 2022</a>. Other instances, including the hikes on <a href="https://blockworks.co/news/fed-ends-0-75-streak-opts-for-lower-rate-increase-in-december">Dec. 14</a>, <a href="https://blockworks.co/news/federal-reserve-raises-interest-rates-25-bps">Feb. 1</a>, 2023, and, most recently, <a href="https://blockworks.co/news/federal-reserve-interest-rate-25-bps-march">on March 22</a>, resulted in moderate increases in bitcoin’s price.



Research-focused digital assets brokerage firm K33 <a href="https://k33.com/research/analysis/analysis/correlations-are-declining-and-it-makes-sense" target="_blank" rel="noreferrer noopener">said</a> in a Thursday post that growth had been the main priority amid the zero-interest rate regime, which had kicked into high gear from the outset of the COVID-19 pandemic.



“In crypto, the growth focus was perverse. This is the source of the yearlong correlated hangover that was 2022,” the firm said.



The abundance of capital available to startups via private fundraising led to a prioritization of growth over everything else, with lower interest rates further fueling that trend, K33 said.



While the impact on digital asset performance over the short term appeared sensitive to future hikes, the longer-term implications of “high-interest rates are unknown,” it said.



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BlackRock Predicts More Rate Hikes, Possible Short-Term Volatility for Crypto

A new MIT masters thesis from a US Space Force major contends bitcoin is not just a form of internet money — but a weapon to be utilized by the Pentagon in modern warfare.



In an exhaustive 400-page dissertation, Major Jason Lowery claims bitcoin’s proof-of-work consensus mechanism presents a massive shift in the way world powers could wage war.



Instead of boots on the ground or nukes in the air, Lowery suggests nations battle by competing for Bitcoin block rewards, <a href="https://www.politico.com/newsletters/digital-future-daily/2023/03/30/space-force-major-to-pentagon-mine-bitcoin-00089745" target="_blank" rel="noreferrer noopener">Politico reported</a> Thursday.



“Space Force” is the newest brand of the US Armed Forces, created in December 2019. It&#8217;s responsible for organizing, training and equipping military persons across the stars in a bid to protect US and allied interests.



Lowery is an active-duty US Space Force astronautical engineer and US National Defense Fellow at MIT whose job it is to advise senior military personnel on the implications of bitcoin, according to a bio of his latest book.&nbsp;Politico says it confirmed his rank with an Air Force spokesperson.



Lowery&#8217;s thesis was released as a <a href="https://www.amazon.com/Softwar-Projection-National-Strategic-Significance/dp/B0BW358F37" target="_blank" rel="noreferrer noopener">book</a> in February under the title &#8220;Softwar: A Novel Theory on Power Projection and the National Strategic Significance of Bitcoin.&#8221; It&#8217;s said to describe a scenario in which governments duke it out with hashrate; fighting something akin to a Cold War, where the spoils are bitcoin and bragging rights.



The blurb reads:



&#8220;Using scientific concepts from biology, evolution, anthropology, political science, and computer theory, Lowery summarizes the dynamics of power projection in human society and provides an argument for why emerging proof-of-work technologies (namely Bitcoin) will have a dramatic impact on how humans organize, cooperate, and compete on a global scale by empowering populations to project physical power in, from, and through cyberspace.&#8221;



Bitcoin’s consensus could also be harnessed to deter denial-of-service attacks, Lowery reportedly reasons, which would make it costly and therefore prohibitive for bad actors to spam software systems based on its principles.



Should the asset be viewed through that lens, it would serve the US’s interest to protect the network and foster an industry for domestic crypto mining, or so the thinking goes.&nbsp;



<h2>Bitcoin is a &#8216;national strategic imperative&#8217;</h2>



In a stark warning to US policymakers, the major contends the country should support and adopt bitcoin immediately in a bid to avoid losing its status as a global superpower.



That’s just the kind of message of which industry proponents have hoped for years.&nbsp;Although, it&#8217;s probably unlikely.



&#8220;Major Lowery concludes that Bitcoin represents a national strategic imperative that the US should support and adopt as quickly as possible, else it risks losing its lead as a global superpower in the 21st century,&#8221; states the book&#8217;s description. 



Instead, the current campaign employed by US regulators and the <a href="https://blockworks.co/news/bidens-view-on-crypto" target="_blank" rel="noreferrer noopener">White House</a> has been to offer up no support in that regard, opting to <a href="https://blockworks.co/news/crypto-regulation-policy-law" target="_blank" rel="noreferrer noopener">regulate digital assets through litigation</a> with little discourse, critics argue.&nbsp;Various arms of the US government have also routinely <a href="https://jlopp.github.io/us-marshals-bitcoin-auctions/" target="_blank" rel="noreferrer noopener">sold</a> bitcoin seized as a result of criminal cases.



“Our first amendment rights to free speech will not protect you from government regulators who are actively maneuvering to ban bitcoin under the argument that it represents a threat to national security,” <a href="https://twitter.com/JasonPLowery/status/1640808749328748574?s=20" target="_blank" rel="noreferrer noopener">Lowery tweeted</a> Tuesday.



“Your best bet is to argue that it would be a national strategic security hazard to ban bitcoin. It would be against the second amendment (not just the first). It&#8217;s an undefeatable argument, you just have to have the courage to use it,” he said.



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Pentagon, Mine Bitcoin To Stay Superpower: Space Force Major

Casey Wagner

The CFTC’s crackdown on Binance found US institutions have allegedly been interacting with the exchange, and market research shows liquidity depth may have been the main attraction. 



<a href="https://blockworks.co/tag/binance">Binance</a>, the world’s largest crypto exchange, long maintained the top spot in terms of trading volume and market share, but institutions may have been drawn to it for another reason: liquidity options.&nbsp;



“Liquidity is paramount in crypto, particularly for institutions that are building or selling large positions or trading frequently,” research analysts at Kaiko wrote in a note. “On this front, Binance again scores well, with spreads 36 times tighter than Binance.US and 8 times tighter than Coinbase as of this writing.”



Binance trading volume has traditionally suggested the majority of traders were in the US, considering US trading hours have been the most bustling times for trades executed on the platform. Year-to-date, 43.4% of Binance’s bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) trading volume has occurred during hours, just below Coinbase’s 47.5%.



“Unsurprisingly, Binance has the tightest spread for both BTC-USDT and ETH-USDT,” researchers said.&nbsp;



Radix Trading, a Chicago-based firm, identified itself as one of the three entities named in the CFTC’s complaint; “trading firm A,” the Wall Street Journal <a href="https://www.wsj.com/livecoverage/stock-market-news-today-03-28-2023/card/chicago-s-radix-says-it-is-trading-firm-a-in-binance-lawsuit-vO56wCCHBxs9YtKQfVGV?utm_campaign=Research%20newsletter&amp;utm_source=hs_email&amp;utm_medium=email&amp;utm_content=70276830&amp;_hsenc=p2ANqtz-9ZBfTThBpUq9daD3MJcL2fbITJQvbZy8PCdK4RUBHT4IC2utMjhjjyHswdP3w8tcFcwsFxGHs57EdZYY_YaEb-FzO0MRtUpGEPd1XWm9sEC87CgLQ" target="_blank" rel="noreferrer noopener">reported</a> Wednesday. The firm had to use offshore accounts to avoid restrictions, but the trouble could have been worth it, industry members say. 



The lawsuit could impact <a href="https://blockworks.co/news/can-we-solve-the-crypto-exchange-liquidity-problem">liquidity options for the rest of the market</a>.



“This could negatively impact market liquidity, which is already unusually thin,” said Noelle Acheson, author of Crypto is Macro Now and former head of market insights at Genesis. “The suit mentions a few large US trading desks that have been actively avoiding US regulations when dealing with Binance – these could end up temporarily laying low for a while.”



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Why Binance May Have Been Worth Risk for US Institutions 

Bessie Liu

Badger DAO plans to bring a synthetic bitcoin onto Ethereum through liquid staking derivatives.



The aim of the new cryptoasset, Dubbed eBTC, is to become one of the most decentralized synthetic bitcoin (<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a>) assets in the market backed solely by liquid-staked ether (<a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">ETH</a>) and reliant on immutable smart contracts.



There’s historically been a difficult environment to drive consistent utility and yield sources for bitcoin assets on Ethereum, Badger DAO’s head of marketing, who goes by <a href="https://twitter.com/0xWill_">Will</a>, told Blockworks.&nbsp;



Assets such as wBTC are in the custody of centralized entities. By comparison, liquid staking derivatives (LSDs) on Ethereum have driven a consistent, sustainable source of yield, and Badger hopes to tap the asset to build a bitcoin primitive on Ethereum that does not require bridging or wrapping.



“Your native bitcoin can stay on Bitcoin and you can play around, speculate and hold a decentralized bitcoin on Ethereum,” <a href="https://twitter.com/0xWill_">Will</a> said.&nbsp;



<h2>Fewer censorship risks than wBTC</h2>



As it stands, wBTC is one of the most commonly used forms of BTC on Ethereum, but with points of centralization come potential censorship risks.



eBTC, on the other hand, “eliminates the custodial risk as anyone can mint it and at launch, the protocol will be significantly governance minimized with a clear path toward further decentralization and censorship resistance,” according to Will.&nbsp;



Will said with eBTC, smart contracts will be immutable, and the user’s collateral or debt positions will not be controlled by any governance. Even so, plans for a multisig are still in place, and multisig governance will operate through BadgerDAO that can adjust the yield share fee earned from staked ETH collateral.&nbsp;



Read more: <a href="https://blockworks.co/news/what-are-multisig-wallets">What Are Multisig Wallets?</a>



“This is in direct contrast to many existing CDP systems and on-chain money markets that constantly need to adjust their risk parameters such as minimum collateralization ratio or others that have upgrade rights to the underlying smart contracts,” Will said.



<h2>How is eBTC pegged to BTC, anyway?&nbsp;</h2>



The new primitive is designed as an over-collateralized debt position that uses liquid-staked ether to borrow eBTC, meaning: To borrow eBTC, a user must provide a higher value as denominated in staked ether.



The debt position will be primarily determined through Chainlink’s LSD/BTC oracle, with Tellor as the backup oracle.



“If a user&#8217;s debt position falls below the minimum overcollateralization ratio, they are subject to liquidation,” Will said. “This is based on the staked ETH/BTC ratio not BTC in USD terms. These liquidation mechanics are open to the market to participate.”



The amount of staked eth backing eBTC will be publicly available for all buyers to see and is also available on-chain, Will said.&nbsp;&nbsp;



One driving factor for Badger to leverage staked ETH/BTC for BTC: Both assets have “historically tracked well together in terms of price…thus [ranking] low on the volatility scale.”



Will does say though, that as price fluctuations happen, liquidations are very much possible.&nbsp;



“With that being said, users&#8217; positions are fully redeemable for the underlying collateral at all times as long as their positions are within the liquidation threshold,” he said.&nbsp;



Badger is currently <a href="https://forum.badger.finance/t/ebtc-builder-update-1/5975">working</a> with RiskDAO to examine its risk exposures to different market conditions. Stability mechanisms and parameters are being explored as part of an ongoing design process.&nbsp;



“This process is still underway and will inform some key architectural decisions such as liquidation parameters and collateral ratios,” Will said.



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A New Synthetic Bitcoin Is Coming to Ethereum

Though one of the largest public bitcoin miners suffered a net loss of $687 million in 2022, Marathon Digital’s CEO says it remains on track to more than double its hash rate in the next few months and expand to a new region.



Marathon Digital’s deficit last year sprinted up from a $37 million loss in 2021. The company attributed the higher shortfall, in part, to “unfavorable variances” in a company announcement earlier this month.



A total of $651 million of the losses were unrelated to business operations, <a href="https://blockworks.co/tag/marathon-digital" target="_blank" rel="noreferrer noopener">Marathon</a> CEO Fred Thiel told Blockworks in an interview. They came in the form of impairment charges on the company’s mining rigs and digital assets — incurred when the value of an asset falls below the cost at which it was purchased.



Analysts at Compass Point Research and Trading maintained its buy rating of the stock in a research note last week, noting that it excludes non-cash impairments in its estimates.



Marathon’s stock price was $7.83 at 1:00 pm ET on Thursday — down about 1.5% on the day.



Compass Point lowered its price target from $11.50 to $10, as analysts expect the company’s share count to increase and bitcoin holdings to decrease. Marathon sold 650 of the 683 bitcoins it produced in February for operating expenses — a practice the company expects to continue, according to Thiel.&nbsp;



<h2>Hash rate growth, moving into UAE</h2>



The Florida-based miner is on track to fulfill its hash rate growth target from 9.5 exahashes (EH), as of Feb. 28, to 23 EH by mid-year, Thiel said.



It energized about 19,000 bitcoin miners last month, including 8,000 S19 XPs, Bitmain’s most recent ASIC hardware release in July 2022.



Not included in the expected 23 EH of computing power is Marathon’s upcoming entrance into the United Arab Emirates. The company revealed a joint venture with FS Innovation to build and operate two crypto mining sites in Abu Dhabi — amounting to 250 megawatts.



Thiel called the expansion the firm’s “first foray into vertical integration,” noting that the site would utilize self-designed immersion systems. Marathon began an immersion-cooled pilot project in November, which involves submerging mining servers in a dielectric fluid. It found that such technology could reduce the cost of servers when compared to using air-cooled setups.



“They have very warm summers, and then outside that period of time the temperature is quite mild,” Thiel said of the region. “[It’s] the perfect marriage to their energy situation where we can come in, take all that stranded energy and use it for bitcoin mining.”



Keep reading for more excerpts from Blockworks’ interview with Thiel.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Blockworks: What could stand in the way of Marathon meeting its goal of 23 EH of computing power by mid-year?



Thiel: Our build-out domestically right now is predominantly with Applied Digital.



We don’t see any hindrances there. Construction is well on its way, if not completed, at a number of the sites. Miners have already been delivered, so that’s not an issue.



So, if you typically think of the issues, of ‘do you have regulatory approval for the energy to energize, do you have construction completed, do you have your transformers installed and on site, and do you have your miners?’ In all cases, those items have all been taken care of.



Blockworks: How do you think about managing your bitcoin holdings going forward?



Thiel: If you go back to the 2021 period, the cost of capital was very low. It was easy to raise debt, it was easy to raise equity capital, and so it made sense to <a href="https://www.blockworksresearch.com/glossary#hodl-slang">hodl</a> all your bitcoin.



Then we go through 2022, [there’s] a big price decline, the markets get tighter. We still had a good ability to raise equity capital, so we focused, in the second half of 2022, on really strengthening our balance sheet, paying off all our current and revolving debt…and building a cash pile while continuing to build a bitcoin pile.



For this year and going forward…we’re going to sell bitcoin to cover operating expenses. We’ll look to hodl the rest, and so over time our bitcoin pile should continue to grow.



And, as we need capital for growth initiatives, we’ll leverage the capital markets for that.



Blockworks: What about potential acquisition opportunities?



Thiel: There are still a lot of miners who made investments in infrastructure — power and sites — and were not able to raise capital to either fully complete those sites or populate them with their own miners.



So there are a number of sites coming to market that miners like us could look at potentially investing in or acquiring. We’re very picky as we look at that.&nbsp;



The last thing we want to do is go and add a bunch of two-generation-old miners that may only have a year or two of good life on them and pay any sort of price for those.”



If an opportunity comes along where we can essentially acquire a site with a great power energy agreement, and it’s renewable energy predominately and there just happens to be miners there, we’ll definitely look at it. We probably won’t pay anything for the miners because what we’re really looking at is access to the energy and infrastructure.



We’re looking much more at a mix of sites going forward — self-designed and self-built, some third-party and then also joint venturing with folks. So I think you’ll see much more diversity in our site mix going forward.



This interview was edited for clarity and brevity.



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Marathon CEO: ‘Diversity in Site Mix’ Is Key to Future Growth

David Canellis

Crypto and institutions go together like lightning and thunder these days. Traditional finance shops are moving over, while the digital asset market births debutants all by itself.



This brings about two problems:



<ol>
<li>How do institutions — which are meant to represent the smart money — find market moving information before markets move?</li>



<li>How can they share that information with clients while remaining compliant with strict data security controls?</li>
</ol>



The Tie, a crypto-native data platform, is gunning to solve both concerns. In the same vein as Bloomberg Terminal, the firm’s crypto-only terminal platform serves as an all-in-one screener for news, market data, regulatory filings, analytics and research.&nbsp;



The startup, founded in 2017, says it has attracted more than 150 hedge funds, asset managers, venture capital firms, over-the-counter desks, market makers and the like (and even news organizations such as Blockworks).



It’s common for such firms to rely on encrypted messaging apps such as WhatsApp, Signal or Telegram — but regulators have recently handed out billions of dollars in <a href="https://www.computerworld.com/article/3675289/16-wall-street-firms-fined-18b-for-using-private-text-apps-lying-about-it.html">fines</a> for communicating about trades or other orders via platforms that don’t preserve business records, a key SEC requirement.



Those firms require chat histories to be stored and logged in a compliant manner, and until recently, they haven’t had a way to communicate with their counterparties from within the terminal.



“The roll-out of The Tie Terminal Messenger enables firms like ours to take advantage of [the digital asset investor network] and compliantly communicate with a range of leading market participants including banks, asset managers, funds, and liquidity providers,” Rob Hadick, general partner at Dragonfly Capital, said in a statement.



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1600" height="815" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/03/image-8.png?w=1024&amp;h=1024" alt="" class="wp-image-50669" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/03/image-8.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2023/03/image-8.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/03/image-8.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/03/image-8.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/03/image-8.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2023/03/image-8.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/03/image-8.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/03/image-8.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/03/image-8.png?w=80 80w" sizes="(max-width: 1600px) 100vw, 1600px" /></figure>



There are other firms shooting for the same market. Aurox, for one, is a free terminal service intended to support fast-moving crypto traders, but its offerings are more skewed towards retail investors, rather than institutional types.&nbsp;



Other crypto-specific terminals, such as Orion Terminal, are more like market aggregators, allowing trades across multiple platforms all under one umbrella platform. And of course, there’s the Bloomberg Terminal, which does support a number of cryptocurrencies, but its selection is comparatively limited.&nbsp;



To help service institutional types that need more variety, The Tie’s terminal messenger is SOC 2 compliant, a benchmark built by the American Institute of CPAs, which translates to strict internal controls regarding how data — such as sensitive financial messages between institutions — is stored (to avoid leaks and whatnot).



All Tie Terminal users are verified via corporate email, reducing the chance of profile spoofing commonly seen across Telegram and WhatsApp. The firm says around half of its clients are using the messenger app but declined to give specific metrics for total usage so far.



“More than 80 of our 150+ clients have turned on Messenger and we are already seeing a significant number of messages per day,” CEO Josh Frank told Blockworks. “We anticipate both users and messenger volume to increase over time as new connections are formed and comfort with the feature improves.”



The Tie was <a href="https://www.accesswire.com/693801/The-TIE-Announces-9-Million-Strategic-Funding-Round-at-100-Million-Valuation">valued</a> at $100 million in March last year, when it raised a $9 million round led by Avalanche-focused venture firm Blizzard.



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Institutions Are Going Crypto — But How Do They Share Info?

Lior Lamesh

There’s nothing more some in the crypto industry would like than to seize upon the failures of Silicon Valley Bank, Signature Bank and Silvergate to sow distrust of traditional financial institutions. And while it doesn’t seem these banks did anything illegal at this juncture, the events may indicate a broader, perhaps industry-wide, failure. In fact, a <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4387676">recent report suggests</a> that at least 190 additional banks in the US are currently in danger of uninsured market runs (similar to that of SVB and Signature).&nbsp;



Despite the crisis, traditional banks are in many ways still far better equipped to provide crypto services than their crypto counterparts are. First, banks are skilled at taking custody of assets in a manner that is secure and compliant with regulation. Second, banks, in many cases, are still considered to be more trustworthy and transparent than their crypto-native counterparts. And third (most importantly), traditional banks can offer more diversified portfolio management, straddling both the crypto and fiat domains. All three points here give banks a definite leg-up in providing digital asset services to retail and institutional investors alike.



<h2>A deep, dark void of trust&nbsp;</h2>



The hacks, insolvencies and crashing crypto valuations that characterized 2022 have eroded consumer trust and confidence in crypto to its lowest levels in years. Believers and skeptics alike have had their faith severely tested. Increasingly, both critics and crypto natives are calling for more regulation and oversight. Industry thought leaders and exchange CEOs are all urging for self-custody. With a general lack of trust for all things crypto native — and in particular centralized exchanges (CEX) — a major void has formed within the industry.



Up until now, the market has virtually been monopolized by crypto-native companies. Financial institutions have been slow to keep pace with their crypto-native counterparts. In fact, a recent <a href="https://www.bnymellon.com/content/dam/bnymellon/documents/pdf/insights/migration-digital-assets-survey.pdf">survey</a> by Celent found that 65 percent of institutions go through crypto-native platforms for digital asset services, such as trading, lending and borrowing.



However, over the last couple of years, traditional financial institutions have gradually warmed up to digital assets, realizing that they have been missing out on viable revenue-generating opportunities. With 35 percent of the market share at the end of 2022, traditional finance has been steadily gaining traction for crypto custody, even prior to the <a href="https://www.theguardian.com/technology/2022/nov/18/how-did-crypto-firm-ftx-collapse">collapse of FTX</a>.



<h2>Regulation is around the corner</h2>



Given the events of the past year, regulators around the world have upped their game. <a href="https://www.europarl.europa.eu/thinktank/en/document/EPRS_BRI(2022)739221">MiCA (Markets in Crypto Asset) regulations</a> are expected to be passed in the EU during the first half of 2023. Earlier this year, the <a href="https://www.finextra.com/newsarticle/41711/uk-govenment-outlines-plans-to-regulate-cryptoasset-industry?utm_medium=newsflash&amp;utm_source=2023-2-1&amp;member=136033">UK announced</a> plans to strengthen regulation in the crypto industry, with stricter rules for financial intermediaries, custodians and crypto trading platforms. The US is also slowly making progress with a <a href="https://cointelegraph.com/news/congress-may-be-ungovernable-but-us-could-see-crypto-legislation-in-2023">framework</a> published in late 2022, albeit with less certainty.&nbsp;



<h2>Straddling the divide</h2>



Banks offering digital asset services could easily straddle the divide between traditional finance and the ‘future economy’ by offering customers access to diversified portfolio management. No longer would investors need to manage their crypto with A and their fiat with B.



Case in point, the aforementioned Celent survey suggests that 70 percent of institutional investors would increase their digital asset activity if services like custody and management were available from recognized, trusted institutions.&nbsp;



Moreover, 72 percent of institutional investors prefer to work through financial institutions providing hybrid portfolios consisting of both digital and fiat-backed assets. This indicates that the prevailing separation of asset classes doesn’t provide the optimal strategy for most investors.



<h2>Not as easy as it seems</h2>



Traditional financial institutions are well-positioned to fill the void of ‘trust,’ have more experience in asset custody, and know how to work with regulatory bodies — all of which positions them to take advantage of new revenue-generating opportunities in the custody and management of digital assets.



But there’s certainly a learning curve for financial institutions entering the digital asset custody space. While banks are well versed in safeguarding fiat assets, the custody of digital assets often requires a different mindset. The very nature of these digital assets exposes them to unique challenges which require additional safeguards.&nbsp;



Banks need to look to technology solutions that will enable them to effectively custody digital assets in a way that fits their operational needs while providing the highest degree of security. Luckily, digital asset custody solutions have come a long way and are empowering financial institutions to play a larger role than many would have imagined a year ago.&nbsp;



Regulators, investors and responsible industry players are all looking to minimize uncertainty and guarantee basic investor protections. The crises experienced across both markets make the need for a safer, more stable, financial ecosystem for all more clear than ever before. An ecosystem in which traditional financial institutions have an opportunity to take the lead.



<hr class="wp-block-separator has-alpha-channel-opacity"/>


<div class="wp-block-post-author-biography">Lior Lamesh is the co-founder and CEO of GK8, a company that offers both traditional and crypto-native institutions an end-to-end platform for managing blockchain-based assets, including custody, DeFi, staking, NFT, CBDC, and tokenization support. Having honed his cyber skills in Israel’s elite cyber team reporting directly to the Prime Minister&#8217;s Office, Lior led the company from its inception to one of the most impressive acquisitions of 2021. In 2022 Lior, alongside his co-founder Shachar Shamai, were selected by Forbes to be included in its prestigious ‘Forbes 30 under 30’ list.</div>


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Crypto Custody Has a Problem and Only Banks Have a Solution

Binance was <a href="https://blockworks.co/news/bitcoin-and-ether-are-commodities-says-cftc-in-binance-lawsuit">sued</a> by the Commodity Futures Trading Commission this week for allegedly evading trading and derivatives rules.&nbsp;



The crypto exchange operated without proper registration and illegally allowed Americans to trade crypto derivatives on its platform, according to the regulator. Binance called the CFTC’s complaint “unexpected and disappointing,” saying it had worked collaboratively with the agency for more than two years.



CEO Changpeng Zhao himself <a href="https://www.binance.com/en/blog/from-cz/czs-response-to-the-cftc-complaint-2408916493005890282">said</a> that the lawsuit contained an “incomplete recitation of facts” and that the company does not agree with the CFTC’s depiction of several concerns raised.



But what’s interesting to note is that the exchange was hit with an <a href="https://blockworks.co/news/binance-cftc-damning-quotes">exhaustive list of allegations</a>, despite having a solid team with expertise in financial crimes.



It appears to be a question of timing, as much of the conduct at issue took place before Binance dramatically ramped up its compliance efforts, according to Leo Mizuhara, CEO of DeFi asset management platform Hashnote.



“If you broke the law in 2019, then it doesn’t matter that you reformed your behavior in subsequent years,” Mizuhara told Blockworks.



<h2>‘A’ for effort Binance, but…</h2>



Binance’s efforts do count for something in the eyes of regulators, per Dave Weisberger, CEO of algorithm-trading platform CoinRoutes.



“The CFTC does care that Binance has hired a global team of compliance experts — but it’s more complicated than this,” Weisberger told Blockworks. “Both the CFTC and SEC consider actions against organizations for previous actions important for deterring future bad behavior.”



Binance can argue that it already has taken steps to beef up compliance, pointing to recent history.



In Sept. 2021, Binance <a href="https://www.binance.com/en/blog/leadership/nils-andersenr%C3%B6ed-joins-binance-from-europol-to-further-strengthen-investigations-and-audit-team-421499824684902767">hired</a> Nils Anderson-Röed, a former dark web specialist at Interpol, to lead investigations into offenders trying to commit crimes on the exchange.&nbsp;



Around the same time, Tigran Gambaryan, a former special agent with the Internal Revenue Service, was <a href="https://www.binance.com/en/blog/leadership/former-irsci-special-agent-tigran-gambaryan-joins-binance-as-vp-of-global-intelligence-and-investigations-421499824684902817">appointed</a> Vice President of Global Intelligence and Investigations. His career history includes investigations in bank secrecy act violations, terrorism financing and one of crypto’s biggest heists ever — the Mt. Gox hack.



Less than three months ago, Anderson-Röed was promoted to the position of deputy head of financial crime compliance. And only last month, Binance <a href="https://www.binance.com/en-IN/feed/post/220706">hired</a> Noah Perlman, who has served as a global head of financial crimes at Morgan Stanley and as division counsel at US Drug Enforcement Administration New York, as chief compliance officer.



Back in 2021, Zhao had <a href="https://www.binance.com/en/blog/from-cz/a-letter-from-our-ceo-reflecting-on-progress-and-the-road-ahead-421499824684902301">openly</a> said that Binance would double the size of its global compliance team by the end of that year, as the industry was facing “a lot of uncertainty.”&nbsp;



Gambaryan rebutted comparisons to FTX by <a href="https://www.efinancialcareers.co.uk/news/2023/03/binance-financial-crime">some observers</a>, saying Binance’s compliance team is larger than the total number of employees at most exchanges, while FTX’s had virtually none.



“We are proud to have in our ranks some of the most celebrated cyber investigators representing virtually every single major international law enforcement agency across the globe,” a Binance spokesperson told Blockworks.&nbsp;



“Just as they did during their time in the public sector, the investigators in our financial crimes compliance team are working hard on the front lines to protect users from illicit actors seeking to access the crypto markets,” the spokesperson said.



Weisberger thinks that whatever good will is engendered by Binance’s efforts only goes so far in light of other evidence.



“What struck me about this case as being important — and why I think Binance will likely have to settle with the CFTC — are the emails that allegedly prove that Binance worked with firms based and regulated in the United States to help them evade the rules,” Weisberger said.



Regardless of its investments in financial crime experts, Binance other behavior is still a big deal for the agency.



“The CFTC only cares about whether or not a crime has been committed, and changes to behavior taken after the alleged crime likely won’t be enough,” Mizuhara said.



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Binance Compliance Hires Didn’t Allay CFTC Investigators’ Concerns

John Lee Quigley

The Investor’s Guide to Bitcoin and Crypto Loans

Bitcoin and ether may be cryptocurrencies built atop public blockchains, but that’s really where their similarities end.&nbsp;



Yet they trade in almost exactly the same way — their prices move increasingly in tandem to near complete correlation. And they’ve been tightening ever since ether (<a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">ETH</a>) started trading almost eight years ago.&nbsp;



Across 2016 and 2017, bitcoin’s 100-day correlation with ether averaged at 35% (where 100% indicates complete correlation, -100% being complete inverse correlation). That number jumped to 66% across 2018 and 77% in 2019, before reaching more than 87% last year.



So far this year, bitcoin (<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a>) and ether’s correlation coefficient has averaged out to 98%. So, whatever bitcoin does — ether does too, with near perfect precision.



But why is their correlation increasing, and not decreasing? Their value propositions are quite different.&nbsp;



Read more: <a href="https://blockworks.co/news/the-investors-guide-to-crypto-correlation">The Investor’s Guide to Crypto Correlation</a>



Bitcoin is a pure-play decentralized cash system that doubles as a store of value. Bitcoin’s famous 21-million supply limit promotes scarcity in the vein of Austrian economics — that commodities should back currencies rather than the state.&nbsp;



Ethereum, on the other hand, supports an array of use-cases outside of the strict money doctrine: digital collectibles, prediction markets, metaverse communities and blockchain gaming.



ETH has no supply limit, with issuance and <a href="https://blockworks.co/news/ethereum-deflationary-2-months">burn rates more elastic</a>, tied to network usage.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/13127226/embed#?secret=RmfLVKbIpr" data-secret="RmfLVKbIpr" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">All lines are leading to complete correlation.</figcaption></figure>



Dessislava Aubert, a Kaiko research analyst, told Blockworks that macro investors tend to group bitcoin and ether together as risk assets (or crypto more generally), leading them to treat the two in a similar manner.



“This could explain why they are highly correlated, especially during periods of market turmoil when investors tend to be less discerning,” Aubert said. “However, as these assets mature, and their fundamental differences become clearer this is likely to change.”



<h2>Mainstream investors treat bitcoin and ether the same way</h2>



A rise in mainstream investment could also be responsible for the correlation. Sam Doctor, chief strategy officer at crypto-focused financial services firm BitOoda, reasoned that the bitcoin and ether camps were initially different, leading to distinct investor groups pumping money into their preferred cryptocurrencies (in other words: BTC and ETH “maximalists”).



More mainstream investors — whether <a href="https://blockworks.co/news/study-retail-still-bullish-crypto-post-ftx">retail</a> or <a href="https://blockworks.co/news/74-of-institutions-plan-to-buy-crypto-fidelity-survey">institutional</a> — have joined the market in recent years. “These tend to view crypto more as one trade, want exposure to the asset class and are diversifying into the top two, three or four tokens,” Doctor said.



There are still investors committed to either bitcoin and ether, he added, but as more “protocol-agnostic” investors enter the space, the more correlated these assets should be.



That is, at least until the space matures to where large investors are making very informed decisions about which protocol to invest in,” Doctor said. “Today such investors are in the minority, in my view.”



Specific catalysts, such as Ethereum’s <a href="https://blockworks.co/news/effect-ethereum-shanghai-upgrade-price">Shanghai fork</a> (which will activate staking withdrawals) could reduce correlations, along with the general maturation of the digital asset class.&nbsp;



But for the most part, bitcoin and ether are still one trade, he explained, drawing similarities between high correlation in airline stocks which can break down when one particular carrier faces a challenge.



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<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/13131853/embed#?secret=ZLd2hXyQHN" data-secret="ZLd2hXyQHN" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Ether began outstripping bitcoin in 2020, but their correlation has since rebounded.</figcaption></figure>



The evolution of bitcoin and ether’s correlation could map to three distinct phases, per Doctor:



<ol>
<li>Independent crypto projects with their dedicated market adherents (low correlation)</li>



<li>Institutional and retail investors with more passive strategies buying both tokens (high correlation)</li>



<li>More discriminating active strategies (lower correlation)</li>
</ol>



“At the moment, crypto investors at scale are still somewhat passive investors, rather than actively valuing and shifting between protocols based on an informed analysis of underlying fundamentals,” he said.



There’s another potential factor, beyond investor profiles: how crypto markets themselves have evolved.



<h2>Most crypto markets were once denominated in bitcoin</h2>



Nick Hotz, vice president of research at digital asset investment firm Arca, explained that in the ‘old days,’ there weren’t any trusted stablecoins (with <a href="https://blockworks.co/news/stablecoin-issuers-book-big-profits">Tether’s</a> <a href="https://blockworks.co/price/usdt" target="_blank" rel="noreferrer noopener">USDT</a> an exception in some cases).



This meant traders on the primary exchanges priced all assets against BTC. And in the early stages of ether’s life, it was considered just another altcoin that was “by and large traded against BTC,” Hotz said. This would have resulted in the assets being less correlated than today.



Hotz cited increased use of stablecoins USDC, USDT and DAI as quote assets as the biggest factor that drove up correlations for other cryptocurrencies relative to BTC across 2018 and 2019.



“A lot of big money now treats BTC and ETH simply as ‘risk,’ since they are the most liquid assets, and not as many trade their pair (ETH/BTC) anymore.”



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<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/13133804/embed#?secret=5Xz7dJUQkX" data-secret="5Xz7dJUQkX" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Correlation streaks are becoming increasingly common.</figcaption></figure>



The correlation of the two today is more representative of external risks, such as <a href="https://blockworks.co/news/federal-reserve-interest-rate-25-bps-march">monetary policy</a>, crypto adoption, institutional market structure and <a href="https://blockworks.co/news/sec-serves-coinbase-in-latest-alleged-crypto-securities-violation">regulatory risk</a>, Hotz added, rather than the fundamentals of the two cryptocurrencies.&nbsp;



He also cited trends among larger investors, which show them treating digital assets as just one sub-sector of technology. “Assets of the same sector should be highly correlated (see: equity sectors), but should Bitcoin be highly correlated to a token that provides utility in a video game? Probably not.”



Hotz added: “For them to trade independently, there needs to be recognition of BTC and ETH as separate assets with very different fundamentals. Either that or more institutional interest in differentiating the two by pair trading them, which I think is unlikely.”



Studying the correlation between the top two cryptocurrencies and the S&amp;P perhaps reveals the real reason for the former’s tightening correlation: Everything is correlated with US-listed equities these days. Bitcoin and ether are simply no different.&nbsp;



“Periods when you see a spike in correlation [between BTC, ETH and the S&amp;P] are often also periods when the market is risk-off, so correlations have risen across the board,” Doctor said.



Doctor highlighted major events like the 2020 Covid sell-off and the 2022 bear market, marked by increasing BTC and ETH correlation with the S&amp;P: Risk-off markets beget high correlation between stocks and crypto. And markets are mostly risk-off right now.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/13255131/embed#?secret=hWQxc9C9hR" data-secret="hWQxc9C9hR" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Risk-off markets bring it all together.</figcaption></figure>



Still, there are signs that crypto markets are starting to make industry-specific investment decisions, rather than pure macro plays.&nbsp;



Kaiko’s Aubert pointed to recently-shrinking correlation between bitcoin and equities markets. The tech-heavy Nasdaq’s 30-day correlation with BTC has declined from an average of 60% last year to between 20% and 30% this year.



&#8220;As more value enters Bitcoin and its usage as a store of value increases, it is likely that its correlation with tech equities declines,&#8221; Aubert said. “In contrast ETH’s correlation with the Nasdaq could strengthen as it is arguably more similar to tech equities (it&#8217;s a decentralized, composable smart-contract network).”



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Why Are Bitcoin and Ether More Correlated Than Ever?

Ethereum scaling with zero-knowledge (zk) proof technology has rapidly moved from theory to functioning public mainnet, with dueling zero-knowledge Ethereum Virtual Machines (zkEVMs) from <a href="https://blockworks.co/news/zksyncs-evm-era-opens-to-the-public">Matter Labs</a> and <a href="https://blockworks.co/news/polygon-zkevm-live-on-ethereum">Polygon</a> launching in the past week.



Soon to follow will be ConsenSys, the Ethereum blockchain infrastructure company, which recently <a href="https://twitter.com/ConsenSys/status/1640643146240409600?s=20">deployed</a> its zkEVM onto an Ethereum testnet.



Zk rollups are considered a breakthrough in crypto technology, as zero-knowledge proofs allow information to be proven to be valid or invalid without revealing the information itself.



On Ethereum layer-2 rollups, this means that transactions can be batched and validated by Ethereum without revealing the specifics involved in the individual transactions on the Ethereum mainnet.&nbsp;



This type of technology can considerably lower transaction costs by compressing the data, making more efficient use of Ethereum blockspace.



<h2>How do zk rollups lower transaction fees?</h2>



Zk rollups built on Ethereum offload the computation and execution of smart contracts to a separate layer-2 blockchain built on top of the base layer.



This means that, rather than having the Ethereum mainnet validators process individual transactions, the rollup instead offloads that responsibility to a prover and verifier on the layer-2 network.



“Anyone can download the data and check if it is correct for some period of time,”&nbsp;<a href="https://www.blockworksresearch.com/">Blockworks Research</a> said.



Unlike Ethereum mainnet, where more users and more transactions lead to increased <a href="https://www.blockworksresearch.com/glossary#gas">gas</a> fees, <a href="https://ethereum.org/en/developers/docs/scaling/zk-rollups/">the costs</a> of writing data to mainnet from a zk rollup in fact decline as the number of users increases since the otherwise fixed cost is divided between all users whose transactions are in a batch, DeFi researcher who goes by the ​​pseudonym Ignas <a href="https://twitter.com/DefiIgnas/status/1641426707172425730">tweeted</a>.



&#8220;When there are fewer transactions the fixed cost is distributed among fewer users, leading to higher average gas fees per transaction. As transaction volume increases, the fixed cost gets spread out, and fees drop,&#8221; Ignas said.



Mikhail Komarov, founder of zk infrastructure developer =nil; Foundation, agrees, but with a caveat.



&#8220;In terms of L-1 transactions, this is true. But a user pays an L-2 fee, not an L-1 fee,&#8221; Komarov told Blockworks. &#8220;This means a rollup can charge some larger or smaller end-user fee with the only difference of using its own L-2 token for that.&#8221;



Current zk rollups, however, do not charge fees in a native token — if they have one — but instead use ether.



What exactly gets posted back to Ethereum mainnet depends on the specifics of the rollup implementation.



For instance, Polygon’s zkEVMs posts full transactions to mainnet, Bartek Kiepuszewski of L2Beat explained <a href="https://twitter.com/bkiepuszewski/status/1640728189109411841">on Twitter</a>, Tuesday. By contrast, both zkSync and StarkNet only submit changes in the state of the EVM that occur as a result of those transactions.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">In contrast to other zkEVMs it posts full transactions (with signatures) to L1 calldata, not just state roots. <a href="https://twitter.com/zksync?ref_src=twsrc%5Etfw">@zksync</a> and <a href="https://twitter.com/Starknet?ref_src=twsrc%5Etfw">@Starknet</a> post only state diffs. Transactions are not compressed, expect L2 tx cost to be not the cheapest as a result /2&mdash; bartek.eth (@bkiepuszewski) <a href="https://twitter.com/bkiepuszewski/status/1640728189109411841?ref_src=twsrc%5Etfw">March 28, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“Right now, we have to differentiate between systems that are EVM-equivalent and EVM-compatible,” Kiepuszewski <a href="https://youtu.be/eveHo7ncHt4?t=653">said</a> at Devcon Bogota, in October 2022. “I think we’re going to see a very interesting competition between systems that try to emulate the EVM as close as possible and systems that will prefer to make sure that the proving is optimized for the particular VM — and in this category I would definitely put zkSync and StarkNet. The competition between these two approaches is will be very interesting to watch.”



Similar to how transactions on layer-1 cost a gas fee, posting data from layer-2 validity proofs also requires a fee. Currently, transactions are posted through ordinary Ethereum “<a href="https://www.quicknode.com/guides/ethereum-development/transactions/ethereum-transaction-calldata/">calldata</a>” in a transaction. But this will change under <a href="https://blockworks.co/podcast/0xresearch/ac87740a-b80f-11ed-b2e2-4b2bbafab32b">EIP-4844</a>, Blockworks research said.&nbsp;



“It will be posted to these things called blobs that will have a separate fee market to normal transactions making it cheaper,” Blockworks Research said.



EIP-4844, also known as Proto-Danksharding, will the part of the next major Ethereum upgrade<a href="https://blockworks.co/news/ethereum-devs-opt-for-withdrawals-in-march-and-nothing-else"> after Shanghai</a>, dubbed Cancun.



&#8220;I would say the only thing which can drive down data availability cost is a better compression (proof and circuits &#8216;quality&#8217;),&#8221; Komarov said. &#8220;The better the compression — the smaller the L-1 [data availability] charge.&#8221;



Ultimately, technological and hardware improvements will reduce the costs of data availability further and, over the long run, transaction fees on Ethereum layer-2s using zk proofs will continue to come down, Blockworks Research said.



Updated March 30, 2023 at 12:02 pm ET: Additional comments.



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Zero-knowledge Rollups Get Cheaper With Scale

The price of bitcoin (<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a>) almost hit $29,200 on Thursday morning, reaching its highest point in more than nine months.



“Market structure is sound,” Anthony Rousseau, head of brokerage Solutions at TradeStation told Blockworks. 



Bitcoin last traded above $29,000 across late May and early June last year, per TradingView. BTC was hovering around $28,600 as of 8:45 am, ET.



“Prices do not represent the kind of doomsday scenario that widespread regulatory action seemingly could ignite in a structurally less-stable market.”



Since the start of the year, crypto has enjoyed a short-term trend which has stuck around, providing a convincing rationale for accumulation, Rousseau said.



James Lavish, managing partner at the Bitcoin Opportunity Fund, said the broader market had enjoyed a “risk-on day across the board.”



The broad S&amp;P 500 and Dow Jones indexes closed 1.4% and 1% higher, respectively, while tech-heavy Nasdaq Composite climbed 1.8%.



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<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/13253017/embed#?secret=ZBiVEzdW2G" data-secret="ZBiVEzdW2G" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Bitcoin still has some catching up to do</figcaption></figure>



&#8220;Investors seem to be positioning themselves and their books ahead of some crucial data this week, namely the GDP and PCE inflation data,” Lavish said.



If data comes in weaker than expected, it would give US Federal Reserve Chair Jerome Powell more evidence to pause further rate rises, or so the theory goes.



Still, a shift in the global liquidity tide has been net positive for assets like bitcoin, Rousseau added.



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Bitcoin Eyes Return To $30K After Hitting 9-Month High

Around $4 billion in deposits tied to Signature Bank’s crypto business are set to be returned next week amid growing scrutiny around the Federal Deposit Insurance Corporation (FDIC).



During a Financial Services hearing on Wednesday, FDIC chairman Martin Gruenberg fielded questions over his agency’s handling of the recent US banking crisis, including its takeovers of Signature and Silicon Valley Bank.



Pro-crypto Congressman Tom Emmer asked Gruenberg whether the FDIC plans to sell intellectual property tied to Signet, Signature’s blockchain-powered private money network utilized by major crypto firms such as Kraken.



“I believe that’s already been sold out of the bridge institution, Congressman,” Gruenberg responded. Emmer later rebuffed the chairman’s response in a tweet.



The FDIC and other US regulators moved to shut down Signature and Silicon Valley Bank earlier this month over concerns of risks to the US banking system, just days after Silvergate opted to shutter. 



All three serviced crypto clients in one way or another.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">And if not, why is our government controlling one of the few private sector 24/7 money rails that supported the digital economy?&mdash; Tom Emmer (@GOPMajorityWhip) <a href="https://twitter.com/GOPMajorityWhip/status/1641221687105536003?ref_src=twsrc%5Etfw">March 29, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<h2>Crypto insiders demand FDIC scrutiny</h2>



The FDIC <a href="https://www.fdic.gov/news/press-releases/2023/pr23023.html" target="_blank" rel="noreferrer noopener">sold</a> Silicon Valley Bank’s deposits to First Citizens Bank earlier this week.



Emmer pressed Gruenberg on his assertion that the sale included assets or liabilities tied to crypto-related firms.



“Gruenberg claims that all deposits from [Silicon Valley Bank] were assumed by First Citizens. But I am almost certain that&#8217;s not true,” Nic Carter, co-founder at venture capital firm Island Castle Ventures, <a href="https://twitter.com/nic__carter/status/1641183746660466688?s=20" target="_blank" rel="noreferrer noopener">tweeted</a>.



Emmer and the FDIC did not immediately respond to requests for comment.



Others took umbrage with the hearing’s apparent focus on Silicon Valley Bank, rather than the FDIC’s action against Signature.&nbsp;



Barney Frank, former House Financial Services Committee chair and Signature director, had <a href="https://fortune.com/2023/03/12/nyc-based-signature-bank-fails-closed-by-regulators-fdic-treasury/" target="_blank" rel="noreferrer noopener">previously</a> alluded to the bank’s solvency even as the FDIC took control.



Research unit Delphi Digital’s general counsel <a href="https://twitter.com/SH_Brennan/status/1640795386557153281?s=20" target="_blank" rel="noreferrer noopener">Sarah Brennan</a> tweeted: “Insane that there wasn’t a significant discussion on this. I thought this was a fact-finding hearing but was used for mostly grandstanding… business as usual.&#8221;



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FDIC Chair Grilled Over Crypto-friendly Bank Takeovers

Media giant Warner Music Group plans to lay off 4% of its global workforce, meaning 270 employees would lose their jobs, but positions related to Web3 could be retained.



CEO Robert Kyncl told employees it would reallocate resources towards “new tech initiatives,” and that the company will reduce discretionary spending, according to a memo seen by Variety.&nbsp;



The group is the third-largest label in the global music industry and represents some of the world’s best-known clients including Beyonce, Jay-Z, Ed Sheeran and Coldplay. Kyncl didn’t specify which divisions would be cutting jobs, but he said the move did not indicate a “blanket cost-cutting exercise.”



“Every decision has been made thoughtfully by our operators around the world, who considered the specific needs, skills, and priorities of each label, division, and territory, in order to set us up for long-term success,” he <a href="https://variety.com/2023/music/news/warner-music-to-lay-off-270-staffers-hard-choices-evolve-1235567703/" target="_blank" rel="noreferrer noopener">said</a>. Blockworks has reached out for comment.&nbsp;



Kyncl added that “new business models are constantly emerging,” creating a path for innovative opportunities. Warner Music would “likely” keep employees working in the group’s Web3 and AI initiatives, Decrypt reported.



Warner Music&#8217;s UK arm separately announced a string of <a href="https://www.wmg.com/news/warner-music-uk-announces-series-of-strategic-changes" target="_blank" rel="noreferrer noopener">strategic changes</a> on Wednesday. Among those updates, the brand said that London-based executive Sebastian Simone will “continue his innovative work in Web3 and the metaverse” as Vice President of Community.



Under Simone’s leadership, Warner Music announced the launch of a Web3 record label called “Probably A Label” in collaboration with TV chef Jeremy Fall in October. The label sold out a collection of 5,555 NFT access passes at launch in seven minutes, according to <a href="https://www.digitalmusicnews.com/2022/10/12/warner-records-imprint-probably-a-label-web3/" target="_blank" rel="noreferrer noopener">Digital Music News</a>.



Among other Web3 collaborations, Warner Music <a href="https://twitter.com/Blockworks_/status/1575509586496323585" target="_blank" rel="noreferrer noopener">partnered</a> with NFT marketplace OpenSea in September to expand engagement with artist fan communities. The company also <a href="https://blockworks.co/news/music-nfts-beat-the-bear" target="_blank" rel="noreferrer noopener">banded together</a> with Polygon and digital collectible marketplace LGND Music to connect with fans for curated experiences.



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Warner Music Web3 Moves Could Still Be in Play Despite Layoffs

Sam Martin

Bitcoin Update

Digital Asset Summit (DAS) is returning March 2024.



This year&#8217;s event will be held in our nation’s capital, where industry leaders, policymakers, and institutional experts will come together to discuss the latest developments and challenges in the ever-evolving world of cryptocurrency.



What you can expect:



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<li>Insights on the impact of regulatory implications and the need for realistic policy</li>



<li>Access to institutional dinners and exclusive networking events,</li>



<li>Unparalleled insights from industry leaders</li>
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And more! Don’t miss out on the opportunity to be in the room when the future of crypto is decided.



Join us and help shape the future of our industry.

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Digital Asset Summit 2024 | Washington, D.C.

Permissionless is the brainchild of Blockworks and Bankless. Over 5,500 people attended the inaugural event in 2022, making Permissionless the world’s largest DeFi conference.&nbsp;



What sets Permissionless apart? It’s a crypto native’s paradise, crafted specifically for both builders and investors who are dedicated to scaling the industry.&nbsp;



Permissionless is headed to Austin in 2023, and you know what they say… Everything is bigger in Texas.&nbsp;



Permissionless 2023 will feature the biggest names in Web3, a gargantuan exposition hall filled with the top brands in the space, an awe-inspiring NFT Gallery, inclusive, community-focused parties and events, metaverse experiences, and so much more.



See you in Paradise.

Tickets

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Prices increase every 2 weeks. Only 250 tickets available in each drop. Register today and save!

General Admission Pass

30% off available to Bankless Premium Subscribers aka Bankless Citizens. Discount code is required.

BANKLESS CITIZENS

Get notified 

Student tickets will be launching in early 2023

Student Ticket 

Prices increase every 2 weeks. Only 250 tickets available in each drop. Register today and save!

Presenting Sponsor 

Speakers

Erik Voorhees

Mary-Catherine (MC) Lader is the Chief Operating Officer of Uniswap Labs, a developer of foundational web3-based products and applications. In this role, she oversees the company’s growth efforts, strategic initiatives, and operations. Previously, she held various leadership roles at BlackRock, including as the Global Head of the firm’s digital sustainability business, Chief Operating Officer of the firm’s digital wealth business, and leader of the firm’s strategic fintech investments and blockchain activities. MC began her career as an investor in Goldman Sachs’ Special Situations Group. She received her J.D. and M.B.A. degrees at Harvard Law School and Harvard Business School, respectively, and her B.A. at Brown University.

Mary-Catherine Lader

Zaki Manian is a Co-Founder of Sommelier, the most powerful coprocessor yet for DeFi traders and Liquidity Providers. He’s also a Co-Founder of iqlusion, which provides infrastructure like a data center and a Cosmos validator for next-gen crypto technologies. Previously, Zaki helped build the Cosmos ecosystem, including launching the first public Cosmos testnet, and served as a director of Tendermint. Zaki has been a leading developer in the blockchain space since 2014, when he taught himself cryptography and began contributing to projects including Bitcoin, Ethereum, Zcash, and Tendermint. Having studied history of science at the University of Pennsylvania, Zaki’s skill sets in software engineering, programming, and computer science are largely self-taught.

Zaki Manian

Justin Drake

At Alluvial, Chief Growth Officer Mara Schmiedt focuses on advancing industry participation and adoption of Liquid Collective, seeking out world-class partnership opportunities, and overseeing Business Development, Sales, and other strategic functions. Mara recently joined Alluvial as Chief Growth Officer from Coinbase, where she served as the Head of Sales for Coinbase Cloud, the leading developer platform for blockchain-based infrastructure products and APIs. She expanded Cloud's staking business, supporting large-scale organizations, enterprises, and institutional investors. Prior to joining Coinbase, she managed Business Development at Bison Trails, a leading provider of blockchain-based infrastructure acquired by Coinbase in February 2021. Mara also served as Strategy Manager at ConsenSys, where she supported the strategic development of Codefi, the blockchain application suite for Web3 Commerce and Finance.



Mara is passionate about open-source technology and has published multiple research reports and papers on liquid staking, such as <a href="https://drive.google.com/file/d/13-s15SvCIUBukhSZiNkpd0sTff3izQ5G/view">The Internet Bond</a> and <a href="https://consensys.net/insights/eth-2-staking-ecosystem-report/">Ethereum 2.0 Staking Ecosystem Report</a>.&nbsp;



Additionally, she has led various industry initiatives, including leading the working group with the Ethereum Foundation that developed the Ethereum Launchpad and the first distributed validator technology (DVT) PoCs. Mara's deep experience in bringing technology and blockchain-based products and services to market — as well as her track record of building world-class business and sales organizations — bolsters Alluvial's support of Liquid Collective.

Mara Schmiedt

Stani Kulechov

Hasu

Christine is a Partner and Head of Digital Asset Strategy at Apollo Global Management, Inc. In this newly created position, Christine leads digital asset strategy across the firm, exploring more ways to apply blockchain technologies to Apollo’s business. She also plays a key role in Apollo’s strategy to invest in some of the most innovative digital asset companies and founders, with a specific focus on those transforming the financial services sector where Apollo can serve as a validator and enabler of new technologies. Previously, she was a Managing Director at J.P. Morgan and led its Blockchain/Crypto/Metaverse program through initiatives in digital assets, tokenized payments, internet of-things, decentralized identity, NFTs, and virtual worlds. She is a graduate of Brown University. Christine was named in Fortune’s The Ledger 40 Under 40 list of “the most impressive, young superstars transforming business at the leading edge of finance and technology.”

Christine Moy

Santiago Roel Santos (CryptoPunk #9159) is an investor focusing at the intersection of DeFi and the Web3 metaverse (NFTs/gaming). Most recently was a Partner at ParaFi Capital, one of the largest crypto funds specializing in DeFi. Prior to that, he was at Sageview Capital investing in Internet and software and, before that, at JP Morgan investment banking. Santiago began investing in crypto in 2012.

Santiago Roel Santos

Michael Anderson is the co-founder of Framework Ventures, one of earliest and largest VC firms to enter the “DeFi” or Decentralized Finance industry. With over $1B in AUM, the firm has since expanded into additional maturing verticals like blockchain gaming and social crypto. Prior to Framework, Michael and his co-founder Vance Spencer launched Hashletes, a digital collectible startup with official licensing from the NFL. Before entering crypto, Michael served as a product manager at both Snapchat and Dropbox, where he helped build out their monetization platforms.

Michael Anderson

Soona Amhaz is founder and GP of Volt Capital, a venture firm that focuses on pre-seed and seed companies in the digital assets space. Soona is also an advisor to On Deck, Forbes 30 under 30 in VC, and an alum from the University of Michigan School of Engineering.

Soona Amhaz

Colleen Sullivan is Co-Head of Ventures at Brevan Howard Digital. Prior to joining Brevan Howard Digital, Colleen co-founded and served as CEO of CMT Digital, where she was also a partner with the broader CMT Group and commenced activities in the crypto industry in 2013. Prior to starting CMT Digital, Colleen co-founded Sullivan Wolf Kailus, a boutique law firm that specializes in hedge fund, private equity, venture capital, digital assets, and other alternative investment products. Colleen also previously practiced law in the Investment Funds and Derivatives group at Sidley Austin LLP and, at age 25, co-founded a company called iOptions Group LLC, which developed hedging and monetization strategies for holders of employee stock options. Ms. Sullivan currently serves on the Advisory Board of the Chamber of Digital Commerce.

Colleen Sullivan

Tarun is an alumni of D. E. Shaw Research (DESRES), Vatic Labs, an HFT firm, and Cornell. He fell into the blockchain world in 2011, when he was working on ASICs at DESRES and observed Bitcoin ASIC mining rigs substantially delay DESRES’s ASIC production. He has spent the last seven years working on simulation-based R&amp;D at the intersection of high-performance computing and AI and is applying this knowledge to the blockchain ecosystem.

Tarun Chitra

Kevin Owocki is the founder of Gitcoin.co — Where builders &amp; funders come together to build the open web.  Gitcoin has delivered <a href="http://gitcoin.co/results">$50mm worth of value</a> to OSS devs in the last several years. He has a BS in Computer Science, 15 years of engineering leadership experience in Open Source Software and Web Startups. Kevin is a community organizer in the Boulder Colorado Tech Scene.

Kevin Owocki

Meltem Demirors is Chief Strategy Officer of CoinShares, a publicly listed investment firm that manages over five billion in digital assets on behalf of a global investor base, and is a trusted partner to investors and entrepreneurs navigating the digital asset ecosystem.



 An established veteran of digital asset investing, Meltem draws on her substantial experience and widespread influence to accelerate growth and acceptance of the asset class. Prior to joining CoinShares, Meltem helped build and grow Digital Currency Group, raising capital from the world’s largest corporations and managing a portfolio of 120 companies and 4 subsidiaries. Before she was bitten with the bitcoin bug, Meltem worked in the Oil &amp; Gas industry in trading, corporate treasury, and M&amp;A roles. 



Meltem has been recognized for her personal contributions to the industry and serves as an outspoken advocate. She is a founding member of the World Economic Forum Blockchain Council. Meltem teaches at her alma mater MIT as well as Oxford, and is passionate about privacy and civil rights.

Meltem Demirors

Vance is the co-founders of Framework Ventures, a thesis-driven venture capital firm whose team of technologists, researchers, and investors partner with founders and teams to build token-based networks and develop the requisite cryptoeconomics, governance, and community to scale.

Vance Spencer

Jim Bianco is President and Macro Strategist at Bianco Research, L.L.C. Since 1990 Jim’s commentaries have offered a unique perspective on the global economy and financial markets. Unencumbered by the biases of traditional Wall Street research, Jim has built a decades long reputation for objective, incisive commentary that challenges consensus thinking. In nearly 20 years at Bianco Research, Jim’s wide ranging commentaries have addressed monetary policy, the intersection of markets and politics, the role of government in the economy, fund flows and positioning in financial markets.



Jim appears regularly on CNBC, Bloomberg and Fox Business, and is often featured in the Wall Street Journal, Bloomberg News, Grants Interest Rate Observer, and MarketWatch. Prior to joining Arbor and Bianco Research, Jim was a Market Strategist in equity and fixed income research at UBS Securities and Equity Technical Analyst at First Boston and Shearson Lehman Brothers. He is a Chartered Market Technician (CMT) and a member of the Market Technicians Association (MTA). Jim has a Bachelor of Science degree in Finance from Marquette University (1984) and an MBA from Fordham University (1989).

Jim Bianco

Mr. Forman is the Founder and Managing Partner of ParaFi Capital. ParaFi is a leading investment firm focused on the blockchain and digital asset markets, and an early pioneer in decentralized finance (“DeFi”). ParaFi is one of the largest investors, users, and governance participants within the DeFi ecosystem, spanning the full network lifecycle from pre-launch to full decentralization. Mr. Forman serves as the Chief Investment Officer across the firm’s strategies, which include investing in public and private cryptoassets, systematic credit and market neutral DeFi strategies, and blockchain-focused venture capital and growth equity investing.



Prior to founding ParaFi in 2018, Mr. Forman spent 10 years at leading alternative investment managers, including KKR and TPG. While at KKR, Mr. Forman served as a Director in the Credit business, investing across a wide array of industry sectors and strategies, including distressed special situations, private credit, and opportunistic and liquid credit. Prior to KKR, Mr. Forman served as a Vice President with TPG’s former credit business, Sixth Street Partners, as one of the first investment professionals to join the platform, helping scale its private credit vehicle, TPG Specialty Lending, which listed publicly in 2014. Earlier in his career, Mr. Forman worked in private equity at Littlejohn &amp; Company and investment banking at Rothschild &amp; Co. Mr. Forman graduated with a B.A. in Philosophy, Politics and Economics, magna cum laude, from the University of Pennsylvania.

Ben Forman

Haseeb is a Managing Partner at Dragonfly. He was previously a partner at Metastable Capital, and has a background in software engineering at Airbnb and Earn.com (acquired by Coinbase).

Haseeb Qureshi

Vanessa Grellet is a Managing Partner at Aglaé Ventures. Vanessa is a Global Executive with over 20 years of expertise in the Financial Services and Tech industry. At Aglaé Ventures she manages the Web 3 focused fund. Prior to joining Aglae she has Head of Portfolio growth at CoinFund and Executive director at ConsenSys where she focused on driving adoption for Ethereum based products,  Strategic initiatives, Alliances and Channels.  She was involved in setting up the Enterprise Ethereum Alliance (EEA), the Accounting Blockchain Coalition (ABC) and the Blockchain for Social Impact Coalition (BSIC). Prior to ConsenSys she was a Strategy Executive at NYSE focused on investments and M&amp;A and a key member of PwC’s global wealth management team. Vanessa is a Founding Board member of AABC focused on Blockchain and Art, a member of the Advisory Council of ConsenSys, a Milken Institute Associate, a contributor to the  World Economic Forum Digital Future Council and part of <a href="https://cointelegraph.com/top-people-in-crypto-and-blockchain-2022/vanessa-grellet">Cointelegraph’s list of 100 most influential people for 2022</a>. Mrs. Grellet graduated Cum Laude from Law School (Paris II Assas) and Business School (HEC).

Vanessa Grellet

Mihailo Bjelic received his MSc in CS from the University of Belgrade. Prior to entering Web3/blockchain industry, he co-founded an AI/ML-powered platform for automotive industry and several other smaller startups and side projects. In 2017, he decided to join the Web3 movement full-time, primarily as a researcher interested in Ethereum scaling and multi-chain paradigms. In parallel with his work, he became one of the prominent Ethereum proponents and community members. In 2019, he started working on Polygon and conceptualized its architecture, vision and brand. In 2020, he joined hands with the Matic Network team and they have been working together on Polygon since then.

Mihailo Bjelic

Ben is a co-founder of Optimism, a leading Ethereum L2 ecosystem. He served as Chief Scientist before becoming a director at the Optimism Foundation. In his free time, he makes Ethereum-based parody songs under his stage name, Weird ETH Yankovic.

Ben Jones

Kristin is the CEO of the Blockchain Association, the Washington, D.C.-based trade association representing more than 100 of the industry’s leading companies. She also serves as a board member of the Filecoin Foundation for the Decentralized Web. Kristin serves as a liaison between policymakers and the cryptocurrency industry to assist in the creation of legislation and regulation that promotes the growth of the cryptocurrency ecosystem in the U.S. She is also a leading, public voice advocating for the cryptocurrency and blockchain industry through top-tier media interviews, op-eds and letters to the editor, and global speaking engagements. Kristin is a renowned voice for the industry, having been featured on Fortune’s 2020 40 under 40 list, CoinDesk’s 2021 50 people who defined the year in crypto, and CoinTelegraph’s 2022 top 100 Influencers in Crypto and Blockchain. Prior to leading the Blockchain Association, Kristin helped blockchain and technology companies achieve their public policy objectives in Washington. She served as a Senate and congressional aide on Capitol Hill for nearly ten years, much of which was spent focusing on technology policy.

Kristin Smith

Avichal is a successful entrepreneur with executive experience at Google and Facebook, which acquired his previous company. As an angel investor, Avichal has invested in 15 unicorns and 5 decacorns including Airtable, Boom Supersonic, Color Genomics, Cruise, Deel, Figma, Newfront Insurance, Notion, Nova Credit, Pulley, and others. He co-founded Electric Capital in 2018 and has grown it to one of the largest crypto venture firms globally. Electric is an investor in many of the leading web3 protocols and companies such as Bitwise, Bitnomial, dYdX, Frax, Kraken, Magic Eden, NEAR, and Solana.

Avichal Garg

Matt Hougan is one of the world’s leading experts on crypto, ETFs, and financial technology. He is Chief Investment Officer for Bitwise Asset Management, a pioneer in cryptoasset index funds with more than $1.2 billion in assets under management. He was previously CEO of ETF.com, where he helped build the world’s first ETF data and analytics system, the leading ETF media site, and the world’s largest ETF conference, Inside ETFs. Hougan is co-author of both “A Comprehensive Guide to Exchange-Traded Funds” and “Cryptoassets: The Guide to Bitcoin, Blockchain and Cryptocurrencies for Professional Investors” from the CFA Institute’s Research Foundation. He is a crypto columnist for Forbes, and a three-time member of the Barron’s ETF Roundtable.

Matt Hougan

Li Jin

Ethan is the co-founder of the Cosmos network and serves as the CEO of Informal Systems. Informal Systems is a member-driven worker’s cooperative building software that enables trustworthy relationships between protocols and people to flourish. Ethan also serves as the President of the Interchain Foundation which funds and coordinates development of public goods in the Cosmos ecosystem. Ethan sees local money systems as the basis for self-sufficient local economies to prosper. With a background in cell biology, neuroscience, mathematics, machine learning, and distributed systems, his goal is to build systems that encourage humans to work cooperatively through methods of self-organization. He is currently focused on blockchain technology as a means to bring greater political and economic sovereignty to local communities around the globe. Prior to Informal Systems, Ethan co-founded the Tendermint and Cosmos projects, and served as CTO of Tendermint Inc. Today, dozens of projects are adopting technology conceived in the original Cosmos whitepaper, including the Inter-Blockchain (IBC) Communication protocol – an industry-standard for permissionless communication between sovereign blockchains. Today, the Cosmos ecosystem continues to pioneer technological paradigms for building interoperable application-specific blockchains.

Ethan Buchman

Tyrone leads J.P. Morgan’s Blockchain team and is responsible for creating innovative Web3-focused products &amp; solutions for J.P. Morgan’s businesses and clients, and for engaging with the industry at large in order to provide a holistic blockchain strategy for the firm. Tyrone is also the Head of Onyx Digital Assets, a multi-asset tokenization platform that enables the exchange of value for various types of digital assets. Tyrone was previously a Senior Blockchain Product Manager in J.P. Morgan’s Blockchain Center of Excellence and was also the Head of Product for Quorum, an open-sourced Ethereum-based blockchain platform built for Enterprise use. Prior to moving into the blockchain industry in 2015, Tyrone was a software engineer within J.P. Morgan's Credit Markets business, and before that he spent several years in Product transformation, managing and delivering large strategic programs across various businesses within J.P. Morgan, across Front, Middle and Back Office risk and trading systems. Tyrone sits on the Board of Directors of The Enterprise Ethereum Alliance and The Hyperledger Foundation.

Tyrone Lobban

Rich is a Co-Founder and President of GSR and leads the group across strategic initiatives and growth. He began his career at Goldman Sachs where he spent 11 years between New York and London in commodities trading as a Managing Director and Global Head of Crude Oil and Derivatives Trading. Prior to joining GSR, he spent a few years on the buy-side, running energy trading teams at two New York-based hedge funds. Rich earned a bachelor’s degree in Mathematics from Columbia University.

Rich Rosenblum

Kain Warwick is an Australian cryptocurrency entrepreneur most-known as the founder of Synthetix protocol. Synthetix is a financial primitive that enables the creation of synthetic assets, offering unique derivatives and exposure to real-world assets on the blockchain.&nbsp;In 2020, Kain popularised the concept of yield farming that sparked the 2020 DeFi boom, earning the moniker: ‘the father of modern agriculture.

Kain Warwick

Brian Quintenz is the Head of Policy for a16z crypto, where he helps to translate between the crypto and policy communities.



Brian has long stood out as an innovative thinker in crypto and DeFi and was one of the earliest leaders in Washington to recognize the value of crypto. Brian initially joined a16z crypto as a senior advisor. In December 2022, he moved to the full-time role leading its policy team.



Prior to joining a16z, he was nominated by both Presidents Obama and Trump to serve as commissioner of the Commodity Futures Trading Commission (CFTC) and, in August 2017, was unanimously confirmed by the U.S. Senate. He also led the agency’s Technology Advisory Committee, which hosted the most comprehensive set of public crypto-related policy discussions and briefings of any federal financial regulator. During his service, the CFTC oversaw the listing of the first U.S. regulated Bitcoin and Ether futures contracts on derivatives exchanges, and the rapid expansion of DeFi. All the while, he was a champion for tailored, risk-calibrated regulation.



Prior to his appointment to the CFTC, Brian was the Founder and Managing Principal of Saeculum Capital Management, LLC where he developed and implemented Saeculum’s long term, momentum-based investment process for both traditional discretionary accounts as well as a managed-futures, commodity pool hedge fund.



Brian began his career on Capitol Hill, where he worked for 6.5 years and served as senior policy aid to a Member of Congress. He received his B.S. from Duke University and M.B.A. from Georgetown University.

Brian Quintenz

Robby Yung, Animoca Brands’s CEO of Investments, partner at Animoca Capital, a leader in digital entertainment, blockchain, and gamification with a portfolio of products and games including the REVV and SAND tokens, as well as investment and partnerships with companies like Axie Infinity,  OpenSea, Dapper Labs, and Alien Worlds and subsidiaries like The Sandbox, Gamee, Quidd, and Lympo. Robby has been in gaming since 2012 and blockchain gaming since 2018. He served as the first CEO of Animoca Brands after taking the group public in 2015. Prior to that, he cofounded magazine publisher, One Media Group, which he listed on the Hong Kong Stock Exchange. He also founded Chinese television and outdoor media concern, Redgate Media Group, which was acquired by  Inno-Tech Holdings . He began his career in technology, building wireless telecom networks in China and Indonesia with Metromedia.

Robby Yung

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<h2>Why Sponsor Permissionless 2023?</h2>
If you’re serious about crypto, you have to be at Permissionless. Permissionless brings together DeFi builders, DAO participants, protocol developers, crypto companies, funds and institutions, and more. It’s a true crypto-native’s paradise, where you’ll have the opportunity to showcase your offerings and form lasting connections with the community.
We’ll work with your team to define the perfect sponsorship opportunity that best fits your needs and budget. Want to do something completely revolutionary? Our team can help design a bespoke package that brings your vision to life.
Get in touch with us at <a href="mailto:sales@blockworks.co">sales@blockworks.co</a>
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