Michael Bodley

The moat has been breached, and the sky is all but falling.



Even blue-chip crypto traders running serious institutional money have booked eye-popping losses in just weeks. For their investors, the full extent of the damage is still anyone’s guess&nbsp; — a seeming eternity after FTX’s <a href="https://blockworks.co/news/bankman-fried-underestimated-collapse" target="_blank" rel="noreferrer noopener">abrupt bankruptcy</a> — as investor relations professionals hide behind pending mark-to-market valuations for startup stakes and early-stage tokens.&nbsp;



And that’s not to mention the scores of asset managers who have battened down the hatches as they’ve tried to trade their way out of historic holes, before their monthly performance updates are due, any day now, to their limited partners, industry participants told Blockworks.



One institutional crypto fund allocator, who has written checks to more than a dozen such operations, said the abrupt radio silence has been all but “maddening” — drawing a direct parallel to TradFi traders running for any kind of cover during the 2008 financial crisis.



“We’re all in the dark,” the source said. “I gave you my money. Why are you not answering my calls?”&nbsp;



Not that they’ve all beat feet to desert islands with no cell service. Case in point: Multicoin Capital.&nbsp;



The veteran cryptoasset manager’s flagship liquid hedge fund <a href="https://blockworks.co/news/multicoin-lost-more-than-half-its-crypto-funds-capital-this-month-sources" target="_blank" rel="noreferrer noopener">plummeted 55% in approximately two weeks</a> in November. The firm’s investors, of course, were not pleased.&nbsp;



But three sources close to the firm told Blockworks they took some solace in the fact that Multicoin executives didn’t hem and haw on a recent call explaining what happened — and at least tried to walk them through why.



One of the sources provided a detailed account of the call, which was open exclusively to limited partners. A Multicoin spokesperson declined to comment.



“The market is down a lot this year,” an executive said on the call. “And we&#8217;re down more than that. There&#8217;s no sugarcoating that. Making matters worse, we got hit while [we were] down. We strongly and publicly endorsed [FTX Founder] Sam Bankman-Fried and FTX. And they turned out to be frauds.”



Indeed, Managing Partner Kyle Samani led the charge to back FTX US with an unspecified amount in January 2022, when he <a href="https://www.coindesk.com/business/2022/01/26/ftx-us-attains-8b-valuation-in-400m-fundraise-including-softbank-temasek-report/" target="_blank" rel="noreferrer noopener">told Coindesk</a> that the affiliate of FTX proper was “laying the groundwork to become the dominant trading platform in the United States for all things crypto.”&nbsp;



FTX US had raised $400 million at a valuation of $8 billion. Bankman-Fried, ironically, has <a href="https://blockworks.co/news/ftx-run-by-inexperienced-unsophisticated-traders-court-hears" target="_blank" rel="noreferrer noopener">recently scrambled</a> to come up with $8 billion to bail out his flailing businesses. Samani’s fund has also gone in alongside Bankman-Fried in <a href="https://blockworks.co/news/multicoin-capital-leads-60m-round-in-data-dao-delphia" target="_blank" rel="noreferrer noopener">backing</a> a number of startups, an indicator of the venture business more broadly, wherein portfolio managers typically rely on one another for deal flow and due diligence.&nbsp;



Multicoin execs — pointing out internal capital accounts for, collectively, the largest chunk of the flagship — said they had no intention of shuttering the vehicle or, worse, the firm. Nor would they entertain converting to a proprietary trading shop, an increasingly <a href="https://www.ai-cio.com/news/bluecrest-to-return-8b-become-family-office/" target="_blank" rel="noreferrer noopener">enticing route</a> for those with the stomach to place riskier wagers in a bid to print big profits from staggering market dislocations, especially arbitrage opportunities.&nbsp;



<a href="https://www.axios.com/2022/11/21/multicoin-lps-frustrated-solana-ftx-performance-tax" target="_blank" rel="noreferrer noopener">Axios</a>, <a href="https://www.theblock.co/post/184766/multicoin-capital-hit-by-ftx-collapse-with-10-of-its-funds-aum-stuck-on-the-exchange" target="_blank" rel="noreferrer noopener">The Block</a>, <a href="https://www.cnbc.com/2022/11/17/crypto-firm-multicoin-says-contagion-fallout-from-ftx-will-continue.html" target="_blank" rel="noreferrer noopener">CNBC</a> and <a href="https://fortune.com/2022/11/15/multicoin-capital-ftx-bankruptcy/" target="_blank" rel="noreferrer noopener">Fortune</a> have reported aspects of Multicoin’s recent dealings. This story contains unreported details and provides the first account of the firm’s investor call.&nbsp;



<h3>Due diligence can avert a disaster&nbsp;</h3>



Scheduling an impromptu mid-month call is easy when you’re crushing your benchmark and want to put uneasy, information-starved investors at ease. But precious few digital assets-focused hedge and venture capital firms have been in that fortunate position lately.&nbsp;



They’re facing, instead, the onerous, come-to-Jesus undertaking of owning up to many, many errors: disproportionately relying on FTX custody, employing far too much leverage and doubling down on bets — that would turn out to be disastrous — in round after round.&nbsp;



It doesn’t have to be this way, though.



It doesn’t, that is, if asset managers do their homework. If they establish ironclad due diligence standards, put in place appropriate risk parameters and stay in near-constant communication with their investors all the while, a due diligence professional told Blockworks.&nbsp;&nbsp;



And it needs to be communicated in writing, according to James Newman, co-founder of London-based perfORM Due Diligence.&nbsp;



The startup <a href="https://blockworks.co/news/crypto-due-diligence-startup-vying-to-bring-transparency-to-opaque-industry" target="_blank" rel="noreferrer noopener">specializes in deep dives</a> on digital asset buy-side players and their service providers. Newman declined to specifically discuss Multicoin, or perfORM customers, citing client confidentiality.



“So, it’s one thing, verbalizing it,” Newman said. “The next step is actually to write that down in a policy that is then made available to investors. So, that’s part of assuring investors that there is an actual procedure and policy in place.”&nbsp;



Simply putting all that in place to begin with isn’t enough, Newman said. There needs to be a real commitment to a schedule of conducting due diligence check-ins with counterparties, as well as communicating the results, and, especially, any material changes, to investors.&nbsp;



Multicoin competitor Arca, for one, has likewise recorded choppy performance in its flagship liquid hedge fund this year, despite not having significant FTX exposure. The firm, led by CEO Rayne Steinberg, has rejigged a number of internal guidelines since.&nbsp;



The market’s turn for the worse has forced Steinberg’s hand in <a href="https://blockworks.co/news/dodging-worst-of-ftx-arca-wont-stay-stagnant" target="_blank" rel="noreferrer noopener">shifting the capital-raising strategy</a> for the firm’s ongoing Series B raise — with capital already earmarked, in part, to bolster regulatory and compliance safeguards.&nbsp;



<h3>Are third-party crypto custodians still a necessary evil?</h3>



In Multicoin’s case, “what happened?” has been the question de jour.&nbsp;



The short version: Outstanding financial instruments under FTX custody and related derivatives, as well as a position in the startup Serum and a bullish thesis on SOL, were to blame. Both Serum and SOL, Solana’s native token, have lost immense value, partially because of their longtime ties to Bankman-Fried. The former has been placed in a side-pocket since the 2020 investment.&nbsp;



Traders are required to keep collateral with market-markers before open derivatives are settled.&nbsp;



On the custody front, Multicoin entrusted FTX with unspecified cash and FTT, the exchange’s native token that is also now underwater&nbsp; — plus relatively small sums of tokens only FTX US would custody, including Solana-based Mango (MNGO). Multicoin also has an equity stake in FTX, one which it will, presumably, have to write down, too — to zero.



The firm, as of mid-November, had successfully withdrawn about a quarter of its locked assets — resulting in a total fund exposure of about 10% — and had been planning to whip up a side-pocket to protect potential incoming limited partners.



Multicoin had one other main trading counterparty: the <a href="https://blockworks.co/news/binance-could-acquire-genesis-loan-book" target="_blank" rel="noreferrer noopener">now-defunct Genesis</a>. But its team “closed out that exposure immediately” after FTX stopped withdrawals. The firm also has exposure to Coinbase&#8217;s custodial solutions. It it, however, moving certain outstanding assets to non-custodial, multi-signature solutions.



With centralized custodians, as keepers of clients’ private keys, there’s always an element of risk, according to Nick Neuman, chief executive of Casa, which helps individuals and entities set up their own <a href="https://blockworks.co/news/jameson-lopp-doesnt-want-to-be-found" target="_blank" rel="noreferrer noopener">cold storage solutions</a>. Neuman declined to specifically discuss Multicoin or any Casa clients.&nbsp;



Complicating matters: It’s tricky for active crypto traders to rely much on cold storage, Neuman told Blockworks, because of the time and logistics involved in transferring assets in an alpha-driven game where mere milliseconds matter.



Relying on third-party custodians — however reputable — “inherently requires trust” in potential bad actors, Neuman told Blockworks, the “exact type of thing our industry is trying to eliminate.”&nbsp;



The Casa head said the problem calls for a “mix of solutions.”



“One thing I know is that we have seen repeatedly [&#8230;] in our industry, problems with bad actors — since the beginning, with Mount Gox [being the] earliest and largest,” he said.&nbsp;



<h3>Multicoin: What to do, what to do?</h3>



Multicoin is in the process of onboarding Anchorage as an additional custodian in an effort to reduce its counterparty exposures, one of the sources said. A spokesperson for Anchorage declined to comment.



Multicoin has one big, quick fix. The firm — in addition to conducting due diligence on a number of other potential custodians, as well as other types of service providers — said it has already moved to keep its assets on any exchange for no more than 48 hours at a time. A number of other high-profile competitors have historically entrusted tokens to counterparties on a near-indefinite basis.&nbsp;



Its traders are also in the process of reducing collateral it pledges to market-makers. The upside is that the move reduces the tail risk of another liquidity crunch. The downside is that it significantly increases the risk of margin calls. 



The “more tightly knit” the collateral, the firm said, the “greater the risk” of abrupt liquidation, adding that new mitigating risk controls are in the works. Some of those incoming, tightened controls have been about four months in the making. Multicoin is also implementing fresh restrictions on staking, aiming to minimize exposures of locked-up tokens “in order to maintain flexibility and optionality during times of crisis.”



At least one thing is clear: the toll nefarious actors have taken — and, by all appearances, are continuing to take — on all of crypto, is mounting. And it has real-world consequences for the investors who entrust their capital to the traders who increasingly encounter them.&nbsp;



The firm told limited-partners it was not yet “sure” how its administrators and auditors would value frozen assets under GAAP accounting standards.&nbsp;



“But in our view, they should be marked to zero,” an executive said. “There is some chance of a partial recovery. And, you know, it&#8217;s maybe a smaller, much smaller chance of a larger recovery. But we believe that the conservative thing to do is to value them at zero for the time being.&#8221;



Multicoin had $8.9 billion of gross assets under management as of year end 2021, the latest data available.&nbsp;



How much is left?



Updated Dec. 2, 2022 at 2:53 pm ET: Clarifies the process and rationale behind Multicoin&#8217;s move to reduce the collateral it posts with market-makers. 



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OK, You Blew Up Your Crypto Fund. What Do You Tell Your LPs?

Bessie Liu

Interactive, virtual, events platform Notable Live has partnered with e-commerce giant eBay to leverage NFTs for fan experiences with their favorite sports players, leagues and teams, among other initiatives.



The partnership will combine eBay’s collectible marketplace with an immersive experience facilitated by Notable Live, and provide sports fans with a platform to connect with players.



EBay’s venture capital arm, eBay Ventures, previously led Notable Live’s Series A round, the company said in a statement. The two businesses are currently executing a multi-year contract where Notable Live will be bringing limited edition NFT and player merchandise to eBay. 



The online marketplace&#8217;s latest partnership with Notable Live marks its next step in the digital collectible space.



&#8220;Our partnerships [focus] on delivering transformational solutions that provide fans true access. These solutions are built upon authentic offerings that attach memories to memorabilia and experiences directly from the source themselves,” Mike Antonucci, co-founder and CEO of Notable Live, said in a statement. 



The tech startup is the brainchild of Antonucci and NFL Hall of Famer Emmitt Smith. Launched in 2018, Notable Live initially started as a mobile app that gave fans access to memorable experiences with players.



&#8220;Fans and collectors turn to eBay to celebrate their favorite players and teams, knowing they can find authentic, one-of-a-kind memorabilia that connects them with the history and future of sports,&#8221; Dawn Block, vice president of collectibles at eBay, said. 



&#8220;Our partnership with Notable Live further enhances the market-leading experiences we&#8217;ve been building for our community of sports fans, collectors and investors, enabling them to engage with living legends in a new and meaningful way.&#8221;



It’s not yet clear which blockchain Notable Live’s NFTs will be issued on. Blockwork has reached out to both companies for comment.&nbsp;



Still, eBay has been slowly making moves in the NFT space. It <a href="https://blockworks.co/news/ebay-acquires-uk-based-nft-marketplace-knownorigin">acquired UK-based NFT marketplace KnownOrigin</a> for an undisclosed amount in June last year and <a href="https://blockworks.co/news/ebay-acquires-uk-based-nft-marketplace-knownorigin">launched the NFT collection “Genesis”</a> despite declining market interest.



Unlike NFTs sold on crypto-native marketplaces such as OpenSea, eBay’s NFT sales aren’t recorded on-chain. Purchases require fiat currencies — through PayPal or credit card — and the digital asset is delivered to the buyer through a redemption link once the purchase is made.



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EBay Wants NFTs To Connect Fans With Sports Stars

Casey Wagner

Equities and crypto stayed in the green early in Tuesday’s trading session as markets bet on the central bank opting for a slower-paced interest rate increase, but investors should remain cautious, analysts advise.&nbsp;



The S&amp;P 500 and Nasdaq Composite indexes each locked in around a 0.5% gain Tuesday morning in New York, putting their monthly gains around 4.5% and 10%, respectively. Bitcoin and ether also each rallied around 1% Tuesday, making their January returns around 40% and 32%, respectively.&nbsp;



After 2022’s losses, the returns are welcome, but tomorrow’s rate decision and Federal Reserve Chair Jerome Powell’s comments on the state of the economy will set the stage for future market moves.&nbsp;



“We’re rallying year-to-date due to the belief that the Fed will soon stop tightening, but we’re not yet out of the woods,” Nicholas Colas, co-founder of DataTrek Research, said. 



<blockquote class="wp-block-quote">
“The [Federal Open Markets Committee] FOMC and Chair Powell’s communications this week will set the tenor for stocks ahead.”
</blockquote>



Powell could take a more hawkish stance in his remarks Wednesday and emphasize the need to re-tighten financial conditions based on economic data, which may spook markets, Nauman Sheikh, head of treasury management at cryptoasset management firm Wave Financial, said.



“Year to date, the market has reacted strongly across risk assets, much of it driven by short squeezes and underweight positioning,” Sheikh said. “There-in lies the key risk going into the Fed meeting. The market may have gotten ahead of itself for the Fed&#8217;s liking.”



If Powell and the committee signal a forthcoming pause in interest rate hikes, markets will react favorably, Tom Essaye, founder of Sevens Report Research, said.&nbsp;



“The stakes for the market are clear,” Essaye said. “Stocks have rallied on the expectation of a near-term Fed pause (possibly announced in March after one more 25-bps hike, at least according to the market) and that the pause will lead to rate cuts later in 2023 as the economy slows.”



The FOMC kicked off its two-day policy-setting meeting Tuesday and is scheduled to release its interest rate decision and statement at 2 pm ET Wednesday. Powell’s press conference is expected to start at 2:30 pm ET Wednesday.



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Fed Preview: Stock, Crypto Rally Relies on Dovish Fed

Ben Strack

A firm that was building out a nuclear energy-powered mining facility in Ohio is the latest victim of tough crypto market conditions.&nbsp;



UK-based Lake Parime, a company focused on transforming energy into zero-carbon computing power, has been acquired by Statar Mining.&nbsp;



The group’s recently-acquired bitcoin mining hardware decreased in value as bitcoin prices fell, according to restructuring specialist Interpath Advisory. Interpath’s Ed Boyle and Will Wright became joint administrators to Lake Parime Limited on Jan. 27.



A number of projects <a href="https://lakeparime.com/" target="_blank" rel="noreferrer noopener">Lake Parime</a> had invested in “fell away,” according to Interpath, leaving the company in “an immediate cash crisis.” 



A solvent solution could not be found, the advisory firm added. As a result of the sale to Statar Mining, 16 Lake Parime employees have joined the acquirer.&nbsp;



The sale comes as <a href="https://blockworks.co/news/compute-norths-business-goes-south">Compute North</a> and <a href="https://blockworks.co/news/bitcoin-miner-core-scientific-to-file-bankruptcy-stock-tanks-30">Core Scientific</a> have filed for bankruptcy in recent months, and industry watchers had said they <a href="https://blockworks.co/news/more-crypto-miner-bankruptcy-2023">expect more casualties</a> in the mining space this year.



“The current crypto winter has posed challenges for many companies operating across the crypto spectrum,” Boyle said in a statement. “In this particular instance, the price of bitcoin fell by more than 60% over the course of 2022, which in turn impacted Lake Parime’s ability to raise finance.”



It is unclear where Statar Mining is based. The company could not be reached.&nbsp;



Spokespeople for Lake Parime and Interpath Advisory did not immediately return requests for comment.&nbsp;



<h2>Nuclear energy could still play larger role in bitcoin mining</h2>



Lake Parime had revealed in November that it launched a site in Ohio using 100% nuclear energy.



“We’re excited to expand our site portfolio from largely wind and hydropower to nuclear energy, showcasing the huge potential of our deployments in accelerating the energy transition,” Lake Parime CEO Sath Ganesarajah said in a statement at the time.&nbsp;



Executives at bitcoin miners Marathon Digital and TeraWulf told Blockworks last week they were <a href="https://blockworks.co/news/bitcoin-mining-nuclear-energy">bullish on the prospect of more bitcoin miners using nuclear energy</a> at scale in the years ahead if the power industry cooperates. TeraWulf recently revealed it is setting up operations at a nuclear energy-powered data center in Susquehanna, Pennsylvania.



Lake Parime’s 20 megawatt Ohio site’s hosting clients were Marathon Digital and TAAL, a company that offers blockchain services and infrastructure.&nbsp;&nbsp;



Charlie Schumacher, Marathon’s vice president of corporate communications, told Blockworks last week the Ohio site is a good way for Marathon to “test the waters” about potentially using nuclear energy on a larger scale.



It is unclear how the sale will affect Marathon’s operations at the site. A company spokesperson did not immediately return a request for comment.



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Nuclear Bitcoin Mining Hits Snag as UK Startup Sells Business

German lender DekaBank has tapped Metaco to head up its digital asset operations as the financial player looks to expand into institutional crypto offerings.&nbsp;



DekaBank, which currently manages more than 360 billion euros ($390.9 billion) in assets, will use Swiss services provider Metaco for custody and capital market solutions, the bank announced Tuesday. The partnership is pending regulatory approval.&nbsp;



Metaco, founded in 2014, specializes in institutional cryptocurrency custody and trading, as well as decentralized finance (DeFi) services.&nbsp;



“Digital assets are a critical part of the future, a radical new way for how assets will be represented, from currencies to real estate,” Andreas Sack, product owner of digital assets custody at DekaBank, said in a <a href="https://www.metaco.com/press_releases/dekabank-technology-partnership-metaco/" target="_blank" rel="noreferrer noopener">statement</a>. 



“Today we make another important step towards laying the foundation for giving our institutional investors and millions of people in Germany access to this transformational opportunity.”



DekaBank, founded in 1918, is the securities provider of Sparkassen-Finanzgruppe, the largest financial services group in Europe.



Metaco has experience with the European regulatory system, DekaBank noted in Tuesday’s press release. Metaco “established itself as a leading technology provider to financial institutions and corporations in the digital asset ecosystem,” the release read.&nbsp;&nbsp;



The Metaco partnership is not Sparkassen-Finanzgruppe’s first foray into crypto. In December 2021, the banking group confirmed it was working on a pilot project to allow customers to access bitcoin and ether directly through their existing accounts.&nbsp;



DekaBank’s announcement comes shortly after Metaco revealed it would be partnering with Togg, a Turkish car company, on its mobility ecosystem built on the Avalanche blockchain.&nbsp;



In any case, DekaBank’s native Germany has been known as one of the more friendly countries when it comes to crypto regulation, Renate Prinz, partner at McDermott Will &amp; Emery LLP, wrote in a November 2022 <a href="https://www.finextra.com/the-long-read/534/understanding-the-regulatory-landscape-for-crypto-assets-in-germany-and-the-eu" target="_blank" rel="noreferrer noopener">blog</a>. 



The country has some of the clearest guidelines on licensing requirements and token classification, Prinz said, allowing for investors and businesses to more confidently enter the space.



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105-Year-Old German Bank Readies To Offer Crypto Services

Shalini Nagarajan

A string of findings by an independent examiner show Celsius operated its business in a manner completely unlike what it advertised, a <a href="https://cases.stretto.com/public/x191/11749/PLEADINGS/1174901312380000000039.pdf" target="_blank" rel="noreferrer noopener">report</a>, published Tuesday, revealed.



Shoba Pillay, the <a href="https://blockworks.co/news/celsius-to-shell-out-some-5m-on-independent-examiner">court-appointed examiner</a> in Celsius’ bankruptcy case, was given a mandate to review its native currency CEL, its representations to customers and to examine claims that its operations qualified as a “Ponzi scheme.”



She wrote that customers were sold on the concept that the lender offered better returns than a traditional bank, but it “was not the business that Celsius actually operated.”



Celsius emphasized that it puts its “community first,” with former CEO Alex Mashinsky convincing investors that customer-deposits coins “are your coins, not our coins,” she said. He also promised that coins would be returned to owners even in the event of a bankruptcy, her report alleged.



Another foundational marketing ploy the firm is said to have used is trading in its CEL token. Customers were allegedly told they would score CEL rewards that Celsius would procure from the company’s internal treasury or by buying CEL in the secondary market — what it described as a self-sustaining “flywheel.”



“From its inception, however, Celsius and the driving force behind its operations, Mr. Mashinsky, did not deliver on these promises. Behind the scenes, Celsius conducted its business in a starkly different manner than how it marketed itself to its customers in every key respect,” Pillay said.



Blockworks has reached out for comment on the examiner’s report.



<h3>Celsius abandoned transparency promises from the get-go</h3>



Celsius allegedly failed to tell customers about its flop initial coin offering (ICO). Mashinsky had initially promised to snap up any unsold tokens from the ICO, but failed to deliver on that pledge.&nbsp;



However, the company chose to “substantially expand” its CEL purchases in 2020, with the intention to boost its price, and timed purchases in a way that would create a market buzz around the token. So although Celsius customers were aware the company would purchase CEL tokens, the lengths to which it would go was kept hidden.



The report stated that Celsius’ head of trading desk wrote to colleagues including the CFO: “Just to clarify between us three: The last 3-4 months we bought always more CEL than what we pay as interest per week but we did not buy it for the interest payments, that is just what we told the community.”



They later praised their secretive purchases and discussed how it led to “people thinking [the price of CEL] is going to the moon haha.”



<h3>Edits to Ask Me Anything interactions</h3>



Internal managers noted that several statements Mashinsky made in his tweets and during AMAs weren’t accurate. The chief risk office proposed editing the AMAs beginning May 2021 even though investors may have heard them, and before they were posted to YouTube, “to eliminate any misleading statements.” However, Mashinsky thwarted this effort as he felt delays would lead to doubts.



“Throughout 2021 and up through the bankruptcy filing, Celsius continued to identify incorrect statements Mr. Mashinsky made during the AMAs,” the report said. “In some instances, Celsius was able to edit the AMAs after posting; in other instances, it was not.”



<h3>Employee concerns about CEL</h3>



The examiner noted that CEL had limited utility as it could only be used on Celsius, that employees often discussed it was “worthless” and that its price should have been zero.



Celsius also engaged in protecting the price of its token if insiders like Mashinsky wanted to cash out and make millions on his CEL holdings.



The report noted an employee saying internally on Slack: “if anyone ever found out our position and how much our founders took in USD could be a very very bad look…We are using users USDC to pay for employees’ worthless CEL…All because the company is the one inflating the price to get the valuations to be able to sell back to the company.”



Dean Happen, coin deployment specialist at Celsius, noticed that customer funds were being used to fund CEL purchases. In January 2021, he said internally that his title at Celsius should be “Ponzi Consultant.” And last year, Tappen called Celsius’ practice of using customer assets to fund CEL purchases as “very Ponzi like.”&nbsp;



<h3>Use of new customer funds to support withdrawals</h3>



The examiner found that Celsius didn’t have enough liquidity to cover future withdrawals in the period leading up to its withdrawal pause, and that it had to rely on new customers to fund further claims. This would be typical of a Ponzi case, but the examiner didn’t explicitly state that it amounted to one.



“If Celsius had not instituted the Pause and the run on the bank continued, new customer deposits inevitably would have become the only liquid source of coins for Celsius to fund withdrawals,” Pillay found.



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Celsius Execs Joked that Investors Thought the CEL Token Was ‘Going to the Moon’

An NFT creator is battling French fashion giant Hermès over a set of MetaBirkin digital collectibles inspired by its famously expensive bags.



Courts have been tasked with deciding whether MetaBirkins’ issuer, Mason Rothschild, has infringed on Hermès copyright. 



To support their case, Rothschild had enlisted art critic Blake Gopnik, famous for penning Andy Warhol’s biography. Gopnik’s testimony supported the argument that the MetaBirkins NFTs represent free artistic expression, according to a <a href="https://www.thefashionlaw.com/ahead-of-metabirkins-trial-hermes-rothschild-spar-over-admissible-evidence/" target="_blank" rel="noreferrer noopener">report</a> from The Fashion Law. 



But <a href="https://www.sportskeeda.com/pop-culture/who-mason-rothschild-all-nft-creator-hermes-files-lawsuit-trademark-infringement" target="_blank" rel="noreferrer noopener">Rothschild</a> won’t be allowed to present the testimony in court after all. Judge Jed S. Rakoff made the ruling on the first day of the trademark trial, a move that could ruin Rothschild’s chances of comparing his work to Warhol’s art, Bloomberg Law <a href="https://news.bloomberglaw.com/ip-law/andy-warhol-art-expert-excluded-from-hermes-metabirkin-nft-trial" target="_blank" rel="noreferrer noopener">reported</a>.



Rakoff reportedly permitted Hermès’ bid to exclude the expert testimony without providing much detail.



Hermès sued Rothschild one year ago, <a href="https://www.businessoffashion.com/news/luxury/hermes-sues-nft-creator-over-metabirkin-sales/" target="_blank" rel="noreferrer noopener">alleging</a> his MetaBirkin NFTs violate its trademark rights by depicting them in colorful fur and advertising them. The luxury retailer has claimed Rothschild offered the NFTs at an Art Basel fair in Miami in a “get rich quick” scheme without seeking permission. 



The NFTs, of which there are 100, are still listed on LooksRare. They’ve generated 15.5 ETH ($24,350 at current prices) in sales volume via the platform, with 83 different owners.



Rothschild&#8217;s utilization of the Birkin brand is said to have misled consumers into believing the product is endorsed and sold by Hermès. The case is significant as it could shed light on how traditional trademark law could be applied to NFTs.



<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">MetaBirkins 95 just sold for 3.5 Ether (≈$10,500.00) on <a href="https://twitter.com/looksrareNFT?ref_src=twsrc%5Etfw">@LooksRareNFT</a>! <a href="https://t.co/IMCwx77CnZ">pic.twitter.com/IMCwx77CnZ</a>&mdash; MetaBirkins (@MetaBirkins) <a href="https://twitter.com/MetaBirkins/status/1492683849335128064?ref_src=twsrc%5Etfw">February 13, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption class="wp-element-caption">MetaBirkin NFTs have sold as recently as November, often for as much as real Birkin bags</figcaption></figure>



In the week before the trial, Hermès moved to inspire the court to exclude some of Rothschild’s proposed exhibits, including Gopnik’s testimony.



Hermès’ counsel further argued that Gopnik shouldn’t be allowed to testify because his opinions aren’t based on reliable data or methodology “to support his mere ipse dixit assertions,” and that his opinions “do nothing more than repeat Rothschild’s account of his own statements and actions.”



In his pre-trial testimony, Gopnik reportedly opined that Rothschild’s MetaBirkin NFTs fell under the same concept pioneered by Warhol called “Business Art.” 



Despite granting Hermès request, the judge reportedly criticized the luxury brand’s attorneys for explaining how NFTs work in a complex manner, saying that the jury was left baffled.&nbsp;



Gopnik would have been the only person who could produce analytical comparisons of Warhol and Rothschild’s art.



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Hermès ‘MetaBirkin’ NFT Lawsuit Begins With Blow For Creator

Billionaire Elon Musk is set to execute his payments-related vision for Twitter as he works on revamping the company’s revenue streams.&nbsp;



The Financial Times <a href="https://www.ft.com/content/9d84d534-b2dd-4cff-85d1-aee137b26a45" target="_blank" rel="noreferrer noopener">reported</a> Monday that the microblogging site has begun applying for the required regulatory licenses in the US and is shaping the software needed to implement the payments plan.



Musk reportedly wants the system to be “fiat, first and foremost” so that crypto payments can be added at a later point. He intends to create an “everything app,” one that is expected to be similar to China’s WeChat, for a suite of services like peer-to-peer payments, social networking and e-commerce shopping.&nbsp;



This wouldn’t be the first time Musk would be working on payments-related tech. He is hailed as the pioneer of the digital payments industry for starting financial services company <a href="http://x.com" target="_blank" rel="noreferrer noopener">X.com</a> in 1999, which later became PayPal.



One of Twitter’s most influential leaders, Esther Crawford, has begun to draw up specifics of what would be required to roll out Musk’s vision, the FT said. Musk recently appointed Crawford, who is director of product management at the company, as the chief of Twitter Payments, a subsidiary set up in August before he became CEO.



Her compact team is working fast on aspects of the plan, including developing a vault to store and protect user data gathered in the process, FT said, citing two people familiar with the matter. Blockworks has reached out for comment on the matter.



<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">When your team is pushing round the clock to make deadlines sometimes you <a href="https://twitter.com/hashtag/SleepWhereYouWork?src=hash&amp;ref_src=twsrc%5Etfw">#SleepWhereYouWork</a> <a href="https://t.co/UBGKYPilbD">https://t.co/UBGKYPilbD</a>&mdash; Esther Crawford ✨ (@esthercrawford) <a href="https://twitter.com/esthercrawford/status/1587709705488830464?ref_src=twsrc%5Etfw">November 2, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Twitter plans to generate $15 million from the payments business this year, which is expected to balloon to $1.3 billion by 2028, the New York Times <a href="https://www.nytimes.com/2022/05/06/technology/elon-musk-twitter-pitch-deck.html" target="_blank" rel="noreferrer noopener">reported</a>, citing a pitch deck. Musk specifically wants advertising to contribute just 45% of Twitter’s total revenue, down from about 90% in 2020.



Musk <a href="https://blockworks.co/news/crypto-faithfuls-await-elon-musks-blockchain-plans-for-twitter">discussed integrating digital payments</a> and wiping out crypto-related scams at his first Twitter all-hands meeting in June last year.



“I think it would make sense to integrate payments into Twitter so that it’s easy to send money back and forth…currency as well as crypto,” he <a href="https://www.vox.com/recode/23171541/leaked-transcript-elon-musk-first-meeting-twitter-employees" target="_blank" rel="noreferrer noopener">said</a> then.



Twitter has already kick-started regulatory licenses for its payments business. In November, the company filed paperwork with the Financial Crimes Enforcement Network (FinCEN) to become a money service business. Now, it’s reportedly in the process of applying to some state licenses that are required for launch.



<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">Yep, Twitter Payments LLC registered with FinCEN a few days ago as a money transmitter. You can verify its registration on FinCEN&#39;s search page: <a href="https://t.co/cKJ9rCpd2F">https://t.co/cKJ9rCpd2F</a> <a href="https://t.co/7zo8tWDdmq">pic.twitter.com/7zo8tWDdmq</a>&mdash; John Paul Koning (@jp_koning) <a href="https://twitter.com/jp_koning/status/1590413986843201536?ref_src=twsrc%5Etfw">November 9, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Musk is among the most public and influential figures in the crypto space, with observers noting that his impact on the market can’t be underestimated.



His electric car manufacturer was one of the first corporates to buy bitcoin in 2021. Despite <a href="https://blockworks.co/tesla-sells-bitcoin-for-profit-still-posts-impairment-loss">selling 75% of its bitcoin</a> holdings in 2022, Tesla <a href="https://blockworks.co/news/tesla-holds-bitcoin">chose to hold on</a> to its remaining bitcoin in the fourth quarter.



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Elon Musk Eyes Twitter Payments: ‘Fiat First, Crypto Later’

Crypto mergers and acquisitions were up last year despite the value of such transactions falling significantly, as increased activity by non-crypto firms looking to get more involved in the segment could signal even more deals going forward.



Deal count in the segment was 204 in 2022, according to a report by advisory firm Architect Partners — an all-time high and up 13% from 181 during the prior year.&nbsp;



But the value of all crypto M&amp;A deals fell by 64% year over year, from roughly $6 billion in 2021 to about $2 billion last year.&nbsp;



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="733" src="https://cms.blockworks.co/wp-content/uploads/2023/01/2022-Crypto-MA-Chart-1024x733.jpg" alt="" class="wp-image-45037" srcset="https://cms.blockworks.co/wp-content/uploads/2023/01/2022-Crypto-MA-Chart-1024x733.jpg 1024w, https://cms.blockworks.co/wp-content/uploads/2023/01/2022-Crypto-MA-Chart-300x215.jpg 300w, https://cms.blockworks.co/wp-content/uploads/2023/01/2022-Crypto-MA-Chart-768x550.jpg 768w, https://cms.blockworks.co/wp-content/uploads/2023/01/2022-Crypto-MA-Chart-359x257.jpg 359w, https://cms.blockworks.co/wp-content/uploads/2023/01/2022-Crypto-MA-Chart-364x261.jpg 364w, https://cms.blockworks.co/wp-content/uploads/2023/01/2022-Crypto-MA-Chart-306x219.jpg 306w, https://cms.blockworks.co/wp-content/uploads/2023/01/2022-Crypto-MA-Chart-80x57.jpg 80w, https://cms.blockworks.co/wp-content/uploads/2023/01/2022-Crypto-MA-Chart.jpg 1522w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>



The dollar volume of crypto M&amp;A represents just 0.3% and 0.4% of the tech and financial services sectors, respectively, Architect Partners data shows.



“The downturn in transaction value perfectly correlated with the exposure of massive counterparty risk and both hidden and disclosed leverage permeating the sector,” the report states.&nbsp;



<h3>Deals between traditional, crypto firms also up</h3>



Still, deals in which a non-crypto native company acquires a crypto firm, which Architect Partners calls “bridge transactions,” also increased, amounting to 36% of all 2022 crypto M&amp;A transactions.&nbsp;



The London Stock Exchange Group (LSEG), for example, bought cloud-based technology provider TORA the following month for $325 million. The buy included an order and execution management system and portfolio management system for customers trading equities, fixed income and digital assets.&nbsp;



Ryan McCullough, told Blockworks he believes bridge transactions are the biggest indicator of future M&amp;A in the segment.&nbsp;



“Traditional groups will continue to invest heavily in the space via acquisition,” he said. “We saw bridge M&amp;A pick up last year and expect that trend to continue despite a slowdown in the beginning of 2023.”



Other larger deals, like LSEG’s buy of TORA, happened early in the year before segment-altering events such as the crash of Terra’s algorithmic stablecoin and crypto exchange FTX.



January deals included <a href="https://blockworks.co/news/coinbase-acquires-regulated-futures-exchange-to-expand-derivatives-offerings">Coinbase’s $275 million acquisition</a> of derivatives exchange FairX and <a href="https://blockworks.co/news/facebook-led-crypto-project-diem-to-be-sold-off-for-200m-report">Silvergate’s roughly $200 million buy</a> of Facebook-led Diem Association’s blockchain and crypto infrastructure.



Blockchain.com made headlines in March after it <a href="https://medium.com/blockchain/accelerating-institutional-growth-through-the-acquisition-of-altonomy-3a2ebd4e351a" target="_blank" rel="noreferrer noopener">bought</a> Singapore-based Altonomy for $250 million in an effort to boost its institutional business.



<h3>Most active acquirers</h3>



Digital entertainment company Animoca Brands was the sector’s most active acquirer last year, buying Grease Monkey Games, Eden Games, Darewise Entertainment, WePlay Media and Pixelnyx.&nbsp;



Second was now-bankrupt FTX, as well as its US affiliate not included in the November bankruptcy filings, which combined bought four companies in 2022 — Liquid, Good Luck Games, Bitvo and Embed Financial Technologies.



The theme of acquirers targeting decentralized applications, games, exchanges and marketplaces reflect “the strategic imperative to capture and onboard more users,” the Architect Parners report notes.&nbsp;



The only companies to buy three entities last year were SmartMedia Technologies and <a href="https://blockworks.co/news/wonderfi-continues-to-consolidate-canadian-market-with-second-acquisition%EF%BF%BC">WonderFi</a>, while about a dozen firms made two acquisitions, according to the report.



Among those with two buys in 2022 was Binance, which purchased Indonesia crypto exchange Tokocrypto and Japan-based <a href="https://blockworks.co/news/binance-expands-into-japan">Sakura Exchange BitCoin</a> (SEBC).&nbsp;



Galaxy Digital revealed its second acquisition of the year just days before the start of 2023, committing to buy Argo Blockchain’s Helios bitcoin mining facility for about $60 million.



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Crypto M&A Deals Hit Record High in 2022, Despite Downturn

Ordinals, a non-fungible token protocol, has launched on Bitcoin mainnet, causing a ruckus in the community.



Ordinals were created by software engineer Casey Rodarmor, and can be described as a numbering scheme for satoshis — the smallest denomination of bitcoin — which can track and transfer individual sats and allow “inscriptions” or “digital assets” to be uniquely identified.



“Ordinal NFTs use an accounting-like method to distinguish between single (fungible) satoshis, making them non-fungible (differentiated) in this closed-off system,” <a href="https://www.blockworksresearch.com/" target="_blank" rel="noreferrer noopener">Blockworks Research</a> analyst <a href="https://twitter.com/MattFiebach" target="_blank" rel="noreferrer noopener">Matt Fiebach</a> said.



Ordinals store texts, images, SCG, or HTML on-chain and can be authorized through a transaction —&nbsp; they can also be purchased, stored and gifted.&nbsp;



This was accomplished using a loophole from the Taproot upgrade in 2021, which enabled “practically unlimited (capped by block size) storage using Opcodes, an executable script in a txn that can store arbitrary data,” Fiebach said.



Rodarmor notes in a <a href="https://rodarmor.com/blog/" target="_blank" rel="noreferrer noopener">blog post</a> that these digital artifacts will be held to a “higher standard” than NFTs, as they can not be stored off-chain and on centralized servers with back-door keys. 



“Inscriptions are immutable and on-chain, on the oldest, most decentralized, most secure blockchain in the world,” Rodarmor said. “They are not smart contracts, and do not need to be examined individually to determine their properties. They are true digital artifacts.”



<h2>A torn community</h2>



Bitcoin&#8217;s purpose has been hotly debated since its inception, and not all community members are thrilled about Ordinals.



For a long time, community members have been torn on whether Bitcoin’s ledger should simply be a space to record financial transactions or a distributed data store for different applications, the pseudonymous Pourteaux <a href="https://read.pourteaux.xyz/p/illegitimate-bitcoin-transactions" target="_blank" rel="noreferrer noopener">wrote in a blog post</a>.



Before the Taproot upgrade, Opcode was limited to 80 MB, Fiebach said.



“Many BTC supporters believe block space should be reserved for sending BTC rather than storing data, or anything else, given BTC is supposed to be peer-to-peer electronic cash,” he said. “Others may argue that increased demand for block space could be considered a positive for the long term sustainability of securing the network.”



<h2>The pros and cons</h2>



So, what are the chances of Bitcoin becoming the next big hotspot for NFTs?



One of the appeals of purchasing NFTs on Bitcoin is the price. Since the Segwit upgrade in 2017, Bitcoin has already included a heavily discounted <a href="https://www.eip4844.com/" target="_blank" rel="noreferrer noopener">eip-4844-style blob space</a>, cryptocurrency researcher Eric Wall <a href="https://twitter.com/ercwl/status/1619323900982349824?s=20&amp;t=30B8eLW76FWCi59II6pwKA" target="_blank" rel="noreferrer noopener">tweeted</a>.



“That blobspace is now being abused by taproot to make full-block (≤4mb) bitcoin NFTs 10x cheaper than ETH L1,” Wall <a href="https://twitter.com/ercwl/status/1619323900982349824?s=20&amp;t=30B8eLW76FWCi59II6pwKA" target="_blank" rel="noreferrer noopener">wrote</a>.



<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">This should help you understand how cheap ordinals are. <a href="https://t.co/OoAgI6WCKF">https://t.co/OoAgI6WCKF</a>&mdash; Erica Wall (@ercwl) <a href="https://twitter.com/ercwl/status/1619644247313125376?ref_src=twsrc%5Etfw">January 29, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Despite this, a legitimate concern remains.&nbsp;



As Ordinals don’t operate on a separate sidechain or protocol and run on bitcoin mainnet, popular usage of Ordinals will increase transactions, creating congestion and hefty fees.&nbsp;



“Even though with op_codes, the cost of storing an image on Bitcoin is much cheaper than Ethereum, it is still much more expensive to store data on-chain than through centralized data storage services,” Blockworks Research analyst <a href="https://twitter.com/purplepill3m" target="_blank" rel="noreferrer noopener">Ren Yu Kong</a> said.



If NFTs on bitcoin were to take off, and more people began storing images on the network with op_codes, transaction fees per block would significantly increase and full nodes will have to download much more data, Yu Kong said.



“Over time, that leads to higher technical requirements to run a full node, and thus from a security standpoint, likely leads to further centralization for the set of full nodes verifying the chain,&#8221; he said.



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Bitcoin NFTs: Love ‘Em or Hate ‘Em, You Can’t Ignore ‘Em

As regulators around the world continue to take a closer look at the crypto industry, firms are starting to bring in third-party help. But a lack of clear technical standards means even the industry’s most popular choice for compliance software has a tough job on its hands.



Texas-based compliance software company Eventus works with traditional and crypto-native firms, including exchanges, banks and broker-dealers, to provide trade surveillance, transaction monitoring and anti-money laundering services.&nbsp;



Eventus has emerged as a popular choice for crypto companies, working with major names in the space including Coinbase, Gemini and, most recently, options exchange Deribit.&nbsp;



“Because additional crypto regulations are still in development across the globe, clients come to us to discuss how they can apply institutional-grade compliance to their businesses now,” a representative from Eventus said. “Global crypto regulations are not as specific and clear as what we see in other asset classes.”



But even as crypto companies take a more prescriptive approach to compliance, regulators are bringing the hammer down on past indiscretions. And some of them have involved companies that partner directly with Eventus, though none of the matters cited by regulators were related to the scope of Eventus’ work.



Earlier this month, Coinbase, an Eventus client since 2018, agreed to settle for <a href="https://blockworks.co/news/coinbase-stock-up-after-settlement">$100 million</a> with the New York State Department of Financial Services for violating anti-money laundering laws. 



Coinbase <a href="https://www.coinbase.com/blog/how-coinbase-thinks-about-market-integrity-and-trade-surveillance" target="_blank" rel="noreferrer noopener">said</a> in October 2021 it used Eventus for trade surveillance, noting the company helped “provide 24/7/365 monitoring across all of Coinbase’s trading platforms in a way that manual tracking alone cannot.” A representative from Coinbase confirmed to Blockworks that the exchange is still partnered with Eventus.&nbsp;



In April 2022, FTX <a href="https://www.prnewswire.com/news-releases/ftxcom-selects-eventus-for-global-trade-surveillance-and-risk-monitoring-on-all-of-its-markets-301532661.html" target="_blank" rel="noreferrer noopener">announced</a> it had contracted with Eventus for trade surveillance and risk monitoring services. The partnership came months after FTX US, the exchange’s American subsidiary, revealed it had started using Validus, Eventus’ platform for “surveillance, market risk, algo monitoring and anti-money laundering/transaction monitoring,” according to the firm’s <a href="https://www.eventus.com/validus-overview" target="_blank" rel="noreferrer noopener">website</a>.



Gemini, which has been working with Eventus since 2020, was recently <a href="https://blockworks.co/news/genesis-gemini-charged-with-securities-violations-by-sec">charged by the Securities and Exchange Commission</a> with an unregistered securities offering through its Lend program in December 2020. Genesis was also charged. 



The issues cited with Coinbase, FTX, and Gemini were not related to the relationships between these exchanges and Eventus, or any software provided by Eventus.



The representative from Eventus declined to comment on the company’s relationship with specific customers.&nbsp;&nbsp;



When asked if there is adequate infrastructure to effectively manage market surveillance for crypto companies, Eventus said the support is there.&nbsp;



“The technology exists to monitor crypto trading at scale and in near real-time,” the representative said. “The data needs for crypto are enormous but this is also the case for monitoring stocks, commodities, and derivatives, which our company does as well.”







Updated Jan. 31, 2023 at 09:15 am ET: This article has been updated to make it clearer that enforcement actions against exchanges mentioned were not related to their relationship with Eventus. A previous version of this article stated that Coinbase&#8217;s relationship with Eventus began in 2021; it has been corrected to 2018. We regret the error.



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Despite Enforcement Actions, Eventus Says Crypto Compliance Can Work

A competitor of Grayscale Investments has sued the cryptoasset manager, claiming Grayscale has misled investors about its services in an effort to steal market share.&nbsp;



In a suit <a href="https://civilinquiry.jud.ct.gov/DocumentInquiry/DocumentInquiry.aspx?DocumentNo=24393260">filed</a> Monday in Connecticut Superior Court, Osprey Funds alleges Grayscale engaged in “deceptive acts and unfair competition” in the asset management industry.



“Grayscale has made materially false and misleading statements in its advertising and promotion to the effect and in substance that turning its bitcoin asset management services into access to a bitcoin ETF was a foregone conclusion, when it knew that access was never likely to happen,” the complaint states.



An Osprey Funds representative declined to comment beyond the filing.&nbsp;



A Grayscale spokesperson called the lawsuit “frivolous” in an email to Blockworks.&nbsp;



“The conversion of GBTC to an ETF is the best long-term product structure for Grayscale’s investors, and approval of a spot bitcoin ETF in the United States would directly benefit our industry peers,” the spokesperson added. “At Grayscale, we remain confident in our common sense, compelling legal arguments, and we look forward to a final decision from the US Court of Appeals by fall 2023.”



Grayscale is seeking to convert GBTC to an ETF — a process that executives have said would essentially eliminate the roughly <a href="https://ycharts.com/companies/GBTC/discount_or_premium_to_nav" target="_blank" rel="noreferrer noopener">40% discount</a> at which the vehicle currently trades.



<figure class="wp-block-embed aligncenter 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/12595927/embed#?secret=gIcH4tfWhz" data-secret="gIcH4tfWhz" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">GBTC has returned 905% over the past six years, while BTC has given more than 2,200% | Chart by David Canellis</figcaption></figure>



The company <a href="https://blockworks.co/news/grayscale-sues-sec-over-rejection-of-proposed-spot-bitcoin-etf">sued the SEC in June</a> after it chose to block GBTC from becoming an ETF. That case crawls on, as the <a href="https://blockworks.co/news/grayscale-sec-illogical-denial-of-gbtc-conversion">cryptoasset manager called out the regulator</a> for “illogical” reasoning in its latest brief earlier this month.&nbsp;Oral arguments are <a href="https://grayscale.com/wp-content/uploads/2023/01/22-1142-Oral-Argument-Notice.pdf" target="_blank" rel="noreferrer noopener">set for</a> March 7.



Grayscale CEO <a href="https://blockworks.co/news/no-gbtc-redemptions-but-considering-other-options">Michael Sonnenshein said in December</a> if the company is unsuccessful in converting GBTC to an ETF, the firm would consider a tender offer.



The Monday filing comes after Osprey CEO Greg King earlier this month called his company <a href="https://blockworks.co/news/osprey-proposes-gbtc-takeover">the “best-positioned third party” to manage GBTC</a> in an <a href="https://ospreyfunds.io/wp-content/uploads/Open-Letter-to-Barry-Silbert-regarding-Grayscale-Bitcoin-Trust-from-Osprey-Funds-CEO-Greg-King-1.pdf" target="_blank" rel="noreferrer noopener">open letter</a> addressed to Digital Currency Group (DCG) CEO Barry Silbert.



DCG is the parent company of Grayscale Investments, which has operated <a href="https://blockworks.co/tag/gbtc">GBTC</a> since its 2013 launch. The trust now has roughly <a href="https://grayscale.com/products/grayscale-bitcoin-trust/" target="_blank" rel="noreferrer noopener">$14.6 billion</a> in assets and imposes a 2% management fee.



Osprey operates <a href="https://ospreyfunds.io/products/obtc/" target="_blank" rel="noreferrer noopener">its own bitcoin trust</a>, which has $64 million in assets. The trust carries a fee of 0.49%.



Hedge fund firm <a href="https://blockworks.co/news/lawsuit-against-grayscale-likely-to-drag-on">Fir Tree Partners sued Grayscale in December</a> in an effort to explore what it alleges to be potential “mismanagement” of GBTC. <a href="https://blockworks.co/news/grayscale-to-fight-fir-tree-lawsuit">Grayscale told Blockworks</a> the suit is “baseless and without merit.”



Updated Jan. 306, 2023 at 3:44 pm ET: Added quote from Grayscale.



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Grayscale Slapped With Another GBTC Lawsuit – This Time From Osprey

The debate between self-custody crypto solutions is rapidly evolving. Our last article in this series explained the <a href="https://blockworks.co/news/what-are-seed-phrases">seed phrase</a> and why new custody solutions have started calling the recovery tool into question.&nbsp;



But to fully grasp the security advantages and drawbacks of the latest alternatives, users must first understand an older self-custody debate.&nbsp;



When it comes down to it, all self-custody options are divided into two categories: hot wallets and cold wallets. Both types have advantages and disadvantages; choosing one will depend on an individual&#8217;s specific needs and preferences. This guide will help weigh options and offer strategic ways to combine solutions.&nbsp;



<h2>Hot wallet vs. cold wallet</h2>



A hot wallet is connected to the internet and used for regular transactions such as sending payments or interacting with decentralized applications (dapps). They are primarily mobile or desktop applications and represent an easy self-custody option for investors.



A cold wallet, by definition, is a custody solution that stores funds entirely offline. Because sending crypto with cold wallets requires more steps than hot wallets, their primary purpose is to receive funds and provide secure, long-term storage. And although cold storage solutions use hardware wallets, not all hardware wallets are considered cold storage. If the hardware wallet uses Bluetooth or can automatically connect to the internet, it is vulnerable to many of the same threats as hot wallets.&nbsp;



Both hot and cold wallets offer the benefit of self-custody, where users hold private keys that allow them to move assets on their respective blockchains. When proper security measures are in place, either approach can be a safer option compared to centralized exchanges, which can expose users to additional third-party risks.



<h2>What&#8217;s the difference between the two?</h2>



The primary difference between cold and hot wallets is that users mainly use cold wallets for long-term storage and protecting coins, while hot wallets are used regularly. Thus, as their names suggest, funds in cold wallets are &#8220;cold&#8221; and largely untouched, while funds in hot wallets are &#8220;hot&#8221; because of their frequent use.



In a typical example, a cryptocurrency investor may set up a hardware wallet only used to receive funds designated for long-term investments. These funds are rarely transferred out and could lie &#8220;cold&#8221; in the wallet for several months or even years.&nbsp;



The same investor could set up a browser-based or mobile wallet to interact with dapps and smart contracts. Funds in this wallet are &#8220;hot&#8221; because of the risks associated with smart contracts and internet connection. A hot wallet ideally holds a lesser portion of a crypto investor&#8217;s portfolio – an amount they can afford to lose.&nbsp;



Centralized cryptocurrency exchanges are other entities that utilize cold and hot wallet solutions. Many centralized cryptocurrency exchange hacks have come from compromised hot wallets, underlining the risks associated with this storage method. Coinbase, for instance, claims to <a href="https://help.coinbase.com/en/coinbase/other-topics/legal-policies/what-does-coinbase-do-with-my-digital-assets" target="_blank" rel="noreferrer noopener">store up to 98%</a> of customer funds in &#8220;guarded cold storage,&#8221; with a smaller amount kept in hot wallets to fulfill deposit and withdrawal requests.



<h2>Hot Wallets: Pros and Cons</h2>



<h3>Pros</h3>



<ul>
<li>Hot wallets provide greater convenience, as they are primarily mobile and desktop-based apps.</li>



<li>Hot wallets are free to use and are relatively easy to set up.</li>



<li>They provide a seamless gateway to access opportunities in the Web3 economy (including NFTs, DeFi and gaming applications).&nbsp;</li>



<li>Hot wallets are ideal for regular crypto trading and payments. They often provide third-party integrations for buying coins or even performing cross-chain swaps.</li>



<li>Hot wallets generally allow investors to store more cryptocurrencies. Hardware wallets support fewer cryptocurrencies, as such functionalities take longer to build.</li>



<li>Hot wallets usually provide a more intuitive user experience, including a portfolio tracker, dapp browser, NFT display, etc.</li>
</ul>



<h3>Cons</h3>



<ul>
<li>Being connected to the internet exposes hot wallet users to a greater risk of security breaches.</li>



<li>Users could suffer substantial losses resulting from malicious software updates or installing apps from unofficial sources.</li>
</ul>



<h3>Examples of leading hot wallet solutions</h3>



The most popular examples of hot wallet solutions include:



<ul>
<li>Metamask: Ethereum development studio Consensys initially released Metamask in 2016. Since then, it has become the leading wallet for accessing Ethereum dApps and other EVM-compatible networks. Metamask is available as a browser extension and mobile app.</li>
</ul>



<ul>
<li>Trust Wallet: Trust Wallet went live in 2017 and grew in prominence after the founding company was acquired by the leading cryptocurrency exchange Binance. Although Trust Wallet gained most of its initial market share as a mobile-first application, it has since expanded to offer a browser-based extension.</li>
</ul>



<ul>
<li>Coinbase Wallet: Coinbase Wallet is a self-custodial crypto storage solution developed by crypto exchange Coinbase. Coinbase Wallet enables access to Web3 apps and basic functionalities such as sending and receiving many cryptocurrencies. The application is available as a browser extension and mobile application.</li>
</ul>



<h2>Cold Wallets: Pros and Cons</h2>



<h3>Pros</h3>



<ul>
<li>Cold wallets provide unparalleled security as private keys are stored offline, sometimes in air-gapped devices and multiple locations.</li>



<li>Cold wallets encourage long-term investments, which are historically profitable for cryptocurrency investors.</li>



<li>Cold wallets lower the risk of physical crypto theft, as users do not usually move with private keys or hardware wallets.</li>



<li>Cold storage solutions rarely require software upgrades, making them more immune to new security issues.&nbsp;</li>



<li>Cold wallets also encourage greater privacy as associated addresses mainly receive funds and have fewer trails on the blockchain.</li>



<li>Users require a less proactive approach to secure funds in cold storage than a hot wallet.</li>
</ul>



<h3>Cons</h3>



<ul>
<li>Cold-storage wallets are not free to use. Getting a decent hardware wallet could cost between $50-$300.</li>



<li>Cold storage wallets could be more convenient. Users must currently go through several steps to sign transactions.</li>



<li>Investors must replace cold storage wallets in the event of a loss to guarantee security.</li>
</ul>



<h3>Examples of cold wallet storage solutions</h3>



<ul>
<li>Ledger: Ledger is a leading provider of cryptocurrency hardware wallets and has sold four million devices since launching in 2014. The company currently offers the Ledger Nano X, Ledger Nano S Plus and Ledger Stax. Although these devices offer varying functionalities, they keep cryptocurrencies in secure cold storage.</li>
</ul>



<ul>
<li>Trezor: Trezor wallets are cold-storage hardware devices developed by Czech-based startup SatoshiLabs since 2014. The wallet currently comes in two variants, the Trezor Model T and Trezor One. The latter offers fewer features, as it was Trezor&#8217;s flagship product. Yet, both provide secure offline storage for cryptoassets.</li>
</ul>



<ul>
<li>Paper wallets: This method involves generating a pair of public and private cryptographic keys printed on paper. The user transfers funds to the associated address and safely puts away the paper wallet until a future date when they choose to move the assets. The advent of hardware wallets has made this cold storage method archaic. Yet, it comes in handy for long-term storage or gifting cryptocurrencies.</li>
</ul>



<h2>A closer look at the wallet comparison</h2>



Cryptocurrency investors make several tradeoffs when choosing between a hot and a cold wallet. Both wallets have unique strengths that determine what&#8217;s best for individual users. This section presents a head-to-head comparison of cold versus hot wallets.



<h3>Security</h3>



Cold wallets provide the highest level of security for cryptoassets. They store private keys offline, eliminating most online vulnerabilities. Bad actors must gain physical possession of the cold storage device and the owner&#8217;s consent to move funds. There is also an additional hurdle if the wallet utilizes a multi-signature feature where several entities must sign a transaction before it is approved.



Learn more about <a href="https://blockworks.co/news/what-are-seed-phrases">multi-signature and MPC wallets</a> in our explainer on seed phrases.



In stark contrast, hot wallets are susceptible to online attack vectors, including device malware, malicious smart contracts and software upgrades. For example, an unprecedented hack that affected 9,231 Slope Wallet users directly resulted from a software upgrade that allowed attackers to <a href="https://blockworks.co/news/solana-based-wallet-users-drained-in-suspected-exploit">steal private keys</a> holding approximately $4.1 million worth of assets. The losses later affected even users who merely imported (to a different wallet) a seed phrase created with Slope Wallet.



But both hot and cold wallet users risk falling victim to phishing attacks such as those perpetrated through email and social media platforms. The attack was traditionally only a threat to hot wallets. But a recent <a href="https://blockworks.co/news/hardware-wallet-provider-trezor-targeted-in-phishing-attack">Trezor malware hack</a> proved this to no longer be the case.&nbsp;



<h3>Pricing</h3>



Cold wallet solutions are usually expensive to set up. The cheapest hardware wallet devices cost around $40 and offer minimal functionality. Users must acquire a mid-budget-sized device for about $100 to enjoy a relatively high-quality experience.&nbsp;



Most hot wallets are free to use and available on respective app stores for Android and iOS users. They are also easy to set up and offer a superior user experience to cold storage solutions.



<h3>Convenience</h3>



Being mobile and desktop-native applications make hot wallets more convenient than cold wallets. For cold storage solutions, the user must physically possess the device and pass through several security steps to validate transactions. In most cases, the screens are relatively small and barely display a few lines of text.



However, hot wallets are mobile and routinely come in the shape of smartphones, tablets, and PCs. Features such as fingerprint authentication, QR codes, and advanced transaction fee customization make hot wallets more convenient for signing transactions. This is especially helpful if users want to send payments frequently or interface with smart contracts.&nbsp;&nbsp;



<h3>Interaction</h3>



Hot wallets are more interoperable with Web3 applications and smart contracts. Users immediately find the option to connect to dapps using these wallets. In contrast, most cold storage wallets do not provide functionalities for new-age crypto innovations such as NFTs and DeFi protocols. For instance, some do not support sending and receiving NFTs or liquidity provider (LP) tokens.



Most hot wallets come equipped with a dapp browser, NFT display, staking portal and gaming hubs. Cold storage solutions are not designed for such use cases and thus provide fewer user interactive opportunities.



<h2>Final considerations</h2>



The most experienced investors combine cold and hot wallet solutions to ensure the best security for their cryptoassets. Such a combination is advantageous, especially for investors with diversified portfolios who need to explore Web3 applications.&nbsp;



Cold wallets are essential to protect funds in the long term, while hot wallets are helpful for anyone who needs regular engagement. Users can decide to create multiple hot wallets for different purposes. For instance, the best security practice is to create a new &#8220;burner wallet&#8221; for participating in NFT mints. Users may also create specific wallets for interfacing with DeFi protocols or gaming applications. This diversification protects against losing funds to a single hot wallet breach.



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Hot Wallets vs. Cold Wallets: Self Custody 101

Major crypto tokens retreated Monday and erased their weekend gains as traders gear up for a potentially volatile week ahead of the Federal Reserve’s interest rate decision.&nbsp;



<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">Bitcoin</a> was trading about 2.5% lower Monday afternoon in New York, hovering around $23,000 after briefly approaching $24,000 on Sunday. <a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">Ether</a> was similarly down, trading almost 4% lower and remaining around the $1,500 level.&nbsp;



The whipsaw pattern has some traders crying “bull trap,” since both bitcoin and ether were unable to rally past their breakout levels, but analysts say there is likely steam left in the rally after this week’s uncertainty.&nbsp;



&#8220;I’d really view this as natural volatility rather than any major market signal,” Darius Tabatabai, CEO of decentralized exchange Vertex Protocol, said. “With the Federal Open Markets Committee meeting this week, I’d expect the market to take a breather and positioning to slow down slightly as traders clean up their books ahead of the meeting.”



Markets are nearly certain the Fed will opt for a slower-paced hike this week and decide on a 25 basis point increase, according to <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">data</a> from CME. With cooling inflation, slowing growth and a general sentiment among international central banks that a pause in rate hikes is warranted, some investors are wondering if the Fed’s hawkishness is fading.



“Reaching peak hawkishness is one of our three keys to a bottom, and the most important one, so if the Fed has reached peak hawkishness that’s a powerful positive to consider,” Tom Essaye, founder of Sevens Report Research, wrote in a note Monday.&nbsp;



Of course, with inflation still running far above the Fed’s 2% target, its work is not yet complete, Essaye added.&nbsp;



Retracement or not, the next few days will be telling in terms of future price action, Marcus Sotiriou, market analyst at GlobalBlock, said in a note, Monday. If crypto tokens can manage to break through these key resistance levels, traders can rest assured the rally will be sustained, he added.&nbsp;



Even amid Monday’s falter, crypto is poised to lock in a strong month. Bitcoin and ether are up about 40% and 32%, respectively, since the start of the year, <a href="https://twitter.com/DaanCrypto/status/1608078976949403649" target="_blank" rel="noreferrer noopener">a historic feat</a> for January, Josh Olszewicz, head of research at Valkyrie Investments, said. A minor selloff is not yet telling of a lasting trend, he added. 



“Low timeframe technical analysis, including a rising wedge or channel with declining momentum on relative strength index, does support a near term pullback in price,” Olszewicz said. “This combination of technicals is commonly seen when rallies become overextended and can trap entrants who were late to the party.”



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Fed Watch: Bitcoin Gives Up Weekend Gains, Analysts Say Not To Worry

Venture capital-backed, layer-1 blockchain Aptos saw huge price growth in January, with its value surging over 400% in the last month.



Native token <a href="https://blockworks.co/price/apt" target="_blank" rel="noreferrer noopener">APT</a> traded at just $3.59 last month, but last traded at $18.37. Its nearly $3 billion market cap has now surpassed Stellar and Bitcoin Cash and is approaching that of Ethereum Classic and Monero.



When you consider the fully diluted value, Aptos is currently the fourth-largest chain at $18 billion. But interest in the network has <a href="https://blockworks.co/newsletter/issue/30389460" target="_blank" rel="noreferrer noopener">raised some eyebrows</a>, largely because it has a low user and developer base.&nbsp;


<div class="wp-block-image">
<figure class="alignright size-medium"><img decoding="async" loading="lazy" width="300" height="279" src="https://cms.blockworks.co/wp-content/uploads/2023/01/Screen-Shot-2023-01-30-at-11.02.32-AM-300x279.png" alt="" class="wp-image-44970" srcset="https://cms.blockworks.co/wp-content/uploads/2023/01/Screen-Shot-2023-01-30-at-11.02.32-AM-300x279.png 300w, https://cms.blockworks.co/wp-content/uploads/2023/01/Screen-Shot-2023-01-30-at-11.02.32-AM-768x714.png 768w, https://cms.blockworks.co/wp-content/uploads/2023/01/Screen-Shot-2023-01-30-at-11.02.32-AM-276x257.png 276w, https://cms.blockworks.co/wp-content/uploads/2023/01/Screen-Shot-2023-01-30-at-11.02.32-AM-281x261.png 281w, https://cms.blockworks.co/wp-content/uploads/2023/01/Screen-Shot-2023-01-30-at-11.02.32-AM-236x219.png 236w, https://cms.blockworks.co/wp-content/uploads/2023/01/Screen-Shot-2023-01-30-at-11.02.32-AM-80x74.png 80w, https://cms.blockworks.co/wp-content/uploads/2023/01/Screen-Shot-2023-01-30-at-11.02.32-AM.png 966w" sizes="(max-width: 300px) 100vw, 300px" /><figcaption class="wp-element-caption">Aptos co-founder Avery Ching</figcaption></figure></div>


“That is pure insanity for a chain with near zero users and applications; what are investors pricing in? Aptos was shamed for its poor token allocation that favored insiders and investors, which allowed them to stake vesting tokens to earn liquid rewards,” said <a href="https://www.blockworksresearch.com" target="_blank" rel="noreferrer noopener">Blockworks Research</a> Senior Analyst <a href="https://twitter.com/smyyguy" target="_blank" rel="noreferrer noopener">Dan Smith</a>.



Blockworks spoke with Aptos co-founder and Chief Technology Officer Avery Ching, who broke down the network’s development, insight on its user base and why he thinks it’s gaining traction right now.



<h3>Confidence in a tech-bro team</h3>



Ching worked at Meta, formerly Facebook, for about a decade. His focus was data infrastructure and scaling systems to support insights and analytics for products within Meta.&nbsp;



Three years into working there, he joined the Diem (or Libra) team, where the mission was to build an innovative financial infrastructure for Facebook’s billions of daily active users.&nbsp;



The project ultimately didn’t work out, and Ching left, along with co-founder Mo Shaikh, to work on a related project, now known as Aptos.



The duo’s experience at the social networking site “allowed us to build this technology in a way that would be even more open and more permissionless than within the boundaries of something that happened at Meta,” Ching said.



Aptos currently has a team of more than 100 people, and there are no plans to grow too fast. The network has people based around the world including Palo Alto, New York, Seattle, Florida, Israel and Asia, which Ching credits as having “fueled the rise of Aptos.”



“And some of them come from other backgrounds like myself that know how to operate machines at scale in large production environments for supporting goods for customers,” Ching said.



<h3>As impactful as cloud computing infrastructure?&nbsp;</h3>



Ching said the main goal for Aptos is to be for decentralized applications what cloud computing is for Web2.



“Think about what Netflix relies on, or Dropbox, or Amazon, or Meta? These products rely on millions of machines running in data centres across the world, they can scale up and scale down at a minute’s notice so that they can have a tremendous amount of volume to support their products.”



But the Web3 industry is still far from being the decentralized internet for everyone, and Aptos wants to be around for the long term.



“There&#8217;s just a ton of things to solve before we can make this more mainstream. So that&#8217;s our mission. That&#8217;s our purpose,” he said.



<h3>But what’s driving the buzz behind Aptos?</h3>



The network claims its mainnet launch had 10,000 full nodes and more than 30 projects, which, according to Ching, is the highest number of projects a blockchain ever counted at launch.



Aptos’ <a href="https://github.com/aptos-foundation/ecosystem-projects" target="_blank" rel="noreferrer noopener">Github</a> page shows a number of projects built in gaming, DeFi, infrastructure, marketplaces, NFT tooling and bridges.



Aptos proponents <a href="https://twitter.com/Aptosians__/status/1618572239791878146" target="_blank" rel="noreferrer noopener">tout</a> an increase in total value locked (TVL) in recent weeks with respect to DeFi protocols, such as decentralized exchange PancakeSwap — a DEX which originated on Binance Chain. But a TVL measured in US dollar terms is misleading when much of a chain’s DeFi activity is taking place in volatile tokens.



When tracking the Aptos TVL in APT terms, there is a downward trend since late 2022.



&#8220;Looking at this data, I don&#8217;t see a meaningful TVL change,&#8221; Smith said.



<figure class="wp-block-image"><img decoding="async" src="https://lh4.googleusercontent.com/1fEZlxrNiuw31AJJ7xglSBQrBM_znle3l8LalaYPXbPtonY8f0tna-_MG2-nXW6Lld0jpO9bXNaUcoIWFaymiMU8o6kCbPPji6RXuwxYjLqsi_K5R_vJX2rnG4NIk1U9Vwg2hqyTQZo1yndzLD1igQb23IHb-G_RMRpdDyumriXvgCS4ardh_VEOxmD4eg" alt=""/></figure>



The network’s market cap to TVL ratio, shows it attracting <a href="https://twitter.com/henriquecentiei/status/1619898913816981504">many multiples</a> of the ratio for Ethereum at the current APT price.



Ching doesn’t care for the tired ‘Ethereum-killer’ trope.



“We&#8217;re not here to kill anybody,” Ching said, noting, “I think Ethereum is a great technology. In fact, we&#8217;re inspired by many of the things that Ethereum had done.”



The core team’s 19% token allocation is locked for 12 months, <a href="https://aptosfoundation.org/currents/aptos-tokenomics-overview" target="_blank" rel="noreferrer noopener">according to</a> the Aptos Foundation’s tokenomics breakdown, however, the full APT allocation is available for staking <a href="https://research.thetie.io/aptos-vs-sui/" target="_blank" rel="noreferrer noopener">even while unvested</a>, meaning that the team, the foundation and investors can all profit from selling daily staking rewards into the surging market.



Ching declined to comment on the price of the token.



&#8220;I can&#8217;t speak to the token specifically, I can just speak about what our mission is and kind of what we&#8217;re doing and why we think it&#8217;s getting traction now,&#8221; he said.



<h3>Early NFT foray and other activity</h3>



Aptos reports having added over 5,000 NFT collections, with the top ones being Aptos Monkeys, Aptosmingos and Bruh Bears, according to a press release.



Aptos Monkeys shows about 1,700 APT in traded volume (about $30,000) over the past 24 hours on the leading Aptos NFT market <a href="https://www.topaz.so/" target="_blank" rel="noreferrer noopener">Topaz</a>.



OpenSea’s <a href="https://opensea.io/rankings" target="_blank" rel="noreferrer noopener">currently</a> top-ranked BAYC Sewer Pass traded 907 ETH ($1.4 million) over the same time period.



The network’s native wallets have over 1.4 million downloads, the release notes, however daily active accounts have remained stagnant in the past month, ranging from about 25,000 to 30,000.



<figure class="wp-block-image"><img decoding="async" src="https://lh3.googleusercontent.com/DspyF2uSYcSJr4zTQvPaw26oBEqaK-_thcmLVo2eBiz5dAFAiYrO7PydczcUCTxi80WS8vpYXAytc4BVtMXcku8FGH7pwW7qpJ7PFVJpOhe-D7trvYr3eYq1K0r36GUAbY13dpmE4jSvse48svieKXC3vQEatAfMNNfRzPzRkh9gxwDKYrp-8lBYXhY6Ng" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://explorer.aptoslabs.com/analytics" target="_blank" rel="noreferrer noopener">explorer.aptoslabs.com/analytics</a></figcaption></figure>



The network’s developer and user base is <a href="https://blockworks.co/newsletter/issue/30389460">considered</a> low compared to other major blockchains.



But Aptos told Blockworks that by the end of 2022, it counted 2.85 million cumulative unique addresses and 60.6 million user transactions.



“For a network that’s just like a little more than three months old, this is pretty tremendous,” Ching said.



Another point of interest for the network is some of its recent partnerships, including Seoul-based gaming studio Megapixel, which is set to announce its first Web3 game on Aptos.



Korean interest has largely been <a href="https://blockworks.co/news/aptos-surge-mirrors-ripple-bull-run">driving the APT price</a> rally, Blockworks previously reported. Aptos pointed to its <a href="https://aptosfoundation.org/currents/aptos-world-tour-hackathon-coming-2023" target="_blank" rel="noreferrer noopener">world tour hackathon</a> starting next week, with the first stop in Seoul.



<h3>A rough time for the industry</h3>



Aptos had a <a href="https://blockworks.co/news/aptos-mainnet-launch-draws-criticism">rocky launch</a> in October, with observers noting that it didn’t actually live up to its promised transactional speed. However, Blockworks’ Dan Smith said the chaos was to be expected because “launching a layer-1 is a multi-year undertaking.”



Ching said many people would say the network’s launch happened at possibly the worst period, given the bearish environment around the industry.&nbsp;



“But for us, we were not really focused on a lot of the exterior things like that,” he said.&nbsp;



“Hundreds of projects had been waiting for us to launch and asking us to get going on the technology stack and wanted to build, and we felt like serving those builders was more important than anything else at that time.”



Ching notes a focus on four verticals: gaming, social, finance and immediate entertainment.



Social seems like an obvious choice for Ching, given his experience at Meta and the fact that this is a great way to attract people to blockchain. Aptos expects to soon make an announcement in this space.



Macauley Peterson contributed reporting.



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Aptos ‘Not Here To Kill’ Any Blockchain: Co-founder

Sebastian Sinclair

The supply of leading stablecoin <a href="https://blockworks.co/tag/tether">tether</a> has clawed back recent losses to reach two-month highs as speculation of this year’s market rally continues to drive digital assets further.



USDT witnessed a 3.8% increase in market capitalization from a Nov. 27 low of $65.3 billion to $67.8 billion on Sunday — its highest point since the collapse of FTX led the market lower.



The asset, whose value is pegged one-to-one to the US dollar, is the industry’s most widely used stablecoin, eclipsing rivals USDC and Binance’s BUSD.



Data compiled by NYDIG across the previous 30 days show <a href="https://blockworks.co/tag/usdt">USDT</a> has facilitated more than $980 billion in exchange trading volume, compared to BUSD’s $323 billion and USDC’s $135 billion.



The tech and financial services firm points to an increase in the stablecoin’s supply as evidence of a capital flow boost into the market and a positive sign based on prior events.



“We think the continued growth of Tether supply is a positive indicator for the continued price rally,” the firm said in a Friday newsletter.



The supply growth resembles 2019’s recovery which coincided with another rally for bitcoin whose price jumped from $3,250 to more than $13,000 before retracing in the second half of that year.



That was also true with the lead-up to the industry’s most recent bull run, where the stablecoin’s supply ballooned 100% from August 2020 through to January 2021 alongside a 130% increase in bitcoin’s price.



Though not all are convinced the appreciation in USDT’s supply is closely correlated.



“We have definitely seen an elevated interest in digital asset accumulation as well as transaction flows in stablecoins recently,” William Fong, Treasurer at Australian trading firm Zerocap told Blockworks. “However, we cannot be sure if it&#8217;s directly related to USDT supply movement or is really simply a risk adjustment on macroeconomic events.”



More likely catalysts are the several central bank policy meetings this week, including a potential reduction in the <a href="https://blockworks.co/news/bitcoin-ether-prices-strong-markets-eye-easing-rate-hikes">pace of tightening</a> from the US Federal Reserve, Fong said.



BUSD, the industry’s third-largest stablecoin, has been unable to keep up the pace. Binance’s stablecoin supply has instead fallen 27% from $21.8 billion on Dec. 13 to $15.7 billion.&nbsp;



Pressure on BUSD was exacerbated, in part, due to the <a href="https://www.ft.com/content/bb50a204-5239-4db0-9964-c3bf9339c594" target="_blank" rel="noreferrer noopener">outflows</a> from the token’s native exchange in mid-December and those pairings facilitating traders exiting the platform. 



A general drop in the confidence of the Binance brand following Mazer’s decision to halt its <a href="https://blockworks.co/news/circle-taps-deloitte-as-new-auditor-doubles-down-on-proof-of-reserves">auditing services</a> of the exchange’s assets only strengthened the stablecoin’s decline in the fourth quarter of last year.



Tether has failed to deliver on years-long promises to engage an accounting firm for an audit of its own reserves.



USDC, the industry’s second-largest, has fared better — down about 4.6% from $45.1 billion to 43 billion over the same period.



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Growth of Tether Supply ‘Positive’ Indicator for Further Crypto Gains

The majority of crypto-related equities finished up in positive territory last week, with US-traded mining firms gaining distance from historical lows set at the end of last year.



Bitcoin is also pushing for further gains on the day after closing the session roughly 3.2% higher to $23,800 Sunday, while its market capitalization also leaped 3.3% to $458.6 million.



Ether clocked a higher daily close above $1,645, gaining 4.5% alongside a $10 billion uplift to its market value. Bitcoin and ether are now up 43.9% and 37.6% year-to-date respectively.



Bitcoin miners continue to rise alongside market sentiment, witnessed by the positive jump in spot prices for digital assets as the beleaguered sector takes stock of a shifting risk-on attitude.



Hong Kong-based Bit Mining (BTCM), listed on the New York Stock Exchange, posted a Friday close of 7.6% to $3.55 while Chinese miner SOS ADR, also listed in New York, rose almost 2%.



NASDAQ-listed mining firms Bitfarms, Stronghold Digital, Cipher Mining, Cleanspark and Bit Digital rose between 2.8% and 16.6% on Friday.



Marathon Digital and Iris Energy were the US’s main outliers in the bitcoin mining category, shedding 8.3% to $8 and 4.3% to $2.10 respectively by the end of last week’s closing bell.&nbsp;



Greenidge Generation Holdings, which also fell 0.8% on Friday, has begun to reverse prior losses, with a 2.6% gain in after-hours trading to $0.90.



Prices for most US-traded miners have more than doubled this year, following daily lows set at the end of 2022. It comes as the average mining difficulty for bitcoin hit a new all-time high beginning Jan. 18 — now 41% greater than a year ago, <a href="https://ycharts.com/indicators/bitcoin_average_difficulty#:~:text=Bitcoin%20Average%20Difficulty%20is%20at,41.09%25%20from%20one%20year%20ago.">data from YCharts</a> show.



Global hashrate — a measure of bitcoin network security — hit a fresh all-time high on Friday at 316 exahashes per second (EH/s), while miners have until Feb. 11 before the next <a href="https://www.coinwarz.com/mining/bitcoin/difficulty-chart">difficulty adjustment</a> will make it an estimated 4.3% harder to mine.



Both a rise in the price of bitcoin and <a href="https://www.reuters.com/business/energy/us-wholesale-power-prices-broadly-expected-fall-this-year-2023-01-10/" target="_blank" rel="noreferrer noopener">anticipation</a> of cheaper power prices this year are beginning to erase previous sector sell-offs that had begun amid last year’s Q2 market rout.



Read more: <a href="https://blockworks.co/news/bitcoin-mining-nuclear-energy">Going Nuclear: Bitcoin Mining’s Potential Energy Future</a>



Other sectors across the industry also posted positive gains Friday, with exchanges Coinbase (COIN) and Robin Hood (HOOD) up 15.7% and 7.8% respectively. COIN has <a href="https://blockworks.co/news/coinbase-stock-soaring">continued to outperform</a> both the broader tech sector and bitcoin, up an eye-watering 80% since the new year began.



<a href="https://twitter.com/MacroAlf/status/1619380322004766721" target="_blank" rel="noreferrer noopener">Analyst fears</a> over a global recession remain firmly entrenched, with several leading indicators now pointing to declining economic growth in the second quarter of this year.



The impact for risk-on assets, such as crypto, would likely result in further market sell-offs as traders seek to book profits and allocate capital into cash, large market cap equities and gold.



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Bitcoin Price Boosts Miners, as Hashrate Climbs

Sam Martin

ETH Liquid Staking Derivatives Primer

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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General Admission Pass

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Student tickets will be launching in early 2023

Student Ticket 

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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

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Speaker applications can be submitted <a href="https://form.asana.com/?k=L3gwAY1GRAX-RRAGDZYc0g&amp;d=1199885946213540">here</a>. Due to the high volume of submissions, we will not respond to all applicants. We anticipate &lt;2% of applicants being selected.
Blockworks&#8217; content team will reach out in the event you are accepted to speak. Please do not follow up directly.

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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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