CoW Protocol

Jack Kubinec

Solayer, a startup building a product akin to EigenLayer on Solana, opened restaking deposits Thursday afternoon.



The invite-only deposit period was capped at $20 million dollars. Users could natively restake SOL on Solayer, or deposit the liquid <a href="https://blockworks.co/tag/staking">staking</a> products mSOL, bSOL, JITOSOL, and INF. With the private access launch, Solayer becomes a horse in the race to build a restaking ecosystem on the Solana blockchain.&nbsp;



Few Solana restaking protocols have gone live, with the exception of Picasso, which runs its own <a href="https://docs.picasso.network/technology/restaking/vaults">version</a> of Solana restaking.&nbsp;



Read more: <a href="https://blockworks.co/news/robinhood-solana-staking-europe">Robinhood enables Solana staking for customers in Europe</a>



Perhaps in a testament to the hype surrounding these protocols launching, Solayer hit its $20 million cap within 45 minutes of opening withdrawals, a member of the Solayer core team confirmed to Blockworks. And it’s not just degens placing bets on the new restaking protocol. Solayer is looking to raise $8 million at an $80 million valuation led by Polychain, CoinDesk <a href="http://.com/business/2024/05/01/restaking-gold-rush-spreads-to-solana-from-ethereum-with-jito-and-others-joining-in/">reported</a>.&nbsp;



Still, little is known about the company. Solayer <a href="https://solayer.org/blog/stage-1-genesis-epoch-is-live">said</a> the protocol has “been in the works since [the] end of 2023” in a blog post. It called the first deposit period “epoch 0,” and restaked assets will be locked in the protocol until “epoch 3.” A roadmap Solayer <a href="https://solayer.org/blog/introducing-solayer-stage-1-release-roadmap">posted</a> Wednesday said that a liquid restaking token called sSOL would launch in epoch 6.&nbsp;



A Solayer team member did not say how long each epoch would last but confirmed sSOL being an LRT.&nbsp;



Read more: <a href="https://blockworks.co/news/risks-restaking-overrated-ethereum">The risks of restaking are extremely overrated</a>



Restaking refers to using the staked tokens securing proof-of-stake blockchains to secure another layer of applications — or essentially staking staked tokens a second time. This extends the security of the blockchain’s base layer and puts idle staked assets to use, creating additional yield opportunities. By distributing security responsibilities across multiple layers, restaking enhances network resilience and maximizes the utility of staked tokens.



<a href="https://blockworks.co/tag/solana">Solana</a> is secured by a combination of proof-of-stake and proof-of-history, meaning restaking could be applied to the network.



The concept was pioneered on Ethereum by EigenLayer, which has raised over $150 million in venture funding and secured over $14 billion in total value locked (TVL), <a href="https://defillama.com/protocol/eigenlayer#information">according</a> to DeFiLlama.



Read more: <a href="https://blockworks.co/news/investors-betting-on-eigenlayer">Funding Wrap: Investors place more EigenLayer bets</a>



And now, the concept has made its way to Solana.



“In the coming year, we are excited about and hope to lead the movement of ‘scaling out’ of the Solana base chain,” Solayer wrote in a blog post.



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Solana restaking protocol Solayer soft-launches deposits

Casey Wagner

The US Senate on Thursday passed Joint Resolution 109, which seeks to overturn the Security and Exchange Commission’s Staff Accounting Bulletin (SAB) 121. The legislation now heads to President Joe Biden’s desk, where it is expected to be vetoed.&nbsp;&nbsp;&nbsp;&nbsp;



Twelve Democratic Senators voted in favor to pass the resolution Thursday: Kirsten Gillibrand of New York, John Hickenlooper of Colorado, Gary Peters of Michigan, Jon Tester of Montana, Kyrsten Sinema of Arizona, Mark Kelly of Arizona, Jacky Rosen of Nevada, Bob Casey of Pennsylvania, Cory Booker of New Jersey, Ben Ray Luján of New Mexico, Ron Wyden of Oregon and Majority Leader Chuck Schumer of New York.&nbsp;



SAB 121, introduced in March 2022 and enacted the following month, states that digital asset custodians should <a href="https://blockworks.co/news/sec-staff-call-for-crypto-entities-to-show-liability-on-balance-sheet">report a liability and “corresponding assets”</a> on their balance sheets for all custodied cryptocurrencies. The practice, SEC staff <a href="https://www.sec.gov/oca/staff-accounting-bulletin-121">said</a>, is intended to guard against the “significant risks and uncertainties associated with safeguarding crypto assets.”&nbsp;



Last week, in the Republican-controlled House, 21 Democrats voted in favor of passing the resolution. The White House <a href="https://www.whitehouse.gov/wp-content/uploads/2024/05/SAP-HJRes109.pdf">said</a> last week that should the legislation make it to President Joe Biden’s desk, he would veto it.&nbsp;



Read more: <a href="https://blockworks.co/news/crypto-bills-in-house-and-senate">Crypto bill update: What legislation is making its way forward?&nbsp;</a>



“SAB 121 was issued in response to demonstrated technological, legal and regulatory risks that have caused substantial losses to consumers,” the Biden administration wrote in a statement. “By virtue of invoking the Congressional Review Act, it could also inappropriately constrain the <a href="https://blockworks.co/tag/sec">SEC</a>’s ability to ensure appropriate guardrails and address future issues related to crypto assets including financial stability.”



The president has ten days, excluding Sundays, to veto or sign off once it reaches his desk.&nbsp;



Rep. Wiley Nickel, D-N.C., who co-sponsored the resolution, on Wednesday <a href="https://nickel.house.gov/uploadedfiles/nickel_sab121_letter_to_sec.pdf">asked</a> SEC Chairman Gary Gensler to repeal SAB 121 ahead of the Senate vote.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/senate-gensler-sec-overturn-sab-121">It’s time to overturn SAB 121</a>



“Today&#8217;s Senate vote to repeal SAB 121 sends a clear bipartisan message: Congress will not stand idly by as <a href="https://blockworks.co/tag/gary-gensler">Gary Gensler</a> and the SEC deliberately sidestep the statutory rulemaking process and overstep their regulatory authority,” Nickel said Thursday in a statement.&nbsp;



The SEC did not immediately respond to Blockworks’ request for comment.



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Senate passes resolution to overturn SAB 121

Katherine Ross

Pump.fun was attacked Thursday by an exploiter who seemingly used flash loans to buy out the bonding curve.&nbsp;



In a post on X, Pump.fun said that it was “aware” that the contracts were compromised and were investigating.&nbsp;



“We have upgraded the contracts so the attacker cannot siphon any more funds. The TVL in the protocol right now is safe,” the team said. “We’ve paused trading — you cannot buy and sell any coins at the moment. Any coins that are currently in the process of migrating to Raydium cannot be traded and will not be migrating for an indefinite period of time.”



Igor Igamberdiev, head of research at Wintermute, analyzed the situation in a series of posts on X, saying that the key was compromised, “though the possibility of an inside job remains.”



<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">5/6 &#8211; liquidity withdrawal initiated by 5PXxuZ and subsequent return of enough SOL to the exploiter to repay the flash loan and donation to a random account instead of creating a pool on Raydium <a href="https://t.co/SIWhzNs3OJ">pic.twitter.com/SIWhzNs3OJ</a>&mdash; Igor Igamberdiev (@FrankResearcher) <a href="https://twitter.com/FrankResearcher/status/1791164335806394820?ref_src=twsrc%5Etfw">May 16, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Igamberdiev <a href="https://twitter.com/FrankResearcher/status/1791173010679824492">said</a> that the amount lost by Pump.fun is “at least” 12,000 SOL, or roughly $2 million.



An account on X going by Stacc seemed to take credit for the attack, writing “I’m about to change the course of history” in a <a href="https://twitter.com/STACCoverflow/status/1791134470071865576">post</a>.&nbsp;



Stacc seemed to imply in his posts that he didn’t intend to keep the stolen funds, but rather planned to transfer the “remaining balances of bonding curves” to some token users.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">1. slerf holders 2. stacc holders 3. saga holders 4. risklol holders. This ~80m airdrop may cause a solana fork n it may cause an awful lot of sourpuss rich kids everywhere but it certainly stops the evil here. Probably shoulda went for the bonuses, eh? /x&mdash; 🔥🪂staccoverflow ; j&#39;arrête ; (@STACCoverflow) <a href="https://twitter.com/STACCoverflow/status/1791134479072809365?ref_src=twsrc%5Etfw">May 16, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



It’s not clear as of publication how Stacc was able to execute the attack, or if they’re distributing the balances to random people.&nbsp;



As Blockworks previously reported, Pump.fun lets <a href="https://blockworks.co/news/having-fun-pump-fun">developers launch tokens</a> without seed liquidity for a couple of dollars. Its revenue comes from users buying and selling tokens.&nbsp;



Tokens that exceed market caps of $69,000 can then be listed on the Raydium DEX. 



This is a developing story.



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Pump.fun pauses trading after apparent flash loan attack

Ben Strack

While we now have a better sense of who is, or was, invested in bitcoin ETFs, how these products are being used is a different story.&nbsp;



Various institutions have been filing so-called 13F filings in recent weeks, giving a glimpse into the buyers of the spot bitcoin ETFs that <a href="https://blockworks.co/news/bitcoin-etf-performance-first-four-months">attracted big demand after their January launches</a>, and the size of the positions.&nbsp;



Advisers and their clients are considering allocations anywhere from 1% to 10%, financial professionals told Blockworks — sometimes pairing bitcoin ETF holdings with exposure to crypto stocks, ETH and other assets.&nbsp;



And what might these positions be taking the place of? That depends.



Read more: <a href="https://blockworks.co/news/13f-filings-institutional-appetite-bitcoin-etfs">What 13F filings tell us about institutional appetite for bitcoin ETFs</a>&nbsp;



An April 25 filing showed Tennessee-based Fielder Capital held roughly $23 million worth of the Bitwise Bitcoin ETF (BITB) and the Grayscale Bitcoin Trust ETF (GBTC) combined, as of March 31.



The <a href="https://blockworks.co/tag/bitcoin-etf">bitcoin ETF</a> holdings of Kansas-headquartered United Capital Management’s amounted to roughly $35 million at that date.&nbsp;



Some have put even more money in.



Wolverine Asset Management and Envestnet had about $54 million and $42 million worth of the Fidelity Wise Origin Bitcoin Fund (FBTC), respectively, under its control.&nbsp;



Hightower Advisors disclosed owning $68 million worth of BTC funds.



We also found out that the State of Wisconsin’s Investment Board <a href="https://blockworks.co/news/wisconsin-discloses-blackrock-ibit-shares">bought 2.4 million shares</a> of BlackRock’s iShares Bitcoin Trust (IBIT) and over a million shares of GBTC.&nbsp;



Oh yeah, and hedge fund <a href="https://blockworks.co/news/empire-newsletter-bitcoin-etf-shareholders">Millennium Management revealed owning about 20 million IBIT shares</a> worth more than $844 million.&nbsp;



While a bunch of the bigger players didn’t return requests to discuss these positions, some smaller firms did. Let’s jump in.



<h2 class="wp-block-heading">Mulling an appropriate allocation size</h2>



“Our view has been [that crypto] deserves to be part of a holistic portfolio,” Fielder Capital Chief Investment Officer Stephen Korn told Blockworks.



Korn said he and members of his firm were “crypto skeptics” for a while before becoming more interested in the space in 2020.



The firm began allocating capital from its high-net-worth and ultra-high-net-worth clients to a private crypto fund run by Galaxy Digital, as well as GBTC, which at that point was available over the counter to accredited investors.



Its most recent 13F disclosure — showing a nearly $15 million position in BITB — reflects a more recent switching out of GBTC into the significantly cheaper Bitwise fund for certain clients, Korn noted. Some Fielder Capital clients remain invested in GBTC, with filings showing the firm held Grayscale ETF shares amounting to about $8 million.



Fielder Capital works with roughly 110 families and manages roughly $800 million in assets.&nbsp;



The “vast majority” of the firm’s clients have crypto exposure, Korn said.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;



“When a new client has come on — unless they’re strongly opposed — we’ve taken that position generally between 1.5% to 2% toward overall crypto,” he explained.



A crypto allocation, when made, could be as low as 1% in the case of clients around retirement age, for example. Others may have a crypto position appreciate to as high as 5% in a portfolio before the firm may choose to “trim it back,” Korn explained.&nbsp;



“We assume it can go to zero, and we want to make sure that if it goes to zero, it’s still appropriate from a client standpoint,” he said of crypto positions. “But we size all positions holistically on an overall portfolio basis.”



The allocation size between 1% to 5% for most Fielder Capital clients seems to be a popular choice for those putting money toward the space, according to a survey by the Digital Assets Council of Financial Professionals.&nbsp;



The findings showed that 87% of the advisers who recommend an allocation to crypto are suggesting a position between 1% and 5%.



As allocations go beyond 5%, “the impact on maximum drawdowns began to increase rapidly,” according to an August study by Bitwise Asset Management.



Read more: <a href="https://blockworks.co/news/bitcoin-boosts-60-40-portfolios">Bitcoin allocations trend positive for 60/40 portfolios: Bitwise</a>



Clients of Kansas-based United Capital Management may be a bit deeper into crypto than those of most other firms, with allocations of up to 10%, according to CEO Chad Koehn.



United Capital Management held about $22 million worth of FBTC as of March 31, filings show. It also owned shares of the ProShares Bitcoin Strategy ETF (BITO) amounting to about $13 million.



Koehn has been interested in bitcoin for nearly all of the asset’s 15-year history. He recalled getting exposure via GBTC in 2013 when bitcoin was at about $600.&nbsp;



“We pretty much bought and sold that like a stock,” he told Blockworks.



Things have evolved though, as GBTC would ultimately convert to an ETF in January. It would be <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">joined by nine other spot bitcoin funds</a>.



Just days before the Jan. 11 launches, Koehn swapped client positions in GBTC with shares of BITO out of fear the Securities and Exchange Commission might not let Grayscale’s ETF come to market.



United Capital Management later on swapped a majority of its BITO exposure for FBTC, noting that it liked Fidelity’s decision to custody its own bitcoin.



In all, Koehn said his firm holds about $50 million worth of “Web3” positions, which includes the bitcoin ETF shares. That represents nearly 10% of the $530 million or so assets that United Capital Management has under its discretion.



The firm has leeway to include crypto exposure in portfolios labeled between moderate and aggressive, the CEO explained. The majority of those $50 million worth of crypto-related positions is spread across roughly 500 clients.



<h2 class="wp-block-heading">Bitcoin ETFs’ portfolio role, and what it’s paired with</h2>



Bitcoin has become known to many as a digital store of value — often likened to gold — that does not rely on institutions and exists outside of the fiat currency system.&nbsp;



“Even if you strip that away, as a portfolio asset it’s pretty amazing,” Bitwise Chief Investment Officer Matt Hougan said during a panel <a href="https://www.youtube.com/watch?v=Uw4EE104ARE">discussion</a> last month. “It has low correlations to other traditional assets, it’s liquid, it has high return potential.”



In that way, he added, BTC is similar to early-stage venture capital or private equity, albeit without the liquidity restraints.



“We’re definitely trying to capture growth,” Koehn said of his firm’s bitcoin ETF positions. United Capital Management pairs exposure to those funds with allocations to the stocks of Coinbase, MicroStrategy and bitcoin miners like Marathon Digital and CleanSpark.



David Warshaw, founder of The Wealth Plan, said while he likes the 1% to 5% crypto allocation range for interested clients, the next questions are which crypto assets to include and what the position will be replacing.&nbsp;



Warshaw’s clients typically have a relatively small position to gold, he said — meaning he might instead choose to swap a portion of a client’s equity position to put toward crypto.&nbsp;



“But obviously if an adviser has a 10% gold allocation, it might make sense to take from that,” he explained. “I think that might be the asset class that is most comparable.”



The Long Island-based financial profession, whose firm manages about $65 million in assets for 125 households, has selected several of the spot bitcoin ETFs as options for his clients.



Beyond that, Warshaw uses <a href="https://blockworks.co/news/crypto-smas-hyperdrive">the Eaglebrook Advisors platform</a> for clients also interested in ether. For others who want even more crypto exposure, he utilizes a multi-coin strategy by Arbor Digital.



Fielder Capital clients with a crypto allocation remain also invested in gold, Korn said.&nbsp;



Like The Wealth Plan, the firm also doesn’t limit crypto-interested clients to BTC. A client’s crypto allocations generally have a 75% to 25% bitcoin-to-ether split.



Fielder Capital gains ether exposure via Fidelity, or the Grayscale Ethereum Trust — <a href="https://blockworks.co/news/grayscale-eth-trust-ethe-filing-vaneck-proshares">a product Grayscale is trying to convert to an ETF</a>.



Read more: <a href="https://blockworks.co/news/sec-decision-ether-etf-possibilities">Why the SEC could choose to deny ether ETFs, and what could happen next</a>



“We think about it as a small component of an overall portfolio that’s got a lot of potential upside in certain scenarios as governments potentially debase currency,” Korn said. “And then there’s the potential utility of some of the tokens, smart contracts…where we’ll see what happens.”



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How are advisers using bitcoin ETFs in client portfolios? It depends.

David Canellis

<h2 class="wp-block-heading">Out with a bang</h2>



The filing deadline for 13Fs was yesterday.



Millennium Management disclosed a huge position in BlackRock’s bitcoin ETF, holding roughly 20 million shares worth over $844 million.&nbsp;



Millenium also disclosed holdings in Fidelity, Grayscale, ARK and Bitwise, leading with nearly 13 million shares of Fidelity’s ETF. It owns roughly three million Grayscale shares, a mere 634,000 shares of Ark and 1.1 million shares of Bitwise’s ETF.



This makes Millennium the top holder of IBIT, but there’s a catch.&nbsp;



The thing is that this disclosure only shows the holdings on March 31. And I say that because Millennium is a multi-strategy hedge fund.&nbsp;



This isn’t to discount the sizable position they racked up — nearly $2 billion in bitcoin ETFs with $64 billion of assets under management — but this isn’t as straightforward as, say, Wisconsin. This kind of fund isn’t the buy-and-hold type, and could have shorted or sold off the position by now.



Read more: <a href="https://blockworks.co/news/vanguard-ceo-blackrock-bitcoin-etf">Yes, Vanguard’s new CEO supported BlackRock’s bitcoin ETF launch</a>



Sorry for the cold water there, but it’s easy to see such large numbers and get excited despite the fact that the reality is more complicated. However, I’d say that we still saw impressive holdings from an array of investment managers that are holding and some that may have just dipped their toes into the bitcoin ETF waters.&nbsp;



Let’s <a href="https://blockworks.co/news/wisconsin-discloses-blackrock-ibit-shares">go back to Wisconsin</a>. Earlier this week, the State of Wisconsin’s Investment Board (SWIB) bought 2.4 million shares of IBIT and over one million shares of GBTC. The board manages the Wisconsin Retirement System and State Investment Funds. It’s also more of a, shall we say, HODLer than a fund like Millennium.&nbsp;



Crypto Twitter went nuts about the filing, and rightly so. This is the kind of disclosure that can be used to see how investment managers are approaching bitcoin ETFs.&nbsp;



Outside of the flashy names, there were a <a href="https://blockworks.co/news/13f-filings-institutional-appetite-bitcoin-etfs">handful of very interesting disclosures</a>. For example, Hightower Advisors, a registered investment advisor, disclosed $68 million worth of bitcoin ETFs and manages over $100 billion in assets.&nbsp;



On Monday, <a href="https://blockworks.co/tag/bitwise">Bitwise</a> pointed out that, this time last week, there were roughly 560 disclosures reporting $3.5 billion worth of bitcoin ETF shares. Now that we’ve wrapped up, that figure could be a lot higher, especially if you count firms like Millennium. That alone puts investment managers at nearly $5 billion. To put that into perspective, US <a href="https://blockworks.co/bitcoin-etf">bitcoin ETFs</a> hold almost $59 billion in bitcoin.&nbsp;



When the 13Fs began to drop — roughly a month ago, we talked about how some analysts had warned that we might not necessarily see an appetite in this first slew of 13Fs (reminder that these forms are due on a quarterly basis) but clearly there’s interest.&nbsp;



This isn’t to say that they were totally wrong. The <a href="https://experts.bitwiseinvestments.com/cio-memos/whos-buying-bitcoin-etfs-according-to-13f-filings?_gl=1*17sch0n*_gcl_aw*R0NMLjE3MDkyMjM5NDEuQ2owS0NRaUE4NEN2QmhDYUFSSXNBTWtBdmtJVTFEZk12NW9TYnRoWWVGbkhUalppanJDR045TmlsQ2Jkd2x6R1QzZjRmWnRZNlBMUVBnWWFBakswRUFMd193Y0I.*_gcl_dc*R0NMLjE3MDkyMjM5NDEuQ2owS0NRaUE4NEN2QmhDYUFSSXNBTWtBdmtJVTFEZk12NW9TYnRoWWVGbkhUalppanJDR045TmlsQ2Jkd2x6R1QzZjRmWnRZNlBMUVBnWWFBakswRUFMd193Y0I.*_gcl_au*OTU4NjQ5MjI5LjE3MTM0NTY3NTI.&amp;_ga=2.110618821.1166902171.1715629445-825885356.1704924317">note</a> from Bitwise’s Matt Hougan earlier this week noted that professional investors own between 7-10% of all bitcoin ETF shares circulating. It’s still a retail game, but that could change by the next quarter and even the next year.&nbsp;



Hougan remains bullish, and rightfully so, because there is a factor of time here. To do the proper due diligence, a lot of these professionals will sit on the sidelines before they’re ready to jump in themselves.&nbsp;



New Hampshire state representative Keith Ammon, in a <a href="https://twitter.com/RepKeithAmmon/status/1789734542401552781">post</a> on X, expressed potential interest in his state looking into bitcoin ETFs as an investment.&nbsp;



The appetite is there, it just might take some time but we’re already seeing stunning (and sometimes unexpected!) positions from institutional managers.



13F season may be over for now, but the institutions are just getting started.



— Katherine Ross



<h2 class="wp-block-heading">Data Center</h2>



<ul>
<li>Arbitrum’s number of daily active <a href="https://app.artemis.xyz/chains">addresses</a> has more than doubled in the past month, from 317,000 to almost 800,000 yesterday (and close to 1 million on Tuesday).</li>



<li>Base and Arbitrum are jostling for the top Ethereum layer-2 spot, together <a href="https://dune.com/hildobby/blobs">posting</a> 55% of all blobs to Ethereum right now.</li>



<li>EigenLayer’s TVL is back <a href="https://dune.com/hahahash/eigenlayer">above</a> 5 million ETH ($15 billion) after losing more than 55,000 ETH ($165.4 million) post-airdrop reveal.</li>



<li>BTC has blasted past $66,000 to three-week highs, up almost 7% as of 8am ET.</li>



<li>Only five tokens in the top 100 are down in the past 24 hours: PEPE, TON, FLOKI, TRON and LDO, with the former worst off at minus 5%.</li>
</ul>



<h2 class="wp-block-heading">What’s the opposite of hopium?</h2>



There is no altcoin season.



At least, not yet. Which is strange.



We’ve heard it before — this time is different. Bitcoin hit an all-time high before the halving, a glitch in the four-year crypto market cycle.&nbsp;



What that really means, nobody knows. But it’s definitely “different,” so it must count for something.



These four charts, too, must matter in that case. <img loading="lazy" decoding="async" src="https://lh7-us.googleusercontent.com/PUb3Axf-Gr63eBzcCkbfb__7hz4v9_VuDtzxXgowEmph1-sRkYgkDaletFNVlJAdHGwcM7YJOXpI4yQUN2ejYh3MnmUDmqlsIU2s3NuCwzhx7PCvzVh49szZ0zVmHuBxdkcDuCS_UIXJeM2yrZZtPWo" width="624" height="468">



Bitcoin may have set a new all-time high in March but the rest of the crypto market is still well below its 2021 top



There’s no real textbook definition for what constitutes an “altcoin season.” But here’s my attempt:&nbsp;



<a href="https://blockworks.co/tag/altcoins">Altcoin</a> season can potentially start when the market capitalization growth of the crypto sector — minus the top 10 digital assets — surpasses that of bitcoin’s, starting from the cycle low. Altcoin seasons are confirmed if that flippening lasts three months or more.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/nWnz3AZxpVuHCwim25khdDF1XMdq_66sJEuOGUoHPfaB4q05SGRL83PiLjpn1YmTUDizAmlSrd396XTN2jVIHPvcWmV1l2QA8OEPdeUFjJqanBEcFrv4l_Pt2dssjbaTJZ8hdwXJ8Aig2HI-X8V2lEU" alt=""/><figcaption class="wp-element-caption">Keep in mind, this chart is in log view. If it wasn’t, you could barely bake out bitcoin’s growth</figcaption></figure>



Above is the bull market that ran until 2018. Notice that ether season started in the earlier portion of the cycle, in January 2016 (although it had some advantage in that it was less than a year old).&nbsp;



Altcoin season started about six months later, and even persisted for more than a month after bitcoin set a price record close to $20,000.



The start of altcoin season in the next bull market, which ran well into 2021, was much harder to spot.



Going by our very official definition, an altcoin season began almost straight away but was cut short by a three-month long bitcoin stint.&nbsp;



A much more substantive altcoin season began in May 2020, resulting in the market capitalization of the non-bitcoin crypto sector (minus the top 10) multiplying by more than 70 times.&nbsp;



Bitcoin’s market cap otherwise managed about 20x from the 2018 bottom to the 2021 top.



<img decoding="async" width="624" height="470.43749999999994" src="https://lh7-us.googleusercontent.com/gclLdn17TmHTaH9EmTiG0Fkk9NQOeRXbczoq72LeB8Vx499ln6auql-IozKlhjbKeUD438Sz2evXs_0AHQ4aeskgb6JAY2Jig3YwLhw2SFkJYYgXtRnDFoNde4il8gLFHhBygQkyDDSvJ3x3m1jk1O0">



DeFi summer made for a spectacular altcoin season during the previous cycle



This time around, there hasn’t been an altcoin season at all.&nbsp;



Since bottoming <a href="https://blockworks.co/news/ftx-meltdown-timeline">due to the FTX crisis in late 2022</a>, the closest crypto has come was in August 2023, when the market cap growth of crypto (minus the top 10) eclipsed ether’s.&nbsp;



But considering how poorly ether has performed against bitcoin, that doesn’t really say much.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/GSPzXeKOY8uw_Xg5y68UYUlTN_eOanshsTOi8gI5fo7Npx47DWXPjKsUZrS57y1iZ9FhTh9cjuMXuxwxwxgP_GJU34DAPDgrBmXJpnf-D5v4J59BX0cXQC3qYo4quL3Il8zyLzkwiuozYfjIs6NxJZM" alt=""/><figcaption class="wp-element-caption">Right now, crypto is about a whole order of magnitude away from altcoin season</figcaption></figure>



Is all this bullish or bearish?&nbsp;



First, for the hall-monitor types: past performance is not indicative of future results, yadda yadda.&nbsp;



But in the previous two bull markets, altcoin season happened well before bitcoin hit all-time high. That hasn’t been the case during this cycle.



The bull case would posit that only means we’re in for a major altcoin season soon — followed by another, even bigger, bitcoin high.



Bears would otherwise say that the lack of altcoin season indicates that the most recent bitcoin bull run was a blip, a market mistake fueled by boomer investors who aped into ETFs, just because.



— David Canellis



<h2 class="wp-block-heading">The Works</h2>



<ul>
<li>Neel Somani, the Eclipse CEO accused of sexual misconduct, has <a href="https://twitter.com/EclipseFND/status/1790939437695996019">stepped down</a>, according to the Ethereum L2 startup. Vijay Chetty, formerly chief growth officer, has been named CEO.&nbsp;</li>



<li>CME Group plans to offer <a href="https://www.ft.com/content/bfae5894-8fa7-4131-86ce-7f8614065985">spot bitcoin trading</a> to its clients, the FT reports.&nbsp;</li>



<li>Alexey Pertsev, a Tornado Cash developer sentenced to 64 months in prison, has <a href="https://www.coindesk.com/policy/2024/05/16/tornado-cash-developer-alexey-pertsev-appeals-guilty-verdict/?utm_medium=referral&amp;utm_source=rss&amp;utm_campaign=headlines">appealed</a> the ruling, according to CoinDesk.&nbsp;</li>



<li>Coinbase is developing a product to <a href="https://www.bnnbloomberg.ca/coinbase-targets-crypto-demand-in-600-billion-australian-pension-sector-1.2073605">capture</a> potential demand in the market for Australian self-managed pensions, Bloomberg reports.&nbsp;</li>



<li>Canadian regulators <a href="https://www.osc.ca/en/news-events/news/joint-investigation-leads-fraud-money-laundering-charges-against-self-proclaimed-crypto-king-and">charged</a> a 25-year-old “Crypto King” with fraud and money laundering in connection with an investment scam.&nbsp;</li>
</ul>



<h2 class="wp-block-heading">The Morning Riff</h2>



The Department of Justice flexed its understanding of crypto in an indictment naming two brothers responsible for an attack on MEV bots last year.&nbsp;



There’s a lot to talk about when it comes to the 19-page <a href="https://www.justice.gov/opa/media/1351996/dl">indictment</a>, but I trust that CT has that covered (for now).&nbsp;



Instead, I want to turn your attention to a couple of paragraphs around the planning before and after the brothers executed the attack.&nbsp;



The DOJ alleges that the two “created and shared with each other online a document setting forth their plans.”&nbsp;



Read more: <a href="https://blockworks.co/news/doj-charges-brothers-mev-bot-attack">DOJ charges 2 brothers tied to $25M attack on MEV bots last year</a>



Excuse me, good sir, are we talking about a Google Doc to plan this attack?&nbsp;



Not only that, but the two supposedly conducted Google searches for crypto attorneys, how to launder crypto, “does the United States extradite to [foreign country]” and the charges they’d later end up facing.&nbsp;



(In case you feel like this sounds familiar, Nirvana Finance hacker Shakeeb Ahmed also <a href="https://blockworks.co/news/crypto-hacker-used-google-after-hack">turned to Google</a> to ask the important questions following his exploit.)



While I could say something about their use of Google (I hope they at least tried to use Incognito Mode), I’m selfishly thinking about my own Google search history and how truly embarrassing it would be to see that end up in an indictment.&nbsp;



Practice safe Googling habits out there, friends.&nbsp;



— Katherine Ross



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Empire Newsletter: Taking stock of who’s buying which bitcoin ETF

Rep. Mike Flood

Rep. Wiley Nickel

Gary Gensler’s Securities and Exchange Commission has made a name for itself with its hostility towards cryptocurrency. Time after time, over the last few years, his agency has repeatedly thrown up roadblocks to the common-sense regulation of digital assets and overstepped its regulatory authority.



One of the SEC’s most detrimental actions on digital assets came in the form of a seemingly innocuous memo known as Staff Accounting Bulletin 121 (or SAB 121). SAB 121 is significant because it requires publicly traded banks to place digital assets on their balance sheet. This change contradicts a basic rule of bank custody: that bank custodial assets are always held off-balance sheet.&nbsp;



As a result, banks are staying on the sidelines. These highly regulated institutions have successfully offered custodial services to the traditional financial system for decades. They are the experts in their field, and keeping them out of this market is making Americans less safe.



The recent approval of the bitcoin ETPs revealed a problem: The bitcoin within these ETPs is not held by banks, and most have the same custodian.&nbsp;



If Chair Gensler wishes to protect retail investors, he should take this problem seriously. Whether you love crypto or hate crypto, digital assets are here to stay. We need to ensure American investors receive the same protections they would with any other asset class.



The content of the Bulletin <a href="https://blockworks.co/news/sec-staff-call-for-crypto-entities-to-show-liability-on-balance-sheet">is a problem</a>, but the process<a href="https://blockworks.co/news/senators-oppose-sec-accounting-standards"> is arguably even worse</a>. First, Gensler’s SEC issued this bulletin without conferring with the banking regulators — an obvious misstep. Then, they attempted to circumvent the customary regulatory process by issuing a bulletin rather than a rule. Their process foul was so egregious that even the nonpartisan Government Accountability Office threw a flag on it, declaring that SAB 121 is effectively a rule for the purposes of the Congressional Review Act.



Last week, the US House of Representatives had the chance to change the course of federal policy and restore the role of Congress in the administrative rulemaking process. With the support of 207 Republicans and 21 Democrats, the House <a href="https://blockworks.co/news/house-committee-resolution-against-sab121">advanced our bipartisan resolution</a>, H.J. Res. 109, which repeals SAB 121 under the CRA.



Now, the Senate is <a href="https://blockworks.co/news/senate-vote-sab-121">slated to take up H.J. Res. 109</a>. We’re hopeful that this bipartisan, bicameral resolution will send a message — It’s time to adjust the SEC’s misguided approach to digital assets.&nbsp;



We need a repeal of SAB 121 for the future of our digital economy, the safe custody of cryptocurrencies and the good of the American investor.



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Rep. Mike Flood, a Republican, represents Nebraska&#8217;s 1st Congressional District.



Rep. Wiley Nickel, a Democrat, represents North Carolina’s 13th Congressional District.



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It’s time to overturn SAB 121

The US Senate plans to vote on Joint Resolution 109 on Thursday, and sources on and around Capitol Hill say they believe the measure will draw enough Democrat support to pass.&nbsp;



<a href="https://www.congress.gov/bill/118th-congress/house-joint-resolution/109">Joint Resolution 109</a>, which passed the House of Representatives last week with <a href="https://blockworks.co/news/house-committee-resolution-against-sab121">bipartisan support</a>, aims to invalidate the Security and Exchange Commission’s controversial Staff Accounting Bulletin (SAB) 121.&nbsp;



SAB 121, introduced in March 2022 and enacted the following month, states that digital asset custodians should report a liability and “corresponding assets” on their balance sheets for all custodied cryptocurrencies.&nbsp;



While not an official agency rule, which would have required a public comment period, SEC staff <a href="https://www.sec.gov/oca/staff-accounting-bulletin-121">said</a> that SAB 121 is intended to guard against the “significant risks and uncertainties associated with safeguarding crypto assets.”&nbsp;



In the Republican-controlled House, 21 Democrats voted in favor of passing the resolution. In the Senate, the resolution needs a simple majority to pass, meaning at least two Democrats and all Republican Senators would have to vote in favor.&nbsp;



Four people familiar with the matter told Blockworks that multiple Democratic senators intend to vote in favor.&nbsp;



Longtime crypto advocate Sen. Kirsten Gillibrand, D-N.Y., told Blockworks that she will vote in favor of Joint Resolution 109 on Thursday.&nbsp;



“The rule was issued without proper consultation with the respective regulatory agencies or Congress and without going [through] a proper notice and comment period,” Gillibrand said.&nbsp;



“More importantly, it imposes an accounting approach that deviates from established standards, forcing financial institutions to count their customers’ digital assets as their own. This will limit options for consumers and leave them with less, not more consumer protection in cases of bankruptcy.”&nbsp;



Gillibrand last year co-signed a bipartisan <a href="https://financialservices.house.gov/uploadedfiles/2023-11-15_mchenry_lummis_sab_121_letter_-_final_11.15.pdf">letter</a> along with Sen. Cynthia Lummis, R-Wyom., and House Financial Services Committee Chair Patrick McHenry, R-N.C., opposing SAB 121 and asking the Federal Reserve, Federal Deposit Insurance Corporation, National Credit Union Administration and Office of The Comptroller of the Currency to step in.&nbsp;



While Democratic Reps. Ritchie Torres of New York and Wiley Nickel of North Carolina also signed the letter, Gillibrand was the only senator from her party who supported the effort.&nbsp;



Nickel on Wednesday penned a <a href="https://nickel.house.gov/uploadedfiles/nickel_sab121_letter_to_sec.pdf">letter</a> to SEC Chair Gary Gensler, asking the agency head to withdraw SAB 121 ahead of Thursday’s Senate vote. Nickel later told Blockworks that as of mid-afternoon Wednesday, the SEC had not responded to the letter.&nbsp;



“I&#8217;m just trying to make the point and the case to Gary Gensler and the SEC that they&#8217;re not serving President Biden&#8217;s interests by turning this issue into a partisan political football,” Nickel said in an interview. “And my hope is that Gary Gensler will withdraw SAB 121 and work in a bipartisan way on the custodial banking piece.”&nbsp;



The White House <a href="https://www.whitehouse.gov/wp-content/uploads/2024/05/SAP-HJRes109.pdf">said</a> last week that should the legislation make it to President Joe Biden’s desk, he would veto it.&nbsp;



Gensler defended SAB 121 in December, saying it was “just a staff accounting bulletin,” and it is consistent with precedent set in US bankruptcy court.&nbsp;



“It basically addresses whether liabilities should be on balance sheet, and what we have found actually in bankruptcy court, time and again, many times now, that indeed bankruptcy courts have said that crypto assets are not bankruptcy remote,” <a href="https://blockworks.co/tag/gary-gensler">Gensler</a> said during a December 2023 appearance hosted by the American Bar Association.&nbsp;



The SEC did not immediately respond to Blockworks’ request for comment.



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Senate predicted to overturn SAB 121 in vote Thursday, Hill sources say

Jeff Albus

Howdy!



Web3 is helping pay for both my coffee and my cell phone plan. The latter is the subject of today’s newsletter.&nbsp;



Who said the millennial lifestyle subsidy was <a href="https://www.theatlantic.com/newsletters/archive/2022/06/uber-ride-share-prices-high-inflation/661250/">dead</a>?&nbsp;



— Jack Kubinec



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<h2 class="wp-block-heading">How high can Helium float?</h2>



It’s been more than five months since Helium Mobile debuted its nationwide cell plan, one of the most ambitious applications of what crypto folks call DePIN (decentralized physical infrastructure) to date.&nbsp;



For $20 a month, Nova Labs, the developer behind the Helium Network, <a href="https://blockworks.co/news/helium-cell-plan-goes-nationwide">began offering</a> US residents unlimited data plans.&nbsp;



Helium Network participants run hotspot nodes that emit cellular coverage, and they’re paid in Solana-based MOBILE tokens for operating these miniature cell <a href="https://www.fierce-network.com/wireless/helium-mobile-launches-20month-plan-nationwide">towers</a>. In places where no Helium data is available, Nova Labs purchases coverage from T-Mobile.&nbsp;



The product has <a href="https://dune.com/rawrmaan/helium-mobile">gained</a> nearly 90,000 subscribers since its launch, including this newsletter writer. Nova Labs CEO Amir Haleem told me these growth numbers are solid when put in context.



“It looked like in all of last year, AT&amp;T, Verizon, and T-Mobile only added something like 300-400,000 subscribers combined,” Haleem said, adding that Helium Mobile hopes to reach 300,000 subscribers by the end of the year.&nbsp;



Publicly available data seems to tell a different story: <a href="https://www.investopedia.com/att-q1-fy2023-earnings-preview-7482020">AT&amp;T</a>, <a href="https://finance.yahoo.com/news/verizon-communications-inc-vz-reports-182823453.html">Verizon</a>, and <a href="https://www.t-mobile.com/news/business/t-mobile-q4-2023-earnings">T-Mobile</a> each reported millions of new subscribers last year. Nova Labs did not immediately return a request for comment on the discrepancy.&nbsp;



As a user, I’ll say Helium’s coverage has been as good as any of my past cell carriers. Recently, I enabled discovery mapping, where Helium Mobile pays MOBILE tokens in exchange for location data in order to determine where it needs to create more coverage. On my first day, I earned $0.78-worth of MOBILE — or roughly ½ of a slice of pizza, in New York terms.&nbsp;



But there’s a question that’s followed the Helium Network for a while now: <a href="https://blockworks.co/news/where-is-the-revenue-helium-investors-inquire">Can this make money</a>? Nova Labs added another revenue stream in January when it partnered with the Spanish telecommunications company Telefónica. The company is offloading some of its mobile data in parts of Mexico to the Helium Network. As data usage increases globally, a new network like Helium’s could prove valuable to data providers.&nbsp;



Still, the sustainability of the network’s MOBILE token-based incentives are something of an open question. MOBILE’s price leapt more than 2,000% right after Helium Mobile went nationwide in December, <a href="https://www.coingecko.com/en/coins/helium-mobile">according</a> to CoinGecko. Helium Mobile has yet to face a serious stallout in subscriber growth, which could potentially put downward pressure on the token price.&nbsp;



Haleem thinks that the inefficiencies in legacy cellular coverage make Helium an “obvious” application for DePIN.



“It&#8217;s just wildly too expensive to keep deploying infrastructure the way it&#8217;s being deployed,” Haleem said. “It&#8217;s hundreds of billions or trillions of dollars to deploy towers all the time. It doesn&#8217;t make any sense.”



— Jack Kubinec



<h2 class="wp-block-heading">Zero In</h2>



The Helium Mobile dashboard from Dune Analytics shows steady growth in newly minted subscriber NFTs, with 89,474 issued since January 2024.



<img loading="lazy" decoding="async" width="624" height="472" src="https://lh7-us.googleusercontent.com/IM3WOjmK3k0OI3QCRXqF1fRLgC5VDpegLcxS2XT5BNwls-tuh6bycCArtvhWr5tqksR5o3m9l78Jcr2hWRzzXxBxzqWwdVM1V9lEofG8LG4X2Ob577GmTer222r8GyuNSfwLDrdi8qr6YkssABcdcsg">



Initially, numbers soared, but enthusiasm flattened somewhat in recent weeks. On May 10, however, a spike occurred with 837 newly minted NFTs. This surge coincides with Helium Improvement Proposal 113, which increased rewards for Wi-Fi hotspots and reduced them for CBRS radios, incentivizing efficient coverage. The spike seemingly underscores the importance of user rewards on growth within the Web3 world. However, sustained long-term interest will likely depend on the quality of services, not just profit incentives.



— Jeffrey Albus



<h2 class="wp-block-heading">The Pulse</h2>



<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">For the first time ever on May 12, Solana generated more Total Economic Value than Ethereum in a single day <a href="https://t.co/nrCe7pMNjb">pic.twitter.com/nrCe7pMNjb</a>&mdash; Dan Smith (@smyyguy) <a href="https://twitter.com/smyyguy/status/1790429003553165393?ref_src=twsrc%5Etfw">May 14, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



On May 12, Solana surpassed Ethereum in daily economic value, recording $2.25 million in transaction fees and MEV — compared to Ethereum’s $1.98 million. The community has been abuzz since, with vibrant discussions spreading across social media.



In one X thread by <a href="https://twitter.com/smyyguy">Dan Smith</a> of <a href="https://www.blockworksresearch.com">Blockworks Research</a>, users pointed out the milestone’s intriguing timing. Users debated the significance of Ethereum’s L2 solutions, noting that reduced transactions on Ethereum’s L1 could reflect L2s working as intended rather than a decline in utility. This raised questions about whether L2 activity should be included in such metrics.



Mert Mumtaz, co-founder and CEO of Helius and co-host of the Lightspeed podcast, highlighted competitive dynamics, noting how other blockchain projects are targeting Solana developers with job offers. He has been vocal about the potential of Solana’s integrated approach and the limitations of Ethereum’s dominance.



Valuation disparities between Solana and Ethereum also fueled discussions, with some suggesting that Solana’s lower current valuation indicates significant potential for growth. This broader sentiment reflects a belief that Solana could see increased adoption and value as it continues to showcase its capabilities and attract more developers and users.



— Jeffrey Albus



<h2 class="wp-block-heading">One Good DM</h2>



A text from Arman Dezfuli-Arjomandi, a board member at the Helium Foundation:



<img loading="lazy" decoding="async" src="https://lh7-us.googleusercontent.com/HYP_lDuO3lOzrWi2Phdt2kTPkQiq_lqEfnsxZ6hxjYd7uWk5Y61Xu9nQBvcWaH2NlZtrACBVg1BWMi0RqagvfD2Vt5nc-Uc699QxaaZhzsXxi0iyBiPsaHNuPxFVf7KFOzJqXCrZnscnEJghDhG6_1s" width="624" height="611">



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Lightspeed Newsletter: Helium eyes the big guys

Two brothers accused of orchestrating an attack last year on Ethereum trading bots have been indicted by the US government.&nbsp;



The Department of Justice unsealed charges against Anton Peraire-Bueno and James Peraire-Bueno on Wednesday.



The pair are charged with conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering after the brothers allegedly tried to “exploit the very integrity of the Ethereum blockchain to fraudulently obtain approximately $25 million worth of cryptocurrency within approximately 12 seconds.”



Both were arrested on Tuesday and will face judges in Massachusetts and New York.&nbsp;



<a href="https://blockworks.co/news/validator-frontruns-mev-bots">The April 2023 exploit</a> targeted bots that seek profit by essentially trying to front-run transactions on the network. Maximum extractable value, or MEV, referring to the maximum value that can be obtained during transaction block production beyond rewards and fees.&nbsp;



Read more: <a href="https://blockworks.co/news/validator-frontruns-mev-bots">Ethereum Validator Goes Rogue, Frontruns MEV Bots for $25M</a>



The Peraire-Bueno brothers sought to “lure” MEV bots from the traders they allegedly targeted by “proposing at least eight specific transactions that…the defendants knew would cause the” targeted bots to include the lure transactions in the bundles, the indictment said. The exploit took advantage of a since-patched code vulnerability in the MEV-Boost software.&nbsp;



“In each of these eight bundles, the victim traders effectively bought substantial amounts of particularly illiquid cryptocurrencies…for approximately $25 million of various stablecoins.”&nbsp;



“Through the Exploit, which is believed to be the very first of its kind, Anton Peraire-Bueno and James Pepaire-Bueno manipulated and tampered with the process and protocols by which transactions are validated and added to the Ethereum blockchain. In doing so, they fraudulently gained access to pending private transactions and used that access to alter certain transactions and obtain their victims’ cryptocurrency,” a DOJ press release said.&nbsp;



To avoid detection, the two tried to conceal their identities through shell companies and private crypto addresses.&nbsp;



Following the attack, the brothers even “transferred the stolen cryptocurrency through a series of transactions designed to conceal the source and ownership of the stolen funds.”



They researched know-your-customer (KYC) procedures online, per the indictment, to learn the KYC standards and extradition procedures. They allegedly also researched the crimes they’d end up being charged with.



“As alleged in today’s indictment, the Peraire-Bueno brothers stole $25 million in Ethereum cryptocurrency through a technologically sophisticated, cutting-edge scheme they plotted for months and executed in seconds,” said Deputy Attorney General Lisa Monaco.



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DOJ charges 2 brothers tied to $25M attack on MEV bots last year

Vanguard has said it doesn’t believe in crypto’s investment case, and it doesn’t allow bitcoin ETFs to trade on its platform.



But the fund giant’s new CEO, Salim Ramji, led BlackRock’s ETF business as the company spurred an industry double-take with its bitcoin ETF filing last year.&nbsp;



So something’s got to give, right?&nbsp;



Maybe not soon, but ultimately yes, according to Ric Edelman, founder of the Digital Assets Council of Financial Professionals (DACFP).



Ramji was <a href="https://blockworks.co/tag/blackrock">BlackRock</a>’s global head of iShares and index investing before leaving the world’s largest asset manager in January. He started his career leading the firm’s corporate strategy and moved on to become its head of US wealth advisory.



Vanguard said Tuesday that Ramji would succeed Tim Buckley as chief executive on July 8. The firm had revealed in February that Buckley was set to retire by the year’s end.&nbsp;&nbsp;



Though Ramji left BlackRock the month that US spot bitcoin ETFs <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">gained Securities and Exchange Commission clearance</a>, he was of course involved in the lead-up.



Fast-forward four months, and BlackRock’s iShares Bitcoin Trust (IBIT) has so far <a href="https://blockworks.co/news/blackrock-bitcoin-etf-inflows-streak">led the category with $15.5 billion of net inflows</a>. IBIT trails the segment’s largest fund — the Grayscale Bitcoin Trust ETF (GBTC) — by less than $1 billion in assets under management.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-etf-performance-first-four-months">Strong start, slowing demand: The first 4 months of US spot bitcoin ETFs </a>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;



In a July 2023 <a href="https://twitter.com/BloombergTV/status/1678499259581100040">interview</a> on Bloomberg TV, Ramji said the company was “incredibly excited” about blockchain technology given its ability to remove considerable “friction” across the financial ecosystem.



The then-BlackRock executive likened the planned bitcoin product to its physical gold ETF — the iShares Gold Trust (IAU) — launched in 2005.



“The gold is held in custody in a vault, which is remote from us, but it’s now easier to transact in gold using our gold ETFs,” he said at the time. “We’re applying that same philosophy to other new and emerging asset classes like bitcoin, just as we did to gold 20 years ago and just as we did to bonds 20 years ago.”



The <a href="https://blockworks.co/tag/bitcoin-etf">bitcoin ETF</a> bid was an effort to “help investors gain access to parts of the market that otherwise have been more difficult or really expensive or opaque for them to access otherwise,” Ramji added.&nbsp;&nbsp;&nbsp;



For what it’s worth, Vanguard’s Tuesday news release does not mention IBIT or crypto.



A company spokesperson did not immediately return a request for further comment.&nbsp;



While brokerage firms Fidelity and Charles Schwab, for example, give investors access to trade bitcoin ETFs, Vanguard does not. The company has called the investment case for cryptocurrencies “weak” — noting that most crypto assets “lack intrinsic economic value” and are highly volatile.



Read more: <a href="https://blockworks.co/news/vanguard-disallows-bitcoin-etf-trading">As spot bitcoin ETF volumes soar, Vanguard is blocking such trades</a>



DACFP’s Edelman, who also founded Edelman Financial Services, said he believes Ramji will bring a more “market-focused approach” to Vanguard.&nbsp;



After all, he noted, the company’s focus on being the cheapest doesn’t give it as much of an edge in an increasingly low-cost industry.



“Paternalistic views that prevent investors from owning what they want won’t foster growth either,” Edelman told Blockworks.



Bloomberg Intelligence analyst James Seyffart said in an X <a href="https://twitter.com/JSeyff/status/1790504096195084583">post</a> that he doesn’t think the hire means Vanguard launches a bitcoin ETF in the near-term.



“But I think Salim could reverse Vanguard’s stance on not allowing their clients to buy spot bitcoin ETFs on their brokerage platform,” Seyffart added.



Bitcoin won’t be the first item on Salim’s agenda, Edelman noted.



“But eventually…Vanguard will indeed offer bitcoin ETFs,” he said. “From a purely business perspective, it’s foolish not to. And Salim is not foolish.”



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Yes, Vanguard’s new CEO supported BlackRock’s bitcoin ETF launch

Circle’s looking to move across the pond.&nbsp;



The USDC issuer confirmed to Blockworks that its parent company filed the “required paperwork with the High Court of the Republic of Ireland to redomicile the company to the US.”



<a href="https://www.bloomberg.com/news/articles/2024-05-15/usdc-issuer-circle-to-make-us-legal-home-ahead-of-ipo">Bloomberg</a> first reported the news.



Earlier this year, Circle revealed that it confidentially filed for an initial public offering in the US in January of this year. The approach is common and has been used by other companies such as Airbnb and Uber. 



Read more: <a href="https://blockworks.co/news/circle-files-ipo">Circle confidentially files for US IPO</a>



“The number of shares to be offered and the price range for the proposed offering have not yet been determined. The initial public offering is expected to take place after the [Securities and Exchange Commission] completes its review process, subject to market and other conditions,” the press release said at the time.&nbsp;



This isn’t the first time that <a href="https://blockworks.co/tag/circle">Circle</a>’s expressed interest in a US IPO, though the move from Ireland could suggest that the company is pursuing the traditional approach to going public.&nbsp;



Circle had previously <a href="https://blockworks.co/news/circles-public-listing-plans-undeterred">expressed interest in going public</a> through a special-purpose acquisition company or SPAC. The route — which requires the private company looking to go public to merge with an existing publicly listed shell company — was popular throughout 2021 and 2022.&nbsp;



While the S-1 filed with the <a href="https://blockworks.co/tag/sec">SEC</a> hasn’t been publicly released yet, it shows that the company is pursuing the more traditional IPO model this time around. 



Per SEC <a href="https://www.sec.gov/corpfin/announcement/draft-registration-statement-processing-procedures-expanded">rules</a>, potential investors won’t be able to publicly view the S-1 filed with the regulatory agency until 15 days before the company starts its roadshow. This changes, however, to 15 days prior to the registration date if a company chooses to not pursue a roadshow.



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Circle says it plans to ‘redomicile’ company in the US

Miller Whitehouse-Levine

We find ourselves in a strange interregnum for crypto policy in the United States.&nbsp;



On one side, Securities and Exchange Commission Chair Gary Gensler is <a href="https://blockworks.co/news/secs-gensler-crypto-disclosures-for-investors">ramping up an all-out war</a> against the crypto industry, accelerating enforcement actions and saber-rattling, perhaps in anticipation of being replaced after November&#8217;s elections. The aim seems straightforward: Let’s do as much damage to crypto while we have the chance.&nbsp;



On the other side, a growing bipartisan group in Congress is working, ploddingly, towards new crypto-focused legislation in an acknowledgment that the current status quo is untenable.&nbsp;



The slow and steady legislative pace gives Chair Gensler the chance to be the fox in the crypto henhouse while our lawmakers are occupied with other jobs on the farm.&nbsp;



The insatiable campaign against crypto undermines the work that Congress has done so far to address crypto’s long-standing regulatory quagmire. It’s time the farmers regain control and flush the fox out.



Indeed, Congress has made notable progress towards addressing key regulatory issues, even if their efforts remain imperfect and incomplete. Some of the pieces of draft legislation could prove a net positive for the crypto ecosystem with considered revisions. Rep. Patrick McHenry and Rep. Maxine Waters&#8217; yet-to-be-released stablecoin bill has <a href="https://www.coindesk.com/policy/2024/03/20/key-us-lawmaker-mchenry-says-house-has-workable-stablecoin-bill/">garnered decent bipartisan support</a> and could reach a House floor vote this session. McHenry&#8217;s FIT21 bill on crypto market structure is <a href="https://rules.house.gov/bill/118/hr-4763">headed for a full-House vote at the end of May</a>.&nbsp;&nbsp;



Just last week, <a href="https://www.axios.com/2024/05/08/house-vote-sab121-sec-guidance-crypto-custody">a bipartisan House coalition repealed</a> the SEC&#8217;s punitive SAB 121 accounting rules for crypto — a clear rebuke of Gensler&#8217;s aggressive tactics, and a sign there is Congressional appetite to move quicker than the typical glacial speed they are accustomed to with core crypto issues.&nbsp;



These moves demonstrate that lawmakers at least seem to grasp that if they don&#8217;t act soon to rein in Gensler&#8217;s crusade, they may end up protecting just a <a href="https://blockworks.co/news/crypto-industry-will-move-offshore-if-congress-doesnt-act-executives-warn">rump of what was once a vibrant American crypto industry.</a>



What is to be done? Congress faces two key constraints: It&#8217;s an election year when major legislative lifts are difficult, and they must consolidate enough bipartisan consensus to push comprehensive crypto legislation over the finish line.



Fortunately, new polling indicates growing public engagement on the crypto issue which could provide productive tailwinds.&nbsp;



According to a <a href="https://theblockchainassociation.org/cryptovoters/">recent Harris Poll</a>, most voters don&#8217;t trust elected officials to understand innovative technologies like crypto, and over half are concerned about policymakers stifling innovation through heavy-handed regulation. Those sentiments are warning lights for the SEC and are opportunities for members of Congress. Former President Trump&#8217;s <a href="https://x.com/EleanorTerrett/status/1788375364223283485">recent overtures</a> embracing crypto and courting crypto-aligned voters should also add impetus for Congressional action.



Read more from our opinion section: <a href="https://blockworks.co/news/eth-not-security-howey">No, ETH isn’t suddenly a security now</a>



Ultimately, lawmakers must recognize that an overzealous regulator is attempting to unilaterally decide the fate of an ecosystem that is vitally important to America&#8217;s future economic competitiveness and technological leadership. This circumvents the proper role of Congress in setting foundational rules, and our elected officials should reassert their prerogative rather than ceding that power to crypto&#8217;s most fervent detractors.



The clock is ticking. As election day approaches, the impetus for Chair Gensler to gobble up even more crypto hens will grow stronger. Our nation&#8217;s legislative farmers must return to the crucial task of protecting and catalyzing the homegrown crypto ecosystem. They’re close to drafting fit-for-purpose rules that would clarify how the government understands and regulates crypto, though much more work needs to be done.&nbsp;



If they don’t move quickly, they may find the hen house empty and wonder why they didn’t act sooner.



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<div class="wp-block-post-author-biography">Miller has overall strategic and operational responsibility for the execution of the organization’s mission and goals. Prior to joining the fund, Miller led the Blockchain Association’s policy operation and worked at Goldstein Policy Solutions on a range of public policy issues, including crypto. Miller holds a B.S. in international politics and a minor in Mandarin Chinese from Georgetown&#8217;s School of Foreign Service.
</div>


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It’s time for Congress to protect the crypto henhouse

<h2 class="wp-block-heading">A new scare tactic</h2>



Crypto mixers, and those who make them, are having their day in court.&nbsp;



Yesterday, Tornado Cash developer Alexey Pertsev was <a href="https://blockworks.co/news/alexey-pertsev-tornado-cash-guilty">found guilty of money laundering</a> and sentenced to 64 months in a Dutch prison.&nbsp;



The sentencing, which happened after a brief trial in March, left CoinCenter’s Peter Van Valkenburgh “sad” and “angry that the money laundering laws in the Netherlands have such a low threshold for intent, especially mere negligence.”



But the verdict shouldn’t impact US cases, which is important to note because <a href="https://blockworks.co/tag/tornado-cash">Tornado Cash</a> co-founder Roman Storm is expected to face a trial later this year.&nbsp;



So let’s zoom out for a second here.&nbsp;



Crypto mixers, such as Tornado Cash, have clearly hit a nerve with governments outside the US. But, as we previously mentioned here, the US government is looking to seriously inhibit or scare people away from these services. Tornado Cash was <a href="https://blockworks.co/news/roman-semenov-tornado-cash-ofac-list">sanctioned years ago</a>, then both Storm and Roman Semenov were charged. (Semenov is notably still at large, though Storm was arrested.)



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/8AcwGA-hMmu3Qec1xlLPHqD85nj2Mc6DHjQ2s_NgBuux66vOKMeg_YqASNZLOQyU1SlYHgUejbRAARHyukSUy9BV6F3Rj2sZ-c_6aKMoSZZuc-n2Nn0v_MwdyeUunJif36UfiGCIBfMzcqf0oruSyS8" alt=""/></figure>



The chart from Dune shows that there are still cash deposit transactions happening on Tornado Cash, though there’s clearly been a drop-off since the March 2022 highs. The US government sanctioned Tornado Cash in August 2022, making it illegal for US citizens to interact with the protocol, which is reflected in charts of deposit and withdrawal transactions.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/sNZzs8Jh4Qw_JoezRWH20lQfq8pO_ys_2VWtQqcsuaC7zd2_1YKaXM9k-26yEXjKQEOwG5ukqGNsEYhdHKwJAW75K-sXEGzFnpqWY6J0GFXIumOeDJyEm85GkWKqwDj-Q4sYxWqTHRslM84LBirDv3M" alt=""/></figure>



The privacy tool has many lawful users and provides a receipt mechanism to prove the provenance of withdrawn funds when requested by an appropriate authority.



Then there’s Samourai Wallet, which <a href="https://blockworks.co/news/doj-arrests-founders-samourai">saw a bit of a different approach</a> from the US government.



The Department of Justice teamed up with other international agencies to not only arrest two co-founders — William Lonergan Hill and Keonne Rodriguez —- but also seized the web servers and domain “in coordination with law enforcement authorities in Iceland.”



The indictment accuses the Samourai Wallet account on X of encouraging users to “launder proceeds” using its services.&nbsp;



What’s the aim here for the government? Is it to suppress the technology or is it to punish those behind it?



That’s the question I’ve been mulling over when looking at the approach that the DOJ has taken to both cases.&nbsp;



CoinCenter’s note earlier this month explained how the DOJ changed tack when it comes to the developers.&nbsp;



As we <a href="https://blockworks.co/news/binance-changpeng-zhao-deal-unpacked">talked</a> about previously, guidance from FinCEN — the Treasury’s financial enforcement bureau — has long suggested that crypto shouldn’t count as funds.



The agency further wrote: “The person participating in the transaction to provide additional validation at the request of the owner does not have total independent control over the value.”



These points are worth bringing up once again because of the potential shift they show. The <a href="https://blockworks.co/tag/doj">DOJ</a> has seemingly disregarded such guidance in favor of directly targeting the developers.&nbsp;



And, while the Dutch legal system is totally separate and neither the US nor the Dutch systems will have any direct influence on these types of cases, the underlying theme here is that multiple governments have targeted the developers behind the technology.



Is that enough to end mixers? In crypto, probably not as seen by the aforementioned charts. But it’s clearly enough to scare folks from using the services.&nbsp;



<h2 class="wp-block-heading">Data Center</h2>



<ul>
<li>Among memecoins, FLOKI’s <a href="https://www.coingecko.com/en/crypto-gainers-losers?top=100">leading</a> the gains — up 10% — this morning as Roaring Kitty continues to post videos on X. </li>



<li>Grayscale’s bitcoin ETF saw outflows of $50 million on Tuesday, while ARKB brought in $133 million, per <a href="https://farside.co.uk/?p=997">Farside data</a>. </li>



<li>Ark’s Bitcoin Monthly <a href="https://ark-invest.com/crypto-reports/the-bitcoin-monthly-april-2024-report/?utm_campaign=The%20Bitcoin%20Monthly&amp;utm_medium=email&amp;_hsenc=p2ANqtz-9omYG7oTStDKnjIqc2-iL8QUtnSf0MsTMGsbQs9fWfDd-FC9mGUNfLMVvcbUH9OVM0Dz6w-ikAqe-DaoKGfL9u4KYVEQ&amp;_hsmi=307073862&amp;utm_content=307073862&amp;utm_source=hs_email">noted</a> that there are two “crucial” support levels remaining for bitcoin: the 200-day moving average of $48,335 and the on-chain mean, which is $42,538.</li>



<li>BTC’s price is hovering around $62,000, a 1.2% change in the last day.</li>



<li>Core Consumer Price Index month-over-month fell to 0.3%, just under the 0.4% expected in April. </li>
</ul>



<h2 class="wp-block-heading">The end is near</h2>



After a few years of bankruptcy proceedings, we may be near the endgame when it comes to the companies that failed at the beginning of last cycle’s downturn.&nbsp;



As we wrote about last week, <a href="https://blockworks.co/tag/ftx">FTX</a> put forth a creditor payback plan that could be approved by both a creditor vote and, in June, a court.



But it may not be all smooth sailing for the former crypto exchange, as Blockworks’ Ben Strack and I <a href="https://blockworks.co/news/ftx-latest-creditor-payback-proposal">previously reported</a>. The estate’s plan does have some “controversial elements” that aim to shield some of the non-debtor entities from potential future lawsuits, Matthew Gold, partner at Kelinberg Kaplan, told Ben last week.&nbsp;



<a href="https://blockworks.co/tag/ftx">FTX</a>’s bankruptcy — though it came at a time when there were a number of other bankruptcies such as Celsius, Voyager and BlockFi — <a href="https://blockworks.co/news/ftx-comparison-crypto-bankruptcies">stands on its own</a>, said Jonathan Groth, partner at DGIM Law.



The bankrupt exchange is a “special case” in comparison.&nbsp;



“The plan that they&#8217;re proposing [and the fund they’ve amassed] to repay creditors is really based more on the liquidation of securities holdings through FTX’s branch of Alameda and other recoveries…just really selling off other assets,” Groth said.



Voyager and Celsius returned between 35% and 65% to 85%, respectively, to creditors. Just looking on a numbers basis, FTX is saying it is planning to make customers whole and even pay interest to some. That, of course, doesn’t take into account the appreciation of certain cryptocurrencies such as bitcoin. When FTX filed for bankruptcy, bitcoin was under $20,000. Now, of course, it’s above $60,000. That’s clearly a massive change.&nbsp;



However, the bankruptcy code — which Judge John Dorsey <a href="https://blockworks.co/news/ftx-bankruptcy-victim-compensation">upheld earlier this year</a> at a hearing after some creditors said they wanted their <a href="https://blockworks.co/news/ftx-former-customers-oppose-bankruptcy-plan">payouts to recognize current prices</a> — says that customers should be repaid based on the date that the company declared bankruptcy.&nbsp;



FTX also benefited from the asset location, managing to cobble together between $14 billion and $16 billion to repay creditors. Creditors are owed $11 billion.



“In any of these other insolvency proceedings where the estate and the fiduciary may be lucky enough to still hold some crypto assets, they may be able to benefit from this market upswing that we’re seeing,” Groth said.



Even if some creditors are unhappy with the plan, Groth said “it’ll be really difficult for a court to look at this and say, ‘How unhappy can you be?…You’re being made whole.’”&nbsp;



— Katherine Ross



<h2 class="wp-block-heading">The Works</h2>



<ul>
<li>Circle is looking to make the US its legal home base ahead of its planned IPO, Bloomberg <a href="https://www.bloomberg.com/news/articles/2024-05-15/usdc-issuer-circle-to-make-us-legal-home-ahead-of-ipo">reports</a>. </li>



<li>Peter Thiel’s VC fund and Vitalik Buterin <a href="https://www.bloomberg.com/news/articles/2024-05-14/peter-thiel-s-founders-fund-backs-election-betting-with-polymarket-funding">backed</a> Polymarket in a $70 million raise across Series A and Series B rounds.</li>



<li>Ex-FTX executive Ryan Salame is <a href="https://www.coindesk.com/policy/2024/05/15/former-ftx-exec-ryan-salame-asks-for-lenient-18-months-in-prison/">seeking</a> an 18-month sentence, according to a court filing.</li>



<li>Robinhood <a href="https://blockworks.co/news/robinhood-solana-staking-europe">announced</a> its first-ever staking product — Solana staking — for customers in Europe. </li>



<li>Berachain’s $1.5 billion valuation following its $100 million Series B raise last month <a href="https://news.crunchbase.com/venture/unicorn-board-april-2024-ai-web3-e-commerce-xaira/">earned</a> it a spot on Crunchbase’s Unicorn Board. </li>
</ul>



<h2 class="wp-block-heading">The Morning Riff</h2>



Former Binance CEO <a href="https://blockworks.co/tag/changpeng-zhao">Changpeng Zhao</a> is about to have a lot of time on his hands as he prepares to serve his four-month prison sentence in the US. Or, as he called it, “quiet time.”



So what’s a guy to do with all that time?



Sounds like CZ might be going the very classic route of publishing a book. The former executive said he’ll “give it a try” in a <a href="https://twitter.com/B_daojia/status/1789506320204435781">response</a> on X.&nbsp;



What could the said book be about? I’m thinking not about what led to his prison sentence, and Zhao — at least in court — said he’d go back and “change that part of Binance’s story” when discussing what led him to be in front of a judge for sentencing.&nbsp;



Read more: <a href="https://blockworks.co/news/empire-newsletter-cz-vs-sbf-sentencings">Empire Newsletter: Why CZ and SBF’s sentencings were so different</a>



CZ’s newest endeavor is Giggle Academy, a nonprofit education platform, so maybe he’ll pen a self-help book or advice on how to be the next crypto kingpin.&nbsp;



Actually, the latter might be helpful — depending on what he writes about — because we’ve seen quite a few topple thanks to casual law-breaking and deceptive practices. But, hey, there’s always room for improvement.&nbsp;



Either way, there’s no denying that CZ is a force within crypto even putting the guilty plea aside. I’m hoping that his book ends up in the hands of our very own Molly Jane Zuckerman.&nbsp;



— Katherine Ross



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Empire Newsletter: Crypto mixers have their day in court

Yet another potential milestone for crypto is just days away.



Or, we may find out US spot ether ETFs are — for now — not meant to be.



The Securities and Exchange Commission’s decision on such funds by fund firms Ark Invest and VanEck, slated to come by May 23, is only half of what to watch for next week.



In the case of a denial, the SEC is set to give its reasoning. There is also the question of whether a lawsuit follows, how quickly it is filed, and who would lead that charge.



<h2 class="wp-block-heading">Expected reasons for possible denial&nbsp;</h2>



The SEC was essentially forced to <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">approve spot bitcoin ETFs</a> in January after Grayscale Investments notched a legal victory against the regulator.



Then there was SEC Chair Gary Gensler’s warning in his statement published a day before spot bitcoin ETFs launched on Jan. 11: “Today’s commission action is cabined to ETPs holding one non-security commodity, bitcoin.”



A reasonable interpretation: Not so fast, prospective ether ETF issuers.&nbsp;



Read more: <a href="https://blockworks.co/news/ether-etf-approval-unlikely-soon">Ether ETFs coming in May? Here’s why many are bearish</a>



“I think the SEC is aware that sponsors may assume an air of inevitability of additional spot crypto approvals once multiple crypto ETPs have been approved,” said Arie Heijkoop, partner at law firm Haynes Boone. “It will take an extra cautious approach as a result before approving any further spot crypto ETP — at least under this current administration.”



Perhaps the biggest elephant in the room is the SEC’s reticence to call ether a security or a commodity.



A March 8 <a href="https://www.federalregister.gov/documents/2024/03/08/2024-04928/self-regulatory-organizations-the-nasdaq-stock-market-llc-order-instituting-proceedings-to-determine">filing</a> confirms the regulator continues to mull this question, Van Buren Capital general partner Scott Johnsson said in an X post.



The <a href="https://blockworks.co/tag/sec">SEC</a> asks in the document whether the listing exchange — in this case Nasdaq — filed to properly list and trade shares of BlackRock’s proposed iShares Ethereum Trust “given the nature of the underlying assets held by the trust.”



<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">The obvious purpose is to potentially deny on the basis that these spot filings are improperly filed as commodity-based trust shares and do not qualify if they are holding a security.&mdash; Scott Johnsson (@SGJohnsson) <a href="https://twitter.com/SGJohnsson/status/1790219763211198510?ref_src=twsrc%5Etfw">May 14, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The document also asks whether arguments supporting the list of spot bitcoin ETFs apply to ether given “its proof of stake consensus mechanism and concentration of control or influence by a few individuals or entities.”



Read more: <a href="https://blockworks.co/news/sec-investigation-of-eth-as-security">SEC has been investigating ETH for over a year, new court filing shows</a>&nbsp;



Indeed, K&amp;L Gates partner Richard Kerr noted during an ETF Prime <a href="https://etfstore.com/vanecks-matthew-sigel-on-spot-ether-etf-hodl-cryptos-investment-case/">podcast</a> last week that the proposed spot ether ETFs are registered under the Securities Act of 1933 as commodities-based products. They would not be allowed to trade under that designation if ether is deemed a security, he noted.&nbsp;



More likely, Kerr added, the SEC will “very carefully try to push the decision on ETH down the line” by saying the correlation between the ether futures and spot markets is not as strong.&nbsp;



The SEC <a href="https://blockworks.co/news/ether-futures-etfs-vaneck-proshares-bitwise-offerings#">allowed ETFs that hold ether futures contracts</a> to start trading last October.&nbsp;&nbsp;&nbsp;



Matthew Sigel, VanEck’s head of digital assets research, said during the same podcast he does not believe such an argument holds water.



A March <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/rule-filings/filings/2024/SR-NYSEArca-2024-31.pdf">analysis</a> by crypto asset manager Bitwise <a href="https://twitter.com/BitwiseInvest/status/1773427635919458551">found</a> the correlation values for the ether futures and spot markets, when compared to bitcoin, differ up to 0.2% for the hourly correlation, 5% for the five-minute correlation and 8% for the one-minute correlation.



“We think the SEC may use any reason, not necessarily a logical one, to disapprove,” Sigel said. “But we would highlight that the correlation between ethereum spot and ethereum futures…is similar to what the SEC found acceptable for the approval of spot bitcoin ETFs.”



Approved or not, multiple industry watchers previously told Blockworks the SEC would almost definitely not allow ether products that stake their holdings. Ark Invest and 21Shares, which previously <a href="https://blockworks.co/news/ark21shares-ether-etf-staking">proposed for their planned fund to stake the fund’s ETH</a>, did not include such language in a May 10 <a href="https://www.sec.gov/Archives/edgar/data/1992508/000121390024041758/ea0205580-01.htm">filing</a>.&nbsp;



<h2 class="wp-block-heading">Would a lawsuit follow?</h2>



An SEC denial could be challenged, as the bitcoin ETF rejections ultimately were.



Some lawyers have told Blockworks a court decision could be the best route to seeing these products launch.&nbsp;



Read more: <a href="https://blockworks.co/news/ether-etf-sec-question">Court decision could be only way US spot ether ETFs see light of day</a>



But Johnsson <a href="https://twitter.com/SGJohnsson/status/1788973146478948614">said</a> he would be surprised to see a lawsuit after Grayscale withdrew its ether futures ETF application earlier this month.&nbsp;



<a href="https://blockworks.co/tag/grayscale">Grayscale</a> CEO Michael Sonnenshein <a href="https://www.dlnews.com/articles/regulation/grayscale-to-focus-on-spot-ethereum-products-says-ceo/">reportedly</a> said at an event hosted by the Financial Times that the firm “decided to focus our energy on our spot products.”&nbsp;



A company spokesperson declined to comment further on the proposal withdrawal.&nbsp;



Johnsson noted in a separate X <a href="https://twitter.com/SGJohnsson/status/1787955970762490042">post</a> that keeping the product in registration would have put the SEC “on record with a 19b-4 order” related to ether futures.&nbsp;



A 19b-4 form is filed by stock exchanges and other entities to record a rule change with the SEC. A regulatory decision on such a rule change was “critical” in Grayscale’s legal victory against the SEC last year, Johnsson added.



Existing US ether futures ETFs, registered under the Investment Company Act of 1940, did not go through the 19b-4 process.



Heijkoop said he doesn’t expect Grayscale’s ether futures product withdrawal to impact a decision to sue the SEC, if it comes to that.



“If a litigant can show strong correlation between ether futures and spot prices, I think the same premise of the Grayscale bitcoin court ruling should provide legal precedent here, which is that disparate treatment of futures and spot market products is ‘arbitrary and capricious’ in cases where strong correlation is present,” Heijkoop told Blockworks.&nbsp;



Neena Mishra, director of ETF research at Zacks Investment Research, puts low odds on a lawsuit, noting the regulator should approve the products based on the correlation argument.&nbsp;



Issuers, she guessed, would re-apply for ether funds and hope for more engagement with the SEC within the next 240-day period.



“The legal process is costly, and spot ether ETFs are likely to attract much less interest from investors compared to spot bitcoin ETFs,” Mishra explained. “Moreover, with elections approaching, issuers may prefer to wait until the outcomes are known. They will hope for an SEC chair who is more favorable towards cryptocurrency.”



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Why the SEC could choose to deny ether ETFs, and what could happen next

Robinhood’s European crypto branch launched Solana staking.



The feature will offer roughly 5% APY at launch, though that could vary as staking rewards change, Robinhood Crypto general manager Johann Kerbrat told Blockworks in an interview.&nbsp;



This puts Robinhood Crypto a tick below Coinbase, which offers an estimated reward of 5.42% for Solana stakers. The Phantom wallet offers Solana staking with an APY as high as 7.58%.



The firm chose Solana for its first staking product because SOL’s one of the most popular tokens among its EU customers, and staking on <a href="https://blockworks.co/tag/solana">Solana</a> is simpler than on Ethereum, Kerbrat said.



Read more: <a href="https://blockworks.co/news/robinhood-trading-volume-february">Robinhood’s crypto trade volume rose 10% in February</a>



(Bitcoin is the most-held crypto among EU customers, <a href="https://blockworks.co/tag/robinhood">Robinhood</a> said in a press release.)



Kerbrat mentioned that the company was drawn to Solana’s shorter bonding period — the amount of time it takes before newly-staked assets begin earning yield. Solana’s bonding <a href="https://solana.com/staking#how-do-i-estimate-and-view-my-staking-rewards">period</a> is roughly two days, while Ethereum’s <a href="https://help.coinbase.com/en/prime/staking/unbonding">varies</a> from a few days to a few weeks.



When asked if Robinhood Crypto would add <a href="https://blockworks.co/tag/staking">staking</a> for additional assets — like Ethereum — in the future, Kerbrat said “we are definitely thinking about it,” but declined to go into specifics.&nbsp;



Robinhood Crypto launched in December as a crypto trading app in the European Union. The entity is registered and regulated in Lithuania, according to a Robinhood blog <a href="https://newsroom.aboutrobinhood.com/robinhood-launches-crypto-trading-in-the-eu/">post</a>. The company’s crypto arm noted that its app is highly downloaded by users in Poland, Italy and Lithuania.



Read more: <a href="https://blockworks.co/news/robinhood-eyes-eu-expansion">Robinhood looks to jumpstart crypto trading revenue via EU expansion</a>



Robinhood Crypto lists 33 tokens, as opposed to Robinhood’s US trading app, which only <a href="https://robinhood.com/us/en/support/articles/no-commission-crypto/">offers</a> 15 crypto assets — even fewer in New York and Texas.&nbsp;



SOL and Solana <a href="https://blockworks.co/tag/meme-coins">memecoins</a> including BONK and DogWifHat are available in the EU but not the US.



<a href="https://blockworks.co/news/robinhood-nixes-ada-matic-sol">Robinhood’s US arm delisted Solana</a> — among other cryptocurrencies alleged by the US Securities and Exchange Commission to be unregistered securities — in June of last year after the agency filed lawsuits against Coinbase and Binance.



Robinhood’s crypto efforts in <a href="https://blockworks.co/tag/europe">Europe</a> are perhaps overshadowed by the company receiving a Wells Notice from the US SEC for its crypto listings last week. 



Read more: <a href="https://blockworks.co/news/robinhood-wells-notice-sec">Robinhood discloses Wells notice over its crypto business</a>



Robinhood and Robinhood’s EU crypto branch are “completely separate entities with different business models and different structures, and so at this point, the business in Europe is completely isolated from what&#8217;s happening in the US,” Kerbrat said.



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Robinhood enables Solana staking for customers in Europe

Hiya!



Markets may be down slightly, but that’s not the main thing bumming me out today. Last night, I took a train all the way up to Queens just to see the Mets blow a 9th-inning lead. What even is a “Phillie?”



Anyways, let’s talk Solana.



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<h2 class="wp-block-heading">Pandora’s Box of L2s</h2>



Solana’s lack of layer-2s has long been a point of pride for some Solana supporters.&nbsp;



Rather than relying on a fragmented and expanding network of blockchains to scale à la Ethereum, why not just move to a blockchain fast and cheap enough to keep everyone in the same building?



But since fast things can always be faster, and cheap things cheaper, the layer-2 bug appears to be coming for Solana.&nbsp;



Zeta Markets announced a $5 million raise Tuesday, partially to build a DeFi layer-2 on Solana. Electric Capital led the round, which added to the $8.5 million Zeta Markets raised in a 2021 seed round led by Jump Capital.&nbsp;



Zeta Markets currently runs a regular derivatives DEX — the fifth-largest on Solana, <a href="https://defillama.com/protocols/Derivatives/Solana">according</a> to DefiLlama. By adding a layer-2 to the mix, it wants to make its DEX as fast as a CEX.



Zeta Markets founder Tristan Frizza told me that he’s always been a “monolithic chain maxi,” but when you’re letting traders take big leverage on derivatives, market makers want to see some really low latency.



“Solana does what, 400 millisecond block times? But these guys are used to like 10 milliseconds on Binance,” Frizza said.



Off-chain centralized exchanges can basically figure out the price of assets faster than decentralized exchanges, which are slowed down by the underlying blockchain’s throughput. In some cases, savvy arbitrageurs can exploit the momentary differences in price — <a href="https://blockworks.co/news/bell-curve-lvr-defi-liquidity-providers-unfair">to the detriment</a> of DEX liquidity providers.&nbsp;



So, there are justifiable reasons beyond snake oil sales for why Solana would want to build layer-2s. Still, it bears notice that Solana co-founder Anatoly Yakovenko — who invested in this Zeta Markets round — <a href="https://blockworks.co/news/lightspeed-yakovenko-layer-2-scaling">appeared on Lightspeed</a> in August asserting that having too many layer-2s can create massive composability and user experience problems. Other notable Solana ecosystem angel investors also took part in Zeta’s round.



Perhaps this signals that Solana’s thought leaders are softening toward rollups.&nbsp;



Zeta’s layer-2 is set to launch in the first quarter 2025, The Block <a href="https://www.theblock.co/post/294284/solana-dex-zeta-markets-token-funding-round">reported</a>. By then, I wouldn’t be surprised to see other Solana projects following suit.



— Jack Kubinec



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<h2 class="wp-block-heading">Zero In</h2>



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1600" height="963" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png" alt="" class="wp-image-85890" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=434 434w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=364 364w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=80 80w" sizes="(max-width: 1600px) 100vw, 1600px" /></figure>



Solana&#8217;s fee generation looks to be rapidly closing the gap with Uniswap. Over the past year, Uniswap&#8217;s fees stand at $751.193 million, while Solana&#8217;s reach $185.173 million; that&#8217;s about $14.446 million and $3.562 million per week, respectively.&nbsp;



However, Solana&#8217;s fees have risen sharply over the past week to $10.078 million, nearly matching Uniswap&#8217;s $12.260 million. Interest in the Solana network continues to increase, thanks at least in part to Solana&#8217;s high network uptime, low transaction fees, and ever-increasing user adoption in the DeFi and NFT segments.&nbsp;



If this trend continues, Solana could soon surpass Uniswap in fee generation. This rise suggests growing network usage and transaction volume, which — while positive for Solana&#8217;s ecosystem — could also mean higher costs for users​.



— Jeffrey Albus



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<h2 class="wp-block-heading">The Pulse</h2>



If you&#8217;ve ever spent time exploring Solanaland, you&#8217;ve probably come across the term OPOS — Only Possible on Solana. And while this may sound exaggerated to the uninitiated, it is true that certain innovations are indeed only achievable within the Solana ecosystem. Well, for the most part&#8230; kind of&#8230; at least for now.



The idea isn&#8217;t so much that other blockchains can&#8217;t do what Solana is capable of, full stop. It&#8217;s more that there are a lot of things that other chains just can&#8217;t do quite so well.&nbsp;



For instance, Solana&#8217;s state compression technology drastically reduces the cost of storing data on-chain. That makes large-scale transactions far more feasible, and is why projects like Drip Haus are able to affordably distribute millions of NFTs to users across the ecosystem. Other blockchains, which famously struggle with scalability and high fees, would have a tough time developing similar projects.



Projects like Hivemapper and Helium also benefit from Solana&#8217;s high throughput and low costs in support of their decentralized mapping and community-powered 5G services. This is yet another area where transaction speeds and costs hinder the practical implementation of such large-scale decentralized applications for most other chains.



But while Solana holds the advantage in these areas for now, there is little reason to believe it will stay that way forever. Competing networks are assuredly taking notes on what is and isn&#8217;t working across Web3, and may soon develop similar or even superior capabilities. So the question is: Will Solana be able to keep up with these challenges over the long term? Anything is possible.



— Jeffrey Albus



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<h2 class="wp-block-heading">One Good DM</h2>



An excerpt of our chat with Sam Lehman, principal at Symbolic Capital:



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="550" height="628" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Screenshot-2024-05-14-at-11.48.57-AM.png" alt="" class="wp-image-85886" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Screenshot-2024-05-14-at-11.48.57-AM.png?w=550 550w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Screenshot-2024-05-14-at-11.48.57-AM.png?w=263 263w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Screenshot-2024-05-14-at-11.48.57-AM.png?w=225 225w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Screenshot-2024-05-14-at-11.48.57-AM.png?w=229 229w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Screenshot-2024-05-14-at-11.48.57-AM.png?w=192 192w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Screenshot-2024-05-14-at-11.48.57-AM.png?w=70 70w" sizes="(max-width: 550px) 100vw, 550px" /></figure>



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