Ekta

Jack Kubinec

Jeff Albus

One key driver behind Solana’s current congestion issues is giving the network a break.



Hardhat Chad, the pseudonymous creator of the Ore project, has <a href="https://x.com/HardhatChad/status/1780249831207837726">announced</a> the project will suspend all mining activities, effective immediately. This decision comes just weeks after Ore&#8217;s launch, amid growing pains for the Solana network that have included severe congestion issues and network instability.



Ore’s price more than <a href="https://www.coingecko.com/en/coins/ore">tripled</a> on news that the token’s supply would be paused, from around $93 before the announcement to over $300 shortly after, before drawing down to around $215, according to CoinGecko. Solana extended its bearish week even further, falling roughly from $131 to $127.



Ore is a blockchain-based project that implemented a proof-of-work (PoW) token distribution mechanism on the Solana network to explore a possibly more engaging and equitable way of distributing cryptocurrency.



Since Ore began trading earlier this month, the network’s diehards have flocked to what some <a href="https://x.com/odai_0x/status/1776079833484640715">dubbed</a> Bitcoin on Solana.&nbsp;



Bitcoin uses a PoW mechanism to distribute new coins and validate transactions. While secure, this system has been known to result in high energy consumption and slow transaction times.



The Solana blockchain, which has high throughput and low transaction costs, operates differently. It uses a proof-of-history (PoH) consensus combined with proof-of-stake (PoS), which significantly speeds up transactions and reduces costs.



Ore was introduced as an experiment to explore how proof-of-work could be implemented on Solana as a fun and fair token distribution mechanism. It aimed to merge the security and distribution model of PoW with Solana&#8217;s high-speed transaction capabilities.



Shortly after launch, Ore became the most active program on Solana by transaction count, according to the project&#8217;s creator.&nbsp;



Amid the deluge of transactions, as many as 75% of non-vote Solana transactions were not going through in early April, according to a Dune Analytics <a href="https://dune.com/scarn_eth/solana-tx-fail-rate">dashboard</a>. That figure is closer to 60% now.



While colloquially referred to as “failed” transactions, Solana’s <a href="https://solana.com/docs/core/transactions/retry">problem</a> is actually that the network is failing to schedule some transactions effectively. That means they’re dropped from the network before ever being included in a block. Regardless, to the end user, a frustrating fraction of on-chain actions are failing to land.&nbsp;



Ore highlighted how Solana’s low fees can actually work against the network when the transaction cost isn’t high enough to discourage spam.&nbsp;



Read more: <a href="https://blockworks.co/news/solana-network-congestion-transaction-volume">Solana’s cheap fees are turning out to be a curse — for now</a>



This realization has led to the current pause in Ore mining activities, allowing Hardhat Chad and their team to redesign the Ore contract for a Version 2 (v2). The next iteration aims to optimize the existing system, address inefficiencies that gave some miners an asymmetric advantage, and introduce structural incentives for holding the token, which were previously lacking.



“Welcome back, Solana,” one industry watcher <a href="https://x.com/AuronnBE/status/1780260014034153735">wrote</a> on X.&nbsp;



As Solana continues to deploy patches like v1.17.31 to improve performance and manage congestion, Ore&#8217;s v2 is being developed to better align with these network upgrades. All existing Ore tokens will be upgradable one-for-one into the new v2 token, ensuring fairness and continuity for current participants.



The mining halt is only temporary, as Ore hopes to bring its PoW concept back to Solana under more favorable conditions.



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Solana price falls further as Ore suspends mining on the network

Zack Shapiro

The Securities and Exchange Commission is investigating whether the Ethereum Foundation’s sale of ETH since the September 2022 “Merge” constitutes an unregistered securities offering in violation of US law, according to <a href="https://fortune.com/crypto/2024/03/20/sec-gary-gensler-ethereum-security-commodity-crypto-foundation/">Fortune</a>.



If the reports are true, then this investigation — just ahead of the SEC’s May deadline for a decision on an Ethereum spot ETF (more on that later) — raises the question: Did Ethereum’s switch to proof-of-stake transform it into a security?&nbsp;



The short answer is “no.”&nbsp;



The slightly longer answer is “still probably no.”



ETH tokens are not, in and of themselves, “securities” in the way that stocks or bonds are. They do not confer legal ownership of any business entity or contractual rights to any kind of payments — they are just code in a decentralized database.&nbsp;



When we talk about ETH “being a security,” we are instead actually asking whether the offer and sale of ETH tokens (in a particular context, between a particular buyer and seller) constitutes an “investment contract” under the dreaded Howey test. Under the Howey test, the offer and sale of an asset like ETH constitutes an investment contract if (1) someone invested money, (2) in a “common enterprise,” (3) in the expectation of profit and (4) where that expectation is based on the “essential managerial efforts of particular others.” 



The four Howey “prongs” have already been discussed and debated to death in the crypto space, so I’ll avoid beating a dead horse here. But if you look closely at the language from Howey, I think two things quickly become apparent about the sale of ETH tokens over time:



First, the sale of pre-mined ETH tokens to investors in Ethereum’s 2014 ICO sure looks a lot like an “investment contract.” ICO participants invested money (BTC) in order to receive their allocation of ETH (Howey prong #1). That BTC was pooled to fund a common effort led by Vitalik and the Ethereum Foundation to develop the Ethereum blockchain and produce the ETH tokens (Howey prong #2). Given that the Ethereum blockchain “pre-launch” at the time of the ICO, the only plausible motivation to take part in the ICO was to make money on the price appreciation of ETH (Howey prong #3). And, at the time of the ICO, if Ethereum was going to succeed as a protocol and ETH was going to succeed as an asset, Vitalik and his developers were going to have to roll up their sleeves and put in some good old “managerial efforts” to make the tokens worth anything (Howey prong #4).



Had the SEC brought suit around the time of the Ethereum ICO, they would have almost certainly won in court, and that may well have been the end of ETH.&nbsp;



However, the SEC didn’t bring suit, and the statute of limitations for such a claim (typically five years) would have run out in 2019. And importantly, the Ethereum ecosystem has evolved in ways since its ICO that make current sales of ETH tokens look less like an investment contract than they once did.&nbsp;



For one thing, the proliferation of applications (think DeFi and NFTs) utilizing ETH for “gas” provides a &#8220;consumptive utility&#8221; for ETH tokens that challenges the notion that current-day purchases of ETH are solely, or even mainly, based on profit expectation.&nbsp;



Even more important, however, is the so-called “<a href="https://www.sec.gov/news/speech/speech-hinman-061418">Hinman speech</a>” delivered in 2018 by Bill Hinman, then the director of corporation finance at the SEC, where he proposed that a digital asset’s classification under Howey could evolve over time.&nbsp;



According to Hinman’s logic — to the extent that Ethereum’s success no longer hinges on the efforts of a particular entity, like Vitalik or the Ethereum Foundation — the sale of ETH tokens would no longer fulfill the requirement of the final Howey prong that there be “particular others” upon whose efforts a buyer would rely for their profits. 



Read more from our opinion section: <a href="https://blockworks.co/news/staking-eth-no-security">Staking or not, ETH is no security</a>



Therefore, regardless of the legally dubious nature of the ICO, the Ethereum network (at least from 2018 onwards) has become “sufficiently decentralized.” This means that its native token constitutes a digital commodity like bitcoin, rather than an investment contract, subject to SEC jurisdiction.



Since the Hinman speech, the securities law status of ETH has been at a bit of a stalemate. The SEC has never explicitly endorsed the notion that ETH (even pre-merge) is a digital commodity — which they readily concede with regard to bitcoin. And Gary Gensler regularly<a href="https://www.youtube.com/watch?v=aIcNGfF8FDA"> ties himself in knots</a> before Congress trying to evade questions about his view on ETH’s current legal status.&nbsp;



But the fact remains that (at least until now) the SEC has never brought an action specifically alleging that primary or secondary sales of ETH constitute investment contracts under Howey (like they did with over a dozen other tokens in the Coinbase, Binance and Kraken lawsuits). The SEC even went as far as to approve the listing of ETFs based on ETH futures contracts that trade on the CME, which would be hard to understand if the Commission felt that ETH tokens traded as unregistered securities.



But what about Ethereum’s migration to proof-of-stake? Does the fact that ETH tokens can be staked for “yield” change the legal situation and turn either (A) current-day sales of ETH, or (B) the act of staking ETH into securities offerings under Howey?&nbsp;



In my opinion (and I spend an unhealthy amount of time thinking about crypto securities law), no.



With regard to present-day sales of ETH tokens — whether directly from the Ethereum Foundation or on the secondary market — I don’t think ETH’s staking functionality makes much of a difference under Howey. That is, the ability to stake does not make ETH tokens any less useful for individuals who might buy them for their consumptive utility (i.e. gas fees).&nbsp;



And while the Ethereum Foundation does indeed still hold a large supply of ETH tokens, there is no reason to think that the introduction of staking makes the foundation’s “managerial efforts” “essential” to the financial success of ETH in some way that was not the case at the time of the 2018 Hinman speech.



The question of whether the act of staking ETH in order to receive “yield” in the form of staking rewards constitutes an investment contract under Howey is more nuanced — but properly understood, the answer should still be no.&nbsp;



Read more from our opinion section:&nbsp;<a href="https://blockworks.co/news/ether-commodity-or-not" target="_blank" rel="noreferrer noopener">Ether is the Schrödinger’s cat of crypto</a>



When you run a validator node and stake 32 ETH tokens in exchange for rewards, what you are actually doing is providing a service to the Ethereum network and getting paid for that service. You only get the reward if you honestly validate blocks, and you stand to lose your stake to “slashing” if you attempt to validate dishonestly.&nbsp;



This is very different from the type of passive “yield” you might expect to receive from holding a bond or a dividend-paying stock or real estate asset (which rewards ownership and not activity). Unlike with these traditional financial instruments, you are not relying on “managerial efforts” of other people in order to profit when you stake ETH directly, but rather on your own skill and honestly as a validator.



This question becomes trickier, however, when we move from direct proof-of-stake validation to “staking services” such as those run by exchanges like Coinbase and collaborative staking protocols like Lido and Rocketpool.&nbsp;



At one end of the extreme, you could see an argument for how custodial staking services could look quite security-like under Howey (given how reliant depositors would be on the staking service provider’s efforts in order to earn yield).&nbsp;



At the other end of the spectrum, you could imagine a purely on-chain tool that allowed users to jointly stake their ETH in collective, automated, validator nodes with clearly defined behavior looking much more like direct staking than an investment contract.&nbsp;



Where the specific services by Coinbase, Lido and Rocketpool fall on this continuum is very much an open legal question — and one that in Coinbase’s case is being actively litigated in federal court in the Southern District of New York.&nbsp;



But none of this makes ETH itself, even when being used for staking purposes, an investment contract and therefore none of this seems to justify the SEC’s new investigation.



Why, then, might the SEC be pursuing this type of weak claim about Ethereum?&nbsp;



Observing the success of the Bitcoin ETF — and the SEC&#8217;s dissatisfaction with its launch — suggests that the investigation into Ethereum might be a pretext to deny the upcoming spot ETH ETF application.&nbsp;



Moreover, acknowledging Ethereum’s transition to a commodity despite its seemingly illegal ICO genesis could concede a legal strategy meant to apply to other token projects that the SEC believes aiming to circumvent securities classification (in other words, creating a loophole).&nbsp;



The SEC’s actions could be seen as a strategic move to maintain regulatory leverage over the crypto market, rather than a clear-cut determination of Ethereum’s status as a security.



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<div class="wp-block-post-author-biography">Zack Shapiro is the Managing Partner at Rains and leads the law practice. Previously, he was co-founder and general counsel of BZR, a startup backed by Founders Fund, Greycroft, and Abstract Ventures. Zack is a graduate of Williams College and Yale Law School, and started his legal career clerking in the federal courts for the S.D.N.Y. and the 2nd Circuit, and at Davis Polk &amp; Wardwell. Zack serves in various advisory roles in the crypto industry, including as a member of the Pleb Lab Accelerator advisory board, and as a Legal Fellow at the Bitcoin Policy Institute.
</div>


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No, ETH isn’t suddenly a security now

Ben Strack

It appears ever more likely that fund issuers will launch crypto ETFs in Hong Kong very soon. This move could catalyze acceptance of such funds elsewhere, with some speculating that other regulators in Asia could be next to follow suit.



In the US, the Securities and Exchange Commission had held out on approving spot bitcoin ETFs for years, restricting investors from engaging with cryptocurrencies through regulated financial avenues. This barrier prevented the broader financial adoption and accessibility of blockchain assets.



That all changed in January when the SEC <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">approved 10 spot bitcoin ETFs for trading</a> on US exchanges. This approval not only marked a significant shift in policy but also led to approximately $12.5 billion in net inflows to these funds, demonstrating a robust market appetite.



Fast forward just weeks after the US bitcoin ETF approvals, to when the <a href="https://blockworks.co/news/london-stock-exchange-crypto-etn-proposals">United Kingdom’s Financial Conduct Authority said it would support</a> “recognized investment exchanges” listing physically backed bitcoin and ether exchange traded notes (ETNs) for professional investors.



The London Stock Exchange indicated that such listings <a href="https://blockworks.co/news/london-stock-exchange-crypto-exchange-traded-notes">could be expected by the end of May</a>.



Now in <a href="https://blockworks.co/tag/hong-kong">Hong Kong</a>, fund issuers have indicated in recent days that they are looking to launch spot bitcoin and ether funds soon.



Read more: <a href="https://blockworks.co/news/hong-kong-reportedly-looks-to-approve-crypto-etfs">Hong Kong could green light spot bitcoin and ether ETFs next week: Report</a>



HashKey Capital and Bosera International noted in a Monday <a href="https://group.hashkey.com/en/newsroom/bosera-hashkey-co-launch-spot-etfs">post</a> they had gained approval from Hong Kong’s Securities and Futures Commission to offer crypto-related asset management services.&nbsp;



A HashKey spokesperson declined to comment further.



A representative for Hong kong-based China Asset Management said the firm is planning to launch a spot bitcoin ETF and a spot ether ETF.&nbsp;&nbsp;



Still, issuers do not appear to have official approval to launch such funds. An SFC spokesperson did not immediately return a request for comment.&nbsp;



“Regarding the approval progress, we are currently not in a position to provide comment, as it is the decision of SFC,” the China Asset Management spokesperson told Blockworks in an email.&nbsp;



<a href="https://blockworks.co/news/uk-crypto-regulation-panel-das">Developments in the UK</a> and Hong Kong “reiterate the global ripple effect of the spot ETF approvals in the US,” according to Tim Bevan, CEO at crypto ETP issuer ETC Group.



Michael Silberberg, head of investor relations at Alt Tab Capital, added in a statement that the Hong Kong move was likely to attract more institutional investors. He believes that this would result in more liquidity and better price discovery.



“As other jurisdictions observe Hong Kong’s approach, it will likely encourage similar regulatory frameworks worldwide, further legitimizing bitcoin as an investable asset class and driving more growth in BTC and across the market,” Silberberg said.



<h2 class="wp-block-heading">Who’s next to approve such products?</h2>



While the US became the latest to approve spot <a href="https://blockworks.co/tag/bitcoin-etf">bitcoin ETFs</a>, other countries had beat them to it.



Canadian fund group Purpose Investments launched its spot bitcoin ETF on the Toronto Stock Exchange in February 2021 — the world’s first bitcoin ETF backed by physically settled bitcoin.



Read more: <a href="https://blockworks.co/news/bitcoin-etf-fee-level">Purpose Investments, Grayscale defend their higher fees as outflows continue</a>



QR Asset Management <a href="https://blockworks.co/brazil-bitcoin-etf-follows-similar-launches-in-canada">launched Latin America’s first spot bitcoin ETF</a> in Brazil in June 2021.



<a href="https://blockworks.co/news/us-europe-spot-bitcoin-etf">Europe’s first spot bitcoin ETF</a> went live on Euronext Amsterdam last year, though crypto ETNs — debt instruments typically collateralized by the underlying exposure — had existed there for years prior. &nbsp;&nbsp;



Karim Saber, a research associate at crypto ETP issuer 21Shares, said Asia appears poised to take the lead in approving new spot bitcoin ETFs given higher-than-average crypto adoption rates in countries like South Korea, Japan and Singapore.



Read more: <a href="https://blockworks.co/news/apac-web3-2023">The future of Web3 lies in the Asia-Pacific</a>



“The victory of the bitcoin-friendly South Korean opposition party in April&#8217;s election enhances the likelihood of the country approving BTC spot ETFs in the near future,” he told Blockworks.&nbsp;



The winning party had pledged to prioritize offering investors access to such products, Bloomberg <a href="https://www.bloomberg.com/news/articles/2024-04-05/south-korean-party-pledges-access-to-us-bitcoin-etfs-in-race-for-votes">reported</a> earlier this month.&nbsp;



While South Korea’s recent political shift could lead to regulators approving a bitcoin ETF as soon as this year, Saber noted, Japan and Singapore might not be far behind.&nbsp;



The Government Pension Investment Fund (GPIF) of Japan said last month it was <a href="https://blockworks.co/news/japan-pension-fund-considers-bitcoin">considering investing in “illiquidity assets” like bitcoin</a>.



That came about a month after the Japanese government advanced a proposal that would allow investment limited partnerships to acquire and hold crypto assets.



Read more: <a href="https://blockworks.co/news/japan-crypto-policy-step-forward">Japan’s crypto policy takes a positive step forward</a>



A March <a href="https://www.independentreserve.com/blog/wp-content/uploads/2024/03/Independent-Reserve-Cryptocurrency-Index-Singapore-2024.pdf">survey</a> of Singaporeans by Independent Reserve found that one-third of respondents would consider investing in an overseas spot bitcoin ETF.



While the Monetary Authority of Singapore has expressed <a href="https://www.zaobao.com.sg/finance/singapore/story20240117-1462706">concerns</a> about retail access to spot ETFs, crypto adoption is evolving in the country.&nbsp;



Singapore app Grab, for example, allowed users to start making payments in BTC, ETH and stablecoins last month. The move highlights “the growing integration of cryptocurrencies into mainstream commerce,” Saber said.



“Therefore, we anticipate Singapore and Japan to increasingly pursue regulatory approval following South Korea,” he added. “The approval in Hong Kong could catalyze discussions this year as Asian countries vie for prominence as the next financial center for innovation.”



Bevan said he expects Japan and South Korea could approve such products in the next six to 12 months — noting that while timelines are hard to predict, “they are all playing catch-up with the US.”



<h2 class="wp-block-heading">Progress in the UK and Australia</h2>



The <a href="https://blockworks.co/tag/fca">FCA</a>’s change of stance related to United Kingdom-listed crypto ETNs currently applies to products accessible only to professional investors.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;



But the regulator’s cautious “phased approach” is likely a step toward retail access once it assesses the products’ impact with that “more informed participant base,” Mandy Chiu, head of financial product development at 21.co, previously told Blockworks.



Read more: <a href="https://blockworks.co/news/bitcoin-etfs-in-uk">After US bitcoin ETFs, the UK fights for retail to have the same freedom</a>



Over in Australia, additional spot bitcoin ETFs could soon be available as well.



The Global X 21Shares Bitcoin ETF (EBTC) launched on Cboe Australia in May 2022. The fund provides holders an interest in bitcoin held in cold storage by Coinbase.



Asset manager Monochrome last year <a href="https://blockworks.co/news/australian-spot-bitcoin-etf">applied for Australia’s first fully-licensed spot bitcoin ETF</a> under new regulatory guidelines. Monochrome CEO Jeff Yew previously told Blockworks that the proposed fund would be uniquely authorized under the country’s “crypto asset” licensing category, which allows the fund to hold bitcoin directly on the fund level.&nbsp;



It is unclear whether this distinction will attract investors to such a fund. The Global X fund has $93 million in assets under management after about two months on the market — a far cry from several of the much-younger US spot bitcoin ETFs.&nbsp;



“Monochrome expects to receive a positive response for the Monochrome Bitcoin ETF (IBTC) within a matter of weeks, not months,” Yew said.



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After crypto ETF movement in Hong Kong, other Asia regulators could act 

Katherine Ross

Binance.US tapped the New York Federal Reserve’s former compliance chief to its board of directors. 



Martin Grant, who served as the Fed’s compliance and ethics officer until 2022, will help “oversee financial reporting processes and internal controls,” <a href="https://blog.binance.us/martin-grant-joins-board/">according</a> to a press release from Binance US.



“The American digital asset industry is at an inflection point, and I am excited to help guide the future of one of the country’s most influential and customer-centric crypto platforms,” Grant said.



Grant’s addition “reflects the strength of our business and demonstrates our commitment to maintaining the highest standards of compliance and integrity. We look forward to benefiting from his expertise and counsel as we continue to navigate the current regulatory environment and position Binance.US for long-term growth and success,” <a href="https://blockworks.co/tag/binance">Binance</a> US interim CEO Norman Reed added.



Read more: <a href="https://blockworks.co/news/binance-settlement-message-to-crypto-industry">Yellen: Historic Binance settlement “sends message” to crypto industry</a>



The Securities and Exchange Commission targeted both Binance US and Binance in a lawsuit <a href="https://blockworks.co/news/binance-changpeng-zhao-face-sec-charges">filed last June</a>. The SEC alleges that the two — which are separate entities — offered and sold unregistered securities and also failed to register as an exchange.&nbsp;



Last year, the Department of Justice also announced a multi-billion dollar settlement with the crypto exchange, and former CEO <a href="https://blockworks.co/tag/changpeng-zhao">Changpeng Zhao</a> was <a href="https://blockworks.co/news/changpeng-zhao-binance-steps-down">ousted as part of the terms</a>.&nbsp;



Another part of the settlement requires Binance to allow some teams from the Department of Justice to review Binance’s activities. It will also be overseen by the Financial Crimes Enforcement Network. 



Binance’s Chief Compliance Officer Noah Perlman said on a panel last week that the settlement is an “opportunity” for Binance to “uplift the [compliance program],” the Wall Street Journal <a href="https://www.wsj.com/articles/top-crypto-exchanges-look-to-move-beyond-settlements-with-u-s-regulators-fddbeb29">reported</a>.



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Former NY Fed compliance chief joins Binance US board

The Bitcoin halving is looming, as the quadrennial event is expected to take place at the end of the week.&nbsp;



The halving, which marks the fourth such event in bitcoin’s history, will knock rewards down to 3.125 BTC per block from 6.25.&nbsp;



However, a lot has changed since the last time the rewards were halved in 2020 from the launch of the spot bitcoin ETFs to bitcoin notching new all-time highs just last month.



BitGo CEO Mike Belshe sat down with Blockworks ahead of the <a href="https://blockworks.co/tag/bitcoin-halving">halving</a> to discuss the overall market environment, bitcoin and the launch of the ETFs.&nbsp;



Read more: <a href="https://blockworks.co/news/etfs-helped-legitimize-bitcoin-halving-cme">ETFs helped ‘legitimize’ bitcoin ahead of halving: Q&amp;A</a>



Keep reading for excerpts from Blockworks&#8217; interview with Belshe.



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



Blockworks: How is <a href="https://blockworks.co/tag/bitgo">BitGo</a> approaching the space post-bitcoin ETFs?



Mike Belshe: What we have found, as an industry, in the last year and a half to two and a half years, is that there&#8217;s a political thing going on that is influencing the interpretation of laws and regulations. And because of that, the traditional players are largely locked out. But all of a sudden, they&#8217;ve got the ETF vehicle, which has been approved. It&#8217;s the one shining light that they can definitely use without feeling like they&#8217;re putting their entire businesses at risk. It allows them to participate in Bitcoin, to provide access to their own clients for Bitcoin, and yet not necessarily have to take all of the exposures that they would have to take if they tried to do what BitGo does. So instead, they lean on BitGo to make that happen.



Blockworks: You guys have direct exposure to ETFs, correct?



Belshe: So we&#8217;re handling two of them so far. I think there are many more that you&#8217;ll be hearing about very soon. We provide all the regulatory compliance that [bitcoin ETF issuers] would need to expect. We’re regulated in three different states as a Trust Company. We&#8217;ve got South Dakota, New York and Wyoming now. And then, of course, we have money transmission licenses and other things that we do so we&#8217;re a very easy player for anybody that&#8217;s looking for that secure storage to work with.



Blockworks: Can you give some insight into the conversations that you&#8217;re having with these institutions following the <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">spot bitcoin ETF launches</a>?



Belshe: The business this year is just growing so fast. I actually think the institutions aren&#8217;t as much in as you would think. We have our existing institutional clients, and they&#8217;re all going to retail on their own — and that retail demand has been growing.



Some people are asking, ‘Where is this ETF demand coming from?’ And I think it&#8217;s still mostly retail demand — that is, retail clients going through Schwab, through TD Ameritrade. They’re going through their brokers and just now getting access to this asset class, which previously was just too hard to touch.



Read more: <a href="https://blockworks.co/news/2024-bitcoin-halving-new-era">The 2024 halving could usher in a new era for Bitcoin</a>



Now they just log in and buy. This is actually very good news for the industry, because there&#8217;s an endless amount of institutional demand, which we know is coming. So institutions are not yet in, and I believe they are coming, but the ETF was only approved in January…it&#8217;s not enough time for those evaluations to have been completed yet, which is why most of what we see so far is retail coming in. There&#8217;s some amount of the small hedge funds that are now coming in some amount of RAs can come in because they can make faster decisions and move quickly. And I think there&#8217;s a lot of headroom here for more demand.



Blockworks: We’ve heard similar things from Valkyrie, that some financial advisors, etc. are not quite ready to embrace the ETFs just yet, and that they need more time. Are you hearing similar rumblings?



Belshe: Some just need to see how bitcoin ETFs play out. The [Securities and Exchange Commission] was initially a no. Now they approved the products, but it’s not like these guys were like, ‘Great, the [bitcoin ETFs] are ready to go.’ A lot of them were on the sidelines, and now — even with the ETFs being launched — they need to see how it all shakes out.



Is it all going to go to BlackRock or to Fidelity, or heck, is Bitwise going to get some of this? Is it going to be really unstable? Is it going to get big really fast?



Read more: <a href="https://blockworks.co/news/bitcoin-halving-different-institutions-investors">This Bitcoin halving will be different — the institutions are here</a>



That&#8217;s all starting to shake out now. People are now looking at it and saying, ‘Yeah, this is a pretty robust ecosystem, the largest, fastest-growing ETF sector in the history of the market.’



Blockworks: Is this going to be a different halving than what we’ve seen before because of all the outside factors?



Belshe: I don&#8217;t tend to think about it in the short term. But long term, what is it really? Well, we have a distribution schedule for how new bitcoin [is] issued out into the world. That was put in motion all the way back in 2009. It hasn&#8217;t changed. That, by the way, is the first monetary policy in the history of humans that has been static for 15 years straight.



Humans can&#8217;t stop tinkering — the Fed changes things every quarter — and yet Bitcoin has managed to hold it steady by the exact same schedule that was put in place in 2009. It just shows the difference between what happens when you hand the rules over to the machines versus the emotions of people.



Read more: <a href="https://blockworks.co/news/bitcoin-halving-outlook-for-public-miners">Financial trouble for bitcoin miners: A look back, and ahead as the halving looms&nbsp;</a>



You could ask the question: Why does it work this way? And that gets more into how do you build a currency of value without just giving yourself all the tokens. There are other currencies out there, like XRP, where Ripple gives themselves all the money to begin with, and then they say, ‘Come buy my coin.’ Alright, maybe some people are gonna do that and they&#8217;ve been fairly successful. Ripple still holds a chunk of XRP to this day. But it&#8217;s a lot harder to trust that, because you&#8217;re so dependent on Ripple and good stewardship of XRP.



And I’m not trying to say they haven’t been good stewards. I think they&#8217;ve been reasonably good. But with Bitcoin, they didn’t want that.



So instead, Satoshi Nakamoto put together this thing. I think it builds trust, and this is going to be just another milestone in building trust. Bitcoin is the one asset that&#8217;s going to do exactly what it said it was going to do, and not falter from the original plan.



This interview was edited for brevity and clarity.&nbsp;



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Despite bitcoin ETF approval, institutions are on the sidelines: BitGo CEO

Casey Wagner

David Canellis

Michael McSweeney

<h2 class="wp-block-heading">Where to, digital gold?</h2>



Halving week is off to a tumultuous start.&nbsp;



Cryptocurrencies whipsawed over the weekend on growing geopolitical concerns after Iran’s Saturday drone attack on Israel.&nbsp;



Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) crashed to below $62,000 on Saturday evening, further extending the sell-off that began Friday when BTC dipped from $70,000 to $66,000 in a matter of hours. By early this morning, though, things had relatively stabilized.&nbsp;



Bitcoin is currently down more than 2% over the past 24 hours, sitting at $64,500 as of 11 am ET.



Ether (<a href="https://blockworks.co/price/eth">ETH</a>) and Solana (<a href="https://blockworks.co/price/sol">SOL</a>) had bounced harder. Earlier this morning, ETH had been up 7% on the day while SOL had gained 9%. Both have since retraced slightly.



It is, of course, worth noting that when the threat of a wider regional war looms over a weekend, traders are limited as stock markets are closed.&nbsp;



The rush to traditional financial havens — gold, namely, which rallied 17% — started Friday. Oil prices hit their highest level since October last week.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-halving-outlook-for-public-miners">Financial trouble for bitcoin miners: A look back, and ahead as the halving looms&nbsp;</a>



By this morning, oil prices were easing but gold was still rallying, with spot futures ticking up another 0.3%.&nbsp;



Crypto-related stocks fell on Friday along with bitcoin. COIN shares closed last week almost 7% lower, but were trading 0.6% higher pre-market this morning. MicroStrategy similarly lost 5% Friday and was trending 0.6% lower before the open today.&nbsp;



Looking ahead, aside from the <a href="https://blockworks.co/tag/bitcoin-halving">halving</a>, analysts have their eye on oil prices, which historically are a leading indicator for recession. The oil shocks of 1973, 1980 and 1990 all led to gas prices spiking +35%, and, in every case, the US economy also dipped into a recession.



“If oil prices spike enough to get US gasoline to $5.40/gallon this summer, a recession later in the year is a genuine possibility,” Nicholas Colas, co-founder of DataTrek Research, said.&nbsp;



When oil and gas prices spiked during the second Gulf War in 2023, the jump was an exception to the recession rule, but at that point the Federal Reserve had already been in a rate-cut cycle for two years. Quite different from our current situation.&nbsp;



Central bankers meet again in a little over two weeks, and expectations of a rate cut continue to dwindle. CME Group futures data shows only a 4.5% probability of a decrease.&nbsp;



— Casey Wagner&nbsp;



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



<ul>
<li>Tokenized hedge fund Ethena saw net daily <a href="https://defillama.com/protocol/ethena?denomination=ETH#tvl-charts">outflows</a> for the first time over the weekend, altogether losing $31.58 million.</li>



<li>Net <a href="https://defillama.com/bridges/chains">flows</a> to <a href="https://blockworks.co/tag/layer-2-2">layer-2s</a> Arbitrum and Optimism hit $278 million over the past week. Ethereum outflows reached $289 million across the same period.</li>



<li>Uniswap <a href="https://defillama.com/protocol/uniswap">volumes</a> haven’t slowed after <a href="https://blockworks.co/news/sec-issues-uniswap-wells-notice">the SEC’s Wells notice</a>: still around $3 billion per day compared to around $1 billion in February.</li>



<li>Bitcoin is firmly the number one <a href="https://www.cryptoslam.io/blockchains">blockchain</a> for NFT volumes over the past month, week and day, currently more than double number-two Ethereum.</li>



<li>Solana’s active <a href="https://app.artemis.xyz/chains">addresses</a> are down to 1 million after hitting 30-month highs of 2.4 million in mid-March.</li>
</ul>



<h2 class="wp-block-heading">Hedge status still pending</h2>



Crypto seems to have overreacted to Iran’s attack on Israel over the weekend, with large parts of the market dumping up to 20%.



Stock markets weren’t dumping before the bell on Monday. Still, anything could happen, but it seems whatever crypto investors were worried about, equities folk haven’t minded too much.



At times like this, it would be nice if bitcoin were truly uncorrelated with the stock market. One could buy bitcoin as the world teeters. A hedge against dystopia, as has long been the value prop for gold.&nbsp;



But that’s not always the case — yet.<img loading="lazy" decoding="async" width="624" height="419" src="https://lh7-us.googleusercontent.com/5IffKOx5z-y60Z9a3AdPy4P3s87B_BZJCYOZl54L9T8-gUuA45NRhtgfen1Nev0FHfRECRpdhx70lGtVVMGgWn1o2TCWYxyf_SUatb-5vJu5-XpI4PlAOB34JbpM_hLtO_6aYLw4zzBCnmFHaEON5_o">



There have been instances where bitcoin was indeed a useful hedge. Times when it ran opposite to benchmarks amid high geopolitical tension and market uncertainty.



Bitcoin and ether rallied more than 50% as then-President Donald Trump ratcheted up his trade war with China in May 2019, with plans to boost tariffs on Chinese imported goods from 10% to 25%. The S&amp;P 500 fell more than 2.2% across that time.



Bitcoin spiked by 40% around the Jan. 6 Capitol riots in 2021, while the S&amp;P fell. Ether and the wider crypto market pushed even higher than bitcoin.



And while crypto initially sank alongside the S&amp;P as Silicon Valley Bank went belly-up last March, bitcoin and ether went onto pump more than 20% as the US government swooped in to make depositors whole. The S&amp;P meanwhile only really managed to pare back losses.



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-us.googleusercontent.com/nuZrqxTHcyS6yFMariY6dwXpXZj1SfeU7Z0Jci1-Ex5_kHyvA2le45Z-UD1NglWx9-uc6Zo3gLYlkKuVE_24LCtamQFOkfbHuZmWF6F7OHovCs6L-JPxA8GMfAjrBgnsZwL5w37ihoN0DYfhIiQVIT0" alt="" style="width:596px;height:auto"/><figcaption class="wp-element-caption">(Bank busts are apparently good for bitcoin)</figcaption></figure>



Bitcoin even surged by more than a quarter in the immediate aftermath of the Oct. 7 Hamas’ attack on Israel. The S&amp;P 500 dipped about 5%.&nbsp;



At other times of stress, however, crypto has traded opposite of hedgers’ hopes. Bitcoin, ether and the rest of the digital asset market crashed alongside the S&amp;P 500 when Jamal Khashoggi was assassinated in Saudi Arabia in October 2018.&nbsp;



Bitcoin and ether tanked again, by almost 15%, as the Hong Kong protests ramped up in early June 2019, even as the S&amp;P 500 held strong, although crypto would sometimes rally as demonstrations waged on throughout the year.



Sometimes, crypto even trades just like everything else. When the US dramatically pulled out of Afghanistan in September 2021, bitcoin and ether shed more than 10% as the S&amp;P slipped 6%. <img loading="lazy" decoding="async" src="https://lh7-us.googleusercontent.com/Jns5mwvTHWHK36Yu4Y4scARBzlZiQM7tt8OyTDDAOpuMosbyUVPiS7XcSu3GZmuRi06O3nIg_sdNHT1ghQB0g29_CpAlkcjubkmaN9ltvVlj0eBlCgtAIppcxm9ci-fWRPy44cGLfYeDShiV-DOgz7M" width="624" height="417">



And then there’s bitcoin’s monstrous 50% collapse around the Covid-19 crashes in Q1 2020, which happened in unison with global markets. Despite all this, perhaps we’re headed for a time where bitcoin and crypto really do act like a safe-haven asset.&nbsp;



Although, judging by the weekend action, we’re still a long way from that kind of certainty.



— David Canellis



<h2 class="wp-block-heading">That’s a big one</h2>



Hong Kong may have just joined the European and American ranks, as it potentially allows some firms to launch spot <a href="https://blockworks.co/tag/bitcoin-etf">bitcoin ETFs</a>. The Securities and Futures Commission, Hong Kong’s regulator, also seemed to beat out the SEC in simultaneously approving some issuers to launch spot ether ETFs.



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>



In a statement, China Asset Management said it was partnering with OSL Digital Securities and BOCI Prudential. The asset manager “plans to issue ETF products that can invest in spot bitcoin and spot Ethereum,” a translated version of the company’s statement <a href="https://mp-weixin-qq-com.translate.goog/s/L41jvBB5hthR4mXRoL1G2Q?_x_tr_sl=auto&amp;_x_tr_tl=en&amp;_x_tr_hl=en&amp;_x_tr_pto=wapp">said</a>.



OSL, in a separate statement, <a href="https://osl.com/press-release/osl-appointed-first-exchange-sub-custodian-china-amc-spot-btc-eth-etf-hong-kong/">confirmed</a> the “approval in principle and launch of its inaugural spot bitcoin/ethereum ETFs in Hong Kong.”



HashKey <a href="https://group.hashkey.com/en/newsroom/bosera-hashkey-co-launch-spot-etfs">said</a> it also received approval alongside Bosera International. The two plan to team up to “jointly promote the issuance of spot ETFs for Bitcoin and Ethereum, providing investors with a secure, compliant and convenient way to directly participate in these markets.”



The news Monday, which was <a href="https://blockworks.co/news/hong-kong-reportedly-looks-to-approve-crypto-etfs">expected thanks to reports</a> late last week, was enough to buoy both bitcoin and ether after a volatile weekend. Ether gained roughly 7%.



This is <a href="https://blockworks.co/tag/hong-kong">Hong Kong</a>’s moment to solidify itself as a major player in the crypto space. The Special Administrative Region has been plotting new regulations and attracting crypto firms for the past year. Outside of that, this could open a door for institutional demand in Asia.&nbsp;



In the US, the launch of the spot bitcoin ETFs led to <a href="https://blockworks.co/news/bitcoin-all-time-high">bitcoin hitting new all-time highs</a>, and a slew of institutions and retail buying into the new ETFs as firms look to gain exposure for themselves and their clients. Specifically, the launch of the <a href="https://blockworks.co/tag/ether-etfs">ether ETFs</a> — if executed in Hong Kong before the US — could give the overall market an idea of what to expect if, or when depending on who you ask about the ETFs, are launched in the States.



— Katherine Ross



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



<ul>
<li>Germany’s top federal bank, Landesbank Baden-Württemberg, has teamed up with the Bitpanda exchange to offer custody service, Bloomberg <a href="https://www.bnnbloomberg.ca/germany-s-largest-federal-bank-to-offer-crypto-custody-services-1.2058976">writes</a>.&nbsp;</li>



<li>Guy Ficco, the criminal investigation chief at the IRS, <a href="https://www.cnbc.com/video/2024/04/12/irs-criminal-investigation-chief-agency-prepared-crypto-tax-crimes-cnbc-crypto-world.html">warned</a> that his agency is prepared for an increase in tax evasion and fraud cases involving crypto.</li>



<li>English football team Real Bedford has <a href="https://www.bbc.com/news/articles/cv27e9qn4qno">scored</a> a cryptocurrency denominated investment from Cameron and Tyler Winklevoss. The team was bought by bitcoin podcaster Peter McCormack in 2021, as the BBC notes.&nbsp;</li>



<li>Crypto partnerships are back: STEPN <a href="https://twitter.com/TatsianaSTEPN/status/1779841057200484561">announced</a> that it teamed up with Adidas to launch 1,000 sneaker NFTs on Solana.</li>



<li>Former Trump official Steve Mnuchin’s quixotic bid to buy TikTok now <a href="https://nypost.com/2024/04/15/business/steve-mnuchin-seeks-ai-partner-to-rebuild-tiktoks-algorithm-sources/">includes</a> a plan to hire an AI firm to help rebuild its algorithm, according to the New York Post.</li>
</ul>



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



Could a crypto-backed candidate kick Senator <a href="https://blockworks.co/tag/elizabeth-warren">Elizabeth Warren</a>, D-Mass., out of office? An array of crypto execs are betting that attorney John Deaton could, according to <a href="https://www.politico.com/news/2024/04/12/crypto-executives-put-money-behind-longshot-bid-to-oust-elizabeth-warren-00151882">Politico</a>.&nbsp;



Publicly available polling on Warren’s chances is scarce. A survey in March 2023 <a href="https://www.wgbh.org/news/politics/2023-03-27/analysis-as-warren-seeks-a-third-term-her-position-is-stronger-than-it-seems">showed</a> Warren with some vulnerabilities among Massachusetts’ famously prickly electorate —&nbsp;just 41% of survey-takers held a positive view, compared to 36% unfavorable. Another poll a couple of months later had Warren <a href="https://thebrunswicknews.com/sports/national_sports/new-poll-shows-sen-elizabeth-warren-vulnerable-in-2024-pollsters-say/article_9b1f3707-3b6a-5c65-81f7-5d5e781ee71c.html">narrowly</a> beating former Lt. Gov. Karyn Polito in a hypothetical matchup, plus a huge percentage —&nbsp;30% —&nbsp;undecided on their votes.



Read more: <a href="https://blockworks.co/news/elizabeth-warren-challenger-senate">Pro-XRP lawyer John Deaton launches bid against Elizabeth Warren</a>



I live two hours west of Boston. If weekend talk radio and the cat food aisle at Big Y is to be believed, there’s a constituency here ready to boot Democrats, both state and national, off their perch. Look at Republican Charlie Baker’s run as governor, and Mitt Romney’s too, the argument goes. Plus, Scott Brown proved in 2010 that a Republican can win a Senate race here —&nbsp;right?



Call me skeptical. Warren was viewed as a weak candidate heading into the 2018 race, and she won by a hair over 60%. Brown won against a terrible candidate in 2010, and then lost to Warren a few years later. Plus, Massachusetts has a thing about GOP governors who prove willing to tack to the center.&nbsp;



Deaton is an intriguing candidate. But as Politico notes, Deaton isn’t well-known here, and the fact that he <a href="https://www.wpri.com/news/elections/ri-lawyer-john-deaton-moves-to-mass-to-challenge-sen-warren/">just</a> moved to Massachusetts will definitely be used against him. If Deaton wants to beat Warren, he’ll need to focus on what’s really got people here grumbling — housing unaffordability, infrastructure and the cost of food. Hammering on about XRP won’t cut it.&nbsp;



— Michael McSweeney



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Empire Newsletter: Bitcoin wasn’t a hedge — this time

As the Bitcoin halving nears, miners express ongoing concerns about the potential need to shut down less efficient mining rigs due to reduced block rewards.



When the halving happens less than a week from now, the Bitcoin network’s per-block mining rewards will halve from 6.25 BTC to 3.125 BTC.



This impending reduction has led to worries about increased cost inefficiencies that may render smaller contributors unprofitable. These apprehensions are not new, having surfaced prior to past halving events as well.



In anticipation, a number of mining companies have sought to strengthen their balance sheets, deploy more efficient machines, and diversify their revenue streams to better withstand the upcoming changes.



However, some observers believe these fears are generally overblown. They point out that larger mining outfits have historically managed to adapt and thrive amidst the cyclical market fluctuations typically associated with block halvings.



They predict a similar <a href="https://blockworks.co/news/coinbase-primer-investors-bitcoin-halving">outcome for the upcoming cycle</a>, where initial disruptions may give way to a phase of price discovery, driven by the increased scarcity of Bitcoin.



This could potentially lead to higher Bitcoin prices, which would help to offset the reduced block rewards. That in turn may alleviate some of the financial pressures on miners and possibly restore profitability to their operations.



Read more: <a href="https://blockworks.co/news/miners-stockpiling-btc-before-halving">Miners keep adding to BTC stockpiles in homestretch before halving</a>



Industry giants like Marathon Digital and Riot Platforms seem to have a clear edge over most of their peers in at least one category; their balance sheets consist of more than $1 billion each in combined cash and BTC.



Chase White, a senior analyst at Compass Point Research &amp; Trading, previously said private miners without easy access to public markets capital are more likely to have to shut down operations in the aftermath of the per-block <a href="https://blockworks.co/tag/mining">mining</a> rewards cut.



Despite expecting “pain for everyone,” White added that miners carrying low or no debt, who pay the lowest amounts in terms of energy costs, and who are equipped with the most efficient mining fleets are likely to be fine.



Not all mining companies fit these criteria.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-halving-impact-on-at-home-miners">‘BTC will have to hit $79K’: At-home miners brace for the Bitcoin halving</a>



And so, the question remains: Which firms will come out on the other side of the <a href="https://blockworks.co/tag/bitcoin-halving">halving</a> intact, and stronger?



<h2 class="wp-block-heading">Past financial troubles for miners</h2>



Several sources had trouble coming up with any major miners hurt badly by the last halving event four years ago.



According to Kayla Joyce, an associate at the law firm Holland &amp; Knight, the 2024 halving event differs from its predecessors in 2016 and 2020. She predicts it may lead to a wave of consolidation and defaults across the now matured space.



She did not disclose which firms she believes are most at risk, however.



Read more: <a href="https://blockworks.co/news/bitcoin-halving-crypto-miner-consolidation">Bitcoin miner consolidation appears imminent as halving looms</a>



“The 2020 halving seemed to have less of an impact because the bitcoin mining industry was a smaller space prior to the 2021 crypto bull market,” Joyce told Blockworks. “Investors only started pouring money into the industry in 2021.”



Hardship across the mining sector was not primarily due to the 2020 halving, but rather resulted from the 2022 crypto winter. This downturn followed a period where mining firms accumulated substantial debt to fund aggressive growth initiatives.



Crypto mining data center operator Compute North <a href="https://blockworks.co/news/compute-norths-business-goes-south">filed for bankruptcy</a> in September 2022 after raising $385 million in debt financing that February. The company said in bankruptcy filings at the time that it owed as much as $500 million to at least 200 creditors.



<a href="https://blockworks.co/news/bitcoin-miner-core-scientific-to-file-bankruptcy-stock-tanks-30">Core Scientific then filed for bankruptcy</a> in December 2022. It noted at the time that while its cash flow was positive, it was insufficient to repay an equipment financing loan.



<a href="https://blockworks.co/news/core-scientific-emerges-from-bankruptcy">The Texas-based company emerged from bankruptcy</a> in January — reducing its net debt to $571 million by converting equipment lender and convertible note holder debt to equity.&nbsp;



Core Scientific CEO told Blockworks last month that going forward, the company intends to be more “pragmatic” on its infrastructure growth strategy and more “opportunistic” on the machine purchase side.



Read more: <a href="https://blockworks.co/news/adam-sullivan-core-scientific-bitcoin-halving">Core Scientific CEO: Machine buys, deleveraging key around Bitcoin halving</a>



Though Argo Blockchain did not go bankrupt amid the 2022 bear market, the London-based firm said late that year <a href="https://blockworks.co/news/argo-bankruptcy-still-on-the-table">it was looking to avoid such a fate</a> despite holding “insufficient cash” to sustain operations for much longer.



Argo mined 103 bitcoin last month and held digital assets worth the equivalent of 26 BTC ($1.82 million), as of March 31. Last month, the company also closed on the sale of its facility in Mirabel, Quebec for $6.1 million



It used the proceeds of the sale to repay the Mirabel facility&#8217;s remaining mortgage of $1.4 million and also paid back a portion of its outstanding debt to Galaxy Digital. Argo still owes Galaxy $12.8 million, down from its original $35 million debt balance to the company.&nbsp; &nbsp;



Overall, the company reduced its debt by $12.4 million during the first quarter, Argo Blockchain CEO Thomas Chippas said in a statement.



He added: “As we approach the halving, we continue to focus on streamlining our operations and running as efficiently as possible.”



<h2 class="wp-block-heading">A look at hash cost, miners’ fate this time around</h2>



Looking at the hash price and hash cost of public mining companies, it is clear that some are better positioned than others as they head into the halving.



Hash price takes bitcoin price, network difficulty, block subsidy and transaction fees into account. It <a href="https://data.hashrateindex.com/chart/bitcoin-hashprice-index">measures</a> the potential earnings a miner can expect from a specific quantity of hash rate. This is positively correlated with changes in BTC price and negatively associated with shifts in bitcoin mining difficulty.



Hash cost, though similar to hash price, offers a different perspective by measuring the cost to the miner.



Reducing hash cost — via improving efficiency by deploying newer machines or securing lower energy rates — has been a key focus for the segment’s firms as the halving looms.&nbsp;



The hash price for bitcoin stood at roughly $106 per petahash per second (PH/s) on Monday, according to Hashrate Index <a href="https://data.hashrateindex.com/chart/bitcoin-hashprice-index">data</a>. This figure takes into account intraday variations in price and transaction fees.



Wolfie Zhao, head of research at TheMinerMag, notes that the hash price will be cut in half after the halving, resulting in earnings of just over $50 per petahash per second (PH/s).



“In that scenario, most of the mining companies would still be mining with a gross profit, albeit much less than before,” he told Blockworks.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1898" height="1056" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=1024&amp;h=1024" alt="" class="wp-image-84117" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=1898 1898w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=80 80w" sizes="(max-width: 1898px) 100vw, 1898px" /><figcaption class="wp-element-caption">Source: TheMinerMag</figcaption></figure>



Some of the publicly traded miners with a higher hash cost don’t have much debt on their balance sheet, Zhao noted. Companies with elevated debt-to-equity ratios — like Greenidge, Terawulf and Stronghold Digital — are on the lower end of the all-in hash cost scale, he added.



“So it looks like most of the public miners will survive the halving after having survived the highly levered bear market of 2022,” Zhao said.



<h2 class="wp-block-heading">Companies remain confident despite challenges&nbsp;</h2>



Bit Digital and Bitfarms had higher total hash costs than competitors during the fourth quarter, according to TheMinerMag data — amounting to about 74.2 PH/s and 70.3 PH/s, respectively.&nbsp;



Bit Digital CEO Sam Tabar told Blockworks in an email that the company plans to double the size of its fleet by the end of the year with more efficient miners.



The company may consider acquiring some of its hosting infrastructure to lower production costs. That decision “depends on the opportunity set and corresponding returns profile,” he added.&nbsp;



Beyond that, the company launched a business line in October that is focused on supporting <a href="https://blockworks.co/tag/artificial-intelligence">AI</a> workstreams.



“The margins are substantially better than our mining margins, and helps absorb all of our fixed overhead costs, making us more resilient to hash price volatility,” Tabar said.&nbsp;&nbsp;



Ben Gagnon, chief mining officer at Bitfarms, said that the company&#8217;s low-cost power contracts and energy efficiency strategies will ensure profitability even after the halving.



The Canadian miner agreed to buy nearly 36,000 Bitmain machines in November as part of what it called a “transformative fleet upgrade.” That process will help the company more than triple its hash rate and improve its energy efficiency by about 40%.&nbsp;



“With this plan we are strongly positioned to thrive and take advantage of what we believe will be the most bullish post-halving market the industry has ever seen,” Gagnon told Blockworks.



Joe Flynn, an analyst at Compass Point Research and Trading, wrote in an April 9 research note that Stronghold Digital Mining goes into the Bitcoin halving “in a more difficult position relative to other miners.” This is due in part to its debt and limited access to capital markets.



Stronghold’s infrastructure and access to power is valuable, however, Flynn noted, as companies will need such resources to plug in the hoards of mining machines they have already ordered. He added that selling some of that infrastructure could boost Stronghold’s stock, which was down about 48% year to date, as of Friday morning.&nbsp;&nbsp;



“We ultimately think there&#8217;s value in its assets that could be taken out through [mergers and acquisitions], as there is ability to take out [general and administrative expense] and lower Stronghold’s high overhead as a current small public company,” Flynn wrote.



Stronghold CEO Greg Beard told Blockworks that if Stronghold is deemed an attractive M&amp;A target by an industry peer, such a deal would be “something to consider.”&nbsp;



“Generally speaking, companies that are misunderstood by the public market that have actual attributes and value that can be valued by other public companies…tend to be realized in that way.”



Despite its debt, Stronghold’s vertically integrated structure gives it levers to pull around the halving, Beard said.&nbsp;



For example, last month the company shut down operations at one of its Pennsylvania plants to take advantage of lower electricity prices by importing power instead. It intends to keep that in effect “until it becomes economically compelling to run it relative to purchasing electricity,” the company said in a news release.



“I think the challenge for a lot of miners is that if their power contracts are structured in a difficult way, they’re forced to buy power at a negative margin,” Beard said. “We don’t have that issue.”



While Stronghold is a potential target to be acquired post-halving, Applied Digital has already been on the sell-side of pre-halving deals — agreeing to sell its facility in Garden City Texas last month to Marathon for $97.3 million.&nbsp;&nbsp;



Read more: <a href="http://v">Miner Marathon poised to acquire, expand after Bitcoin halving, exec says</a>



Applied Digital CEO Wes Cummins said in a statement that the company will focus on building out its HPC data centers.



“This strategic transaction represents a purposeful pivot, equipping the company to allocate financial and operational resources toward strategic sites in North Dakota, as well as bolstering our balance sheet strength,” Cummins said.&nbsp;



The company declined to comment further about its post-halving strategy.



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Financial trouble for bitcoin miners: A look back, and ahead as the halving looms 

US spot bitcoin ETFs saw net outflows last week, an occurrence seen just twice before over such a span since such funds launched three months ago.



The 11-fund category bled $83 million in assets from April 8 to April 12, according to BitMEX Research data — down from <a href="https://blockworks.co/news/bitcoin-etfs-net-inflows-btc-price">net inflows of $485 million the week prior</a>.



Spot bitcoin ETFs have collectively welcomed $12.5 billion in positive flows to their coffers since Jan. 11.&nbsp;



The Grayscale Bitcoin Trust ETF (GBTC) has been the only US BTC fund to see consistent outflows, watching $767 million leave last week, the data <a href="https://twitter.com/BitMEXResearch/status/1779079059445617007">shows</a>.&nbsp;



Asset-gathering leaders — BlackRock’s iShares Bitcoin Trust (IBIT) and the Fidelity Wise Origin Bitcoin Fund (FBTC) — were not able to fully offset the GBTC negative net flows, reeling in $487 million and $90 million, respectively.&nbsp;



Read more: <a href="https://blockworks.co/news/blackrock-q1-earnings-bitcoin-fund-inflows">BlackRock bitcoin fund accounts for 20% of the firm’s Q1 ETF net inflows</a> &nbsp;



The bitcoin fund segment saw just two weeks of net outflows prior to last week — losing $417 million in assets from Jan. 22 to Jan. 26 and hemorrhaging $888 million from March 18 to March 22.&nbsp;



Net inflows in one week <a href="https://blockworks.co/news/bitcoin-etf-snapshot-record-inflows">peaked at $2.5 billion</a> for the category from March 11 to March 15.



The latest outflows came during a week in which <a href="https://blockworks.co/price/btc">bitcoin’s price</a> fell roughly 5% to $65,650 by Friday. It dipped below $62,000 on Saturday.



Net money coming out of the US <a href="https://blockworks.co/tag/bitcoin-etf">spot bitcoin ETFs</a> signals “increased profit-taking and investor caution” following the strong uptrend over the last two quarters, Fineqia research analyst Matteo Greco wrote in a Monday research note. 



Trading volumes into the funds were about average last week, Greco noted, standing at about $3.2 billion per day.



Read more: <a href="https://blockworks.co/news/btc-record-monthly-growth-streak-jeopardized">Why BTC’s record monthly growth streak could be in jeopardy</a>



James Butterfill, head of research at CoinShares, added in a Monday report that investors are seemingly hesitant since the positive price momentum has stalled.&nbsp;



Bitcoin’s price hit an all-time high above $73,500 on March 14 and was above $72,000 as recently as April 8. The asset’s price hovered around $66,200 at 7:30 am ET on Monday, down about 4.5% from a week ago.



“ETP [and] ETF activity dropped relative to the overall market, from 40% of total volumes on trusted exchanges over the last month to 31% last week, demonstrating this caution amongst investors,” Butterfill wrote.



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Bitcoin ETF snapshot: Outflows strike last week as BTC price uptrend stalls

Jim Lee, who spent nearly three decades at the Internal Revenue Service, has departed the agency to take up a role titled global head of capacity building at blockchain research firm Chainalysis.



Lee was most recently the head of IRS Criminal Investigation.&nbsp;



“Crypto is the future of finance, which also means it’s the future of crime,” read a header from Lee’s introductory <a href="https://www.chainalysis.com/blog/former-chief-jim-lee-joining-chainalysis/">blurb</a>.&nbsp;



While leading IRS-CI, Lee helped take down the dark web marketplace Hydra, seized crypto being used to finance Hamas and helped take down Welcome to Video, a crypto-based child exploitation site, Lee said.&nbsp;



Read more: <a href="https://blockworks.co/news/crypto-fraud-financial-scam">All fraud will eventually be ‘crypto fraud.’ And that’s okay.</a>



“[B]y equipping law enforcement agencies with the best-in-class tools and data to fight this activity, we can ensure that the crypto ecosystem remains as safe as possible, so that people around the world can realize its many benefits without fear of being targeted by criminals,” Lee added.



His role will initially focus on helping international agencies combat crypto crime.&nbsp;



The last time the <a href="https://blockworks.co/tag/irs">IRS</a> cropped up in crypto hiring news, it was the reverse situation: Crypto tax experts joined the agency to help beef up its crypto tax compliance capabilities.&nbsp;



Read more: <a href="https://blockworks.co/news/irs-consensys-exec-compliance-hires">Crypto Hiring: IRS’s latest hires are long-time crypto industry colleagues and friends</a>



Lee said near the end of last year that the IRS’ crypto tax evasion cases were mounting, <a href="https://blockworks.co/news/irs-rising-crypto-tax-evasion-cases">Blockworks previously reported</a>.



<h2 class="wp-block-heading">The talent deck begins to shuffle</h2>



While this week lacked many marquee hires, crypto companies added to their rank-and-file as crypto gears up for what could be another bull run.&nbsp;



Some of this movement came in the DeFi sector. Multiple anonymous Uniswap employees <a href="https://x.com/patagucci_girl/status/1778603024488784278">announced</a> they’d be leaving the company this week. One <a href="https://x.com/dcwj/status/1777722573683318785">said</a> they would be taking up a role at Blackbird Labs, the Web3 restaurant loyalty app.&nbsp;



Read more: <a href="https://blockworks.co/news/sec-issues-uniswap-wells-notice">SEC signals to Uniswap that enforcement actions are looming</a>



It wasn’t all departures for Uniswap on the hiring front though. Connor Chevli, formerly of Ava Labs, <a href="https://x.com/connorchevli/status/1778262704211312783">joined</a> Uniswap as a developer. Avara, formerly Aave, also made a <a href="https://x.com/MPtherealmvp/status/1777347826575409195">growth</a> hire.



Jack Corddry, formerly a developer at Frax Finance, <a href="https://x.com/jackcorddry/status/1778615136078704982">began</a> a development role at custody platform Waymont.&nbsp;



Elsewhere, Jordan Walker, who used to be the business development lead at Fidelity Digital Assets, <a href="https://www.linkedin.com/posts/jordanwalker3_funds-familyoffices-ugcPost-7181589577772474369-CFLQ/?utm_source=share&amp;utm_medium=member_desktop">took</a> a role as head of business development at crypto investment firm Re7 Capital.



<h2 class="wp-block-heading">Other notable hiring news</h2>



<ul>
<li>Former TechCrunch journalist Jacquelyn Melinek and media personality Anthony Pompliano teamed up to <a href="https://x.com/jacqmelinek/status/1777682705104183435">launch</a> Token Relations, a firm helping crypto projects connect and communicate with their communities.</li>



<li>Binance’s Europe-based head of legal <a href="https://www.linkedin.com/feed/update/urn:li:activity:7183896644973670402/">left</a> the exchange.</li>



<li>Michiel Schop, formerly of Activision Blizzard, <a href="https://x.com/ChainsofWarNFT/status/1777779899807215711">joined</a> Cardano-based gaming project Chains of War.</li>
</ul>



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Crypto Hiring: Chainalysis enlists high-level IRS veteran

For venture capitalists looking for significant returns on their crypto investments, layer-1 blockchains that are compatible with Ethereum’s software are a pretty popular bet.&nbsp;



This week, two layer-1 blockchains compatible with the Ethereum Virtual Machine (EVM) secured significant funding. Monad, which is developing a parallel EVM, raised $225 million in a round led by Paradigm.



Meanwhile, Berachain, an EVM-compatible layer-1 built with Cosmos’ software development kit (SDK), <a href="https://x.com/berachain/status/1778776309927191012">closed</a> a $100 million Series B funding round co-led by Brevan Howard Digital’s Abu Dhabi branch and Framework Ventures.



Read more: <a href="https://blockworks.co/news/paradigm-leads-monad-parallel-evm-fundraise">Paradigm leads $225M round for high-throughput blockchain Monad</a>



Monad’s raise was the largest crypto venture round since cross-chain messaging protocol <a href="https://blockworks.co/tag/wormhole">Wormhole</a> secured $225 million in November. Monad’s valuation wasn’t disclosed, though <a href="https://blockworks.co/news/cross-chain-protocol-investor-funding">Wormhole was valued at $2.5 billion</a> when it raised the same amount in the fall.&nbsp;



Monad justifies its lofty fundraising with the promise to deliver a much more performant <a href="https://blockworks.co/tag/evm">EVM</a>. For context, Monad hit 10,000 transactions per second in testing, while Ethereum often <a href="https://etherscan.io/">sits</a> around 15 TPS.



The parallel EVM is yet to go to mainnet however, and as <a href="https://blockworks.co/news/solana-network-congestion-transaction-volume">Solana experienced this week</a>, the obstacles blockchains encounter in the real world can be unpredictable.&nbsp;



Berachain, which also has not yet launched its mainnet, is set to introduce a “proof-of-liquidity” (PoL) consensus mechanism. This model <a href="https://docs.berachain.com/learn/what-is-proof-of-liquidity">aims</a> to improve upon Ethereum’s proof-of-stake (PoS) by addressing limitations around liquidity and centralization.



Unlike PoS, where users delegate tokens to validators who lock them up as stakes, PoL incentivizes users to contribute liquidity to decentralized exchange pools. Users’ contributions are then rewarded with governance tokens, improving both the security and efficiency of the network.



Berachain’s PoL model separates its governance tokens (BGT) from its transactional gas tokens (BERA), to prevent the centralization of stake. This promotes a fairer distribution of rewards and influence among participants.



Notably, this proof-of-stake downside — the fact that too much of the liquidity supply can end up being staked — has been on the Ethereum Foundation’s mind as of late. With around a quarter of the ETH supply now staked, some EF researchers are proposing ways to discourage staking and keep ether liquid.&nbsp;



Read more: <a href="https://blockworks.co/news/empire-newsletter-eth-monetary-policy">Smell Ethereum’s cooking: What ETH has in common with pro wrestling</a>



And of course, Berachain’s active online community looks good to <a href="https://x.com/hiFramework/status/1778776939903242378">investors</a> as crypto’s memecoin phase carries on.&nbsp;



<h2 class="wp-block-heading">Mini Q&amp;A: Dragonfly’s Tom Schmidt</h2>



Blockworks caught up with Tom Schmidt, partner at the crypto venture fund Dragonfly, to talk about the recent upswing in crypto VC activity.&nbsp;



Keep reading for excerpts from Blockworks’ conversation with Schmidt.



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Blockworks: What are you seeing in the crypto venture world currently?



Schmidt: I think crypto VC is just starting to get a little bit warmer. The past two years have been really just ice cold. You know, these rounds are not super competitive, they happen pretty slowly. It’s great on my end because it gives you a lot of time to do deeper due diligence, build up time with the team, etc.



Overall though, it&#8217;s maybe reminiscent of fall 2020, in that we&#8217;re seeing institutions start to get more into crypto, we&#8217;re starting to see them come a little bit more into the rounds. We&#8217;re starting to see some interesting novel use cases and a little bit more excitement in the asset class.&nbsp;



But it isn&#8217;t like peak frenzy, you know, CNBC’s every other story is about crypto, which is great for <a href="https://blockworks.co/tag/venture-capital">VC</a> because I think there’s still great opportunity and deals to be had, but it&#8217;s not as sort of easy pickings as it was maybe a year ago.&nbsp;



Blockworks: Going off of that fall 2020 analogy, last cycle there were some bets that worked out and some bets that very noticeably didn&#8217;t. What are the lessons learned from the prior cycle and what sorts of investments do you think are going to pay off in four years’ time?&nbsp;



Schmidt: The beauty of being a proper venture fund is we have a very long fund life and so we can make bets that we think are going to pay off in five years or something like that. Obviously in venture too, there is this weird dynamic where you know most of your investments aren&#8217;t going to pan out. They&#8217;re going to be a zero or a 1x or something like that. And then you have one or two that are going to pay for the entire fund.



So there&#8217;s always going to be things where you invest, where you lose money. Like, that&#8217;s the nature of the business. I think the lesson from the past year has been don’t invest in anything that is going to blow up or embarrass you or embroil you in lawsuits.



There&#8217;s this component to crypto where everything is inherently a little bit procyclical, right? Like even Coinbase earnings, they go up when the price of bitcoin goes up and they go down when the price of bitcoin goes down. There&#8217;s some businesses that you look at that are maybe procyclical on the downside but conversely, they do not get paid and there&#8217;s no convexity when markets really rally, and those are the businesses that I&#8217;d try to avoid where you&#8217;re basically not getting paid for the risk that you&#8217;re taking.



This interview has been edited for brevity and clarity



<h2 class="wp-block-heading">Other notable funding news</h2>



<ul>
<li>Bitcoin mining hardware producer Auradine <a href="https://x.com/Auradine_Inc/status/1778093722657243256">closed</a> an $80 million Series B.</li>



<li>A new report <a href="https://blockworks.co/news/vcs-funding-early-stage-bitcoin-projects">showed a spike</a> in pre-seed rounds for Bitcoin ecosystem startups.</li>



<li>Alpen Labs <a href="https://x.com/AlpenLabs/status/1778080721128599949">announced</a> a $10.6 million seed round led by Ribbit Capital to apply zero-knowledge proofs to Bitcoin rollups.</li>



<li>Blockchain beauty platform KIKI World <a href="https://x.com/kikiworld_/status/1777614313366131092">rolled</a> out a “community commerce platform” with a16z crypto and the venture arm of cosmetics giant Estée Lauder as financial backers.</li>
</ul>



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Funding Wrap: Monad raises $225M, Berachain bags $100M in big week for L1s

First there was the Solana Saga, now there’s the Sui SuiPlay0X1.&nbsp;



That’s the bet Sui developer Mysten Labs is making, as it <a href="https://x.com/SuiNetwork/status/1777990298385219986">announced</a> the pending launch of a handheld gaming device that natively integrates with the Sui blockchain. The product will be <a href="https://x.com/SuiNetwork/status/1777990300138393895">built</a> with Playtron’s device-agnostic gaming operating system, Sui said.&nbsp;



A marketing video posted by Sui showed a slick, PlayStation Portable-esque device, but any actual gaming handheld is in the very early stages, and the product isn’t set to hit the market until 2025.&nbsp;



Official details on the release remain relatively sparse, though VentureBeat <a href="https://venturebeat.com/games/suiplay-0x1-is-an-open-steam-deck-like-gaming-handheld-with-multiple-game-stores/">reported</a> some details based on interviews with executives involved in the partnership. The device will aim to integrate Sui wallets for users at the OS level, so game developers could do things like airdrop rewards directly to users.&nbsp;



But the elemental design choice of which chip to use is still to be determined, VentureBeat reported. A spokesperson for Sui did not immediately return a request for more information.&nbsp;



<a href="https://blockworks.co/tag/solana">Solana</a>’s Saga phone did uninspiring numbers at launch before becoming highly sought-after among crypto natives due to BONK airdrops being offered by protocols developing apps for the phone.&nbsp;



Read more: <a href="https://blockworks.co/news/solana-phones-sold-out">Solana fans suddenly BONKers over the Saga phone</a>



Like Solana, Mysten teamed up with an external developer for its handheld Web3 product. Playtron is a handheld gaming software startup that <a href="https://x.com/PLAYTR0N/status/1774316904251068686">came</a> out of stealth with $10 million in funding roughly two weeks ago. Mysten Labs, along with Polychain, Circle and CMT Digital, were crypto companies that have invested, The Verge reported.



Playtron’s calling card is an operating system that can support games from different platforms, perhaps opening up the notoriously siloed gaming space.



<h2 class="wp-block-heading">When one chapter ends, another begins</h2>



Bored &amp; Hungry, the Long Beach, California-based hamburger restaurant, is <a href="https://x.com/longbeachcounty/status/1777043411490746835">closing</a> up shop roughly two years after its 2022 founding. The shop, opened and branded around the Bored Ape NFT said to be owned by founder Andy Nguyen, let some customers <a href="https://www.web3isgoinggreat.com/?id=first-crypto-burger-purchase-at-bored-ape-restaurant-illustrates-why-people-dont-widely-do-this#:~:text=Instagram%20video%20of%20%24APE%20transaction">pay</a> using APE tokens.&nbsp;



It’s not the end of the road though, as Bored &amp; Hungry also opened three stores in the Philippines and another in South Korea. The burger chain’s branding has been acquired by Seoul-based Hungry DAO. The company will hold pop-ups this year in Hong Kong, Singapore and Dubai, Nguyen <a href="https://x.com/AndyTheNguyen/status/1777349077954592981">said</a> on X.&nbsp;



In other APAC-based-NFT-themed-restaurant news, a restaurant in Australia <a href="https://www.theurbanlist.com/melbourne/a-list/nouns-deli">rebranded</a> to become Nouns Deli, with branding based on the <a href="https://blockworks.co/news/nouns-fork-two-dao-treasuries-spending">NFT collection and DAO</a>.&nbsp;



<h2 class="wp-block-heading">One interesting stat:</h2>



<ul>
<li>A Flipside dashboard <a href="https://flipsidecrypto.xyz/marqu/solana-nft-marketplaces-organic-wash-trading-F-UoCh">suggests</a> that over the past 90 days, 50.84% of trading volume on the Magic Eden NFT marketplace has been wash trading.</li>
</ul>



<h2 class="wp-block-heading">Also of note:</h2>



<ul>
<li>Crypto: The Game, the online survival game where competitors vie for an 80 ether prize, has <a href="https://x.com/cryptothegame_/status/1778816423990878528">whittled</a> the pool from 800 contestants down to 570.</li>



<li>Shooter game MetalCore <a href="https://x.com/Immutable/status/1777825818221428801">became</a> the first playable title on the Immutable zkEVM network.</li>
</ul>



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Web3 Watch: Sui unveils handheld Web3 gaming device

Bitcoin is not scarce and it’s not going to become so after the halving next week.



Don’t let anyone tell you otherwise.



Yes, Satoshi Nakamoto coded Bitcoin with a supply limit of 21 million BTC. Bitcoin supply is finite. But that doesn’t make BTC, the currency, at all rare.



We’re largely accustomed to this by now, but one of bitcoin’s most appealing features is that each coin is extremely divisible, up to eight decimal places, making 100 million satoshis (sats) per bitcoin.



Dollars meanwhile only divide out to 100 physical cents, two decimal places, or at most, 1,000 mills to three decimal places.



Read more: <a href="https://blockworks.co/news/bitcoin-halving-inflation-and-issuance-schedule">Why is 2140 the end of bitcoin inflation?</a>



Now extrapolate all those sats to the current circulating supply of bitcoin. 100 million sats in 19.68 million bitcoin makes 1.968 quadrillion sats. And sometime in 2140, when you and everyone you know will be floating about the great Bitcoin <a href="https://decrypt.co/84125/the-bizarre-rise-of-the-bitcoin-citadel">citadel</a> in the sky, there will be 2.1 quadrillion sats.



The <a href="https://fred.stlouisfed.org/series/BOGMBASE">base</a> money supply of the US dollar is currently less than $5.9 trillion and the much broader <a href="https://fred.stlouisfed.org/series/MABMM301USM189S">M3</a> is under $20.8 trillion. A quadrillion has 15 zeros, a trillion has 12.&nbsp;



If bitcoin is scarce, then so is the US dollar.



For what it’s worth, Gizmodo tried to grasp just how large a quadrillion really is with a Sour Patch Kids thought <a href="https://gizmodo.com.au/2013/10/what-does-a-quadrillion-sour-patch-kids-look-like/">experiment</a> in 2013. It scaled 100 candies laid out in real life to a quadrillion virtual ones across New York City, and found a jelly cube of that size “covered most of Downtown Manhattan.”



It’s true that only 21 million people can ever own one bitcoin each. Around 1 million <a href="https://bitinfocharts.com/top-100-richest-bitcoin-addresses.html">addresses</a> have at least 1 BTC right now, and that number is slowly growing, although it’s not knowable how many of those are owned by the same person, nor how many exchange accounts have million-dollar bitcoin balances.&nbsp;



Read more: <a href="https://blockworks.co/news/state-of-bitcoin-development-ahead-of-halving">Here’s what the current state of Bitcoin development looks like ahead of the halving</a>



There are also 53 million <a href="https://blockworks.co/tag/bitcoin">Bitcoin</a> addresses that have one satoshi or more. If the current supply were suddenly sent to those addresses, each would net more than 37 million sats ($25,500).&nbsp;



With this in mind, bitcoin is not scarce. That’s the fiat brain talking — it automatically goes to the largest unit when considering bitcoin as a currency. Your fiat brain does the same with dollars, euros, leprechaun gold and tacos.



The reality is that sats are just incredibly cheap right now, $0.00069 each, so few consider them.&nbsp;



If every sat were worth the current price of a whole BTC, then an even distribution would give every human alive $16.7 billion BTC. Do the same with all addresses containing at least one sat and each would net $2.5 trillion.



A few years back, there was a <a href="https://thenextweb.com/news/crypto-twitter-satoshi-symbol-nobody-can-agree">push</a> to find a symbol to represent the satoshi but nobody could really agree. 



With scarcity on the fiat brains of everyone watching the Bitcoin <a href="https://blockworks.co/tag/bitcoin-halving">halving</a> next week — crypto’s own solar eclipse — what better time to revisit the idea of pricing BTC in sats, rather than whole coins. Plenty of those go around.



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If you still think bitcoin is scarce, you’re suffering from fiat brain

Temujin Louie

One of the prerequisites for the mass adoption of blockchain technology is interoperability — the ability to pass data between distinct blockchain and blockchain-like systems. Numerous interoperability projects have established themselves today, and many are growing at an incredible rate. Indeed, it’s only a matter of time before the number of cross-chain messages is measured in trillions.&nbsp;



Blockchain interoperability has never been more ubiquitous. In January 2024, <a href="https://blog.bcas.io/implications-of-cross-chain-bridges-under-mica#:~:text=As%20of%20January%202024%2C%20the,ranks%20third%20at%20%242.27%20billion.">more than $23 billion worth of assets</a> were locked in cross-chain bridges on Ethereum alone. Clearly, our industry’s early adopters — affectionately called Web3 enthusiasts — are keen to explore new ecosystems as they routinely bridge assets from one blockchain to another. This process, though clunky, has become so commonplace that&nbsp;many believe that blockchain interoperability is a solved issue.&nbsp;



The truth is far more bleak.&nbsp;



The state of blockchain interoperability today is one of fractured incompatibility. Competing interoperability projects build ad hoc solutions that gerrymander the blockchain landscape, making it impractical for enterprises and regulators to vet the security of each. As it stands, the current state of blockchain interoperability poses an existential threat to the mainstream adoption of blockchain technology as a whole.&nbsp;



Modern interoperability projects are far too focused on building and growing their own proprietary products. The fight to become the one-and-only has introduced growing system complexity and, therefore, unbounded risk. As different projects make different tradeoffs to solve different problems, blockchain interoperability protocols continue to increase in complexity. Not only does this complexity make protocols progressively more incompatible with one another, each new system component or trust assumption introduces new attack vectors. As an industry, we must curb this troubling trend.



A shared framework for interoperability is desperately needed.&nbsp;



As a trustless system, decentralized blockchains are incapable of communicating with other blockchain networks out-of-the-box. Trust assumptions dictate the risk profile of a particular cross-chain design by shaping its vulnerabilities and delineating how a system can be exploited. Generally speaking, the greater the complexity of a system, the higher its susceptibility to attack. It is therefore preferable to simplify the design of cross-chain solutions in order to limit the number of exploitable components. So, while it is true that trust assumptions are inherent to blockchain interoperability solutions, there is security in simplicity. 



Read more from our opinion section: <a href="https://blockworks.co/news/open-tech-scapegoat-progress">There’s no reason to fear open platforms</a>



A shared framework for interoperability between blockchain and blockchain-like systems — one that includes architectural guidelines and vetted interface definitions — makes it possible to reduce system complexity. This has the knock-on effect of preventing fragmentation across different project implementations. Even something as simple as common interfaces and functions to decode and verify the validity of messages would go a long way towards enhancing interoperability, while reducing the need for custom implementations.&nbsp;



A shared framework for interoperability also has the potential to foster collaboration between different interoperability projects. Broadly speaking, interoperability projects simply don’t trust each others’ work. This isn’t entirely surprising considering that, between 2021 and 2023, more than <a href="https://twitter.com/PeckShieldAlert/status/1741852326305100283?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1741852326305100283%7Ctwgr%5E97ab62338d1c1ccce7cdd60687e8ec02e6921617%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fcointelegraph.com%2Fnews%2Forbit-bridge-hack-pushes-december-crypto-losses-100m">$2.9 billion was stolen</a> from exploited cross-chain bridges. Nevertheless, this distrust has directly contributed to the fractured state of blockchain interoperability today. A shared framework, built openly and vetted by all, will result in a more secure system.&nbsp;



Blockchain interoperability must be core infrastructure first, product second. If we as an industry are to have any hope of achieving the mainstream adoption of blockchain technology (without sacrificing the industry’s core ethos of decentralization), we must establish a shared framework for interoperability. Time is running out.



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


<div class="wp-block-post-author-biography">Temujin Louie (Tem), CEO of Wanchain, is committed to bridging the world of emerging tech to the broader public in an easy-to-understand and accessible way.

With over 10 years of experience driving the adoption of transformative digital technologies, Tem has served as a marketing director for leading new tech companies such as Matrix AI network, Calwave Group, and Lightnet Group before pursuing a VP position at Wachain in 2021. 

In addition to professional experience, Tem proved his deep understanding of decentralized technologies in an academic field as well, dedicating two years to researching Bitcoin’s impact on incumbent power structures at the London School of Economics. 

Tem believes that accessibility, simple UX, and narratives that address the non-technical everyday users are the secret sauce to making blockchain widely adopted by the general public.</div>


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Blockchains still aren’t great at communication

<h2 class="wp-block-heading">ETH monetary policy is just like WWE</h2>



The fighting in pro wrestling is largely fake and the outcomes are mostly pre-determined.&nbsp;



But much of the appeal for fans is that they, as a whole, can influence characters and storylines over the course of years — even who holds the World Championship belt.&nbsp;



Take Dwayne Johnson, perhaps better known as The Rock. The WWE (then the WWF, back in 1996) first played Johnson as “Rocky Maivia,” combining ring names of his real-life father and grandfather who were wrestling legends in their own right.&nbsp;



The Rocky Maivia character was a clean cut babyface nicknamed “The Blue Chipper” — wrestling’s first third generation star who could do no wrong. Except, the crowd hated Rocky, despite the Federation’s attempts to build the character up with Intercontinental Championship wins and defenses against fan favorites HHH and Bret Hart.&nbsp;



Rocky was harassed with chants of “Rocky sucks” and “die, Rocky, die” for so long that a decision was made to <a href="https://www.ringsidenews.com/2023/09/13/the-rock-personally-requested-vince-mcmahon-for-heel-turn-during-rocky-maivia-run/">let</a> the character turn “heel” — switch him into a villain — by joining the bad-guy faction Nation of Domination, referring to himself in the third person and having the character spend much of his promo time in-ring insulting the crowd and everyone else.&nbsp;



The fans themselves had made The Rock, working in organic symbiosis with WWF writers to shape the character arc, and ultimately Johnson’s career.



<a href="https://blockworks.co/tag/ethereum">Ethereum</a>’s relationship with the crypto ecosystem is really quite similar. The Ethereum Foundation, of which project co-founder Vitalik Buterin is one of three board members, has pitched repeated changes to ETH’s monetary policy over the years, generally on account of what’s playing out in real time across the Ethereum economy.



In 2017, when Ethereum still ran on a consensus algorithm powered by proof-of-work, a <a href="https://github.com/ethereum/EIPs/blob/master/EIPS/eip-649.md">proposal</a> jointly written by Buterin and long-time contributor Afri Schoedon was enacted to cut block rewards from 5 ETH to 3 ETH — a 40% reduction.&nbsp;



The price of ether had gone from $1 when it launched in August 2015 to over $200 by mid-2017, while block rewards had stayed the same. This led the Ethereum economy to overpay for security, with miners earning far more dollar value per block than they spent on electricity and other overheads. It’s much fairer for Ethereum users to pay the minimum-viable fee.&nbsp;



Another <a href="https://github.com/ethereum/EIPs/blob/master/EIPS/eip-1234.md">proposal</a> was pushed through two years later to slash the block reward further, by 33%, down to 2 ETH. Those were monetary policy changes made in response to the price of ether, itself an extension of market sentiment.



Read more: <a href="https://blockworks.co/news/cheatsheet-ethereum-burning-almost-10b">Cheatsheet: Ethereum on track to burn more than $10B ETH over next year</a>



More fundamental changes to Ethereum’s monetary policy occurred in the following years, also reflective of what was happening in the wild. In 2021, a fee burn <a href="https://github.com/ethereum/EIPs/blob/master/EIPS/eip-1559.md">mechanism</a> sought to mitigate risks associated with miners gauging Ethereum users with MEV tactics, and also opened the door for ETH’s supply to turn deflationary after the Merge under certain conditions.



Ethereum’s issuance was then cut by 90% as it transitioned to proof of stake in 2022, which made sense considering the cost of running validator nodes is a fraction of the cost of running crypto mining rigs. Rewards were placed on a sliding scale based on how many validators were staked on the network — the more validators there are, the less ETH yield there will be.



Now, Ethereum Foundation researchers are back with another <a href="https://ethereum-magicians.org/t/electra-issuance-curve-adjustment-proposal/18825">proposal</a>: reduce ETH issuance in such a way that it discourages stakers, which have so far <a href="https://dune.com/hildobby/eth2-staking">locked</a> up almost 27% of the current circulating supply. All those validators must be paid yield, which would eventually dilute ETH holders, leading them to once again overpay for security.



As it stands, there are enough validators securing the network, the thinking goes, and the ever-rising popularity of liquid staking tokens could threaten ETH’s position as the blockchain’s cryptocurrency. ETH must be made more valuable to encourage holders not to stake their ETH. Reducing issuance to increase scarcity is one way to do it.



The Ethereum Foundation researchers were much like WWF story writers when they debuted babyface Rocky Maivia: fairly sure the response would be positive but probably surprised by the <a href="https://unchainedcrypto.com/why-the-ethereum-community-is-up-in-arms-against-a-proposal-to-change-the-monetary-policy/">negative</a> response from the crowd — which is now worried over its lack of power over monetary policy.&nbsp;



Better start chanting.



— David Canellis



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



<ul>
<li>There’s now more than 1 million <a href="https://dune.com/hildobby/eth2-staking">validators</a> on Ethereum, with a total stake of 32.28 million ETH ($114.14 billion).</li>



<li>Less than half that (15.44 million ETH) is locked up in Ethereum DeFi, up 7% since the start of April.</li>



<li>Base’s TVL is the <a href="https://defillama.com/chains">fastest</a> growing for chains with over $300 million, now at $1.56 billion after gaining 26% in the past week.</li>



<li>Ahead of the <a href="https://blockworks.co/tag/bitcoin-halving">halving</a> next week, bitcoin’s holding on to $70K, just $3K shy of its all-time high according to Coinbase.</li>



<li>Bitcoin Cash, <a href="https://blockworks.co/news/bitcoin-cash-completes-halving-before-bitcoin">which went through its halving last week</a>, has since shed gains and is down 11% to $600 in the last seven days.</li>
</ul>



<h2 class="wp-block-heading">Can the Wild West be tamed?</h2>



Speaking of Ethereum…BlackRock’s continued foray into crypto may hit some complications if the Securities and Exchange Commission decides to declare ETH a security.



Not only does BlackRock have a standing application for an ETH ETF, which has not yet been approved by the <a href="https://blockworks.co/tag/sec">SEC</a>, but the firm launched its first tokenized fund on Ethereum last month.&nbsp;



All of this is based on reports that Gary Gensler’s agency is mulling ETH as a security after special purpose broker dealer Prometheum <a href="https://fortune.com/crypto/2024/02/07/sec-prometheum-ethereum-broker-dealer-gary-gensler-coinbase/">announced</a> that it would offer custodial services for ETH.&nbsp;



Read more: <a href="https://blockworks.co/news/ether-commodity-or-not">Ether is the Schrödinger’s cat of crypto</a>



Obviously, a security designation would make a path to the <a href="https://blockworks.co/tag/ether-etfs">ether ETFs</a> more complicated, though <a href="https://blockworks.co/tag/blackrock">BlackRock</a> CEO Larry Fink told Fox Business in March that he thinks an ETH ETF would still be possible.&nbsp;



Van Buren Capital general partner Scott Johnsson noted that if <a href="https://blockworks.co/tag/gary-gensler">Gensler</a> and the SEC decided to go “nuclear” and label ETH as a security, it could “kill” the ETH ETF app and potentially put a stop to both BUIDL and the firm’s tokenization efforts.&nbsp;



The designation would only block a potential ETH ETF, Johnsson noted, but BUIDL would basically be taken away from BlackRock and Fink.&nbsp;



“[Gensler] can stop the [ETH ETF without] going nuclear,” he added.



Read more: <a href="https://blockworks.co/news/cftc-alleges-eth-as-commodity-kucoin-lawsuit">CFTC calls ETH a commodity in KuCoin complaint</a>



Johnsson explained to Blockworks that BUIDL is at risk because those using the fund would need to use ETH for gas.&nbsp;



“Depending on the specifics of the SEC&#8217;s theory of ETH as a security, it&#8217;s not clear how ETH as [a] gas token could be characterized or used to facilitate those transfers without potentially running afoul of engaging” with an unregistered security,” he told Blockworks.



While BUIDL is a fairly tame play in the space, it shows how crypto is being treated — at least by some regulators — as a legal thought experiment, which can be risky for firms trying to expand their interests in the space.&nbsp;



And, no, it doesn’t matter if it’s BlackRock <a href="https://blockworks.co/news/coinbase-dismissal-denial-staking-and-securities">or Coinbase</a>.



— Katherine Ross



<h2 class="wp-block-heading">SDNY: Crypto’s hottest club&nbsp;</h2>



Another crypto case is underway in New York. This time it’s Avraham “Avi” Eisenberg’s criminal trial.&nbsp;



Prosecutors say the 28-year-old crypto trader illegally manipulated markets when he <a href="https://blockworks.co/news/avi-eisenberg-committed-fraud">made off with $110 million</a> in October 2022 following a series of trades on DeFi trading operation Mango Markets. Eisenberg has been charged with commodities fraud, commodities manipulation and wire fraud.&nbsp;



His defense team <a href="https://twitter.com/innercitypress/status/1777689619523309593">said</a> this week that it’s all a big misunderstanding. Eisenberg just made some good trades. Plus, he had $13 million on the line. It’s not his fault he wasn’t required to submit personal information or that Mango didn’t run a credit check, the argument goes.&nbsp;



Read more: <a href="https://blockworks.co/news/sam-banmkan-fried-fraud-sentencing">Bankman-Fried’s legal team argues for leniency, citing philanthropy and character&nbsp;</a>



Hopping on a plane out of the country right after the alleged heist — which, surprise, is exactly what Eisenberg did — will be harder to explain to the jury.&nbsp;



In all seriousness, Eisenberg’s defense (at least based on what we heard during opening statements) rests on the idea that if the code allowed for something to happen, then it can’t be illegal. Eisenberg was just “using the protocol as designed,” he <a href="https://x.com/avi_eisen/status/1581326199682265088">said</a> in October 2022, days after completing the transactions.&nbsp;&nbsp;



Eisenberg may not be the most popular defendant, but the US government’s allegations, if proven true, could impact a lot of the activities traders today enjoy. Like using anonymous accounts and skirting know-your-customer (<a href="https://blockworks.co/tag/kyc">KYC</a>) requirements. It’s a case a lot of the industry probably will want to watch.&nbsp;



When the criminal proceedings wrap, Eisenberg has a slew of civil suits waiting for him. The SEC, CFTC and Mango Labs all filed cases, which are on hold for now.&nbsp;



—&nbsp;Casey Wagner



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



<ul>
<li>Hong Kong could <a href="https://www.bloomberg.com/news/articles/2024-04-12/hong-kong-bitcoin-ether-etf-approval-expected-as-soon-as-monday">approve</a> spot bitcoin and ether ETFs as soon as Monday, Bloomberg reports.</li>



<li>Ex-FTX CEO Sam Bankman-Fried <a href="https://www.courtlistener.com/docket/66631291/united-states-v-bankman-fried/?filed_after=&amp;filed_before=&amp;entry_gte=&amp;entry_lte=&amp;order_by=desc">filed</a> to appeal his fraud conviction and 25-year prison sentence.</li>



<li>The delisting of privacy coins continued after Kraken <a href="https://support.kraken.com/hc/en-us/articles/notice-of-asset-delisting-in-ireland-and-belgium-for-monero-xmr">pulled</a> Monero in Ireland and Belgium.</li>



<li>Blockchain analytics unit TRM Labs <a href="https://www.trmlabs.com/post/trm-labs-appoints-mr-boon-hui-khoo-as-senior-advisor">tapped</a> a former INTERPOL president as a senior advisor.</li>



<li>BUIDL holders can now transfer<a href="https://blockworks.co/news/blackrock-tokenized-fund-trading-circle-usdc"> shares of BlackRock’s fund to receive USDC</a>, Circle announced.</li>
</ul>



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



Talk about regulatory whiplash.



Even as it battles the SEC in an open court battle, US crypto exchange <a href="https://blockworks.co/tag/coinbase">Coinbase</a> is apparently earning plaudits from the Financial Crimes Enforcement Network.



Yes, FinCEN sent Coinbase a <a href="https://twitter.com/iampaulgrewal/status/1778472385068610033">letter</a> to “recognize” the exchange’s “substantial contributions” to an internal award-winning investigation. Thanks for being part of the team, the letter basically says.



Read more: <a href="https://blockworks.co/news/coinbase-class-action-lawsuit-partial-revival">Coinbase class action lawsuit gets partial revival&nbsp;</a>



In a way, this letter sums up the regulatory picture in America today. On the one hand, Coinbase is allegedly breaking every rule imaginable in the eyes of the SEC. But for FinCEN, Coinbase is a critical player, helping its team rack up literal points on the anti-money laundering scoreboard.&nbsp;



Meanwhile, Congress —&nbsp;ostensibly the ones who might be able to provide an iota of clarity — is preparing to jettison a House Speaker for the second time in history.&nbsp;



Well, at least Coinbase has something to pin on the fridge in the staff break room.&nbsp;



— Michael McSweeney



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Empire Newsletter: Smell Ethereum’s cooking (What ETH has in common with pro wrestling)

Shakeeb Ahmed, the hacker behind the 2022 Nirvana exploit, a flash loan attack, was sentenced to three years on Friday.



The Department of Justice announced the sentencing, which marks the first time someone has been convicted for hacking a smart contract.



“No matter how novel or sophisticated the hack, this Office and our law enforcement partners are committed to following the money and bringing hackers to justice,” US attorney Damian Williams said in a <a href="https://www.justice.gov/usao-sdny/pr/former-security-engineer-sentenced-three-years-prison-hacking-two-decentralized">statement</a>. “And as today’s sentence shows, time in prison — and forfeiture of all the stolen crypto — is the inevitable consequence of such destructive hacks.”&nbsp;&nbsp;



<a href="https://blockworks.co/news/nirvana-hacker-pleads-guilty">Ahmed pleaded guilty to the DOJ’s charges in December</a> of last year. At the time, he forfeited $12.3 million, with roughly $6 million of that in crypto.



Ahmed, in addition to the forfeiture, was ordered to “pay restitution to the Crypto Exchange and Nirvana in the amount of over $5 million,” Friday’s release said.



Read more: <a href="https://blockworks.co/news/crypto-hacker-used-google-after-hack">‘Can I cross border with crypto?’: Hacker turned to Google after $9M DeFi raid</a>



The charges against Ahmed were first brought in July of 2023. However, they only linked him to the hack of one exchange. He was later found to have launched a multi-million dollar hack on another exchange.&nbsp;



Blockworks <a href="https://blockworks.co/news/nirvana-hacker-pleads-guilty">previously reported that the references matched</a> the Crema Finance hack in July 2022. The <a href="https://blockworks.co/tag/doj">DOJ</a> still hasn’t publicly released the second exchange’s name.



According to the <a href="https://blockworks.co/tag/doj">DOJ</a>’s release, Ahmed – in addition to his prison term — will also face three years of supervised release.



The original indictment filed against Ahmed revealed that he attempted to utilize Google in the hopes of evading the authorities.&nbsp;



Ahmed allegedly searched “defi hack” and “how to stop federal government from seizing assets” on Google following the exploits.&nbsp;



At the time, Nirvana attempted to offer Ahmed a bug bounty of $600,000 to return the funds, but Ahmed — after demanding $1.4 million — didn’t reach an agreement with the team.



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Nirvana hacker sentenced to 3 years after pleading guilty

Hong Kong is reportedly looking to approve spot bitcoin and spot ether ETFs as soon as next week.&nbsp;



Bloomberg first <a href="https://www.bloomberg.com/news/articles/2024-04-12/hong-kong-bitcoin-ether-etf-approval-expected-as-soon-as-monday">reported</a> the news, citing sources familiar.&nbsp;



HashKey is expected to be among the issuers who receive the green light, according to the report.&nbsp;



HashKey announced on Thursday that it received an upgrade to its licensing conditions from <a href="https://blockworks.co/tag/hong-kong">Hong Kong</a>’s Securities and Futures Commission (SFC). 



“This approval paves the way for HashKey Capital Limited to manage virtual asset investment products that may be offered to retail investors, subject to securing the requisite product authorisations from the SFC,” HashKey <a href="https://twitter.com/HashKey_Capital/status/1778288485948129573">said</a> in a statement. 



Read more: <a href="https://blockworks.co/news/hong-kong-releases-crypto-etf-requirements">Hong Kong releases crypto ETF requirements ahead of US approval</a>



The company announced a partnership with Bosera International earlier this month, which would allow the two to launch the <a href="https://blockworks.co/tag/etfs">ETFs</a>. The partnership is “aimed at driving innovation and fostering growth.”&nbsp;



“Along with the recent license upgrade, the collaboration is expected to pave the way for innovative fund products, including spot ETFs, and new investment opportunities for retail investors,” HashKey said.



HashKey declined to comment on the report.



Another potential issuer is Harvest Fund Management’s international arm.&nbsp;



Read more: <a href="https://blockworks.co/news/apac-web3-2023">The future of Web3 lies in the Asia-Pacific</a>



If the SFC gives the firms the green light, then the ETFs could launch by the end of April, Bloomberg said.



In the US, the Securities and Exchange Commission approved spot bitcoin ETFs <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">back in January</a>. It hasn’t, however, given spot ether ETFs approval to launch yet. A decision is expected in late May, but Bloomberg’s ETF analysts have given the SEC <a href="https://blockworks.co/news/ether-etf-approval-unlikely-soon">low odds of approval </a>for the slew of applications from firms like <a href="https://blockworks.co/tag/blackrock">BlackRock</a> and Ark 21Shares.



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