Itheum

Ben Strack

Activity on the Bitcoin network has evolved over the span of a billion transactions, with the latest usage starting to resemble that of Ethereum in 2020.



Bitcoin transaction number 1,000,000,000 occurred at the start of the week, giving an excuse to take a closer look at how a network once used mostly for payments is starting to sport broader utility.



The Runes protocol is a recent driver of Bitcoin blockchain activity, satisfying “a surge of interest in the purchase of memecoins and NFTs,” according to Bitget research analyst Ryan Lee.



Read more: <a href="https://blockworks.co/news/runes-bitcoin-token-standard-ordinals">A look into Runes, a new Bitcoin token standard for issuing fungible tokens</a>



The protocol is a fungible token standard designed by Ordinals creator Casey Rodarmor. It was <a href="https://blockworks.co/news/bitcoin-ordinals-brc-20-standard">created as an alternative to BRC-20</a>.&nbsp;



<a href="https://blockworks.co/tag/ordinals">Ordinals</a>, which debuted in January 2023, is a protocol used to inscribe individual units of BTC with unique data to create digital collectibles.



Unlike BRC-20, Runes do not depend on the Ordinals mechanism of inscription, Rodarmor <a href="https://x.com/rodarmor/status/1774613900119699701">said</a> on X.



Runes has accounted for between 10% and 70% of daily Bitcoin transactions in recent weeks, according to Dune Analytics <a href="https://dune.com/cryptokoryo/runes">data</a> — reaching as high as 81.3% on April 23.



The majority of activity on the <a href="https://blockworks.co/tag/bitcoin">Bitcoin</a> blockchain has historically been payment transactions — a fact that is poised to change as more gets built on top of it.



“Current activity on the Bitcoin network is very similar to the state of the Ethereum blockchain during the boom of dapp projects,” Lee said. “I think it will continue to varying degrees as the number of new projects and add-ons based on Bitcoin grows.”



Bitcoin’s total value locked (<a href="https://blockworks.co/tag/tvl">TVL</a>) stands at roughly $1.2 billion, according to DeFiLlama <a href="https://defillama.com/chains">data</a> — about what Ethereum’s TVL was four years ago, Lee noted.&nbsp;



That was a time that preceded a “DeFi boom” that spurred a rise in yield farming, algorithmic stablecoins and new liquidity models, Lee said. Ethereum’s TVL is $53 billion today, making up nearly 60% of the TVL across all blockchains.&nbsp;



“As DeFi increasingly adopts BRC-20 tokens, which have a potential to displace competitors, Bitcoin may react to these shifts positively due to increased demand,” Lee added.



Compass Point Research &amp; Trading analyst Joe Flynn said in an April 30 note that, unlike prior bitcoin cycles, the addition of protocols built on top of the layer-1 are indeed set to up demand for blockspace. This could lead to periods of congestion “that users will pay up for to be included in the next block,” he added.



Read more: <a href="https://blockworks.co/news/ordinals-impact-on-bitcoin-network">Ordinals are driving up Bitcoin fees — but that may be good for the network</a>



The Bitcoin network’s advanced functionality — like the innovation in standards like BRC-20 — are converging with broader factors set to drive BTC adoption, according to Neo founder Da Hongfei.



One of the most influential was the launch of <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">US spot bitcoin ETFs in January</a>, he noted. Such funds have given retail and institutional investors alike exposure to the crypto asset via a familiar investment vehicle.



The 11-fund category has tallied net inflows of nearly $11.8 billion during the four months they have traded, Farside Investors <a href="https://farside.co.uk/?p=997'">data</a> shows. “The impact of such an initiative will continue to encourage heightened trading activity, as these new financial instruments become embedded in the traditional financial infrastructure,” Hongfei said.



Not to mention the recent Bitcoin halving — reducing per-block mining rewards from 6.25 BTC to 3.125 BTC — <a href="https://blockworks.co/news/bitcoin-halving-2024-occurs">occurred on April 19</a>.&nbsp;



Bitcoin&#8217;s “immutable monetary policy” and a receptive macro backdrop could spark the crypto market&#8217;s “most violent supply squeeze yet,” Hongfei explained — pushing BTC price up.&nbsp;



That said, industry watchers have argued the current environment could hold back BTC in the coming months before the expected post-<a href="https://blockworks.co/tag/bitcoin-halving">halving</a> rally plays out.&nbsp;



Read more: <a href="https://blockworks.co/news/macro-headwinds-bitcoin-summer">Macro headwinds could spur a ‘boring’ bitcoin summer — or something worse</a>



Either way, Bitcoin’s DeFi and Web3 capabilities appear poised to help it challenge smart contract networks.



“We anticipate critical mass adoption of Web3 settlement on Bitcoin&#8217;s ecosystem within this decade,” Hongfei told Blockworks. “As Bitcoin&#8217;s utility and reliability become apparent for global trade and contracts, network effects and technical advantages could propel a mass migration from 2028 to 2030.”



Ethereum is likely to remain a place to test gadgets and “tinkering without jeopardizing critical applications,” the Neo founder added.&nbsp;&nbsp;



“Both networks would then assume complementary roles,” Hongfei said. “Bitcoin as the supreme base settlement layer and Ethereum pioneering less mission-critical use cases as a secondary chain.”



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After billionth Bitcoin transaction, a look at the network’s evolution

Katherine Ross

One of the final battles between the Securities and Exchange Commission and Ripple continues.&nbsp;



The case, initially launched in 2020, still faces a final judgment. The SEC is seeking nearly $2 billion in a final judgment. A sum, Ripple argued, that is too high. The firm asked the court to lower the penalty to “no more than $10 million” in a filing late last month.&nbsp;



The SEC, in its newest filing, disagrees with Ripple unsurprisingly.&nbsp;



Ripple, the regulator said, failed to argue how “that negligible ‘low’ penalty would meaningfully punish its violations or deter it or others from future large-scale capital raises without required registration.”



The regulator is arguing that the <a href="https://blockworks.co/news/sec-wants-multi-billion-sum-from-ripple">$1.9 billion it’s seeking</a> pales in comparison to the $1 billion that <a href="https://blockworks.co/tag/ripple">Ripple</a> made in violating Section 5 of the Securities Act and “the multi-billion-dollar business it built selling XRP.”



Read more: <a href="https://blockworks.co/news/ripple-counters-sec-penalties">Ripple proposes ‘no more than $10M’ in penalties after SEC seeks $1.9B</a>



Ripple, on the other hand, argues that the multi-million sum is fair when looking at other crypto cases like BlockFi, Genesis Global and Block.one. The <a href="https://blockworks.co/tag/sec">SEC</a> disagreed with the argument, saying the listed cases were just settlements.&nbsp;



“Ripple has failed to meet its burden of showing that the SEC’s calculation is not a reasonable approximation of Ripple’s ill-gotten gains,” the SEC wrote.&nbsp;



On X, Ripple’s Chief Legal Officer Stuart Alderoty <a href="https://twitter.com/s_alderoty/status/1787985041043386531">said</a> that the filing was “more of the same from the SEC.”



“The good news is that we are closer than ever to putting this lawsuit behind us, though unfortunately, <a href="https://blockworks.co/news/empire-newsletter-sec-issues-robinhood-wells-notice">many are just starting the journey</a>. We trust the Court will approach the remedies phase fairly,” he continued.



The filings suggest that the final judgment is looming, though it’s unclear what the court will decide with two radically different proposals.



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Ripple and the SEC’s legal fight continues ahead of final judgment

Mike Mallazzo

In the craziest highs of ZIRP mania, there was a popular internet adage that Coinbase and DraftKings were the same product, but just didn’t know it. Well, it sure as hell seems like they know it now. Crypto is currently tumbling off its high water mark precisely as sports betting seems to have reached its fathomable peak. With the number of gambling platforms ads and live in-game betting lines, watching an NBA playoff game in 2024 is essentially staring at a roulette wheel with a sideshow of world-class athleticism. The best player in baseball <a href="https://sports.yahoo.com/new-details-emerge-in-alleged-gambling-ring-behind-shohei-ohtani-ippei-mizuhara-scandal-004930035.html?guccounter=1&amp;guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&amp;guce_referrer_sig=AQAAAAJu6pYq4wJZqcOrD0lxMqWBpSu7WCZeUR_0yjilgc2LKzrswA9P0NzrK2RygQ9cb6Q9RJDfUyA-chLgCAgadUMbKNnIJmrU-gaLJTwLhdGp13L4sIFO2sHNIFYwRuMLVZyPbNLrsJzxG198C3oE4RMt92TyMYyDcucqjpuzwDqL">embroiled</a> in a <a href="https://sports.yahoo.com/new-details-emerge-in-alleged-gambling-ring-behind-shohei-ohtani-ippei-mizuhara-scandal-004930035.html?guccounter=1&amp;guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&amp;guce_referrer_sig=AQAAAAJu6pYq4wJZqcOrD0lxMqWBpSu7WCZeUR_0yjilgc2LKzrswA9P0NzrK2RygQ9cb6Q9RJDfUyA-chLgCAgadUMbKNnIJmrU-gaLJTwLhdGp13L4sIFO2sHNIFYwRuMLVZyPbNLrsJzxG198C3oE4RMt92TyMYyDcucqjpuzwDqL">gambling scandal</a> that defies any semblance of reason reminds us all that the richest among us have no idea how much money is in their checking account.  Zooming out, we’re currently experiencing the ultra financialization of every aspect of American society. You can now ruin lifelong friendships<a href="https://www.nytimes.com/2024/05/02/business/dave-busters-arcade-betting.html"> betting on Hungry Hungry Hippos at Dave and Busters</a>. One of the largest private equity firms is making futures bets on life insurance policies. Brown computer science students are making more than the median American salary <a href="https://www.businessinsider.com/brown-sophomore-sold-105000-dollars-in-restaurant-reservations-2024-4">reselling</a> Carbone reservations on the secondary market. As the always eloquent Neeraj Agrawal at Coin Center <a href="https://twitter.com/NeerajKA/status/1783142965956825133">said</a> on Twitter, “let’s tokenize that shit.” 



More than ever before, crypto is unabashedly embracing its most reductionist and obvious purpose — turning everything into a game where you can seamlessly buy low and sell high.&nbsp;



<h2 class="wp-block-heading">What came before</h2>



In previous crypto boom cycles, there was a subtle pretense that utilitarian, normie use cases beyond vibes-based speculation were a prerequisite for any crypto technology to hold true value.&nbsp;



In the ICO era, every coin was trying to convince buyers that there were super legit, world-changing companies behind the tokens.&nbsp;



NFTs had an even wilder grifter-industrial complex, trying to shill themselves as the future of personal identity. Or art? Or was it entertainment?&nbsp;



Mercifully, tokens like Jeo Boden have no such delusions of grandeur. The memecoin is — quite literally — just the President’s name spelled differently. With sincere apologies to Marshall McLuhan, it appears that the memecoin is now the message.&nbsp;&nbsp;



When the powers that be pivot and start talking about world-changing use cases again, know that they need exit liquidity. When the grand utopian promises of reimagining the concept of currency rear their heads again, the fat cats are looking for a new generation of retail suckers to offload their bag on. In related news, Stripe just <a href="https://decrypt.co/228152/stripe-stablecoin-payments-usdc-ethereum-solana">announced they are re-entering crypto after a six-year hiatus.</a> To the lifeboats, lads!&nbsp;



There’s a certain midwit approach to crypto that suggests that anything less than the full reform of the global financial system is an unworthy and cynical goal. At its best, crypto is a fun way to make money and vibe with good people.&nbsp;



The real egalitarian appeal to crypto is not that it will democratize payments — but that a wintergreen ZYN-fueled degenerate in his mom’s basement can outperform an MIT trained quant who spent a decade at Goldman. If even a single hedge fund trader quits over the shame of being shown up by a degen to pursue a career in theoretical mathematics or civic analytics, we should give Satoshi the Presidential Medal of Freedom.&nbsp;



The counterpoint to this logic, of course, is that sophisticated institutional investors often prey on the naivete of everyday retail traders. In a sense, the powers that be amplify the stories of the underdogs who beat the system so that others are naive enough to buy at the top.&nbsp;



But here too, the macro brand of crypto is evolving in a positive direction. One of the sneaky benefits of this current crypto run being less ideologically driven is that retail investors are simply more willing to take profits. When crypto is less identity politics and more a means to an end of securing a bag, people will take the money and run. This is a good thing.&nbsp; None of this is to say that the initial promise of a peer-to-peer electronic cash system or a next generation smart contract is unworthy. But bifurcating the grand ideological notion of permissionless currency from the broad appeal of “number go higher” will be good for both causes.&nbsp;



To date, crypto has been two different value propositions with two different customer profiles bundled under one abstract idea.&nbsp;



There are still plenty of zealots who care a lot about a 1/4 inch drill. But the hundreds of millions of regular people still to be onboarded into Web3 just want a 1/4 inch hole. And that hole is basically a fairer playing field for speculating on how to make money.&nbsp;



Depending on where you sit ideologically, this is either the perfect embodiment of late capitalism or the wheels of an unfettered free market dripping in grease and pumping out incremental equity value.&nbsp;



But one thing is for damn sure — everything is a market that can be tokenized.&nbsp;



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<div class="wp-block-post-author-biography"> Mike Mallazzo is a revenue leader, writer and red sauce aficionado. By night, he drinks Dorothy Parker gin and writes United States of Amazon, a newsletter covering the nexus of commerce, technology and democracy. His words have appeared in Bloomberg, Adweek, The Drum, AdExchanger, QZ, The Next Web, Entrepreneur, Chicago Tribune and many more. He lives in Brooklyn with his wife, daughter and English bulldog and was once mistaken for Justin Bieber in a South Africa&#8217;s largest karaoke bar.</div>


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Everything in crypto is becoming a game — and that’s good

Michael Ippolito

Jason Yanowitz

I am excited to announce that Blockworks has acquired The Breakdown, a podcast and newsletter network founded by Nathaniel Whittemore (NLW).



The Breakdown’s offerings, including its influential The Breakdown podcast, YouTube channel, dedicated newsletter, and the Bitcoin Builders podcast, are now integral parts of the Blockworks family.&nbsp;



Mike and I first met Nathaniel in 2018. We had just launched Blockworks, and he had just launched one of the early crypto newsletters. In 2020, when we decided to start building our editorial division, Nathaniel became a pivotal advisor, helping us shape our vision for a crypto-native media brand.



Over the years, we&#8217;ve seen Nathaniel elevate The Breakdown into the most trusted daily podcast in the industry. What sets The Breakdown apart is not just its frequency — published six times a week — but its depth. It delves into macroeconomics, geopolitics, and major power shifts, always framing these discussions within their implications for the crypto world.



This acquisition marks a significant expansion of our podcast network, enhances our advertising capabilities, and broadens our distribution channels. It also strengthens our ability to cross-promote our events and research, furthering our commitment to delivering top-tier information to crypto professionals and investors.



Looking ahead, our plan is to establish The Breakdown as the flagship daily podcast of Blockworks. We are also thrilled to share that NLW will continue to lead The Breakdown podcast as its host.&nbsp;



The Bitcoin Builders podcast will become our flagship Bitcoin podcast – more on that soon.&nbsp;



This is a momentous step for Blockworks, and we are excited about the opportunities this collaboration unlocks for our community.



 — Jason and Mike



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Blockworks expands ‘House of Brands’ model with acquisition of The Breakdown

Michael McSweeney

<h2 class="wp-block-heading">End in sight</h2>



There’s some good news for creditors in the joint reorganization plan filed late Tuesday by FTX’s bankruptcy overseers.



FTX says it has collected between $14.5 billion and $16.3 billion in cash, and it’s ready to distribute those funds to creditors. It owes customers and other creditors around $11 billion. FTX says that 98% of its non-government creditors will receive “at least” 118% of claims in cash within two months of the plan being approved.&nbsp;



Some, including crypto loan creditors, could see up to 142% of their claims paid back, according to a court filing.&nbsp;



Others can expect to be paid in full and receive interest on their claims.&nbsp;



But don’t get too excited just yet. The plan still needs to be approved by the bankruptcy court. While it seems to check all of the boxes on paper, one should expect this process to take a while to play out.&nbsp;



Further, creditors shouldn’t expect to see their claims benefit from the recent crypto boom. Instead, the claims will be <a href="https://blockworks.co/news/ftx-former-customers-oppose-bankruptcy-plan">paid out according to November 2022 prices</a>. Bitcoin hovered around $20,000 back then —&nbsp; a far cry from its current level of $62,000.&nbsp;



But that shouldn’t be a surprise after the judge <a href="https://blockworks.co/news/ftx-bankruptcy-victim-compensation">said</a> earlier this year that the bankruptcy code is “very clear” and that FTX doesn’t meet the criteria for an exception.



A press release about the new plan explained that debtors reached a series of settlements, including the IRS claims, an agreement with the CFTC, and a separate agreement with the DOJ.



The hope, according to the estate, is to resolve disputes “without costly and protracted litigation.” That’s something, I think, everyone can agree on.&nbsp;



Much of the funds came from the sales of Alameda and FTX Ventures investments, including the firm’s stake in Anthropic, which was <a href="https://blockworks.co/news/ftx-to-sell-anthropic-shares">approved for sale</a> earlier this year. The estate also sold out of its position in Grayscale’s bitcoin ETF.&nbsp;



CEO John J. Ray, who took over from the now incarcerated Sam Bankman-Fried, expressed his <a href="https://blockworks.co/news/new-ftx-ceo-on-government-claims">optimism about the proposed plan</a>, saying that the firm was “pleased” to be able to pay back creditors.&nbsp;



While there’s no denying that this plan is good news for creditors, the debtors previously teased that they had enough to pay people back. FTX lawyer Andrew Dietderich said in January that it expected to repay creditors in full “eventually.”



According to the bankruptcy docket, the court scheduled two hearings for later this summer.&nbsp;



Approval of the plan could represent one of the final steps in the closure of the FTX saga since Bankman-Fried was sentenced earlier this year after being found guilty of fraud.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/sbf-blew-it-final-defense-trial">Given one more chance to defend himself, SBF blew it&nbsp;</a>



It’s been a long journey since Ray took over nearly two years ago and said the bankruptcy represented an “unprecedented” mess. (That, coming from the guy who took over Enron’s bankruptcy, says a lot.)&nbsp;



Soon we can officially put <a href="https://blockworks.co/tag/ftx">FTX</a> in the rearview mirror.



— Katherine Ross



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



<ul>
<li>Grayscale’s bitcoin ETF once again saw outflows Tuesday, with $28 million departing the fund.</li>



<li>ARK <a href="https://ark-funds.com/?utm_campaign=idt_fund_homepage&amp;utm_medium=email&amp;_hsenc=p2ANqtz-9W1OZVa2mBS-SXb2AZPyM8TOcqFU9mQSVW2LCamh3qiakQEbgXlV3O74tvKuIK_iQnr-Wh234rIInQgydD7ZPJW1EMFA&amp;_hsmi=306060191&amp;utm_content=idt_0572024&amp;utm_source=IDT">offloaded</a> $15 million worth of Coinbase shares from three funds.</li>



<li>Over the past 24 hours, $27 million of shorts have been liquidated, per CoinGlass <a href="https://www.coinglass.com/LiquidationData">data</a>.</li>



<li>Bitcoin continues to slip from its local Monday highs, <a href="https://www.tradingview.com/chart/?symbol=COINBASE%3ABTCUSD">trading</a> around $62,250 as of press time.</li>



<li>Ether, too, is showcasing some near-term weakness as well, <a href="https://www.tradingview.com/chart/?symbol=COINBASE%3AETHUSD">trading</a> just below $3,000 this morning, or about 2.4% off in the past day.&nbsp;</li>
</ul>



<h2 class="wp-block-heading">Where in the world is Binance?</h2>



<a href="https://blockworks.co/tag/binance">Binance</a> has a checkered past when it comes to getting along with countries and regulators.&nbsp;



The exchange still struggles with this today, as countries like Nigeria and the Philippines either move to <a href="https://www.sec.gov.ph/pr-2024/sec-proceeds-with-blocking-of-binance/#gsc.tab=0">block</a> the exchange from operating or — <a href="https://blockworks.co/news/nigerian-government-binance-fine">in Nigeria’s case</a> — detain executives and charge them with the same crimes as their employer.&nbsp;



Speaking of Nigeria, Binance stopped support for the naira as it continues to <a href="https://blockworks.co/news/nigeria-court-postpones-binance-case">fight for the country to release</a> Tigran Gambaryan, one of <a href="https://blockworks.co/news/binance-executive-escapes-nigerian-custody">the aforementioned detained</a> executives.



Binance’s own website claims that it’s available in over 100 countries. However, it only lists 44 countries. Binance didn’t return my multiple requests for comment on the discrepancy.&nbsp;



Here’s a fun little note: Binance’s site says it supports 19 European countries but lists Europe as one of those countries, alongside others like the Czech Republic and France.&nbsp;



Despite the <a href="https://blockworks.co/news/binance-settlement-message-to-crypto-industry">multibillion-dollar settlement</a> Binance agreed to pay the US government last year, operations in the US remain a sticky situation. Investors in the States — well, really, just certain states — can use the platform. Unfortunately, if you’re based in a handful of states, including my home state of Texas, you’re unable to use the US platform.&nbsp;



The exchange exited the Canadian market last year, citing regulatory concerns. Those worries didn’t seem to faze Coinbase, though, which received registration as a restricted dealer last month.



Binance is also <a href="https://www.reuters.com/technology/binance-did-monthly-transactions-worth-90-bln-banned-china-market-wsj-2023-08-02/">blocked</a> in China after the country took action against crypto a few years back. It ceased operations in South Korea back in 2020, citing low usage and volume.&nbsp;



Over in Europe, Binance left the Netherlands last year and withdrew its application for a crypto license in Germany. But the firm still operates in France and is available in other European countries including Spain.&nbsp;



The exchange did admit that French authorities made an on-site visit in June of last year, <a href="https://blockworks.co/news/binance-france-on-site-visit">claiming</a> that it was “fully collaborative” with said authorities.



According to a February report from Bloomberg, Binance is still trying to re-enter the UK market, but the company continues to face regulatory hurdles.



Oh, and did I mention that the company still doesn’t have a headquarters? Though new CEO Richard Teng did <a href="https://www.theblock.co/post/287168/binance-ceo-says-exchange-is-weighing-up-a-few-jurisdictions-for-selecting-its-headquarters">say</a> — at Paris Blockchain Week — that the company was mulling a “few jurisdictions.”



Stay tuned.&nbsp;



— Katherine Ross



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



<ul>
<li>The US filed <a href="https://www.justice.gov/opa/pr/us-charges-russian-national-developing-and-operating-lockbit-ransomware">charges</a> against the creator of the ransomware program LockBit, offering a $10 million reward for information that would lead to their arrest.&nbsp;&nbsp;</li>



<li>Mastercard and a group of banks including Citi and JPMorgan <a href="https://www.bloomberg.com/news/articles/2024-05-08/mastercard-citi-jpmorgan-test-ledger-for-settling-bank-money?embedded-checkout=true">tested</a> new blockchain-based tools for in-bank settlement, Bloomberg reports.&nbsp;&nbsp;</li>



<li>Tom Brady’s troubled history in the crypto space <a href="https://www.tiktok.com/@netflix/video/7365942757124361515">came up</a> during a new Netflix-hosted roast.&nbsp;</li>



<li>Consensus continues its tradition of hosting US presidential hopefuls with an <a href="https://www.coindesk.com/policy/2024/05/07/robert-f-kennedy-jr-a-pro-crypto-presidential-candidiate-to-appear-at-consensus-2024/?utm_medium=referral&amp;utm_source=rss&amp;utm_campaign=headlines">appearance</a> by independent candidate Robert F. Kennedy.&nbsp;</li>



<li>Microsoft built an “air gapped” artificial intelligence tool for <a href="https://qz.com/microsoft-offline-ai-service-chatgpt-gpt4-us-spies-1851462266">US spy agencies</a>, according to Quartz.</li>
</ul>



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



Turns out Gary Gensler’s not the biggest fan of crypto journalism.



The SEC Chair <a href="https://blockworks.co/news/secs-gensler-crypto-disclosures-for-investors">grew a bit frustrated</a> yesterday during an interview with CNBC’s Andrew Ross Sorkin over the latter’s questioning on crypto.&nbsp;



Crypto, Gensler stressed, is “a small piece of our overall markets” but “an outsized piece of the scams and frauds and problems in our markets.” As a result, “you end up with, like, an outsized ratio of journalist questions and crypto journalists to market cap.”



Gensler basically accused Sorkin (and other journalists, I guess?) of focusing too much on crypto.&nbsp;



Okay, fair point, I suppose. But perhaps it’s equally fair to say that the SEC is <a href="https://www.coindesk.com/policy/2024/03/22/us-sec-asking-for-more-millions-dozens-of-lawyers-to-beef-up-crypto-oversight/#:~:text=The%20Treasury%20Department's%202025%20budget,and%20around%20%242.5%20billion%20for">seeking</a> a budgetary bump thanks to its strong focus on crypto. And Gensler has made it pretty clear that he thinks the SEC ought to have <a href="https://www.wsj.com/articles/secs-gensler-supports-commodities-regulator-having-bitcoin-oversight-11662641115">a bigger</a>, not smaller, role in overseeing an industry that has attracted billions of dollars of capital over a relatively short period.&nbsp;



There ought to be an equal trade off. Want more power? Prepare to answer more questions. Seems pretty fair to me.&nbsp;



— Michael McSweeney



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Empire Newsletter: FTX bankruptcy almost across the finish line

Jack Kubinec

Solana’s validators are a bit like baristas flipping around an iPad — they’re nicer to you when you include a tip. And as traders keep cramming into Solana’s metaphorical coffee shop, the validator tip jar looks increasingly stuffed with money.&nbsp;



Validators are a group of 1,728 computers that run software to produce blocks on the Solana blockchain. Coinbase Cloud <a href="https://www.jito.network/stakenet/">is</a> a prominent Solana validator, as is Google Cloud. One revenue stream that validators earn is called maximal extractible value (MEV), which refers partly to tips paid by searchers to be included in Solana blocks.&nbsp;



This MEV revenue has been growing quickly since mid-March. Notably, Solana validators are earning more from MEV overall than Ethereum validators, <a href="https://app.blockworksresearch.com/analytics/l1?interval=daily&amp;dashboard=l1-sector-comparison-financial">according</a> to Blockworks Research. Just a few months ago, Solana’s MEV revenue was a rounding error compared to Ethereum’s.



Read more: <a href="https://blockworks.co/news/draft-mev-dydx-chorus-one">MEV doesn’t have to be a zero-sum game, research suggests</a>



Broadly defined, <a href="https://blockworks.co/tag/mev">MEV</a> refers to the largest amount of value that validators can create by packing transactions into blockchain blocks. Blockworks Research’s dashboard suggests Solana validators raked in a hair under $7 million from MEV last week.



At the moment, <a href="https://blockworks.co/tag/solana">Solana</a> MEV is almost entirely the product of a protocol named Jito. Jito offers a fork of the Solana validator called Jito-Solana, and 78% of Solana’s validators use this client, according to Jito’s website. The client lets searchers, or traders, arrange transactions in bundles. Searchers can include a tip to try getting validators to send their particular bundle to the blockchain.



Whether all this is good for Solana is something of a matter of perspective. Some forms of MEV can be predatory. Jito recently suspended its mempool, a kind of waiting area for transactions, due to “sandwich attacks” that let opportunists create MEV by trading right before and after a transaction to manipulate the price and take profit from the trader.&nbsp;



Read more: <a href="https://blockworks.co/news/jito-labs-suspends-mempool-functionality">Jito Labs ends mempool functionality citing impact on Solana users</a>



In Jito’s <a href="https://jito-labs.gitbook.io/mev">telling</a>, the protocol is making Solana more efficient while also minimizing negative forms of MEV like sandwich attacking. If it can pull that off, Solana could see a lot of benefit.&nbsp;



Continued long-term growth in Solana’s MEV would likely imply that less spam is being included in blocks, and Solana would have more available blockspace, Blockworks Research analyst Hayden Tsutsui said. In a best case scenario, more blockspace could free up room for more on-chain activity, which could also bring along more liquidity, Tsutsui said.



But it bears mentioning that as things currently stand, Solana is still staggering under a mountain of spam. More than 60% of non-vote transactions fail on Solana, according to Blockworks Research, largely due to bots <a href="https://blockworks.co/news/solana-network-congestion-transaction-volume">taking advantage of Solana’s cheap fees</a> by inundating the network in hopes of getting transactions to land.&nbsp;



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MEV collected by validators is now higher on Solana than on Ethereum

Bitcoin is no longer merely that taboo thing your techie uncle awkwardly brings up at family gatherings.



Well, maybe the asset is only that for you —&nbsp;but if so, you’re in the minority at this point.&nbsp;



Whether you believe in bitcoin or not, it has increasingly perforated traditional finance in recent years and months. Institutions can gain exposure to crypto through a regulated liquid derivatives market, and more recently via bitcoin ETFs.



While some traditional finance bigwigs still criticize the asset (at least publicly), large financial companies are waking up to the potential of BTC, as well as <a href="https://blockworks.co/news/blackrock-tokenization-investment">blockchain tech more broadly</a>.



“Before, people had to buy coins,” said Lucas Kiely, chief investment officer at Yield App. “Now they can trade on [traditional finance] markets which means big market players can get involved.”



The increased market participation around bitcoin is one reason the asset has become more correlated to global markets — a fact that could spur investor concern in an environment like this one.&nbsp;



That’s because a range of macro factors are set to continue tussling with post-halving bitcoin price rally expectations in the coming months, industry watchers say.



Bitcoin halvings — when per-block rewards for mining bitcoin are reduced every four or so years — have historically helped catalyze crypto bull markets.&nbsp;



Read more: <a href="https://blockworks.co/news/post-bitcoin-halving-price-predictions">With halving just hours away, bitcoin price predictions proliferate</a>&nbsp;



Such events prior to the latest one last month have propelled BTC to new highs between 12 months and 18 months after the halving.



Before then, the macro environment this time around may push BTC downward.



<h2 class="wp-block-heading">Macro headwinds lingering</h2>



Though bitcoin has rebounded from its recent stint below $57,000, “investors should be wary of being lulled into a false sense of security,” Kiely noted.



The asset’s price hovered around $63,000 at 4 pm ET Tuesday — down 9% from a month ago, but up nearly 7% in the last five days.&nbsp;&nbsp;



“The macro headwinds that pushed BTC south have not eased,” he said in an email. “If anything, global political uncertainty is only more pronounced, while inflation in the US is still not under control.”



K33 research analysts Anders Helseth and Vetle Lunde said in a Tuesday note that global macro conditions have “re-emerged to become a relevant market mover.” Bitcoin’s 30-day correlation to the S&amp;P 500 has reached a seven-month high, they added. “BTC first followed the market down on increased interest rate expectations on Wednesday, before following the markets up on decreased interest rate expectations on Friday.



The analysts are referring to the “higher for longer” posture from the Federal Reserve last Wednesday, which held interest rates at their current level.&nbsp;



Fed Chair Jerome Powell called the path forward “uncertain,” noting that central bankers will need to see more evidence that inflation is easing before cutting rates.



Two days later, bitcoin’s price rose on news that the economy added 175,000 positions in April — a number closer to the pre-pandemic monthly average of 183,000 job gains.



Read more: <a href="https://blockworks.co/news/bitcoin-back-above-60k">Bitcoin is back above $60K, stocks rally on cooler jobs data</a>



The crypto market has been “consumed” in recent months by the first US spot bitcoin ETF launches and the Bitcoin halving, according to LMAX Group market strategist Joel Kruger.&nbsp;&nbsp;&nbsp;



“As these risks have played out and the market has settled down, attention is shifting to the other side of the equation where there has been more pressing volatility risk around the state of the US dollar, yield differentials and the outlook for fiat monetary policy,” Kruger told Blockworks.&nbsp;



Market participants previously expected the Fed to cut rates by 0.75% or 1% in 2024, Finequia International research analyst Matteo Greco said in a research note.&nbsp;



After Powell’s comments last week, many now anticipate lower cuts amounting to 0.25% or 0.50% — and only if inflation doesn’t worsen.



<h2 class="wp-block-heading">How far down before a possible rally?</h2>



Outside of monetary policy, the war in the Middle East rages on, and the US domestic situation is “increasingly volatile” ahead of the November presidential election, Kiely said.



Oh yeah, and the Securities and Exchange Commission appears to be continuing its regulation-by-enforcement approach, with <a href="https://blockworks.co/news/robinhood-wells-notice-sec">Robinhood most recently receiving a Wells notice</a>.&nbsp;



In other words, tailwinds for bitcoin are few and far between right now, Kiely added.



“Best case scenario, we will see a very boring summer,” he explained. “Worst case scenario, bitcoin will lose some key support and take a long journey back down to recent lows.”



Such a retreat could mean BTC sinking to between $50,000 and $55,000, Kiely predicts.



Aside from central bank policy developments, bitcoin investors should monitor the pace of traditional finance adoption of bitcoin ETFs, Kruger noted. Some institutions and corporations are also considering adding bitcoin to their balance sheet.&nbsp;



“We believe any setbacks should be exceptionally well supported into the $50,000 area, with any dips below to be short-lived,” he said. “As far as the topside goes, we wouldn’t at all be surprised to see bitcoin making fresh record highs towards and through the next major barrier at $100,000.”



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Macro headwinds could spur a ‘boring’ bitcoin summer — or something worse

Casey Wagner

Democrats and Republicans clashed over how the Securities and Exchange Commission is handling crypto enforcement actions during a House Financial Services subcommittee hearing Tuesday.&nbsp;



Capital Markets Subcommittee Chair Ann Wagner, R-Mo., kicked off the hearing titled “SEC enforcement: balancing deterrence with due process,” with a jab at the securities regulator, mentioning the recent sanctions the SEC received in its case against Debt Box.&nbsp;



“Public trust in the SEC will only decline when its employees are sanctioned and forced to resign for their quote gross abuse of power, as they were in the recent case against the crypto platform known as Debt Box,” Wagner said.&nbsp;



Read more: <a href="https://blockworks.co/news/secs-gensler-crypto-disclosures-for-investors">SEC’s Gensler calls for more crypto disclosures for investors</a>



Rep. Brad Sherman, D-Cali., was quick to counter Wagner’s point, arguing that the agency <a href="https://blockworks.co/news/sec-overreach-failure-debt-box">handled the misconduct appropriately</a>.&nbsp;



“There were two SEC lawyers who acted wrongfully in the Debt Box case,” Sherman said. “They&#8217;ve been fired, and I think that sets an example that will assure that other <a href="https://blockworks.co/tag/sec">SEC</a> lawyers do not act similarly.”&nbsp;



Rep. Maxine Waters, D-Cali., a typical vocal opponent of the crypto industry alongside Sherman, took a partisan stance, asserting that her side of the aisle is the only one looking out for constituents.&nbsp;



“My message to the crypto industry and everyone else: Democrats will always press for compliance, investor protection and market integrity,” Waters said.&nbsp;



The hearing comes a day after the House Committee on Rules moved to advance a joint <a href="https://www.congress.gov/bill/118th-congress/house-joint-resolution/109/all-actions">resolution</a> that would overturn the SEC’s Staff Accounting Bill (SAB) 121, a controversial advisory that states <a href="https://blockworks.co/news/house-committee-resolution-against-sab121">digital asset custodians should report a liability</a> and “corresponding assets” on their balance sheets for all cryptocurrencies under custody.



Committee members Mike Flood, R-Neb., and Wiley Nickel, D-N.C., introduced the resolution earlier this month alongside a similar measure in the Senate spearheaded by Cynthia Lummis, R-Wyom. The legislators cited a report from the Government Accountability Office, which stated in an October 2023 <a href="https://www.gao.gov/products/b-334540?utm_medium=social&amp;utm_source=twitter&amp;utm_campaign=usgao">report</a> that SAB 121 should have been issued as a rule under the official process.&nbsp;



“It is unfortunate that the SEC would attempt to circumvent the rulemaking process while falsely claiming that SAB 121 is simply non-binding staff-level guidance,” Flood said Monday during testimony before the Rules Committee.&nbsp;



The resolution heads to the House floor Wednesday for debate. Waters argued Tuesday that this “attempt to kill SAB 121” is unnecessary and prevents the SEC from carrying out its rightful duties.



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Democrats, Republicans clash over SEC role in House hearing 

Ryan Whitehead

Forget the halving. Don’t mention ETFs. What then is arguably the most important narrative in crypto?



Memecoins.



Yes, that often-cringeworthy menagerie of anime, animalia and animations collectively are the primary on-ramp into crypto for new users. People are always asking, “Where are the next billion users going to come from?”&nbsp;



The answer is pretty clear — the only remaining question is whether the dog will be wearing a hat or not.



Before fans of self-custody, real-world assets and DeFi (and I’m certainly among them) turn up their noses in disdain, let’s consider some of the very valid reasons for the persistent popularity of memecoins and their kissing cousin, airdrops.



First up is entertainment. People love to be entertained, and they don’t mind spending money on it. The global entertainment and media market is valued at well over $2 trillion, according to <a href="https://www.pwc.com/gx/en/industries/tmt/media/outlook/insights-and-perspectives.html">analysts from PwC</a>, on par with the overall market cap for all cryptocurrencies. What’s the utility of $DOGE, $PEPE or $BONK, compared to governance tokens or stablecoins? Entertainment in itself is a utility.



People are also attracted to risk. The global casino industry alone is worth <a href="https://www.businesswire.com/news/home/20230927456720/en/Global-Casinos-Strategic-Business-Report-2023-Market-to-Reach-224.1-Billion-by-2030-from-157.5-Billion-in-2022---Machines-Segment-to-Account-for-Almost-Half-the-Market-Value---ResearchAndMarkets.com#:~:text=The%20global%20casinos%20market%2C%20valued,period%20from%202022%20to%202030.">more than $150 billion</a> and is growing, according to a ResearchAndMarkets.com report. That doesn’t include sports betting, lotteries or all the other ways that people put down relatively small amounts of money in hopes of winning relatively large amounts of money. (In investment lingo, “asymmetric opportunities.”) Obviously, buying a memecoin carries a lot of this type of risk, but putting in time, resources and energy into a potential airdrop event — where the amount and timing of the reward is uncertain — is an experience undeniably tinged with the thrill of the gamble as well.



Read more from our opinion section: <a href="https://blockworks.co/news/memecoin-mania-learn-risk-management">Memecoin mania can teach us something</a>



Organizations and builders support memecoins and airdrops because they can bring liquidity to an ecosystem. They also help capture slices of the exceedingly precious &#8220;attention economy,&#8221; whose value economists <a href="https://deliverypdf.ssrn.com/delivery.php?ID=732088024087092092125077080120102089026050064018017000018003123126008094069005107120099022017062023057007117019122019087082089051090012016041006112073127119112008068012087073015082122027123083074026007001029122022001026119004091004109068071072100031&amp;EXT=pdf&amp;INDEX=TRUE">estimate</a> to be in the “trillions of dollars.” It can be argued that the $BONK airdrop and community campaign were the lighter and lighter fluid that reignited the Solana ecosystem. Or just look at how <a href="https://blockworks.co/news/bitcoin-halving-runes-launch">Ordinals and now Runes</a> have turned Bitcoin into a blistering hot network, as opposed to a passive digital-gold-like store of value.



In my position as head of marketing for Moonbeam (which integrates the Ethereum and Polkadot ecosystems), I’ve had a front-row seat for the recent launch of a memecoin on our network and the concomitant entertainment, risk and attention.



Based on my experience, I can attest that admittedly silly memecoins can have seriously positive effects on a network level. New users are attracted by the entertainment value and potential for airdrops. Cross-chain synergies are fostered with other ecosystems where the memecoin has also been launched. And networks that are able to secure a supply of the memecoin can direct those resources to targeted growth areas in strategic areas, in our case, DeFi, gaming, real-world assets, DePIN, AI and more.



But while memecoins are sweet and all, here&#8217;s the bitter pill: Besides memecoins, we in crypto have largely created a very bad, very difficult system from a user experience perspective.



Gambling and lotteries comprise the dark side of the traditional financial system, but at least it’s an easy way of participating in the financial system. Memecoins play a similar role in crypto and DeFi — they’re the best on-ramp we’ve got.&nbsp;



If buying $DOGE or the latest Solana microcap leads someone to exploring the broader crypto ecosystem, then it’s a win for everyone who believes in the democratizing potential of blockchain technology and governance.



But if the rest of the crypto ecosystem provides such a poor user experience — or is not perceived as useful by the new memecoin holders — then this year’s nascent bull run will turn out to be another playing-card structure, doomed again to collapse when the bubble pops or macroeconomic conditions next convulse.



Memecoins are hot again — for the moment. It’s now time for &#8220;serious&#8221; builders to demonstrate real value for new users and capitalize on the attention that dog coins have fetched, because there’s no guarantee they’ll last through the next cycle.



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<div class="wp-block-post-author-biography">Ryan Whitehead is the Moonbeam Foundation’s Global Head of Marketing, where he owns branding, messaging and outreach. Moonbeam is a major EVM-compatible parachain integrating Polkadot with the Ethereum ecosystem. Prior to Moonbeam, Ryan was Director of Product Marketing &#8211; Ecosystems at Coinbase. He’s also held senior positions at Facebook and Microsoft. He’s a graduate of Stanford University.
</div>


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The most important trend in crypto? It’s always been memecoins

Securities and Exchange Commission Chairman Gary Gensler says that the agency is just a “cop on the beat” when it comes to policing the crypto industry.&nbsp;



Gensler spoke to CNBC a day after Robinhood <a href="https://blockworks.co/news/robinhood-wells-notice-sec">disclosed</a> that it received a Wells notice from the US securities regulator.&nbsp;



“We have a really important responsibility as being a cop on the beat and ensuring that people that are asking you to put your money into buy or sell securities are following the law so you get disclosures, that you get certain protections,” Gensler <a href="https://www.cnbc.com/2024/05/07/cnbc-exclusive-cnbc-transcript-sec-chair-gary-gensler-speaks-with-cnbcs-andrew-ross-sorkin-on-squawk-box-today.html">said</a> when asked about the notice.&nbsp;



The crypto industry, Gensler argued, comprises an array of digital assets that constitute securities “under the law of the land, as interpreted” by the Supreme Court. He also said that he doesn’t believe that investors are receiving all of the “information” in crypto.&nbsp;



Read more: <a href="https://blockworks.co/news/consensys-sec-lawsuit-debate">Is the SEC weighing a lawsuit against Consensys?</a>



“Everybody’s asking about what’s the earnings release and how many companies are beating earnings or falling behind and so forth. Where’s the disclosures from these crypto tokens similar to these season earnings releases?” Gensler asked, comparing tokens to publicly traded stocks.



Gensler added that he “genuinely think[s] they’re not getting that in crypto. And if they are a crypto security, it’s required and needed.”



He didn’t directly address the allegations that Consensys made against the <a href="https://blockworks.co/tag/sec">SEC</a> in a lawsuit filed last month, and also avoided addressing the alleged investigation around ether, Ethereum’s native token. 



Read more: <a href="https://blockworks.co/news/empire-newsletter-sec-issues-robinhood-wells-notice">Empire Newsletter: A busy crypto lawsuit season looms</a>



When asked Tuesday, <a href="https://blockworks.co/tag/gary-gensler">Gensler</a> just said that the “intermediaries in the center of this rather centralized market generally are conflicted and doing things we would never allow the New York Stock Exchange to do. The New York Stock Exchange is not allowed to trade against the investors.”



In its lawsuit, <a href="https://blockworks.co/news/consensys-files-lawsuit-against-sec">Consensys claimed that the SEC served</a> the company with subpoenas regarding ETH. The lawsuit confirmed <a href="https://fortune.com/crypto/2024/03/20/sec-gary-gensler-ethereum-security-commodity-crypto-foundation/">reports</a> that the SEC was looking into the status of ETH.



Former employees of the <a href="https://blockworks.co/news/sec-hinman-eth-not-security">SEC had previously agreed</a> that ETH wasn’t a security. The <a href="https://blockworks.co/news/cftc-chair-says-ether-is-a-commodity-hints-that-sec-disagrees">Commodities and Futures Trading Commission has labeled ETH</a> a commodity.&nbsp;



Gensler also added that the ether ETFs are sitting “in front” of the five-member commission now.&nbsp;



The Commission will take up the filings “at the appropriate time,” he said.



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SEC’s Gensler calls for more crypto disclosures for investors

The advent of bitcoin ETFs came only after a legal victory over the Securities and Exchange Commission.



A similar action could be what it takes to get US spot ether ETFs over the finish line, law professionals told Blockworks.



And let’s not forget Consensys’ lawsuit against the US securities regulator, which they added could play a role in helping sort out the ether ETF question.



<h2 class="wp-block-heading">Bitcoin ETFs born from a legal victory</h2>



In a world where the SEC and crypto companies constantly appear to be at odds, the courts have been able to offer some clarity.&nbsp;



<a href="https://blockworks.co/news/grayscale-sec-spot-bitcoin-etf">Judges in the DC Circuit Court of Appeals ruled</a> last August that the SEC’s decision to deny the conversion of the Grayscale Bitcoin Trust (GBTC) to an ETF, but allow bitcoin futures ETFs, was “arbitrary and capricious.”



SEC Chairman Gary Gensler said in a January <a href="https://www.sec.gov/news/statement/gensler-statement-spot-bitcoin-011023">statement</a> that approving bitcoin ETFs was “the most sustainable path forward” given that court decision. He added that the regulator “acts within the law and how the courts interpret the law.”



Enter: proposed funds that would directly hold ETH — the second-biggest crypto asset by market capitalization.&nbsp;



Investment firm VanEck first filed for a spot ether product in 2021. The company, <a href="https://blockworks.co/news/21shares-ark-filing-for-spot-ether-etf">along with Ark Invest and 21Shares</a>, renewed the efforts last September. BlackRock and Grayscale were among those to follow suit.&nbsp;&nbsp;



The SEC, as expected, <a href="https://www.sec.gov/files/rules/sro/cboebzx/2024/34-100065.pdf">delayed</a> its decision on Monday for a spot ether fund filed by Invesco and Galaxy Digital. A ruling on other similar planned offerings by Ark Invest, VanEck, Grayscale, BlackRock and others is expected by the end of the month. Various segment observers have said they don’t expect the US regulator to approve them. This is due to concerns over the liquidity of ETH&#8217;s spot and futures markets and the question of its status as a security or commodity.



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>



The “cleanest path” for the SEC to deny the spot ether ETFs would be solely based on the correlation between the ETH futures and spot markets, Van Buren Capital general partner Scott Johnsson said in an April 25 X <a href="https://twitter.com/SGJohnsson/status/1783487721933070754">post</a>.



Bitwise, a fund group with its own ether ETF filing, submitted a data <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/rule-filings/filings/2024/SR-NYSEArca-2024-31.pdf">analysis</a> showing what it <a href="https://twitter.com/BitwiseInvest/status/1773427635919458551">called</a> a correlation between the ETH futures and spot markets that are “substantially similar” to that of bitcoin.&nbsp;



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1450" height="1392" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=1024&amp;h=1024" alt="" class="wp-image-85468" style="width:768px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=1450 1450w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=268 268w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=272 272w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=228 228w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=80 80w" sizes="(max-width: 1450px) 100vw, 1450px" /></figure>



“They probably overextend, and push for more reasons, because correlation concerns will only result in a temporary delay (and they know this),” Johnsson added at the time.



<h2 class="wp-block-heading">Suing again could be the best route</h2>



Court intervention is of course not needed for the SEC to greenlight spot ether funds, noted Liz Boison, a partner at law firm Hogan Lovells.&nbsp;



But it appears it could come to that.



“We should expect that one of the applicants will sue the SEC if the SEC either unreasonably extends the deadline or disapproves the application,” Boison told Blockworks. “Just as the Grayscale suit succeeded in giving the SEC a court-ordered deadline, the ether spot funds will want the same.”



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



Hailey Lennon, a corporate partner in Brown Rudnick’s digital commerce unit, said she too thinks issuers will consider fighting a potential ether ETF application denial in court.&nbsp;



“The SEC has typically regulated the cryptocurrency industry through enforcement action and has not provided regulatory clarity until it’s pressured to do so by the courts,” Lennon said. “I do think a decision by the court may be the only way we see the spot <a href="https://blockworks.co/tag/ether-etfs">ether ETFs</a> approved.”



Many of the same arguments can be made for a spot ether ETF, she contended. After all, the SEC approved ether futures-based ETFs in October, and companies may argue — like in the Grayscale lawsuit — that those approvals set a precedent for spot ether products.&nbsp;



Muddying the water is additional complexities around the SEC possibly looking to treat ETH as a security, whereas the regulator had clearly labeled bitcoin a commodity.



Not all agree that issuers suing the SEC — should the regulator deny the ether funds — is a foregone conclusion.



Bloomberg Intelligence analyst Eric Balchunas questioned that assumption in an April 10 X <a href="https://twitter.com/EricBalchunas/status/1778186317165437292">post</a>, noting the disparity between the assets in ether futures ETFs compared to bitcoin futures ETFs.



The largest bitcoin futures ETF — the ProShares Bitcoin Strategy ETF (BITO) — has grown to nearly $1.9 billion in assets. ProShares’ ETH futures fund, also the largest in that category, has $70 million.



“That&#8217;s a lot of time and money for something that may only get a fraction of the [assets under management],” he added.



Read more: <a href="https://blockworks.co/news/hong-kong-crypto-etfs-usa-eth">What Hong Kong crypto ETFs may tell us about US ETH fund appetite</a>



Whether prospective ether ETF issuers choose to sue the SEC or not, another court case could help efforts to launch such products.



<h2 class="wp-block-heading">Consensys legal action could offer answers&nbsp;&nbsp;&nbsp;</h2>



MetaMask developer <a href="https://blockworks.co/news/consensys-files-lawsuit-against-sec">ConsenSys sued the SEC last month</a> in a case alleging regulatory overreach. The suit is expected to put pressure on the SEC to defend any position it might have that ETH is a security.



“The SEC has been notoriously tight-lipped about their classification of ETH,” Lennon said. “The SEC is likely trying to retain their stance that Ethereum and bitcoin are not the same, especially after the Ethereum Merge in September 2022 when Ethereum moved from proof of work to proof of stake.”



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



The portion of the suit requesting a declaratory judgment that ETH is not a security likely will require the SEC to shed light on its stance, Boison explained.



Approval of spot ether ETFs could take place before briefing in the Consensys case is complete, she noted.



Boison added: “The SEC can theoretically approve spot ether ETFs, file charges regarding staked ether and still have a court declare that ETH, itself, is not a security.”



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Court decision could be only way US spot ether ETFs see light of day

Bessie Liu

Polygon, an Ethereum layer-2 scaling solution, has recently launched its Miden Alpha Testnet,&nbsp; a zero-knowledge rollup solution designed for private, high-throughput applications.



Miden enables its users to generate proofs for their own state transitions without revealing the state to the wider network. The network will only track commitments, meaning users can transact privately.



Some features that will be unlocked with Miden include the ability to create private accounts and private notes, though it will still be possible to create public accounts and public notes. Additionally, the Miden client will enable parallel transaction <a href="https://0xpolygonmiden.github.io/miden-base/introduction.html#:~:text=Polygon%20Miden%20is%20a%20modular,execution%20and%20client%2Dside%20proving.">execution</a> and client-side proving.&nbsp;



“For builders, that means designing self-sovereign and high-throughput applications. With Miden’s zk-powered rollup, you can build what’s currently not feasible on EVM-chains,” <a href="https://blockworks.co/tag/polygon">Polygon</a> <a href="https://twitter.com/0xpolygon/status/1787533326091235785?s=46&amp;t=ar91EF_W_z2BKrQdY-hJLQ">wrote </a>in a post on X.&nbsp;



Read more: <a href="https://blockworks.co/news/ey-uses-polygon-proof-of-stake-for-business">‘Big Four’ accounting firm EY to use Polygon PoS for business contracts</a>



According to Polygon Miden <a href="https://docs.polygon.technology/miden/miden-client/">documents</a>, there are currently three different types of smart contracts available on Miden. These include a basic wallet contract for sending and receiving tokens and assets and fungible and non-fungible faucet smart contracts, which are used to mint and burn different assets.



Polygon Miden is not the only rollup solution that is hoping to innovate in the <a href="https://blockworks.co/tag/zero-knowledge-rollup">zk rollup</a> space. <a href="https://blockworks.co/news/starkware-starknet-zero-knowledge-prover">Competitors include StarkWare</a> and Matter Labs, the team behind zkSync, who are similarly hoping to bring new possibilities to blockchain scaling.



There has been little price action following the announcement of Miden. The price of Polygon’s native token (<a href="https://blockworks.co/price/matic">MATIC</a>) is <a href="https://www.coingecko.com/en/coins/polygon">trading</a> at $0.7153, <a href="https://www.coingecko.com/en/coins/polygon">down</a> by 0.9% over the past 24 hours, according to CoinGecko.



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Polygon zk-based Miden Alpha Testnet is now live 

David Canellis

<h2 class="wp-block-heading">Another one bites the dust</h2>



And then there were three.&nbsp;



Robinhood has become the latest company to <a href="https://blockworks.co/news/robinhood-wells-notice-sec">receive</a> a crypto-related Wells notice from the Securities and Exchange Commission.



If you don’t know what a Wells notice is, you might be new to crypto. The notice is basically a heads-up given to a company that the SEC completed an investigation and may pursue an enforcement action against them.&nbsp;



The notice doesn’t always mean that legal action will play out, but this is crypto.



This time last year, for example, we were playing the waiting game after Coinbase was served with a Wells notice in March. The SEC then filed a suit against the exchange company in June.&nbsp;



As I previously reported, if that timeline holds, we could be looking at a summer legal action — similar to <a href="https://blockworks.co/news/sec-issues-uniswap-wells-notice">what we saw with Coinbase</a>.&nbsp;



So if things head to court, what happens exactly?



Robinhood, <a href="https://blockworks.co/news/robinhood-wells-notice-sec">as part of its disclosures</a>, said the SEC alleged that it violated 15(a) and 17A of the Securities Exchange Act. If that rings a bell, it’s because both Coinbase and Binance were hit with similar charges.&nbsp;



17A focuses on clearing agencies and 15(a) centers around broker-dealer registration. It’s unclear if the <a href="https://blockworks.co/tag/sec">SEC</a> will seek charges regarding tokens it believes are securities, like we’ve seen in other cases.&nbsp;



For its part, Robinhood has tried to stay out of the SEC’s spotlight by <a href="https://blockworks.co/news/robinhood-nixes-ada-matic-sol">delisting tokens that the regulatory agency has targeted</a>, such as Solana’s SOL, Polygon’s MATIC, and Cardano’s ADA. Unfortunately, it doesn’t seem like any company offering crypto services can avoid Gensler’s ire.



“​​The potential action may involve a civil injunctive action, public administrative proceeding, and/or a cease-and-desist proceeding,” <a href="https://blockworks.co/tag/robinhood">Robinhood</a> warned in its disclosure.&nbsp;



Putting aside the potential charges, let’s talk about Robinhood’s chief legal and compliance officer, Dan Gallagher.&nbsp;



Gallagher is actually no stranger to the SEC, having served as a Commissioner between 2011 to 2015. He worked in other positions within the SEC as well.&nbsp;



Gallagher said yesterday that he was “disappointed” and insisted that the “assets listed on our platform are not securities.” He called the case against Robinhood Crypto “weak.” Perhaps Gensler’s met his match?



Either way, Robinhood’s not alone in the SEC’s spotlight.



Though Consensys — another company that was <a href="https://blockworks.co/news/consensys-sec-lawsuit-debate">served with a Wells notice</a> — may face different charges in a potential lawsuit from the regulator. We know from the lawsuit Consensys filed against the SEC that its Wells notice centered on two of its product offerings: MetaMask Swaps and MetaMask Staking.&nbsp;



One aspect could look similar, however.&nbsp;



<a href="https://blockworks.co/tag/consensys">Consensys</a> said the SEC held a telephone conference between the two parties during which SEC staffers said they believed the Brooklyn-based company was operating as an unregistered broker-dealer because of the MetaMask Swaps software.&nbsp;



The SEC also took issue with the staking program — which would <a href="https://blockworks.co/news/consensys-sec-lawsuit-debate">echo what we’ve seen in the Coinbase and Binance cases</a>. Consensys violated the Securities Act, the SEC allegedly said, because it offered and sold unregistered securities.



The third company in our roundup, Uniswap, represents the most unknowns so far. While Uniswap disclosed its Wells notice, it didn’t disclose any specifics. Uniswap didn’t respond to a request for comment on the details, either.&nbsp;



As our own Casey Wagner <a href="https://blockworks.co/news/empire-newsletter-sec-goes-after-uniswap-defi">pointed out in this newsletter</a> a few weeks ago, Uniswap chief legal officer Marvin Ammori said securities regulators could — as they did with Binance and Coinbase — charge the firm with operating as an unregistered exchange and broker.&nbsp;



It seems likely that Uniswap could also face securities charges as well, based on what we’ve seen with pending lawsuits and the other Wells notices.&nbsp;



So the summer of fun, with the bull market looking like it’s just getting started, might be interrupted by a few more lawsuits. Yay.



— Katherine Ross



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



<ul>
<li>Robinhood’s stock was <a href="https://www.marketwatch.com/investing/stock/hood?mod=search_symbol">down</a> nearly a percent at the close yesterday, but it’s still up 95% over the past year.</li>



<li>Bitcoin, trying to regain $65,000, <a href="https://www.coinbase.com/price/bitcoin">dropped</a> back to $64,000 after Robinhood disclosed its Wells notice.</li>



<li>Grayscale’s bitcoin ETF posted another day of <a href="https://twitter.com/JSeyff/status/1787607380479390175">inflows</a>, a record for the fund, on Monday. The firm saw positive flows of nearly $4 million.</li>



<li>Ethereum notched $30 million of inflows, finally breaking a seven-week streak of outflows, per CoinShares <a href="https://blog.coinshares.com/volume-181-digital-asset-fund-flows-weekly-report-47a9659e08ae">data</a>.</li>



<li>Hong Kong’s new ETH and bitcoin ETFs recorded $307 million in inflows last week, according to the data.</li>
</ul>



Bubbles are mathematically impossible



If crypto were the ‘98 Chicago Bulls, Paradigm and a16z would be Michael Jordan and Scottie Pippen.



A few editions ago, we <a href="https://empire-31ed59.beehiiv.com/p/irancrypto-affair?_gl=1*1ee6888*_ga*NDA0ODY3MTU3LjE3MTIwNjAxMjE.*_ga_E6Y4WLQ2EC*MTcxNDU4ODMxMi4xMjYuMS4xNzE0NTg4Mzc0LjYwLjAuMTYwMDUwODQ.*_gcl_au*NTk1OTIzNTkxLjE3MTE0ODAwNjA.">looked</a> at the companies listed in a16z Crypto’s portfolio for a temperature check on how those bets are playing out this bull market cycle.&nbsp;



Time to compare that to <a href="https://blockworks.co/tag/paradigm">Paradigm</a>.



Paradigm has fewer investments <a href="https://www.paradigm.xyz/portfolio">listed</a> than a16z — 57 to 95. A similar percentage of startups have issued their own tokens, around 40%.&nbsp;



a16z Crypto <a href="https://a16zcrypto.com/about/">says</a> it has $7.6 billion in assets under management in its four crypto funds. Paradigm, meanwhile, reportedly had $8.7 billion toward the end of 2022 — when crypto markets were bottoming out.&nbsp;



Considering how wild these assets can be, let’s just call it even.



Complete details of either firm’s investments in the crypto space aren’t public knowledge, so we’re in the dark on size, mixture of equity and tokens, vesting schedules and cost basis.&nbsp;



That means we can’t know exactly how well the funds are doing. We can still figure out what their star performers might be, at least out of the portfolio companies with native tokens.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/nKRLJWGn5cqPs-lgzYn3XDXiKGf7d9sBkixHavgbQN2HLlMPk7VKLq_oSRaunYd8UPkyb-5MbIF3ElXfCIPaZsNFop-7vYQvlHUpEeo2CcjWSp706Ju8LV6-KULCQXY8K7sevPXWtQhs43A5BU4X2yA" alt=""/></figure>



Let’s say our current bull market began in mid-November 2022, when bitcoin bottomed out around $16,500. 



In Paradigm’s case, it discloses unspecified holdings in bitcoin, ether, Coinbase stock, 23 crypto entities with their own tokens, and 33 without.



Most cryptocurrencies have underperformed the top two cryptocurrencies, with only four beating bitcoin up until the end of April, and another three came out ahead of ether.



Just like in a16z’s case, Sky Mavis’ RON token, the native asset for gaming-centric layer-1 Ronin, is the standout by far, having multiplied 11 times in price.&nbsp;



Next were governance tokens for DeFi structured products protocol Ribbon Finance, trader-focused NFT marketplace Blur and DAI issuer MakerDAO’s, which have more than tripled.



Worst were also governance tokens. JET, for Solana-native lending app Jet Protocol, and FLX, for non-pegged stablecoin protocol Reflexer, which manages RAI. JET has fallen 97% this bull market, FLX has shed 60%.



When we looked at tokens issued by a16z’s portfolio companies, the median return was about 130%, largely thanks to RON and Solana, with about 15% of tokens losing value in the current cycle.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/BIy81OmmlDV9U3sJOL2sCbY0OxCJyMFUoLLCZdh6DXpVhKzmnqHXVhRM2Z1465kgwuDrlMiw94I0W1cSp3ao1zOwzyr6lXuVBkcQ8FPc4D7SBbWoMYM5c9tZgEwaxrO2Fs_o3m-_TKnFGXwLCf8PHqE" alt=""/></figure>



In Paradigm’s portfolio, including bitcoin, ether and Coinbase stock, the median is 58%, with about one-third posting negative returns.



Granted, all this says very little about the potential gains, both unrealized and unrealized, of both funds’ crypto ventures. It also doesn’t at all reflect the health of the companies tied to each token, only market sentiment.



It does, however, show how few VC-backed tokens have outperformed bitcoin in this bull market so far.&nbsp;



Food for thought for those playing along at home.



— David Canellis



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



<ul>
<li>Australia’s tax office is <a href="https://www.afr.com/markets/currencies/ato-targets-crypto-traders-tax-affairs-bank-details-20240501-p5fo5n">probing</a> crypto traders in the country, according to AFR.</li>



<li>Fintech firm Revolut is launching a crypto exchange for traders in the UK.&nbsp;</li>



<li>The SEC <a href="https://www.sec.gov/files/rules/sro/cboebzx/2024/34-100065.pdf">delayed</a> another spot ether ETF late Monday.&nbsp;</li>



<li>Block said Monday that it’s planning to <a href="https://investors.block.xyz/investor-news/news-details/2024/Block-Inc.-Announces-1.5-Billion-Offering-of-Senior-Notes/default.aspx">offer</a> $1.5 billion worth of senior notes.</li>



<li>Apple is <a href="https://www.wsj.com/tech/ai/apple-is-developing-ai-chips-for-data-centers-seeking-edge-in-arms-race-0bedd2b2">developing</a> its own data center chip for artificial intelligence, the WSJ reports.</li>
</ul>



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



Another day, another series of “Satoshi-era coins on the move” headlines.&nbsp;



Yesterday, a clutch of bitcoins worth some $44 million “awoke” according to <a href="https://whale-alert.io/transaction/bitcoin/605c67609ba71c3e707fc73af52a94a982cbd039315ea7beb85e99de59be7402">transaction data</a>.&nbsp;



It’s long been the case that crypto media jumps to report on anything related to old coins —&nbsp;that is, any holdings that haven’t budged in a decade or more.&nbsp;



But this has seemed especially true in recent months, with <a href="https://blockworks.co/news/bitcoin-all-time-high">bitcoin’s recent all-time highs </a>prompting long-time holders to blow the dust off their wallets. A recent <a href="https://finance.yahoo.com/news/old-bitcoin-wallets-keep-waking-131642155.html">survey</a> from Fortune and Chainalysis posits that old coin movements have become routine as of late.



Should people pay so much attention to these Lazarus-style hodlers? Maybe, if you’re the sort who cares a great deal about how many coins are effectively out of circulation because they were previously thought to be “lost.”



Me? I think people are looking for entertainment; if the number isn’t going up, at least somewhere, a number is doing something.&nbsp;



— Michael McSweeney



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Empire Newsletter: A busy crypto lawsuit season looms

On Monday, the experimental currency Ore won $50,000 from a Solana Foundation-supported hackathon focused on identifying Solana’s “next wave of high-impact projects.”



“High-impact” presumably refers to Ore’s potential for making a positive change to Solana’s adoption figures. But so far, Ore’s impact has been more like a gut punch: The project <a href="https://blockworks.co/news/solana-price-falls-ore-mining">halted mining in mid-April</a> after the avalanche of network usage from mining the currency <a href="https://blockworks.co/news/solana-network-congestion-transaction-volume">made it difficult</a> for Solana users to get their transactions included in blocks.



Ore is an experiment in using the proof-of-work security mechanism on the Solana blockchain. PoW systems essentially pay miners native currency rewards in exchange for computing power that makes blockchains difficult to attack. Bitcoin is secured in this fashion, in contrast to <a href="https://blockworks.co/tag/solana">Solana</a>, which combines a system called proof-of-history with proof-of-stake, Ethereum’s chosen consensus mechanism.&nbsp;



Read more: <a href="https://blockworks.co/news/solana-price-falls-ore-mining">Solana price falls further as Ore suspends mining on the network</a>



Ore rewrote a more egalitarian version of the Bitcoin protocol as a Solana smart contract, the project’s pseudonymous creator Hardhat Chad explained in a demo <a href="https://blog.colosseum.org/announcing-the-winners-of-the-solana-renaissance-hackathon/">video</a>. Unlike Bitcoin, which gives 3.125 bitcoin to the fastest miner to return a certain cryptographic hash every ten minutes, Ore is <a href="https://github.com/hardhatchad/ore?tab=readme-ov-file#how-it-works">set</a> up where multiple miners can win a sliver of the network’s block rewards. An average of one ORE is created every minute, split between successful miners.



For many in Solana’s speculation-loving ecosystem, the idea of “Bitcoin on Solana” was simply too juicy to pass up, and Ore mining transactions drove up activity and soon clogged the network. One miner <a href="https://x.com/shoucccc/status/1779323261278666991">posted</a> about “blindly sending millions” of transactions every second in hopes that some would land.



Amid the flurry of usage, Solana users saw more and more of their transactions being dropped rather than included in blocks, and Solana developers <a href="https://x.com/Austin_Federa/status/1777995577696874850">rushed</a> to patch the overloaded network. Perhaps mercifully, Ore temporarily ceased mining on April 16. Soon after, Solana <a href="https://x.com/SolanaStatus/status/1779727821834686592">released</a> a network upgrade to help ease the congestion.



Read more: <a href="https://blockworks.co/news/empire-newsletter-no-12">Empire Newsletter: Solana patch targets congestion woes</a>



In an X post announcing the mining pause, Hardhat Chad said Ore had become Solana’s most-used program by transaction count within two weeks of launching. Solana could thank Ore for the stress test, but the project would be redeploying a better-constructed v2, the developer <a href="https://x.com/HardhatChad/status/1780249833510510964">intimated</a>.



Ore mostly disappeared from view before winning the “Solana Renaissance” hackathon, which was <a href="https://www.colosseum.org/renaissance">judged</a> by key figures in Solana’s ecosystem, including the chain’s co-founders Anatoly Yakovenko and Raj Gokal. Colosseum, which runs Solana hackathons including this one and makes venture investments in some of the winners, has <a href="https://x.com/solana/status/1787476156238921912">said</a> the contest drew over 1,000 entries. The Solana Foundation, a non-profit supporting Solana’s ecosystem, is a limited <a href="https://www.colosseum.org/accelerator/">partner</a> in Colosseum’s venture fund.



Solana’s thought leadership seems to believe a second iteration of Ore can be less chaotic than the first go-round.&nbsp;



“The network should handle anything like this,” Jon Wong, ecosystem engineering lead at the Solana Foundation, told Blockworks. “It’s not about Ore in particular, it’s about continuous stress testing the network in order to get better.”



Hardhat Chad is optimistic as well.



“Ore exists for one reason: to provide the world with a fast, cheap, private, inflation-proof digital currency everyone can mine,” Hardhat Chad <a href="https://x.com/HardhatChad/status/1787487182317367514">wrote</a> on X in celebration of the hackathon win.



Ore v2 is “[f]eature complete” and currently running simulations while awaiting audits, Hardhat Chad <a href="https://x.com/HardhatChad/status/1787507236492775539">said</a> Monday. 



Those who got their hands on the Ore that was mined before the halt are growing richer in the meantime. The token’s price rose more than 90% Monday after the announcement, according to CoinGecko, <a href="https://www.coingecko.com/en/coins/ore">trading</a> hands at around $228 at press time.



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Solana congestion culprit Ore wins $50K from hackathon

A crypto bull market, coupled with the still-uncertain regulatory environment is going to create the perfect storm for increased enforcement actions, US Commodity Futures Trading Commission Chairman Rostin Behnam said.&nbsp;



“We find ourselves with a growing market, growing capital [and] investments, growing market capitalization, and I think a renewed interest by a lot of the entrepreneurs,” Behnam said Monday during a discussion at the Milken Institute’s Global Conference in Los Angeles.&nbsp;



“From my standpoint, as a regulator, we&#8217;re going to probably see in the next six to 18 months or six to 24 months another cycle of enforcement actions.”&nbsp;



Without action from Congress and increased regulatory transparency, Behnam added, agencies are going to lean more heavily on lawsuits.&nbsp;



Read more: <a href="https://blockworks.co/news/bank-secrecy-act-doj-kucoin">Bank Secrecy Act vs crypto: A new DOJ lawsuit revives old tactic</a>



“If you actually count the number of [Congressional] working days between now and the election…it’s really not that much time,” Behnam said when asked about the odds of any of the crypto-related bills making it to the floor for a vote in the House and Senate.&nbsp;



“Getting legislation done these days is difficult,” he added, but noted that there is “momentum” and “desire” from lawmakers to close some of the regulatory gaps around crypto, particularly with regards to <a href="https://blockworks.co/tag/stablecoins">stablecoin</a> legislation.&nbsp;



Behnam’s comments come days after retail trading platform Robinhood announced it <a href="https://blockworks.co/news/robinhood-wells-notice-sec">received a Wells notice</a> from the US Securities and Exchange Commission. Securities regulators plan to proceed with an enforcement action relating to cryptocurrencies traded on the exchange, Robinhood said in a <a href="https://www.sec.gov/Archives/edgar/data/1783879/000178387924000138/hood-20240504.htm">filing</a> Saturday.&nbsp;



“After years of good faith attempts to work with the SEC for regulatory clarity including our well-known attempt to ‘come in and register,’ we are disappointed that the agency has decided to issue a Wells Notice related to our US crypto business,” Dan Gallagher, Robinhood’s chief legal and compliance officer, said in a statement.&nbsp;



Last week, Consensys revealed it was also served a Wells notice from the SEC, in addition to a <a href="https://blockworks.co/news/empire-newsletter-consensys-legal-salvo-sec">number of subpoenas relating</a> to Ethereum. The SEC has not yet brought an enforcement action against Consensys, but the crypto firm is suing the exchange preemptively.&nbsp;



Behnam did not comment Monday on his agency’s relationship with the <a href="https://blockworks.co/tag/sec">SEC</a> with regards to crypto industry regulation, but Congressional leaders have been debating about how to address the so-called “turf war” between the agencies for over a year.



&#8220;When we have two agencies <a href="https://blockworks.co/news/cftc-ether-security-commodity-conflict">contradicting each other</a> about whether one of the most utilized stablecoins in the market is a security or a commodity, we end up with uncertainty,” Rep. French Hill, R-Ark., who chairs the House Subcommittee on Digital Assets, said during an April 2023 hearing.



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CFTC’s Behnam warns crypto industry that more enforcement actions are coming 

Hong Kong’s newly launched spot crypto ETFs might help us predict what ether ETF demand could look like in the US.&nbsp;



Or not.&nbsp;



Either way, the new funds offer a jumping-off point, so to speak, for considering the current differing investor appetites for ETH and BTC and how that could evolve.



The Securities and Exchange Commission approving spot bitcoin ETFs in January offered exhilaration during a month often marred by the holiday hangover.&nbsp;



Many wondered what the demand for these long-awaited products would amount to out of the gate, and long-term. Another common question after the industry’s regulatory victory: When will we see spot ether ETFs?&nbsp;



After all, ether is the second-biggest crypto asset by market capitalization, with its $370 billion market cap nearly a third of bitcoin’s $1.25 trillion. US issuers started trying to launch spot ETH products as far back as 2021.



Not to mention ether has a regulated futures market, and (whaddya know) the SEC already approved ETFs that hold ETH futures contracts. <a href="https://blockworks.co/news/ether-futures-etfs-vaneck-proshares-bitwise-offerings">Those launched last October</a>.



Though the regulator is set to rule on spot ether products sometime this month, it remains unclear when the SEC could ultimately allow those to trade.&nbsp;



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



But aside from the launch timeline, the other question is what demand will be if and when they do debut.&nbsp;



Between ether futures ETF asset bases, US spot bitcoin fund flow data and the seed capital for Hong Kong bitcoin and ether offerings, perhaps we start to paint a picture.&nbsp;



Or maybe crypto-related fortune telling — even with data inputs&nbsp;— is a fool’s game.



<h2 class="wp-block-heading">Trying to make sense of the numbers anyway&nbsp;</h2>



Hong Kong’s six new spot crypto ETFs — three bitcoin funds and three ether funds — opened $292 million worth of seed capital, according to Farside Investors <a href="https://farside.co.uk/?p=1508">data</a>.&nbsp;&nbsp;&nbsp;



The bitcoin funds attracted significantly more of the initial capital, with ether ETF day one assets amounting to 15% of that total, analyst Eric Balchunas <a href="https://twitter.com/EricBalchunas/status/1786035915040674061">noted</a>.&nbsp;&nbsp;&nbsp;



He and others pointed to the seed capital for the offerings — used to fund the ETF’s creation units — as one indicator to compare demand for BTC and ETH. Subsequent flows into the six funds have been trivial at about $23 million over the last three trading days, making the seed capital perhaps the better barometer.&nbsp;



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1172" height="1004" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Farside-Hong-Kong-Crypto-ETF-Chart.png?w=1024&amp;h=1024" alt="" class="wp-image-85395" style="width:683px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Farside-Hong-Kong-Crypto-ETF-Chart.png?w=1172 1172w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Farside-Hong-Kong-Crypto-ETF-Chart.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Farside-Hong-Kong-Crypto-ETF-Chart.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Farside-Hong-Kong-Crypto-ETF-Chart.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Farside-Hong-Kong-Crypto-ETF-Chart.png?w=305 305w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Farside-Hong-Kong-Crypto-ETF-Chart.png?w=256 256w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Farside-Hong-Kong-Crypto-ETF-Chart.png?w=80 80w" sizes="(max-width: 1172px) 100vw, 1172px" /></figure>



The US and Hong Kong differ of course, and the <a href="https://blockworks.co/tag/hong-kong">Hong Kong</a> ETFs just launched. But at least we have some numbers to work with.&nbsp;



Sumit Roy, a senior analyst at ETF.com, said the initial 15% asset share for ether ETFs in Hong Kong sounds about right to him.&nbsp;



“It&#8217;s not peanuts,” he told Blockworks. “But with ether having much less name recognition that bitcoin, it&#8217;s natural that it would attract fewer investment dollars than bitcoin from ETF investors.”



Matthew Sigel, VanEck’s head of digital assets research, noted that the Hong Kong ETH funds accept in-kind subscriptions and redemptions — a feature the <a href="https://blockworks.co/tag/sec">SEC</a> is unlikely to allow for the proposed US <a href="https://blockworks.co/tag/ether-etfs">ether ETFs</a>.



Such a transaction model lets investors buy and sell ETF shares using the ETF’s underlying asset — in this case ETH — rather than cash.



Given that expected difference, the Hong Kong BTC-to-ETH ratio “may not be the best proxy” to predicting US demand, he argued — adding that they could collect less than 15% of the inflows that bitcoin funds have seen.&nbsp;



The 11 US spot bitcoin ETFs have combined for nearly $11.6 billion since most of them launched on Jan. 11.&nbsp;



<h2 class="wp-block-heading">‘Ethereum story’ has room to grow</h2>



While it would make sense for spot ether ETFs to initially see a similar percentage of bitcoin ETF assets in the US as they did in Hong Kong, Roy said, that might be short-lived.



“As the <a href="https://blockworks.co/tag/ethereum">Ethereum</a> story becomes more well known and people come to appreciate the yield — if it&#8217;s available to ETF investors — that comes from staking ether, they might even prefer the cryptocurrency over bitcoin,” he noted.



Whether ether ETFs are able to stake could be the key to wider adoption.&nbsp;



The Hong Kong funds do not offer that perk. Prospective spot ether ETF issuers in the US added language to their applications in recent months about staking the assets they hold.&nbsp;



<a href="https://ethereum.org/en/staking/">Staking</a> ether is the process of depositing ETH to help secure the Ethereum blockchain — and earning yield on that ETH for doing so.



Christopher Jensen, who leads crypto research at traditional finance giant Franklin Templeton, <a href="https://blockworks.co/news/franklin-templeton-institutional-bitcoin-etf-allocation">told Blockworks in an April interview</a> that the simple “store-of-value” characteristics of bitcoin can be a “hang-up” for certain institutional investors.&nbsp;



ETH resonates with some of them better.&nbsp;



“A lot of times, [an investor will say] ‘with Ethereum, I understand that it generates revenues and has a yield and it looks more like a [traditional finance] asset,’” Jensen noted.&nbsp;&nbsp;



Roy said he expects ether ETFs to attract the same types of investors as bitcoin ETFs at first — albeit in lesser numbers. These include those that want to speculate on price or invest in an alternative store of value.&nbsp;&nbsp;



Sigel agreed that a non-staking ether ETF would likely be appealing to more speculators than long-term investors.&nbsp;



“But over time,” Roy added, “ether ETFs may attract a wider spectrum of investors compared to bitcoin ETFs when people come to appreciate that ether is much more than just a store of value.”



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