Zephyr Protocol

Katherine Ross

David Canellis

Today, enjoy the Empire newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox.&nbsp;<a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



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<h2 class="wp-block-heading">The age of adoption</h2>



55%.&nbsp;



That’s how many surveyed institutional investors plan to up their crypto allocations in the next two to three years alone.&nbsp;



The survey, conducted by EY earlier this summer, gives insight into how the institutions are approaching the crypto space. And, mind you, this was conducted before we even knew that ETH ETFs were on the table.



“We may look back on 2023 as the year digital assets firmly planted roots in the challenging soil of traditional finance,” EY wrote.



Fast forward to now, and Wisconsin’s pension fund now includes millions of dollars worth of bitcoin ETFs. In case you’re not ‘boots on the ground’ in Nashville, Jersey City Mayor Steven Fulop on Thursday <a href="https://x.com/StevenFulop/status/1816452663191450015">announced</a> that there was no question that both crypto and bitcoin were “here to stay” and that the two “won” over the doubters.&nbsp;



Most importantly though: Jersey City’s pension fund is following in Wisconsin’s footsteps and plans to allocate a similar amount by the end of the summer (Wisconsin’s is at 2%).



“I do believe blockchain is amongst the most important new technology innovations since the internet,” Fulop added.&nbsp;



So let’s focus on the funds those pension funds are buying — and by that I mean the bitcoin ETFs. EY’s survey had 68% of respondents say they plan to buy them, and just over 60% want exposure to crypto through registered vehicles versus spot products.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfJKhsj2HxE_3kGqYhgGOH89RDp5D_879QB_PGGoHl3gEQ_Rw6J6B4KydkWyzj5kTbKp794vBgVa9L1GEQKpXRBYvDlsXFO3d16RR6AP32K54S7oHevyNXNRdehWCwY83kOwghEgyTNkVk32OnPUDQKRBwj?key=hKUz3ePeRU26RvIXlw4eWA" alt=""/><figcaption class="wp-element-caption">Source: EY-Parthenon</figcaption></figure>



To put these percentages in perspective: EY surveyed over 270 institutional investors. The majority were either institutional asset managers and asset managers, but there were some RIAs and hedge funds surveyed as well.&nbsp;



“To date, while 62% of investors have allocated greater than 1% of their assets to crypto, the survey shows that percentage increasing to 81% two-to-three years out, showing more than a 30% increase in the investors willing to commit more than 1% of assets to crypto,” the report said.



“When it comes to family offices in particular, the appetite for crypto is even greater, with 24% allocating more than 5% of their investments.”



EY’s Prashant Kher told me that 59% of respondents also said they planned to launch a crypto fund in the next two years, or, if you bump their AUM to $500 billion (yes, with a B), then that percentage shoots up to 90%.&nbsp;



The bigger the AUM, the more likely they are to have a larger allocation. And those hedge funds I mentioned? They’re looking to be the “most aggressive in increasing allocations.”



It’s not just bitcoin or the ETFs getting all of the love. Tokenized assets are attracting lots of attention from these firms.&nbsp;



“I think the fund space is a quite interesting one to watch, where we’ve seen some successful launches with the money market funds and treasuries. We know of others that are working on tokenizing alternatives. And then the second angle in tokenization is the blockchain-based payments and tokenized cash. And how you&#8217;re seeing pilots with different banks launching their own tokenized cash,” Kher said.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdcpb9SuRjpnJzlkz7jmxCE6ohfk1bDjHFv8kg9jxOjKtRNSxIBD_p8GdRSmbarw6nBr-X2XIIyKsOJuWY4NRsWIyXRF1T3UFbPPQsNE70w4hAOyJsrAXWvOE_BhAjWGYJgZnIxO3QEGX3z44FEWtfjO6RV?key=hKUz3ePeRU26RvIXlw4eWA" alt=""/><figcaption class="wp-element-caption">Source: EY-Parthenon</figcaption></figure>



As for what these firms want: The majority said connectivity to liquidity providers is first and foremost, followed closely by prime brokerage services. 26% of the firms are looking for stablecoin payment support.&nbsp;



We’re now past halfway through the year, and institutional adoption continues to show strength. Now we’ll just have to see how this narrative pushes our current market cycle forward.&nbsp;



— Katherine Ross



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



<ul>
<li>Over $3 billion has net <a href="https://farside.co.uk/?p=997">flowed</a> into bitcoin ETFs so far in July compared to $666 million in all of June.</li>



<li>Ether ETFs have otherwise seen $179.1 million of net outflows across its first three days of trading, per Farside Investors <a href="https://farside.co.uk/?p=1518">data</a>.</li>



<li>BTC and ETH have bounced, up 5% and 2.5% in the past day, respectively (BTC: $67,350; ETH: $3,250).</li>



<li>POPCAT, TAO and AAVE are rebounding the hardest, between 16% and 13.3%.</li>



<li>Another all-time high for Ethereum validators: 1,044,670 with 4,300 in the <a href="https://www.validatorqueue.com/">queue</a>.</li>
</ul>



BlackRocked&nbsp;



BlackRock’s tokenized money market on Ethereum, BUIDL, is paying out steady yield entirely on crypto rails.



And those dividends are growing. BlackRock fund managers tally yields each day and distribute them on the first business day of every month.



Similar to stablecoins like Tether, USDC and DAI, the yield mostly comes from US Treasurys and various repurchase agreements.&nbsp;



Fund contributors receive their share of dividends in BUIDL tokens. BUIDL can be redeemed 1:1 for USDC through a smart contract built with issuer Circle, with payouts available round-the-clock.



To date, the blockchain data shows BUIDL paying out yield to 15 different addresses, although that also includes RWA protocol Ondo and a small amount to restaking platform Karak.&nbsp;



Initial participants include Coinbase, Fireblocks, BitGo and Anchorage Digital Bank, according to a spokesperson from Securitize, which handles much of BUIDL’s infrastructure.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc3msIg_ZgXeCriyjZZJWug1OkbmZe1TfL-GQ89Hkc0CAsLiDKCwDthvv6lFovIV5bpFwDTtIFFG1gFK9i163v9rBp7T4YyJhSm7-nm20CFC-XpioUmMtj_7dHdl1EtkGa6Sh9Plejfu0xz10WBlh2fCWlP?key=hKUz3ePeRU26RvIXlw4eWA" alt=""/><figcaption class="wp-element-caption">Green columns are BUIDL mints (inflows), red are burns (outflows) and purple are monthly dividends</figcaption></figure>



Since its launch in March, BUIDL has paid:



<ul>
<li>$265,400 at the start of April.</li>



<li>$1.21 million in May.</li>



<li>$1.67 million in June</li>



<li>$1.82 million in July</li>
</ul>



The rising dividends match the growth in BUIDL’s AUM — now $527.6 million, up from just over $280 million at the time of the first payout.



BUIDL holders have otherwise opted to cash in $55.7 million for USDC since its launch in March.



All told, BUIDL is performing well for token holders. Its cumulative yield to date is 1.15% — paid over the space of four months — while ether is down 7.3%.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcXUZggR2xXjAw0yg1uLwwtycyn2X4_rPcbeCDg7KUTzSoQhLr8BRGSB3aH-cvZSiwYIhMgvVjoslNTvwEesnkz47gzmVpqMG6llciXIS3ZkNUbU1hnEZ7NwjZ9CWoxwl1UcVwaZ1znRUVdopDkxzQbhYbs?key=hKUz3ePeRU26RvIXlw4eWA" alt=""/><figcaption class="wp-element-caption">BUIDL yield is anything but volatile</figcaption></figure>



The S&amp;P 500 is outwise up almost 3.5% over the same period while the yen has slipped about 2%.



If it wasn’t already clear, BlackRock’s fund is aptly named.&nbsp;



It’s building capital for its investors slowly and steadily — a nice change from what usually goes on in crypto.



— David Canellis



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



<ul>
<li>X has <a href="https://cointelegraph.com/news/x-removes-crypto-emojis-bitcoin-2024">scrapped</a> hashtag emojis, including bitcoin and other crypto logos.</li>



<li>Bancolombia Group’s Wenia is <a href="https://www.prnewswire.com/news-releases/wenia-part-of-bancolombia-group-taps-chainlink-to-increase-transparency-of-its-stablecoin-backed-11-by-the-colombian-peso-302205816.html">integrating</a> Chainlink’s Proof-of-Reserve to bring transparency to the COPW stablecoin’s Colombian peso reserves.&nbsp;</li>



<li>$4 million worth of crypto has been donated to former President Donald Trump’s campaign from donors such as Ripple’s Stuart Alderoty and BitGo’s Mike Belshe, CNBC <a href="https://www.cnbc.com/2024/07/25/trump-raises-more-than-4-million-in-bitcoin-other-cryptocurrencies.html">reported</a>.</li>



<li>The United Kingdom <a href="https://www.revolut.com/news/revolut_receives_uk_banking_licence/">granted</a> financial technology firm Revolut a banking license.</li>



<li>Marathon Digital said it <a href="https://www.globenewswire.com/news-release/2024/07/25/2918789/0/en/MARA-Purchases-100-Million-of-Bitcoin.html">bought</a> $100 million worth of bitcoin, to hold over 20,000 bitcoin on its balance sheet.</li>
</ul>



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



Q: Is this the final form of institutional participation in crypto?



Final is, well, too final of a word to use.&nbsp;



Instead, I’d probably say that this is the middle stage of institutional participation. We’re finally starting to see real interest, and it’s not just conversations in a conference room anymore.&nbsp;



Things are finally actually happening, which makes all the difference. But I don’t think we’ll be anywhere close to the finish line until the unfriendly — and uncertain — regulatory environment in the US is cleared up.&nbsp;



It’s, unfortunately, simple and complicated at the same time. But until there’s clarity, we’ll keep seeing the institutions that really want to take part be very creative about how they get involved with the overall industry.&nbsp;



— Katherine Ross



The way it’s going, definitely not. Two things crypto needs from institutions to help reach its true final form:



<ol>
<li>Stock markets that run entirely on a blockchain — with crypto-to-stock trading pairs.</li>



<li>Tokenized initial public offerings and direct listings that are integrated with traditional stock exchanges.</li>
</ol>



Bonus points for stablecoins baked into banking apps (especially ones that allow deposits and withdrawals with external, non-bank sources).&nbsp;



Not to mention, home loans and mortgages that don’t penalize for interacting with crypto exchanges and other service providers. Institutions might be chasing exposure to crypto’s growth, but there’s still lots of room to go deeper than that.



— David Canellis&nbsp;



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the On the Margin newsletter</a>.



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Empire Newsletter: Crypto’s next wave of smart money

Jack Kubinec

Solana’s biggest liquid staking project is taking the plunge into restaking.



Earlier today, the Jito Foundation announced in a blog post that it had released the code for Jito restaking. This move places the Jito Foundation ahead in the race to build restaking on Solana, as the network&#8217;s fast and low-cost DeFi ecosystem continues to expand.



Restaking refers to using staked crypto to secure other blockchain apps and services, theoretically extending the security of the blockchain’s base layer. In theory, this should put unproductive staked assets to use and make proof-of-stake systems more efficient.&nbsp;



Read more: <a href="https://blockworks.co/news/lightspeed-newsletter-solana-defi-activity-expanding">Lightspeed Newsletter: Solana’s DeFi activity keeps expanding</a>



Eigen Labs pioneered the concept on Ethereum with EigenLayer, which has drawn billions in deposits on top of a <a href="https://blockworks.co/news/a16z-series-b-eigenlayer-investment">$100 million investment</a> from a16z.



Restaking is yet to go live on Solana, though Jito releasing its codebase represents a noteworthy step forward. One major competitor is Solayer, which has drawn significant interest during the brief periods where it has accepted deposits. Solayer’s GitHub doesn’t <a href="https://github.com/solayer-labs/docs/tree/main">contain</a> code for its restaking product.



Jito’s restaking pivot pairs one of the <a href="https://blockworks.co/tag/solana">Solana</a> ecosystem’s most notable pillars with one of crypto’s buzziest narratives. Jito runs a fork of the original Solana Labs validator client with some modifications to allow for maximal extractible value (<a href="https://blockworks.co/tag/mev">MEV</a>). This MEV can be quite lucrative for validators running the Jito-Solana client. Earlier today, one validator earned a $311,000 tip on a transaction, Jito co-founder Lucas Bruder <a href="https://x.com/buffalu__/status/1816480964509622511">said</a> on X.



Read more: <a href="https://blockworks.co/news/solana-mev-validators-ethereum">MEV collected by validators is now higher on Solana than on Ethereum</a>



Users who stake their Solana tokens with Jito’s liquid <a href="https://blockworks.co/tag/staking">staking</a> pool can receive liquid JitoSOL. This pool is the network’s <a href="https://solanacompass.com/stake-pools">largest</a> by a wide margin, and JitoSOL can be used elsewhere in DeFi while also earning staking and MEV rewards. Since launching in November 2022, JitoSOL has become Solana’s dominant liquid staking token, <a href="https://dune.com/21co/solana-liquid-staking-tokens">comprising</a> roughly 45% of all liquid staking tokens on the network. (Of note, only <a href="https://dune.com/ilemi/solana-staking?ref=bankless.ghost.io">about</a> 6% of all staked SOL is held in liquid staking tokens.)



Jito’s restaking product, as detailed in a Thursday blog <a href="https://www.jito.network/blog/announcing-jito-restaking/">post</a>, uses similar nomenclature to <a href="https://blockworks.co/tag/eigenlayer">EigenLayer</a>. Node operators can enable stakers to restake their assets, which are used to secure actively validated services (AVSs). Nodes that misbehave can be slashed.&nbsp;



One notable difference is that Jito Restaking can accept any token using the Solana SPL token standard, whereas EigenLayer only takes EIGEN and staked or liquid staked ether.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the On the Margin newsletter</a>.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Jito unveils code for Solana restaking network

Macauley Peterson

Monoswap, a small DEX on the Ethereum rollup Blast, announced today that it had been hacked under questionable circumstances. The team attributed the loss of funds from the DEX’s staked liquidity pools to a phishing attack that installed malware on a single developer’s computer.



The team urged users to withdraw any remaining funds and to avoid using the protocol while they work on deploying new smart contracts.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">At the moment, we are deploying new contracts for all features immediately to avoid further attacks from the hackers. All deposit methods, including MonoChest, Lottery, Farm, Dividends were disabled. Users can unstake xMONO and MonoPass as usual. MONO can be redeemed for xMONO…&mdash; MonoSwap (@monoswapio) <a href="https://twitter.com/monoswapio/status/1816462185322979712?ref_src=twsrc%5Etfw">July 25, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The security lapse decimated the exchange&#8217;s already paltry total value locked (TVL), which <a href="https://defillama.com/protocol/monoswap#information">peaked</a> at $2.8 million back in April.



As described, some have indicated that the attack seemed easily preventable. The Monoswap team will need to explain how its contracts were so fragile in the first place.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">To show you how low quality this dev is if you search “Kakaocall” on X you would have seen many posts warning about a meeting call scam with the exact same name from as early as May 2024. <a href="https://t.co/2lbgmHPGVx">pic.twitter.com/2lbgmHPGVx</a>&mdash; ZachXBT (@zachxbt) <a href="https://twitter.com/zachxbt/status/1816380481136648261?ref_src=twsrc%5Etfw">July 25, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The alleged level of incompetence on display naturally has some suspecting an inside job, although there’s nothing clearly pointing to that conclusion for now.



Read more: <a href="https://blockworks.co/news/blast-dapp-exploit-inside-job">Blast dapp hack was an inside job, and it could have been worse</a>



<h3 class="wp-block-heading">Blast Phase 1 claims end</h3>



The past couple months have not been kind to <a href="https://blockworks.co/tag/blast">Blast</a>. Chain-wide TVL has <a href="https://defillama.com/chain/Blast">halved</a>, and activity is down about 35% from its June peak, indicating an exodus of capital and users lured by airdrop farming.



For the early users of the rollup, a fork of <a href="https://blockworks.co/tag/optimism">Optimism</a> — “Phase 1” — concluded June 26 with a token <a href="https://x.com/blast/status/1805964805414830506">airdrop</a>, claimable for 30 days.



Read more: <a href="https://blockworks.co/news/blast-optimistic-rollup-launch">Blast launch leaves users confused about withdrawals</a>



<a href="https://blockworks.co/price/blast">BLAST</a> is down -25% this week and about -45% since launch, while bitcoin is up about 6% in the same period.



The project’s &#8220;Phase 2&#8221; guide, introduced on July 2 and detailing a 12-month rewards season, failed to halt the slide to its local bottom at about $0.013 on July 5.



According to the proposal, the next year of rewards are to be split equally between “Points” and “Gold,” with Points earned based on ETH, USDB — the yield-bearing stablecoin akin to sDAI — and BLAST balances. Using native yielding assets is a Blast specialty but the BLAST token lacks any&nbsp;— making it less attractive to hold.



Read more: <a href="https://blockworks.co/news/tether-competes-stablecoin-project-increase">To unseat Tether, upstart stablecoins are sharing the wealth</a>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">This feels&#8230; off. The vision is great: Mobile-first, native yield, and focused on dapps. The valuation is great: If the vision attracts users and novel applications, the FDV is much lower than comparable chains. The Phase 2 rewards are not great: ETH and USDB receive native… <a href="https://t.co/mJbwcJWmIB">https://t.co/mJbwcJWmIB</a> <a href="https://t.co/e5SDsohl9c">pic.twitter.com/e5SDsohl9c</a>&mdash; darran (@darran0x) <a href="https://twitter.com/darran0x/status/1808260672028819884?ref_src=twsrc%5Etfw">July 2, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



&#8220;Gold&#8221; refers to a type of reward given within the Blast network, used as an incentive mechanism primarily geared toward developers and early adopters of dapps on the rollup. Among a raft of gimmicky incentive schemes, “Big Bang” competitions aim to incubate new dapps, which must distribute available Gold before receiving further allocations.



“Golden Tickets” — designed to encourage active participation and engagement with dapps — continue to offer users the chance to earn Points, Gold and Prizes.&nbsp;



All told, the market expected more in the short-term from marketing maven <a href="https://x.com/PacmanBlur">Pacman</a>, whose brainchild, after all, <a href="https://blockworks.co/news/3-years-launch-eth-staking">attracted hundreds of millions</a> of dollars in deposits before building began in earnest.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">The only users of blast are blast holders, blast holders will not hold blast if price keeps going down. Hes screwing all the holders of his chain. With massive unlocks coming in 26 days, why would I not sell everything and just hold eth.&mdash; wick.eth (@j_wickwick) <a href="https://twitter.com/j_wickwick/status/1808568201015419141?ref_src=twsrc%5Etfw">July 3, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Pacman was <a href="https://x.com/MattsCryptoX/status/1808561642265047226">criticized</a> for placing too much focus on measures to drive long-term value, and giving <a href="https://x.com/PacmanBlur/status/1808589767547682951">short shrift</a> to the notion of DAO governance.&nbsp;



Read more: <a href="https://blockworks.co/news/blast-developers-layer-2-liquidity">Blast developers drawn by layer-2’s liquidity and founder’s success building Blur</a>



In response, a Blast Improvement Proposal <a href="https://x.com/blast/status/1810803799822389612">switched on</a> double Points for BLAST holders. The token was also <a href="https://x.com/tradeonblitz/status/1814329987392249978">added</a> as a collateral asset on Blast-based DEX Blitz on July 19.



The chain remains a leading optimistic rollup by TVL and <a href="https://l2beat.com/scaling/activity">activity</a>, and recently <a href="https://x.com/blast/status/1813272949191024824">added</a> Across Protocol as a faster bridging option. It’s a bet on a mobile-centric layer-2 that appeals to the retail gambler set. The jury is out on whether that’s a formula for longevity.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the On the Margin newsletter</a>.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Blast incentives aim to attract strong devs, as value leaks

Felix Jauvin

Ben Strack

Casey Wagner

Today, enjoy the On the Margin newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the On the Margin newsletter</a>.



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Welcome to the On the Margin Newsletter, brought to you by Ben Strack, Casey Wagner and Felix Jauvin. Here’s what you’ll find in today’s edition:



<ul>
<li>A look at what the Treasury department is up to, and how it’s impacting markets.</li>



<li>New economic data has dropped, and it features a “real shocker.”</li>



<li>The top asset-gathering ETH ETFs after two days of trading, and which are well positioned going forward.  </li>
</ul>



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<h2 class="wp-block-heading">Is the Treasury manipulating the yield curve?</h2>



If you missed the most <a href="https://blockworks.co/podcast/forwardguidance/0d345cee-488a-11ef-8a49-c31d5d996b80">recent episode</a> of the Forward Guidance podcast, you may be unaware that a seminal piece of work related to the tug of war between fiscal and monetary policy was published this week.



Written by renowned economists Nouriel Roubini and Stephen Miran, the economic paper discusses the recent rise of what they call activist Treasury issuance, or ATI.



“By adjusting the maturity profile of its debt issuance, [the] Treasury is dynamically managing financial conditions and through them, the economy — usurping core functions of the Federal Reserve,” the economists wrote. “By manipulating the amount of interest rate risk owned by investors, ATI works through the same channels as the Fed’s quantitative easing programs,” they <a href="https://www.hudsonbaycapital.com/documents/FG/hudsonbay/research/635102_Activist_Treasury_Issuance_-_Hudson_Bay_Capital_Research.pdf">added</a>.&nbsp;



Simply put, despite the most aggressive rate hiking cycle in history, the economy has been staying afloat and markets keep hitting new highs each week. This is because the Treasury is doing “hidden QE” by restricting supply of available long duration debt, making for less duration that the market needs to absorb.&nbsp;



Whereas QE through the Fed works on the demand side, ATI reduces supply of duration at the onset.&nbsp;



The Treasury department has done this by tilting its maturity profile towards short-dated T-bills. It is effectively running policy often used during emergencies such as the 2008 financial crisis — but during a time of little strain on the economy:



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdDUzuHePpU8YtUAhLDXeVliek1ECdSfSRxrAjkMEdoJwI8nCE95ZFRSBt-K6AW_abFy0UMeVGn0kVEIyNK_-WvYuTBzxuXVZGXDOriXA3PKCGVw2URH79akFkS0p-JIxZwFqaHt-ryqbnh6U1RfFP0lcaL?key=QBMIdCr4uFdxKGSb7pDMQQ" alt="" style="width:745px;height:auto"/></figure>



By tilting issuance towards the front end of the curve in recent years, the Treasury is now guiding to run above their long-term average of % of bills issued for the foreseeable future:



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfJL5BWB67Uw2ef9CadZa1sdY2bC9VkSdRyBV1hO-LDEnaK-rzAM3ZNXTvuzinc5pntzDnMyO4apveepn09QV2ZDrC1N_ljWxq3e-EYZ6ULlvDgkpH2QTkq8AZjcEyaQ_EOiXn-eeRQow7XLO2G4oT--3wP?key=QBMIdCr4uFdxKGSb7pDMQQ" alt="" style="width:776px;height:auto"/></figure>



Many market experts have discussed this emerging dynamic. But what makes this paper so interesting is the quantitative approach the authors have taken to understand its impact on markets.&nbsp;



Dr. Roubini and Dr. Miran surmised that ATI has led to a lowering of long-term interest rates by 25 basis points, which is the equivalent to 100 bps in rate cuts on the Federal funds rate.&nbsp;



Essentially, this activist Treasury policy has nullified 100 bps of rate hikes from the Fed through this cycle!



Suddenly, the economy’s apparent strength and the labor market remaining secularly tight starts to make sense.



To me, it seems the Treasury has undertaken a soft version of yield curve control. It is attempting — through an activist approach — to directly influence yields in the long end of the yield curve and ensure they do not rise to where they would naturally move.



This entire dynamic has led to stickier inflation and a drawn-out tightening cycle from the Fed. Another result is a roaring stock market that is keeping higher income classes from feeling financial strain from this hiking cycle.&nbsp;



With the Treasury publishing its quarterly refunding announcement next week, the big question on everyone’s mind is what’s next. Will it continue to run this ATI policy or try to pivot back to a normalized maturity profile of issuance? We’ll soon find out.



— Felix Jauvin



<h2 class="wp-block-heading">$100 million&nbsp;</h2>



The value of bitcoin miner <a href="https://blockworks.co/tag/marathon-digital">Marathon Digital</a>’s latest BTC purchase. The company now holds more than 20,000 BTC on its balance sheet.&nbsp;



Marathon revealed it had bought the dip, saying it would be reverting to “a full HODL strategy.” The company cited increased institutional support and an improving macro environment.&nbsp;



&#8220;We believe bitcoin is the world’s best treasury reserve asset and support the idea of sovereign wealth funds holding it,” Marathon CEO Fred Thiel said in a statement. “We encourage governments and corporations to all hold bitcoin as a reserve asset.”



<h2 class="wp-block-heading">Rough waters ahead?</h2>



We’ve made it to Thursday, and as a little treat ahead of tomorrow’s PCE report, we got a slew of economic data this morning.



Second quarter GDP grew an estimated 2.8% year over year, the Bureau of Economic Analysis <a href="https://www.bea.gov/news/2024/gross-domestic-product-second-quarter-2024-advance-estimate">reported</a>. This blows the expected 2% mark out of the water. The reading is also much higher than the first quarter’s figure of 1.4%.&nbsp;



But the “real shocker” of the day, to quote <a href="https://x.com/EconguyRosie/status/1816474045485133977">David Rosenberg</a>, was the core PCE, which rose 2.9% between Q2 2023 and Q2 2024.&nbsp;



This is a decline from the Q1 2024 annualized rate, which was 3.7%. The second-quarter figure is a tad higher than expected, but so far hasn’t been enough to quell market expectations of a September rate cut. That sat at 89%, as of this afternoon.&nbsp;



But it’s not exactly smooth sailing. Rosenberg said tomorrow’s PCE monthly figure could show an increase of 0.3%, a bit higher than the expected 0.2%. This could have a more detrimental impact on rate cut expectations.&nbsp;



Meanwhile, initial jobless claims fell more than expected. In all, 235,000 people filed for unemployment benefits last week, coming in lower than the anticipated 245,000.&nbsp;



All eyes turn to tomorrow’s PCE print and then Wednesday’s FOMC results. We feel a bit more optimistic than Rosenberg seems to be, but we’ll just have to wait and see.&nbsp;



— Casey Wagner&nbsp;



<h2 class="wp-block-heading">An early look at the ETH ETF flow leaderboard</h2>



US spot ETH ETFs have completed their first two days of trading, and the world’s largest asset manager is — unsurprisingly — looking good out of the gate.



The flow <a href="https://farside.co.uk/?p=1518">data</a> shows themes we have seen play out after six-plus months of US spot BTC funds on the market — with BlackRock’s strength being just one.&nbsp;



The firm’s iShares Ethereum Trust (ETHA) has so far attracted $284 million of net inflows, edging the Bitwise Ethereum ETF’s (ETHW) second-place two-day total of $234 million. Fidelity’s Ethereum Fund (FETH) has brought in $146 million.&nbsp;&nbsp;



Does anyone else have déjà vu?



On the BTC side, BlackRock’s IBIT has blown competitors out of the water with $19.6 billion of inflows since January. Fidelity — the other financial services titan — has watched $10 billion enter its bitcoin fund.&nbsp;



“Mainstream investors are more comfortable with the likes of BlackRock and Fidelity,” said Neena Mishra, director of ETF research for Zacks Investment Research. “BlackRock’s excellent distribution network and marketing power will ensure that ETHA will continue to remain ahead of its peers.”



Outside of BlackRock and Fidelity, Bitwise appears to be the smaller, crypto-focused firm of choice for many. The latter company’s bitcoin ETF (BITB) has tallied $2.6 billion of net inflows — good enough for third-best in that category.&nbsp;



Another similar theme this time around? Big outflows from Grayscale’s more expensive trust-converted-ETF.&nbsp;



Its bitcoin version (aka GBTC) has bled $18.7 billion since January. The Grayscale Ethereum Trust (ETHE) — priced at 2.5% — has watched $811 million exit the product in its first two days. That has dragged down the category’s net flows into the red (-$27 million) after two days.&nbsp;



But there was a difference this time around. Grayscale planned for those outflows by offering a “Mini” ETH Trust — featuring the category’s <a href="https://blockworks.co/news/grayscale-changes-proposed-eth-etf-fee">cheapest</a> price point (0.15%) and a liquidity headstart amounting to about $1 billion in assets.



That potential advantage has so far resulted in $61 million of net inflows for the Mini Trust, putting it in the middle of the pack.



It’s still early, sure. And Mishra told Blockworks she is not giving up on Grayscale’s cheap option — noting its “ultra-low” price “should attract some younger investors.”



VanEck, Franklin Templeton, 21Shares and Invesco/Galaxy all have catching up to do.&nbsp;



But at the end of the day, the real winners are the investors that finally have all these options.



— Ben Strack



<h2 class="wp-block-heading">Bulletin Board&nbsp;</h2>



<ul>
<li>Galaxy Digital has secured $113 million for its latest crypto venture fund. Mike Novogratz’s firm is hoping to hit $150 million, so if you’re interested, now apparently is the time. </li>



<li>The Trump campaign notched another $1 million in crypto donations since the start of the second quarter, bringing its grand total to $4 million, CNBC <a href="https://www.cnbc.com/2024/07/25/trump-raises-more-than-4-million-in-bitcoin-other-cryptocurrencies.html">reported</a>. We’re curious to see if the former president’s speech to bitcoiners in Nashville this weekend will inspire others to open their pocketbooks. </li>



<li>Speaking of Nashville, <a href="https://x.com/caseywagnerr?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor">Casey</a> is on the ground at Bitcoin 2024. It is, as expected, a bit of a circus. More on that tomorrow. Say hi if you’re around!</li>
</ul>



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On the Margin Newsletter: Behind the most important economic paper of the year

Jeff Albus

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



Howdy!



Happy (merry?) Christmas in July to all who celebrate. I know I’m in the minority for celebrating here, but I’m pushing for it nonetheless, because who would turn their nose up at a second Christmas?



I hope your email reading is merry and bright. Anyways:



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



<h2 class="wp-block-heading">What’s the deal with zk compression?</h2>



As blockchains grow in size, they become increasingly expensive to manage and maintain.



Several million Solana accounts are created every day, <a href="https://app.blockworksresearch.com/assets/sol/analytics?dashboard=sol-onchain-activity">according</a> to Blockworks Research. Many of these accounts may not even be actively used, but developers and users of the blockchain shoulder the cost of what’s referred to as “state” — basically the most updated look at things like how much currency is in different accounts. Storing state is expensive, because thousands of distributed validators all have to have access to the most current copy of it at all times.&nbsp;



Keeping track of a lot of data costs a lot of money, so Solana has turned at times to something called “compression” — or putting a unique string of letters and numbers called a hash on the blockchain’s state space, rather than posting all of the data itself.&nbsp;



The most recent instance of this is zk compression, a new tool being developed by Light Protocol and Helius that compresses Solana state while still being part of the layer-1. The tool puts underlying state data in Solana’s ledger space, which is cheaper than its state space.



A successful rollout could make rent much cheaper on the blockchain — by an order of up to 5,000 times, Light <a href="https://www.zkcompression.com/">claims</a>.



Yesterday, the infrastructure went <a href="https://x.com/swen_sjn/status/1816134679571095560">live</a> on Solana’s devnet, which lets developers run test transactions on Solana. Light Protocol’s co-founder Swen Schaeferjohann told me he hopes to bring the technology to mainnet by the time of the Solana Breakpoint conference in September.&nbsp;



Zk compression is an evolution of compressed NFTs, which were <a href="https://blog.crossmint.com/compressed-nfts-explained/#:~:text=NFTs%20on%2Dchain.-,Compressed%20NFTs%20are%20the%20newest%20NFT%20standard%20on%20Solana%2C%20improving,Explaining%20NFT%20Compression">introduced</a> to Solana in 2023 — and initially developed during Instagram’s now-defunct NFT phase. The technology reduces onchain NFT data to a hash, which makes it much cheaper to use the assets.&nbsp;



Compressed NFTs enable Drip to do things like mint videos as NFTs on Solana. Its founder is equally excited about zk compression.&nbsp;



“Account rent is really the last hurdle to making the cost of storing data and interacting on-chain with Solana equivalent to Web2. I’m very excited to see the core developer community continuing to iterate on cost and speed,” Vibhu Norby, the founder of Drip, said in an email.



The “zk” in zk compression stands for zero-knowledge, which essentially means the compressed state can be confirmed to be accurate without giving away the state’s contents. This could prove especially important to privacy-sensitive users.



“In a time where the FTC is investigating larger companies such as Mastercard and Chase for surveillance pricing, consumers are now looking for an alternative to keep their information safe while performing transactions,” Intuition founder Billy Luedtke said of zk compression in an email.&nbsp;



Also of note, the term “zk compression” was sort-of-coined by Light and Helius upon introducing the new piece of infrastructure last month, and it created quite the little semantic battle with the Ethereum crowd, which <a href="https://x.com/ryanberckmans/status/1804549672641376617">complained</a> that the developers had actually created layer-2s under a different name.



This won’t matter much in the long run however. It’ll be much more important to see whether the tech can work.



— Jack Kubinec



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



It’s been just a few weeks since celebrity memecoin mania was at a crescendo, but the tokens appear to have already plummeted from early price runs.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcJk8fyk2FHlxbO21es5hNE2N02Qh--XcnrU7uI8ZJ9NbQwhIrlE2L7fvDDbvy4PjZnKa0A-kVvqPJqDPkxoyeean4d7a4zUeW8DJWa4XUF6sEVcy5ZpXnPvbuYKf7sETBSUUBc4UWSDt9yXkPZ2xJbqfl4?key=MdR-6A6mbBIQjlHcm3PKjA" alt=""/></figure>



This chart <a href="https://x.com/SlorgoftheSlugs/status/1816283505804075184">posted</a> by the pseudonymous Slorg shows a bloodbath generally following these tokens hitting all-time highs. Nearly a third of the celebrities to launch have since deleted their X posts about the projects. Not even Iggy Azalea, who continues to post constantly about MOTHER, has been spared from the carnage.&nbsp;



Incidentally, MarginFi just released a new <a href="https://x.com/mrgnswap">platform</a> where traders can take leveraged short positions on Solana tokens, which may be a good tool to have in the arsenal after looking at this chart.



— Jack Kubinec



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



I don&#8217;t know where the rest of you buried your seed phrases, but I keep mine in an abandoned amusement park. Not a bad ruse, all things considered. But my days of dressing up as a ghost pirate to scare meddling kids away from me gold may be coming to an end, thanks to the rise of abstracted accounts from projects like Privy. Privy wants to streamline the integration of blockchain functionalities into various Web2 and Web3 ecosystems, making it <a href="https://www.privy.io/blog/solana-support">easier</a> for developers to onboard users who may have never interacted with blockchain before. Traditionally, web3 onboarding requires juggling multiple tools and complex systems, like keeping seed phrases safe and managing various wallets. Though common practice for elderly coiners like myself, these methods have always been a hassle for newcomers. Privy&#8217;s embedded wallets take a more intuitive approach, allowing users to log in with familiar methods like email or social media — whether they already have a wallet or not.



It’s worth noting that Privy has drawn venture investment from the likes of Paradigm and Sequoia Capital. The team has also partnered with notable Ethereum-based projects like OpenSea and Friend.tech. As of yesterday, Privy has <a href="https://x.com/privy_io/status/1816132358049030499">introduced</a> support for Solana, allowing developers to create embedded Solana wallets for web and mobile applications. Users can choose to build exclusively on Solana or provision both Solana and Ethereum addresses for a cross-chain experience.



The launch has been well-received by the community. Solana’s official Twitter account <a href="https://x.com/solana/status/1816139143824695607">welcomed</a> Privy to the ecosystem, while Privy developer Osker Lu <a href="https://x.com/skerskerrr/status/1816139799402864910">shared</a> his excitement about expanding from Ethereum to Solana. Paradigm investment partner @caitlinxyz <a href="https://x.com/caitlinxyz/status/1816166658962014293">commented</a>, &#8220;The world is converging towards self-custodial wallet logins&#8230; excited for Solana devs to now have access to Privy&#8217;s embedded wallets.&#8221; This sentiment was echoed by @zjbrenner, who <a href="https://x.com/zjbrenner/status/1816139332886855912">remarked</a>, &#8220;Huge news! There&#8217;s also some alpha in this post that I had no idea about!&#8221;



@solcostcomember <a href="https://x.com/solcostcomember/status/1816141601636602217">told</a> followers, &#8220;Can&#8217;t wait to see the things people build powered by Privy,&#8221; and @SpeeksX of Tensor Labs <a href="https://x.com/SpeeksX/status/1816139588731384227">acknowledged</a>, &#8220;Privy have been awesome to work with.&#8221; The Solana Foundation&#8217;s @therealchaseeb <a href="https://x.com/therealchaseeb/status/1816139707350409530">captured</a> high hopes of the community with the rallying cry &#8220;world domination&#8221;!



— Jeffrey Albus



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



A message from Swen Schaeferjohann, co-founder of Light Protocol:


<div class="wp-block-image">
<figure class="aligncenter"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeQzJkRWxQgAbp-nT5FPItpihcnCFpoh2PKpuTPkKLBKeIEjGGiyPTHzTkg6G5NbgeJ-RDBVE67hIGLsrhfTTkaKb-ClKfnIJ4VoeE6g7da4KGNTs7ex8dB2QZF925SoQdQxRDhf1ABbE0Fm-mXu9kw1n3_?key=MdR-6A6mbBIQjlHcm3PKjA" alt=""/></figure></div>


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Lightspeed Newsletter: Zk compression may help Solana’s data storage problems

Donovan Choy

CB Payments Limited (CBPL), a subsidiary business under the Coinbase Group, has been fined $4.5 million by the UK’s Financial Conduct Authority for inadequate anti-money laundering controls.



CBPL is a regulated electronic money institution (EMI) that serves as a gateway for UK customers to trade crypto assets between entities in Coinbase Group.



In late 2020, it agreed to improve its anti-money laundering controls and not accept high-risk customers in the UK after the FCA issued a warning.



However, the financial watchdog claims that CBPL subsequently provided e-money services to roughly 13,000 “high-risk” customers — receiving about $24.9 million from 31% of these customers — in a timespan of two years.&nbsp;



Read more: <a href="https://blockworks.co/news/uk-fca-crypto-firm-warnings">FCA issued 450 warnings to crypto firms in the final months of 2023</a>



“CBPL&#8217;s controls had significant weaknesses and the <a href="https://blockworks.co/tag/fca">FCA</a> told it so, which is why the requirements were needed. CPBL, however, repeatedly breached those requirements,” Therese Chambers, FCA&#8217;s joint executive director of enforcement and market oversight, <a href="https://www.fca.org.uk/news/press-releases/fca-first-enforcement-action-against-firm-enabling-cryptoasset-trading">said</a>.



<a href="https://blockworks.co/tag/coinbase">Coinbase</a> pushed back in a blog <a href="https://www.coinbase.com/blog/coinbase-and-fca-reach-agreement-to-resolve-investigation-into-voluntary-requirement-breaches">post</a>, claiming that its business had “&#8230;unintentionally onboarded some customers between Oct. 30, 2020, and Oct. 1, 2023, (representing 0.34% of customers on-boarded) who were classified as high-risk.”



This marks the first time the FCA has taken an enforcement action against a crypto-related business under the 2011 Electronic Money Regulations. The regulation is generally designed to regulate smaller companies in the business of digital payment services.



Because CBPL agreed to “resolve the matter,” the FCA noted that the firm qualified for a 30% discount on its fine.



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Coinbase UK subsidiary fined $4.5M for insufficient money laundering controls

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<h2 class="wp-block-heading">Moon signals</h2>



It’s been said that the stock market is like astrology for dudes in finance.



If that’s the case, then mapping politics to markets must be akin to crystal healing, or animal magnetism.



Let’s not let that get in the way of a good time.



Republican nominee and former President Donald Trump is scheduled to appear later this week on stage in Nashville at Bitcoin 2024.&nbsp;



It’s set to be a landmark event for Bitcoin and the broader crypto space. It’s not the first known instance of a former US president participating in an industry event — President Bill Clinton took that honor <a href="https://nypost.com/2023/01/19/sam-bankman-frieds-ties-with-the-clintons-helped-dupe-investors/">alongside</a> former UK Prime Minister Tony Blair at Sam Bankman-Fried’s Crypto Bahamas Conference in April 2022.&nbsp;



Terra would implode a few weeks later and FTX collapsed six months after that, mostly under the weight of Bankman-Fried’s fraud. He was later sentenced to 25 years in prison, almost 700 days after the Bahamas event.



Fingers crossed Trump’s appearance at Bitcoin 2024 bodes better for crypto.&nbsp;



And there are plenty of folk who believe that it will. Same with Trump’s <a href="https://www.nytimes.com/2024/07/20/business/dealbook/silicon-valley-trump.html">positivity</a> towards Silicon Valley — the general consensus being that the tech-heavy stock market will have more room to run under a second Trump administration.



And while the Nasdaq has decoupled from bitcoin over the past three weeks, what’s good for tech stocks is still considered pretty good for crypto.



Now’s time for the crypto’s political palm reading. Five different administrations have directed American politics over the last 30 years, two Republican (Bush and Trump) and three Democrat (Clinton, Obama and Biden).



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfTMWqmurgotvWjb67rRC8NHgTNDeS4FneGLDkSSzxRQY4ATA444TbXpVQ_IBUpQgk_e6-5-ZR4OVlnhhWihtukQwuGKqKdYt1UgaHcEvrBmUZuuCuNY29WecyBKDC_kiMhX1YyJdyD9qix1I6_sjzO_B-_?key=QG4ucSEGoD_2Wi1fDvKXaQ" alt=""/><figcaption class="wp-element-caption">Red for Republican, blue for democrat, AAPL for scale (chart is in &#8220;log&#8221; view)</figcaption></figure>



Markets under Bush struggled. He came in just as the dot-com bubble burst at the turn of the millennium and quickly pulled the US into wars in Afghanistan and Iraq, which together lasted two decades.



The S&amp;P 500 dipped more than 20% in the four months following Obama’s win in November 2008. But since then — a period that includes both Trump and Biden presidencies — stocks have mostly trended upwards, sans a few hiccups (like the Covid crash) and an eight-month stretch in 2022, when the S&amp;P also retraced by over 20%.



Satoshi Nakamoto mined the first Bitcoin block less than three weeks before Obama first took office. Bitcoin, the currency, exploded by nearly 80 million percent across his two terms, alongside the launch of thousands of cryptocurrencies, including ether.



Were Obama and the Democratic Party at all responsible for all that crypto-wealth generation? Are you feeling particularly moody <a href="https://cafeastrology.com/thisweekinastrology.html">today</a> because the full moon is in Capricorn this time of year? Who’s to say.



For what it’s worth, it’s really under Trump that “crypto” flourished into the mainstream. Bitcoin’s $20,000 all-time high, the Ethereum ICO boom and DeFi Summer all happened with Trump in the White House.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfsjQAO9GffLnDnBkUhbCwqXJhcvJIVGLdfN7dfJF5KAfCCNI-j4se07aVTboscJoyJrSMLYsu429i04f1Hpr8-ESWkfn2g4pAldj-bHqTA_9dhsnwjkxIhbCxKEFjPUSqPe6ETc1DONmaC6Hz_9oAaqdRt?key=QG4ucSEGoD_2Wi1fDvKXaQ" alt=""/><figcaption class="wp-element-caption">The orange dotted lines are Bitcoin halvings — which happen half a year before each US election</figcaption></figure>



Crypto’s total market cap went from $1 trillion to as much as $3 trillion in Biden’s first year. But the second was marred by a series of debacles for crypto, the biggest shown on the dotted lines on the chart above.&nbsp;



And even despite bitcoin’s surge to new all-time highs, the rest of the crypto market still hasn’t returned to its 2021 peak.



Bulls would say a second Trump term could make all the difference. But with Mercury going into retrograde a few weeks after the election in November, anything could happen.



— David Canellis



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



<ul>
<li>BTC and ETH are down 3.7% and 8.5% apiece after the S&amp;P 500 posted its <a href="https://www.cnbc.com/2024/07/23/stock-market-today-live-updates.html">worst</a> day since 2022 (BTC: $64,000; ETH: $3,180).</li>



<li>TRX is the only <a href="https://www.coingecko.com/">top-100</a> cryptocurrency still in the green over the past day, up 1.3%.</li>



<li>LDO and the newly-formed AI supertoken ASI (still trading as <a href="https://fetch.ai/blog/artificial-superintelligence-alliance-unveil-token-with-migration-d-app-tools-now-live">FET</a>) are the worst hit over the past week, slipping 20% and 17%, respectively.</li>



<li>ETH ETFs saw $133.3 million in net <a href="https://farside.co.uk/?p=1518">outflows</a> on Wednesday, their second day of trading, bringing the cumulative total to negative $26.7 million.</li>



<li>Weekly Ethereum and Solana NFT sales <a href="https://www.cryptoslam.io/blockchains">volumes</a> are up 16.5% and 19%. Ethereum leads with $34 million to Solana’s $28.25 million. Bitcoin recorded $18.8 million.</li>
</ul>



<h2 class="wp-block-heading">Times are a-changin’</h2>



How the turn tables.



That’s one way to think about former President Donald Trump’s shift in stance when it comes to crypto.&nbsp;



Last election, Trump was staunchly anti-crypto. He even tweeted (back when journalists, myself included, reported on his posts) that he was not a “fan” of bitcoin and crypto.&nbsp;



“Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity,” he said at the time. Looking back on it now, it almost seems like something Senator Elizabeth Warren, D-MA, would <a href="https://www.warren.senate.gov/newsroom/press-releases/warren-demands-answers-from-crypto-firms-on-abuse-of-the-revolving-door-to-undermine-bipartisan-efforts-to-rein-in-crypto-terrorist-financing">say</a> given her staunchly anti-crypto stance.



Trump even went after the now-defunct Libra stablecoin project from Facebook (before it was Meta), claiming that it would need a banking charter.



Now one has to wonder how he’d approach such a project, given his support for the crypto industry this election.



I feel the need to note that we haven’t seen Trump float any actual policies for crypto. Similarly, though, we have yet to see or hear anything on the industry from Vice President Kamala Harris’ campaign. Her camp did turn down an offer to appear at Bitcoin 2024, unlike both Trump and Robert Kennedy Jr.



Trump, however, has already made strides not only by hosting events and making appearances with folks in crypto, but also by becoming the first major party nominee to accept crypto donations to his campaign earlier this year.&nbsp;



And, in a way, when you look back on the price of bitcoin throughout the years, there’s a far-fetched argument that Trump’s always been good for it — even when he was staunchly anti-crypto.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity&#8230;.&mdash; Donald J. Trump (@realDonaldTrump) <a href="https://twitter.com/realDonaldTrump/status/1149472282584072192?ref_src=twsrc%5Etfw">July 12, 2019</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Take a look at 2016, for example. After Trump’s victory, bitcoin was boosted to over $730. In fact, it was one of the few sectors to actually benefit from the 2016 election victory. The futures for the major indices on Wall Street all sold off pretty abruptly. And so started bitcoin’s journey as a safe-haven asset… but I digress, let’s go back to Trump.&nbsp;



In 2021, Trump continued his vocal anti-crypto approach. He <a href="https://www.foxbusiness.com/markets/trump-bitcoin-a-scam-us-dollar-should-reign">said</a> that bitcoin “just seems like a scam.” He <a href="https://www.foxbusiness.com/politics/crypto-potentially-a-disaster-waiting-to-happen-trump.amp">added</a> later that year that crypto investing was “potentially a disaster waiting to happen.”



Given what was just around the corner, with the depegging of Terra’s algorithmic stablecoin and the shitshow that was FTX, he may not have been totally wrong on that one, if we’re being fair. But alas, no one had a crystal ball to really see what was lying in wait for the industry.&nbsp;



I think I’ve made my point: There’s a very detailed history of Trump favoring the US dollar over crypto. But something’s changed this cycle.&nbsp;



Oh how I’d love to be a fly on the wall (and a time traveler to boot) to hear some of the conversations the Trump campaign had around crypto this year, given the narrative shift.&nbsp;



— Katherine Ross



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



<ul>
<li>Galaxy Asset Management, Michael Novogratz’s company, raised $113 million for a new crypto fund, per <a href="https://www.bloomberg.com/news/articles/2024-07-25/michael-novogratz-s-galaxy-raises-113-million-for-a-new-crypto-venture-fund?utm_source=twitter&amp;utm_medium=social&amp;utm_campaign=socialflow-organic&amp;utm_content=crypto">Bloomberg</a>.&nbsp;</li>



<li>CB Payments Ltd, the payments processor linked to Coinbase, was <a href="https://www.coindesk.com/business/2024/07/25/coinbases-cbpl-fined-45m-by-uk-regulator-for-money-laundering-lapses/?utm_medium=referral&amp;utm_source=rss&amp;utm_campaign=headlines">fined</a> over $4 million by the UK government.</li>



<li>Hashdex filed an S-1 for an ETF that would hold both ether and bitcoin, a <a href="https://www.theblock.co/post/307338/hashdex-files-s1-for-an-etf-that-holds-bitcoin-and-ether-leaves-door-open-for-other-assets?utm_source=rss&amp;utm_medium=rss">first</a> for the US.</li>



<li>Bitstamp <a href="https://x.com/Bitstamp/status/1816133303549800768">said</a> it will start distributing Mt. Gox bitcoin and bitcoin cash on Thursday.</li>



<li>Lumerin’s decentralized AI project Morpheous went live on the Arbitrum Test Network, CoinDesk <a href="https://www.coindesk.com/tech/2024/07/25/morpheus-decentralized-ai-project-from-lumerin-goes-live-on-arbitrum-test-network/?utm_medium=referral&amp;utm_source=rss&amp;utm_campaign=headlines">reported</a>.</li>
</ul>



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



Does crypto revolve around the US?



I think the narrative tends to, but maybe not so much the entire ecosystem.&nbsp;



The US, when looking at crypto, is like one of the popular kids in high school. Everyone’s chatting about them, and they tend to suck up a lot of the air in the room, even if they’re not the only ones innovating and creating.&nbsp;



I wouldn’t be surprised if this trend stayed in place until more friendly regulators, or just plain regulation, is voted in.



Projects, founders and VCs would love to see the US as the center of crypto, even in this current environment. So it’s not surprising that the US tends to dominate the conversations. However, a lot of folks have also been scared away from the US.



I guess this is a test of patience. How long can crypto endure in the hopes of establishing a US-based hub?



— Katherine Ross



The US crypto space is definitely a major force. Just like US tech is in the global technology sector.



But it really depends what part of “crypto” you’re talking about. Tether, which operates the largest stablecoin by far, is not a US company. Neither is Binance, the largest exchange by trade volume.



Nor are the entities behind some of the largest DeFi protocols in Lido and Aave registered to the US.



An antagonistic SEC has forced them into regulatory arbitrage, you might say. That’s probably true.&nbsp;



But if offshore firms can keep the crypto space turning over the years, despite all of the pressure from three-letter agencies, then maybe the US isn’t the center of the blockchain space after all.



— David Canellis



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Empire Newsletter: How US presidencies map to crypto markets

Repayments to the customers of Mt. Gox are set to begin after a decade-long court process.&nbsp;



Tokyo-based Mt. Gox once processed more than 70% of all BTC transactions at its peak before collapsing in 2014 after the loss of 950,000 BTC. Bitcoin was worth just $600 at the time.



About 20,658 customers will receive a portion of their lost assets this month, estimated at over $9 billion worth of BTC, BCH and ETH today.



The repayment process is planned to begin with BTC and BCH repayments first, <a href="https://www.mtgox.com/img/pdf/20240624_announcement_en.pdf">according</a> to Mt. Gox’s rehabilitation trustee. 



Kraken CEO David Ripley announced the successful redistribution of Mt. Gox BTC and BCH to creditors yesterday. A sum of <a href="https://platform.arkhamintelligence.com/explorer/tx/ef538385618f0fce71b2939be30d683902dc7df4bff6dcb978001348ff17bb35">48,641</a> BTC was sent to an address suspected to be a Kraken wallet on July 16.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">1/ <a href="https://twitter.com/krakenfx?ref_src=twsrc%5Etfw">@krakenfx</a> has successfully distributed <a href="https://twitter.com/hashtag/Bitcoin?src=hash&amp;ref_src=twsrc%5Etfw">#Bitcoin</a> and Bitcoin Cash from the <a href="https://twitter.com/MtGox?ref_src=twsrc%5Etfw">@mtgox</a> estate back to creditors. It’s been nearly a decade since Kraken was selected by the Trustee to facilitate the investigation and return of client funds. It was our privilege and it was our duty. <a href="https://t.co/ptKexzN4gm">pic.twitter.com/ptKexzN4gm</a>&mdash; Dave Ripley (@DavidLRipley) <a href="https://twitter.com/DavidLRipley/status/1815880303254323603?ref_src=twsrc%5Etfw">July 23, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Bitstamp has publicly <a href="https://blog.bitstamp.net/post/bitstamp-to-restore-crypto-assets-to-mt-gox-creditors/">confirmed</a> receiving funds and began redistributing <a href="https://blockworks.co/tag/mt-gox">Mt. Gox</a> assets back to non-UK creditors.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">We&#39;re pleased to announce that we&#39;ve received the Mt. Gox assets. We&#39;re working diligently to distribute them to our Bitstamp customers who are Mt. Gox creditors. Please allow up to one week for security checks. We&#39;ll inform you when the transfer is finalized. Thank you for your…&mdash; Bitstamp (@Bitstamp) <a href="https://twitter.com/Bitstamp/status/1816133303549800768?ref_src=twsrc%5Etfw">July 24, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Arkham Intelligence data first <a href="https://platform.arkhamintelligence.com/explorer/entity/mt-gox">showed</a> that the European-based exchange received on Monday 1,980 BTC and 382,377 BTC in two separate transactions, followed by another 1,979 BTC and 382 BTC yesterday.



Despite long-standing fears <a href="https://blockworks.co/news/bitcoin-carving-out-low-german-government">of a supply overhang</a>, prices of both assets are holding steady on the news. BTC is up 0.3% to $66,064, while BCH has seen a slight decline of 0.3% to $366.



Based on Arkham’s data, Mt. Gox still <a href="https://platform.arkhamintelligence.com/explorer/entity/mt-gox">holds</a> about 90,344 BTC ($5.77 billion), about 64% of the original 140,000 BTC recovered by law enforcement.



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Mt. Gox customers to receive crypto assets after 10-year wait

As the end of July nears, analysts look ahead to August, a historically volatile month made more interesting this year by the US presidential election.&nbsp;



The S&amp;P 500 and Nasdaq Composite indexes in August 2023 lost 1.6% and 2.1%, respectively. The year prior, the S&amp;P 500 lost just under 1% and the Nasdaq Composite slid 4.6% during August.&nbsp;



The CBOE Volatility Index (VIX) has, for the past eight presidential election years, peaked most often during the first half of the year. Given the especially uncertain nature of this year’s presidential race, volatility in 2024 could peak later than is typical, analysts say.



Read more: <a href="https://blockworks.co/news/joe-biden-re-election-decision-potential-bitcoin-effects">How Biden ending his re-election campaign could impact bitcoin</a>



The VIX at time of publication was 17.3, up more than 20% over the past five days and at its highest level since the spring. So far in 2024, the VIX peaked in April at 19.2.&nbsp;



Given the looming Federal Reserve policy-setting meeting, the Democratic delegate vote and earnings season reports, a rising VIX is to be expected. However, it still has yet to hit 20, the level historically seen as a key indicator of swelling volatility.&nbsp;



Markets seem confident that central bankers will start their rate-cutting cycle in the fall, and delegates have all but confirmed Vice President Kamala Harris as President <a href="https://blockworks.co/tag/joe-biden">Joe Biden</a>’s replacement, so investors may not be too worried about the coming months.&nbsp;



Investors will also be looking ahead to October, which will also be when presidential election speculation will peak as campaigns make their last attempts to woo voters and early voting kicks off.&nbsp;&nbsp;



Read more: <a href="https://blockworks.co/news/kamala-harris-vp-short-list-crypto-issues">Harris VP short list shows mixed support for crypto issues&nbsp;</a>



The S&amp;P 500 and Nasdaq Composites lost 2.1% and 2.8%, respectively, in October 2023.&nbsp;



Still, as DataTrek Research co-founder Jessica Rabe pointed out, stocks more often than not peak during the final quarter of the year. In the past four-plus decades, the S&amp;P 500 has posted its high during the fourth quarter.&nbsp;



Stocks have already posted double-digit returns during the first six months of the year, with the S&amp;P 500 and Nasdaq Composite indexes gaining around 15% and 18%, respectively. A strong first and second quarter performance for equities historically leads to a slowdown in the final half of the year, Rabe said.



“The S&amp;P’s rally tends to slow in the back half after rising by double digits in the first half, so the bulk of the index’s gains are likely already in for this year,” Rabe explained. “That said, the S&amp;P is only up 1.7% in 2H thus far versus the average of 6.7%, so history says there’s still gains to be had.”



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Markets brace for volatility as VIX rises to highest level since April 

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



Welcome to the On the Margin Newsletter, brought to you today by Casey Wagner exclusively. Here’s what you’ll find in today’s edition:



<ul>
<li>We’re heading into one of the more volatile months for equities. Here’s what to watch for.&nbsp;</li>



<li>Bitcoin-based stablecoins may be the reality soon enough. Let’s unpack how.&nbsp;</li>
</ul>



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



<h2 class="wp-block-heading">We’re in Leo season, so buckle up&nbsp;</h2>



Happy birthday to our Leo readers!&nbsp;



As we approach the end of July, I’m starting to think about what is ahead for August, and I’m not talking about astrology. It’s a historically tough month for markets, and I have a feeling this year will be no different. (I’m also wondering how the summer flew by so quickly, but I digress.)



The S&amp;P 500 and Nasdaq Composite indexes in August 2023 lost 1.6% and 2.1%, respectively. The year prior, the S&amp;P 500 lost just under 1% and the Nasdaq Composite slid 4.6% during August.&nbsp;



This August is special — just like every other month of 2024 — because it’s an election year. Curiously, the CBOE Volatility Index (VIX) has historically peaked more often during the first half of the year in the past eight presidential election years.



Normally, by the third quarter of an election year, we have a better sense of how voters are feeling, or at the very least, who will be on the ballot. But <a href="https://blockworks.co/news/kamala-harris-memecoin-pump-2024-elections">nothing about 2024 has been normal</a>.&nbsp;



Today, the VIX stands at approximately 17.3, having risen over 20% in the past five days. However, it remains below the key threshold of 20, which analysts suggest almost always signals increased volatility. So far this year, the VIX reached its peak in April at 19.2.



The next 30 days are fraught with uncertainty. Earnings season rages on, the FOMC is set to convene for a consequential policy-setting meeting and Democratic delegates will choose their presidential candidate.



It’s no wonder the VIX is climbing, but why is it still relatively low? My best guess is that no one wants to ruin a good thing. Stocks have performed exceptionally well this year, and there’s nothing investors like more than a stable environment. For that reason, I think they may be turning a blind eye to the uncertainty.&nbsp;



Markets are confident the Fed will cut rates this fall and that the Dems will select Vice President Kamala Harris as Biden’s replacement. For now, at least, that appears to be enough.&nbsp;



Another month stocks tend to hate is October, which will see the peak of presidential election speculation as campaigns make their last efforts to woo voters as early voting kicks off.



The S&amp;P 500 and Nasdaq Composites lost 2.1% and 2.8%, respectively, in October 2023.&nbsp;



Still, as DataTrek Research co-founder Jessica Rabe pointed out, stocks more often than not peak during the final quarter of the year. In the past four-plus decades, the S&amp;P 500 has posted its high during Q4.&nbsp;



But what about in years when stocks posted double-digit returns in the first half of the year?&nbsp;



“The S&amp;P’s rally tends to slow in the back half after rising by double-digits in the first half, so the bulk of the index’s gains are likely already in for this year,” Rabe said. “That said, the S&amp;P is only up 1.7% in 2H thus far versus the average of 6.7%, so history says there’s still gains to be had.”



And then, of course, there’s crypto. The wild-card asset class tends to keep us on our toes, but has generally adhered to the “August is a bad month” narrative for the past two years. Bitcoin and ether lost 11.3% and 10% in August 2023, respectively. In August 2022, BTC ended the month 14% lower while ETH dipped 8.5% during the 31-day period.&nbsp;



With regulatory headwinds and the expectation of new investment product launches (we’re <a href="https://blockworks.co/news/nine-us-spot-eth-etfs-live-post-approval">looking at you, ether ETFs</a>), crypto prices face other factors. However, we think the macro narrative is one to watch.



— Casey Wagner



<h2 class="wp-block-heading">$1.08 billion&nbsp;</h2>



This is the collective trading volume for ether ETFs on their first day of trading in the US. This is about a quarter of the volume that bitcoin spot ETFs brought in on their first day of trading in January.&nbsp;



The Grayscale Ethereum Trust saw the most volume, with $456 million worth of trades yesterday. Net inflows across all products came in at $106.7 million.&nbsp;



“Now day one is behind us, the market will continue to analyze the data to gauge underlying demand, while refocusing on upcoming catalysts such as Friday&#8217;s PCE data and Saturday&#8217;s Bitcoin conference where Trump is scheduled to speak,” analysts at Wintermute Trading wrote in a Wednesday note.&nbsp;



<h2 class="wp-block-heading">BTC stablecoins?</h2>



On Tuesday evening, Lightning Labs released Taproot Assets version 0.4. This update allows the Bitcoin layer-2 Lightning Network to support assets other than bitcoin, paving the way for bitcoin-based stablecoins.



&#8220;With Taproot Assets, users can make instant, low fee asset transfers, bringing trillions of stablecoin volume to bitcoin,&#8221; Lightning Labs wrote in a <a href="https://x.com/lightning/status/1815768786752164213">post</a> on X.&nbsp;



The news is exciting for bitcoin fans because it showcases a use case beyond an investment vehicle, Noelle Acheson, author of “Crypto is Macro Now” said.&nbsp;



“Lightning already connects to major exchanges (<a href="https://blockworks.co/news/coinbase-bitcoin-lightning-network-adoption-brian-armstrong">Coinbase</a>, <a href="https://blockworks.co/news/bitcoin-lightning-network-binance">Binance</a> and <a href="https://blockworks.co/news/kraken-supports-bitcoins-lightning-network-after-delayed-launch">others</a>), and it’s not a stretch to imagine new stablecoins forming the base of new trading pairs, especially of bitcoin-based tokens,” she said.&nbsp;



Stablecoins currently have a total market cap of more than $172 trillion. Why add more to an already crowded market? The Lightning Labs team says it’s less about market share and more about interoperability.&nbsp;



“While stablecoins do tend to have a network effect, including the dominance of USDT, the design of Taproot Assets also makes it easier to do cross-asset transfers, for example sending a USD stablecoin and receiving in BTC or sending between two different stablecoins,” CEO Elizabeth Stark said in an <a href="https://bitcoinmagazine.com/technical/stablecoins-are-coming-to-bitcoins-lightning-network">interview</a> with Bitcoin Magazine.&nbsp;



You won’t find us launching any BTC stablecoins anytime soon, but it’s an area we are interested in watching.&nbsp;



— Casey Wagner&nbsp;



<h2 class="wp-block-heading">Bulletin Board&nbsp;</h2>



<ul>
<li>Thanks to a recent market rebound, bitcoin miners are expected to return to profitability soon, according to a <a href="https://blog.bitfinex.com/wp-content/uploads/2024/07/Bitfinex-Alpha-114.pdf">report</a> from exchange Bitfinex.&nbsp;</li>



<li>HSBC Australia <a href="https://www.hsbc.com.au/help/security-centre/cryptocurrency-payment-changes/">said</a> Wednesday that it will automatically block clients from making payments to crypto exchanges due to a recent increase in scams and hacks.</li>



<li>One more shameless plug from <a href="https://x.com/caseywagnerr">Casey</a>, our solo newsletter writer today: If you will be in Nashville at Bitcoin 2024, come say hi!</li>
</ul>



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On the Margin Newsletter: A notoriously rough month for markets is upcoming

Zac Townsend

Last month, the US Treasury Department finalized new tax rules for the crypto industry.



We should embrace them.



Crypto users, attracted to the digital asset space because of its libertarian values and independence from the traditional financial system, may chafe at this larger IRS crackdown as burdensome or troubling. However, the time for scams and cons is over.



The market has operated in a fog of ambiguity for too long. The SEC’s regulation by enforcement kills innovation on the business side and leaves investors uncertain about tax obligations and financial planning.



Almost a century ago, US Supreme Court Justice Oliver Wendell Holmes delivered his now-famous phrase: “Taxes are the price we pay for a civilized society.” Embracing this principle, it is time for us to build real businesses and bring much-needed clarity, legitimacy, and stability to the space.



Users who fail to adapt are risking the erosion of institutional trust in Web3 and will likely incur severe financial penalties and audits.



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



Platforms such as Coinbase and Binance will now be legally required to report users’ proceeds from sales to the IRS. Meanwhile, market participants have the responsibility of tracking their tax information. This change necessitates a more formal approach to tax, wealth, and estate planning for their crypto holdings.



While I am as troubled by our broken financial system as any Bitcoin believer, it is time we got our act together to improve our credibility, attract more investors, and drive more growth.



The continued development of the digital asset space is a net positive because it provides rails for new market participants to onboard. Existing participants who continue to snub the traditional financial system do so at their own risk and now face severe financial penalties and audits.



While stablecoins and NFTs are largely excluded from the new IRS tax regime, crypto tax evasion cases are <a href="https://blockworks.co/news/irs-rising-crypto-tax-evasion-cases">on the rise</a>. Investigations range from failures to report capital gains and withholdings of ownership disclosures. Because the IRS treats crypto as property, estates may pay up to 40% in estate taxes when transferring assets to heirs.



Every emerging industry goes through a series of growth phases, from wild experimentation to eventual regulation and integration into the broader financial ecosystem. The crypto industry is no exception. Its initial phase was marked by rapid innovation and wealth creation, but also by significant volatility and a lack of regulatory oversight.



Over the past 12 months, we have seen landmark decisions in favor of the crypto industry in the judicial system. Some of the world’s largest asset managers launched bitcoin ETFs. Digital assets have become a focus in the US presidential race. Most recently, we have the IRS ruling on tax reporting for custodial assets.



Institutional adoption begets regulation. Now, retail investors need to plan ahead.



<h2 class="wp-block-heading">How to plan ahead</h2>



While institutional adoption and regulation are reshaping the crypto landscape, retail investors must also adapt to this new reality. With the IRS&#8217;s new mandate, tracking tax lots will become an essential part of managing crypto investments. Retail investors need to be proactive in understanding the implications of these regulations and seeking solutions to navigate and optimize in this complex environment.



Retail crypto investors should review their entire crypto transaction history to assign a cost basis to each of their wallets, ideally with a tax adviser’s help. Otherwise, the IRS may deem the cost basis $0, resulting in higher capital gains taxes.



This ruling clarifies how the IRS will participate in the crypto industry. All investors should assign a cost basis to their wallets. Those with considerable wealth may benefit from taking additional steps for asset protection, similar to traditional finance practices.



Natural first steps include establishing a will and using trusts to optimize estate settlement. Financial vehicles like retirement accounts and life insurance can also shield crypto assets in tax-advantaged structures.



The financial risks are real. The crackdown on crypto tax evasion is expected to bring in $28 billion over the next decade. The IRS has appointed two crypto executives for compliance and enforcement. We&#8217;re already seeing the fruits of this effort. Back in March, an Austin man faced the first criminal charges for crypto tax fraud.



While many federal agencies continue to prove they do not have a handle on cryptocurrency, some like the IRS are catching up. Figures like Sam Bankman-Fried are being replaced by Larry Fink. Proactive planning can safeguard your crypto holdings and grow your family’s wealth. Investors who choose to put their head in the sand and ignore the changing landscape do so at their own peril.



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Crypto investors must embrace new tax rules or risk falling behind

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Howdy!



I’d like to be more of a wine snob, but I’m useless at figuring out what the notes in a glass of wine are or whatever. I was once told that every red wine tastes like cherry, though, so I just fall back on that one if I need to pretend to know what I’m doing.



Anyways, wine, but on the blockchain:



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



<h2 class="wp-block-heading">DVIN wants to keep track of wine</h2>



It was a brutally hot afternoon as I sat in a midtown Manhattan office building with David Garrett and Jana Kreilein, the co-founders of wine <a href="https://blockworks.co/tag/tokenization">tokenization</a> platform dVIN. An unopened bottle of Spanish red wine sat between us on the table as Garrett embarked on a lengthy explanation of how data is tracked differently between wine and spirits sellers.



“I&#8217;ve been sort of obsessed with data,” Garrett confessed.



In the more-consolidated spirits industry, companies have access to pretty extensive business intelligence on liquor purchasing behavior, Garrett explained. Not so in wine, where a lot of diffuse “tiny players” come together to produce, import, and sell the product — with only a rough idea of where and when the wine is being consumed.&nbsp;



“A lot of [wine producers] are still keeping inventory on clipboards or Google Sheets,” Garrett said. “What that means is that while your Seagram&#8217;s guy knows the depletion report for the CVS on the corner, the winemaker, as soon as the wine leaves the winery, it&#8217;s gone, they have no idea.”



This is partly the problem Garrett and Kreilein are aiming to solve with dVIN, which uses <a href="https://blockworks.co/tag/solana">Solana</a>-based <a href="https://blockworks.co/tag/nfts">NFTs</a> and tokens to incentivize consumers to share data with wine producers. DVIN launches from stealth for members of the platform today and for the general public on Friday, the team told Lightspeed exclusively.



DVIN works by pairing wine bottles with so-called digital corks. In the product demo I did with dVIN, the bottle of red wine had an NFC tag attached to it. When I put my phone near the bottle, I was redirected to dVIN’s platform, where I could view the digital cork and information about the bottle. When consumers open the physical wine bottles, a button on dVIN allows them to burn their digital cork in favor of a tasting token NFT, which is “soul-bound,” or non-transferable.



Garrett, who started his career in software before moving into wine two decades ago, has been mulling over the wine industry’s data problem since 2010, but “couldn’t think of a centralized way to [solve] it,” he said, adding that there was no other practical way to bring wine bottles and consumers together into a shared database.



In a nutshell, consumers would be incentivized with soon-to-launch VIN tokens to burn their digital corks, and wine producers would foot the bill for the VIN payouts in hopes of getting access to valuable consumer behavior data. DVIN Labs makes money by taking a percentage of digital cork listings and sales.&nbsp;



On first blush, I’m a bit skeptical about dVIN’s ability to draw users, since luxury wine and some of the platform’s launch partners (Madlads and Jupiter are a couple) don’t strike me as having very similar customer bases.



Garrett, who admitted he’s “kind of the opposite of a degen,” said that the platform is more of a bet on the preferences of soon-to-come digital-native wine buyers.



“They want transparency, they want experiences more than stuff … they want a direct connection to the brands that they love,” Garrett said. He also noted that dVIN — which he hopes can follow an adoption pattern similar to airline miles — is “not in a hurry” when it comes to company-building.&nbsp;



“We are the most boring project in blockchain, and we&#8217;re boring because we have a 25 year horizon,” Garrett said. “We don&#8217;t expect to take over the world tomorrow.”



— Jack Kubinec



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



Solana has now surpassed Ethereum in trailing 30-day decentralized exchange volume, according to data <a href="https://x.com/_ryanrconnor/status/1815753548841300025">shared</a> by Blockworks Research analyst Ryan Connor.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXega2K_MJvohY06Qd44Ur_1fadTJ7-Z2cY-F0_RcqnWVU4jI2rOTPU1SJ49P0F3wu1iOECeH0ncA_EjFF0DGHPH0R0O3BxMdvGRvnapkpxNOWw3JuIHEykEqwBv_V4AilBXNipAg7rA4wjrc-jeaXK8P_2W?key=BKp4W6nLJt3pQEAJ1MxiQA" alt=""/></figure>



Essentially, this means Solana has sustained its higher volume for an entire month — a feat that would have been all but unthinkable a year ago around this time. Importantly, the data cited by Connor does not include the large amount of trading that happens on Ethereum layer-2s.&nbsp;



Still, even with layer-2s lumped in, Solana is emerging as the blockchain to beat for DeFi volumes, as you can see in this <a href="https://x.com/matthew_sigel/status/1815369101813952952">chart</a> posted by VanEck digital asset research head Matthew Sigel.



— Jack Kubinec



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



Real-world assets (<a href="https://blockworks.co/tag/real-world-assets">RWAs</a>) continue to be a hot topic, driven by the need for more stable and tangible investment options in the blockchain world. With that in mind, Huma Finance has rolled out PayFi, a new network that aims to <a href="https://x.com/humafinance/status/1815424312729632896">supercharge</a> global payment financing with instant liquidity. Traditional payment systems (think credit cards and trade finance) are bogged down by delays, high costs, and compliance issues. They’re slow and clunky for today&#8217;s needs. For example, cross-border payments often require pre-funding accounts, tying up capital and causing delays. According to a recent blog post, PayFi <a href="https://blog.huma.finance/payfi-the-new-frontier-of-rwa">solves</a> these inefficiencies by using blockchain and stablecoins to enable instant settlements and financing for RWA transactions​.



We&#8217;re already seeing industry players like Solana jumping on the PayFi bandwagon. Examples in action <a href="https://x.com/humafinance/status/1815424319499247693">include</a> Arf’s on-chain liquidity <a href="https://x.com/arf_one/status/1815424647527293027">solutions</a> for cross-border payments, @raincards&#8217; <a href="https://x.com/cnaut/status/1815519745585955190">USDC-backed</a> corporate cards for Web3 teams, and @zeebuofficial&#8217;s on-chain <a href="https://x.com/zeebuofficial/status/1811023019051254212">settlement</a> of telecom roaming invoices. PayFi also introduces <a href="https://x.com/humafinance/status/1815424320895918112">new use cases</a> such as instant RWA settlements, which drastically reduce the settlement time for real-world assets, and DePIN financing, which allows the cost of building infrastructure to be covered by its future value. The latter idea being to let projects fund their current infrastructure costs with future expected earnings, speeding up adoption. Huma also <a href="https://x.com/humafinance/status/1815424322569384027">introduced</a> the PayFi Stack, an open framework that helps build and support compliant payment financing solutions, ensuring they meet regulatory and industry standards​.



On X, @edithyeung <a href="https://x.com/edithyeung/status/1815437047072780601">congratulated</a> the Huma Finance team for their launch and partnerships with Solana, Stellar, and Circle. @zengjiajun_eth and @ynonestop remarked that &#8220;PayFi&#8221; is a <a href="https://x.com/zengjiajun_eth/status/1810398558119764135">catchy</a> new buzzword, set to become <a href="https://x.com/ynonestop/status/1815788708001669496">a key term</a> in Web3. @neriah12345 <a href="https://x.com/neriah12345/status/1815994355657920854">agreed</a> that PayFi could significantly impact how real-world assets are managed and financed. Huma Finance co-founder @wisdant expressed excitement about PayFi being the new frontier for real-world assets, <a href="https://x.com/wisdant/status/1815430978560815117">emphasizing</a> its potential to boost blockchain’s impact.



— Jeffrey Albus



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



A message from David Garrett, co-founder of dVIN:


<div class="wp-block-image">
<figure class="aligncenter"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXc1Wkz24pLuTlCJOZFWxR7eaMKgKDUPlU58cftEGmiu1jsrRKs2jzmvfZaJFCrS_Cz7-xtAwL_rp6nkU3tX6PHbxS3ek4v6k3dW792jkRfcKNYKM3zCKV_i9hPPvnpHITn7a7UOmCe7OAiurK-YBUoZp2jR?key=BKp4W6nLJt3pQEAJ1MxiQA" alt=""/></figure></div>


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Lightspeed Newsletter: Wine tokenization on Solana

Crypto isn’t just macro now. It’s political.



If you need any proof, look to the memecoin market. An unofficial Kamala Harris parody memecoin on Solana (KAMA) has exploded by 10,000% over the past three months.



That’s $0.0003216 to $0.0319. And okay — it’s easy for micro-cap memecoins to go ballistic. KAMA’s market cap was under $100,000 in its earliest days of trading in late March. Any relatively small amount of buying pressure was destined to drive its prices upward.



But KAMA has done so well that it’s only another 15% away from flipping doland tremp, another Solana parody coin launched one month earlier.&nbsp;



Read more: <a href="https://blockworks.co/news/politifi-memecoins-us-election">PolitiFi parodies are half-way to the US election — but it’s uphill from here</a>



TREMP was worth as much as $150 million in the first week of June — now it’s $43 million to KAMA’s $38 million, at time of writing. Boden has meanwhile crashed from an April high of over $650 million to $11.1 million right now — a 98% collapse.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/18847853/embed#?secret=sRCzMo7e22" data-secret="sRCzMo7e22" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Tap the “log&#8221; view to better compare performance</figcaption></figure>



It’s not exactly that crypto really loves <a href="https://blockworks.co/tag/kamala-harris">Kamala Harris</a>, which would lead traders to buy a silly <a href="https://blockworks.co/tag/meme-coins">memecoin</a> in a show of solidarity of some sort.&nbsp;



It’s more likely that Kamala Harris running against <a href="https://blockworks.co/tag/donald-trump">Donald Trump</a> made for one of the more attractive bets on the US election season so far.&nbsp;



That KAMA has rallied even harder in the few days since her presidential campaign started shows that certainty begets the pump.&nbsp;



The “brat energy” narrative pushed by parts of the <a href="https://usatoday.com/story/opinion/columnist/2024/07/24/kamala-harris-brat-summer-charli-xcx-gen-z-voters/74515681007/">media</a> wouldn’t be hurting, either.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/18847306/embed#?secret=1hyD0Fz9GU" data-secret="1hyD0Fz9GU" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">KAMA is in orange, in the bottom right</figcaption></figure>



In any case, KAMA is still far below the $300 million market cap of MAGA, the <a href="https://blockworks.co/news/donald-trump-crypto-influencer-effect-on-maga">Trump-themed token launched on Ethereum</a> last year. KAMA would have to rally another 70% to match that, if MAGA were to trade sideways here on out.&nbsp;



Memecoins aside, Polygon-powered betting venue <a href="https://blockworks.co/tag/polymarket">Polymarket</a> has turned out to be incredibly useful in gauging political sentiment — leading to <a href="https://blockworks.co/news/polymarket-july-all-time-high-trading-volumes">all-time high volumes</a>.



Polymarket betters, now with $370 million on the line, say Trump has 62% odds of winning in November to Harris’ 28.9%, with the latter trending upwards.



Before he dropped out, Biden was at 18% to Trump’s 70%, which may indicate that Harris has a much better shot than Biden, but not yet enough to take the cake.



Updated Jul. 26, 2024 at 5:25 am ET: Corrected Polymarket&#8217;s native blockchain.



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Brat energy: Kamala Harris memecoin goes 100x in 3 months as pump intensifies

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<h2 class="wp-block-heading">💎 Perpetual means forever</h2>



Word has it that a pack of market makers are looking to buy software powering an older version of derivatives DEX dYdX.



Wintermute and Selini Capital are leading the supposed deal, according to <a href="https://www.bloomberg.com/news/articles/2024-07-23/defi-exchange-dydx-said-to-be-in-talks-to-sell-derivatives-trading-platform">Bloomberg</a>, for an undisclosed sum. And why wouldn’t they?&nbsp;



Onchain derivatives volumes — perpetual futures trades — have exploded over the past 10 months, leading to major proliferation of various protocols across multiple blockchains.



Practically all onchain perps volume was on Ethereum and layer-2 Arbitrum in January 2023.&nbsp;



That month saw $44.79 billion in onchain perps volume — last month there was over $196.4 billion, or four and a half times as much.



And in March, when bitcoin was at all-time highs, there was $316.4 billion in the same metric, per DeFiLlama data.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcKCw5qiD-Mv1oR02Q5hsPiJn5qIkEtPV6ZPbfzicGDtPsB7utGiK9DP1Tf0Uuq2E9RpP5PDR9sd0y26ZgLUq0-uaytc3_d_8tNSeTME6n1fyaW3BrPJmOISdHNIoVoLfuUpsGEGsZMvIDp34Lv40ifF6iK?key=0SabA8zjnXlzESJUoyDX0Q" alt=""/><figcaption class="wp-element-caption">dYdX, the DEX, launched on Ethereum mainnet years prior to the layer-1 network of the same name</figcaption></figure>



This month, dYdX (both v3, which runs on a custom Ethereum layer-2, and v4, launched on its own layer-1) contributes $22.3 billion to global onchain perps volumes, the equivalent of around 11% of the overall market.&nbsp;



The software up for sale is the code for dYdX v3 — not the actual smart contract, which is governed by token holders. dYdX v3 makes up about 20% of total combined dYdX volumes right now.



Going by blockchain volumes alone, Ethereum mainnet is handling 7.2%, with most of its activity shifted onto layer-2s, other appchains like dYdX and rival layer-1s.&nbsp;



Blast contributes the most with 23%, followed by Arbitrum (16%), Hyperliquid (14%), Solana (9.5%) and dYdX (9%).



Blast’s steep incentive structure seems to be largely responsible for attracting outsized perps volumes, but it’s difficult to say exactly how much would disappear without the promise of future rewards.&nbsp;



In dYdX’s case, it also regularly runs incentives programs and <a href="https://dydx.exchange/blog/v4-rewards-and-parameters">boasts</a> its own rewards structures for users. If those incentives work, it’s safe to say that some percentage of its users may be trading for the sole sake of collecting those rewards.&nbsp;



Still, dYdX volume growth has tracked activity across the broader crypto market, implying organicness.&nbsp;



The big question for DYDX holders would be whether selling the underlying software would dilute their investment further down the line.



Interested parties are almost surely mulling the launch of their own protocol based on the v3 codebase, perhaps even on its own blockchain or across multiple different networks.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXe7nkOWh-g59zfGOdBxVPyCeKIjGHELLyxREfYvKIXYpzcAcM8OH0xJzbx_IHRjqPRnUKHVEKBkh1mrVm0gy5G0djONeeA4E_UJLJZCWagPe2EA5j97gmEOAIoWYLbmbf28nvw_UaIHqKDVm16CgwGYBM4?key=0SabA8zjnXlzESJUoyDX0Q" alt=""/><figcaption class="wp-element-caption">DYDX holders might not be phased if whatever perps DEX that comes doesn’t have its own native token</figcaption></figure>



The green columns on the chart above show monthly dYdX fees generated from users, while the purple line tracks the price of DYDX.&nbsp;



As you can see, the two are tightly correlated (there could be many reasons for this, one being that traders and investors treat fee spend as a fundamental metric for valuations).



dYdX monthly fees have dropped from $86.3 million before trading went live on the dYdX layer-1, to less than $15 million last month, even though volumes haven’t dropped that much.



All that’s by design. Lowering fees was a key feature of dYdX v4 rolling out on its own network.&nbsp;



But if the link between fees and DYDX prices is indeed real, then any reduction in volume from here — say if users were poached to a newer DEX through an airdrop points program, a rival incentive system, or some combination of both — the impact could be meaningful, if indirect.



— David Canellis



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



<ul>
<li>There’s now more onchain derivatives <a href="https://defillama.com/derivatives">volume</a> than standard DEX trades: $196.37 billion in derivatives so far this month compared to $136.8 billion in trades.</li>



<li>RabbitX, Hyperliquid and SynFutures are leading weekly derivatives volumes with between $8.8 billion and $7.8 billion. dYdX is fourth with $6.34 billion.</li>



<li>GMX, which runs on Arbitrum and Avalanche, has raked in $6.3 million in fees so far this month, nearly six times what dYdX users have paid.</li>



<li>ETH is down 1.5% since just before <a href="https://blockworks.co/news/nine-us-spot-eth-etfs-live-post-approval">spot ETFs launched</a> yesterday, sitting at $3,460. BTC has slipped 0.4% to $66,400.</li>



<li>Today’s biggest bounce goes to “internet bond” governance <a href="https://www.coingecko.com/en/coins/ethena">token</a> ENA with 16%. It’s up only 8% over the past week, though.</li>
</ul>



<h2 class="wp-block-heading">DeFi deals ahead?</h2>



Buckle up, there may be some M&amp;A activity ahead of us this cycle.



David mentioned that Bloomberg broke the news about dYdX’s potential deal, citing Wintermute as a potential buyer. The firm, unfortunately, didn’t respond to a request for comment asking about the report.&nbsp;



And, for that matter, neither did dYdX — though they did put out a helpful blog <a href="https://dydx.exchange/blog/updates-to-v3">post</a> explaining its interest in shopping out the matching engine.&nbsp;



“Considering strategic alternatives for the v3 technology is a way to clarify our focus to allow us to make dYdX Chain software as successful as possible,” the team said.&nbsp;



If they proceed with a sale, it won’t include either the Ethereum smart contract or any tech controlled by its utility token.&nbsp;



“DYDX token holders would, of course, have to vote to approve any changes to the smart contracts that underlie v3,” the post continued.



So basically, the team is focused on Chain rather than v3 because Chain “better represents the vision of dYdX Trading Inc. and the ethos of DeFi, and we will be dedicating ourselves to the development of this software.”



Outside of all of this, there aren’t many more details to share right now. It’s not clear how much firms would be willing to pay or even who’s interested outside of Selini Capital and the aforementioned Wintermute. Bloomberg notably used the word “consortium,” which has — if we’re being honest here — left my endless curiosity flustered as I try to get more details.&nbsp;



So let’s go back to what we know: Per data from CoinMarketCap, dYdX v4 is the fourth top DEX, while v3 has slipped to the 12th largest. At the beginning of the year, per a <a href="https://x.com/PaulErlanger/status/1747656334495928354">post</a> in January from its business development lead Paul Erlanger, dYdX held the first and third spots, respectively, on the list.&nbsp;



A deal wouldn’t necessarily pertain to the platforms specifically, but it would make it clear that the underlying software has made the offerings pretty attractive to potential buyers.



There is a caveat here. In some very unfortunate timing, dYdX announced on Tuesday that its website dYdX.exchange was compromised just minutes after Bloomberg’s report on v3 went live. (Ouch.)



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">The smart contracts on dYdX v3 are safe, and are not compromised. Do not attempt to withdraw any funds or interact with the website dydx . exchange until further update. <a href="https://t.co/wtWYDQuyog">https://t.co/wtWYDQuyog</a>&mdash; dYdX (@dYdX) <a href="https://twitter.com/dYdX/status/1815791754756423773?ref_src=twsrc%5Etfw">July 23, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“This breach comes shortly after the wave of DNS hijacks of SquareSpace users, that targeted mainly crypto applications. It should act as a reminder of the importance of end-to-end infrastructure security and holistic mapping of dapps’ dependencies,” Shahar Madar, vice president of security and trust products at Fireblocks, told me.



“While dYdX’s onchain infrastructure remains intact, the industry shouldn’t be in a position where a major dapp has to announce on twitter/X that users should refrain from engaging with their site.”



If this is the first you’re hearing of it, then I do have some good news: They’ve managed to recover the site.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><a href="https://t.co/Ym1dFLLOwx">https://t.co/Ym1dFLLOwx</a> website has been recovered by dYdX Trading Inc. 🙏 Please note that your machine may still be caching the compromised site. Make sure to clear your cache and restart your browser before connecting to the website.&mdash; dYdX (@dYdX) <a href="https://twitter.com/dYdX/status/1815835205334073537?ref_src=twsrc%5Etfw">July 23, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



— Katherine Ross



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



<ul>
<li>Bitcoin financial services company Fold announced it’ll be going <a href="https://www.businesswire.com/news/home/20240724261013/en/Fold-to-Go-Public-as-the-First-Pureplay-Financial-Services-Company-Powered-by-Bitcoin">public</a> on Nasdaq via a special purpose acquisition company. </li>



<li>Ferrari will extend its crypto payment system to Europe, Reuters <a href="https://www.reuters.com/technology/ferrari-extends-cryptocurrency-payment-system-europe-after-us-launch-2024-07-24/">reported</a>.</li>



<li>Per Arkham <a href="https://platform.arkhamintelligence.com/explorer/entity/mt-gox">data</a>, billions worth of bitcoin from Mt. Gox is on the move, and it sent $130 million to Bitstamp. </li>



<li>Bitcoin miner Riot Platforms said it <a href="https://www.riotplatforms.com/riot-announces-the-acquisition-of-block-mining-expands-riots-total-potential-power-capacity-to-2-gigawatts/">acquired</a> Block Mining for $92.5 million.</li>



<li>Ether ETFs saw over $100 million of <a href="https://www.coindesk.com/markets/2024/07/23/ether-etf-volumes-top-1b-on-day-one/?_gl=1*1agfysq*_up*MQ..*_ga*NzA1MzA3NTg3LjE3MjE4MjM5MzU.*_ga_VM3STRYVN8*MTcyMTgyMzkzNS4xLjAuMTcyMTgyMzkzNS4wLjAuMTk0NjQ0Mjc4MA..">inflows</a> after topping $1 billion of trading volume in the group’s first day of trading.</li>
</ul>



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



Q: Are cataclysmic bugs still a threat?



I think they’re always going to be a threat. That’s not to say we always have to be extremely worried about them, but it’s definitely something to keep in mind.&nbsp;



There’s no way to prevent bugs when working with technology. And that’s not even just relating this to crypto. Look at what happened to CrowdStrike as an example.&nbsp;



The cataclysmic update from the firm last week, per an <a href="https://www.crowdstrike.com/falcon-content-update-remediation-and-guidance-hub/">incident report</a> from the company itself earlier this morning, was caused by a bug in the “Content Validator.”



So if one of the world’s largest and, supposedly, most secure cybersecurity companies can suffer from a bug that literally grounded planes and shut down emergency systems, then it’s only rational to expect bugs throughout your technological endeavors. Unfortunately, it’s just a part of our online blueprint at this point.&nbsp;



Be cautious, but keep on keeping on.&nbsp;



— Katherine Ross



“An experimental financial sandbox” is still one of the safest ways to describe the crypto space.



You may have heard about opening multiple brokerage accounts, for example. The idea is to spread risk of losses — say by bankruptcy or other sorts of malfeasance.&nbsp;



It’s not necessarily that recovering any shares tied up in a brokerage bankruptcy is impossible. It’s just that it would take time to be paid out, during which time the stocks could have lost value (like what happened to FTX creditors).



Mitigating the risk here is a similar concept.



It’s practically impossible to have completely bug-free code, even if most bugs are innocuous, but the fact that crypto is money-as-software means there’s value on the line, regardless.&nbsp;



So, yes, be wary of cataclysmic bugs and if you were to be playing around in this crazy cypherpunk sandpit, perhaps consider spreading your activity around — especially so at the bleeding-edge.



— David Canellis



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Empire Newsletter: What the sale of dYdX software would mean for DeFi

Ethereum ETFs are all the rage today in crypto markets, having already posted nearly hundreds of millions in flows within hours of their launch.



By the end of the US trading day, the new funds had hit $1 billion in trading volume, per Bitwise Chief Investment Officer Matt Hougan.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">We just hit $1 billion in trading volume for ETH ETFs today.&mdash; Matt Hougan (@Matt_Hougan) <a href="https://twitter.com/Matt_Hougan/status/1815835532020310146?ref_src=twsrc%5Etfw">July 23, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Though, as Blockworks’ Ben Strack noted in the <a href="https://blockworks.co/news/on-the-margin-newsletter-stir-market">On the Margin newsletter</a> earlier Tuesday, the volumes don’t show the net flows for the funds just yet.



Crypto markets seem to be digesting the news, with the total market cap dipping 2.2% to $2.5 trillion in the past day.



Read more: <a href="https://blockworks.co/news/nine-us-spot-eth-etfs-live-post-approval">9 US spot ether ETFs go live after landmark approval&nbsp;</a>



Per <a href="https://www.coinbase.com/price/bitcoin">Coinbase</a>, BTC’s down 3.7% over the past day at time of publication. ETH, on the other hand, is down slightly in the same timeframe.



This could be attributed to negative perception around yesterday’s BTC asset movements from the now-defunct <a href="https://blockworks.co/tag/mt-gox">Mt. Gox</a> exchange, as markets watch anxiously for a potential sell-off. Based on Arkham Intelligence data, the exchange was seen <a href="https://platform.arkhamintelligence.com/explorer/tx/c07a7164f8432e5df871598f28b5f04285b57af35591b19c0ec9de182db9d506">moving</a> 1,980 BTC ($132 million) to the Bitstamp exchange. Kraken has also <a href="https://blockworks.co/news/mt-gox-bitcoin-repayments-status">received 48,641 BTC</a> from the Mt. Gox Rehabilitation Trustee, to be distributed in one to two weeks.



Meanwhile, the aggregate <a href="https://blockworks.co/tag/stablecoins">stablecoin</a> market cap is also breaking out of a three-month long stagnancy to $156 billion, suggesting a growth in users coming onchain, <a href="https://app.artemisanalytics.com/stablecoins?stablecoinMetric=STABLECOIN_MC">based</a> on Artemis data. Stablecoin growth is largely considered by investors as a crucial metric in assessing the health of DeFi activity, which has been laggard in recent months despite the overall market return since the start of the year.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXct7_wGW4dEmAqF8zdVmPiUrRbDd0y7KMprfWIg7p46NzSnZ78B1vy66MUXqLXEenB6tvTHdGsWtqmY18yGPDunNXofghCAoO_HEFj-R8plBKY1KVQi7RmDAVUUoH1-D5HuA-87xT1hc1r2ZOYJKTDyQPg?key=R4WSzEILYr02NVFGnnOS5A" alt=""/></figure>



How about <a href="https://blockworks.co/tag/altcoins">altcoin</a> markets? The “TOTAL3” market cap, a proxy index to track the altcoin market by excluding BTC and ETH, is slightly down 2% in the last day to $626 billion, <a href="https://www.tradingview.com/symbols/TOTAL3/">according</a> to TradingView.



In light of the landmark launch of ETH ETFs, there are movements around “ETH Beta” tokens too — so called for the perceived correlation in price action with ETH’s price itself.



For the top 300 tokens by market cap, the largest “ETH Beta” movements belong to decentralized naming protocol Ethereum Name Service (<a href="https://blockworks.co/tag/ens">ENS</a>), with a 12% jump in the last 24 hours, per CoinGecko. Within the crowded layer-2 landscape, Arbitrum (ARB) has risen 3%, while Metis (METIS) is up 1.5%.



Bucking the ETH Beta theory, however, is DOGE. Ethereum’s largest <a href="https://blockworks.co/tag/meme-coins">memecoin</a> saw a 7% slump in the last 24 hours, correlating with an overall drop of 7.5% in meme category tokens in the past day.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the On the Margin newsletter</a>.



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Bitcoin slumps, ether flat as market digests ETH ETF launch

Today, enjoy the On the Margin newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox.&nbsp;<a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the On the Margin newsletter</a>.



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



Welcome to the On the Margin Newsletter, brought to you by Ben Strack, Felix Jauvin and Casey Wagner. Here’s what you’ll find in today’s edition:



<ul>
<li>A pulse check on short-term interest rates and where we stand now.&nbsp;</li>



<li>Ether ETFs hit the market today. Find out what we’re watching for.</li>



<li>Kamala Harris is close to securing the official Democratic nomination. Where do her top VP picks stand on crypto?&nbsp;</li>
</ul>



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



<h2 class="wp-block-heading">Monetary plumbing deep dive</h2>



The monetary plumbing network, often referred to as short-term interest rates (STIR), is the esoteric world governed most directly by the Fed. For the most part, daily transactions in this part of the markets go unnoticed by the news media — that is, until something breaks.&nbsp;



The last time this happened was in September 2019, when the overnight repo market broke and repo rates skyrocketed, as shown below in the spread between Fed funds rate and interest on reserve balances:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXdWKmMo0ZaahsIi0OzkWSFm5U5ZpkE3-maKyIuBbKXGFWgsYwZvZ2XegGtRiv31diKaR08hncB1V4WQOTrox8UYUUlrOQTZVxNhTX-8uqR4ZJTfXIoIEk-VeEDKObKQ2zdj8QlEsyBLyWpywlap4EQhwoM?key=1bUJGWhhHIZMw2v4Kgob_g" alt=""/></figure>



The reasons this occurred are exotic and complex, but here’s a simple distillation: Because of ongoing quantitative tightening from the Fed, the amount of available collateral (Treasurys) got low enough so that there was too much cash in repo market chasing too few collateral, leading to a major demand spike that only the Fed could alleviate.



Quickly, the Fed opened up its standing repo facility to allow repo dealers to exchange their cash for collateral (Treasurys) in unlimited amounts. This was also the signal for the Fed to end its QT campaign and also marked the shift toward the eventual rate-cutting cycle.



This vignette shows just how important it is to pay attention to this part of the market, especially if you want to understand when the Fed’s monetary operations may inflect. With that in mind, let’s take a look at where we stand today.&nbsp;



Note: All charts are pulled from <a href="https://www.macrodispatch.com/stir/">this</a> excellent free dashboard so you can keep tracking it yourself!&nbsp;&nbsp;



Compared to September 2019, the current FFR-IORB spread is completely benign with no signs of collateral stress whatsoever. Essentially, we are very far away from anything breaking:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXcg_5DOYYBXIBNVBAzX7D4EvMtdUqct_btC7W2GU-rN7KOsV0yqpBNhdKSARxgBwc8i9xo19hJnkhRh4G5IUXEiZdyNhJ795SlEmi7Scn0Sb-M9YEabTS7OlfOV1xbY1XG_nMBiCT1t1HvCbAns42q5KIE?key=1bUJGWhhHIZMw2v4Kgob_g" alt=""/></figure>



One of the key drivers of monetary stress is bank reserve levels. One of the most steady removers of bank reserves from the system has been QT that has led to an unwind of the Fed’s balance sheet:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXeRh7OPfhGWkMzJEhoJcuu8vM5UJ5JyJV1f0ECdRxRl8Ey1rAhws4oEiR9d9t5LvAn4B_Zh_jPfM-3W59_kCsyFq2YQqTywYUvmfb2xZanHs3zKOIoX2fdT8Zhkd0o-Yb2OWCTEfrORhN9NTAAYOSLTtwLz?key=1bUJGWhhHIZMw2v4Kgob_g" alt=""/></figure>



However, as seen in the chart below, the vast majority of this unwind has been offset by money flowing out of the RRP and into the system, which has led to a muted decrease in reserve levels:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXcHpyRR8DxOlc9uFyG2bR_OWMv0GwIU2tEf1sHkK21YLiTpCCOXHuph3R3ChoIh3iJ-Y8JY5qtD8K4KhcdoerOA31d0fp3Gzbtt0laq7X3brI6AUTAL6N3SR7HUMxi0tE7tt4gmBKWfCsEMCZ-spm_egqma?key=1bUJGWhhHIZMw2v4Kgob_g" alt=""/></figure>



Here’s the TL;DR from the surface-level look at the STIR market:&nbsp;



<ol>
<li>Despite quantitative tightening happening for nearly two years now, there is no evidence of a shortage of bank reserves in the system.</li>



<li>Reserves have yet to reach the “ample reserves” threshold the Fed is targeting as a signal to end QT.</li>



<li>Due to the Fed’s heavy-handed approach to the STIR market and its whack-a-mole approach to patching up any sort of funding market issues, there is much less volatility and fragility in the system than the previous QT cycle in 2018-19.</li>
</ol>



— Felix Jauvin



<h2 class="wp-block-heading">$345&nbsp;</h2>



This is Citibank’s new price target for Coinbase stock. The updated figure is 33% higher than the institution’s previous figure.&nbsp;



&#8220;Shifts in the US election landscape and the Supreme Court’s overturning of the <a href="https://blockworks.co/news/on-the-margin-newsletter-crypto-etf-filing-frenzy">long-standing Chevron precedent</a> has changed our view on Coinbase’s regulatory risks,” Citi research analysts wrote in a Monday note.&nbsp;



<h2 class="wp-block-heading">ETH ETF volumes (unsurprisingly) lag BTC debut</h2>



Nine spot ether ETFs are <a href="https://blockworks.co/news/nine-us-spot-eth-etfs-live-post-approval">now trading on US exchanges</a>. The milestone launches come half a year after the debut of US spot BTC funds.&nbsp;



The ETH products’ trading volumes are not at the level of the bitcoin ETFs’. But to be clear, nobody we spoke to thought they (<a href="https://blockworks.co/news/sizing-up-demand-for-us-eth-etfs">or the funds’ inflows</a>) would be.&nbsp;&nbsp;&nbsp;



The US bitcoin products saw roughly $4.5 billion of <a href="https://blockworks.co/news/day-1-bitcoin-etf-trading-volume">trading volumes on their first day</a> (Jan. 11). The ether ETFs were trailing that pace considerably as of 1 pm ET, combining for nearly $600 million.



Bloomberg Intelligence analyst Eric Balchunas pointed to the data in an X post. If the pace keeps up, the $1 billion-plus in ETH ETF trading volumes would represent between 20% and 25% of those of the BTC funds launched in January.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">HALFTIME: Nearly $600m so far, putting them on pace to hit $1b and change by EOD which would be about exactly 20% of the $4.6b that bitcoin ETFs did on Day One, which would nail our prediction. Re flows: that data comes tonight and tmrw night, but if we assume <a href="https://twitter.com/search?q=%24ETHE&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$ETHE</a> volume is… <a href="https://t.co/6DhQ1ylDhl">pic.twitter.com/6DhQ1ylDhl</a>&mdash; Eric Balchunas (@EricBalchunas) <a href="https://twitter.com/EricBalchunas/status/1815794272496672990?ref_src=twsrc%5Etfw">July 23, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Grayscale’s more expensive Ethereum Trust ETF (ETHE) — carrying a 2.5% fee — was seeing the highest volumes, with about $250 million. The crypto asset manager also has a “Mini” version of the trust priced at 0.15%, which is the <a href="https://blockworks.co/news/grayscale-changes-proposed-eth-etf-fee">cheapest of its kind</a>.



BlackRock’s iShares Ethereum Trust (ETHA) had notched $127 million in volumes by 1 pm ET, second only to ETHE. For comparison, the asset management giant’s bitcoin fund saw about $1 billion in trading volumes on its first day.&nbsp;&nbsp;



While volumes indicate the buying and selling of ETF shares, they do not yet give us a sense of net flows for these funds.



Grayscale research head Zach Pandl described the launch of ETH spot products as “low key” compared to the “splashy” debut of their BTC counterparts. While investors may be “under-appreciating” the importance of such products, Pandl added he expects “significant” net inflows into the ETFs in the coming months.&nbsp;&nbsp;



“These spot Ethereum ETPs are coming to the US market in tandem with a shift in US politics around crypto and as major financial institutions embrace tokenization,” the executive noted.



Analysts and executives have indicated the initial volumes and flows won’t tell the whole story about investor reception of these ETH funds.&nbsp;



But they tell the beginning of the story, and so we watch as history unfolds.



— Ben Strack



<h2 class="wp-block-heading">Harris’ VP short list&nbsp;</h2>



After her first full day on the campaign trail, Vice President Kamala Harris has apparently secured enough delegates to become the Democratic nominee, according to a survey from the Associated Press.&nbsp;



While Harris has kept her crypto opinions fairly under wraps, several of her potential picks for vice president have taken more direct stances:



Roy Cooper&nbsp;



Cooper, who is finishing up his second term as governor, in July vetoed a bill that sought to <a href="https://blockworks.co/news/north-carolina-cbdc-bill">ban CBDCs in North Carolina</a>. The state general assembly had passed the measure with broad bipartisan support. The vote came out to a 109-4 majority in the House and a 39-5 majority in the Senate.&nbsp;



Josh Shapiro&nbsp;



Earlier this year, grassroots environmental organization Save Carbon County sued Shapiro and <a href="https://blockworks.co/news/stronghold-digital-mining-raises-74m-plans-to-buy-second-power-plant">Stronghold Digital Mining</a> for alleged pollution and tax credit abuse. The environmentalists claim that under Shapiro, Stronghold and their subsidiary, Panther Creek Electric Generating Facility, received more than $20 million in renewable energy tax credits from Pennsylvania.&nbsp;&nbsp;



Mark Kelly&nbsp;



Kelly was one of the 12 Democratic Senators to vote <a href="https://blockworks.co/news/senate-passes-resolution-to-overturn-sab121">in favor of Joint Resolution 109</a>, the legislation that sought to overturn the SEC’s <a href="https://blockworks.co/news/sec-staff-call-for-crypto-entities-to-show-liability-on-balance-sheet">staff accounting bill 212</a>. President Biden later vetoed the bill and the House earlier this month <a href="https://blockworks.co/news/house-fails-to-override-anti-sab121-veto">opted to uphold the decision</a>.&nbsp;



Andy Beshear&nbsp;



In 2021, Beshear approved two Kentucky laws that provided tax incentives to cryptocurrency miners. The legislative effort sought to bring more mining operations to the state. It has been successful, though not without <a href="https://www.lex18.com/news/lex-18-investigates/theyre-taking-advantage-crypto-mines-not-only-causing-concerns-in-kentucky">controversy</a>.&nbsp;



Pete Buttigieg&nbsp;



Buttigieg, who made a run for the White House himself in 2020, said years ago that bitcoin should be “treated as a commodity.” The opinion at the time may have been revolutionary, but today even SEC Chair Gary Gensler has taken the <a href="https://blockworks.co/news/jay-clayton-ether-sec-security">same view on bitcoin</a>.&nbsp;



— Casey Wagner&nbsp;



<h2 class="wp-block-heading">Bulletin Board&nbsp;</h2>



<ul>
<li>Decentralized exchange dYdX is in talks to sell its derivatives platform, according to a <a href="https://www.bloomberg.com/news/articles/2024-07-23/defi-exchange-dydx-said-to-be-in-talks-to-sell-derivatives-trading-platform">report</a> from Bloomberg.&nbsp;</li>



<li><a href="https://blockworks.co/news/vanguard-opposes-platforming-eth-etfs">As expected</a>, Vanguard does not allow customers to purchase the <a href="https://blockworks.co/news/ether-etfs-approved-for-us-exchange-july-23">newly-launched ether ETFs</a> on its platform. The announcement comes after the company said in January that it would <a href="https://blockworks.co/news/vanguard-disallows-bitcoin-etf-trading">not offer bitcoin ETFs either</a>, citing volatility concerns.&nbsp;</li>



<li>Coinbase CEO Brian Armstrong is no longer listed on the Giving Pledge, a global group founded by Bill Gates, Melinda Gates and Warren Buffet with a commitment to giving away their wealth. Armstrong originally joined the pledge in 2018.</li>
</ul>



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