Donovan Choy

Founded in 2018, THORChain is an OG DeFi L1 chain that rose to fame with its innovative cross-chain swaps (THORSwap). Since then, the chain has expanded to offer lending and savings interest accounts.



As of earlier today, THORChain withdrawals from its Lending and Savers products have been officially halted. THORSwap and the underlying chain are fine.



The halted withdrawals come off the back of the <a href="https://blockworks.co/news/thorchain-executive-decision-restructuring">painful decision</a> by THORChain co-founder JP Thor two weeks ago to pause deposits into the Savers and Lending program for a six-to-twelve month period — a decision which was <a href="https://blockworks-research.beehiiv.com/p/this-is-unusual">overturned</a> by Thorchain validators.



The chain is sitting on about $200 million of BTC and ETH-denominated liabilities that it cannot afford to pay out, at least not without further crashing the price of its native token, RUNE.



Wait, why does RUNE enter the picture?



THORChain lending works differently to other DeFi money markets like Aave. On THORChain, lent collateral is instantly sold for its native RUNE token, which is then burned after swapping to a borrower’s desired debt asset.&nbsp;



When borrowers repay their loan, new RUNE is minted again to repurchase the borrower’s pledged collateral from the market and repay it to borrowers.



This effectively places RUNE token holders as the counterparty for each loan.



This somewhat roundabout mechanism is nice if you’re bullish RUNE. The mechanism design places RUNE at the center of the value accrual flywheel and increases its demand.&nbsp;



The key risk here, however, is that this depends on RUNE outperforming assets like BTC and ETH that it is borrowed against. Simply put, THORChain’s protocol design is long RUNE against BTC and ETH.&nbsp;



When RUNE depreciates relative to BTC and ETH, more RUNE needs to be minted at the closure of the loan than the amount of RUNE that was burned initially.



This leads us to the unwanted outcome that is happening today: inflationary (and selling) pressure on RUNE rather than the intended effect of deflationary (and buying) pressure.



RUNE’s tokenomics is also intertwined with its yield-bearing Savers product.



THORChain’s Savers uses a kind of wrapped synthetic asset (called <a href="https://docs.thorchain.org/thorchain-finance/savings">synths</a>) to allow single-sided asset exposure. Roughly, it works like this:



<ol class="wp-block-list">
<li>A user deposits one BTC.</li>



<li>THORChain sells half the BTC for RUNE, and adds the BTC-RUNE pair to a liquidity pool.</li>



<li>The user receives synthetic BTC, which can be staked for yield (accruing from swap fees and liquidity rewards) without the risk of impermanent loss.</li>



<li>When the user chooses to withdraw, THORChain sells the previously bought RUNE to form one BTC, which is then returned to the user.</li>
</ol>



Note the similar “long RUNE, short BTC and ETH” dynamic at play here. This design protects against impermanent losses for LPs, but it also means LPs are taking a leveraged long on RUNE.&nbsp;



Thus, RUNE’s underperformance creates the same kind of downward spiral consequences for Savers, just as it did for its lending product.



The chart below shows the rate of RUNE mints far exceeding the rate of RUNE burn:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfiSVy5SBcqZOeE1vMqrXbbG1FjJcgsKCA0BupvvyTm4FhS3lIv1Qf1YookVVhveDaBqKStl1yBlBcgpVPQXyTRG8Ql7Kxu0Qsk6B_BOKxyosozcryL393shJFdiYkfsJhPs304?key=KJE5_E3vkgQFdC7wkJ4LUElg" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://thorcharts.org/thorchain_lending_rune_burned">Thorcharts</a></figcaption></figure>



It’s worth reiterating that THORSwap, the original use case of THORChain, is fine. It’s still swapping about $50-60 billion in weekly trading volumes, and generated about $700k in fees over the past week.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdYVf386ptKZsftpqg5BzGSR8QYXK_XhDgIjbdz0l55Oe50_z4ThDzMdSMI6WyFg1yqH6oSDBQd8CtZqdmVcwrPXkhKpSs8_Lfm2rZXAdYo86jIIXIn76BQLoAam0tbbp_XToT2xA?key=KJE5_E3vkgQFdC7wkJ4LUElg" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://thorcharts.org/thorchain_swap_fees_by_chain">Thorcharts</a></figcaption></figure>



The RUNE token, however, is down 44% on the week, which is not fine. It’s the asset that needs to be sold to repay borrowers wanting to close their loans, or savers wanting to withdraw, but doing so would accelerate the crash of RUNE’s price, which in turn leads to deeper insolvency.



Osmosis co-founder Sunny Aggarwal said of the THORChain debacle: “The situation unfolding with THORChain is eerily similar to what happened with Terra/Luna implosion in 2022, where the protocol&#8217;s solvency was too heavily dependent on the price performance of the native token.”



Next steps? THORChain’s co-founder suggests using protocol revenue and incentives from its sister company Rujira (previously Kujira)&nbsp; to make lenders whole over a 2-3 month timeframe while everything is on pause mode.



<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">If <a href="https://twitter.com/search?q=%24RUNE&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$RUNE</a> hits $2.50 I will be recommending to every node I delegate with to Pause Lending via Node Mimir. 1) Pause lending 2) Tokenise positions on App Layer asap (with maybe even <a href="https://twitter.com/search?q=%24RUJI&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$RUJI</a> incentives) 3) 10% System Income into payback fund to accumulate RUNE to fund payouts 4)…&mdash; JP.THOR | ACEL (@jpthor) <a href="https://twitter.com/jpthor/status/1882573631710200273?ref_src=twsrc%5Etfw">January 23, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“It&#8217;s uncertain whether lenders can be fully compensated. Some have suggested that the shortfall could be covered by protocol fees collected over time. But this overlooks an important point: the bulk of THORChain&#8217;s liquidity comes from its lending and savers platform, ThorFi. So it doesn&#8217;t make sense to consider THORChain and ThorFi as separate entities,” Aggarwal told Blockworks.



For a deeper dive on the mechanics leading to THORChain’s insolvency, see Blockworks Research’s <a href="https://app.blockworksresearch.com/flashnotes/thor-fi-s-unlimited-liability">report</a> by analyst Luke Leasure from last week.



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Layer-1

THORChain halts withdrawals amid $200M insolvency

Macauley Peterson

ThorChain founder JP Thorbjornsen and the development team have decided to pause the ThorFi Savers and Lending programs for the next 12 months. The decision, announced Thursday, comes after consultations with key community members, devs and node operators, according to the project’s Discord.



Thorchain is a decentralized liquidity protocol that enables cross-chain asset swaps without the need for wrapped tokens or centralized exchanges. It allows users to trade native assets like Bitcoin, Ethereum and others directly on the platform, using its native token, RUNE, to facilitate transactions and secure liquidity pools. But the protocol is undergoing a major restructuring to make it more secure and easier to understand.



THORFi, a complex component of the ecosystem, has been identified as a primary source of volatility, particularly due to un-throttled redemptions that are driving away new participants and hindering progress on the 2025 roadmap, developers say. By pausing these features, the team aims to ensure that the protocol is ready to scale efficiently.



Read more:<a href="https://blockworks.co/news/rune-code-vulnerability"> Code vulnerability puts damper on RUNE’s wild run</a>



<h2 class="wp-block-heading">Under pressure</h2>



Inflation of RUNE’s circulating supply has contributed directly to the token’s poor price action. Several mechanisms are behind this inflation, including block rewards distributed to validators. As with many chains, RUNE is minted to reward participants, thus diluting its value. There is a growing consensus that these rewards should be reduced, but the specifics and timing of such changes are a matter of debate.



Beyond block rewards, other mechanisms such as Savers and Lending programs have added additional pressure. The Savers program, which was designed to create buy pressure for RUNE, has instead exacerbated the situation by creating substantial sell pressure when users withdraw their deposits.



The dynamic is simple: When users enter Savers, they must purchase RUNE, but when they exit, they sell it. This cycle becomes problematic when RUNE is underperforming relative to bitcoin. As users exit at lower prices, they trigger further declines in RUNE’s value, creating a feedback loop.



Lending has similarly introduced inflationary effects. While it has already been shuttered, its lingering impact continues to affect the RUNE price. Loans and collateral, primarily backed by BTC and ETH, have created liabilities that are hard to repay as the value of RUNE declines. The situation is compounded by the fact that, due to the current state of the market, more RUNE is being minted to cover obligations, further diluting the token.



<h2 class="wp-block-heading">Sunset of Savers</h2>



In light of these concerns, community members have called for immediate action to address the protocol’s structural weaknesses. The most immediate of these is the sunset of the Savers program, which continues to exert downward pressure on RUNE’s price.



The plan put forward includes a 72-hour period for dissent and discussion, allowing the community to voice concerns and potentially campaign for an unwinding of the decision. If no changes occur, a six-month &#8220;timeout&#8221; will follow, during which no further discussions or economic changes will be entertained. Developers will shift focus entirely to the app layer, optimizing bandwidth and accelerating development without the overhang of THORFi-related distractions.



After six months, the idea is to tokenize Lending and Saver positions, offering holders early liquidity on a peer-to-peer market. By the 12-month mark, a restructuring plan will be presented to provide liquidity for legacy THORFi holders, potentially introducing a System Income Tax that would remain until all positions are cleared.



Some have called for a more radical solution: Force the closure of all outstanding loans. On X, ThorTrades <a href="https://x.com/ThorTrades8/status/1877337451334873141">expressed</a> his concern on the sunset plan.



“If BTC trades at $75-85k, Rune will trade under $3 likely. Best to use this bad moment in the market to get rid of something bad (loans),” he wrote, arguing this aggressive action should be taken immediately. “The right moment to force loans to close was above $6 but the second best moment might be now.”



So it seems Thorchain is at a crossroads. The combination of underperforming RUNE, inflated supply, and growing liabilities threatens to undermine the protocol’s long-term viability. It’s clear that some immediate action is needed to halt this spiral. The protocol has already made strides in decentralization and cross-chain liquidity, but to ensure its survival, the Thorchain team looks to confront these internal challenges head-on.



The question now is whether node operators will play ball, and what comes of brewing community backlash. As JP put it, “prepare your pitchforks,” and be prepared to make the tough calls to save the protocol.



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Developers

ThorChain struggles following executive decision

Andrew Thurman

One of the strongest-performing digital assets of the week has been at least temporarily derailed by a code vulnerability.&nbsp;



On Wednesday, THORChain — among the oldest DeFi projects — announced that the protocol had suspended a number of core functions due to a security vulnerability disclosure in a TSS (threshold signature scheme) library maintained by Binance Smart Chain. 



Over the past three days, the project has suspended functionality for a number of operations relating to their nodes, which rely on the TSS. The project primarily focuses on <a href="https://blockworks.co/news/native-bitcoin-in-defi-this-dex-wants-to-boost-trust">enabling cross-chain asset swaps</a> with a variety of features. 



The team has <a href="https://twitter.com/THORChain/status/1691793526382789044">stated</a> in public channels that they have a patch for their node operators ready, but are waiting on other projects that rely on the TSS library to prepare their own patches and avoid putting those projects at risk. 



The statement pumped the brakes on what had been a strong run for THORChain’s Rune liquidity token. Rune had rallied 60% on the week in advance of the release of a new lending product, but the surge has stalled with the token dropping 3% on the day.&nbsp;



Multiple THORChain team members did not respond to requests for comment by the time of publication.&nbsp;



<h1 class="wp-block-heading">TSS vulnerability</h1>



On Wednesday, the official THORChain Twitter account replied to a tweet announcing that trading had been paused across eight chains, writing that “most TSS libraries in production are vulnerable to a TSS security issue.”



<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 responsible disclosure indicates that most TSS libraries in production are vulnerable to a TSS security issue. All users of GG18/GG20 should reach out to TC core devs immediately. THORChain has paused key-signing until a patch can be released. <a href="https://t.co/qRrcrva9er">https://t.co/qRrcrva9er</a>&mdash; THORChain (@THORChain) <a href="https://twitter.com/THORChain/status/1691793526382789044?ref_src=twsrc%5Etfw">August 16, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The vulnerability was first discussed in the THORChain developer Discord server on Aug. 13. A team representative wrote that “a recent disclosure to Binance around their TSS implementation has caused them to make a security patch to the code.” 



This prompted the THORSec security advisory and THORNode node operation teams to pause “churning” — the process by which validators are added and removed from the network — until a THORNode patch could be released. Per THORChain documentation, the protocol’s TSS relies primarily on two libraries, including Binance’s.



In an interview with Blockworks, pseudonymous developer GiMa of Maya Protocol — a fork of THORChain — said both teams have a patch ready, but are waiting on other teams to respond to the disclosure before releasing. In a statement on the THORChain Telegram, GiMa added they expect the patch to be released in &#8220;24 — 48&#8221; hours. 



While it’s unclear how many active teams are potentially affected, Binance Smart Chain’s TSS Github has been <a href="https://github.com/bnb-chain/tss-lib/forks">forked</a> 50 times in the last two years.&nbsp;



The THORChain team announced on Tuesday night that due to the vulnerability, security advisors had recommended delaying the launch of a forthcoming lending product. 



Traders have responded to the various disclosures with apprehension, sending the price of Rune down 8% from 24-hour highs, falling to $1.48 from $1.61 per CoinGecko.&nbsp;



<h1 class="wp-block-heading">Lending and options</h1>



Prior to the TSS disclosures, THORChain’s Rune liquidity token had been on a tear — largely due to anticipation around the lending product.



In a recent Twitter space community <a href="https://twitter.com/THORChain/status/1691574556794794243">call</a>, Thorchain developer Chad Barraford touted the new product as revolutionary.&nbsp;



“When lending launches, we are, in my view, overnight, going to make the industry look like a bunch of dinosaurs. We’ve developed an entirely different design that makes the old one look like shit, to be honest. It is a very novel idea and experimental,” he said.&nbsp;&nbsp;



Key features advertised in the THORfi Lending <a href="https://docs.thorchain.org/thorchain-finance/lending">documentation</a> include “0% interest, no liquidations and no expiration.”



However, while THORfi Lending is being marketed as a revolutionary lending platform, many <a href="https://twitter.com/TehSlaw/status/1691167395900002304">observers</a> have said that it functions closer to an options platform, with the new protocol acting as the issuer. Borrowers take loans denominated in dollar terms, and have the ability to “buy back” their collateral at a particular price. The protocol, meanwhile, sells the collateral at origination, and buys it back at the “exercising” of the option.&nbsp;



A recent HackMD risk <a href="https://hackmd.io/@blockscience/H1Q-erh_n/%2FgedrnocFRxOWWgT8TXJ-sw">report</a> concluded that “a [THORfi] loan behaves formally the same as an American call option,” and that the risks of the lending product to the wider protocol can be considered in similar terms to those posed to an options issuer.&nbsp;&nbsp;



Notably, the new product also brings new token economic features.&nbsp;



One aspect is a significant potential boost in volume for Rune. As with single-sided liquidity deposits into the THORChain DEX as well as certain cross-chain transactions, Rune is used as an intermediary liquidity asset (a BTC to ETH swap is routed through BTC/RUNE, then RUNE/ETH).&nbsp;



This has led to some speculation that Rune could benefit from additional frequent buy pressure from the protocol itself. Additionally, the lend product will also feature a <a href="https://twitter.com/THORChain/status/1689595386602897408">burn</a> mechanism.&nbsp;



Despite the recent pump and price volatility, Rune remains down 92% from an all-time high of $21.07 reached in May 2021.&nbsp;



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RUNE

Code vulnerability puts damper on RUNE’s wild run

Sam Martin

<div id="highlights-block_60c9fc7f1690b" class="highlights">
 <ul>
 <li>Bitcoin dominance up sharply on today&#8217;s rally</li>
 <li>US Bank launches crypto custody service to satisfy demand</li>
 </ul>
 
</div>



The NASDAQ and Dow Jones closed the day up 1.25% and 0.92% respectively. 



<a href="https://cms.blockworks.co/banking-giant-launches-custody-services-for-bitcoin/" target="_blank" rel="noreferrer noopener">US Bank</a> will be launching a crypto custody solution powered by NYDIG. It will only offer bitcoin, with the intention to support additional coins over time.



Brazil is set to vote on a bill within the next few days to <a href="https://finance.yahoo.com/news/bitcoin-set-become-legal-payment-154644863.html?guccounter=1&amp;guce_referrer=aHR0cHM6Ly90LmNvL0JBQnlBVm9vYkY_YW1wPTE&amp;guce_referrer_sig=AQAAAIQkO8ZzOBl0aoKUt_nsS8PkNhQvgAetH_aKIpgFeO8PjIkkHSdHhQRJrnpSnq7NWLBdGiBiQm5yAJ6q53KgD-3lxKUM5sM9pqaafhXhPkopI_WhwJyacAXLboQPCauMMhMFi3TvNJAT3mOrXLQkMlipNxkp99NiPznVHFDCoIQm" target="_blank" rel="noreferrer noopener">regulate</a> Bitcoin in a way that encourages its use. 



<h3 class="wp-block-heading">DeFi/NFTs/Gaming</h3>



<ul class="wp-block-list"><li>The game studio behind Axie infinity, Sky Mavis, received $152 million in a <a href="https://cms.blockworks.co/axie-infinity-developer-scores-152m-in-series-b-funding-nearing-3b-valuation/" target="_blank" rel="noreferrer noopener">series B funding</a> round led by Andreessen Horowitz. <a href="https://coinmarketcap.com/currencies/axie-infinity/" target="_blank" rel="noreferrer noopener">$AXS</a> was last trading at $130, down 6% after its remarkable run the past week. </li><li>ThorChain-based decentralized exchange, ThorSwap, <a href="https://finance.yahoo.com/news/thorswap-raises-3-75m-private-141222643.html" target="_blank" rel="noreferrer noopener">raised</a> $3.75 million in a private token sale. <a href="https://coinmarketcap.com/currencies/thorchain/" target="_blank" rel="noreferrer noopener">$RUNE</a> was last trading around $8.90. </li><li>Nexus Mutual (<a href="https://coinmarketcap.com/currencies/nxm/" target="_blank" rel="noreferrer noopener">$NXM)</a>, an insurance protocol built on top of ethereum, passed <a href="https://twitter.com/NexusMutual/status/1445327767474688007?s=20" target="_blank" rel="noreferrer noopener">proposal 157</a> to allocate nearly $50 million to earn ETH2.0 staking rewards through Lido Finance(<a href="https://coinmarketcap.com/currencies/lido-dao/" target="_blank" rel="noreferrer noopener">$LDO</a>), a liquid staking solution. </li></ul>



<h3 class="wp-block-heading">TradFi</h3>



<ul class="wp-block-list" id="block-1209f037-00c3-4876-ad37-a29ab610c717"><li>China turns to <a href="https://www.reuters.com/world/asia-pacific/china-turns-stranded-australian-coal-combat-power-crunch-trade-2021-10-05/" target="_blank" rel="noreferrer noopener">abandoned coal mines</a> in Australia to combat coal shortages.</li><li>US ISM Sep services PMI data came in higher than expected at 61.9 vs. 61.7 in August. Yields on the 10-year treasury rose to <a href="https://www.cnbc.com/quotes/US10Y" target="_blank" rel="noreferrer noopener">1.534%</a> on the news. </li><li>US gas prices locked in their highest close in 12 years due to <a href="https://twitter.com/DeItaone/status/1445464140466704394?s=20" target="_blank" rel="noreferrer noopener">supply concerns</a>. </li></ul>



<h3 class="wp-block-heading">Insight</h3>



“This month all eyes are on the SEC’s potential approval of a bitcoin ETF, and this is all the more relevant given two recent developments 一 at a conference last week, Gary Gensler reiterated his preference for a bitcoin futures ETF rather than one based on spot prices, which is relevant given that the proposals up for consideration this month are largely futures-based. Also, on Friday, the CME revealed that it was doubling the limits on initial BTC futures positions. Notably, the day that this new rule will come into effect is October 18th, the same day a decision by the SEC on the ProShares Bitcoin Futures Strategy ETF is due. This could be a coincidence, or it could be the CME planning for a potential surge in futures volumes,&#8221; said Noelle Acheson, Head of Market Insights at Genesis 



<h3 class="wp-block-heading">Bitcoin and Ethereum</h3>



BTC dominance, or the percentage of the total crypto market capitalization BTC makes up, is up 5.16% over the last month. Historically speaking, rising BTC dominance sets the stage for alt coin rallies in the future. 



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="910" height="661" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTC.D_2021-10-05_17-44-29.png" alt="" class="wp-image-8975" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTC.D_2021-10-05_17-44-29.png?w=910 910w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTC.D_2021-10-05_17-44-29.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTC.D_2021-10-05_17-44-29.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTC.D_2021-10-05_17-44-29.png?w=354 354w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTC.D_2021-10-05_17-44-29.png?w=359 359w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTC.D_2021-10-05_17-44-29.png?w=301 301w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/BTC.D_2021-10-05_17-44-29.png?w=80 80w" sizes="auto, (max-width: 910px) 100vw, 910px" /><figcaption>Source: Trading View</figcaption></figure></div>



Perpetual funding rates for BTC are mixed across different exchanges, implying that traders are divided on whether to take a short or long position. 



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="718" height="339" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-05-at-5.56.51-PM.png" alt="" class="wp-image-8978" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-05-at-5.56.51-PM.png?w=718 718w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-05-at-5.56.51-PM.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-05-at-5.56.51-PM.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-05-at-5.56.51-PM.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-05-at-5.56.51-PM.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-05-at-5.56.51-PM.png?w=80 80w" sizes="auto, (max-width: 718px) 100vw, 718px" /><figcaption>Source: https://app.laevitas.ch/dashboard/btc/derivs</figcaption></figure>



<h3 class="wp-block-heading">Top 10 coins excluding stablecoins</h3>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="362" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-05-at-6.00.16-PM-1024x362.png" alt="" class="wp-image-8979" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-05-at-6.00.16-PM-1024x362.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-05-at-6.00.16-PM-1024x362.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-05-at-6.00.16-PM-1024x362.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-05-at-6.00.16-PM-1024x362.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-05-at-6.00.16-PM-1024x362.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-05-at-6.00.16-PM-1024x362.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-05-at-6.00.16-PM-1024x362.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Screen-Shot-2021-10-05-at-6.00.16-PM-1024x362.png?w=1374 1374w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Source: CoinMarketCap</figcaption></figure>



<ul class="wp-block-list"><li>Despite all of the turbulence in traditional financial markets, bitcoin has shown a lot of strength over the past week, last up more than 23%. This is a narrative bitcoin investors would like to see continue. There will be a decision on a futures-backed ETF this month which could be another catalyst for an end of year rally. </li><li>The poor performance of alternative layer-1&#8217;s tells us that money is rotating into the blue chips; BTC and ether. </li></ul>



<h3 class="wp-block-heading">Regulatory News</h3>



<ul class="wp-block-list" id="block-d64d70c9-7052-4f1a-8167-3d370fe08354"><li>Minnesota congressman, Tom Emmer, took to<a href="https://twitter.com/RepTomEmmer/status/1445461291145981958?s=20" target="_blank" rel="noreferrer noopener"> Twitter</a> to call out Gary Gensler for attempting to classify some digital assets as securities. He believes that would hurt retail investors more than it would help them. </li><li>Rep. Patrick McHenry (R-NC) introduced the <a href="https://republicans-financialservices.house.gov/news/documentsingle.aspx?DocumentID=408154" target="_blank" rel="noreferrer noopener">Clarity for Digital Tokens Act</a> today. This bill aims to keep innovation in the US and provide legal clarity to those involved with digital assets. </li><li>SEC chairman, Gary Gensler, echoed Jerome Powell&#8217;s comments that the US has no intentions <a href="https://www.bloomberg.com/news/articles/2021-10-05/sec-chief-signals-crypto-ban-like-china-s-won-t-happen-in-u-s" target="_blank" rel="noreferrer noopener">to ban crypto</a>. </li></ul>



<h3 class="wp-block-heading">What else we are looking out for&#8230;</h3>



<ul class="wp-block-list"><li>ADP employment numbers on Wednesday</li><li>Initial and continuing jobless claims on Thursday</li><li>Nonfarm payrolls, unemployment rate and average hourly earnings on Friday</li></ul>



That is all for today. Let&#8217;s do this again same time tomorrow. 



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