Another Week in Crypto #59 — May 6, 2024

Below is some of the top crypto news from the week of April 29 - May 6, 2024. The views shared in this document represent my views and my views alone and are not intended as financial advice.

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Transactions on-chain

Bitcoin Network surpasses 1 billion on-chain transactions - The transaction was contained in Bitcoin’s 842,241st block and was mined at 5:34?pm ET on Sunday May 5, more than 15 years after Bitcoin’s launching. The milestone follows a recent uptick in transaction volume since Bitcoin’s fourth halving and Runes, a protocol for creating Bitcoin-based fungible tokens, both went live on April 20. Data from Dune shows that Rune has driven more than 5.5m transactions since launching, equating to 0.55% of Bitcoin’s total transaction count over the course of 0.285% of Bitcoin’s entire lifespan.

• Key takeaways - One billion transactions is a huge milestone for the blockchain, and follows a big year for the largest cryptocurrency, including ETF approvals and several projects building smart contracts on the network. For the majority of its tenure, building smart contracts atop the blockchain was only talked about in theory.

Less than 10% of stablecoin transaction volume coming from real users - More than 90% of stablecoin transaction volumes aren’t coming from genuine users, analysis co-developed by Visa finds, according to a Bloomberg report. Out of about $2.2 trillion in total transactions in April, just $149 billion originated from “organic payments activity." The analysis removed transactions done by bots and large-scale traders to “isolate those made by real people.” The stablecoin market supply currently stands at about $150 billion, with tether (USDT) and USD Coin (USDC) dominating the market with shares of 75% and 22%, respectively.

• Key takeaways - Stablecoins are often touted as the biggest use case for crypto right now (especially in the developing world), and this statistic hurts that argument substantially. Though, it would be interesting to compare this with the percentage of “non-real” trading and exchange of funds in traditional finance, as that number is probably higher than we would expect.?

Airdrops

LayerZero Labs sets stage for airdrop with snapshot - LayerZero Labs, a cross-chain interoperability protocol, has completed the first snapshot at 11:59:59 PM UTC on May 1, ahead of its much-anticipated airdrop. On May 3, LayerZero Labs announced it will conduct an internal investigation intended to identify sybil farmers and exclude them from receiving allocations as part of its future token generation event (TGE). Airdrops serve as a means for web3 projects to distribute governance tokens to early users. This incentivizes adoption, with many users hoping to score free tokens flocking to early-stage projects.

• Key takeaways - LayerZero is one of the most hyped projects of the past year. This backlash and subsequent airdrop criteria could end up having real community ramifications to the project’s success over the next several months.

Eigenlayer to distribute 100 more EIGEN to token holders, following airdrop backlash - The Eigen Foundation will airdrop 100 more EIGEN (forecasted to be around $1000) to more than 280,000 wallet holders, shortly after its community took aim at its controversial airdrop. In a blog post, published on Thursday, EigenLayer also clarified that investor tokens will start vesting after token transferability starts. The token will become unlockable sometime after Sept. 30, 2024, when new features roll out on Eigenlayer's mainnet, according to the post.

• Key takeaways - This development shows that the Eigen Foundation is listening to its community and will make adjustments to its path based on feedback, which is a great quality to have, especially in crypto.?

Crypto earnings

Tether nets record $4.5 billion profit in Q1 2024 - The majority, or $3.52 billion, of the profit of Tether Holdings, the company behind the world’s largest stablecoin Tether, stemmed from the firm’s financial gains on Bitcoin and gold, while the additional $1 billion came from operating profits. Tether also revealed its net equity for the first time, which stands at $11.37 billion as of March 31. Tether’s Bitcoin wallet, “bc1q,” currently holds 75,354 BTC, worth over $4.38 billion, which makes Tether the world’s seventh-largest Bitcoin holder.

• Key takeaways - Tether’s success is incredible, with its ~12 employees netting them more profits than Goldman Sachs’ ~45k employees. Whether Tether can continue its dominance by keeping market share from more “compliant” stablecoin alternatives like USDC and Paypal’s PYUSD remains to be seen over the long term.

Coinbase had a blowout first quarter - The business has a number of positive catalysts including its smart wallet, Coinbase Prime, layer-2 network Base and its growing international offering, the analysts said. The crypto exchange reported first-quarter net income of $1.2 billion and diluted earnings per share (EPS) of $4.40. The broker reiterated its market outperform rating and $320 price target. Canaccord Genuity raised its price target to $280 from $240 while maintaining its buy rating. KBW also raised its price target, boosting it to $240 from $230.

• Key takeaways - Wall Street is continuing to wake up to the power of crypto, on- and off-chain. Coinbase has proven itself as the most dominant crypto company in the U.S. and will continue to be a leader in the push for crypto innovating in the States.

SEC

Robinhood gains 2%, erasing early losses following SEC Wells Notice - Robinhood (HOOD), the popular trading platform, received a Wells Notice from the SEC on May 4. The trading platform previously ended support for all tokens that were named in SEC lawsuits against Binance and Coinbase. Robinhood Chief Legal, Compliance and Corporate Affairs Officer Dan Gallagher – a former SEC commissioner – said he was "disappointed" after trying to work with the regulator. "We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law," he said in a statement.

• Key takeaways - Traditional finance companies have avoided entering the crypto market for this very reason: enforcement from the SEC.?

House's McHenry sccuses SEC chief Gensler of misleading Congress on Ethereum - The chairman of the House Financial Services Committee says Gensler refused to discuss his view on ETH in testimony even after the SEC was investigating it as a security. "Chair Gensler refused to answer questions regarding the SEC's classification of ether," McHenry said in a statement posted on X. The classification of (ETH), the second-largest cryptocurrency by market cap, is a major question hanging over the U.S. oversight of digital assets, and it's being fought on multiple legal fronts.

• Key takeaways - Some in Congress are starting to push back on the enforcement actions of the SEC. We can hope that this pressure is able to encourage development of a reasonable, cohesive regulatory framework for crypto in the U.S.

Other

Bitcoin's Ethereum-style programmability could come in 12 months, Rootstock founder says - The new project would build off the much-discussed "BitVM" design released last year by developer Robin Linus, which has kindled hopes that the oldest and largest blockchain could eventually see Ethereum-style programmable layer-2 networks. The project could lead to the development of layer-2 networks atop Bitcoin without requiring any major changes to the blockchain's underlying code. "We have a roadmap to finish this in one year" and "we are moving forward at full speed," it was said during a presentation.

• Key takeaways - Bitcoin has seen a huge year in terms of on-chain developments. However, many are asking (other than incorporating Bitcoin into the defi ecosystem), why should we congest the network of what’s intended to be the world’s digital gold?

Hong Kong Bitcoin and Ether ETFs have soft debut - The initial trading volume was much lower than expected, with trading volume for bitcoin ETFs at $8.5m, and ether ETFs at $2.5m. Ether ETFs are allowed in Hong Kong’s market, as regulators in the Chinese territory don’t have the same concerns about ether being a security as their counterparts in the U.S., who have not yet approved an ether ETF. On the first day of Bitcoin ETF trading in the U.S., total trading volume hit $655m.

• Key takeaways - Some were surprised at the small trading debut of the hyped ETFs. Despite the low numbers, these approvals will hopefully spur other regulatory bodies to approve similar financial tools in other areas of the world.