What has been happening around Blockchain Technology and Cryptocurrencies this week? The most relevant local and international developments as well as appealing background reports in a pointed and compact weekly review.
Selected articles of the week:
The crypto market is basically known for spectacular developments. However, the bankruptcy of one of the largest crypto exchanges is beyond even the scope of this imagination. FTX, which was previously the second largest crypto exchange in the industry, had to reveal a hole in its balance sheet of almost $10 billion after a failed showdown with its competitor Binance, and subsequently filed for bankruptcy. This is by far the largest bankruptcy in the US this year, affecting users, investors and counterparties all over the world. The shocking move comes on the heels of a misappropriation of customer funds that was illegitimate according to user terms. The funds were intended to bail out Alameda Research, a hedge fund also reeling from FTX CEO Sam Bankman-Fried (SBF). On one hand, the actions reveal the massive debt of one of the industry’s largest players. On the other hand, the revelations show the criminal behaviour of a self-proclaimed altruist who, ironically, has been lobbying for stronger regulation of the crypto and DeFi sector in Washington for two years. The FTX debacle is likely to massively accelerate tighter regulation, which was already on the horizon after the fall of other crypto service providers.
All in all, the demise of the FTX conglomerate sets the industry back severely, and the trust that was squandered must now be regained in a time-consuming manner. The crypto rule number 1: “not your keys not your coins” is once again underpinned with a sad reality. The industry can proactively respond to a necessary regulation, which particularly affects disclosure requirements for crypto players, by providing insight into the custody of customer funds. The largest crypto exchange Binance has already presented initial approaches in this regard; after all, blockchain technology is designed precisely for such transparency.
Just a few months after the 3AC debacle, the next billion-dollar player is faltering. Is Binance taking over competitor FTX?
Crypto exchanges fear the advent of what is known as a “bank run”. If doubts about the liquidity situation arise, withdrawing deposits can dramatically exacerbate initial liquidity shortages. When initial rumors surrounding FTX’s solvency surfaced, users withdrew $6 billion in deposits within 72 hours. To counter fears of a similar situation, Binance committed to disclosing all reserves. The leading cryptocurrency exchange revealed the addresses of nearly $70 billion in digital assets, with blockchain-based proof to follow. A sum that has never been transferred to the public like this before. By comparison, stock trading app Robinhood reported around USD 64 billion in assets under custody last quarter.
In response to the fall of competitor FTX, the largest crypto exchange Binance is revealing the full reserves of their customer deposits.
Goldman Sachs is continuing to drive institutional adoption in spite of turbulent times. The US investment bank is developing a data analytics system with other companies in order to monitor emerging trends in the crypto and DeFi space. The data feed, called “Datonomy,” is designed to make it easier for investors to evaluate digital assets in the market.
Recently, the major U.S. bank Goldman Sachs published that it will work with MCSI and CoinMetrics to create a new framework for digital assets.
Web3 applications consist of a variety of use cases. The Lens Protocol was introduced in February 2022 by the team of the DeFi Protocol Aave and is intended to form the decentralized basis for social interactions on Web3. The profile and contacts of the users are represented in a censorship-resistant way in a so-called social graph, whereby content can be monetized directly via the blockchain. With these features, the protocol wants to offer an alternative to centralized social media services such as Twitter and Facebook.
Lens Protocol, a creation of DeFi’s Aave platform development team, is the building block for the decentralized social media landscape.
In addition: The weekly market review makes it clear what is happening outside the FTX situation in the cryptocurrency markets. In addition to an analysis of Coinbase’s quarterly results, market metrics are analyzed and a look is taken at the macro situation.
A summarizing review of what has been happening at the crypto markets of the past week. A look at trending sectors, liquidity, volatility, spreads and more. The weekly report in cooperation with market data provider Kaiko.
