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Category: Crypto Trends

Make sense of the news and how it affects the blockchain space as a whole. Crypto trends is a collection of relevant news and insights to help you make an informed decision.

  • Sovereign Labs: Unlocking the Potential of ZK-Rollups in 2023 – Why This Project Should Be On Your Watchlist

    Sovereign Labs: Unlocking the Potential of ZK-Rollups in 2023 – Why This Project Should Be On Your Watchlist

    ZK-rollups could be one of the strongest performing sectors in 2023, as demand for Ethereum scaling solutions is increasing. As such, Sovereign Labs is one of the most promising upcoming projects in the ZK-rollup space. The team is well-funded and the development is on track to be completed in Q2 2023. As such, Sovereign should definitely be on your watchlist for 2023.

    Check out our zkSync article for another highly anticipated ZK-rollup project this year.

    What is Sovereign?

    Sovereign Labs, the team behind Sovereign, is creating an open, interconnected rollup ecosystem to make it easier for developers to deploy interoperable and scalable rollups on any blockchain. It’s been compared to Cosmos ($ATOM), but instead of layer-1 chains, Sovereign uses their software development kit (SDK) and inter-blockchain communication protocol (IBC) for ZK-rollups.

    Current Problems of Blockchain Scaling Solutions

    The current blockchain scaling solutions including application-specific layer-1s, optimistic rollups and ZK-rollups, all have their own drawbacks:

    1. Application-specific layer-1s are the easiest to design and implement, but require large amounts of capital from validators to secure the blockchain. This approach is only viable for a few well-funded blockchain apps.
    2. Optimistic rollups produce fraud proofs to prevent misbehavior. However, during an attack, fraud proofs can be censored, leading to long finality delays. This makes bridging out of optimistic rollups slow and costly.
    3. ZK-rollups share the advantages of optimistic rollups, but without the long finality delay. Large batches of transactions can be finalized with validity proof in a matter of seconds. However, ZK-rollups are incredibly difficult to build because it involves a very high level of cryptography and protocol engineering.

    Out of the three blockchain scaling solutions, ZK-rollups prove to be the most promising scaling paradigm despite the massive undertaking it requires to build them. As such, Sovereign aims to make it easier for developers to create secure and interoperable ZK-rollups, just like the Cosmos SDK did for layer-1 chains. As a result, developers do not need to be experts in cryptography to write their apps, allowing them to focus on the business logic of their chain.

    Who is the Team behind Sovereign?

    Sovereign Labs is co-founded by Cem Özer (CEO) and Preston Evans (CTO). Özer had worked as a smart contract and protocol engineer in ConsenSys, the company behind MetaMask. On the other hand, Evans had worked as a software engineer in Amazon, and has years of experience in computer science and machine learning.

    Sovereign aims to make scaling simple, supporting billions of blockchain users without sacrificing security. In late January 2023, Sovereign Labs raised $7.4 million in seed funding led by Huan Ventures with participation from Maven 11, 1KX, Robot Ventures and Plaintext Capital. According to CoinDesk, a spokesperson from Sovereign stated the fundraise puts the company’s valuation in the “eight-figure” range. The fund will be used to build the SDK and hire protocol and researchers with expertise in blockchains and cryptography.

    Properties and Key Features of ZK-Rollup SDK

    The Sovereign SDK will provide a set of default modules, a peer-to-peer network, a database, and an RPC node, and will abstract away the details of zero-knowledge. This way, developers can write their apps in Rust or C++, and the SDK will automatically compile it to an efficient zero-knowledge virtual machine.

    It will also use a novel bridging technique based on proof aggregation to allow rollups on a shared L1 to bridge back and forth at minimal cost without a trusted third party. Off-chain relayers can combine the proofs of all the peer rollups into one proof, which can then be verified on the chain. As the state transitions are proven to be valid, there is no need to pay fees to a liquidity provider or wait a week for transactions to be completed. This means that bridging can be done immediately with no drawbacks.

    The biggest feature here is that Sovereign SDK Rollups are able to be used on any blockchain, as the responsibility of verifying proofs is given to the user, not the original blockchain. This is what sets them apart from smart-contract rollups. As the data availability layer does not need to be able to check proofs, SDK rollups can be used on any blockchain without needing to be rewritten. This makes them incredibly versatile, creating an ecosystem of interoperable and scalable rollups that can run on any blockchain.

    When is Sovereign Launching?

    Sovereign is currently in the process of developing the SDK, which includes designing the default storage module, cryptoeconomics, and core APIs. They are also working on a research prototype which is currently integrating with modular blockchain Celestia for data availability and ZK virtual machine Risc0 for the proving system. This phase is expected to be complete around Q2 2023.

    Initial implementation of the SDK will begin afterwards, which they will implement a peer-to-peer network, RPC node, core APIs, default storage and sequencing modules. Once this feature is complete, the SDK will be repeatedly stress tested and audited for about six months until it is ready to be deployed across all mainnet chains.

  • Crypto Market Analysis for Beginners: Looking at Macro Data (Inflation, Interest Rate) to Determine Trends

    Crypto Market Analysis for Beginners: Looking at Macro Data (Inflation, Interest Rate) to Determine Trends

    The crypto market is volatile and unpredictable, but there are events outside of the crypto space that heavily influences the performance of the market. If you are unsure of how the market will react, it always helps to take a step back and look at the bigger picture, which in this case is the macroeconomic data.

    Why Technical Analysis and Narratives are Not Enough

    A lot of people use technical analysis and narratives to determine future price movements. For example, traders would use chart patterns, trading ranges, and technical indicators to determine bullish or bearish trends. On the other hand, investors with a more fundamental approach tend to capitalize on rising narratives in the crypto industry, such as the upcoming Ethereum Shanghai Upgrade causing liquid staking derivatives to pump or halving events for Bitcoin.

    These can be effective strategies, but not always reliable because there are larger forces at play. When the Ethereum Merge came in September, everyone expected ETH to surge in price because of the hype. But the crypto market was under pressure from macroeconomic factors causing broader investment market volatility rather than negative reactions from investors. This was when inflation and interest rate was at its highest for the year, affecting not only the crypto market but other financial markets as well.

    How Do Macro Data Influence the Crypto Market?

    As we have seen in 2022, short term speculation has been significantly influenced by macroeconomics. Since crypto is not widely adopted yet, it is still treated as a speculative asset. As such, Bitcoin’s price movement tend to mirror Nasdaq tech stocks, despite its vision of decoupling from the stock market. It is important not to underestimate macro data as they affect all financial markets. These are some of the common macro data to look out for when analyzing the market.

    U.S. Consumer Price Index (CPI)

    Inflation is measured by the Consumer Price Index (CPI). It is a key economic metric based on prices that consumers pay for goods and services throughout the U.S. economy. When CPI is high, it means that prices for goods and services have risen, indicating inflation. Essentially, high inflation erodes the purchasing power of fiat currencies, meaning that individuals have less buying power for goods and services.

    As a result, inflationary pressures can cause market volatility, as people are more likely to save money for daily necessities and reduce their exposure to risky investments such as crypto. But as shown in the image below, the inflation rate and CPI are cooling off in 2023, which means that the worst is already behind us.

    Federal Interest Rate

    The federal interest rate, also known as the federal funds rate, is the benchmark interest rate set by the Federal Reserve (the central bank of the United States) for overnight lending between banks. It is measured in basis points (bps), describing the percentage change in the interest rate. One basis point is equal to 0.01%. It is an important tool used by the Fed to influence the overall level of interest rates in the economy and to affect the supply of credit.

    The fed rate goes hand-in-hand with CPI and inflation rate. If the Federal Reserve raises interest rates, it becomes more expensive to borrow money. This affects businesses in particular, and shifts the investment landscape from risk-on to risk-off, reducing the demand for stocks and crypto alike.

    Although CPI and inflation has been cooling off in 2023, it is not guaranteed that the Fed will scale back to 25 bps. According to Bloomberg, broader analysis of economic and financial conditions would favor the Fed raising rates by 50 bps. This could result in a stock market dip, which also affects the crypto market.

    Supply Chain

    The supply chain refers to the series of industries involved in the production, delivery, and distribution of goods and services worldwide. They are key indicators of global economic activities. Strong economic growth can increase demand for cryptocurrencies, as investors seek alternative investments in a growing market. On the other hand, weak economic growth or disruptions in the supply chain can reduce demand for cryptocurrencies and impact their price.

    As of 2023, the supply chain is slowly recovering as the COVID pandemic is dying down. With the rise of artificial intelligence (AI) tools such as ChatGPT, supply chain leaders are focusing on automation, robotics and sustainability to improve manufacturing and solve labor cost problems. As such, shipping costs and gas prices have gone down. But there are still some areas struggling with shortages and bottlenecks, leading to bankruptcies and unemployment. For more information, Forbes has published an article sharing their insight on supply chain trends in 2023.

    US Gross Domestic Product (GDP)

    Out of all countries, the US seems to have been the dominating narrative in what has affected the price action of the crypto market. This could be related to the US CPI and Fed interest rates. While the US GDP does not have a direct affect on crypto prices, it can indirectly impact crypto prices by affecting the overall economy, consumer confidence, and market sentiment.

    A strong US economy may increase consumer confidence and investment, potentially leading to an increase in crypto prices. Conversely, a weak economy may lead to a decrease in consumer confidence and investment, potentially leading to a decrease in crypto prices.

    Housing Market

    The housing market can affect crypto prices indirectly, as changes in the housing market can impact the overall economy and consumer confidence. A strong housing market can boost consumer confidence and lead to an increase in investment, potentially resulting in an increase in crypto prices.

    On the other hand, a weak housing market can dampen consumer confidence and lead to a decrease in investment, potentially leading to a decrease in crypto prices. However, it is important to note that the relationship between the housing market and crypto prices is not direct and can vary depending on various other factors such as interest rates, economic policy, and global events.

    As of 2023, the supply chain recovery has helped bring back inventory of single family homes on the market, and has increased the supply side as well. But with mortgage rates increasing, it is unlikely there will be an increase in demand for housing any time soon. Therefore, it is highly likely there will be a housing market correction, but we do not know if it is going to small or big.

    Source: Altos Research

    Oil Prices

    Energy has been a critical factor in the economic turmoil and increased inflation in the past year, and it has mainly come from oil prices. With the ongoing war in Ukraine, many people were fearful of a major worldwide energy crisis this winter. Although there was an energy crisis in Europe, it was not as bad as predicted. Meanwhile, oil prices dropped from $120 to $80 as a result of CPI and inflation rate cooling off.

    Key Takeaway

    Macroeconomic data is important for crypto prices because it can provide insight into the health and stability of the overall economy, which can impact investor confidence and market sentiment. This, in turn, can affect demand for cryptocurrencies and ultimately their prices. Macroeconomic data such as GDP, inflation, interest rates, employment figures, and trade balances can all provide a broader understanding of the economic environment, helping traders and investors make informed decisions about the crypto market. Additionally, changes in macroeconomic conditions can also impact the supply and demand of cryptocurrencies, affecting their prices.

  • Flare Launches Layer-1 Oracle Network with FLR Token Airdrop

    Flare Launches Layer-1 Oracle Network with FLR Token Airdrop

    Flare, a new layer-1 Ethereum Virtual Machine (EVM) blockchain has gone live with the launch of two core protocols as well as its FLR token airdrop. All existing XRP holders from participating crypto exchanges including Binance, Bybit, Kraken, and OKX have been distributed FLR tokens. The airdrop marks one of the largest token distributions in crypto history, with over a million users receiving 4.279 billion FLR tokens.

    Source: Twitter (Flare Community)

    Flare FLR Token Airdrop Details

    The initial airdrop began at 23:59 UTC on January 9, representing 15% of the FLR’s total token distribution. The remaining 85% of tokens will be distributed over the next 36 months according to the community vote on Flare Improvement Proposal 01 (FIP.01). If passed, the proposal would place a hard cap on FLR’s annual inflation at 5 billion tokens per annum.

    Over 4.28 billion Flare ($FLR) tokens were airdropped to XRP holders holding at least 1 XRP based on a snapshot taken in December 2020. FLR tokens were distributed at 1:1, meaning that XRP holders received 1 FLR for every 1 XRP held.

    Fortunately, Celsius Network (which is now bankrupt) obtained Court approval for XRP token holders to also receive the Flare ($FLR) token airdrop.

    What is Flare Network?

    The Flare network serves as an oracle network that allows developers to build apps that are interoperable with the internet and other blockchains. It leverages two interoperable protocols to power its application-building suite: the State Connector and the Flare Time Series Oracle (FTSO).

    • State Connector

    According to their white paper, the State Connector protocol enables smart contracts to interact securely with information and data from other blockchains and internet sources. This function offers powerful data to the network in a decentralized manner on-chain, facilitating the development of cross-chain solutions.

    • Flare Time Series Oracle (FTSO)

    The Flare Time Series Oracle (FTSO) provides prices and data series to DApps running on the layer-1 blockchain without relying on centralized data providers. It is essentially a decentralized data feed oracle that sources data from many independent data providers. In conjunction with the State Connector, it provides inputs for DeFi platforms as DApps can access timely information across different blockchains easily.

    Key Takeaway

    Flare initiated its token airdrop on Jan. 9, with 4.27 billion FLR tokens distributed to millions of existing XRP holders across various cryptocurrency exchanges including Bybit, Binance, Kraken, and OKX.

    The initial token distribution released 15 percent of the full public token allocation, with the remainder set to be released monthly over 36 months. The allocation method for the remaining token supply will be settled by a community vote through the Flare Improvement Proposal 01 (FIP.01).

    Flare Network is a layer-1 EVM blockchain that serves as an oracle network to provide developers a platform to build interoperable DApps such as DeFi solutions.

    Other Upcoming Token Airdrops!

    Hunting token airdrops is a great way to earn free money. There are many highly anticipated token airdrops that can get you to earn as high as $5000, including zkSync, Arbitrum, Quai Network, LayerZero, and zkLend.

  • Genesis Trading Insolvency Could Trigger a Bitcoin Collapse

    Genesis Trading Insolvency Could Trigger a Bitcoin Collapse

    What’s Happening with Genesis Trading?

    Genesis Trading is one of the world’s largest crypto trading desks for professional investors, primarily offering Bitcoin over-the-counter (OTC) trades and lending services. Recently, Genesis has temporarily suspended redemptions and new loan originations due to abnormal withdrawal requests in the aftermath of the collapse of FTX.

    Genesis stated that the withdrawal requests have exceeded its current liquidity, which raised concerns about the firm going insolvent. Because Genesis is directly affiliated with some of the largest crypto institutions, its fall could start another domino effect that is even more devastating than the FTX contagion.

    In case you are out of the loop, we have covered the entire timeline of the FTX contagion in chronological order listed down below:

    Fallback of Genesis Trading from Three Arrows Capital

    The lack of liquidity Genesis is undergoing is not only because of FTX. It is largely attributed to the fall of Three Arrows Capital (3AC) in the aftermath of the Terra Luna collapse.

    Genesis was the biggest creditor to 3AC, lending $2.4 billion. After 3AC went bankrupt, Genesis filed a $1.2 billion claim against them. When 3AC failed to provide the required collateral, the parent company of Genesis, Digital Currency Group (DCG), stepped in and assumed the $1.2 billion claim, leaving Genesis with no outstanding liabilities to 3AC.

    By Q3 2022, their market activity drastically fell, with loan originations falling from $50 billion in Q4 2021 to a mere $8.4 billion. Despite the situation, institutional investors still believe they were crypto’s safest counter-party.

    Gemini’s Exposure to Genesis Trading

    Gemini, one of the top crypto exchanges regulated in the U.S., announced that there would be withdrawal delays with its Earn product, in which Genesis is a lending partner. If you do not know how Genesis ties into Gemini Earn, here’s how it basically works:

    After the lenders give their crypto to Gemini, it will be given to Genesis for them to lend out to a fund. The borrowing party will pay fees for this, which will be shared between Gemini and the lenders. The problem now is that Genesis is having liquidity issues, thus they are unable to give Gemini back their crypto. This means that lenders on Gemini Earn cannot get their crypto back.

    Although Gemini assures this does not impact any other products and services, Gemini customers are rushing to get their funds out fearing the exchange is next to go down as the FTX contagion spreads. Over the past 24 hours at the time of writing, Gemini has seen $570 million in withdrawals and ETH withdrawals reached an all-time high on the exchange.

    Genesis Trading’s Impact on the Crypto Market

    It is not just Gemini but also many other CeFi platforms and major hedge funds use Genesis for their yield product. Moreover, many crypto whales opt to give their funds directly to Genesis to earn yields as well as custodial services. If Genesis is unable to give them back their crypto, many lenders worldwide could potentially lose their asset.

    Genesis is also a sister company of Grayscale, the world’s largest Bitcoin fund (GBTC) and one of the largest Bitcoin holders worth $11 billion at the time of writing. If Grayscale is affected by this, there is a possibility that Grayscale will dissolve GBTC to pay back lenders. This impact of this could be huge.

    However, Grayscale assured users that Genesis is not a counterparty or service provider for any Grayscale product, which means they will not be affected by Genesis suspending withdrawals. But in light of recent situations where FTX and Alameda claimed that they are two independent entities, sceptics are demanding a full audit to prove customer funds are safe.

    Genesis Trading Lays Off 30% of Workforce

    On 5th January 2023, Genesis Trading announced a large-scale layoff in order to reduce cost. According to sources close to the matter quoted by Coindesk, 30% of its workforce were cut, which especially affected the sales and business development departments. In addition to Genesis previously slashing 20% of its workforce in August, the company now has around 145 employees.

    The layoff follows shortly after Genesis Interim CEO Derar Islim sent a letter to clients on January 4, addressing the fact that the firm needs more time to sort out its financial issues. However, time is not something Genesis can afford as it faces increasing pressure from creditors.

    Genesis currently owes $900 million to Gemini, and is due to come up with a solution by 8th January 2023. Gemini co-founder Cameron Winklevoss believes that DCG is to blame and should be held responsible for its subsidiary company’s situation. In an open letter to DCG CEO Barry Silbert, Winklevoss accused him of “bad faith stall tactics” and claimed that a $1.675 billion loan from Genesis to DCG is the reason why Genesis is facing liquidity issues.

    Genesis Trading Considers Bankruptcy

    According to Wall Street Journal, Genesis hired investment bank Moelis & Company to review Chapter 11 bankruptcy filings. A Genesis spokesperson explained that it is to “preserve customer assets and drive the business forward.”

    As of 19th January 2023, Genesis is laying the groundwork for a bankruptcy filing, according to Bloomberg. Reports indicated that Genesis is in confidential negotiations with various creditor groups in an attempt to raise cash. However, if Genesis fails to raise capital, it is highly likely they will file for bankruptcy.

    Digital Currency Group (DCG) Under Severe Pressure Amid Genesis Crisis

    On 17th January 2023, DCG halted dividend payments to preserve cash. According to a letter to DCG shareholders reported by Bloomberg, DCG is focusing on strengthening their balance sheet by reducing operating expenses and preserving liquidity. As the parent company of Genesis, this move is most likely the result of the financial crisis Genesis is facing.

    Moreover, CoinDesk, whose parent company is DCG, is hiring advisors at investment bank Lazard to explore options for a potential sale, including a partial or full sale of the company. According to Wall Street Journal, CoinDesk has actually been privately seeking a deal for months, and has received numerous offers. Whether this is related to the Genesis and DCG crisis, no parties have responded to requests for comment.

    CONFIRMED: Genesis Trading Filed for Chapter 11 Bankruptcy Protection

    According to latest news by CNBC, Genesis Trading filed for Chapter 11 bankruptcy protection late Thursday night in Manhattan federal court. Over 100,000 creditors were listed in the company’s bankruptcy filing, with aggregate liabilities ranging from a whopping $1.2 billion to $11 billion.

    In its filing, Genesis stated that it anticipates that after the restructuring process, there will be funds available to pay off unsecured creditors – a group that can be completely eliminated in bankruptcy cases if the circumstances are particularly dire. They also noted the bankruptcy only affects its lending business, and that its derivatives and spot trading business will continue unhindered.

  • Coinbase Data Privacy: How to Opt Out of Financial Data Sharing

    Coinbase Data Privacy: How to Opt Out of Financial Data Sharing

    Coinbase Data Sharing Policy Takes Effect on 22nd January 2023

    On 23rd December 2022, Coinbase publicly announced that they would be sharing and selling customer data for marketing purposes as well as other business related purposes. According to their notice, this includes both active and former customers:

    “If you are a new customer, we can begin sharing your information 30 days from the date we sent this notice. When you are no longer our customer, we continue to share your information as described in this notice. However, you can contact us at any time to limit our sharing.”

    Reddit User Claims Coinbase Ignores Opt Out Requests for Data Sharing

    This is in accordance with U.S. financial law allowing users to opt out of financial and personal data sharing for marketing purposes under the Gramm-Leach-Bliley Act (GLBA). However, according to Reddit user u/durg0n, they had repeatedly request to opt out of data sharing with Coinbase over the past month, but Coinbase did not respond to their request.

    Despite the Reddit user filing a complaint with the Consumer Financial Protection Bureau (CFPB) and even closing their account in protest, Coinbase still did not agree to limit data sharing with marketers and affiliates.

    How to Opt Out of Coinbase Data Sharing?

    Based on feedback from other Reddit users, Coinbase customers can try the following methods to opt out of Coinbase’s data sharing.

    • If you have a current/active account, there is an opt-out setting on the website/app people are reporting success with:
      • Website: Settings > Privacy > Share my Personal Info
      • App: The 9 dots in the corner > Profile and Settings > Privacy > Share my Personal Info
      • Note — You should double-check it is properly set as it seems to be defaulting to sharing enabled, even in Europe.
      • Not all locations appear to have the opt-out setting available (ex: Argentina). If you live in such a country, try contacting Coinbase Support to opt-out manually.
    • If you have a closed/former account, the only option is to contact Coinbase support. Reddit user u/durg0n has tried this method, but mentions it is still worth a try.
    • If you have an old open account, you may be forced to agree to the new Terms of Service (ToS) in order to access the privacy settings. Please note that the newer ToS’s include other forms of data sharing and arbitration. Accepting it may open you up to data being used in other ways and limit your legal rights. According to Reddit comments, it is probably better to deal with Coinbase Support and send in a written request. But you could accept the new TOS and use the website to opt-out if you don’t care about the TOS.
    • If you have already ‘deleted’ your data, you should write in and opt-out anyway. Coinbase retains some ‘deleted’ data of former customers (ostensibly required for regulatory purposes), and this may be subject to the data sale. u/durg0n suggests writing in to Coinbase Support that you wish to limit data sharing to be safe, and carefully read the reply to see if they actually did it or not.
  • Ethereum Censorship Explained: Your Stablecoins Can Be Frozen Without Warning

    Ethereum Censorship Explained: Your Stablecoins Can Be Frozen Without Warning

    If you hold stablecoins on Ethereum or other EVM platforms, you must be aware of this smart contract feature…

    Token Issuers on Ethereum Can Freeze Your Funds Without Notice

    In order to issue tokens on EVM platforms including Ethereum and Polygon, the first step is deploying a smart contract, which is then used for transferring tokens. However, the token issuer can define support for transaction censorship and token freezing in the contract. This is how Circle, the issuer of USDC, froze 75,000 USDC in user funds with ties to Tornado Cash, in compliance with U.S. sanctions.

    Not many users are fully aware of this feature. This can be compared to how traditional banks have the authority to freeze your funds without notice. If the stablecoin ecosystem depends on a centralized entity for issuing tokens, it could prove to be risky for all crypto users.

    USDT and USDC — Regulatory Compliant Stablecoins

    Paxos and Circle, the issuer of USDT and USDC respectively, are required to comply with regulators in order to be allowed to tokenize US dollars on blockchain platforms. One of the major regulators is the Office of Foreign Assets Control (OFAC), who not just sanctioned Tornado Cash, but also oversees Ethereum block validations.

    It is important to note that regulations for the crypto industry is not necessarily bad. They protect the interests of investors and prevent fraudulent activities. However, this is in conflict with the basic principles of decentralization, especially when user funds are on the line.

    How are Transactions Censored on Ethereum?

    Although a deployed smart contract can never be stopped or otherwise manipulated by a third party, token issuers, however, can write whatever they want in smart contracts, including censorship features. Here’s how:

    In order to mint fungible tokens on Ethereum, developers must follow the ERC token standards including the ERC-20 (token), ERC-721 (NFT) or ERC-1155 (multi-token). These standards define a common list of rules that EVM tokens should adhere to. A customized and deployed smart contract is then used each time tokens move from address to address. However, a smart contract can define any behavior that the EVM will allow, which includes the ability to censor transactions based on a blacklist or freezing an account. As a result, any Ethereum user may lose the ability to spend or use the tokens in any way. This is what the smart contract for USDT looks like:

    Source: cexplorer.io

    As shown in the image above, Paxos has the power to blacklist token owner accounts and burn their funds. Of course, one could argue that this is for our safety, freezing the account of someone who has been involved in criminal activity. After all, the blockchain industry should not be a way for criminals to circumvent the law. But herein lies the dilemma: how is decentralized finance (DeFi) different from traditional finance if we still have to trust the system?

    Key Takeaway

    It is true that certain censorship features in place help protect investors’ interest, but the blockchain industry is meant to be different from the traditional financial world. Take the Tornado Cash incident for example, one of the developers was arrested for simply writing code, and several users who used Tornado Cash without malicious intention ended up having their funds frozen.

    If we blindly accept the rules of the existing system, we will not be able to create anything innovative. It is not true self-custody if a third party can control the tokens you have in your own wallet. Nevertheless, the blockchain industry is still in its infancy, and if we are being pragmatic, a common ground must be reached between crypto users and regulators. For DeFi to move forward, we can only construct a system that remains decentralized and that regulators have no objections to.

  • Will Digital Currency Group (DCG) file for Bankruptcy?

    Will Digital Currency Group (DCG) file for Bankruptcy?


    Digital Currency Group (DCG) is a leading cryptocurrency conglomerate. DCG however has been in the spotlight recently due to issues surrounding its subsidiaries- Genesis Global Capital, Silvergate Capital and CoinDesk. This article looks at the recent troubles surrounding the Digital Currency Group (DCG) and whether it will file for bankruptcy.

    Learn more: Genesis Trading Insolvency Could Trigger a Bitcoin Collapse

    Who is Digital Currency Group (DCG)?

    Digital Currency Group (DCG) is a venture capital company with a specific focus on cryptocurrencies. They are a conglomerate whose subsidiaries include trading desks (Genesis Global Capital), crypto banks (Silvergate Capital), crypto media (CoinDesk) and asset managers (Grayscale).

    What is happening at Digital Currency Group (DCG)?

    DCG has been struggling financially due to the recent market downturn and has been unable to raise additional capital. In a tweet from its CEO, Barry Silbert, the Company talks about how “bad actors and blow-ups” have negatively affected the industry, to which DCG is not immune.

    https://twitter.com/BarrySilbert/status/1612890612507807753?s=20&t=vUGresXpmYnlfR3NA311Jg
    Tweet from Barry Silbert on 11th January 2023

    DCG halts dividends until further notice

    Furthermore, on 17th January 2023, DCG wrote to its shareholders indicating that it has plans to halt quarterly dividends until further notice. DCG states that the reason for this is to reduce operating expenses and preserve liquidity.

    Genesis Global Capital planning to file for bankruptcy

    The halt in declaring dividends stems from the fact that its subsidiary, Genesis Global Capital, is in serious trouble. Genesis Global Capital is said to owe its creditors over US$3 billlion, and has US$175 million locked up in FTX exchange after its collapse.

    Genesis has halted customer withdrawals since 16th November 2022, and there is no news as to when it will reopen.

    Learn more about the troubles surrounding Genesis and the potential implications of it going bankrupt: Genesis Trading insolvency could trigger a Bitcoin collapse

    Silvergate Capital loses deposits, fires 40% of staff

    However, there is the suggestion that simply halting dividends may not be enough to save DCG. This is especially since one of DCG’s subsidiaries, Silvergate Capital, had announced that total crypto deposits from its customers fell almost 68% to US$3.8 billion on 31st December 2022, from US$11.9 billion mere months ago in September 2022. In response, Silvergate laid off about 40% of its workforce and sold around US$5.2 million in debt securities. This is to ensure that the Company would be able to maintain a cash position that exceeds its deposits.

    Learn more- Silvergate Capital’s Exposure to FTX Collapse: What Investors Need to Know

    CoinDesk exploring a full or partial business sale

    Rumours of potential trouble at DCG were further deepened by the news that its subsidiary, CoinDesk Inc, has hired investment bank Lazard Ltd to look into a sale of its business. According to CoinDesk CEO Kevin Worth, CoinDesk is exploring a full or partial sale of its business as a way to attract growth capital.

    Disputes between DCG’s CEO and Gemini exchange

    Gemini is a major cryptocurrency exchange and one of DCG’s partners. The two companies had partnered together on Earn, a crypto lending product. However, not all is going well with this partnership resulting in a public spat between Gemini exchange Co-Founder Cameron Winklevoss and DCG CEO Barry Silbert.

    On 10th January 2023, Cameron Winklevoss wrote an open letter to the Board of DCG calling for them to remove Barry Silbert as CEO. In the letter, Winklevoss accused Genesis, DCG, Silbert and other key personnel of defrauding Gemini and its over 340,000 Earn customers. The letter claims that Genesis owes Gemini US$900 million which Silbert has been unable to satisfactorily resolve.

    Tweet from Cameron Winklevoss on 10th January 2023

    Conclusion: Will Digital Currency Group (DCG) file for bankruptcy?

    Digital Currency Group is fighting a battle from multiple directions. There is news of trouble coming from several of DCG’s subsidiaries including Genesis, Silvergate, and CoinDesk. Digital Currency Group’s CEO, Barry Silbert, is also facing accusations as to his running of DCG. With subsidiary Genesis Global Capital reportedly filing for bankruptcy this week, there are fears that DCG will also go bankrupt. Especially as DCG owes US$575 million to Genesis’ crypto lending arm, which is to be repaid in May 2023.

    With these factors in mind, it appears that Digital Currency Group (DCG) is in a precarious financial situation and there are fears that it may file for bankruptcy. It remains to be seen if DCG will be able to overcome these troubles surrounding it and its subsidiaries. However, as we’ve seen from the collapse of other crypto industry giants in the past, the contagion effect when a crypto company collapses can be huge and wide.

  • Meme Coins 2023: How Smart People Get Rich Investing in Them

    Meme Coins 2023: How Smart People Get Rich Investing in Them

    2023 started off with the explosive rise of Bonk ($BONK), a Solana-based meme coin. In the process, some people made a lot of money, and some did not even have to invest a dime as they were eligible for $BONK airdrops as Solana users. It is important to remember that meme coins are purely speculative and extremely volatile, but smart traders are able to recognize patterns and trends, allowing them to capitalize on these opportunities.

    What are Meme Coins?

    Meme coins are cryptocurrencies that are created for the purpose of entertainment and humor. They are often based on popular internet memes. Dogecoin is the most famous example, a dog-themed token based on the viral Doge meme in 2013.

    What started as a joke quickly became a driving force in the crypto market. Thanks to Dogecoin’s success in 2021, the meme coin market rapidly expanded, and is now valued over $17 billion in total market capitalization.

    Why are Meme Coins So Popular?

    Investing in meme coins present a low-entry barrier. Since meme coins are typically valued at pennies per token, investors can acquire large amounts of tokens for a relatively small price. As a result, investors can gain significant profits if these tokens spike up in price. Many investors view meme coins as a way to make a quick profit, as they are often volatile and can be traded for a profit.

    In contrast to actual blockchain projects such as Ethereum or Aptos, meme coins have no utilities at all. They are less about technology and solutions, and more about fun and community engagement. Additionally, meme coins are often seen as a way to show support for a particular meme or cause, which can be a powerful motivator for investors. Instead of complex blockchain terminologies, meme coin communities focus on building on their biggest facility — humor. Because of this, meme coins are a good at exposing newcomers to the crypto space.

    The Psychology Behind Investing in Meme Coins

    The originator of the term “meme” is Richard Dawkins. In his book “The Selfish Gene”, he explains that when a cultural meme becomes viral and is attached to an exchangeable value, it can theoretically become an actual currency. With blockchain technology, memes can literally become cryptocurrencies.

    As such, they have become increasingly popular in the cryptocurrency space due to their ability to post rapid gains and reach incredible market capitalization and popularity levels in a very short period. This phenomenon can be attributed to two main factors: Social Media Hype and Fear of Missing Out (FOMO).

    Social Media Hype

    We are currently living in the Internet age, where our average attention span is short. As such, memes could prove to be a powerful marketing tool because they are simple, entertaining, and engaging. When used properly, memes are a low-effort marketing strategy that can drive organic engagement.

    Generating hype via social media channels has been a successful strategy for many meme coin projects. By creating shills and utilizing prominent influencers and mainstream celebrities, projects can generate excitement and attract potential investors, even if there is limited information available about the project. This growth, although organic, is based on “unverified beliefs” and inflated utility. Meme coins have been particularly successful in leveraging this strategy, leading to a surge in their token prices.

    Fear of Missing Out (FOMO)

    The volatile nature of the crypto market is often driven by ambitious investors who jump into new projects with the hope of making a profit or not missing out on the project’s potential success. This fear of missing out on further profits has been a major factor in the success of meme coins.

    The price growth that follows the hype marketing is further augmented by FOMO and widespread hype. This trend has enabled meme coins to gain hundreds of thousands of followers, mainly due to their meme culture, before they adopted a reasonable utility. Additionally, as meme coins generally appeal to less experienced retail investors, they tend to jump on the bandwagon in hopes of making profit and being part of a large community.

    The Risk of Investing in Meme Coins

    While meme coins can be a great way to make a quick profit, they also come with a certain amount of risk. As with any investment, there is always the potential for losses. Additionally, because meme coins have no utilities, they are purely speculative assets. Therefore, they are often highly volatile, meaning that prices can change quickly and without warning. As such, it is important to do your research and understand the risks before investing in meme coins.

    Key Takeaway

    At its core, meme coins are purely speculative, and investing in them is somewhat of a gamble. However, smart traders are able to identify trends before they break out. Because meme coins typically rely on hype, they monitor activities on the niche market via social media channels or word-of-mouth. Because these tokens are usually valued at pennies per token, they are able to secure a position before any price surge or drop. But from that point on, it is really just a bet.

  • Will Bitcoin (BTC) Market Rally Continue Throughout Q1 2023?

    Will Bitcoin (BTC) Market Rally Continue Throughout Q1 2023?

    It has been an explosive week for the crypto market, as most cryptos see double-digit gains for the first time since the FTX contagion started in November 2022. This rally was led by Bitcoin (BTC) and Ethereum (ETH), which surpassed the $21,000 and $1,590 mark respectively. It is important to understand what factors are causing these uptrends, so that we, as investors, can recognize and capitalize on these patterns.

    Why is Bitcoin (BTC) Pumping in January 2023?

    Over the past week, Bitcoin has seen large numbers of purchases with robust trading volume. According to Glassnode, the exchange outflow volume of BTC has hit an early year-to-date high, with nearly $300 million worth of withdrawn BTC moving into crypto wallets. Moreover, most of these withdrawals were made in large installments ranging from $1 million to $10 million of BTC. This is corroborated by on-chain aggregator Santiment, where Bitcoin whales have been loading up their wallets with a lot of BTC, suggesting institutional action.

    Across the broader crypto market, more than $1.3 billion of crypto assets in short positions were liquidated over the past 8 days, according to data sourced from Coinglass. Additionally, more than 200,000 traders were liquidated, with the most significant liquidation being a $6.84 million short position against Bitcoin, contributing to the surging price movement in the crypto market.

    Apart from market activities within the space, there are other macroeconomic conditions that contribute to Bitcoin’s pump.

    Inflation Slowing Down According to U.S. Consumer Price Index (CPI)

    The price surges in the crypto market also reflects the market’s expectations that inflation is cooling ahead of the release of the U.S. Consumer Price Index (CPI) data. Bitcoin began the week trading at $17,207 and has since seen an upward trajectory, with the CPI report meeting market expectations indicating that inflation in the U.S. economy is slowing. Other equities markets have also responded positively as a result.

    Investors are now anticipating comments from the Federal Reserve which should hint at future policy, including the size of interest rate hikes. The Federal Open Market Committee (FOMC) meeting will be held between January 31 and February 1. According to CME FedWatch Tool, the committee is currently expected to yield a hike of 25 basis points istead of the previous 50 basis points.

    Now, the prevailing narrative is that U.S. inflation has peaked in 2022, which means softer rate hikes going forward. This stimulates all economic activities including in speculative markets, but with the crypto industry, any surprises could spark additional volatility.

    Bitcoin Halving Event in 2024

    Another factor contributing to Bitcoin’s pump this month is the upcoming Bitcoin halving event in 2024, in which Bitcoin rewards to miners are cut in half. This event occurs after every 210,000 blocks are created, which is roughly every four years. Around next year, miner’s payout will be reduced from 6.25 BTC to 3.125 BTC.

    Historically, halving events have been seen as a positive sign for Bitcoin’s price, as it helps to contract the supply of BTC. This is due to the fact that Bitcoin has a fixed supply, and the halving event directly relates to Bitcoin’s deflationary tendency, driving its price up as a result of supply and demand mechanisms. According to Coindesk, we can see from Bitcoin’s halving history, the events have always been able to establish long-term bullish drivers for Bitcoin’s price.

    Correlation with the U.S. Dollar Index (DXY)

    Another factor contributing to Bitcoin’s price movement is its relationship with the U.S. Dollar Index (DXY). The crypto market generally correlates negatively to the DXY due to the purchasing power of fiat currencies. When the DXY declines, investor sentiment for riskier assets such as crypto tends to increase. This year, the DXY dropped to seven-month lows, momentum has slowed as it is beginning to retract. Typically when this happens, it is followed by Bitcoin price moving in the opposite direction.

  • MetaMask Security Guide: Protect Yourself from “Address Poisoning” Scams

    MetaMask Security Guide: Protect Yourself from “Address Poisoning” Scams

    Wallet Address Poisoning Scam: What You Need to Know

    MetaMask warned crypto users of a new scam that is running rampant called “address poisoning”. This scam involves malicious actors copying and pasting wallet addresses in order to steal funds from unsuspecting users. In this article, we will discuss how address poisoning works and what users can do to protect themselves. Also, check out Gemmy’s video for more information on how to secure your MetaMask contacts! (https://prodavinci.com)

    How Does Wallet Address Poisoning Work?

    Address poisoning is a scam that exploits copy-and-paste tendency of most crypto wallet users. Since wallet accounts have cryptographically-generated address with long hexadecimal numbers, users tend to only remember the first and last few characters of their address. As a result, users rely on copying and pasting their addresses to save time. MetaMask addressed this in their blog post, and here’s how it essentially works:

    Attackers usually has softwares that monitor token transfers. If they pick up on your address, they can use vanity address generators to create an address that looks very similar to yours. The attacker then sends you worthless tokens to “poison” your transaction history. If you are not careful, you might copy and paste their address from your transaction history, sending funds to the attacker’s address.

    This method is rather amateurish, compared to other scam types, blockchain attacks, or smart contract exploits. While this would not give the attacker access to user wallets, it relies on user carelessness and haste — something that is common in Web3 when users want to send funds quickly to capitalize on DeFi opportunities.

    The Increasing Cases of Wallet Address Poisoning

    According to an article jointly published by crypto analysts X-explore and Wu Blockchain on 2nd December 2022, over 340,000 addresses have been poisoned on-chain, resulting in $1.64 million stolen from unsuspecting victims. The cases began spiking at the end of November, and is still a prevalent issue now.

    The article suggested that MetaMask should improve its UI features to prevent such attacks from happening, such as letting users identify trusted wallet addresses in transaction history using color markers or other prompts.

    How to Protect Yourself from Address Poisoning

    Metamask recommends users to always double-check the address before sending funds, making sure every single character is correct. As the attacks are still ongoing, users are also advised to avoid copying addresses from transaction histories and block explorers. Users can also add trusted wallet addresses in Settings > Contacts.

    More importantly, it is much safer to use hardware wallets when transferring funds, as users are required to check and confirm any address they are sending funds to before the transaction is authorized. If you are interested in getting a hardware wallet, feel free to check these out:

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