- Choppy price action dominated the crypto market over the past week, but overall, prices remain unchanged amid deteriorating economic conditions.
- The Federal Reserve held interest rates steady in the 5.25%-5.5% range, causing a slight pullback in cryptocurrency prices, but ultimately having little impact.
- A new evaluation of Ethereum that accounts for activity on L2 protocols says the second-ranked crypto is trading at a 27% discount to its fair value.
Market Overview
Choppy price action in the cryptocurrency market resulted in a slight price appreciation for Bitcoin over the past week as economic data continues to present a mixed view of the global economy, while signs continue to emerge that consumers are being stretched thin, posing a risk to stock prices which still trade near all-time highs.
A new report from the research firm RxR that used an enhanced version of Metcalfe’s law suggests that Ether is trading at a 27% discount to its fair value when accounting for activity on various layer-two (L2) scaling solutions. Most Ether valuations use the standard version of Metcalfe’s law that only accounts for its user count on the mainnet, which significantly reduces the actual number of users and total value locked on the Ethereum network.
When accounting for activity on the various L2 solutions, RxR said they “see a reasonable chance of 200% growth in daily active users in 2024, implying a $800B fair network value by 2025 (2.9x from current fair value and 3.9x from current FDV).”
All eyes were on the Fed this week, which announced on Wednesday that it would be holding interest rates in the range of 5.25%-5.5% for the time being but reiterated its projections that rates could close out 2023 in a range of 5.5%-5.75%, implying that there will be one more rate hike this year. Bitcoin initially pulled back after the announcement, but bulls managed to bid it back above $27,000 later in the day. At the close of the daily candle on Thursday, BTC traded at a price of $26,560.
At the time of writing, the total cryptocurrency market cap stands at $1.05 trillion, unchanged over the past week. The DeFi market cap currently stands at $42.1 billion with a 24-hour trading volume of $2.31 billion, which is 8.43% of the total crypto market volume.
Crypto News
No Relent - Following last week's charges against the NFT project “Stoner Cats,” David Hirsch, head of the SEC’s Crypto Assets and Cyber Unit, warned that more enforcement actions are coming related to ongoing investigations. Hirsch said the SEC is currently investigating cryptocurrency exchanges and decentralized finance (DeFi) platforms that have allegedly conducted similar breaches as Coinbase and Binance.US, and a response from the regulator will be forthcoming. “We're going to continue to be active as to intermediaries,” he said. “That can be brokers, dealers, exchanges, clearing agencies, or any others who are active in this space, are within our jurisdiction, and [are] not meeting their obligations, either through registration or failure to provide adequate or complete disclosures.”
Seeking Recompence - Debtors in the FTX bankruptcy case filed a lawsuit against Joseph Bankman and Barbara Fried, the parents of FTX founder and former CEO Sam Bankman-Fried (SBF), alleging that they exploited their access to SBF’s business to enrich themselves at the expense of the FTX bankruptcy estate. The debtors alleged that Bankman and Fried “siphoned millions of dollars out of the FTX Group for their own personal benefit and their chosen pet causes,” including a $10 million cash gift and a $16.4 million luxury property in the Bahamas. They asked that the court award them “compensatory damages in an amount to be determined at trial resulting from defendants’ conscious, willful, wanton, and malicious conduct, which exhibits a reckless disregard for the interests of plaintiffs and their creditors,” and the “Disgorgement of all of Defendant Bankman’s compensation paid by Plaintiffs.”
Institutional Crypto Yields - Standard Chartered’s crypto unit, Zodia Custody, announced the launch of “Zodia Custody Yield,” a platform that will allow the bank's institutional clients to earn a yield on their crypto holdings for the first time. Zodia Custody partnered with OpenEden, a platform focused on bridging real-world assets into DeFi via tokenization, to enable the yield service. The new integration will also give institutions exposure to staking services, enabling them to “access off-chain yield potential for their on-chain assets without compromising on the bank-grade security of Zodia Custody’s platform.” The firms said they decided to launch this collaboration in response to increasing demands for an “institutional-grade custody solution for digital asset products that [is] low-risk, liquid, and transparent with respect to how returns are generated for stablecoin holders.”
And in the World of Blockchain and Cryptocurrency Adoption…
Phygital Marketing - Walmart, the world’s largest retailer by revenue, is looking to “reinvent retail” via the metaverse and virtual commerce, a new type of commerce where customers can purchase virtual goods for their online avatars alongside real-world versions of the same item for use in their daily lives. In the first phase of the project, Walmart plans to add new décor items from Mainstays and Better Homes and Gardens into House Flip, a mobile game that lets players renovate and sell virtual homes. The move will allow users to browse items in the virtual world before purchasing the physical version. The retailer's ultimate goal with the platform is to develop new ways to meet and engage with its customers and power commerce in the metaverse. As the system evolves, Walmart plans to allow customers to make purchases via their Walmart account without the need to leave the virtual world, helping to simplify the checkout process.
Banks Going Blockchain - Citigroup’s Treasury and Trade Solutions (TTS) announced the creation and pilot testing of the Citi Token Services for cash management and trade finance, which utilizes blockchain and smart contract technologies to deliver digital asset solutions for institutional clients. The new service will integrate tokenized deposits and smart contracts into Citi’s global network to upgrade the firm’s core cash management and trade finance capabilities, allowing it to operate on a 24/7 basis with instant settlement. To create the new service, Citi worked with Maersk and a canal authority to digitize a solution that serves the same purpose as bank guarantees and letters of credit in the trade finance ecosystem. Citi Token Services has also been applied to a global cash management pilot, enabling clients to transfer liquidity between Citi branches on a 24/7 basis.
Digital Asset Funding - The Japanese government announced that they plan to allow startups looking to launch in the country to raise funds from venture capital firms through the issuance of digital assets, such as cryptocurrencies, providing more funding avenues for up-and-coming companies involved in blockchain technology. Venture capital firms typically use limited partnerships to pool capital with other companies for startup investment, which caps their exposure to the money they put in. Up to this point, Japanese financial laws have restricted limited partnerships to more conventional assets, such as shares, stock options, and security tokens. The new rule adds other tokens and crypto assets to this list and is expected to primarily benefit companies involved in next-generation Web3 technologies.
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Ethereum could see 200% growth in daily active users, $800B fair value by 2025 - RxR Analyst
