CoinDesk Crypto

This article originally appeared in Valid Points, CoinDesk’s weekly newsletter breaking down Ethereum 2.0 and its sweeping impact on crypto markets. Subscribe to Valid Points here.

Pulse check

The following is an overview of network activity on the Ethereum 2.0 Beacon Chain over the past week. 

For more information about the metrics featured in this section, check out our 101 explainer on Eth 2.0 metrics. 

Related: Bitcoin in Pullback Mode; Support Near $45K

Disclaimer: All profits made from CoinDesk’s Eth 2.0 staking venture will be donated to a charity of the company’s choosing once transfers are enabled on the network.

New frontiers: Ethereum is coming of age

One of the first articles I wrote about Ethereum for CoinDesk was headlined “Unstoppable Scams? Ethereum’s Gambling Problem Is Only Getting Worse.” 

At the time, in the late summer of 2018, Ethereum’s most popular decentralized applications (dapps), outpacing even the incumbent CryptoKitties gaming dapp, were gambling dapps that closely resembled Ponzi schemes. LastWinner, a clone copy of another infamous gambling dapp called FOMO 3D, had raised over $7 million in ETH from users within the span of a week and was eating up one-third of Ethereum’s total computational power, also called hashrate. 

Meanwhile, the biggest headline news about Bitcoin were the pending decisions by the U.S. Securities and Exchange Commission (SEC) on two bitcoin exchange-traded fund (ETF) applications put forth by ProShares. 

Related: ADA, SOL Lead the Way as Crypto Market Sees Price Pullback

As Ethereum attracted retail users and scammers looking to make a quick buck, it seemed the majority of investors and traders serious about adopting cryptocurrencies for a mass audience were focused on Bitcoin. 

In many respects, market infrastructure for and regulatory awareness about bitcoin has paved the way for cryptocurrencies like ether to follow. 

For example, the classification of being a commodity rather than security in the eyes of the SEC was first granted to bitcoin in 2018 and then for ether in 2019. Exchange-traded funds (ETFs) in Canada were first approved for bitcoin then for ether. Crypto custody bank Anchorage Digital started its lending service with bank-grade, bitcoin-backed loans and only recently expanded its offerings to include ether-backed loans through an FDIC-insured bank this summer. 

However, trends are changing, and evidence is mounting to suggest that Ethereum has finally either caught up to or surpassed Bitcoin across a number of key metrics, even as other smart contract blockchains such as Cardano and Solana show promising signs of real adoption and value. 

Key metrics

For starters, Ethereum is surpassing Bitcoin in total value transferred on-chain. Using Coin Metrics’ adjusted transaction volume estimates, so far in August $185 billion worth of ETH has been moved on Ethereum while only $180 billion of BTC has exchanged hands on Bitcoin. The last time Ethereum passed Bitcoin in monthly transfer volume was in May 2021. 

Every month since June 2020, users have been paying more in fees to send transactions on Ethereum than Bitcoin. In 2021 alone, total fees in dollar terms on Ethereum were four times higher than Bitcoin, suggesting demand for block space on Ethereum is outpacing demand for block space on Bitcoin. 

Aside from on-chain metrics, spot market metrics such as the Puell Multiple, historically used to measure the relative value of new coins being mined on a proof-of-work blockchain, suggests the profit-taking opportunities for investors holding ETH have been greater than those for investors holding BTC almost consistently for the past 15 months. 

As a result, trade activity for ETH-USD pairs have surpassed or come close to surpassing that of BTC-USD pairs. For the first time ever, aggregated monthly trade volume in the ETH spot markets surpassed that of the BTC spot markets in May; so far in August, trade volumes for ETH are about 90% of the volumes being seen for BTC. This suggests market interest in ETH is trending as high as BTC. 

There are also telltale signs in the cryptocurrency derivatives market of a shift in market sentiment placing Ethereum in the same rankings as, if not more bullish rankings than, Bitcoin. According to  Alexander Blum, managing director of digital asset investment fund Two Prime, the technical and fundamental measures he uses to evaluate digital assets are beginning to show him that ether is a more promising investment than bitcoin. 

“How much people are willing to pay for bitcoin or ether one or three months out into the future is a good sense of the market sentiment around where things are going,” said Blum in an interview with CoinDesk. The “future premium you pay for ether is close to 10%, whereas for bitcoin it’s right around 7% to 8% right now and the amount of calls being bought out into the future is more skewed to the upside on ether than bitcoin.”

Institutions and professional investors that got involved in the crypto industry because of their interest in bitcoin are getting serious about their interest in ether, too, and, more importantly, they are beginning to value ether as a unique investment separate from bitcoin. 

Key competitors to Ethereum

Although Ethereum has the first-mover advantage of being the first general purpose, smart contract blockchain in the world, there are a number of up-and-coming competitors gaining user adoption and market value. 

Binance Smart Chain, Cardano and Solana are just a few of the platforms that have made headlines this year for wildly popular decentralized applications (dapps) or outlandish token returns of over 1,000% year to date in some cases. 

As important as measuring these competitor networks by their potential is through evaluating their developer teams, white papers and roadmaps, it’s equally important to put their performance and current progress into perspective with the metrics used to evaluate the top cryptocurrencies of the industry. 

As of Aug. 24, 2021, 24-hour trade volume for the native tokens of the Cardano (ADA), Binance Smart Chain (BSC) and Solana (SOL) blockchains combined barely exceed half the daily trade volume for ETH. Public data around total value transferred on-chain for these three networks is scarce and regulated derivatives products for ADA, BSC and SOL are almost non-existent. 

Other important metrics specific to evaluating the performance of smart contract blockchains include number of dapps, total value locked in dapps and number of active dapp users. For some networks such as Cardano, smart contract functionality to support the development of dapps has yet to be launched. For others such as Binance Smart Chain and Solana that do have smart contract functionality, the total value locked in dapps is multiples lower than the value locked in Ethereum dapps. 

As bitcoin paved the way in many respects for the institutional adoption and awareness of cryptocurrencies broadly, the increasing awareness of ether’s use case and design raises the profiles of competing assets and propels investment in their continued development. 

This in turn fuels innovation through market competition in smart contract blockchain technology, which presents opportunities for alternative networks to Ethereum to shine and steal market share even as Ethereum continues to evolve. 

In an industry like crypto where little is established and much is fueled by speculation, the rise of Ethereum over the past six years stands as an example for how quickly user adoption and institutional interest can catch fire, challenging the status quo.  

Validated takes

• Ethereum’s most popular software client, Geth, has issued a hotfix to a high severity security issue in their code. BACKGROUND: All users were encouraged to upgrade immediately to the latest version of Geth, v.1.10.8. The last time a fix for a bug in Geth code was released to users, it caused a temporary chain split on Ethereum due to a lack of communication between Geth developers and users about the urgency of the upgrade.
• Crypto investment firm Paradigm helped mitigate a potential $350 million bug in decentralized exchange SushiSwap’s launchpad code. BACKGROUND: Paradigm is a well-known investor in Uniswap, the original exchange that inspired the creation of SushiSwap. Paradigm Research Partner Sam Sun identified a vulnerability in SushiSwap code that could have allowed hackers to drain users’ funds from the exchange. Sun disclosed his findings with the SushiSwap team, pulling off one of the biggest whitehat rescues ever in the crypto industry.
• Visa announced that it bought a CryptoPunk NFT on Monday, spending roughly $150,000 on the digital art piece. BACKGROUND: Visa’s head of crypto, Cuy Sheffield, said in a blog post that the main purpose behind the purchase was to learn more about the growing non-fungible token market. “We think NFTs will play an important role in the future of retail, social media, entertainment and commerce,” Sheffield wrote.
• $1.5 million has been awarded to Ethereum software client teams such as Besu, Erigon, Geth, Nethermind and Nimbus. BACKGROUND: These client teams build the software that enable users and businesses to connect to the Ethereum network. The grant money was donated by Compound Grants, Kraken, Lido, Synthetix, The Graph and Uniswap Grants.
• Decentralized exchange (DEX) volume is projected to hit around $80 billion for the month of August. BACKGROUND: June and July showed slowing trading volume, but August is on pace to be the second-best month in DEX history. EIP 1559, a revival in governance tokens and an emerging cross-chain ecosystem have helped bring positive sentiment back into the decentralized finance market this month.
• Ether price and active sending addresses have started to diverge over the past week in a way that suggests bearish price trends to follow. BACKGROUND: The number of active addresses on Ethereum is usually a leading indicator on ETH price. While prices have increased 4.87% over the last seven days, the number of active addresses has dropped 5.50% over the same time period. 

Teddy Oosterbaan

Factoid of the week Open comms

Valid Points incorporates information and data about CoinDesk’s own Eth 2.0 validator in weekly analysis. All profits made from this staking venture will be donated to a charity of our choosing once transfers are enabled on the network. For a full overview of the project, check out our announcement post. 

You can verify the activity of the CoinDesk Eth 2.0 validator in real time through our public validator key, which is: 

0xad7fef3b2350d220de3ae360c70d7f488926b6117e5f785a8995487c46d323ddad0f574fdcc50eeefec34ed9d2039ecb. 

Search for it on any Eth 2.0 block explorer site.

New episodes of “Mapping Out Eth 2.0.” with Christine Kim and Consensys’ Ben Edgington air every Thursday. Listen and subscribe through the CoinDesk podcast feed on Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, IHeartRadio or RSS.

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Powerbridge Technologies has arranged the purchase of 5,600 bitcoin and ether mining machines for an undisclosed amount.

• The Zhuhai, China-based company entered into a purchase agreement with Cryptodigital Holdings for the acquisition of the miners, which include Antminer S19 Pro and Antminer S19 models, Powerbridge announced Wednesday.
• Delivery is scheduled to commence in October for the 2,000 BTC mining machines and 3,600 ETH miners, representing expected hash rates of 200 PH/s and 1,700 GH/s respectively.
• The agreement follows Powerbridge’s announcement earlier this month that it’s expanding into crypto mining from its core business providing software-as-a-service products and blockchain applications.
• Powerbridge plans to build a global network for clean-energy-based bitcoin and ether mining.

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Bitcoin (BTC) buyers continued to take profits during Asia hours as short-term overbought signals appeared on the charts. The cryptocurrency is trading around initial support at $47,500 at press time and is down about 3% over the past 24 hours. A lower support zone between $42,000-$45,000 could stabilize the pullback.

• The relative strength index (RSI) on the four-hour chart is approaching oversold territory similar to April 18, which preceded a price bounce.
• However, the RSI on the daily chart is declining from overbought levels as buyers struggled near the $50,000 resistance level.
• Bitcoin’s 30% rally over the past month appears to be exhausted, although support above the $42,000 breakout should hold.

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The crypto market is a sea of red, with Solana’s SOL, Cardano’s ADA tokens and other alternative cryptocurrencies taking a bigger hit than bitcoin and ether. The move seems typical of a breather often observed after notable rallies.

ADA was trading at $2.67 at 10:53 UTC, representing a 7.6% drop on a 24-hour basis, and SOL was nursing a 13% loss at $68, according to data source Messari. ADA debuted on Japanese cryptocurrency exchanges today. Earlier this month, Sebastien Guillemot, CTO at dcSpark and a former executive of Cardano-founding entity EMURGO, hailed ADA’s entry to Japan as being similar to a listing on Coinbase, the U.S.-based, Nasdaq-listed crypto exchange and institutions’ preferred avenue to accumulate bitcoin.

XRP, polkadot and dogecoin were also down more than 8%. Meanwhile, bitcoin was changing hands at $47,500, down 3.7%, and ether traded 5.5% lower at $3,100, CoinDesk 20 data show. All sub-sectors, including decentralized finance and non-fungible tokens, were flashing red.

Related: Valid Points: Ethereum Emerges From Bitcoin’s Shadow

According to analytics platform Laevitas, alternative cryptocurrencies were looking ripe for a pullback as holding long positions in many of the coins had become too costly. “Paying over 100% annualized for longs can’t be sustained forever,” Laevitas tweeted, adding that the price drop looks like a healthy correction.

Some of the coins like ADA and SOL looked overbought, having recently rallied to record highs and outperformed bitcoin by a significant margin. For instance, ADA had rallied 187% and SOL 272% in the past four weeks, more than twice as much as bitcoin’s 70%.

“The duo of Cardano (ADA) and Solana (SOL) has seen a meteoric rise in price and valuation lately, with both printing new all-time highs at $2.97 and $81.81 respectively,” Pavel Shkitin, CEO of the cryptocurrency exchange Nominex.io said. “Despite the superiority in both tokens’ technologies, the surge in the past days is somewhat unprecedented, and the current reversal is an expected reaction.”

James Wo, founder, and CEO of the Digital Finance Group said it is normal for investors to reduce exposure and take profits to enter at a lower price since we’ve seen the market signal that a short-term top was reached.

Related: Bitcoin in Pullback Mode; Support Near $45K

Bitcoin, the leading cryptocurrency by market value, looked due for a pause on Wednesday, with exchanges seeing an increased inflow of coins amid renewed selling by whales.

Similar dynamics were observable in Ethereum’s ether token. According to blockchain analytics firm Santiment, exchanges received 779,880 ETH on Monday, the most since June 21st. “Judging by on-chain data, it might be a whale possibly looking to take some profits,” Santiment said in a research note published Tuesday.

Analysts remain confident of major cryptocurrencies’ long-term prospects. Laurent Kssis, managing director of exchange-traded products at 21Shares, foresees a return of institutional demand to the bitcoin market after Friday’s Jackson Hole Symposium.

Nominex.io’s Shkitin expects the so-called Ethereum killers ADA and SOL to regain their upward trajectory. “With what Cardano, through its forthcoming Alonzo upgrade, is set to usher in and Solana’s blooming fundamentals, these price drops are at best temporary, and a reversal is imminent in the near to mid-term,” he said.

Also read: Cardano Alonzo Hard Fork: What You Need to Know

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Facebook is “definitely thinking about” using its Novi digital wallet to support non-fungible tokens (NFTs), David Marcus, the company’s head of financial services, said.

• Facebook is in a good position to explore supporting NFTs through its new digital wallet, though it is too early to talk about specific plans, Marcus said in an interview with Bloomberg on Tuesday.
• “When you have a good crypto wallet like Novi will be, you also have to think about how to help consumers support NFTs,” he said. Facebook that “is definitely thinking about this.”
• Asked about concerns over the social media giant’s moves into financial services, Marcus restated his position, aired in a recent blog post, that Facebook deserves “a fair shot” at earning people’s trust given the company’s history of bringing competition to areas like communication and thus reducing costs of text messages and international calls.
• “I completely understand the scrutiny and the trust conversations, but I’m not advocating for blind trust. I’m advocating for a shot to earn people’s trust over a long period of time,” he said.

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The global cryptocurrency market will hit $4.94 billion by 2030, more than triple its estimated size of $1.49 billion in 2020, according to a new study.

• The report by Allied Market Research published Tuesday projects a compound annual growth rate of 12.8% between 2021 and 2030.
• The main drivers will be increased demand for international remittances and more transparency in global payments systems, Allied Market said.
• More than two-thirds of the industry’s 2020 size was attributable to the mining segment, which is expected to retain this position of dominance through to 2030.
• However, the transaction segment will see the fastest growth, the report found.
• Allied Market forecast that the Asia-Pacific crypto industry will be the fastest growing due to increased competition from a growing number of exchanges.
• The report largely echoes of another recent study by the same company into the crypto asset-management market, which it projects will grow to $9.4 billion in 2030 from $670 million in 2020. That also identified Asia Pacific as the region for the most significant growth due to the large numbers of crypto mining enterprises there, driving demand for asset-management solutions to help manage their business processes.

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Storms are gathering around hit crypto game Axie Infinity as regulators in its prime market, the Philippines, expressed their intention to tax its players and publisher.

• Income from play-to-earn crypto games such as Axie Infinity should be taxed, Manila Bulletin reported Monday, citing Undersecretary of Finance Antonette C. Tionko.
• Tionko said that whether Axie tokens are assets or securities is being discussed by the country’s Securities & Exchange Commission (SEC) and central bank.
• The undersecretary also said that while the game’s Vietnamese creator, Sky Mavis, is not registered in the Philippines, it must pay taxes in the country for any revenue created through local sources.
• The SEC reiterated that the game and its publisher are not registered in the Philippines, and that Sky Mavis doesn’t have a license to sell securities, the Manila Bulletin said yesterday.
• Axie Infinity allows players to earn passive income using non-fungible tokens (NFTs).
• Globally, it counts almost half a million daily active users, and more than 60% of them are in the Philippines, Leah Callon-Butler, director of consulting firm Emfarsis, wrote in a CoinDesk column in July.
• Concurrently, the price of the Axie Infinity token, AXS, has increased dramatically, from around $5 at the end of July, to over $70 at the time of writing.

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The Bank of International Settlements Innovation Hub in Hong Kong and the territory’s Monetary Authority will look into how tokenized green bonds can spur sustainable investments, the BIS said in a statement Tuesday.

• Under so-called Project Genesis, they will build a “prototype digital infrastructure” which will enable sustainable investments while improving transparency of how proceeds are used, the BIS said.
• Tokenizing the bonds through blockchain technology will allow investors to buy small denominations of the assets, which the institutions hope will boost investment. Investors can also track environmental output in real-time, the statement said. The ultimate goal is to help companies meet global and regional environmental standards.
• Swiss firm Digital Asset and their Hong Kong partner GFT Technologies Hong Kong will deploy permissioned blockchains. The Liberty Consortium, which includes SC Ventures, Standard Chartered Bank and Shareable Asset, will deploy permissionless blockchains. Allinfra, a Hong Kong startup, will provide the data to track the environmental impact of projects in real time.
• This is the first green finance project initiated by the BIS Innovation Hub, the statement said.

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Budweiser is getting frothy on non-fungible tokens (NFTs).

• Budweiser USA changed its Twitter profile picture Tuesday to that of a rocket ship designed by NFT artist Tom Sachs.
• Crypto watchers says the beer company also purchased the Beer.eth domain name for 30 ether, or roughly $95,000.
• “Budweiser is taking its first steps into the NFT universe,” an Anheuser-Busch InBev spokesperson told CoinDesk via email. “We’re excited to support Tom Sachs and his Rocket Factory project and join this incredible community.”
• A link to the DNS (domain name system) address on NFT marketplace OpenSea shows the rocket displayed in Budweiser’s Twitter profile was bought for 8 ETH ($25,000).
• Richard Oppy, vice president of global brands at Budweiser’s parent company, Anheuser-Busch InBev, told CoinDesk last month the beer brand is investing in a new NFT media shop run by internet entrepreneur Gary Vaynerchuk.
• The shop, touted as a “long-term business play” by beer company executives, will see the intellectual property of Budweiser and other beer brands packaged and sold as NFTs.

Zack Seward contributed reporting.

UPDATE (Aug. 25, 12:50 UTC): Updated to include link to Twitter profile.

Related: WNBA ‘Moments’ Are Coming to Dapper Labs’ NBA Top Shot

UPDATE (Aug. 25, 13:46 UTC): Adds comment from Budweiser spokesperson.

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Prolific beer brand Budweiser is getting frothy on non-fungible tokens (NFTs).

• Budweiserusa has changed its Twitter profile picture to that of a rocket ship designed by NFT artist Tom Sachs.
• Online users say the beer company has also purchased the Beer.eth domain name for 30 ether, or roughly US$95,000.
• CoinDesk attempted to contact Budweiser but did not get a response by press time.
• A link to the DNS address on NFT marketplace OpenSea shows the rocket displayed in Budweiser’s Twitter profile was bought for eight ether (US$25,000).
• Richard Oppy, vice president of global brands at Budweiser’s parent company, Anheuser-Busch InBev, told CoinDesk last month the beer brand is investing in a new NFT media shop run by internet entrepreneur Gary Vaynerchuk.
• The shop, touted as a “long-term business play” by beer company executives, will see Budweiser’s, including other beer brands’, intellectual property packaged and sold as NFTs.

Update (August 25 12:50 UTC): Updated to include link to Twitter profile.

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Prolific beer brand Budweiser is getting frothy on non-fungible tokens (NFTs).

• Budweiser has changed its Twitter profile picture to that of a rocket designed by NFT platform Rocket Factory.
• Users say the beer company has also purchased the Beer.eth domain name for 30 ether, or roughly US$95,000.
• CoinDesk attempted to contact Budweiser but did not get a response by press time.
• A link to the DNS address on OpenSea shows the rocket displayed in Budweiser’s Twitter profile was bought for eight ether (US$25,000).
• Richard Oppy, vice president of global brands at Budweiser’s parent company, Anheuser-Busch InBev, told CoinDesk last month the beer brand is investing in a new NFT media shop run by internet entrepreneur Gary Vaynerchuk.
• The shop, touted as a “long-term business play” by beer company executives, will see Budweiser’s, including other beer brands’, intellectual property packaged and sold as NFTs.

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Decentralized finance (DeFi) lending protocol Apricot Finance has completed a $4 million funding round with participation coming from the likes of Lemniscap, and Delphi Ventures, among others.

• A spokesperson told CoinDesk on Wednesday the funding was more akin to a “party round” where multiple investors had participated.
• Solana Capital, Advanced Blockchain AG, Skyvision Capital, Ledger Prime, Valhalla Capital, MXC, Gate, a41 Ventures and several others participated.
• The $4 million follows on from a previous raise of $800,000 in June.
• Apricot said it intends to use its newly raised capital to support the roll-out of its initial flagship services.
• Apricot is a budding DeFi money market platform built on the Solana network and its flagship services will aim to provide cross-margin leveraged yield farming and an automated self-deleveraging mechanism, the spokesperson said.
• This year, Solana has attracted a bevy of new investment to the platform either directly or via projects being built atop it. In June, the leading firm behind the network raised $314 million.
• Apricot’s testnet launch is scheduled for next week while a mainnet launch is expected in September.

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House lawmakers will vote on a $1 trillion infrastructure bill at the end of September, including a controversial crypto tax provision that has been the subject of extensive debate on Capitol Hill. And while there’s bipartisan support for amending the provision, it does not appear that any amendments will be accepted.

The crux of the debate – at least as far as the crypto community is concerned – is how the infrastructure bill defines “broker” in pay-for provision that banks on raising $28 billion over 10 years from a broadened crypto tax provision. 

Critics of the provision argue that the definition of a “broker” is overly broad and could be interpreted to include miners, node validators and developers. There is also concern the provision could impose expanded surveillance on crypto users and make it difficult for crypto businesses to operate in the United States. 

Related: State of Crypto: The Latest on Congress’s Crypto Tax Provision

A bipartisan cadre of crypto-friendly Senators rushed to propose an amendment to the bill that would exclude developers, validators and miners from the reporting requirement. The amendment needed unanimous consent to be adopted and was blocked by a single senator, Richard Shelby (R-Ala.), who tried and failed to tack on $50 billion in additional military spending. 

On Tuesday, the House voted 220-212 to advance the bill without considering any amendments. Another vote is set for Sept. 27.

Brewing opposition

A growing number of congressmen have publicly stated their intentions to push back against the cryptocurrency reporting provision in the infrastructure bill.

A group of Silicon Valley-area Democrats, including Rep. Anna Eshoo (D-Calif.), Rep. Ro Khanna (D-Calif.) and Rep. Eric Swalwell (D-Calif.) have voiced their opposition to the current provision and urged for an amendment to fix the “problematic” definition of “broker.”

Related: State of Crypto: The Crypto Provision in the Infrastructure Bill Now Depends on Non-Crypto Issues

The bipartisan Congressional Blockchain Caucus, headed by Rep. Tom Emmer (R-Minn.) sent a Congress-wide letter earlier this month calling for an amendment to update the “dangerous” pay-for provision. 

In a statement provided to CoinDesk, Rep. Emmer wrote “Congress cannot cross-jurisdictionally try to pay for an infrastructure bill on the backs of our crypto industry though legislation that was slapped together with little to no consideration for the crypto industry.”

And other representatives including Rep. Patrick McHenry (R-N.C.) and Rep. Byron Donalds (R-Fla.) have joined the bipartisan fight, calling the provision “hastily drafted” and “burdensome” on the cryptocurrency industry. A spokesperson for Donalds said he plans to vote against the bill. 

Complicating factors

The infrastructure bill has become a cornerstone of President Joe Biden’s policy and his establishment of a legacy built on public works.

The sweeping bill has been described by the White House as a “once-in-a-generation investment” that seeks to expand high-speed internet across the country, modernize the power grid, upgrade the nation’s roads, bridges and public transit systems and fund clean drinking water and electric vehicles.

There is concern on Capitol Hill that the infrastructure bill, which languished in Senate negotiations for months, could be further snarled – or even die – if the House adds any amendments, which would require the bill to return to the Senate for another vote. 

Despite the growing number of representatives who have announced their intentions to add amendments to the bill, it does not appear that Speaker of the House Nancy Pelosi (D-Calif.) will allow the bill to be amended.  

In a “Dear Colleagues” letter on Saturday, Pelosi told House Democrats that her goal is to enact both the infrastructure bill and the $3.5 trillion budget reconciliation by Oct. 1.

“The House would be very hard-pressed to meet that goal if they amend the bipartisan infrastructure bill, so I do not expect the bill to be amended,” Andrew Hinkes, a blockchain lawyer and partner at K&L Gates, told CoinDesk.

Though the Democrats have control of the House, the margin is slim, and Pelosi potentially needs near-unanimous support from Democrats to pass the bill, though even this remains unclear due to varying levels of support from Republicans.

Further complicating matters, the fate of the infrastructure bill has become intertwined with the ostensibly unrelated budget reconciliation, which the House will also begin to consider this week. Pelosi has doubled down on her previously-stated position to delay the vote on the infrastructure bill until the reconciliation package has passed.

Nine Democratic House moderates, led by Rep. Josh Gottheimer (D-N.J.), are taking the opposite stance, threatening to block the budget reconciliation until the infrastructure bill has been passed. 

A letter from the Congressional Progressive Caucus, led by Rep. Pramila Jayapal (D-Wash.), Katie Porter (D-Calif.) and Ilhan Omar (D-Minn.), said a majority of the caucus’ 96 members would withhold votes for the infrastructure bill until the reconciliation bill is passed – a conflicting stance to House moderates that put Pelosi in a tough position. 

Possible outcomes

According to Hinkes, the most likely outcome for the infrastructure bill is for it to clear the House with no amendments and be signed into law by President Biden. 

Stephen Palley, a crypto lawyer and partner at Anderson Kill, agrees with Hinkes’ assessment. 

“It seems unlikely that the bill’s progress will be delayed over only the crypto-tax reporting language, particularly where Treasury will be issuing clarifying guidance that says they do not intend to apply [the provision] to miners, developers, etc,” Palley told CoinDesk.

As Palley points out, the Treasury has reportedly said that it will provide clarifying guidance after the bill is passed to provide exemptions to firms that do not actually operate as brokers. If reports that Treasury Secretary Janet Yellen was lobbying against amendments to the bill are true, it seems to suggest that this was the Treasury’s end goal: to leave the language purposely vague so the Treasury gets to decide what it means. 

Though this is considered a worst-case scenario for many critics of the provision, Palley thinks that floor testimony and Treasury guidance will prevent the provision from being too broadly interpreted.

“Assuming the IRS honors [Treasury’s guidance], I don’t think the language is as bad as some people have suggested,” he said.

Though there is a chance that the bill dies in the House, Palley thinks it’s unlikely.

“If I had to bet I would say no – it’s too politically important for Democrats to get this through. At the end of the day, I suspect that representatives on the left who are complaining it’s not enough will be legislatively and presidentially browbeaten into submission,” he said.

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Osprey Funds has readied a private SOL fund for wealthy investors, signaling growing institutional interest in the Solana network’s booming native token.

Registered with U.S. securities regulators Tuesday, the “Osprey Solana Trust” did not have any sales as of press time. It is only open to accredited investors – meaning retail traders are shut out for now.

That could change, though. Osprey is “seeking approval” for its Solana Trust to trade on the same over-the-counter marketplace that its bitcoin trust sits on, documents reviewed by CoinDesk show. 

Related: Solana’s Apricot Finance Raises $4M in ‘Party’ Funding Round

The trust appears to be the first private SOL investment vehicle in the U.S.

It comes as a growing number of investors take interest in Solana, whose SOL token is up over 4,500% this year. It’s nearly doubled in value in the last week and now touts a market cap of over $20 billion.

Osprey has been working on its own Solana trust since at least mid-June, according to SEC records. Stiff competitor Grayscale (which is owned by CoinDesk parent company Digital Currency Group) signaled its own Solana fund was in the works one day prior.

Trust products such as Osprey’s give Wall Street types a way to gain exposure to crypto prices without directly holding the underlying tokens. Instead, they give their cash to an investment vehicle that does the buying and holding on their behalf – usually for a fee.

Related: Crypto Funds Snap 6 Weeks of Outflows as Markets Rally

Osprey would not begin charging a 2.5% management fee until 2023 in a sign of the competition for institutional crypto products, according to the documents reviewed by CoinDesk. Coinbase is handling custodial duties and Theorem is the administrator.

Osprey did not immediately return a comment to CoinDesk.

Related Stories

• Market Wrap: Bitcoin Rallies Ahead of $50K Resistance
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Cryptocurrencies were mostly lower on Tuesday after a period of extreme bullish sentiment has started to wane. After breaking above $50,000 earlier this week for the first time in three months, bitcoin slipped below $48,000 at press time and is down about 3% over the past 24 hours. Technical charts suggest support is nearby, which could stabilize the pullback and maintain the breakout move above $45,000. 

Some analysts expressed caution after bitcoin failed to keep pushing higher above the $50,000 resistance level.

“Our bullishness comes with some moderation, and we don’t expect more exponential upside breaks like what we saw at the end of 2020 into 2021,” crypto trading firm QCP Capital wrote in a Telegram chat. 

Latest prices

Related: Solana’s Apricot Finance Raises $4M in ‘Party’ Funding Round

Cryptocurrencies:

• Bitcoin (BTC) $4,8,125, -1%
• Ether (ETH) $3,192.9, -2.76%

Traditional markets:

• S&P 500: 4486.2, +0.15%
• Gold: $1,803.2, -0.14%
• 10-year Treasury yield closed at 1.289%, compared with 1.251% on Monday

‘Extreme greed’ comes, then goes

“The fear is gone for now, and the market is optimistic,” Arcane Research wrote in a Tuesday newsletter. Bitcoin’s rise towards $50,000 pushed the crypto “Fear and Greed” index to “extreme greed” territory this week, before the more recent decline. 

Arcane noted that other indicators suggest neutral sentiment. For example, relatively low funding rates in bitcoin’s futures market indicates less exuberance among investors. 

Related: Citi to Trade Bitcoin Futures?

“Funding rates and future premiums in both BTC and ETH actually continue to be relatively low and muted,” QCP Capital wrote in a Telegram chat. “This means most of the rally has been driven by demand in physical spot rather than from leveraged speculators.”

“A euphoric market could indicate a local top and a signal to traders who want to take some chips off the table,” Arcane wrote.

End of bitcoin capitulation?

Bitcoin’s “spent output profit ratio” (SOPR) – the price at the time the cryptocurrency was sold divided by the price at the time it was originally bought – turned positive after a steep decline since January. The uplift in SOPR could be a sign that the “capitulation period has ended and the market is back on solid ground,” Coin Metrics wrote in a Tuesday newsletter.

SOPR is a proxy for realized profit and loss for all coins moved on the blockchain. The SOPR was negative for most of June, which meant that investors were selling bitcoin at a loss. Now positive, the SOPR is currently suggesting that, in aggregate, holders are sitting on profits relative to their cost basis.

Divergent blockchain activity

Blockchain data has not responded to bitcoin’s price rally (yet), which could point to limited upside. Transaction counts are at historically low levels, similar to previous periods when investor interest in bitcoin waned, according to Glassnode. 

“The Bitcoin network is setting around $18.8 billion in daily volume,” Glassnode wrote in a blog post. “This is 37% lower than at the 2017 bubble peak, and a whopping 57.6% below the peak set during the May capitulation event.”

Bitcoin hashrate recovery

Bitcoin’s hashrate has been recovering from a local bottom in late June and early July, after China started cracking down on crypto mining in the country, according to Coin Metrics. 

The seven-day moving average of bitcoin’s hashrate stood at 127.5 exahashes per second on Monday, August 23, up from a local bottom of 84.3 exahashes per second on July 2, according to data from Glassnode. 

“The recovering hashrate is a signal that some mining operations are starting to come back online in new locations and that the worst of the crackdown is likely over,” Coin Metrics wrote in the notes. 

Altcoin roundup

• DeFi Exchange SushiSwap Builds on Avalanche: Popular decentralized exchange (DEX) SushiSwap is the latest decentralized finance (DeFi) project to join Avalanche’s $180 million incentive program, CoinDesk’s Muyao Shen reports. Avalanche Rush has already attracted lending protocol Aave and automated market maker (AMM) Curve. As a proof-of-stake blockchain built by Ava Labs, Avalanche claims to process 4,500 transactions per second without the security trade-offs usually associated with low-latency blockchains. Avalanche Rush has no doubt boosted investors’ confidence in the layer 1 blockchain that launched its mainnet last September: Prices for AVAX, Avalanche’s native token, were up by more than 300% in the past week, according to data from Messari.
• Paxos Renames Standard Stablecoin as Pax Dollar: Blockchain infrastructure company Paxos is renaming its Paxos standard stablecoin as Pax dollar with the ticker USDP. Paxos believes the USDP ticker more easily identifies the stablecoin as a U.S. dollar-backed token, Walter Hessert, head of strategy, said in a blog post Tuesday. “USDP reserves are held 100% in cash and cash equivalents. … This name makes it obvious to anyone – USDP is a dollar,” Hessert wrote.
• DeFi adoption still far from mainstream, per Chainalysis: Mainstream adoption of decentralized finance (DeFi) protocols remains at an early stage relative to the wider crypto industry, a Chainalysis report released Tuesday said. In its “Global DeFi Adoption Index,” the blockchain data firm found that while DeFi adoption has increased significantly over the past 18 months in both emerging and developed markets, most of that growth has occurred in countries and regions with higher incomes and more professional investors and traders.
• CryptoPunk NFTs Break Sales Record as Visa Sparks Buying Frenzy: Sales of CryptoPunk non-fungible tokens (NFTs) are soaring to record levels, another sign of just how frenzied the market has become as credit-card giant Visa jumped into the fray. On Monday, sales volumes of CryptoPunks topped $86 million, a daily record, according to data from the industry tracking website CryptoSlam. And sales so far in August have already reached $332 million. Prior to August, the largest single monthly sales total was $135.2 million during July. This month’s average price for a CryptoPunk is $199,069, more than double last month’s average.  

Relevant news:

• Citigroup Is Gearing Up to Trade CME Bitcoin Futures: Sources
• Saylor’s MicroStrategy Buys Another $177M of Bitcoin
• Should You Invest in Bitcoin for Retirement?
• Ethereum Foundation Secures $1.5M in Donations to Support Network Upgrade Efforts
• Swiss Financial Trio to Offer Institutions Tokenized Assets on Tezos
• Nasdaq Reveals Valkyrie Bitcoin Futures ETF Application

Other markets

Most digital assets on CoinDesk 20 ended lower on Tuesday. In fact, everything was in the red except for dollar-linked stablecoins.

Notable losers of 21:00 UTC (4:00 p.m. ET):

polkadot (DOT) -8.16%

the graph (GRT) -7.13%

eos (EOS) -6.91%

Related Stories

• Bearish Bitcoin Bets Might Signal Return of This Popular Trade
• Bitcoin Trading Volume Stays Subdued as Price Recovers

The CEO and co-founder of CMT Digital, the investment arm of Chicago-based proprietary trading firm CMT Group, Colleen Sullivan, has stepped down, according to a report from TheStreet.

• The report cites two people familiar with the matter and does not say who will be replacing Sullivan.
• CMT Digital has invested in several large firms in the cryptocurrency industry including crypto derivatives platform ErisX, crypto lender BlockFi, blockchain lending startup Figure, crypto-friendly Silvergate Bank, and crypto venture capital pioneer Polychain Capital. Under Sullivan’s leadership, CMT created the Chicago DeFi Alliance (CDA) with other trading firms in Chicago last year.
• The company has not responded to a request for comment from CoinDesk or stated anything publicly on its Twitter page.

This story is developing.

Bitcoin (BTC) is now trading above the $50,000 price tag, hitting the mark for the first time in over three months. Its year-to-date returns are now at around 71.4%.

Hedge funds and other large traders continued to pile into bearish bets on bitcoin last week even as the cryptocurrency extended price gains. 

Leveraged funds ­ – typically hedge funds and various types of money managers – held 16,000 short positions in bitcoin futures listed on the Chicago Mercantile Exchange (CME) in the week ended Aug. 17, according to data released Friday by the U.S. Commodity Futures Trading Commission, as tracked by data analytics firm Skew. Each CME contract consists of 5 BTC.

The tally of short positions has increased by 6,000 since July 20 to hit the highest in three months. The cryptocurrency’s price has risen from $30,000 to $48,500 in the past four weeks. 

Related: Market Wrap: ‘Extreme Greed’ for Bitcoin Falters at $50K

But the data doesn’t necessarily indicate that the traders are betting on outright price declines. 

The spike in leverage funds’ short bets might have stemmed from a return of the so-called carry trade, which involves buying the cryptocurrency in the spot market against a short position in the futures market. The strategy seeks to make money from the difference between the futures and spot prices, also known as premium, which tends to evaporate as expiration nears. That way, a carry trade can pocket a relatively riskless return. 

“I would assume it’s mostly carry trades,” said Vetle Lunde, an analyst at Arcane Research. “It’s been growing in the last few weeks during the bullish price action, causing the basis premiums on CME to be significantly lower than the basis premiums on the offshore futures platforms.” 

The CME currently offers an annualized rolling three-month basis (futures premium) of nearly 3% versus 8.5% to 10% on other offshore exchanges such as Binance, FTX and OKEx. This premium represents the percentage difference between the futures price on a given exchange and the going spot-market rate for the cryptocurrency.  

Related: Bitcoin Trading Volume Stays Subdued as Price Recovers

The existence of the premium means a trader could lock in a 3% annualized return by selling the quarterly futures contract on the CME and buying the cryptocurrency in the spot market, in a bet that the prices will eventually converge. Some traders borrow stablecoins to purchase bitcoin in the spot market, in which case the interest paid to the stablecoin lender would be subtracted from the net return. 

Such carry trades have lost their shine over the past few months as the price crash in May crowded out excess leverage from the market. Notably, the sell-off below $40,000 seen on May 19 liquidated more than $8 billion worth of positions in the derivatives market.

Another factor could be that several big cryptocurrency exchanges including Binance, the world’s largest exchange by volume, and FTX have recently cut their leverage limits to 20x (20 times a trader’s money down) from 100x amid widespread criticism of leveraged trading. 

“The trade is not yielding the same profits as earlier,” Lunde said. “At its peak in the middle of April, the cash-and-carry trade yielded annualized returns of 20% in the front-month contract, in contrast to the current levels” fluctuating around 1% to 4%. 

Bitcoin futures on Binance and other exchanges traded at a premium of 40% during the height of the bull run in mid-April. 

According to Patrick Heusser, head of trading at Crypto Finance AG, the current yield is not attractive enough for funds to take carry trades. 

“If you look at the absolute yield you can generate right now, I doubt that ‘the carry trade’ is back,” Heusser said. 

“Maybe some market makers or liquidity provider has changed or remodeled his flow concept,” Heusser added. “Usually, the market makers on the CME are the same guys making markets on crypto native exchanges … and some of these guys are labeled as leveraged funds.”

Also read: The 3 Reasons Why Bitcoin’s Ascent May Slow

Market makers are individuals or entities with a contractual obligation to maintain a healthy level of liquidity on an exchange. They ensure there is enough depth in the order book by offering to buy or sell when required and run a direction-neutral book. For instance, a market maker filling a short position in the futures market often takes a short or long position in the spot market or buys a call option. 

In this case, per Heusser, the bitcoin market makers may be short on the CME and hedged on native exchanges. It also indicates “better buying interest from the investment side on the CME,” he said.

Related Stories

• Citigroup Gearing Up to Trade CME Bitcoin Futures: Sources
• Should You Invest in Bitcoin for Retirement?

Although bitcoin broke out to a three-month high over $50,000 on Sunday, trading volume hasn’t picked up, according to Arcane Research. 

The seven-day average real BTC trading volume is still around $5 billion, less than half of what the market witnessed the last time bitcoin was at $50,000, Arcane Research analysts wrote Tuesday in a report. 

If trading volume continues to be relatively flat and bitcoin prices push higher, the market could become exhausted and the rally won’t be sustainable, the analysts said.

Related: Market Wrap: ‘Extreme Greed’ for Bitcoin Falters at $50K

“We have not seen the desired spike in volume with this latest move higher for the bitcoin price, which could indicate that we’re not ready for $50,000 just yet,” the report stated. 

“This means there’s not a lot of interest from traders to get engaged,” said Patrick Heusser, head of trading at Crypto Finance. “This is typical range-trading behavior.

“Either we break out of the range or some news will be the catalyst for a larger move,” he said. 

Matthew Blom, global head of trading at digital-asset firm Eqonex, said that “as lovely, timely and wonderful as this rally has been, the headwinds of the Fed, $50,000, and the muted effect of PayPal announcing their entrance into the U.K. market, could put it on ice.” 

Related: Bearish Bitcoin Bets Might Signal Return of This Popular Trade

Bitcoin blockchain activity also has remained anemic as the bitcoin price recovered, Arcane Research analysts noted, saying that “the number of active addresses is still far from the top levels seen during the hype of early 2021.”

That’s despite signs that market sentiment has climbed along with the price: “Extreme greed is back, the fear is gone for now, and the market is optimistic,” Arcane Research analysts wrote. In July, the index was registering a reading of “extreme fear.” 

Related Stories

• Citigroup Gearing Up to Trade CME Bitcoin Futures: Sources
• Should You Invest in Bitcoin for Retirement?

The race to launch a bitcoin futures exchange-traded fund (ETF) for U.S. investors now has a (procedural) front-runner: Valkyrie Investments.

On Tuesday, a surprise regulatory filing by Nasdaq to “list and trade shares” of the Valkyrie XBTO Bitcoin Futures Fund revealed the existence of the previously undisclosed ETF proposal, Valkyrie’s second that seeks to wrap bitcoin futures into an ETF.

In fact, it was really Valkyrie’s first; the firm said it confidentially filed for the product months ago. 

Related: Market Wrap: ‘Extreme Greed’ for Bitcoin Falters at $50K

The fact that it now has a partner exchange means the U.S. Securities and Exchange Commission can begin consideration of the product, moving Valkyrie closer to judgment day on a bitcoin futures ETF than every other hopeful issuer.

The SEC is also considering a handful of bitcoin ETF applications that are based on the underlying asset, rather than any futures markets.

It remains to be seen whether Valkyrie’s product can pass regulatory muster. Industry observers believe Gary Gensler’s SEC may look more kindly on a bitcoin futures ETF proposal than on the dozen or so ETF applications that would trade the asset itself.

“I think we’re really the only ones out there that has a pure-play futures product,” said Valkyrie CIO Steve McClurg. He said the firm is partnered with XBTO for futures trading. 

Related: Citi to Trade Bitcoin Futures?

McClurg said the newly-revealed Valkyrie futures ETF is a so-called “33 Act fund,” referring to the Securities Act of 1933, that could invest its assets in bitcoin futures contracts exclusively. Many of the recent bitcoin futures ETF filings would be “40 Act” products, referring to the Investment Company Act of 1940, that would have to partly invest in fixed income or treasuries, he said.

All that regulatory minutiae could complicate the Valkyrie/XBTO fund’s path. Gensler has expressed interest in “40 Act” funds that he has said better protect investors than “33 Act” counterparts.

Gensler’s recent comments fueled a wave of tailor-made bitcoin futures ETF filings, including from Valkyrie, which earlier this month filed a 40 Act fund SEC. 

Related Stories

• Citigroup Gearing Up to Trade CME Bitcoin Futures: Sources
• AdvisorShares Files for Bitcoin Futures ETF