| Insights, news and analysis for the professional investor By Marc Hochstein, Executive Editor October 3, 2021 Sponsored by Bitcoin (BTC) - $47,916.88 Ether (ETH) - $3,394.36 Prices as of 10/3/21 @ 8:00 a.m. UTC If you were forwarded this newsletter and would like to receive it, sign up here. How many Bitcoin maximalists does it take to change a lightbulb? Twenty-one. One to change it and 20 to tweet, “This is an attack on Bitcoin!”
I kid, I kid. But in this week’s Briefing (below), I write about the ecumenical spirit of cryptocurrency investing at the moment. Time will tell if the current proliferation of blockchains is just cyclical bubble behavior – ICOs all over again – or a repudiation of zero-sum, winner-take-all thinking common among crypto tribalists. Maybe it’s a bit of both?
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Enjoy the rest of your Sunday.
– Marc Hochstein, executive editor A message from Crypto.com Buy bitcoin and 100+ cryptocurrencies with 20+ fiat currencies. New users can enjoy 0% credit/debit card fees on all crypto purchases made in their first 30 days. Download the Crypto.com App now. The Briefing It’s a Multi-Chain World, Bitcoin Just Dominates It On Tuesday, CoinDesk Research will drop its Quarterly Review for Q3, featuring 60 slides jam-packed with insights, analysis and data. For me, one of the takeaways is that like it or not, we live in a multi-chain world.
For example, the report notes that in September bitcoin dominance – that is, the original cryptocurrency’s share of total crypto market capitalization – was 42%. That’s the lowest it’s been at that point in the year in any of the previous four years.
The report’s authors, CoinDesk Research analysts George Kaloudis and Teddy Oosterbaan, are careful to note this is due to an explosion in growth of other networks rather than a lowering of bitcoin’s power.
“BTC losing dominance does not imply that it is losing, especially as it continues to cement itself as a sound money and global monetary network,” they write. “Waning dominance for bitcoin more accurately suggests that there is money flowing into other projects with different use cases, as typically occurs during times of optimism in digital assets.”
And flow it has. Note that while Ethereum’s share was higher in the most recent September than at any time in the series since 2017 – the heyday of initial coin offerings and CryptoKitties – the share for all other blockchains was the highest of any of the last five Septembers.
As Kaloudis and Oosterbaan note throughout the report, alternative “layer 1” (L1) blockchains gained popularity as the congestion and high fees on Ethereum spurred demand for networks with similar smart contract capabilities but faster throughput. At least, faster for now. Baseball legend Yogi Berra’s quote comes to mind: “Nobody goes there anymore. It's too crowded.”
You see this demand reflected in the market capitalizations of these L1 networks’ native currencies and the total value locked (TVL), or money invested, in their decentralized finance (DeFi) protocols. Cardano’s ADA, Binance Smart Chain’s BNB, Solana’s SOL, Avalanche’s AVAX and Terra’s LUNA are now in the top 12 coins by market cap.
While Ethereum remains king among DeFi host networks, look at how diverse these bars measuring TVL have become:
Again, bitcoin remains the crypto market’s bellwether, the coin with the greatest institutional adoption and network effect, with an unparalleled level of security hard-won by miners’ politically incorrect energy consumption. (Disclosure: It’s the only coin I own.) That seems unlikely to change.
But the Bitcoin network’s scaling limitations, along with those of its largest competitor, Ethereum, mean neither can count on becoming the only game in town any time soon.
The CoinDesk Quarterly Review for Q3 also covers NFTs, stablecoins, BTC’s performance relative to gold and stocks and more. Mark your calendars for Oct. 5 and be sure to bookmark the CoinDesk Research page.
– M.H. A message from Copper Copper provides a gateway into the cryptoasset space for institutional investors by offering custody, prime brokerage, and settlements across 250 digital assets and more than 40 exchanges. We are committed to providing flexible solutions that adapt to the changing cryptoasset space, while enabling far greater transparency, control, and security for asset managers. To learn more visit copper.co/interest Chain Links U.S. Securities and Exchange Commission Chairman Gary Gensler reiterated his support for futures-based bitcoin ETF products. TAKEAWAY: U.S. regulators have not approved any bitcoin ETF filings, but Gensler opened the floodgates for new and tailored applications. The SEC chairman believes that an ETF that invests solely in futures products would have significant investor protections, but futures-based products have had much lower demand in countries that support actual BTC exposure.
The Commodity Futures Trading Commission filed charges against 14 crypto options merchants, two of whom lied about their registration status. TAKEAWAY: Regulators continue to crack down on crypto markets from many directions as the SEC and CFTC ramp up oversight of the industry. A lack of regulatory guidance has kept crypto derivatives markets scarce throughout the United States.
KKR, the second-largest private equity fund in the world, made its first blockchain investment through ParaFi Capital. TAKEAWAY: KKR joined Bain Capital in investing in ParaFi Capital, which seeds and invests in DeFi projects. This investment just adds to the list of institutional capital that has been flowing into blockchain companies, protocols and funds.
Visa continued its dive into crypto, unveiling a proposed interoperability platform for stablecoins and releasing its first open-source smart contract. TAKEAWAY: Visa appears to be experimenting with all forms of cryptocurrency, from NFTs to payments and settlements. The financial services giant is set to be in the middle of mass blockchain adoption.
Decentralized lending protocol Compound accidentally distributed $50 million worth of COMP in a liquidity mining bug. TAKEAWAY: The error in Compound’s code came from a governance proposal that attempted to change distribution ratios for the protocols depositors and borrowers. While no user funds were at risk, COMP’s price fell 13% on Wednesday after the bug was discovered.
– Teddy Oosterbaan Financial advisors are taking a cautious approach to bitcoin as client interest in the space increases and new products offer retail investors easier access to this new asset class. As trusted guides, advisors cannot risk falling behind, even if the jury is still out on bitcoin's role in a client's portfolio. At Bitcoin for Advisors 2021on Oct. 6, Michael Kitces and Tyrone Ross share insights from the front lines. Apply today. Podcast episodes worth listening to: Chainalysis, Gensler and a Supposed Senate Bid – Anna Baydakova, Danny Nelson and Ben Schiller, “Opinionated.” Why This Autumn Could Be Bitcoin Season – Nathaniel Whittemore, “The Breakdown.” A Battle for Bitcoin’s Soul, With Jill Carlson and Raoul Pal – Michael Casey and Sheila Warren, “Money Reimagined.” Crypto Long & Short A newsletter from CoinDesk See Previous Editions Copyright © 2021 CoinDesk, All rights reserved. 250 Park Avenue South New York, NY 10003, USA Manage your newsletter subscriptions | Unsubscribe from all CoinDesk email | 