A potential disruption in Bitcoin (BTC) supply is looming, evident via on chain data revealing that approximately 57% of all BTC has remained inactive for a minimum of two years. Capriole Investments founder Charles Edwards highlighted this trend, emphasizing that the long term holders (LTHs), individuals holding Bitcoin for at least 155 days, include those with a substantial portion of the stagnant supply.

A Noteworthy Pattern

As a statistical observation, coins held by long term holders tend to remain untouched on the blockchain, showcasing a reluctance to move. The aforementioned two years segment comprises investors with an even more resolute commitment, as their holding period surpasses the 155 day mark.

Since the FTX collapse, the supply held by these LTHs has consistently achieved new all time highs, although the recent growth has slightly decelerated. Currently, approximately 57% of Bitcoin is under the control of these committed holders.

Supply Shock May Intensify

Charles Edwards underscores the significant impact of this situation, creating a substantial supply squeeze in the cryptocurrency market. He also draws attention to a historical pattern, noting that similar trends have preceded previous bull runs, indicated by green lines on the chart.

In a noteworthy development, the United States SEC recently granted approval for Bitcoin spot ETFs. Edwards suggests that this approval might intensify the supply shock, emphasizing that the ETFs are approved only for cash subscriptions, leading to a continuous reduction in available Bitcoin on the market. Additionally, chart analyst James V. Straten suggests that this approval could offer another perspective on the brewing supply shock in the asset.

The Ethereum Foundation plans to implement significant alterations to the account abstraction standard within Ethereum to minimize gas consumption, particularly for layer-2 solutions. On January 10th, 2024, a sneak peek of the substantial amendments to the ERC-4337 standard specification was revealed by the Ethereum Foundation. This specification addresses account abstraction, also recognized as smart accounts.

Streamlining The Process

The upcoming version 0.7 incorporates insights gathered over nine months of utilizing ERC-4337, as outlined by developer John Rising. The most notable modification pertains to the structure of account abstraction transactions, which are more intricate than typical Ethereum transactions. Now, these transactions necessitate the specification of five gas values instead of just one.

Rising clarified that the user has to designate multiple gas values to accommodate the fact that an account can perform computations while its signature is being verified. Rising further expounded on the rationale behind requiring more gas values. With smart accounts, he added, users can employ various signature types and pay for gas in diverse ways. Consequently, the gas required varies, and the transaction must delineate the amount willing to be spent for this validation.

Other Important Details

The updated specification will also impose a 10% penalty on users for all unused gas during execution, preventing apps when it comes to submitting transactions with unnecessarily high gas limits. Account abstraction, or smart accounts, extends the capabilities of basic Ethereum accounts by enabling them to possess programmable logic and rules, unlocking various use cases unattainable with conventional accounts.

While current Ethereum accounts are somewhat inert and fixed, account abstraction empowers them to become active and programmable. Proposed in September 2021 through EIP-4337 by Vitalik Buterin and other developers, the Ethereum Foundation has not disclosed a specific release date for version v0.7 but indicated that the security audit is commencing. Rising speculated that everything should be finalized by ETH Denver at the end of February this year.

Elon Musk recently engaged in a conversation with Ark Invest CEO Cathie Wood, expressing his views on Bitcoin at an X Space event. The Tesla CEO, while maintaining his generally indifferent stance toward the leading cryptocurrency, mentioned his openness to considering the use of Bitcoin on X. Musk likened Bitcoin to gold, emphasizing its unsuitability for transactions.

Musk Comes Clean

During the discussion, Musk disclosed both his personal holdings of Dogecoin as well as the fact that SpaceX owns Bitcoin. Regarding Bitcoin ETFs recently gaining regulatory approval in the United States, signaling a new phase for both Bitcoin and the broader crypto industry in general, Musk remarked on the immediate market impact. BTC saw its value surge to $47,500, influencing a broader uptick in the crypto market, including various altcoins.

Ulterior Motives

In response to the United States Securities and Exchange Commission recently tweeting about the approval of Bitcoin Spot Exchange-Traded Funds (ETFs), which was later said to be a false announcement after SEC Chair Gary Gensler stated that the account was hacked, Musk, who had been relatively silent about Dogecoin, reentered the conversation with the comment LFGDogeToTheMoon.

It is worth noting that in 2021, Tesla ceased accepting Bitcoin as payment for vehicle purchases due to concerns about the environmental impact associated with the cryptocurrency. In related news, X quietly removed a key feature for paid subscribers, as these users can no longer set an NFT as their profile picture. The feature was first introduced back in January 2022. 

The US Securities and Exchange Commission (SEC) recently approved various rule changes concerning the introduction of Bitcoin exchange-traded funds (ETFs) in the United States. This decision is expected to lead to the conversion of the Grayscale Bitcoin Trust, holding around $29 billion in cryptocurrency, into an ETF. Mainstream issuers like BlackRock and Fidelity are also likely to launch competing funds, with trading set to commence sometime this week.

This approval comes amid a year marked by significant law enforcement actions targeting crypto firms and industry leaders, including the conviction of FTX founder Sam Bankman-Fried and multiple actions against Binance and its founder Changpeng Zhao.

SEC Finally Comes Around

The approval is seen as a significant step in integrating crypto into mainstream finance, providing institutions and financial advisors with a familiar and regulated route to gain exposure to Bitcoin. Ark Invest CEO Cathie Wood expressed optimism about institutional interest, stating that the approval is a green light for institutions.

While the SEC has traditionally opposed spot Bitcoin funds, a shift in stance on ETFs emerged in 2023, potentially influenced by a court decision criticizing the SEC for blocking Bitcoin ETFs while allowing funds tracking BTC futures. SEC Chair Gary Gensler emphasized that the approval specifically applies to exchange-traded products (ETPs) holding Bitcoin, a non-security commodity. This approval does not signal a willingness to approve listing standards for crypto asset securities.

To The Moon

The optimism for approval gained momentum when BlackRock filed an ETF application in June, triggering a surge in applications by other firms. Over ten firms are in the formal process toward a launch, each competing for market leadership with varying expense ratios and marketing efforts. Some firms have already reduced their proposed fees. While not guaranteed, several BTC ETFs are expected to begin trading on the Cboe BZX exchange soon.

The anticipation of ETFs has influenced a recent surge in cryptocurrency prices, as advocates believe their introduction will stimulate demand via investors previously deterred by custody and exchange security concerns.

The PayPal stablecoin PYUSD is rapidly gaining traction in the DeFi sector. A newly introduced liquidity pool on the automated market maker (AMM) platform Curve, featuring PYUSD, has reached a total value locked (TVL) of $135 million. This pool, named FRAXPYUSD, was launched on December 27th, 2023, and includes FRAX algorithmic stablecoin alongside PYUSD.

Liquidity pools involve multiple cryptocurrencies locked in a smart contract, enabling decentralized exchange of assets. Curve, a popular decentralized exchange, is utilized by traders for stablecoin swaps, and its activity is indicative of significant transactions.

Getting Involved With Stablecoins

Traders using the FRAXPYUSD pool can exchange FRAX for PYUSD and then use the acquired coin on PayPal for various transactions. Currently, the pool exhibits an imbalance, with FRAX constituting over 80% of the total liquidity. According to Sam Kazemian, founder of Frax Finance, FRAX acts as on-chain liquidity for PYUSD, serving as a bridge between on-chain and off-chain transactions. Since its inception, the pool has averaged a daily trading volume of $5.5 million.

Despite being introduced in August, PYUSD is gradually making inroads into DeFi, although it trails behind leaders Tether and Circle. December data by Kaiko reveals that the daily trading volume of PYUSD reached $9 million but has recently stabilized around $4 million, significantly lower than the daily trading volume of Tether which exceeded $55 billion.

The Expansion Continues

Analysts note the positive growth in DeFi liquidity but highlight the competition by USDT and USDC, with PayPal seemingly investing in expanding the utility of PYUSD beyond payments. Clara Medalie, research director at Kaiko, sees potential in what PayPal is doing, stating that the company is enhancing the role of the stablecoin in crypto trading within and beyond PayPal itself.

Furthermore, Kazemian also anticipates further growth for FRAXPYUSD, with Frax Finance exploring decentralized finance integration supported by the PayPal payment app.

Gary Gensler, the Chairman of the United States Securities and Exchange Commission (SEC), recently disclosed that the official X (previously Twitter) account of the regulatory agency encountered a breach, disseminating inaccurate information about the endorsement of a spot Bitcoin exchange-traded fund (ETF).

A Crucial Week

The SEC government X account indeed faced a security breach, and an unauthorized tweet was published, Gensler stated. Nevertheless, the post erroneously proclaimed to a substantial audience that the regulatory body had sanctioned the spot Bitcoin ETF. This week is anticipated to bring a pivotal decision.

Although Gensler emphasized that the SEC has not greenlit the inclusion and trading of spot Bitcoin exchange-traded products, an outright refusal has not been made either. Due to this, the crypto community as well as a wide array of institutional investors remain hopeful that a Bitcoin ETF will be approved soon, despite the various delays.

Minimal Impact

The deadline for the SEC to announce the verdict on the ARK 21Shares spot Bitcoin ETF application is January 10th, 2024. Notwithstanding the optimistic initial announcement and subsequent correction, the impact on crypto prices across the board was in fact minimal.

While there was a marginal decline, the market has since steadied. This triggered speculation in the cryptocurrency community, prompting swift reactions on social media. As of the time of writing, BTC is trading at just below $46,000.

Interestingly, not everyone is convinced this was a breach. Eric Balchunas claims that although there is some evidence which could suggest a possible hack, he believes it may have originated within the SEC itself, possibly a scheduled tweet.

On behalf of the Web3 community, we would like to extend our warmest congratulations to the companies that announced their success in fundraising between 2nd-8th January, 2024. We are thrilled to see such tremendous support from all involved. Well done!

EZswap raised $2m - The EOS Network Foundation (ENF) is excited to announce that EOS Network Ventures (ENV) has strategically invested $500k into EZ Swap, contributing to its successful second fundraising round in December 2023

Solscan Pte. Ltd. raised $4m - Block explorer Etherscan has acquired Solscan, a prominent block explorer for the Solana ecosystem, in a move to &ldquoimprove the accessibility of blockchain data across multiple networks,

IISP raised an undisclosed amount - KuCoin Exchange Labs has announced its investment in ISSP. This investment is aimed at supporting the development of ISSP's ground-breaking inscription protocol, which operates on the cutting-edge Sui Network, known for its high throughput and scalability.

Power Pod raised $1m - The funds will be mainly utilized for hardware development and rigorous testing, the validation of the business model in select markets, and the cultivation of the network ecosystem.

DeMR raised an undisclosed amount - KuCoin Labs, the incubator and investment arm of the KuCoin ecosystem, has announced a strategic investment in DeMR, marking the beginning of a comprehensive collaboration in community operations and subsequent product development.

Bracket Labs raised $2m - Bracket Labs, a project that builds leveraged structured products on-chain with simple interfaces and innovative, adaptive pricing to vastly improve usability.

CharacterX raised $2.5m - A decentralized AI social network, announced a significant 2.8 million round with 30 million valuation co-led by Lightspeed Venture Partners, INCE Capital, and Spark Digital Capital.

TrendX raised $1m - Aims to be the preferred platform for the next billion users entering the Web3 domain, providing a comprehensive experience in project discovery, trend analysis, primary investment, and secondary trading through the combination of AI-driven trend tracking and smart trading.

To stay updated with news about future Web3 Funding Rounds, Follow CryptoWeekly.
 

CoinsPaid, a payment processor facilitating transactions between conventional finance-oriented companies and crypto-paying customers, recently experienced a breach. The platform reports facilitating about a million transactions monthly, valued at around 7 million EUR, and claims to have managed over 19 billion euros in crypto transactions.

Another Attack

The Estonian platform encountered its second significant security breach in half a year. The initial breach, transpiring on July 22nd, resulted in a $37.3 million loss. Following a post-mortem, investigators identified the Lazarus Group, which hails via North Korea, as responsible for the attack. Lazarus executed the breach by tricking a CoinsPaid employee during a fabricated job interview, leading to the downloading of malicious code facilitating unauthorized withdrawal requests.

Damage Control

Recently, the platform faced another breach, with blockchain cybersecurity firm Cyvers detecting unauthorized transactions involving USDT, USDC, ETH, BNB, and the native CPD token. Approximately $7.5 million was pilfered and directed to an external wallet, then rerouted to crypto exchanges like ChangeNOW, WhiteBit, MEXC, and others.

The modus operandi resembled the July breach, hinting at a potential oversight by CoinsPaid in fully eradicating any and all access by the bad actor. Despite the comparatively smaller scale of this attack, the stolen amount aligns with what CoinsPaid claims is its monthly transaction volume. The platform, however, has not issued an official statement on the recent incident.

The United States Securities and Exchange Commission (SEC) initiated the publication of notifications regarding updates on spot Bitcoin ETFs on January 8th, 2023. By 10:45 P.M. UTC, the national securities exchange page on the SEC website displayed modifications to eight 19b-4 filings outlining proposed rule adjustments. Approximately a dozen applicants are presently seeking approval for a spot Bitcoin ETF, indicating the potential for additional amendments in the future.

Getting Closer

Among the aforementioned revised filings, six pertain to proposed rule modifications for the listing and trading of ETFs by WisdomTree, VanEck, Ark Invest, Franklin Templeton, Fidelity, and Invesco Galaxy on the Cboe BZX exchange. Another amendment involves a proposed rule change for NASDAQ to list and trade the Valkyrie Bitcoin ETF. Yet another addresses a proposed rule change for NYSE Arca to list and trade the Hashdex ETF.

The recent amendments largely address prior concerns, including the size of relevant markets, the inclusion of surveillance-sharing agreements, and the prevention of market manipulation. Each notice indicates that the exchanges submitted the relevant amendment to the SEC on Friday, January 5th. Earlier reports also indicated a similar timeline in anticipation of expected approvals around Wednesday, January 10th.

Amendment Details

On January 8th, several spot Bitcoin ETF applicants also submitted amended registration statements, including various forms such as the 8-A12B. Moreover, the latest S-1 update by BlackRock notably underscores the absence of immediate in-kind creations and redemptions, which could have facilitated certain ETF transactions using Bitcoin instead of cash.

The timing of the In-Kind Regulatory Approval is uncertain, and there is no assurance that NASDAQ will receive approval in the future. If NASDAQ obtains In-Kind Regulatory Approval and the Sponsor opts for in-kind creations and redemptions, the Trust will notify the beneficial interest owners of the Shares.

Additionally, S-1 registration statements by BlackRock and other firms also incorporate new details, including fee and seed funding information. Most firms submitted nearly finalized S-1 amendments on or before the December 29th, 2023 deadline. Consequently, the latest amendments do not substantially alter the structure of each application but primarily provide additional details.

The Tron blockchain encountered a minor dip in Stablecoin Total Value Locked (TVL) during the initial part of the latter half of 2023 but eventually surged to achieve unprecedented highs, reaching approximately $48 billion, as disclosed in a recent Reflexivity report. The report highlighted that roughly 94% of this cumulative value was associated with USDT.

Prioritizing USDT

Reflexivity Research indicated that Tron has upheld its position as the foremost blockchain for USDT, surpassing the Ethereum mainnet by approximately 8% in terms of TVL. Tether, an early fiat-backed stablecoin in the crypto market, first launched on the Bitcoin Omni chain, expanded to Ethereum, and currently predominantly resides on Tron and Ethereum.

A notable distinction lies in the composition of stablecoins on Ethereum, showcasing a more even mix of USDT and USDC on-chain. In contrast, the Tron ecosystem is overwhelmingly dominated by USDT. This dominance is particularly evident in Tron contracts, where the USDT Token contract utilizes the majority of on-chain energy, making up roughly 95.6% of all contracts. This implies that Tron is primarily utilized for USDT transactions with limited diversification.

Navigating Challenges

Despite a moderate increase in USDT volume in 2023, a noteworthy trend is the 130% growth in the number of USDT holders during the same period, according to TronScan data. The Tron ecosystem also faced consecutive exploits, with the Poloniex exchange, acquired by Justin Sun, being hacked in November of the previous year, resulting in the theft of nearly $125 million.

Subsequently, crypto exchange HTX and blockchain protocol Heco Chain were also compromised, leading to a cumulative loss of $97 million in various digital assets. Despite these incidents, the decentralized finance sector for Tron managed to remain stable.

In under two years since adopting Bitcoin (BTC) as an accepted legal form of payment, a special economic zone situated in Roatan, Honduras, has officially acknowledged BTC as a unit of account. This designation allows the flagship crypto to be utilized as a measure for determining the market value of goods and services.

The initiative, led by Jorge Colindres, the acting manager and tax commissioner of the regional ZEDE (Zone for Employment and Economic Development) on January 5th, aims to provide increased financial autonomy to individuals and businesses operating within the region.

Still A Ways To Go

Colindres expressed the belief in the right to financial and monetary freedom, emphasizing the freedom for individuals to conduct transactions, manage their accounts, and report taxes in their chosen currency. This development permits BTC to serve as a monetary unit for evaluating the market value of various goods and services within this specific zone.

However, the implementation of the Final BTC Tax Payment Procedure faces various contemporary challenges due to technological limitations in the eGovernance system and external regulatory issues. Presently, tax obligations for entities opting for Bitcoin are determined in BTC for internal accounting but are reported to ZEDE in United States Dollars or the Honduras Lempira.

A Bright Future

Upon resolution of these issues, entities will report and settle tax liabilities to the local ZEDE in BTC. Those wishing to adopt BTC as their unit of account must also submit a notice to the regional tax commission within 30 days of the relevant tax period, referencing an approved cryptocurrency exchange like Coinbase or Kraken.

El Salvador decided to recognize Bitcoin as legal tender nationwide back in September 2021. Colindres highlighted that the aforementioned ZEDE is in fact one of the most competitive special regimes in Latin America, boasting over $100 million in three years and the creation of over 3,000 jobs across the country.

ETH prices could experience an upturn soon following the announcement by crypto lender Celsius, currently undergoing bankruptcy restructuring. Celsius, in the process of transitioning to a Bitcoin mining focus, has declared its intention to withdraw its holdings when it comes to the second largest cryptocurrency.

Unstaking Continues

Celsius, previously committed to incorporating staking into its operations, had been selling staking rewards on the open market to cover expenses related to the reorganization plan. Celsius recently stated that the company will unstake existing ETH holdings, which have generated valuable staking rewards income for the estate, to offset certain costs incurred throughout the entire restructuring process.

The significant unstaking activity expected in the next few days aims to release ETH for prompt distribution to creditors. According to data via the analysis tool Arkham, crypto wallets associated with Celsius have staked over $151 million worth of ETH, likely earning an annualized yield between 4-5%.

ETH Keeps Flowing

Although the staking rewards may not result in substantial ETH sales, they could have contributed to negative sentiment for the token, along with other factors such as interest in alternative blockchains. Concurrently, outflow data reveals that Celsius transferred over 30,000 ETH to custodian Fireblocks in the past week, some of which may have been deposited at the crypto exchange Coinbase, where it is possibly exchanged for stablecoins.

According to a post on X, in preparation of any asset distributions, Celsius has already begun the process of recalling and rebalancing assets to ensure ample liquidity for the foreseeable future.