Weekly Insights #22

French Finance Committee President Calls For Ban on Anonymous Cryptocurrencies—Mar 7, The Block Crypto

The Finance Committee of France’s National Assembly has prepared a report on crypto assets and blockchain with an introduction from Éric Woerth, the committee’s president. In the introduction, Woerth explains that the Committee supports blockchain as it offers great innovation, but he cautions against cryptocurrencies that provide complete anonymity to users. In fact, he proposes a ban on crypto assets designed to deliberately “prevent any possibility of [the] identification of their holders,” giving the examples of Monero, PIVX, DeepOnion, and Zcash.

Kraken Futures Trading Nears $1 Billion in Its First Month—Mar 5, Coindesk

Since Kraken acquired Crypto Facilities at the beginning of February, the futures provider has seen more than a 500% increase in trading volume. Nearly $1B has been traded in crypto futures in the past month across bitcoin, ether, litecoin, bitcoin cash, and XRP based products. Crypto Facilities’ user base increased by 400% since the acquisition, with the majority of new customers coming from Kraken. Crypto Facilities is best known for providing bitcoin and ether reference rates to CME group.

Swiss Stock Exchange SIX Will Tokenize Equity on R3’s Corda Blockchain—Mar 7, Coindesk

Like many traditional financial institutions, the SIX stock exchange is also developing a blockchain-based platform for trading, settlement, and custody services for tokenized DLT-based digital assets. They picked the R3 Corda Enterprise platform after researching various distributed ledger technologies. The platform will launch in the second half of this year and will initially be used for traditional bankable assets such as equities, bonds, funds, and structured products, all of which will be issued on their DLT to avoid issues with split liquidity between the DLT market and the traditional one. Later, other financial products may be tokenized.

Enjin Coin Soars Amid SDK Announcement and Samsung Partnership Rumours

Enjin is a company working on a platform for building blockchain games. It’s one of those promising projects built on Ethereum that are often overlooked due to their near constant ability to focus on development rather than putting all their efforts into marketing. The project is nearly two years old, and their recent development announcements have been strongly reflected in the price of their token, Enjin Coin (ENJ). ENJ is a cryptocurrency for virtual goods or in-game items and can be exchanged, traded, or swapped across platforms. This has the potential to create entirely new in-game e-commerce ecosystems utilizing the ERC-1155 token standard based on the Ethereum blockchain.

In the past week, the token price has seen an increase of nearly 120%, reaching 12th place on CoinMarketCap (CMC) by trading volume—even overtaking Monero. This price appreciation can be attributed primarily to the rumor of a partnership with Samsung in which Samsung would integrate Enjin into their new Blockchain Keystore on their new smartphone, the Galaxy S10; these rumors were confirmed today.

The speculation regarding Samsung began on February 25 and sparked a frenzy of continuous investor interest, as the price rose 206% before retracing. Another major spike happened a few days ago on March 5, after Enjin announced that their Blockchain Software Development Kit (SDK) is due to launch in the Unity Asset Store on March 14. For those unfamiliar, Unity is a video game engine that more than half of current mobiles games are based on, and mobile gaming is expected to grow in the coming years. All this helped fuel investor interest, currently keeping ENJ’s USD price nearly 400% above where it was 30 days ago.

THE WEEK AHEAD

Decentralized Finance (DeFi) Space Growing Rapidly, Primarily Built on Ethereum

Decentralized finance encompasses financial decentralized applications and services built on top of public blockchains. The space is very interesting and important, as the essence of public blockchains comes from the idea of permissionless money and freedom of usage. Bitcoin was the first to materialize this idea, but currently, the majority of decentralized applications (dapps) that offer complex financial operations are being built on Ethereum. This space is very broad and includes services in the fields of borrowing and lending, decentralized asset exchange, derivatives, payments, and asset tokenization. Some services are completely permissionless, some are governed by DAOs, and some are semi-centralized, as private entities are necessary for some parts of the service.

The first DeFi applications to gain traction weredecentralized exchanges (DEX). This space is evolving very quickly, and new DEXes are constantly entering the space. One DEX currently growing rapidly in popularity is Uniswap, which was launched in November on Ethereum. This dapp differs from others, namely EtherDelta and IDEX, in that it does not have an order book; instead, it offers a liquidity pool for specific markets and uses a formula relative to order size and the amount of liquidity to determine the price of assets. Anyone can create new markets and provide liquidity for existing ones, receiving trading fees in exchange, which are collected from traders in proportion to their liquidity share in that specific market.

Recently, a new decentralized Ethereum-based exchange service called SwapMarket was released to the public. SwapMarket has a novel new feature, offering many-to-many trades, including of ERC20 and ERC721 tokens, and token swaps between multiple assets and addresses (e.g. swapping an entire portfolio for another portfolio or selling a portfolio for ether).

There are also new kinds of DEXes being built on Plasma sidechains such as Leverj. These offer much faster and cheaper on-chain trades on the sidechain while still enjoying the security of the main chain. In the future, many dapps will utilize Ethereum sidechains.

The largest segment of the DeFi space by locked-in assets is lending services. Most of these services work on a simple principle; you provide more collateral than you wish to borrow, and the collateral is liquidated if you are unable to repay the debt. The largest and most dominant DeFi lending service is Maker, which enables anyone to issue debt to themselves in the form of Dai, a stablecoin on Ethereum, for the price of an annual interest rate called the stability fee. Individuals and companies do this either to open leveraged positions or to pay for ongoing operational costs. On the other side of the trade, buyers of Dai use it to hedge their portfolios or for payments in other dapps and services, as well as for trading pairs on exchanges.

Another relatively new dapp offering alternative token borrowing for short positions is Compound. Compound is a pooled source of ether and a few ERC20 tokens. Suppliers of assets earn interest with each block, and borrowers can open a short sell position by selling the borrowed assets. Compound offers a way to open a leveraged long or short position or just earn interest by providing supply for the pool.

MARKET OVERVIEW & METRICS

Weekly Crypto Stats

• Global network value reached $133.56B, with 2% weekly delta.
• Global crypto market turnover was $31.4B, 56.3% from ATH.
• Bitcoin dominance is 51.7%, with -0.4% weekly delta, and beta of 0.81.
• Ethereum dominance is 10.83% with -1.8% weekly delta, and beta of 1.32.
• Bitcoin hashrate is 42.86B TH/s, with -5.3% weekly delta.
• Ethereum hashrate is 154.5K GH/s, with -1.4% weekly delta.

CHART OF THE WEEK

Commodity trading plotted from 1982 to 2017 shows a big shift towards digitalization and dependency. Throughout each phase of this trend, it seems that one asset paves the way, and others follow. Bitcoin’s emergence as a new type of asset (top right quadrant) is expected to have a similar effect and pull other assets in this direction as well.