Judge Torres's Ripple of Illumination and UniswapX's Swapping Charades

• Bitcoin posted a modest dip but alts rallied this week
• Ripple soared 74.2% on favorable US court ruling
• Uniswap announced the launch of UniswapX

Charting new horizons, Judge Torres's ripple of illumination

Crypto markets saw a broad rally last week driven by Ripple and alts. The total market cap of the crypto universe surpassed $1.2 trillion and the bitcoin dominance fell below 49% this week. Among the majors, bitcoin slipped 1.6% while ether rose 0.9% compared to the previous week. Among other large cap coins, Ripple jumped 74.2% week on week, fueled by a favorable ruling from a US court.

In 2020, the SEC filed a lawsuit against Ripple, alleging that XRP is a security and that Ripple conducted unregistered security offerings. Last Thursday, the federal judge of the Southern District of New York issued a ruling, stating that XRP qualifies as a security when sold to institutional investors (meeting the Howey test). However, the same ruling clarified that XRP is not considered a security when sold programmatically on exchanges. While the ruling provided a partial win for both the SEC and Ripple, crypto markets saw this ruling as a positive one for overall crypto markets.

In essence, as Matt Levine put it, if Judge Torres is right, all crypto sales would be exempt from SEC registration, and crypto exchanges and brokerages would no longer fall under securities regulations. In that case, the SEC's involvement in the crypto space would be eliminated entirely. Crypto token sales primarily occur either directly to institutional investors or on exchanges. According to the ruling, sales of tokens on exchanges are not considered security offerings. However, sales of tokens to institutional investors are classified as security offerings. Nevertheless, it's worth noting that securities registration typically applies to public sales rather than sales to major institutional investors. Considering the potential impact, it's reasonable to anticipate that the SEC may challenge the ruling through an appeal.

UniswapX's charades, seamless trades and MEV escapades

Among the large cap DEX’s, Uniswap and Sushiswap rallied 11.6% and 11.5% respectively compared to the previous week. Sushiswap surged after a multi-chain liquidity mapping platform, Shared Liquidity Box, disclosed its partnership with Sushiswap via a twitter post. According to the post, Shared Liquidity Box enables liquidity providers to leverage their assets on the original chain for multi-chain farming, ensuring the principal's safety while unlocking opportunities. Earlier this week, Uniswap announced the launch of UniswapX, a protocol for trading across automated market makers (AMMs) and other liquidity sources. As per the blog post, UniswapX is set to enhance asset swapping by offering features such as liquidity aggregation, gas-free swapping, protection against maximal extractable value (MEV), and zero cost for failed transactions.

UniswapX addresses the liquidity pool depletion issue that swappers face while trading on DEXs. By collaborating with third-party fillers, UniswapX facilitates direct swap filling or guides users to suitable AMM pools. This competition with Uniswap leads to lower prices for traders, ensuring better accessibility to liquidity. In addition, fillers will cover the gas fees for swappers, eliminating the requirement for swappers to hold a blockchain's native network token for trading participation. Uniswap's approach involves fillers incorporating gas fees into the total swap prices while giving them the ability to minimize transaction costs by aggregating multiple orders.

Miner Extractable Value (MEV), arises when block producers in a blockchain (e.g., miners, validators) extract value based on how they order transactions within a block. This can include reordering, and including or excluding transactions, often at the expense of users. With UniswapX, any potential MEV that would have been extracted through arbitrage transactions is redirected to swappers, leading to improved prices. UniswapX also safeguards users from explicitly extractive forms of MEV. Orders executed using fillers' inventory are protected from sandwich attacks, and fillers are incentivized to utilize private transaction relays when routing orders to on-chain liquidity platforms. This ensures a fair and secure trading environment for UniswapX users.

Macro pulse

Among tradfi markets, oil futures posted a modest 0.5% decline compared to the previous week, primarily due to a smaller than anticipated reduction in US inventories. On the other hand, US equities performed well, rallying 2.1% over the week, driven by strong bank earnings. Meanwhile, the US Dollar index saw a modest drop of 20 basis points, and the 10-year US Treasury yields slipped by 11 basis points, while the Gold & Silver index rose 2.2% week on week.

Note: Weekly (7 calendar day) performance figures are as of 8am SGT on July 20, 2023

DISCLAIMER: The views and opinions expressed herein are those of the author(s) and do not necessarily reflect the views of Talos Trading, Inc. or its affiliates (collectively, "Talos") and summarizes information and articles with respect to cryptocurrencies or related topics. This material is for informational purposes only and is only intended for sophisticated institutional investors, and is not (i) an offer, or solicitation of an offer, to invest in, or to buy or sell, any interests or shares, or to participate in any investment or trading strategy, (ii) intended to provide accounting, legal, or tax advice, or investment recommendations, or (iii) an official statement of Talos. No representation or warranty is made, expressed or implied, with respect to the accuracy or completeness of the information or to the future performance of any digital asset, financial instrument or other market or economic measure. The information is believed to be current as of the date indicated and may not be updated or otherwise revised to reflect information that subsequently became available or a change in circumstances after the date of publication. Talos and its employees do not make any representation or warranty, expressed or implied, as to accuracy or completeness of the information or any other information transmitted or made available. Investing in cryptocurrency comes with risk. Certain statements in this document provide predictions and there is no guarantee that such predictions are currently accurate or will ultimately be realized. Prior results that are presented here are not guaranteed and prior results do not guarantee future performance. Recipients should consult their advisors before making any investment decision. Talos may have financial interests in, or relationships with, some of the assets, entities and/or publications discussed or otherwise referenced in the materials. Certain links that may be provided in the materials are provided for convenience and do not imply Talos's endorsement, or approval of any third-party websites or their content. Any use, review, retransmission, distribution, or reproduction of these materials, in whole or in part, is strictly prohibited in any form without the express written approval of Talos.

‍