Bitcoin's OI in a spin, Aave's Steward joins in
Crypto markets saw a broad-based rally this week posting 3.1% gains in total market capitalization which flirted with the $1.1 trillion mark and bitcoin dominance stayed north of 50%. Among the majors, bitcoin rose 3.4% week on week while ether underperformed bitcoin this week posting a weekly gain of 0.9%. Notably, at the start of the week, bitcoin surged past the $27,000 mark and crypto derivatives exchanges saw a sudden surge of $1 billion in open interest on bitcoin futures contracts, although a significant 80% of this open interest surge evaporated in less than 24 hours.
The price action could be seen as a prompt response to the unsealing of Binance's court filings. It was not expected that these filings would favor Binance, especially since it was the SEC that had initially requested their disclosure. However, the bitcoin perpetual futures contract funding rate, which serves as an indicator of imbalances between long and short positions, remained relatively flat during this timeframe. This suggests that the surge in open interest may have been primarily driven by spot market activities, possibly involving market makers and dealers hedging their spot exposure, and subsequently unwinding those positions to acquire the actual assets in the spot market.
AAVE took the lead among major DeFi tokens with a remarkable 22% price surge compared to the previous week. Aave V3 introduced a significant enhancement, the freezing steward, which empowers the emergency administrator to freeze reserves across diverse networks. This AIP (Aave Improvement Proposal) aims to harmonize this capability across multiple networks. Previously confined to the Ethereum network, this feature now extends its reach to various networks, including Ethereum, Optimism, Arbitrum, Polygon, Metis, and Base. Its fundamental purpose is to fortify security across Aave V3 deployments, ensuring that preventative measures remain consistently updated. A recent deployment of Aave v3 on Base enables undercollateralized borrowing using predefined smart contracts, a significant DeFi advancement. This collaboration among DeFi developers introduces a non-custodial liquidity market on the Base network, facilitating automatic connections between liquidity pools and borrowing strategies, highlighting the continuous growth of DeFi solutions on Base.
Tokenized assets soar, progress roars, yet prices remain on different shores
Chainlink, the decentralized oracle network operating on the Ethereum blockchain, recorded a significant weekly gain of 14.8%. This surge followed an announcement made by ANZ, the Australian banking giant, in the previous week. ANZ disclosed the successful completion of a transaction involving tokenized assets, employing its A$DC stablecoin and Chainlink's Cross-Chain Interoperability Protocol, known as CCIP. Notably, on-chain data sourced from SpotOnChain revealed that four Chainlink wallets recently unlocked and transferred approximately 18.75 million LINK tokens, equivalent to around $117 million at the time, over the weekend.
Tether Holdings, the issuer of the stablecoin USDT, has reportedly resumed lending its coins to customers. This decision comes less than a year after Tether had initially announced its intention to phase out this practice. In its latest quarterly financial update, Tether disclosed that it now holds $5.5 billion in loans as of June 30, reflecting a notable increase from the previous quarter's $5.3 billion. Tether Holdings' spokesperson, Alex Welch, mentioned that the choice to resume lending was driven by short-term loan requests from long-standing clients in the second quarter of 2023. Welch emphasized the company's commitment to eliminating loans by 2024, highlighting Tether's aim to safeguard customer liquidity and prevent potential losses resulting from the sale of collateral at unfavorable prices.
On Monday, Citi unveiled the launch and pilot testing of Citi Token Services for cash management and trade finance. This innovative service harnesses blockchain and smart contract technologies to provide digital asset solutions tailored to institutional clients. According to the company statement, Citi Token Services will seamlessly integrate tokenized deposits and smart contracts into Citi's extensive global network, enhancing the core functionalities of cash management and trade finance. Addressing the demand for continuously available and programmable financial services among institutional clients, this initiative by Citi will deliver cross-border payments, liquidity, and automated trade finance solutions on a 24/7 basis.
Japanese financial services firm Nomura's digital assets subsidiary, Laser Digital, has unveiled the Bitcoin Adoption Fund, catering to institutional investors seeking bitcoin exposure. According to the press release, this fund offers long-only exposure and marks the initial offering in Laser Digital's series of digital asset investment products. To ensure asset security, the fund will rely on Komainu, a joint venture involving Nomura, Ledger, and CoinShares. Both Laser Digital and Komainu recently secured operating licenses from Dubai's Virtual Asset Regulatory Authority (VARA), enabling them to provide a variety of digital asset trading services and investment products.
Zodia Custody, a subsidiary of Standard Chartered specializing in cryptocurrency storage, recently inaugurated its operations in Singapore, offering digital asset custody services tailored for financial institutions. In a subsequent development, the company also revealed a strategic partnership with OpenEden to introduce the "Zodia Custody Yield" service. This innovative offering enables clients to generate income from their cryptocurrency holdings. The program achieves this by tokenizing tangible assets like treasury notes, providing investors with returns while harnessing the advantages of blockchain technology.
A common sentiment shared by participants of recent large conferences is the remarkable energy and enthusiasm present in the industry, making it feel far from a bear market. Attendees noted the presence of high-quality content and engaging side events. What's particularly astonishing is the multitude of positive developments, from new technical advancements to fresh offerings, all taking place despite the ongoing market conditions. This scenario paints a compelling picture where progress in infrastructure is surging ahead while prices are trailing. It provides hope that, at some point, this disparity may resolve itself, with prices catching up to reflect the industry's significant advancements.
Among TradFi assets, oil futures rose 1.3% week on week, driven by fears of supply cuts. Meanwhile, US equities declined 1.5% compared to the previous week. The Federal Reserve decided to keep current interest rates unchanged while signaling a more hawkish stance for the year, including a possible rate hike and fewer rate cuts in the near future. Elsewhere, the US Dollar index inched 70 bps higher, the 10-year US treasury yields rose 15 bps and the Gold & Silver index rallied 2.9% week on week.
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