Copper’s Weekly Dispatch – 26 October 2021

Analysing what went right, and what went wrong, in this week’s Crypto Weekly Dispatch

Copper

Those within crypto often joke that this space moves like dog years.

Last week saw not one but two bitcoin futures ETFs make a splash on their respective NYSE debuts. Despite Valkyrie’s ETF having just launched four days ago, the company is already looking to debut another – this time applying 1.25x leverage.

Elsewhere, from MasterCard and Bakkt teaming up to enable cryptocurrency card payments, to BlockFi partnering with the 82-year-old asset manager, Neuberger Berman, we saw the industry make massive strides in integrating with the traditional economy.

And of course, not a single week passes in this space without some form of billionaire trolling.

On this occasion, it was presented in the form of a ‘funny fundraise’, courtesy of Sam Bankman-Fried. FTX on Thursday announced a new $420,690,000 fundraising round from 69 major investors to give the crypto derivatives exchange a jaw-dropping eleven figure valuation. Oh, to be a fly on the wall at Sam’s explanation to the likes of Singapore’s sovereign wealth fund, Temasek, on why he wanted only 69 investors for a $420m round… But funny numbers aside, the most bewildering aspect of this story is FTX’s growth that seemingly runs beyond dog years.

Elsewhere, the stratospheric growth of crypto has been on full display these past few days at Money 20/20 USA, where the Copper team is at currently. Digital assets are dominating the speaker lineup, events and boast some of the largest booths. If you’re in las Vegas this evening (Tuesday 26th), there’s still time to RSVP for our party at Starlight on 66 tonight. Details on how to attend can be found near the bottom of this email.

Beneath the top headlines

WorldCoin: Egalitarian dream or nightmarish dystopia?

WorldCoin, an ambitious digital asset project backed by some of the world’s most prestigious VCs, has been caught up in the receiving end of major criticism this week.

In short, the concept is a crypto attempt at creating a collectively-owned global currency that gets distributed fairly, and that anyone willing to have their retinas scanned from an ‘orb’ has access to.

The iris-scanner (or creepy orb) is WorldCoin’s controversial (or ingenious) mechanism of ensuring that nobody gets multiple payouts. It works by scanning the iris, creating a hash and publishing a signed version on-chain. Users get a private key that they can use to generate zero-knowledge proofs (ZKPs) and prove that they’ve been verified without revealing who they are.

Despite the fancy ZKPs and WorldCoin’s insistence that biometric data doesn’t leave the orb, it seems people aren’t all that comfortable at tying their financials to the hash of their eyeballs. What’s more, the collection of biometrics only forms a small fraction of the overall concerns about this project.

Thursday’s funding announcement revealed that 20% of the supply (aka ERC20 tokens to be deployed on Ethereum L2s) will be set aside for the founders and investors. This has invited enormous backlash over the project’s supposed egalitarian mission and claims that tokens are ‘fairly distributed.’ Moreover, WorldCoin is also being criticised for first rolling out in primarily developing countries where people may not fully understand the project but are desperate enough to participate for free tokens. Other notable red flags include an MLM-like user acquisition model and the name WorldCoin itself, which has been likened to a 2017 ICO scam ( https://twitter.com/zachxbt/status/1452017760788258819 ).

Lastly, according to WorldCoin, more than 130,000 people have already gazed into the orb. That’s certainly an impressive number at this early stage. In our view, and to quote One River Asset Management’s Eric Peters in his  recent Bankless appearance – the power of crypto technologies hold the potential to lead to both dystopia and renaissance. While we applaud WorldCoin’s bold vision and clever approach to solving the multiple payout issue, in today’s Squid Game obsessed era, the project crosses a disturbing line, so its practicality is doubtful.

The Houston Firefighters’ Relief and Retirement Fund’s purchase of BTC and ETH marks the first-ever crypto investment by a public pension in the U.S. Will others follow suit?

On Thursday, the Houston Firefighters’ Relief and Retirement Fund announced its $25m investment in Bitcoin and Ether (or about 0.45% of its assets) through NYDIG, a Bitcoin-focused subsidiary of asset manager Stone Ridge.

In yet another sign that retirement vehicles have set digital assets in their sights, a report from the other side of the world yesterday announced that the Korea Teacher’s Credit Union will be investing in bitcoin next year. The credit union, which manages $40bn in assets, won’t be buying bitcoin directly but getting exposure to it via investment products, such as bitcoin ETFs. The plan is to start doing so when the first Korea-based company launches a bitcoin ETF in the first half of 2022.

In terms of future implications for the digital asset class, the $35T pension fund market taking the plunge in crypto (whilst the industry is in a legal grey area I might add) is right up there as one of the most important developments for the sector. As this investor category tend to be the most prudent, their participation in this space is symbolic of how drastically the digital asset narrative has shifted over the last year, and how quickly blockchain acceptability is gaining ground.

The SEC is about to be given ‘significant authority’ over stablecoins. How will this affect the market’s monster growth?

The SEC looks set to gain substantial powers to oversee the $130bn+ stablecoin market, according to a Bloomberg report citing anonymous sources. It’s expected that Gensler and his team’s newfound authority over the sector will be formally announced in the Treasury Department’s forthcoming stablecoin report that is scheduled to be published later this week.

Research by Copper published earlier today shows that the stablecoin market has ballooned by 300% in 2021 alone. At the astronomical growth rate seen, it’s vital that a robust regulatory regime grows alongside this market to protect consumers, promote transparency, and prevent illicit activity. We’re glad regulatory progress is being made, and if done right, this should bring more confidence to the market.

Roundup of other key developments.

INSTITUTIONAL

BlockFi to develop cryptoasset management products with Neuberger Berman.

Pimco announces foray into crypto sphere.

CoinShares data: Crypto products and funds had record inflows last week to the tune of $1.5bn.

CME bitcoin open interest surges to record $5.4bn following ETF launches.

LEGAL + REGULATORY

Terraform Labs CEO, Do Kwon, is suing the SEC.

Crypterium gets FCA registration in UK.

Facebook, Square, PayPal and others told to hand over payments info to the Consumer Financial Protection Bureau (CFPB).

COMPANY

Coinbase spent nearly $800k on lobbying in 2021.

FTX raises $420m from 69 investors, in meme funding round.

Tesla’s bitcoin holdings have earned the company $1bn in profit.

Walmart shoppers can now buy bitcoin at 200 kiosks in its stores.

The Robinhood crypto wallet waitlist is well over a million people long.

CoinList is now valued at $1.5bn with a fresh $100 million in funding.

CBDCs

Nigeria rolls out Africa’s first CBDC.

Israel reportedly on its way to design digital Shekel based on Ethereum.

DeFi + WEB3 + NFTs + METAVERSE

Reddit says it wants to build the biggest creator economy using its own NFT platform.

DeFi activity on Solana just touched an all-time high.

Goldman Sachs: DeFi has its advantages over traditional finance.

Facebook is spending at least $10bn this year on its metaverse division.

What to watch out for this week

TUESDAY 26 OCTOBER

Copper Money 20/20 USA afterparty at Starlight 66. If you’re in Las Vegas and keen to attend, contact Lucia Camarillo here to RSVP.

WEDNESDAY 27 OCTOBER

Ethereum upgrade day: Altair, the first mainnet upgrade to the Beacon Chain, is due.

Odin Protocol is launching its mainnet Freya (two months ahead of schedule).

CFTC Commissioner Stump will participate in the MarketWatch ‘Investing in Crypto’ event to discuss the agency’s role in regulating bitcoin and how it is working with other regulators, including the SEC.

THURSDAY 28 OCTOBER

FATF is expected to publish an updated version of its virtual asset guidance.

The October edition of Cardano’s monthly show, Cardano360, takes place from at 4:30pm UTC on YouTube.

Day 1 of Crypto Valley Conference in Rotkreuz, Switzerland. Our Chief Revenue Officer, Boris Bohrer-Bilowitzki, will kick off the conference with a masterclass on MPC custody at 12pm CEST.

FRIDAY 29 OCTOBER

US Treasury Department and other government agencies are expected to publish a report sometime before Friday explaining the SEC’s authority over stablecoins.

Day 2 of Crypto Valley Conference. At 2pm CEST, Copper’s Bohrer-Bilowitzki will take the stage as part of a panel discussion on advancements in cryptoasset infrastructure.

SUNDAY 31 OCTOBER

31 October will mark 13 years since Satoshi published the bitcoin whitepaper. Also, happy Halloween!

Horizen Protocol: Zendoo mainnet release.

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