Copper’s Weekly Dispatch – 7 December 2021

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

Copper

 

Bitcoin fell by almost 20% over the weekend, from around $57k on Friday to $45k the next day. Other top assets also shed a similar proportion of their value, dragging down the total crypto market cap by approximately $400bn. BTC has since climbed above $50k while other assets are also back in the green today.

As usual, for any questions of comments, send a note.

Best Regards,

Iva Lila

Beneath the headlines

BitMart hacked with losses estimated at $196m. Is there something fundamentally broken from a security perspective at crypto exchanges?

On Saturday night, BitMart suffered a $196m security breach after hackers stole two private keys to the exchange’s Ethereum and Binance Smart Chain hot wallets.

Sheldon Xia, the CEO of BitMart said that the exchange plans to refund the users who fell victim out of its own pocket. In the meantime, the Cayman Islands-based exchange has been conducting “a thorough security review” and has temporarily suspended all deposits and withdrawals  (these functions are expected to be restored sometime this week).

Commenting on the incident, which is the latest in a series of high-value attacks against the cryptocurrency sector (this occurred less than 72 hours after BadgerDAO fell victim to a $120m hacking attack), Luke Somerville, Security Researcher at Copper, said: “BitMart has stated that the breach was the result of a stolen private key leading to the compromise of two of their hot wallets, however we’re still in the dark as to the technical details of the attack. Once again, this underlines the importance of protecting private keys and the need to defend them as critical business assets.”

With attacks on crypto exchanges only set to rise, the case for trading and settling off-exchange with ClearLoop gets stronger. To those who need their memories jogged, ClearLoop enables users to trade directly on exchange without moving their assets out of custody. This removes counterparty risk with the exchange and protects crypto investors against assets being frozen or seized on exchange, or worse, being hacked on exchange.

Crypto ETP listings rise wildly in Europe. Is institutional crypto adoption still in the early stages?

The number of crypto-based exchange-traded products in Europe expanded massively this past week to open more avenues for institutions to engage with digital assets.

Nasdaq Stockholm notably welcomed its first two physically backed ethereum and bitcoin exchange-traded notes (courtesy of 21Shares), while US firm Invesco became the largest asset manager to launch a spot bitcoin ETP on the Deutsche Boerse.

Swiss stock exchange, SIX, and Frankfurt-based, Börse Xetra, welcomed a trio of crypto basked ETPs from US asset manager WisdomTree last Monday. According to report by the FT published earlier today, SIX has since accommodated two more digital asset ETPs – jointly listed by Ficas and Bitcoin Capital.

It also proved to be an especially busy week for 21Shares, which added to the glut of crypto ETPs in Europe by listing a product linked to Polygon’s MATIC token on the Euronext exchanges in Paris and Amsterdam. Not to be outdone, Britain’s ETC Group on Thursday announced plans to list five new ETCs on the Deutsche Boerse.

Most recently, in a move that demonstrates crypto has become impossible for financial institutions to ignore, FTSE Russell, the London Stock Exchange subsidiary that produces the FTSE 100 index, said that it is developing an index that spreads investment across 40 digital assets. In comments provided to CityAM, Kristen Mierzwa, the head of ETF strategy and business development for the FTSE Russell, estimates crypto will have a global market cap greater than $3T by 2025, putting the asset class on a par with private equity.

While investing directly in digital assets will yield the best results for investors, ETPs eliminate a number of the frictions and concerns of buying and holding digital assets and are a great way to gain crypto exposure without the complexity of direct investment. Looking ahead, 2022 will likely to be a story of ascent for crypto ETPs as more institutional investors wake up to the potential that cryptoassets can bring to portfolios as a diversifier. This could especially be the case as we head into higher inflationary environment.

Roundup of other key developments

INSTITUTIONAL

CME Group introduces micro ether futures.

Fidelity launches spot bitcoin ETF in Canada.

SEC rejects WisdomTree’s spot bitcoin ETF application.

Goldman Sachs sees crypto options markets as ‘next big step’ for institutional adoption.

LEGAL + REGULATORY + GOV + CBDCs

El Salvador stacks 150 bitcoin after BTC price crashes below $50k.

South Korea delays plans to tax crypto to 2023.

VC Hashed confirms it is under investigation by South Korea’s tax authority

Singapore suspends crypto exchange Bitget over spat with K-pop group BTS.

FBI confiscated around $2.3m in crypto tied to ransomware gang REvil.

AOC says she doesn’t hold bitcoin to ‘remain impartial’ on policy making.

COMPANY

1inch Network closes $175m Series B, aims to serve institutional customers.

Crypto.com targets US derivatives market with acquisition of NADEX and Small Exchange.

Binance is working to set up UK arm after FCA setback.

DeFi + WEB3 + NFTs + METAVERSE

Bitcoin DeFi project BadgerDAO hacked for $120m.

JPMorgan gave away NFTs at an event this week. One is now listed for 420 ETH.

FTX.US adds Ethereum collectibles to NFT marketplace.

Bank of America sees massive opportunity in Metaverse for crypto ecosystem.

Asia’s Richest man, Mukesh Ambani, thinks metaverse will unlock next generation of value creation.

Cardano’s DEX SundaeSwap launches public testnet.

What to watch out for this week

(In the run-up to Christmas, expect this section to remain pretty scant…)

WEDNESDAY 8 DECEMBER

-SEC to make a decision on the Valkyrie XBTO Bitcoin Futures Fund, More.

-Alpha Finance Lab launches their mainnet on Avalanche at 14:00 UTC. More

-FTX’s Sam Bankman-Fried, Circle’s Jeremy Allaire, Bitfury’s Brian Brooks, Paxos’ Charles Cascarilla, Stellar Development Foundation’s Denelle Dixon and Coinbase’s Alesia Haas will testify at a hearing of the House Financial Services Committee. More

What we’ve been reading this week

-The Chainalysis 2021 NFT market report. Read it here.

-Messari’s Crypto Theses for 2022. Read it here.

-Pareto Technologies Mining Mutualism: The symbiotic relationship between renewable energy and crypto mining. Read it here.

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