Can spot Bitcoin ETFs push Hong Kong to the crypto throne?

In this issue

  1. Bitcoin ETFs: Hong Kong has entered the chat
  2. Bitcoin Ordinals flip Ethereum NFTs
  3. IPO comes full circle

From the Editor’s Desk

Dear Reader,

The verdict is in. Sam Bankman-Fried, founder and former chief executive officer of failed cryptocurrency exchange FTX, has been found guilty in what U.S. government prosecutors labeled one of the biggest financial fraud cases in history.  

As Bankman-Fried awaits a likely decades-long sentence for his part in FTX’s collapse — a truly catastrophic implosion that contributed in large part to the digital asset market’s travails over the past year — the industry is now looking forward.

And nowhere, arguably, is more forward-looking than Hong Kong when it comes to the digital economy. 

The special administrative zone was again in the news this week as Hong Kong Securities and Futures Commission (SFC) head Julia Leung gave her first international media interview since taking office in January. Leung said that the regulator is happy to try any innovative digital asset proposal that “boosts efficiency and customer experience.”

Significantly, that willingness to engage with digital assets includes the much-heralded spot Bitcoin exchange-traded fund (ETF). The financial instrument — which allows investors to trade Bitcoin on a traditional exchange at any time throughout the day — is expected to bring much-needed institutional cash into the industry.

That’s particularly so in the U.S., where spot Bitcoin ETFs from the likes of investment giant BlackRock are reportedly just around the corner. With the U.S. spot Bitcoin ETF buzz causing a recent surge in the price of Bitcoin to over the US$35,000 mark, a ripple of fresh excitement has spread throughout the wider crypto market. 

But Leung also advised caution. She added the caveat to her comments about a spot Bitcoin ETF that the regulator would only consider products that meet the jurisdiction’s strict requirements on customer protection. 

Amid all the talk over a luxurious penthouse lifestyle for FTX executives in the Bahamas — where Bankman-Fried is also known to have cozied up to local officials — it is easy to forget that the exchange began life in Hong Kong. Added to that, the city has also just been through its own huge crypto scandal, with customers of the JPEX exchange losing out on over US$200 million in investments.

Particularly as Beijing continues to clamp down on crypto in the Chinese mainland, Leung is right to advise caution. Hong Kong is seen as a so-called “sandbox” for crypto innovation, an area where experiments — regulatory and otherwise — can be conducted with a degree of separation from the wider Chinese market.

Should the marriage between innovation and effective regulation work out as planned, Hong Kong has every chance of achieving what is now a key aim for the region — restoring its international reputation as a cutting edge financial center by becoming a global hub for the digital asset industry. 

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Bitcoin ETFs: Hong Kong has entered the chat

Global race ignites for Bitcoin ETFs
As fund managers vie to launch Bitcoin spot ETFs in major markets, the financial world watches, poised for a transformative shift in the digital asset landscape. Image: Canva

The Hong Kong Securities and Futures Commission (SFC) is considering the approval of ETFs investing directly in cryptocurrencies, with regulations to mitigate new risks.

  • Two Bitcoin futures ETFs and one Ethereum futures fund have already been approved by the SFC, signaling a cautious advancement into institutionally accessible crypto-based financial products.
  • According to Bloomberg, SFC Chief Executive Julia Leung emphasized the need for a “comprehensive regulatory framework” following a significant fraud case involving the Hong Kong Exchange JPEX, which saw HK$1.6 billion (US$204 million) in customer funds misappropriated.
  • The SFC is refining its cryptocurrency regulations and developing new rules for stablecoins and asset tokenization, while the Hong Kong Monetary Authority (HKMA) is aiding banks in handling tokenized assets.
  • In the U.S., the Securities and Exchange Commission (SEC) has been wary of approving Bitcoin ETFs, citing potential market manipulation and the need for secure handling of customer assets.
  • BlackRock and Fidelity Investments are among several major investment giants that have applied to set up a spot Bitcoin ETF in the U.S., with Grayscale Investments looking to convert its Bitcoin trust into a spot ETF.

Forkast.Insights | What does it mean?

The spot Bitcoin ETF remains the news of the week, regardless of location. The crypto industry views the arrival of this financial instrument in the U.S. as the silver bullet needed to steady the listing ship of the crypto market, down some US$2 trillion over the past 18 months after the collapse of FTX, among a host of other digital asset firms. 

But spot Bitcoin ETFs already exist in Europe, where they have been met with a muted reception. Bitcoin futures ETFs also already exist. But beyond an initial bump in the price of Bitcoin when ProShares first introduced a Bitcoin futures ETF in the U.S. in October 2021, they too have failed to pull up many trees. 

But, the optimism is there. Bitcoin is up over 30% since mid-October just on the suggestion that a spot Bitcoin ETF in the U.S. is imminent. Some analysts argue that the past month’s price pump goes to show that the market had yet to price in the existence of a spot Bitcoin ETF. The rise in prices across crypto is just a way of factoring in the potential inflow of institutional cash this particular financial instrument is expected to bring. 

But others, including former Wall Street banker Norbert Gehrker, believe that the improvements to the user experience for investors enabled by the creation of a spot Bitcoin ETF in the U.S. is enough to potentially attract further large scale inflows of money into the industry. 

In a note to Forkast, Gehrke used the example of the first gold ETF. Introduced in 2004, it pulled in US$5 billion in the first 15 months and US$10 billion over the first 10 years, dramatically changing the gold market. Expectations are similar in the Bitcoin market. We could soon see multiple jurisdictions look to get in on the action in the near future, particularly if — as expected — the SEC makes an approval early in the new year. 

2. Bitcoin Ordinals flip Ethereum NFTs

Blockchains NFT sales volume

Bitcoin’s ecosystem of inscribed blockchain artifacts, Ordinals, BRC20s, and infinite future iterations, overtook Ethereum’s ecosystem of NFTs in sales volume this week for the first time.

  • Bitcoin Ordinals and BRC20s saw over US$17.9 million in sales Tuesday, beating the combined sales volume of the next four blockchains.
  • The Bitcoin ecosystem has traded for over US$57.6 million in November, reflecting a return to pre-summer levels of trading.
  • $SATS BRC-20s are the top-selling NFT collection in the past seven days across blockchains, with US$25.2 million in sales.

Forkast.Insights | What does it mean?

A true milestone moment for Bitcoin happened this week. Not just for blockchain collectibles, artifacts, or NFTs. Instead, it’s a milestone for the Bitcoin blockchain itself, which is seeing its utility beyond payments legitimized. 

Sales volume for Ordinals, an iteration of NFTs on the Bitcoin network, has been on the rise. The blockchain’s BRC20s, a fungible token standard powered by Ordinals, are really seeing an increase in sales. Seven of the top 10 collections on CryptoSlam are represented by BRC20s. These bundles of fungible tokens are being sold at a rate that we’ve not seen before, and Binance’s recent integration of ORDI tokens suggests there’s much more in store for this genesis of decentralized finance (DeFi) on the Bitcoin blockchain.

It’s fair to say that Bitcoin “flipping” Ethereum is a controversial statement. Most on the Ethereum side don’t accept it. Comparing BRC20s to NFTs is not apples to apples. But comparing non-fungible bundles of BRC20s to tokenized houses, profile pictures, cars, and fantasy sports assets shouldn’t require an apples to apples comparison.

The NFT ecosystem is young, and as it matures, clever technologists will find all kinds of ways to shoehorn strange use cases into NFTs. Last month, it was Pokemon cards stored in Brinks vaults, this month it’s BRC20s, and next year it just might be your entire bank account. 

3. IPO comes full circle

Circle gears up for an exhilarating return to the IPO arena, riding the wave of regulatory shifts and market optimism. Image: Circle/Canva

Circle Internet Financial Ltd., the company behind USDC, the world’s second-largest stablecoin, is contemplating an initial public offering (IPO) in early 2024, Bloomberg reported Wednesday, citing unnamed sources.

  • The sources reportedly said Circle is in talks with advisers over the potential listing, although the outcome and valuation remain uncertain.
  • Circle canceled a previous attempt to go public via a SPAC merger. The company was valued at US$9 billion in 2022.
  • Despite the aborted merger with Concord Acquisition Corp., Circle has attracted significant investment from heavyweights like Goldman Sachs and BlackRock.
  • The stablecoin issuer faced a scare earlier this year due to its US$3.3 billion exposure to the defunct Silicon Valley Bank. 

Forkast.Insights | What does it mean?

The landscape of public listings, particularly those through special purpose acquisition companies (SPACs), has been marked by considerable volatility. In early 2021, SPACs surged in popularity, comprising over 70% of IPOs in the U.S. for Q1. But by the next quarter, their prevalence dramatically dropped to just 23%. The decline was influenced by heightened scrutiny from the U.S. Securities and Exchange Commission (SEC) starting April 2021,when the regulator cautioned SPACs regarding their financial reporting. Then in March 2022, the SEC proposed rules that made SPAC mergers more difficult. 

In mid-2021, amid this backdrop, Circle embarked on its own SPAC journey, before ultimately ditching its plans last December. But the SEC’s recent legal setbacks — including a partial defeat in the Ripple Labs case and a court directive to reassess the denial of Grayscale’s Bitcoin trust ETF conversion — may hint at a shifting regulatory tone, one more accommodating for cryptocurrency-related entities.

Meanwhile, the crypto sector is eyeing a resurgence. Bitcoin is trading at its highest price range this year. The ball is again in the SEC’s court as it deliberates on pending spot Bitcoin ETF proposals from heavyweight asset managers, including BlackRock and Fidelity.

For Circle, there’s a renewed sense of optimism. The clearer regulatory frameworks emerging in global financial centers such as Singapore, Hong Kong and Dubai, combined with the SEC’s recent legal challenges, could offer a more conducive environment for its IPO ambitions. A strategic window for going public has opened, and Circle may now look to take advantage.

SBF trial drama fails to dampen Bitcoin’s meteoric October

In this issue

  1. Bankman-Fried’s memory lapses seek jury’s doubt
  2. Betting that NFTs are Back
  3. ETF dreams inspire Bitcoin’s October revival

From the Editor’s Desk

Dear Reader,

There’s really only one place to start. The criminal trial of Sam Bankman-Fried entered a new decisive phase over the past week as the one-time crypto poster boy took to the stand to testify in his own defense. The founder and former chief executive officer of failed cryptocurrency exchange FTX faces seven charges at his trial in New York, including money laundering and wire fraud. If found guilty, he could spend decades in jail.

But the interesting thing is, no matter how much crypto is dragged through the mud throughout the trial, the market isn’t faring too badly. 

To be sure, crypto is, through its SBF avatar, airing its dirty laundry in public. The level of wrongdoing on display, be it as part of a labyrinthine criminal scheme or — as Bankman-Fried and his lawyers would have us believe — just some poorly handled startup highjinx, is staggering.

Still, crypto — and Bitcoin in particular — is on the rise. 

What started as fake news about a spot Bitcoin exchange-traded fund (ETF) approval in the U.S. has snowballed over the past couple of weeks into genuine positivity. The so-called ‘Uptober’ bounce for October struck again, with Bitcoin recording a 26% rise for the month. A host of other altcoins are also riding the tailwind, with Ether — the second largest cryptocurrency after Bitcoin — recording a 6.8% monthly increase. 

Some analysts are still advising caution. Bankman-Fried and a host of other former crypto darlings have done serious damage to the industry, with US$2 trillion wiped off the market since the Terra stablecoin platform collapsed in May last year. 

That is a hard bell to unring. But as a spot Bitcoin ETF for the U.S. — the world’s largest economy and traditional source of much of crypto’s funding — edges closer, the prospect of institutional scale money flooding into the market at a time when the next Bitcoin halving event is only around the corner, has other analysts expressing optimism. 

Bad actors can harm any industry and crypto has faced a number of serious setbacks over the past 18 months, not least the collapse of FTX — the second largest centralized crypto exchange after Binance. But with the witness testimony in, damning as it is, the SBF trial does not appear to be setting the industry back any further. 

With the damage done, the crypto world keeps turning on its axis. The industry has weeded out many of its bad apples and, as the muted market reaction to the SBF trial seems to suggest, may finally be ready to move on.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Bankman-Fried’s memory lapses

Sam Bankman-Fried
Bankman-Fried trial concludes, jury deliberates after tense testimony and defense claims of no fraudulent intent. Image: Alex Wong/Getty Images/Canva

Bankman-Fried’s fate now rests in the hands of a 12-member jury after his testimony concluded in a lower Manhattan courtroom on Tuesday. Facing potential life imprisonment if convicted on fraud charges related to the collapse of FTX and its sister hedge fund Alameda Research, the 31-year-old has pleaded not guilty. Both the defense and prosecution made their closing arguments Wednesday, with jurors now set to deliberate.

  • Assistant U.S. Attorney Danielle Sassoon led the cross-examination, focusing on Bankman-Fried’s relationship with the Bahamian Prime Minister, Philip Davis. Sassoon asked if Bankman-Fried had proposed paying off the Bahamas’ US$11 billion national debt. He claimed not to remember such discussions. The attorney also probed into other alleged favors given to members of the Bahamian government, such as the prime minister’s visit to an FTX-sponsored Miami Heat basketball game.
  • The key issue in the case is the US$8 billion hole in FTX’s balance sheet, and Bankman-Fried expressed regret for not investigating it further. He claimed that when he asked his deputies about the missing funds, they brushed off his inquiries, stating they were too busy to discuss it.
  • Bankman-Fried’s defense strategy revolves around convincing the jury that he did not intentionally divert customer money to fund a luxurious lifestyle involving private jets and a penthouse in the Bahamas.
  • During the redirect examination, Bankman-Fried discussed his frustration with regulators and how his comments might have influenced the regulatory landscape. He also addressed why he didn’t fire anyone upon discovering the US$8 billion liability, stating that his focus was on moving forward rather than assigning blame.
  • He defended his use of a private jet as a valid CEO expense, stating it was essential due to logistical challenges in traveling between the Bahamas and Washington, D.C.

Forkast.Insights | What does it mean?

Bankman-Fried’s defense opted to place the defendant in the witness stand during his criminal trial. Grilled by prosecution attorney Sassoon, Bankman-Fried attempted to sidestep direct questioning, repeatedly using the phrase “I don’t recall” to dance around various issues. The judge, on occasion, had to intervene with the admonishment: “Mr. Bankman-Fried, just answer the question.”

Bankman-Fried’s defense strategy centers on convincing the jury of his lack of intent to funnel customer funds away from FTX for a multitude of purposes — including to offset Alameda’s losses, buy his opulent Bahamas residence, finance venture investments, and obtain the naming rights for the home stadium of basketball team the Miami Heat.

Following a month replete with witness testimonies, Bankman-Fried’s destiny now rests squarely in the hands of the jurors. The scales appear tipped against him, with testimony from former associates turned prosecution witnesses providing formidable evidence. 

Throughout the trial, the defense has labored to establish the narrative that Bankman-Fried’s actions were not driven by fraudulent intent. Rather, his lawyers have attempted to show that his actions were the consequence of teething problems during FTX’s inception, exacerbated by a dearth of robust risk management.

This week’s testimony represented Bankman-Fried’s final, desperate gambit to sway the jury in his favor. His chosen strategy, replete with memory lapses, may not win over all 12 of the jurors. But it doesn’t have to. Bankman-Fried needs to convince just one jury member there is reasonable doubt in his culpability to produce a hung jury — a winning outcome for his defense. 

When a jury is “hung,” the jurors are divided in their opinions and cannot agree on whether the defendant is guilty. As a result, the case remains unresolved, and the trial may end in a mistrial. 

It’s unlikely the case would just go away and Bankman-Fried faces trial for another set of civil charges brought by regulators in the new year. But if his strategy has worked, and doubt about his guilt exists among the jury, crypto’s most notorious figure could — for the time being at least — walk free.

2. Betting that NFTs are back

CryptoPunks Bids-01
CryptoPunk #9280 garners US$2.1 million bid as NFT sales surge signals a market uptick. Source: CryptoPunks

CryptoPunks are on the move and large offers are starting to roll in for some of the rarest Punks in the iconic Larva Labs collection.

  • CryptoPunk #9280 has a current active bid of 1.1k ETH (US$2.01 million) on Larva Labs’ CryptoPunks website.
  • There are currently 2,099 ETH worth of open bids for CryptoPunks on the Larva Labs website.
  • Over US$4 million worth of CryptoPunks have been sold on secondary markets over the past seven days.
  • The floor price of CryptoPunks is up 9.0% this week to 46.88 ETH.
  • Eleven CryotoPunks have sold for over US$100,000 over the past week.

Forkast.Insights | What does it mean?

CryptoPunks are widely considered to be a barometer for the broader NFT market. When CryptoPunk sales are up, many see it as a sign that collectors are gaining confidence both in the market, and in the idea that the iconic collection may be on the up again.

CryptoPunk #9280’s has a US$2.1 million active offer, which is particularly noteworthy because large Punk sales are often forward indicators of a run on NFTs. In the peak bull market, rare CryptoPunk sales show the potential of these major NFT investments. CryptoPunk #5822 sold for US$23.7 million in Feb. 2022, CryptoPunk #7523 sold for US$11.7 million in June 2021, and the most expensive Ape CryptoPunk #4156 (the same rare trait of the Punk with the active US$2.1 million bid), sold for US$10.2 million in Dec. 2021. 

This year’s top CryptoPunk sale was CryptoPunk #5066, a rare Zombie Punk that sold for US$1.4 million. If Punk #9280’s holder accepts the current US$2.1 million offer, it will mark the highest CryptoPunk sale in well over a year, and could lead to a run on rare Punks.

It’s not just large CryptoPunk sales that indicate the start of a bull market. Recent large NFT sales like Bored Ape #6022 which sold for 169 ETH (US$303,000), Azuki #3309 for 115 ETH (US$204,000), and DeGod #3251 sold for 110 ETH (US$196,000), all represent sales that usually only happen when collectors feel there’s a risk other collectors could beat them to the purchase.

Right now it feels like big collectors are starting to bet on NFTs again. The market is improving, with October breaking a seven month streak of declining monthly NFT sales. Public figures have started uttering the phrase “NFTs” once again, with Elon Musk, Joe Rogan and Mark Cuban all weighing in on NFTs this week. While not all of their words were positive, it is a certainty that when people like them talk about NFTs, the public begins to get curious about non-fungible tokens again. 

3. ETF dreams inspire Bitcoin’s October revival

Bitcoin Uptober
Bitcoin surges in ‘Uptober’, exceeding $35,000 on ETF anticipation, reviving hopes for crypto’s recovery. Image: Canva

Bitcoin experienced a notable rise in October. It was down to around US$26,600 half way through the month before starting its sudden rise. The coin is now sitting pretty at over US$35,000 as we go to print. The price pump saved the ‘Uptober’ narrative of October rises in the crypto market. The catalyst? Anticipation that the U.S. Securities and Exchange Commission will approve at least one of a number of spot Bitcoin ETF applications in the near future.

  • The “Uptober” narrative is driven by historically strong Bitcoin performance in the month of October. While dismissed by some analysts as coincidence, the narrative is backed up by data, with only one negative October for the coin since 2015.
  • Many crypto advocates feel that an ETF approval could usher vast institutional investment into Bitcoin, potentially boosting the crypto market by US$1 trillion.
  • After losing US$2 trillion in value over 18 months, the crypto industry is therefore pinning much of its hope for recovery on the imminent arrival of a spot Bitcoin ETF in the U.S.
  • Beyond cryptocurrencies, other sectors of Web3, including NFTs and the metaverse, face an uncertain future despite Bitcoin’s uptrend.
  • Analyst views on Bitcoin’s performance are split between an upcoming bearish November and a positive long-term outlook.
  • Kaiko’s Clara Medalie underscores the need for more than just an ETF approval to counteract the market’s volatility after 18 months of losses. 

Forkast.Insights | What does it mean?

In an interview with Forkast, Kaiko’s Medalie spoke about ‘Uptober’ as one of the many narratives driving the crypto market. What may seem like historically strong performance in October could be just coincidence. The month of February, for instance, also tends to perform just as well, without the fanfare. But this October, the Uptober narrative is driven by some genuine positivity in the market sparked by a potentially needle-moving development.

The prospect of an imminent approval for a spot Bitcoin ETF has electrified the market. A host of huge investment names led by Larry Fink’s BlackRock are lining up to become the first firm to get in on the action. What was shaping up to be a damp squib of an October turned around in the month’s final weeks as news emerged that these applications may be further along than first thought. 

The rise saved the Uptober narrative, with many analysts speculating that the 18-month long bear market may now be drawing to an end. Markus Thielen, head of research at crypto services platform Matrixport, used the October upswing to highlight another, more prevalent theme emerging in the Bitcoin market. 

“Bitcoin has gone through four bull market cycles, each driven by a distinct narrative,” he said in a weekly report. Those four cycles go: Bitcoin’s emergence as a payment option; crypto adoption in China; the emergence of initial coin offerings (ICOs) as a means to fund companies; then the so-called DeFi (decentralized finance) summer and the NFT minting craze.

“The fifth Bitcoin bull market appears to be primarily driven by the expectations of institutional adoption,” Thielen said. “Bitcoin’s characteristics, which were traditionally associated with assets like gold and other safe-haven investments such as treasury bonds, have led institutions to consider Bitcoin for diversifying their asset allocation.”

The key to unlock that diversification? The dominant narrative says it’s a spot Bitcoin ETF. Whether or not the financial instrument, when finally approved, can have the galvanizing effect the industry craves, the narrative has at least brought some optimism back to crypto. It’s an exciting place to be again.

Neo sets sights on DeFi, unveils EVM-compatible sidechain

Neo blockchain has announced the development of a new Ethereum virtual machine (EVM)-compatible sidechain. An EVM-compatible blockchain can execute smart contracts written for Ethereum without changes.

See related article: In Conversation with Da Hongfei, Neo: China-Born Digital Asset Protocol

Fast facts

  • Neo founder, Da Hongfei, introduced the sidechain during his keynote speech at Neo’s 2023 Asia-Pacific hackathon’s grand finale held in Hong Kong.
  • The Neo Sidechain will further allow the deployment of smart contracts, paving the way for trading-specific applications, including decentralized finance.
  • The sidechain will be interoperable with Neo N3 (mainnet). Additionally, the sidechain is structured to counteract Maximum Extractable Value (MEV) attacks like frontrunning, to enhance the trading experience.
  • DeFi has become a popular use case of blockchain technology with over US$41 billion worth of value locked in decentralized applications, according to DeFiLlama data.
  • However, MEV attacks threaten its sustainability. The transparency of most DeFi transactions allows attackers to manipulate and exploit transaction details. They use sophisticated algorithms to monitor mempools, enabling them to execute profitable actions, including transaction reordering.
  • Neo’s cryptocurrency, NEO, rose 13.7% to US$8.87 in the 24 hours to 8:20 p.m. in Hong Kong on Friday, putting on the strongest daily performance among the top 100 cryptocurrencies by market capitalization.

See related article: BSN to integrate Neo’s chain to bolster NFT issuance in China

Taiwan introduces crypto regulation proposal

Taiwan has introduced a crypto bill for its first reading to the Legislative Yuan, the country’s parliament, The Block reported, citing official records

See related article: Taiwan may mandate public servants to declare crypto holdings

Fast facts

  • The bill proposed Friday, mandates crypto platforms in Taiwan to apply for an operating permit. Failure to do so may result in a forced shutdown of their operations.
  • Taiwan’s Financial Supervisory Commission last month rolled out guidelines prompting the local crypto industry to devise its own self-regulatory standards, according to the Block. 
  • Yung-Chang Chiang, one of the lawmakers backing the proposals, told the crypto media outlet that the “special law” would grant regulatory authorities the power to levy administrative penalties on entities flouting self-regulation rules.
  • Chiang reportedly added that a date for the second reading has not been set. 

See related article: Taiwan tightens crypto governance, HK acts on JPEX; El Salvador stockpiles Bitcoin

Bitcoin soars amid buzz of potential ETF approval: Is a crypto renaissance on the horizon?

In this issue

  1. ETF price pump
  2. Ethereum NFTs on the up
  3. Working blues

From the Editor’s Desk

Dear Reader,

It’s not like it came out of nowhere. We’ve known for some time about the potential for a spot Bitcoin ETF bounce and the buzz it can bring back to the crypto industry. But what many were unprepared for was the huge surge in Bitcoin’s price over the past week. Briefly topping US$35,000 during Tuesday trading, Bitcoin is up around 23% for the past 7 days as we go to print.

It started Oct. 16. Crypto media picked up on a post claiming the U.S. Securities and Exchange Commission (SEC) had approved an application by investment giant BlackRock to create a spot Bitcoin exchange traded fund for the U.S., the world’s largest economy. Bitcoin’s price shot up nearly 10% to around US$30,000 before tracing back the gains when it was revealed the post was a fake. 

But the buzz was real. Confirmation of a win for digital asset investment firm Grayscale over the SEC then filtered through on Monday, Oct. 23, electrifying the market. The SEC, the regulator announced, will not contest Grayscale’s right to convert its GBTC (Grayscale Bitcoin Trust) into a spot Bitcoin ETF.

SEC head Gary Gensler confirms that the regulator is currently considering “eight to ten” of these spot Bitcoin ETF applications. Among those are applications from some of the biggest investment names out there. The consensus is that once one application is approved, the rest will follow. While obstacles remain — not least that the SEC may well find another way to oppose the creation of a spot Bitcoin ETF as a new financial instrument — the Grayscale announcement was seen as a major win for crypto. 

And don’t we all need a win about now?

A spot Bitcoin ETF will allow investors to trade the coin on regular stock exchanges. That’s a big deal. Many think it will open the door for a multibillion dollar inflow of institutional cash into the Bitcoin market. But those gains aren’t in the bag yet and we should temper our excitement over what is still a complicated process. 

Even if a U.S. spot Bitcoin ETF is approved and the bounce returns to the market’s step, the wider industry needs to capitalize and make the most of that momentum. Perhaps then, after what has been a truly rough 18 months, the industry can return to its previous heights and beyond.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. ETF price pump

Bitcoin surges past $35,000 after Grayscale’s GBTC conversion gets a nod. Image: Canva

With one announcement Monday, the U.S. Securities and Exchange Commission (SEC) may have inched closer to green-lighting a U.S. spot Bitcoin exchange-traded fund (ETF). The belief is that once one such ETF is approved, others will follow, catalyzing institutional investment in the blockchain industry.

  • This sentiment was bolstered as the SEC announced it won’t challenge Grayscale’s conversion of its GBTC into a spot Bitcoin ETF. The news contributed to a 10% spike in Bitcoin’s price, briefly sending the coin above US$35,000 for the first time since May 2022.
  • Grayscale’s GBTC, with assets worth $16.7 billion, is currently the world’s largest cryptocurrency fund. Following the SEC announcement, the company expressed its readiness and eagerness to transition GBTC into a Bitcoin ETF, emphasizing a commitment to its investors.
  • The introduction of a spot Bitcoin ETF is expected to bridge the gap between traditional finance and the relatively niche cryptocurrency market. As Jack Jia of Unlimit highlighted, such ETFs will streamline the investment process for potential crypto investors, making the onboarding process smoother via traditional brokers.
  • Heavyweight financial institutions like BlackRock, Fidelity, and Ark Invest are also in the queue, having submitted their applications to the SEC. Historically, the SEC has shown reluctance to approve a spot Bitcoin ETF, voicing concerns about crypto market liquidity and potential price manipulation.
  • Vivian Fang, a finance professor and fintech expert, feels the SEC is becoming more receptive to the idea, especially given its recent acknowledgments of the Bitcoin market’s resilience to potential manipulation.

Forkast.Insights | What does it mean?

There is a certain irony that the SEC is now “warming up,” as Vivian Fang put it, to the idea of a spot Bitcoin ETF. The Grayscale announcement arrived only a week after the fake BlackRock ETF news originally sent Bitcoin’s price skyrocketing after months of losses and inactivity across crypto.

The SEC’s reasoning for now entertaining the idea of a spot Bitcoin ETF is that the Bitcoin market is sufficiently mature and large enough to protect investors from manipulation and overnight fluctuations in price. But the fake BlackRock announcement has, to some extent, shown that argument to be porous. 

Total transaction volume in the wider crypto market is still way down from its bull market heights, while Bitcoin’s dominance of that market is now 53%. Whether or not the fake news post about BlackRock’s successful ETF bid was a deliberate attempt at market manipulation, or simply a prank gone wrong, the effect was still a manipulation of the market. 

To the tune of US$100 million in BTC liquidations over the course of 30 minutes, to be exact.

Will that now impact the SEC’s thinking? Is governance and general reporting standards surrounding crypto robust enough to justify a spot Bitcoin ETF — a financial instrument expected to finally entice the mountains of institutional cash we’ve all been waiting for into the industry?

The moneypeople holding the purse strings seem to think so. At least “8 to 10” major investment funds are, according to Gary Gensler, in line to make that bet. BlackRock, it was revealed on Monday, has had a ticker for its spot Bitcoin ETF listed online since August. 

However, in the days since the ticker’s existence was first discovered, the listing has been taken down, only to then be restored. While this may be nothing, and the existence of a ticker itself could just be part of the application process rather than anything concrete, what it does show is that we shouldn’t take anything for granted.

2. Ethereum NFTs on the up

Forkast ETH NFT Composite

The Forkast 500 NFT Index is up 6.28% in the past seven days. Ethereum NFT sales volume is up 43.40%, hitting US$45.6 million in the week.

  • Average Sale price of Ethereum NFTs climbed to US$389.74 on Oct. 24, the highest it’s been since average sale prices reached US$429.36 on July 13.
  • It was a 63-day high for Ethereum NFT sales, its highest mark since Aug. 22, when sales reached US$8.9 million.
  • ETH price climbed 13.70% in the past seven days to US$1,788.29, helping to drive up the price of NFTs on the network, which are denominated by the cryptocurrency. 

Forkast.Insights | What does it mean?

Many cryptocurrencies are reaching yearly highs this week and Ether seems to be on its way to similar heights. The sudden increase in Ether’s price has brought the value of NFTs up along with it, and the excitement surrounding the movement is also driving sales volume.

Traders who believe that crypto prices will continue to climb may be tempted to purchase some of the top NFT collections, most of which have been at all-time low prices. In the past seven days, multiple collections saw their floor price climb considerably. That includes Doodles (+34%), Nakamigos (+27%), CloneX (+23%), Milady Maker (+22%), and Azuki (+19%). 

So-called profile picture (PFP) collections benefited the most from this surge in trading. Bored Ape Yacht Club (US$6 million), Mutant Ape Yacht Club (US$2.5 million), and CryptoPunks (US$2.4 million) NFTs claimed 3 of the top 4 spots in the NFT collection rankings by sales volume on 

NFT sales and value increasing on Ethereum also has a correlation to declining sales on the social finance platform, On Oct. 24, over US$7.6 million worth of keys were sold on FriendTech, the same day Ethereum NFTs hit their 63-day high of US$8.01 million in sales. 

With Yuga Labs’ Ape Fest 2024 taking place in Hong Kong next week, hype around NFTs will be in full force in the Asia markets. Anticipation that the SEC may approve a U.S. spot Bitcoin ETF should also continue to drive NFT trading action. Many traders are now hoping to see sustained growth throughout the rest of the year. 

3. Working blues

Amid a 63% plunge in global crypto market cap, major blockchain firms like Parity, announce workforce reductions. Image: Parity/Canva

Parity Technologies, the developer of the Polkadot blockchain, is cutting around 30% of its workforce, primarily targeting marketing and business development sectors.

  • Parity CEO Björn Wagner told Bloomberg via a spokesperson that the company aims to allow affected employees to continue contributing to Polkadot. Wagner said that Parity’s financial health and regulatory engagement “remains robust.”
  • Polkadot’s DOT token has a market value of US$5.35 billion and is ranked 15th in market cap among cryptocurrencies.
  • This wave of layoffs comes as the global crypto market capitalization plunged 63% from its all-time high. Widespread staffing reductions have become a trend in the crypto sector throughout this year, reflecting continued bear market conditions.
  • Earlier in August, blockchain intelligence firm Chainalysis announced it is shedding 15% of its 900 staff members, marking its second round of layoffs this year.
  • Binance.US, the American subsidiary of global cryptocurrency exchange Binance, announced last month that it had cut one-third of its workforce.
  • Blockchain and cryptocurrency developers like Polygon Labs and Circle have also announced job cuts over the course of the past year.

Forkast.Insights | What does it mean?

The U.S. economy has been showing remarkable resilience, even in the face of interest rate hikes that usually temper demand, borrowing, and investment. For an impressive 33 months in a row, job creation has been on the rise, adding 14.4 million new positions. As a testament to this strength, the unemployment rate has consistently stayed below the 4% mark for 20 straight months, a feat last seen more than 50 years ago. However, unemployment did record a marginal rise from 3.4% to 3.8% between April and September of this year.

According to the Bureau of Labor Statistics’ latest data, there’s now a record number of employed people in the U.S., reaching 161.6 million. That is compared to the 6.4 million eligible people who are currently unemployed. However, despite 9.6 million job vacancies in the country, the Federal Reserve projects the unemployment rate may inch up to 4.1% next year, in part due to the central bank’s cycle of rate hikes throughout the past year. 

While employment in the traditional economy has been overperforming, the same cannot be said for the cryptocurrency industry. The sector has been grappling with its own set of challenges, seeing numerous bankruptcies and a noticeable reduction in liquidity.

Bitcoin is often referred to as a form of “digital gold.” In its short history, it has already adopted the role of a safe haven during times of economic turbulence, such as the recent Covid-19 pandemic. If the broader U.S. job numbers remain high, the Fed may consider keeping interest rates higher for longer than planned. With looming uncertainties caused by U.S. monetary policy and geopolitical tensions, an increasing number of investors could now turn to Bitcoin as a protective measure. 

However, as rates rise, borrowing becomes (or remains) pricier, potentially curbing the appetite for leveraged trading in the Bitcoin arena. It’s therefore crucial to remember that Bitcoin isn’t solely influenced by the U.S. economy. It’s a global player, and economic winds from other major economies like China and the EU could yet sway its trajectory.

Binance challenges CFTC’s global reach in legal clash

Binance, the world’s largest cryptocurrency exchange, argued in a court filing on Monday that the U.S. Commodity Futures Trading Commission (CFTC) is overstepping its boundaries by trying to police global cryptocurrency activities.

See related article: Binance’s rollercoaster week: expansion, setbacks, and the ghost of FTX’s collapse

Fast facts

  • In March, the CFTC accused Binance of offering unregistered crypto derivatives to U.S. customers.
  • The CFTC is the U.S. commodities regulator that oversees the nation’s derivatives markets, such as futures and options.
  • Binance filed a statement in an Illinois court on Monday in response to the CFTC. The exchange said that while U.S. law applies within its borders, it doesn’t have the authority to regulate activities across the globe. Binance criticized the CFTC’s “broad arguments” and stated that the agency was not the “world’s derivatives police.”
  • Binance claimed that its U.S. operations, conducted under Binance.US, are separate. The company argues that only this domestic segment should be under U.S. regulatory scrutiny.
  • Binance also faces regulatory scrutiny from the U.S. Securities and Exchange Commission, which has accused the exchange of violating local securities rules. 

See related article: Binance says it signed agreements with new euro banking partners

Binance’s rollercoaster week: expansion, setbacks, and the ghost of FTX’s collapse

In this issue

  1. Japan — a new frontier for Binance?
  2. AI art sweeps NFT sales
  3. ETF buzz electrifies Bitcoin

From the Editor’s Desk

Dear Reader,

It’s been quite the week for Binance. The world’s largest cryptocurrency exchange has been headline news on our pages for some time now. And that’s no mean feat considering the Sam Bankman-Fried trial is still only a few weeks old and readers all over the world remain glued to their screens, waiting to learn the fate of crypto’s most (in)famous individual.

Second on that list, arguably, is Changpang Zhao, known to most as CZ. The Binance CEO and co-founder was a one-time mentor to SBF. Something of a crypto-older-brother to the FTX founder, Zhao was there for Bankman-Fried in the early days of the collapsed exchange, becoming one of the first investors and helping FTX off the ground.

But he was also reportedly there as it all came crashing down. At one stage in November last year, when rumors of a multi-billion dollar shortfall in customer funds at FTX came to light, it appeared as though Zhao may step in to bail SBF out. But it wasn’t to be. Zhao and Binance pulled out of an agreement to buy FTX at the last minute and… well… we all know what happened next.

For some time before Bankman-Fried’s rapid fall from grace, there had been whispers that Zhao was less than impressed by the FTX boss’s apparent cozying-up to U.S. regulators. Some reports even allege that he had a hand in exposing the balance sheet discrepancies that brought the curtain down on FTX. It was Zhao, after all, who contributed to the run at FTX when he said he would sell all Binance’s holdings in its native token FTT.

Regardless of Zhao’s alleged involvement in FTX’s demise, this could and should have been a triumphant moment for Binance. The exchange’s main rivals are no longer part of the picture. The company continues its outward expansion into territories new — Japan in particular representing a particularly promising growth market for the brand. 

But it’s not exactly smooth sailing elsewhere. Binance said it will no longer register new users in the U.K. on Monday in response to the country’s new overseas promotion rules, while on Tuesday Binance.US announced it has suspended U.S. dollar withdrawals for U.S. customers. Add that to the announcement last week that Brazil’s regulators want to indict Zhao for running a pyramid scheme, and the picture starts to look far less rosy.

Of course, Binance remains a juggernaut. Its website claims the exchange has 150 million users worldwide, enjoying a daily transaction volume of US$65 billion. But the lay of the land has without doubt turned a little bumpy, while there’s some really mountainous terrain up ahead.

Where the journey leads is yet to be decided. But knowing Binance and Zhao, it’s bound to be one heck of a ride.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Japan — a new frontier for Binance?

Binance Japan
Binance’s official entry into Japan signals a shift towards the Asia-Pacific, revitalizing the Japanese crypto scene and positioning the nation as a potential crypto haven amid global regulatory challenges. Image: Canva

Binance Japan started trading operations Aug. 1, launching with an impressive 34 coins on its platform. The number might be a fraction of what Binance’s global exchange offers, but for the Japanese crypto market, it marks a significant leap. The number places Binance Japan at the forefront of the domestic industry in terms of cryptocurrency variety.

  • The official arrival of Binance, the world’s largest cryptocurrency exchange, as a licensed entity in Japan, signals challenging times ahead for the multitude of smaller domestic exchanges already grappling with dwindling liquidity and an oversaturated market. As noted by Norbert Gehrke, founder of the Japan FinTech Observer newsletter, the dominance of Binance could potentially kill off many of these smaller competitors.
  • Binance has faced regulatory hurdles in Japan in the past. It received reprimands from the Financial Services Agency (FSA) for operating as an unlicensed online exchange in both 2018 and 2021. However, the company’s strategic acquisition of the Sakura Exchange BitCoin platform last year fast-tracked its official re-entry into the country.
  • Binance’s interest in the Japanese market showcases an industry-wide pivot toward the Asia Pacific market amidst growing U.S. resistance to crypto.
  • Despite past frictions, the country’s pro-crypto stance — led by Prime Minister Fumio Kishida’s endorsement of Web3 technologies — hints at a promising future for foreign crypto investments in the country. But some local competitors have raised concerns over Binance’s swift licensing process, suggesting a potential double standard.
  • While Binance’s global operations face legal scrutiny in various countries, experts like Tokyo-based fintech lawyer So Saito believe that existing Japanese regulations will safeguard local investors. As they were during the FTX collapse, Japanese assets are expected to remain secure even if Binance Global encounters challenges.
  • On the positive side for Binance and Japan, the entry of a global giant might just be the spark the domestic crypto industry needs to really get up and running. The market is shifting away from one-note cryptocurrency trading to the broader potentials of Web3. If developers can integrate Japan’s traditional strengths in areas like anime, manga, and video games, then the future seems ripe with opportunity. 
  • The hope, as expressed by industry advocates, is that Binance’s presence will rejuvenate Japan’s crypto space, drawing in more foreign interest and innovation much like the crypto hubs of Dubai and Singapore.

Forkast.Insights | What does it mean?

The picture can look a little bleak for Binance in the West. U.S. regulation in particular and the threat of legal action there has slowed the company’s momentum. It has been forced to beat a hasty retreat from Canada and a host of European jurisdictions. The business landscape is also growing increasingly complicated in the U.K. The exchange announced Monday it will no longer accept new customers in the country in compliance with local regulations.

Binance is far from alone in facing these challenges. Crypto businesses are struggling across the board. It’s just that Binance’s size and industry heft means it inevitably attracts a lot of the ire aimed at the wider industry. And like the wider industry, it’s now looking for opportunities beyond Europe and the U.S. — powerhouses for both traditional finance and the digital economy — toward the Asia-Pacific region, which is emerging as something of a crypto haven.

One key region for the company is Japan. Blockchain intelligence firm Chainalysis shows that while India leads the world in crypto adoption and other APAC regions such as Indonesia and Vietnam are accelerating their crypto uptake, blockchain adoption in Japan is also significant. 

The nation’s government is never shy about promoting Japan as a regional hub for Web3, which it has positioned over the past year as a key economic growth strategy. It aims to use blockchain technologies like non-fungible tokens (NFTs) and decentralized autonomous organizations (DAOs) to unlock hidden value in Japan’s graying society and address the rapid onset of regional depopulation.

But exactly how it aims to do that remains unclear. While the will is there, Japanese developers express a lack of blockchain understanding among policy-makers. There is therefore a sense that a current wave of government enthusiasm for Web3 could fizzle out without any specific strides for the industry. Which is where Binance could step in.

The exchange was able to fast-track its official arrival in Japan this August despite past run-ins with regulators. Despite the legal baggage it carries elsewhere, there is clearly a desire among policymakers and industry advocates to leverage the experience and technical knowhow that Binance brings to the table.

Could Japan emerge as a home-away-from-home for the company? The official arrival of Binance Japan has at least stirred up a lot of conversation and crypto interest in the country.

2. Art and charity over apes in NFTs

Winds of Yawanawa
Refik Anadol’s AI-art NFTs bridge cutting-edge tech and cultural preservation, generating millions and benefiting the Yawanawa tribe. Source: CryptoSlam

Refik Anadol’s artificial intelligence (AI)-created art collection “Winds of Yawanawa” is currently the top non-fungible token collection on the Ethereum blockchain. 

  • Over US$3.7 million in secondary sales of the collection have been recorded over the past seven days, marking a 446% increase since the collection’s unveiling last week.
  • Winds of Yawanawa was responsible for 11.4% of Ethereum’s US$32 million in total NFT sales the past week.
  • The highest sales within the collection include one NFT for 23 ETH (US$36.560.17), and 17 individuals sales at more than 15 ETH (over US$23,000) each.
  • Refik Anadol’s art was featured on the exterior of The Sphere, an immersive events structure in Las Vegas, during the venue’s opening in September.
  • The Museum of Modern Art welcomed Refik Anadol’s “Unsupervised — Machine Hallucinations” NFT into their permanent collection, making it the first NFT to be owned by MoMA.

Forkast.Insights | What does it mean?

It’s not often that art gets a chance to take center stage in NFTs, but when a milestone such as Refik Anadol’s recent accomplishments arrives, it must be talked about. 

For the past few weeks, Refik has represented the heart of NFTs, serving as a much needed distraction from the current 33-month low point for the NFT market. His art and its success has reminded the collective community about the roots of NFT technology, which is the provenance it preserves, and the financial opportunities it offers to artists.

While Anadol’s art being featured on the Las Vegas Sphere and being acquired by the Museum of Modern art are milestones for NFTs, they’re equally as important for the world of AI art. His work lives at the cutting edge of two fronts, showcasing how AI can be used as a tool to create beauty, while using technology to preserve it. 

Using data from Acre Brazil’s Yawanawa tribe’s village in the Amazon rainforest, Refik painted wind speeds, direction, gusts, and temperatures onto a digital canvas with AI tools to create the iconic 1,000 edition “Winds of Yawanawa” collection. 

The collection also highlights another important side of NFTs, one that is rarely talked about. We’re accustomed to hearing about scams and manipulations across the blockchain industry, but seldom do we hear about good deeds in the NFT ecosystem. The “Winds of Yawanawa” collection was co-created with artists from the Yawanawa tribe, and because of that collaboration, the tribe earns royalties for each NFT sold on secondary markets. 

To date the “Winds of Yawanawa” collection has traded for over US$9.4 million, with 10% of all sales going directly to the Yawanawa tribe. While royalties are no longer enforced on marketplaces, most art collectors happily honor artists’ requested royalties. In a space that witnessed a US$6.2 million generative art sale over the summer, a US$69 million Beeple NFT sale in 2021, the Art Blocks platform’s US$1.4 billion in all-time sales, and now Refik Anadol’s milestone collection of AI art, a picture is being painted on the blockchain that may help you understand just how significant the art movement in NFTs really is.

3. Finks forecast: Golden Bitcoin era?

Bitcoin ETF BlackRock Larry Fink
BlackRock’s potential Bitcoin ETF signals growing institutional crypto interest, highlighting the asset’s responsiveness to global events and the need for due diligence in the digital age. Image: Canva

BlackRock CEO Larry Fink addressed the recent fleeting surge in Bitcoin prices during an appearance on the Fox Business broadcast on Monday, highlighting the immense global interest in cryptocurrency.

  • This surge was initially fueled by a rumor that the U.S. Securities and Exchange Commission (SEC) had given the green light to BlackRock’s application for a spot Bitcoin exchange-traded fund (ETF).
  • Fink refrained from delving into specifics but noted that the rally wasn’t solely based on the rumor. He attributed the upswing to worldwide concerns about the current Israel-Palestine conflict and what he described as escalating global terrorism. He discussed the growing trend of investors moving towards safer assets, whether it’s treasuries, gold, or even — at a time of global disruption in traditional markets — cryptocurrencies.
  • The ETF rumor and spike in Bitcoin price originated from Cointelegraph, a cryptocurrency news platform. It claimed early Monday on social media platform X (formerly Twitter) that the SEC had approved BlackRock’s spot Bitcoin ETF application.
  • However, Cointelegraph later retracted the claim. In the meantime, Bitcoin’s value briefly spiked to nearly US$30,000 before stabilizing back to within the US$28,000 range.
  • In June, BlackRock lodged an application for its iShares Bitcoin Trust with the SEC. Should it gain approval, the firm plans to collaborate with Coinbase Custody as its custodian.
  • Despite an influx of spot Bitcoin ETF applications from various institutions, the SEC has delayed a decision on approvals. Nevertheless, Steven Schoenfeld, a prominent figure in the industry, anticipates the SEC to approve all applications in the coming three to six months.

Forkast.Insights | What does it mean?

Bitcoin’s latest major price swing was fueled by the industry’s longing to see a spot Bitcoin ETF open for business in the world’s largest economy. It not only demonstrated investors’ appetite for cryptocurrencies, as noted by BlackRock’s Larry Fink. It also revealed the asset’s responsiveness to unfolding events and hearsay. 

The quick correction from Cointelegraph after the outlet’s mistaken ETF claim reflects the lightning-fast dissemination of information in the internet era. It fires a clear message to the financial community about the importance of due diligence in today’s rapid information age.

BlackRock’s flirtation with the Bitcoin ETF sphere is a sign of the times, pointing toward a growing institutional interest in digital assets. A potential alliance with platforms like Coinbase Custody, contingent on regulatory blessings, could mark the beginning of an advanced framework for further institutional forays into the crypto world.

For investors, a spot Bitcoin ETF would become another channel to legally bet on the success of digital assets. But for existing cryptocurrency industry participants, it would serve as a lifeline that brings much needed funds, liquidity and mainstream interest into the sector. 

The so-called “crypto winter” and wider macroeconomic headwinds have hastened the demise of multiple Web3 firms. Even the strongest and the fittest companies left behind now tend to operate with a much smaller workforce and war chest. The introduction of a spot Bitcoin ETF would be a turning point. 

While rejuvenating the dwindling reserves of these firms, this new financial instrument could also instill renewed confidence among stakeholders. As mainstream investors gain an easier and more regulated avenue into Bitcoin investment, the resultant inflow of capital could stabilize the volatile crypto market, fostering an environment ripe for increased growth and innovation.

Israel-Palestine crisis: Navigating the intersection of conflict, aid and blockchain

In this issue

  1. Gaza tensions, digital tremors
  2. NFTs: not dancing in September
  3. Lubin talks twilight: Traditional system’s eclipse

From the Editor’s Desk

Dear Reader,

It’s a geopolitical conflict with roots stretching back over more than a century. Yet the latest escalation of violence in Israel and Palestine this past week feels particularly shocking. Not least because the Hamas-led attacks throughout Israel over the weekend apparently caught the Israeli government, intelligence services and military — one of the world’s most well-provisioned — completely off-guard. 

Reports have emerged suggesting that the militant group Hamas, the de facto political leadership in the Palestinian region of Gaza, used crypto transfers to raise millions of dollars in funds for the weekend’s attacks. It therefore appears we have once again seen financial access weaponized, as it always is in modern day conflict. 

The hope now is that crypto steps up to take on a more positive role in what happens next. The blockchain, after all, is advertised as stateless, and permissionless. In its truest guise, it bypasses politics. It could be used here to get much needed humanitarian aid to civilians on both sides of this bloody conflict. 

Local Web3 entrepreneurs set up an emergency crypto fund for Israeli victims of the violence — a move that we applaud and recommend readers seek out. But there are also more than 2 million Palestinian civilians inside Gaza who could benefit from financial aid delivered in the form of crypto. 

As we have seen in this abhorrent incursion, civilians have cruelly been included in the attack equation. From afar, the complex web of history, politics, and homeland intertwine. On the ground, there are simply lives at stake. 

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Crisis? Bitcoin’s dual response

Bitcoin Israel Gaza
Crypto’s dual role in the Middle East conflict emerges as Israel freezes Hamas-linked accounts and an Israeli consortium launches Crypto Aid for war-affected citizens. Image: Canva

Israel’s cyber crimes unit, in conjunction with the National Headquarters for Economic Warfare, has announced the freezing of cryptocurrency accounts believed to be instrumental in raising funds for the Gaza-based Palestinian militant group, Hamas. 

  • Israeli authorities have reportedly urged Binance, the world’s largest crypto exchange, to transfer the confiscated funds into Israel’s state treasury.
  • That follows a devastating series of attacks on Israel by Hamas over the weekend. The attacks, which included multiple atrocities against civilians, killed an estimated 1,200 people and wounded at least 2,700 others as of noon Thursday in Hong Kong. 
  • In retaliation, Israeli warplanes have bombarded Gaza, a tiny strip of land some 40 km in length and home to over 2 million people. The air strikes have reduced large parts of the area to rubble, with 900 people reported killed and 4,500 injured. Reports indicate that the Israeli military has called up 350,000 reservists and may now be preparing for a ground assault on Gaza.
  • In response to this humanitarian crisis, a consortium of Israeli crypto companies has launched Crypto Aid Israel. This emergency fund aims to support Israeli citizens affected by the ongoing conflict. It is spearheaded by local crypto industry figures and companies such as Fireblocks, 42Studio, Market Across and CryptoJungle. They have teamed up with non-profit organizations to receive and deliver humanitarian aid to affected Israeli communities using cryptocurrencies such as Bitcoin, Ether and stablecoins like USDT and USDC.
  • Crypto has been used in conflict before. On-chain data shows that combatants and civilians on both sides of the Russo-Ukrainian war make use of cryptocurrencies as a way to receive and send funds. The use of crypto on both sides of the divide reveals crypto’s dual-edged nature as a tool designed to increase financial access, regardless of political affiliation, location, or intended use. 
  • Six months into the conflict with Russia, Ukraine had already raised US$54 million in crypto donations, channeling it towards the provision of military essentials, medicine, and vehicles for their armed forces. On the flip side of that, pro-Russia militias also received over US$20 million in cryptocurrencies in the first year of the conflict.

Forkast.Insights | What does it mean?

The Middle East, as a pivotal hub for global oil production and transit, has long been a focal point of geopolitical tension reverberating through the global economy. When conflicts arise in the region, the immediate concern for markets is often the threat to oil supply chains. Physical infrastructure can be damaged, while fear of wider escalation stokes market uncertainties. Locations like the Suez Canal and the Strait of Hormuz become choke points for global oil supply.

However, the market impact is felt beyond the oil sector. Rising oil prices lead to higher transportation and production costs. As these costs surge, consumers feel the pinch, leading to inflationary pressures. Central banks, in a bid to stabilize economies, adjust monetary policies, which in turn further fuel inflation. 

In the midst of these economic fluctuations, investors begin to search for stability. Historically, this stability was sought in gold, a time-tested “safe haven.” However, the digital age has ushered in another contender: Bitcoin. 

Dubbed “digital gold” by some, Bitcoin offers certain features that make it attractive in times of uncertainty. Its capped supply makes it a potential hedge against fiat currency depreciation, especially at times of high inflation. Additionally, in regions with limited banking, the decentralized nature of Bitcoin can offer an alternative means of accessing financial services. 

But Bitcoin’s journey amid geopolitical unrest is not a straightforward one. While some investors view it as a refuge, others might liquidate volatile assets like cryptocurrencies to cover losses or rebalance portfolios. This duality in investor sentiment can lead to sharp, unpredictable price movements in the Bitcoin market. On top of that, as Bitcoin’s ecosystem intertwines with the broader economy, significant spikes in global oil prices could impact the energy-intensive process of Bitcoin mining, affecting its network dynamics.

2. Wake me up when September ends

NFT market september
Despite drops in major collections and marketplaces, global brands like Starbucks remain optimistic, exploring innovative NFT use-cases. Image: Canva

The NFT production on Ethereum reached an all-time low of US$17.55 million in September, marking a 12.4% decline from August’s US$20.05 million, according to data from Forkast Labs.

  • Prestigious NFT collections like Bored Ape Yacht Club and CryptoPunks saw a significant drop in their valuation, pointing to a potential shift in the broader market sentiment.
  • Forkast ETH NFT Composite, an index tracking the top 250 NFTs on Ethereum, plunged 48% year-to-date, hitting its low of 715.22 points in September.
  • Polygon’s NFT production experienced a dip, with September’s figures at a seven-month low of US$4.7 million. That was, nonetheless, an overall year-to-date increase of 219%.
  • Anndy Lian, NFT author, suggests the NFT hype from 2021 has tapered off, leading to a selective and realistic approach from buyers.
  • Major NFT marketplaces like OpenSea and Blur reported drops in monthly trading volumes by 31.8% and 38.3% respectively in September.
  • While the market faces challenges, global brands like Starbucks are still adopting NFTs, showcasing new innovative use cases that could reignite interest in the sector.

Forkast.Insights | What does it mean?

There has been a fundamental shift in the way NFT investors collect and trade. They’re finally looking for real value.

Where they aren’t finding value is in new mints, currently at all-time low NFT production levels. Those new NFT mints typically represent run of the mill profile picture collections, which can make creators enormous profits in an instant during a bull market. Today, you’ll be lucky to flip a new mint for what you paid. 

After major projects like the CyberKongz’ Genkai, and NWay’s Wreck League failed to sell out their primary sale over the summer, creators hit the brakes on minting new collections.

Still, even with declining primary sales and plummeting value for NFTs on secondary markets, some NFT collections are proving resilient even today. Those collections offer more tangible value, like the Pudgy Penguins NFTs who offer royalties on toy sales to select NFT holders. 

Similarly, the Winds of Yawanawa collection by Refik Anadol offers a more abstract, but equally attractive value as pure art. Refik’s art has been featured both on the Las Vegas Sphere, and now in the Museum of Modern Art as the first NFT creator to have his NFT backed digital art welcomed into their collection.

Even more value has been uncovered in new SoFi (social finance) platforms, which have themselves been a main contributor to the decline of the NFT markets. Total new users of the new platform have climbed to over 299,000 unique users, up from 130,000 on Sept. 1. Total locked value in the platform also rose from around 3,260 ETH to approximately 29,200 ETH over the month of September.

Innovation is for now mostly coming from outside NFTs. Until it returns to the non-fungible token market, expect to see September’s trend of all-time-low sales to continue well into October and beyond.

3. Monetary system’s impending sunset

Joe Lubin AI monetary system
Joe Lubin predicts AI and blockchain synergy as U.S. regulators tighten grips while other regions embrace decentralized tech. Image: Canva

Joe Lubin, chief executive of blockchain technology platform Consensys and a co-founder of Ethereum, spoke to Forkast during the recent Token2049 conference in Singapore. He discussed the parallels between today’s crypto bear market and the dotcom bubble of the late ’90s. Lubin attributes the current crypto downturn to similar waves of unbridled enthusiasm followed by market corrections. He predicted that a marriage between AI and blockchain could be the crypto industry’s route back to prominence.

  • Amid escalating global financial challenges, such as inflation and interest rate hikes, Lubin said that traditional monetary systems might be approaching their twilight.
  • Regulators in the U.S. are scrutinizing the crypto industry. Lubin sees this as a veiled effort to either “slow-roll” or outright suppress the budding industry.
  • Looking abroad, regions like Europe, Asia, and the Middle East are painting a contrasting picture. Those regions, he said, see decentralized tech as an equalizing force against the might of U.S. financial power.
  • A tech marriage is on the horizon, Lubin said. He highlighted the importance of weaving artificial intelligence into the fabric of blockchain technology — and vice versa.
  • There’s no need for society to be overly concerned about artificial intelligence, according to Lubin. He remains buoyant about AI’s potential, particularly in collaboration with decentralized protocols that prevent the concentration of AI control in a small number of hands.

Forkast.Insights | What does it mean?

Lubin is no AI doomer. He made that clear during his interview with Forkast. But while the blockchain mogul and Ethereum godparent outlined a lot of the good that can come from AI’s impending global takeover, he touched on some of its more dystopian aspects also. 

Tech is never inherently bad, was the primary thrust of Lubin’s argument on artificial intelligence. The Consensys boss should know. He graduated from Princeton with a degree in computing and electrical science before kicking off his working life in the university’s robotics lab. So he enjoys a pretty solid grasp on the nascent field.

The only danger of artificial intelligence, he said, is if those now working on it allow its power to become entirely concentrated in a small number of hands — the bevy of private companies driving much of today’s AI advances. That would be “failure mode for humanity,” he said, without so much as a flinch. 

The remedy for that, Lubin argued, is open source building and the incorporation of decentralized blockchain protocols. That way, the capabilities explored on the back of large language models (LLMs), generative pretrained transformers (GPTs) and the like will remain visible for all to see and make use of.

Your next open source coding tutor? Look no further than AI.

“We need to level up humanity in a big way,” Lubin said. “Our AI allies are going to get better and better at that.”

SEC Chair Gensler faces bipartisan backlash over strict crypto regulations

In this issue

  1. SEC vs. Bitcoin ETFs: Lawmakers call
  2. NFTs: Down but not dead
  3. Mixin: US$200 million lost in crypto hack

From the Editor’s Desk

Dear Reader,

It takes a lot for U.S. Democrats and Republicans to come together these days – particularly given the Trump-trance into which the latter have fallen in recent years – but congratulations are in order for Securities and Exchange Commission Chair Gary Gensler for having united lawmakers from the two sides.

Having distinguished himself for leading a crusade against crypto companies of all shapes and sizes, Mr. Gensler can now add the epithet “peace broker” to his résumé.

Unfortunately for him, however, peace is the last thing with which he was rewarded at the House Financial Services Committee hearing on SEC oversight this week. His roasting before the committee came hot on the heels of a strongly worded letter from four of its members – two Democrat and two Republican – that described the SEC’s stance on spot Bitcoin exchange-traded funds as “untenable” and accused the regulator of applying “inconsistent and discriminatory standards” to applications to set up those ETFs.

The barbequing the SEC boss received on Wednesday wasn’t his first brush with legislators’ hostility. Just last month, he was the target of a tirade by lawmakers following the SEC’s court defeat in its case against Grayscale’s Bitcoin ETF application. Two months before that, one of the signatories of this week’s letter, committee member Tom Emmer, co-sponsored the SEC Stabilization Act, a bill expressly aimed at removing the regulator from his post following what Emmer said were “his long series of abuses” in the role.

So, a rough few months for the SEC chief, then. And a probable win for the crypto industry as the pressure to accommodate the inevitable – in this instance a Bitcoin ETF – becomes impossible to resist.

Mr. Gensler and his colleagues may dig their heels in, but the SEC is ultimately accountable to Congress, whose “crypto caucus” looks likely to become one of the most powerful blocs in the legislature in the years ahead.

Ranged against such remarkable and staunch bipartisanship, the SEC’s Canute syndrome just won’t cut it. Bring on the tide.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Lawmakers enter the fray

Bitcoin SEC
In a potent show of bipartisan unity, four members of the House Financial Services Committee penned a stern letter to SEC Chair Gary Gensler, condemning the regulator’s ongoing rejection of spot Bitcoin ETF applications, citing “inconsistent and discriminatory standards.” Image: Canva

The U.S. Securities and Exchange Commission (SEC) should stop rejecting Bitcoin exchange-traded fund applications “under inconsistent and discriminatory standards, four members of the House Financial Services Committee wrote in a Tuesday letter to SEC Chair Gary Gensler, after the U.S. financial regulator was ordered by a court last month to review Grayscale’s spot Bitcoin application.

  • The letter was meant to ensure the SEC “does not continue to discriminate against” spot Bitcoin ETFs, the Tuesday letter said, urging the SEC to approve the multiple pending spot Bitcoin ETF applications immediately.
  • The letter was written by Congress members Tom Emmer, who is the majority whip of the House of Representatives, Mike Flood, Ritchie Torres and Wiley Nickel.
  • The letter cited a court decision on Aug. 29 that required the SEC to review Grayscale’s spot Bitcoin application it rejected earlier. The court’s finding underscores a “fundamental point” that a spot Bitcoin ETF is “indistinguishable” from a Bitcoin futures ETF that has already been approved by the SEC, thus the agency’s current stance against spot Bitcoin ETFs is “untenable moving forward,” said the letter.
  • After the letter was sent on Tuesday, SEC delayed its decision on the Ark Investment Management and 21Shares spot Bitcoin ETF application from Nov. 11 to Jan. 10, 2024. The agency had earlier delayed multiple similar applications, including those from BlackRock, WisdomTree and Invesco Galaxy. BlackRock, the world’s largest asset management company, has its next Bitcoin ETF decision deadline on Oct. 17, which could be postponed again by the SEC.
  • At a Wednesday hearing before the House Financial Services Committee, Gensler was questioned about his “crusade against the digital asset ecosystem,” given the agency’s enforcement actions against crypto firms for alleged securities law violations in the past few months. 
  • Despite the Congress’ pressure, Gensler held to his point that “most crypto tokens are subject to the securities laws,” which makes most crypto intermediaries obliged to comply with securities laws as well. He also added that SEC was still considering what to do with the pending spot Bitcoin ETF applications, which could be further delayed due to a potential U.S. government shutdown in October.

Forkast.Insights | What does it mean?

The cryptocurrency market, including Bitcoin, has been relatively quiet lately. Prices have been stable, with the world’s largest cryptocurrency maintaining a value between US$25,000 and US$30,000 since early August, creating a somewhat unexciting period for investors used to the asset’s usually turbulent nature. However, there are significant events on the horizon that have the potential to shake things up.

One such event is the anticipated Bitcoin halving in April 2024, which is expected to reduce the number of new Bitcoins entering the market and could affect the price. Another potential game-changer is the possibility of the approval of the first U.S. spot Bitcoin ETF. The exact timing is still unknown, but recent legal developments, like the SEC losing a case against Grayscale, are making people think it’s more likely to happen than not.

While the market seems to be in a holding pattern, some, like software company MicroStrategy, are using this time to increase their holdings, seeing it as a chance to buy before potential increases in value. MicroStrategy, recognized as the largest corporate holder of Bitcoin, purchased around US$150 million more of it between August and September, showcasing its unwavering confidence in the long-term value of Bitcoin.

For investors, the current market situation, combined with the potential upcoming events, makes for an interesting landscape. Although things seem calm on the surface, there could be significant opportunities for those willing to look for them. The strategic moves by companies like MicroStrategy to accumulate more assets suggest that there are underlying opportunities in the current market environment.

2. Down but not out

Forkast 500 NFT Index Sept. 29
The tumultuous NFT market is experiencing a significant downturn, contradicting earlier media narratives heralding the limitless potential of non-fungible tokens.

A report came out last week stating that 95% of NFTs are now worthless. While true, the story has been spun into a narrative that NFTs are dead. This couldn’t be further from the truth. However, NFT’s value is down tremendously.

  • The Forkast 500 NFT Index fell below 2,000 for the first time in the index’s history.
  • The value of the NFT market is down 93.99% since the peak of the market in January 2022.
  • The individual blockchain NFT Composites reflect similar all-time declines in NFT value with Solana NFTs down 94.34%, Polygon 93.53%, Ethereum 93.42% and Cardano NFTs performing the best, down just 74.49%
  • In the past seven days, the index has lost 5.68%, indicating an increasing decline in value of NFTs across blockchains.
  • Global NFT sales on CryptoSlam declined for the fifth week in a row, with just over US$69 million in total NFT sales in the week ended Sept. 24.

Forkast.Insights | What does it mean?

There is no disputing that the value of NFTs has declined, but there’s a difference between value declining, NFTs being largely worthless, and the adoption of NFTs.

Last week’s “95% worthless” report claimed that NFTs were just a fad that has finally passed. While data supports that 95% of NFT collections are indeed worthless, this phenomenon has been the case on multiple occasions during the many slow periods in the NFT market. Simply put, NFTs quickly become illiquid and are effectively worthless. 

There is significance in still-liquid projects like Bored Apes Yacht Club, CryptoPunks, World of Women, and Pudgy Penguins losing roughly 94% of their value. This is the story that the Forkast 500 NFT Index tells, as it reflects the value of the top 500 NFT collections across blockchains, and acts as a proxy for the rest of the NFT market.

Whether the plot has been lost or never understood, there is a picture telling the story of what has happened over the past few years in NFTs. In fact, the growth of the industry has been more significant than most realize and if we’re the only outlet to report the real facts, we’re proud to do just that.

Since 2020, the NFT market has grown exponentially in almost all metrics beyond value. Unique buyers are up 10,100% in 2023 compared to 2020, while global sales are up 31,872%, and transactions are up 52,415% over this time. 

The picture is now clear, NFTs have become baked into internet culture. With brands continuing to pour into Web3, the technology around NFTs maturing, and a base of collectors that are convinced that the digital economy is the future, we’re convinced that the value many want so desperately is just a cycle away.

3. Yet another heist

The Mixin heist is the biggest crypto heist this year. Image: Canva

Hong Kong’s crypto sector saw its second major blow in a month with Mixin Network, a cross-chain transaction network for digital assets, suffering a US$200 million exploit on Saturday.

  • The database of Mixin Network’s cloud service provider was hacked last Saturday and caused the loss of around US$200 million worth of assets, Mixin announced on X (formerly known as Twitter) on Monday.
  • Mixin said it has temporarily suspended its deposits and withdrawal services until the platform’s vulnerabilities are addressed, and has contacted Google and blockchain security firm SlowMist to assist with the investigation, according to the announcement.
  • On Monday, Mixin Founder Feng Xiao-dong said Bitcoin was the main asset lost in the hack, and the platform will pay up to 50% of the customers’ losses for now. The rest of the losses will be compensated in the form of bonds and tokens, which the company will repurchase in the future, according to Chinese online news media BlockBeats.
  • The hack added to negative sentiment in Hong Kong’s crypto industry. On Sept. 12, Hong Kong-headquartered global crypto exchange CoinEx lost approximately US$70 million from a cyberattack. Last week, Hong Kong police arrested multiple persons related to crypto exchange JPEX, which allegedly misled investors through social media promotions and suspended trading last Monday, charging high withdrawal fees.
  • As of Monday, JPEX’s case has involved 11 arrests, at least 2,305 victims, and over US$180 million of investments, according to the South China Morning Post.
  • Hong Kong has been implementing a slew of regulatory measures this year amid efforts to be a global hub of crypto trading while preparing guardrails for investors against bad actors. Its new rules, which went into effect on June 1, allowed licensed crypto trading platforms to offer services to retail investors.

Forkast.Insights | What does it mean?

Hong Kong has garnered much attention in crypto circles since its rollout of rules for crypto trading several months ago. That attention has come largely for the right reasons, but this month it’s come for all the wrong ones.

The Mixin Network heist – the biggest crypto hack so far this year – shows that, rules or no rules, basic security remains a challenge in the crypto space. The cyberattack on CoinEx, less than a fortnight earlier, serves only to underline the point.

Mixin bills itself as an “open and transparent decentralized ledger, which is collectively booked and maintained by 35 mainnet nodes.” But Mixin says the vulnerability lay in its cloud service, whose database was hacked. That begs the question of just how decentralized Mixin really is when it comes to security; accessing a database isn’t the same thing as accessing a supposedly decentralized network.

As for CoinEx, the problem was compromised private keys to hot wallets. CoinEx’s hack may have been smaller and its impact relatively quickly addressed, but there’s a whiff of menace around talk that North Korean hackers may have been responsible for it. Indeed, the name of notorious North Korean hacker group Lazarus surfaced with little delay. It shouldn’t be lost on anyone that hackers linked to Pyongyang were responsible for half of the crypto stolen in attacks last year. 

None of this is the fault of Hong Kong’s Securities and Futures Commission, whose rules are well-intentioned and a step in the right direction for the city’s aim of realizing its crypto ambitions. The SFC is, after all, a finance regulator, not a cybersecurity enforcer.

Neither can the JPEX debacle be laid at the SFC’s doorstep. Pending proper legal due process, the conduct of the rogue exchange appears to be a textbook case of flouting the rules.

The JPEX case appears already to have shaken local investors’ confidence in crypto, and the two hacks will likewise have done little to foster increased trust. More’s the pity, as Hong Kong’s internationally respected finance regulator has taken an encouraging – if somewhat cautious – step toward bringing crypto back in from the cold following what was arguably its lowest point just 10 months ago.

US SEC to tighten regulatory enforcement beyond Coinbase, Binance.US

In this issue

  1. US SEC: Stepping up enforcement
  2. NFTs: Gaming juggernaut Zynga moves into NFTs
  3. JPEX exchange: Woes ahead as Hong Kong makes arrests

From the Editor’s Desk

Dear Reader,

It’s been quite the week for regulatory enforcement in the cryptocurrency space.

In the U.S., the Securities and Exchange Commission appears to be redoubling its efforts to bring market players it regards as errant into line. On our side of the world, in Hong Kong, the Securities and Futures Commission is cracking down on crypto exchange JPEX.

You’ll notice that the names of the two regulators don’t differ much, but that’s where the similarities pretty much end.

Hong Kong’s SFC operates within the context of a regulatory framework for crypto and digital assets in which enforcement action is a vital tool but a last resort.

The U.S. SEC, by contrast, operates in the absence of a regulatory framework that accommodates crypto and digital assets, and – as has been well documented over the past year – has relied on enforcement actions to fill that regulatory vacuum.

Hong Kong’s crypto rules have been criticized in some quarters as too restrictive, with their 12-month cooling-off period between token launches and exchange listings, and their ban on crypto derivatives, stablecoins, staking and airdrops. But at least Hong Kong has rules for the sector.

Those rules provide regulatory certainty, improving the business environment for crypto companies, reducing the need for proactive enforcement and – critically for the regulator and the taxpayers that fund it – reducing enforcement costs.

Enforcement costs are an issue. As David Hirsch, head of the SEC’s Crypto Assets and Cyber Unit admitted this week, the regulator has a finite budget. The pace of the SEC’s enforcement actions in the crypto space has been relentless, arguably eating away at that budget at the expense of other regulatory priorities – one of which might be drafting a prudent but enabling rules framework for the industry.

So, ask yourself this, Mr. Hirsch: What would serve the industry – and the investing public – better? Costly de facto regulation by enforcement (which, ironically, breeds regulatory uncertainty), or enforcement only as a last resort within a fixed-cost framework of rules?

Feel free to surprise us.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Warning bell

US SEC enforcement Binance Coinbase
The U.S. regulator has been criticized by the digital assets industry for slapping fines and filing lawsuits on crypto exchanges. Image:

The U.S. Securities and Exchange Commission (SEC) will expand its regulatory enforcement beyond Coinbase and Binance.US to other cryptocurrency exchanges, intermediaries and decentralized finance (DeFi) entities, the agency’s head of crypto assets and cyber unit David Hirsch said Tuesday at a forum in Chicago.

  • “We’re going to continue to bring those charges,” said Hirsch, adding that intermediaries such as brokers, dealers and clearing agencies that are not fulfilling their obligations will not escape the regulator’s reach.
  • The SEC sued Coinbase and Binance.US in June for allegedly offering unregistered securities, which deprived investors of protection against conflicts of interest and other risks. The agency also sued Ripple Labs in 2020, claiming the company’s sales of XRP constituted the unregistered offering of investment contracts. 
  • Hirsch further added that adding a “DeFi” label to an operation will not help circumvent the SEC’s enforcement. 
  • In the agency’s enforcement action against the Stoner Cats non-fungible token (NFT) project last week, enforcement director Gurbir Grewal said the “economic reality of the offering” determines an offering as a financial security, not its labels.
  • In partnership with the U.S. SEC, the Philippines Securities and Exchange Commission held a workshop last week to enhance the two agencies’ enforcement capabilities on “securities-related crimes” that include crypto scams, according to a press release last Friday.

Forkast.Insights | What does it mean?

DeFi, short for decentralized finance, has emerged as a revolutionary frontier in the world of finance, promising democratized financial access to anyone with an internet connection and the allure of operating without third-party intermediaries, notably due to the automation enabled by smart contracts. It has painted a vision of a sector untouched by traditional security threats and regulatory impositions.

However, a nuanced review of recent developments challenges this idealistic portrayal. An effective DeFi platform should inherently be decentralized, smart contract-driven, and impervious to undue influences. Yet, notable instances have arisen that call these tenets into question. Case in point: Terra-Luna’s UST stablecoin. Designed to maintain parity with the U.S. dollar, algorithmic manipulations led to a significant deviation from this benchmark. This anomaly precipitated a staggering loss of approximately US$50 billion, culminating in a fatal blow to what was then the world’s second-largest DeFi ecosystem.

From a security standpoint, while DeFi was envisioned as a robust and secure alternative to traditional finance, the reality has been starkly different. Data from Chainalysis, a leading blockchain analytics firm, indicates that DeFi platforms were the victims of a staggering 82.1% of all crypto-related thefts in 2022, summing up to losses worth US$3.1 billion. This trend seems to continue in 2023 with notable breaches such as the US$73 million attack on Curve Finance.

Regulatory perspectives on DeFi have also evolved. Initial beliefs that blockchain-based projects could operate beyond the purview of regulators are being reassessed. With the U.S. SEC signaling a more stringent oversight approach towards DeFi, it’s becoming evident that the sector might not be as insulated from regulatory interventions as previously thought.

2. NFT gaming is here

With high anticipation, gaming giants like Zynga and Konami are stepping into the NFT arena, launching pioneering Web3 games and setting the stage for a revolutionary blend of fun and blockchain technology in the booming $334 billion gaming industry. Image: Zynga

Zynga’s entry into NFTs marks the intersection of mainstream gaming and Web3, and it is not the only major game studio entering Web3 this year. These major games arrive at a time when Web3 native games are beginning to launch, creating the perfect conditions for gaming NFTs to shine.

  • Zynga’s first NFT was a free mint for a collection called Sugartown Oras. In just 7 days the collection has traded for over US$1.7 million on secondary markets, with 40% of the collection still waiting to be minted.
  • Five of the top ten collections on CryptoSlam are gaming-related NFTs including Gods Unchained and DMarket, the top two collections this week, trading for US$8.1 million and US$5.2 million on secondary markets.
  • DMarket’s CS:GO gaming skins boast over 1.7 million transactions in the past 30 days from 70,948 unique buyers.
  • Konami unveiled its first NFT game, Project Zircon at the Tokyo Game Show on Sept. 21.
  • Krafton, the developers behind PUBG, is releasing its own blockchain and an NFT-backed game called Overdare this year. The open-world sandbox game will host live events, and digital fashion and foster a Roblox-esque experience for gamers.
  • Major Web3 native games including Yuga Labs’ HV-MTL Forge and Legend of the Mara, NWay’s WreckLeague, PixelVault’s BattlePlan!, and My Pet Hooligans have either launched this month or are launching in early access later this year.

Forkast.Insights | What does it mean?

2022 was supposed to be the year of P2E gaming, and while that didn’t materialize with playable games, it certainly appears that the games we hoped to have played were meticulously being developed.

Before the end of this year, multiple Web3 native games will be launching to a rather large community of gamers whose anticipation never fizzled out. Wreck League, the Animoca backed brawler from NWay, along with two unique offerings from Yuga Labs, HV-MTL Forge and Legends of the Mara (arriving next week), will keep gamers more than busy until the big players in the gaming industry join the party, but in many ways, they’re already here.  

Mobile gaming juggernaut Zynga had its first NFT mint last week with Sugartown Oras, and this free mint demonstrated that Zynga’s understanding of the NFT market may match its expertise in attracting traditional gamers. Zynga’s revenue in 2022 was over US$2 billion, yet in this bizarre NFT world, it opted to take in no money with its mint. These guys get it, and it’s a very bullish sign that their time in NFTs will be well worth our attention.

Last week we also learned that an icon of the gaming industry, Konami, is releasing its first NFT game called Project Zircon. While it previously released collectible NFTs, this will be a playable game with tradable NFTs. Krafton, the studio behind one of the world’s most successful battle royale games PUBG, is also releasing a game called Overdare this year. This will be a Roblox-style open-world sandbox, and should reach a massive audience of gamers given their previous success. It’s worth noting that the game will be launched on Krafton’s own Settlus blockchain, which demonstrates its level of commitment to Web3.

Mobile gaming generated over US$91.8 billion in revenue last year, and that certainly seems to be why current NFT game developers are favoring that platform. Wreck League, HV-MTL, Overdare, and most other current Web3 offerings have or will be released on mobile, and now with Google’s Play store and Apple’s App stores having favorable NFT policies, the stage is now set for NFT gaming to have a fair chance at success.

Above all else, the games must be fun, and if early hands-on impressions from existing games are any indication of what we’re in store for, then I’d say Web3 has a real chance to live up to the hype. Make no mistake, being part crypto, part NFT collectibles, and all part of the massive gaming industry that is projected to grow to US$334 billion next year, all eyes are on NFT gaming right now.

3. Arrests in Hong Kong

Hong Kong JPEX
JPEX has shut trading on its platform amid a probe by the Hong Kong’s Securities and Futures Commission that said the firm was operating as an unlicensed entity. Image: Canva

Hong Kong police on Monday arrested six people connected with Dubai-based crypto exchange JPEX after receiving over 1,400 fraud-related complaints related to the company, according to the South China Morning Post (SCMP).

  • The people arrested include two social media influencers Joseph Lam Chok and Chan Wing-yee, who have been detained on suspicion of conspiracy to defraud. The total losses involved in JPEX’s fraud complaints were estimated at HK$1 billion (US$128 million).
  • The arrest followed a warning statement issued by the Hong Kong Securities and Futures Commission (SFC) on Sept. 15, which said JPEX had been “actively promoting its products and services to the Hong Kong public” without applying for a license to operate as a virtual asset trading platform (VATP), and that some influencers “have made false or misleading statements on social media” to suggest that JPEX had made its license application.
  • “This incident reflects the elements of fraud, so the police took immediate action to arrest relevant individuals for suspected fraud,” said Hong Kong Chief Executive John Lee Ka-chiu on Tuesday. “This is why we have the licensing system to protect investors.”
  • Following the arrest, JPEX said Monday its partnered third-party market makers had “maliciously frozen” the platforms funds due to “unfair treatment by relevant institutions in Hong Kong towards JPEX” and “a series of negative news,” and that the crypto exchange was negotiating with its partners to resolve the liquidity shortage.
  • Hong Kong kicked off its new crypto exchange licensing regime in June, allowing licensed exchanges to provide certain crypto trading services to retail investors in the city. 
  • JPEX’s case arises as Hong Kong ramps up its regulatory protections in the crypto industry. Apart from the SFC, Hong Kong Monetary Authority — the city’s de facto central bank institution — issued a warning last Friday that some crypto companies are purporting to provide “banking services” in their promotions to mislead investors.

Forkast.Insights | What does it mean?

Hong Kong’s Securities and Futures Commission is respected in finance industry circles and rightly feared by those in the same circles who break the rules.

Although JPEX can and should expect due process following the arrests of eight employees, social media boosters and money changers this week, the SFC is plainly delivering on its promise to make an example of any miscreant players in the crypto space that claim to hold licenses but which in reality do not.

The commission has been crystal clear in warning that crypto exchanges claiming to be licensed or to have filed license applications will find such misrepresentations counting against them if they file genuine license applications.

Given the seriousness of the allegations against JPEX, the exchange’s shutdown in the city may therefore prove to be permanent.

Since the arrests, JPEX has gone on the offensive, attempting to discredit the SFC, bleating about fairness, and pointing to its registrations with regulators in the U.S., Canada and Australia. To be fair, JPEX appears to be registered with the U.S. Financial Crimes Enforcement Network and the Financial Transactions and Reports Analysis Centre of Canada. However, its registration with the Australian Securities & Investments Commission is in the process of being struck off. Read into that what you will.

Further signs that all may not be well at JPEX come in the form of reports that its Taipei office appears to have been recently abandoned and that Taiwanese social media influencers it has hired are assisting authorities with their inquiries. And despite being a Platinum Sponsor of last week’s Token2049 digital asset conference in Singapore, JPEX pulled a disappearing act after the event’s first day, leaving its booth unattended.

So far, so sketchy. Yet whatever happens to JPEX, the case has brought home – once again – the potential perils of questionable operators running free in the crypto space, such that Hong Kong authorities are now considering tightening up the city’s barely three-month-old crypto regulatory framework.

So far, the SFC has issued only three crypto exchanges with licenses to serve retail customers. As what appears to be a growing problem at JPEX plays out, the regulator may well exercise even more caution before handing out additional permits.

Binance.US CEO calls it quits amid major layoffs

In this issue

  1. Shakeup at Binance.US
  2. NFT: Ethereum projects at risk
  3. India’s crypto stand: Decision looms

From the Editor’s Desk

Dear Reader,

We here at Forkast are big fans of creative destruction, the theory advanced by economist Joseph Schumpeter in which new innovations disrupt and replace established practices. In other words, out with the old, in with the new.

Events in the cryptocurrency space in recent days may be pointing that way, as the world’s biggest crypto exchange hemorrhages executive leadership and the fuzzy outlines of international norms for the industry begin to sharpen following the G20’s support for recommendations on regulation.

In and of themselves, these two developments aren’t a sufficient basis to conclude that the industry has reached a transformative, Schumpeterian moment, trading its often turbulent times on the fringes of finance for a more secure spot.

However, given the direction of travel more broadly – reflected in increasingly sure-footed digital asset regulation in such key jurisdictions as Singapore and Hong Kong, a much more solid industry consensus around what’s deserving of investment, and not least in the promise of a well-defined framework of crypto rules tailored for India as it concludes its G20 presidency – change seems to be in the air.

In this industry, we like to think that change comes quickly – and indeed it often does, although frequently not by design. But almost a year since the implosion of FTX – an event that arguably changed the crypto landscape more than any other in recent times – the industry is still dusting itself off, demonstrating that more fundamental shifts take time. As, indeed, they do in any sector. 

One thing that hasn’t changed is the upstart nature of crypto, and it isn’t likely to anytime soon, no matter how much it becomes an unremarkable part of the financial ecosystem.

Yet signs that the digital asset revolution is entering a new phase of its development are abundant. If the industry can avoid blowing itself up à la the likes of FTX and Terra LUNA, and continue to develop the creative component of Schumpeter’s thesis, its growing maturity – regulation and all – is to be welcomed.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Winds of change

Binance US
Binance.US CEO Brian Shroder’s departure comes after Binance’s global head of product Mayur Kamat’s departure last week. Image: LinkedIn/Canva

Brian Shroder, the chief executive officer of Binance U.S., has departed the company as the U.S. affiliate of the world’s largest cryptocurrency exchange laid off one-third of its staff, or more than 100 employees.

  • This downsizing will provide Binance.US “more than seven years of financial runway,” a spokesperson of the firm told Forkast in an email statement. Norman Reed, the company’s chief legal officer, has assumed Shroder’s position on an interim basis.
  • Schroder’s departure came amid regulatory challenges in the U.S., with the layoff being an “unfortunate example” of the impact from “the SEC’s aggressive attempts to cripple our industry,” the spokesperson added.
  • Binance U.S. has been dealing with growing regulatory pressures in the U.S. this year. In June, the company was sued by the Securities and Exchange Commission (SEC) for allegedly violating securities regulations.
  • Binance, the parent company, also faces regulatory scrutiny from the U.S. The Commodity Futures Trading Commission filed a civil suit against the exchange and founder Changpeng Zhao in March for operating an “intentionally opaque” business to take advantage of “regulatory arbitrage.” The exchange is also reportedly being investigated by the U.S. Department of Justice, which could pursue fraud charges against it. 
  • Last week, Binance’s global head of product Mayur Kamat resigned from the company, according to Reuters.

Forkast.Insights | What does it mean?

The cryptocurrency market, notoriously volatile and seen by some as a harbinger of wider economic trends, offers a tantalizing snapshot of current financial winds. Binance.US’ decision to downsize, stemming not just from the ebbs of a crypto bear market but also its intertwined legal complexities, serves as a poignant indicator of shifting sands in the financial world. With the company boasting of a “seven year financial runway,” it would seem that even the giants of the crypto realm are donning a cloak of caution.

Yet, while digital currency platforms take precautionary steps, the broader U.S. economic narrative is engrossed with the menace of inflation. The very mention of the term ‘inflation’ sends tremors through the spine of any economy, and the U.S. is no exception. A 3.7% rise in consumer prices over the past year, exacerbated by surging gasoline prices, has understandably sounded alarm bells.

The Federal Reserve has made bold strides to counteract this specter. By hiking interest rates from near-zero in 2022 to a staggering 5.25%-5.5%, levels unseen since the dawn of the 21st century, the Fed’s intent is clear: to temper inflation and ensure a safe landing.

But this safeguard comes at a cost. With the consequential surge in mortgage and credit card interest rates, borrowing has transformed from a benign affair into a more daunting endeavor. This shift has understandably ruffled the feathers of investors and business magnates, who worry that such steep hikes could push the economy into the chasm of recession.

Despite these dramatic monetary maneuvers, the U.S. job market has remained resilient. Wages continue to surge upward, hinting at an economy that isn’t ready to bow down just yet. This juxtaposition brings financial behemoths like BlackRock and Amundi hinting at cracks appearing in the U.S. economy, according to the Financial Times. Vincent Mortier, chief investment officer of Amundi, claims that the possibility of a recession in the U.S. is “very high.” Conversely, the undeniable vitality of the job market suggests a U.S. economy that’s still basking in the glow of its heyday.

2. On shaky ground

Forkast 500 NFT September 13

The declines in Ethereum’s NFT ecosystem have outpaced those in Polygon, Solana, and Cardano, with the impact of OpenSea’s creator fees policy, SEC charges against NFT projects, and controversy in major projects driving down the broader NFT market.

  • Since Aug. 18 (the date of OpenSea’s policy announcement), the Forkast ETH NFT Composite has lost 12.9%, compared to declines of 7.28% on Cardano, 6.78% on Solana, and 3.9% on Polygon.
  • The Forkast 500 NFT Index fell 15.27% in that period, reflecting the impact of Ethereum NFTs.
  • The SEC’s war on NFTs has disproportionately impacted Ethereum, with the SEC’s first two lawsuits against Impact Theory and the Stoner Cats projects both being on Ethereum.
  • Ethereum’s top collections were hit by negative news over the past few weeks, driving down the value of NFTs across the ecosystem. DeGods’ poor “downgraded art”, WreckLeague failing to mint out, the Nouns DAO fork, and US$1 million being stolen from the Milady Maker DAO’s treasury have had ripple effects across the Ethereum NFT landscape.

Forkast.Insights | What does it mean?

The bigger they are, the harder they fall, and there’s no denying that Ethereum is the big kahuna when it comes to NFTs. From its astronomical peak of value in 2022 to the post-bubble market we now find ourselves in, Ethereum’s fall from the top has hit harder and has done more damage to collectors than anything we’ve seen on other blockchains.  From some perspective, Ethereum NFTs have traded for over US $44 billion, while their closest competitors saw only 10% of those sales (Ronin US$4.2 billion, Solana US$4.1 billion, Flow US$3.5 billion, Polygon US$1.2 billion, and Cardano US$606 million)

Blow by blow, hit by hit, much of what was built with NFT sales is being knocked down by new negative events that just keep coming in. Each story and event ripples across the rest of the market, driving sentiment down and priming each collection for their own collapse once they hit any bumps in the road. Ethereum is the biggest target of all and has already shown us exactly how the market collapse will play out.

In the past few weeks we have had two prime examples that showcase exactly how a project tumbles down the mountaintop. The Nouns, one of Ethereum’s top collections from 2021, hit a patch of turbulence this month that has altered the course of their future. With their DAO’s members voting to fork, existing NFT holders have been given an opportunity to exit the project, minus their NFT, but with their share of the treasury. Since the NFT market has declined, and the supply of Nouns NFT increases by the day (a built-in mechanic where 1 Noun is minted every day, forever), the value of Nouns on secondary markets has fallen drastically.

Members have an easy decision, take 30+ ETH now from the DAO, 20-25 ETH on secondary markets, or hold for years and hope the value exceeds what they can get today. Seems to be an easy decision, and 40% of Nouns are now leaving the DAO. The Nouns’ treasury has now lost over 35% of its holdings (down to 17,000 ETH from 28,000), signaling a loss in confidence in both the project and the broader market.

Milady Maker, one of the few PFP collections on Ethereum to actually gain value over the bear market, finally faced reality when one of their own developers stole US$1 million from the project’s treasury. While legal options may ultimately be able to recover the funds, this type of news causes a rush for the exit, because nobody wants to be the last man holding the NFT in this illiquid market. Miladys had reached as high as 4.5 ETH this summer, and this week were selling for just 2.1 ETH.

It feels like we’re still at the true start of the market collapse. There’s just not enough projects that have fallen to zero yet. But as predicted weeks ago, more charges are coming from the SEC and its target has become clearer. With their most recent charges against the Stoner Cats the SEC has declared that selling NFTs to raise funds and promoting a secondary market means you’re likely in the crosshairs. Like a Jenga puzzle balancing on one peg, I think we’re just one big story away from the big collapse.

3. India to take a stand

India crypto
India’s harsh stance on crypto has taken a toll on the industry. Image: Canva

India will decide its position on crypto assets in the coming months, and take reference from the international consensus formed at the recent G20 summit, said the South Asian nation’s Secretary of the Department of Economic Affairs, Ajay Seth.

  • The G20 summit under India’s presidency has brought about a “very clear and comprehensive understanding” of the policy framework and risk assessment of crypto, as well as an endorsement from global leaders of India’s previous initiatives to regulate stablecoins and unbacked crypto assets, Seth said in an interview with CNBC TV18 on Sunday.
  • “Based on the consensus which we have been able to achieve or rather build, we will be considering those recommendations very carefully and decide our own policies and thereafter take further action,” he said, noting that New Delhi’s position on crypto assets will be decided in coming months.
  • India’s crypto industry has been troubled by a harsh stance from the government, which imposes a 30% tax on all crypto income and has expanded the anti-money laundering measures to the digital asset industry.
  • The summit that ended on Sept.10 could signal a change in India’s crypto policies. When asked about the Reserve Bank of India’s 2022 proposal to outright ban cryptocurrencies, Seth said the crypto industry “is not to be seen in that binary,” and that the Indian government will now consider its own position in reference to what global leaders have agreed with.
  • Meanwhile, some analysts questioned whether the G20 consensus could substantially impact crypto regulation in member states. “G20 is not powered to make binding regulations,” Amitendu Palit, senior research fellow at the National University of Singapore, told Forkast
  • The bloc can, at best, provide policy suggestions and directions for global adoption and the regulations would have to be implemented by the member states, Palit said.

Forkast.Insights | What does it mean?

India’s official stance on cryptocurrencies has been the subject of intense attention in the crypto industry for a number of years now. The country has also been a source of serial disappointments as its government has imposed hefty taxes on crypto transactions, its central bank has attempted to throttle the industry, enforcement action has been taken against exchanges, and lawmakers have toyed with the idea of banning crypto altogether.

So, when India assumed the presidency of the G20, with an apparent determination to allow the industry to thrive under a consensus set of rules that could be adopted internationally, industry observers might have been forgiven a flush of optimism.

However, now that New Delhi has chalked up nine months at the G20’s helm, with little to show for it in terms of its own position on crypto other than a wordy pronouncement by its economic affairs secretary that the government will draw up a regulatory framework “in the coming months,” we’re left wondering just what’s coming down the pipe.

On balance, it seems unlikely that the government will reverse course, given the levels of hostility toward crypto expressed by its central bank and various authority figures. But New Delhi appears – unlike Beijing – to understand that crypto can’t simply be wished away, and from that the industry might take some comfort.

Indeed, the joint policy paper commissioned by the G20 and published by the International Monetary Fund and the Financial Stability Board explicitly warns countries against imposing bans on crypto. Both bodies, however, are noted crypto skeptics, meaning that no matter how commonsense any Indian framework is that emerges from the consultative exercise, it’ll be likely to cleave toward a more restrictive line than many in the industry would doubtless prefer.

Whatever comes of India’s apparent final push to get the industry into compliance with its forthcoming rules, at least in a democracy – even one as flawed as India’s – bad regulations can be changed in response to public pressure. Try that in a place like China.

Coinbase and Wall Street: The merging worlds of TradFi and crypto

In this issue

  1. Coinbase ventures into crypto lending
  2. NFTs: Losses pile up
  3. Singapore’s president-elect: What’s next for crypto?

From the Editor’s Desk

Dear Reader,

The more things change, the more they stay the same. The old aphorism sounds better in the original French (plus ça change, plus c’est la même chose) but it’s true in any language and, as we watch institutional capital mobilize in crypto, it’s arguably applicable to our industry as much as it is to anything else.

Take, for instance, Coinbase’s launch of a crypto lending service for institutional investors in the U.S. This is a fairly clear sign that – at least in the eyes of the exchange, America’s biggest – the road to widespread crypto adoption runs through TradFi.

Coinbase’s involvement with such Wall Street super-heavyweights as BlackRock, for whose planned Bitcoin exchange-traded fund it aims to provide custody services, and Fidelity, which it is seeking to serve as a surveillance partner, does little to counter that impression.

TradFi has long flirted with crypto and digital assets, which is understandable, given the latter’s multiple points of appeal as an asset class, a potential source of operational efficiencies, a paradigm-changing innovation, and an unapologetic means of making money. Yet the relationship between the two remains unconsummated.

That’s not because there’s a lack of va-va-voom, but simply because the ecosystems involved differ so markedly. Combining two types of radically different infrastructure, after all, takes a lot of time and an enormous amount of effort.

Regulators and other finance sector authorities worldwide have been finding that out as they’ve tried to get TradFi to consume crypto. Singapore’s central bank is further along in that process than most, having roped some of the most established names in finance into its digital asset development strategy in a bid to tame the phenomenon. More distracted authorities, such as the U.S. Securities and Exchange Commission (SEC), seem to be making a meal of the process.

But even the gnomes of Singapore’s Monetary Authority will find out, as they seek to preserve the finance sector’s status quo while giving it a powerful dose of innovation, it’s not just crypto that’ll have to change.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Strategic offering

Coinbase is not letting legal skirmishes weigh on its plans as seen in the launch of its crypto lending program and Base, an Ethereum layer-2 chain. Image: Coinbase/Canva

Following the vacuum left by collapsed crypto lenders such as Celsius Network, BlockFi and Genesis Global, which saw significant losses in 2022 that drove them into bankruptcies, crypto exchange Coinbase has launched a crypto lending program for institutional investors in the U.S., according to a filing with the U.S. SEC last Friday.

  • The program will allow institutions to “lend digital assets to Coinbase under standardized terms in a product that qualifies for a Regulation D exemption,” a Coinbase spokesperson said in a Tuesday statement seen by Bloomberg. The exemption allows companies to offer a limited amount of securities without registering with the SEC.
  • According to a filing with the SEC on Sept. 1, Coinbase has applied for the exemption through its subsidiary Coinbase Credit. The program saw its first sale on Aug. 28 and had already raised US$57 million from investors.
  • The move followed a recent crackdown on the crypto exchange in the U.S., with the SEC charging Coinbase on June 6 for alleged securities law violations, saying the company’s staking-as-a-service program constitutes unregistered offer and sale of securities, which Coinbase “strongly disagreed” with.
  • Coinbase also suspended its crypto staking services in the states of California, New Jersey, South Carolina, and Wisconsin on July 14, after the four states ordered the crypto exchange to ban retail customers from the services.

Forkast.Insights | What does it mean?

Coinbase is strategically positioning itself to dominate the crypto landscape. The recent selection of Coinbase by BlackRock, the world’s largest asset manager, as its custodian for a proposed spot Bitcoin ETF underscores its rising stature in the industry. Moreover, when Cboe’s BZX Exchange refiled its spot Bitcoin ETF applications, it too named Coinbase as the player for its surveillance-sharing agreement, covering proposals from top-tier institutions like Fidelity.

Adding to its arsenal of offerings, Coinbase recently launched Base, an Ethereum layer-2 chain. Within its initial month, Base has managed to secure over US$400 million in crypto assets locked in the network, making it the eighth-largest blockchain for decentralized finance applications, as per DeFiLlama data.

Diversifying its services, Coinbase has also ventured into the lending domain, targeting institutional clientele. This move appears timely, especially with the vacuum created by the unfortunate bankruptcy of former prominent crypto lenders like BlockFi, Genesis, and Celsius Network.

On the competitive front, while Binance continues to be a significant player, recent regulatory challenges and partnership losses in several regions might create room for competitors like Coinbase to reduce the volume gap. As of the latest figures, Coinbase’s 24-hour trading volume stands at US$718 million, compared to Binance’s commanding US$5 billion, according to CoinMarketCap data. 

Coinbase is currently engaged in a legal skirmish of its own against the U.S. Securities and Exchange Commission. The crux of the conflict stems from the SEC’s claim that Coinbase functioned as an unregistered broker and exchange for certain cryptocurrencies deemed as securities. Coinbase has retaliated, seeking a dismissal on the grounds of jurisdictional overreach by the SEC. The recent verdict in favor of Ripple Labs, determining that the XRP token’s sale on exchanges like Coinbase didn’t infringe upon securities rules, might serve as a precedent and have potential implications for Coinbase’s ongoing battle.

2. What’s the value of NFTs?

Value of NFTs
Recent charges against NFT project Impact Theory fuel market uncertainty, leading to heightened selling pressures. Image: AI-generated via Midjourney

Traders are selling once prestigious non-fungible tokens at massive losses, signaling fear that most NFTs may never regain the value that they once held. The SEC’s charges against NFT project Impact Theory has injected fresh FUD (fear, uncertainty and doubt) into the markets, possibly leading to an increase in sellers realizing losses.

  • Total NFT losses for the week of Aug. 28 showed that sellers were on the losing end of trades with over US$11.9 million in losses.
  • Major losses on trades largely centered on the Bored Ape Yacht Club collection, highlighted in BAYC #8262, BAYC #8614, BAYC #2530, BAYC #9026, BAYC #5228, BAYC #966 that saw losses between US$212,000 and US$379,000.
  • The Forkast 500 NFT Index declined 4.2% and the ETH NFT Composite lost 1.21% since the SEC’s charges were filed last week, reflecting a broader loss of value across the NFT markets.

Forkast.Insights | What does it mean?

What is an NFT worth? That’s still the question that everyone is trying to figure out, and there’s obviously no real answer. There are different NFTs with different values — even prices of tokens in the same collections vary. What traders have figured out is that they’re definitely not worth what they once were. Across the board, investors are either holding their NFTs or selling them at a loss, and almost universally it has become accepted that the value they once held may never return. 
At its peak in April 2022, Bored Apes sold for an average of US$312,000. So far this month, its average price has fallen to US$34,000. We have years of NFT market data reflected on CryptoSlam and on the NFT Indexes to see that between market cycles, NFTs only bleed out. In fact, January is the only time of the year where NFTs increase in value, so outside of a few weeks early in the year, there’s rarely a good time to even hold an NFT, let alone buy.

Most NFT collections have also fallen to all-time low prices, but these new lows still leave them priced at many thousands of dollars. Projecting when buyers may find bargains worth shopping for is almost impossible because buyers have all of the time and leverage on their side to drive prices down even further. Until the scope of the SEC’s NFT agenda comes into view, prices will fall, and savvy buyers who are aware that we’re approaching tax loss harvesting season will be wisely waiting for NFTs to be sold for literal pennies. If you’re not aware, the end of the year finds traders selling NFTs for essentially nothing. In fact, there are multiple platforms created for just this purpose.

Maybe questioning the value of NFTs is the wrong approach and instead we should be asking what the purpose is of the current products offered in NFTs. If the community can solve this question, and begin delivering quality instead of quantity, they may indirectly solve the the value question

3. A new beginning

New Singapore PM layered in front of city's skyline
Tharman Shanmugaratnam, a 22-year veteran of the city state’s ruling People’s Action Party (PAP), will be sworn in as president on Sept. 14. Image: GIC/Canva

The former chair of Singapore’s central bank, who once called the crypto industry “purely speculative” and “slightly crazy,” is now the city state’s president-elect after winning a three-way race on Saturday. Tharman Shanmugaratnam, who currently holds several international appointments, including chairman of the G20’s Eminent Persons Group on Global Financial Governance and member of the World Economic Forum’s board of trustees, will be sworn into the largely ceremonial presidential role on Sept. 14.

  • Tharman has been a veteran in Singapore’s financial governance, serving as chair of the Monetary Authority of Singapore (MAS) — the country’s central bank — from 2011 to 2023. He was the country’s finance minister between 2007 and 2015, deputy prime minister from 2011-2019 and senior minister from 2019-2023.
  • He said in February 2018 that cryptocurrencies were still an experiment and the MAS saw “no strong case to ban cryptocurrency trading.” 
  • But as the industry developed — especially after the collapse of Terraform Labs and local crypto hedge fund Three Arrows Capital in 2022 — the MAS began to take a more restrictive approach to the industry, such as mandating crypto firms to segregate customer assets and proposing to block retail investors from crypto staking and lending services.
  • At the World Economic Forum in January, Tharman said the crypto industry has to be regulated for illicit activities like money laundering. But beyond that, crypto firms should not be regulated in a similar way to banks and insurance firms as that would legitimize an industry that is “inherently purely speculative and, in fact, slightly crazy.” 
  • He also sees the potential of blockchain technologies, saying in 2021 that “there may be a role for crypto in future finance that extends beyond pure speculation and illicit finance,” and that regulated stablecoins could play a “useful role” in the traditional payment system.

Forkast.Insights | What does it mean?

The election of Tharman Shanmugaratnam to the position of Singapore’s head of state may be regarded as an ascent in terms of pomp and ceremony, but when compared with the power he held as deputy prime minister, in his numerous ministerial posts, and, notably, in his roles first as managing director of the Monetary Authority of Singapore then as its chairman, it looks a lot like being put out to pasture.

That’s not to say Tharman won’t have any input into policy – he will, after all, have some say on how Singapore’s ample financial reserves are deployed – merely to say that his previous comments on crypto will carry little official weight.

And it’s even the case that some of those comments, although carefully parsed by industry observers and media outlets, have sometimes been taken out of context. The fact that he once described cryptocurrencies as “purely speculative” and “slightly crazy” is not the same thing as cracking down on them China-style.

In fact, in 2021, he said: “There may be a role for crypto in future finance that extends beyond pure speculation and illicit finance”. Not exactly a wrecking-ball approach, is it?

Indeed, under Tharman’s chairmanship, the MAS made its stance on crypto and digital assets very clear, restricting retail investors’ access, launching a TradFi-heavy initiative aimed at testing asset tokenization and decentralized finance applications, and just after Tharman stepped down as its chair, unveiling a regulatory framework for stablecoins.

All of which should reinforce the importance of listening to what people say, but also watching what they do.

Tharman’s replacement as MAS chair is Singapore’s deputy prime minister, Lawrence Wong, who is being groomed to take over as prime minister, and whose line on crypto shows little sign of deviating from that of his predecessor.

A member of Singapore’s ruling elite who has arguably been at least equally influential when it comes to Singapore’s crypto stance is Ravi Menon, the MAS’s outgoing managing director, who steps down at the end of the year.

Wong’s prime all-but-certain anointment as Singapore’s next leader will likely discourage him from rocking the boat. Menon’s departure leaves big shoes to fill. And that makes Menon’s replacement, MAS veteran and current Deputy Managing Director Chia Der Jiun, the man to watch.

Grayscale triumphs over SEC: A David v. Goliath win in the crypto arena

In this issue

  1. SEC to review Grayscale’s ETF application
  2. NFTs: Next on the SEC’s hit list?
  3. Asia’s richest man eyes digital assets

From the Editor’s Desk

Dear Reader,

Everyone loves an underdog. And in crypto, an underdog can be any entity in the industry, so long as it puts up a fight against the biggest bully around, a.k.a. the United States Securities and Exchange Commission (SEC).

The SEC has in the past year run amok with a chainsaw in its zeal to cut the industry down to size following the FTX debacle and other crypto catastrophes. So even a player as big as Grayscale – the world’s largest Bitcoin fund – gets to star in the role of the little-guy hero, prevailing in court against the overmighty regulator’s rejection of its bid to offer a Bitcoin exchange-traded fund.

It didn’t have to come to this – and indeed, the SEC may yet appeal against Grayscale’s legal victory – but the company’s court win paves the way for it and other Bitcoin ETF candidates to succeed in offering fund products.

Yet popping the champagne would be entirely premature. Not only are the pending ETF applications still subject to SEC approval, but also, as essentially TradFi instruments, ETFs – even those related to crypto – are a little underwhelming when it comes to the transformative potential of digital assets.

Grayscale’s win nevertheless represents progress, and for that we should be grateful. Progress is also evident from developments in India, where the country’s biggest conglomerate has announced a foray into digital assets, and where the government, currently presiding over the G20, has got with the program and has called for the group to craft global crypto rules.

That’s a welcome change from the bad old days – not even that long ago – when Indian politicians were calling for a ban on crypto and the country’s central bank was doing its best to throttle the industry.

Both developments suggest that the backlash against crypto fueled by the likes of FTX and Terra-Luna may be waning. And both developments convey a clear message: Authorities can’t banish crypto, so they’d better ‘fess up to that and find a way to regulate it.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Grayscale’s Bitcoin ETF dream revived

Grayscale SEC
This pivotal ruling is not only a beacon of optimism for Grayscale but may also pave the way for other financial heavyweights, such as BlackRock and Fidelity, waiting for the SEC’s decision on their own spot Bitcoin ETF applications. Image: Grayscale/SEC

A U.S. Court of Appeals has sided with Grayscale in challenging the Securities and Exchange Commission’s (SEC) rejection of the firm’s Bitcoin exchange-traded fund (ETF) application, marking a victory for the world’s largest digital currency asset manager that could impact multiple pending Bitcoin ETF applications. 

  • In June 2022, the SEC rejected Grayscale’s application to convert its Bitcoin trust product (GBTC) into a spot Bitcoin ETF. Grayscale then sued the SEC to demand a review of the application.
  • In Tuesday’s court decision, the District of Columbia Court of Appeals said “the denial of Grayscale’s (Bitcoin ETF) proposal was arbitrary and capricious” and granted Grayscale’s petition, meaning the SEC now has to review the company’s application it rejected earlier.
  • The court ruling is a “historic milestone for American investors, the Bitcoin ecosystem, and all those who have been advocating for Bitcoin exposure through the added protections of the ETF wrapper,” Grayscale Chief Executive Officer Michael Sonnenshein said in a Tuesday announcement.
  • Following the court’s decision, Bitcoin price surged from around US$26,000 on Tuesday evening in Asia to about US$28,000 on Wednesday morning, the biggest daily gain for months, according to data from CoinMarketCap.
  • “Undoubtedly this development is a strong positive signal for the market,” Matteo Greco, research analyst at Canada-based digital asset investment firm Fineqia International, said in an emailed comment. “However, final decisions on when and if Grayscale will be able to list its product as an ETF are yet to be made.”

Forkast.Insights | What does it mean?

The SEC, historically critical of the cryptocurrency industry, holds significant influence over the approval of a much-anticipated financial instrument: a spot Bitcoin ETF. 

Despite a challenging summer for cryptocurrency prices (and the global economy), the industry witnessed some legal success. San Francisco-based Ripple Labs secured a notable partial victory against the regulator, with the court ruling that the public sales of the XRP cryptocurrency did not violate securities regulations. 

Grayscale’s legal win further punctuated these positive developments, though it doesn’t automatically ensure the approval of its GBTC fund as the first U.S. spot Bitcoin ETF. However, the decision has enhanced its prospects. 

The SEC’s forthcoming verdicts on numerous Bitcoin ETF applications, including submissions from industry giants BlackRock and Fidelity, are eagerly awaited. The pioneer in launching a U.S. spot Bitcoin ETF will capture a crucial market edge, but the first mover is yet to be identified. 

Market watchers largely agree on the potential impact of such a financial product on Bitcoin prices, as evidenced by the notable price surge following Grayscale’s victory. 

2. SEC’s war on NFTs

SEC’s US$6.1 million fine on Impact Theory may signal a pivotal shift in NFT regulation. Image: AI-generated via Midjourney

The first shot in the SEC’s war against NFTs has been fired, beginning with charges against Web3 media studio Impact Theory for selling unregistered securities. Impact Theory quickly settled, but many are convinced that this is just the start of a much more calculated attack on NFTs by the U.S. government.

  • Impact Theory, launched in October 2021, and offered three tiers of NFTs ranging from Legendary, Heroic, and Relentless. Each tier of NFTs offers a different level of access, discounts, and perks across projects in their ecosystem.
  • A US$6.1 million fine has been levied against Impact Theory in “disgorgement, prejudgement interest, and a civil penalty.” The company is also required to “burn” all KeyNFTs in its possession, publish a notice on its website, revise its smart contract, remove royalties on any marketplace, and offer a refund to all primary sale buyers of its NFTs.
  • Each NFT used the ERC-1155 token standard, making them semi-fungible with non-unique art and numbering across the tiers. About US$30 million was raised in Impact Theory’s primary sale, and its NFTs saw over US$39 million in sales on secondary markets. The highest-priced secondary sale was Founder’s Key #217, which sold for US$17,460.05 on Oct. 13, 2021
  • The SEC said that Impact Theory planned to use funds raised from its NFT sale to develop products, bring on more teams, and create more projects.
  • Key facts in the SEC’s case against Impact Theory were early statements that the company was “trying to build the next Disney,” had a goal of delivering “tremendous value to Founders Key Purchasers,” and that NFTs will “capture economic value from the growth of the company that they support,” among over a dozen direct comments about future NFT value and project plans.

Forkast.Insights | What does it mean?

It should be no surprise that the SEC would eventually turn its attention towards NFTs with a goal of disrupting or diminishing the industry. We’ve seen the SEC’s unwillingness to provide clarity into crypto, and more accurately, seemed to be actively working against the industry. Since NFTs entered the mainstream conversation and markets in 2021, the SEC’s public statements on the NFTs’ usage made it clear that many were in the crosshairs for being unregistered securities.

A security is a financial asset that can be sold or traded in a financial market and constitutes an investment of money, made in a business, with the expectation of profit to come through the efforts of someone else other than the investor. Impact Theory seems to check quite a few, if not all, of these boxes. The problem for the rest of the NFT ecosystem is that most projects operate almost exactly the same. 

For years, collectors have been wooed by the promise of a new way for creators to build, and a new way for entrepreneurs to raise funds. One that would be free from the needless red tape that the traditional world of business and finance offered. Along the way, the NFT industry, both on the creator and collector side, implored the SEC for guidance and a framework to build with, and not once did that arrive. Now we have tens of thousands of NFT projects who, most with the best intentions, created NFTs using this new technology to build while providing both abstract and financial value to collectors. 

Tom Bilyeu, the co-founder of Impact Theory, stated that the level of aggression from the SEC is high, and that they’re definitely looking at many other projects right now. I believe you must now assume that just about every major NFT project has an active SEC investigation in progress, one that has probably been going on for most of the year. 

Profile picture projects that offered rewarding experiences for buyers of their NFTs, spoke about driving value to holders, used NFT sales to build their business, and probably most projects who developed a crypto currency are set to be impacted by the SEC’s charges the most. On the flip side, pure collectibles and art should feel no impact. In fact, these are the assets that will thrive.

Already, the NFT market, like many projects and traders, is feeling the pressure. The Forkast 500 NFT Index reflects a decline in the NFT market, losing 1.87% of its value since the SEC’s charges against Impact Theory were announced on Monday. This is likely just the tip of the iceberg. Collectors may begin selling their NFTs before any potential charges because the penalty for offering unregistered securities will be a death sentence for most projects.

Use critical thinking, and ask yourself these questions about your favorite NFT project – did this projects offer an NFT (a financial asset), that can be sold or traded in a financial market (OpenSea), and is an investment of money (crypto), made in a business (NFT project), with the expectation of profit to come through the efforts of someone else other than the investor (“WAGMI” or “to the moon!”).

3. Taking a chance

Asia richest man blockchain
Mukesh Ambani, the richest person in Asia and chairman of India’s Reliance, has long been a supporter of blockchain technology. Image: Canva/Forbes

Reliance Industries – the largest private company in India – is exploring blockchain technologies and central bank digital currencies (CBDC), said Reliance’s chairman and managing director Mukesh Ambani who is also the richest person in Asia.

  • Jio Financial Services (JFS) – a newly-launched financial branch of Reliance – “will not just compete with current industry benchmarks but also explore pathbreaking features such as blockchain-based platforms and CBDC,” said Ambani on Monday at Reliance’s annual shareholders’ meeting, according to CNBC.
  • JFS marks Aliance’s entrance into the digital financial products space, which in July announced a partnership with the world’s leading asset manager BlackRock to form Jio BlackRock – a 50:50 joint venture where both are targeting an initial investment of US$150 million.
  • In February, the retail branch of Reliance started to accept Digital Rupee payments, making it the largest Indian firm to adopt the nation’s retail CBDC that launched last December and is now piloted in over a dozen cities.
  • Ambani has long shown interest in the blockchain space, saying in December 2021 that blockchain is a technology he believes in and has the potential to redefine the financial industry, according to local Indian media Business Standard.
  • Meanwhile, at the G20 conference on Tuesday, India Prime Minister Narendra Modi highlighted the need for an international regulatory framework to regulate cryptocurrencies, after the country released a roadmap for global crypto regulation in early August.

Forkast.Insights | What does it mean?

When Reliance Industries – India’s most valuable company by market capitalization – ventures into any new sector, industry watchers ought to sit up and pay attention. When the corporate behemoth makes a foray into digital assets, they’re probably not wrong to start betting long on the future of the asset class.

Mukesh Ambani, the older of the two sons of Reliance Industries’ founder, has found easy fame at the helm of the company, and almost unparalleled influence in Indian political life. He’s described as someone of whom government ministers are wary due to his sheer power, and whose company operates as practically a state within a state.

From this perspective, the timing of Reliance’s digital assets and blockchain announcement – just a day before rightwing Indian Prime Minister Narendra Modi called on the G20 to get to work on a global regulatory framework for cryptocurrencies – makes perfect sense, highlighting the close relationship between the businessman and the politician, both Gujaratis who have ties dating back to Modi’s time as chief minister of the state.

Despite the way that may look, at least India appears to have gotten the memo, recognizing that crypto is here to stay, and, given this, that it ought to do something about regulating it.

Compare that acceptance – however reluctant it may have been – with the attitude of Asia’s other big power, which has taken a decidedly dirigiste stance on crypto to reach the blunt conclusion that the only form of regulation that ought to apply to it is an outright ban. To bastardize a phrase, Beijing’s only tool seems to be a hammer, so it’s hardly surprising that it sees every challenge as a nail.

However Reliance’s interest in digital assets shapes up, and however much the company may have enjoyed political favor, the latest moves in India’s digital asset space are surely better than that.

For new industries such as this one, investment plus regulation can often equal liftoff. So despite India’s on-off approach to crypto, the country appears now to have a greater opportunity to position itself  at the leading edge of the sector’s development rather than being left on the launchpad.

D.C. Court of Appeals greenlights Grayscale’s bid for Bitcoin ETF

The District of Columbia Court of Appeals delivered a favorable verdict for Grayscale on Tuesday, reversing the Securities and Exchange Commission’s (SEC) earlier refusal to allow the company’s Grayscale Bitcoin Trust, known by its ticker GBTC, to become an exchange-traded fund (ETF).

See related article: SEC accepts BlackRock’s Bitcoin ETF application for review

Fast facts

  • Following the court’s decision, the cryptocurrency market showed an upbeat response. Bitcoin surged more than 5%, trading at US$27,436 by 11:15 p.m. in Hong Kong, according to CoinMarketCap data. Meanwhile, STX, the token for the Bitcoin layer-2 solution, Stacks, saw a 14.6% jump to US$0.51.
  • This pivotal ruling not only serves as a beacon of optimism for Grayscale but may also chart the course for other financial heavyweights, such as BlackRock and Fidelity, waiting in the wings for the SEC’s decision on their own spot Bitcoin ETF applications.
  • Grayscale’s dispute with the SEC dates back to June 2022, following the commission’s approval of ProShares’ futures-based bitcoin ETF in October of the previous year. Grayscale aimed to launch its own ETF, uniquely underpinning the fund directly with Bitcoin rather than relying on Bitcoin derivatives.
  • The SEC, however, dismissed their application in the subsequent summer, raising alarms over potential market manipulations and the robustness of investor safeguards.

See related article: Crypto gets a boost following reports of Fidelity’s imminent Bitcoin spot ETF filing

If Chinese crypto holders sneeze, will global markets catch a cold?

In this issue

  1. China’s economic woes: Trouble brewing for crypto?
  2. NFTs: Casualties and a new combatant
  3. Rise of Bright spot in a bear market

From the Editor’s Desk

Dear Reader,

Following a slew of grim economic data from China and amid ongoing investor queasiness related to Russia’s war against Ukraine, persistently high interest rates and simmering geopolitical tensions, the outlook for cryptocurrencies is, let’s say… complicated.

But in all honesty, when was it not?

From its very birth 14 years ago, crypto faced — and continues to face, in some quarters — persistent questions over its inherent value. And since then, it has endured — and survived and thrived in — tough times that have included regulatory assaults, correlations with nosediving equity markets and economic slumps, exchange and token collapses that have tested it almost to destruction, and more.

And here we are. Crypto is clearly still very much alive. As are many of the innovations that it has ushered in.

This week we’re given a timely reminder of that by the news that recently launched, a decentralized application that integrates tokenomics with social media, has attracted more than 100,000 users in under two weeks.

The current moment may not be the most obvious time to launch a completely novel product, but Friend.Tech’s colorfully pseudonymous developers, 0xRacerAlt and Shrimppepe, have demonstrated that plucky “can do” spirit that’s not an uncommon feature of the crypto and Web3 space.

It’s possible that Friend.Tech may be a flash in the pan, a development of passing interest and a fad for some of the fickle celebrities that have gravitated to it. But then again, its developers’ punt on their new social media model may amount to more, or give rise to other, similar projects.

Remember how the naysayers dissed crypto when it first appeared?

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Bumpy road ahead?

China road cryptocurrency economy
China’s economic woes following the pandemic casts a pall over global markets including crypto. Image: Canva

China, the world’s second-largest economy, has seen a halting economic recovery in the post-pandemic era and faces deflationary pressure for the first time in two years. That, and the government’s inadequate stimulus policies so far, could spell trouble ahead for its economy and the crypto market.

  • China’s consumer price index (CPI) in July declined by 0.3% on the year, in the index’s first fall since February 2021, while its producer price index (PPI) dropped 4.4% to book a 10th consecutive month of decline, according to the National Bureau of Statistics earlier this month.
  • Apart from deflation pressure, China’s economic data in July also showed the fastest export decline since early 2020, an uptick in unemployment as well as weaker-than-expected domestic consumption.
  • Despite the pressing economic turmoils, China’s central bank only cut its one-year loan prime rate (LPR) by 10 basis points to 3.45% on Monday – a policy stimulus much smaller than the analysts expectation of two 15-basis-point rate cuts in both one-year and five-year LPRs, according to Reuters on Monday.
  • Concerns over currency stability could account for Chinese policymakers’ reluctance to deploy stronger policy supports, as the offshore Chinese yuan weakened to a low of under 7.3 per U.S. dollar last week, from the all-time low of 7.3749 in October 2022.
  • “The biggest (macro risk for cryptocurrencies) is a potential devaluation of the Chinese Yuan, trading at the weakest level since 2007,” Markus Thielen, head of crypto research at digital asset service platform Matrixport, said in an emailed note last week. 
  • “In August 2015, when China devalued the yuan for the last time, Bitcoin prices declined by 23% during the two weeks following the devaluation,” Thielen added.

Forkast.Insights | What does it mean?

Make no mistake – China’s economic woes are a genuine cause for concern. The specter of an extended period of deflation – a phenomenon that ushered in a “lost decade” of sclerotic economic growth in Japan in the 1990s – is just one among many ugly developments in the world’s second-biggest economy.

Add to that a slump in exports, a crashing property sector that accounts for more than a quarter of the national economy and which has driven its growth for decades, and an unwillingness by companies to invest.

Combine those with a youth unemployment rate that exceeds one in five 16-24-year-olds – a state of affairs so dismal that the authorities have decided simply to hide it rather than own it, presumably because they’re worried about a public backlash.

And then top all of those things out with the fact that China is almost certainly a source of phony official statistics, meaning that things may be even worse than the numbers look, and gosh, what a mess.

When this much goes this wrong in an economy that has the heft and interconnectedness of China’s, the outlook for investment in almost any risk assets – including cryptocurrencies – isn’t ideal.

Some may say that if Chinese crypto holders sneeze, the rest of the market will catch a cold. But not so fast. The country’s central bank declared last year that the country’s share of global Bitcoin transactions had fallen to just 10% from more than 90% before authorities began cracking down on all things crypto in 2013. So even if crypto prices suffer as a direct, domestic result of all the economic misery, that effect will be diminished compared to what it would have been a decade ago.

Another mitigating factor amid all the gloom may be the fact that such a broad pullback of investment in China as we’re witnessing means that money has to go somewhere. It may be wishful thinking to suggest that some of it may end up in crypto, but it’s not out of the question.

And if China devalues its currency, the yuan, historical data suggest that there may be some upside, if not for the entire crypto market, then at least for the chunk of it accounted for by Bitcoin – although the relative strengthening of the U.S. dollar that would result may take some of the upward momentum out of that.

However, in short, crypto, like many other investments, is a risk asset, and in times such as these, all bets are off.

2. Fear is in the air

Forkast 500 NFT Index
The indexes are proxy measures of the performance of the global NFT market. They are managed by CryptoSlam, a sister company of Forkast.News under the Forkast Labs umbrella.

Creator fees or royalties remain a hot topic in the non-fungible tokens ecosystem. In 2022, X2Y2 and the LooksRare marketplaces decided to no longer enforce creator fees, and soon after Blur carried the baton in the race towards zero fees. On Aug. 18, OpenSea announced its decision to no longer enforce royalties, and the NFT market had an immediate reaction. 

  • The value of NFTs has plummeted by nearly 7.5% following OpenSea’s announcement to not enforce creator fees. 
  • Creators argue that royalties are necessary to both drive innovation in Web3 and to support artists, while tech purists want no strings attached to the digital assets they now own.
  • Mark Cuban, Yat Siu and Yuga Labs are just some of the biggest names to make statements opposing OpenSea’s decision, with Mark Cuban calling it a “HUGE mistake.” on messaging platform X, formerly known as Twitter.

    Trade profits have fallen to an average of -us$2.08 million daily since Aug. 18, and reflect the lowest average profits since the last week of June following Azuki’s disastrous mint. 

  • Platforms like the Zora marketplace are innovating around royalties by sharing a percentage of platform fees with NFT creators.

Forkast.Insights | What does it mean?

There’s real fear in the air in the NFT markets. From creators who are seeing the creator fees they depended on in secondary NFT sales disappear, to collectors who are realizing their favorite artists or projects may stop creating, marketplaces’ decision to no longer enforce creator fees (royalties) is a scary big deal. 

NFTs were supposed to be the building blocks of a new digital economy, one that promised a completely new and rewarding way for creators, innovators and buyers to transact. At the core of this economy was one of NFTs earliest and biggest selling points, perpetual royalties. Only problem is, these “forever fees” weren’t actually real, and they still are not. At least, not yet. 

Today, royalties can only be enforced at the marketplace level, and without these marketplaces buying in, creators cannot rely on fees as a revenue stream. There’s a time and place for debating the merit of royalties, but after years of debates in the NFT community, all we’ve managed to do is stagnate. 

Instead of building a new token standard which could possibly include perpetual royalties, we debate. Instead of developing staking mechanics that drive fees towards creators, we debate. Instead of rethinking how platforms can share profits with creators, the Zora marketplace has this covered. Yet our small number of innovations for something that supposedly matters so much seems to show that it maybe doesn’t matter as much as we say it does. 

They say necessity breeds innovation, and seeing the value of NFTs reacting to a future that involves no creator fees highlights just how necessary innovation may now be if prices are what the market cares about. The average NFT sales price is up since OpenSea’s announcement, and while that sounds nice on the surface, it reflects expensive NFTs that are being sold at huge losses, like Bored Ape #8585 which sold for US$255,000 on Saturday. This seller took a US$777,000 loss on the once-million-dollar NFT, maybe fearing that the loss would be even greater if they waited any longer. 

While we wait for the broader NFT community to help with innovation, teams like Yuga Labs, the creator of the Bored Ape Yacht Club are forced to take matters into their own hands. Last week they announced, in a haymaker of a counter to OpenSea, that they will be sunsetting their entire catalog of NFTs from being tradable on the OpenSea platform.

The marketplace war now rages on, with a new army on the battlefield that could lead to more devastation in the markets. As projects begin taking matters into their own hands. expect traders to be in the crossfire of this ongoing battle, with the value of NFTs, collectors’ wallets, and the life of projects themselves to be the main casualties of this war.

3. Next big thing socialfi cryptocurrency has reignited excitement for crypto markets amid a bear market. Image:, a new decentralized mobile application that integrates tokenomics with social media, has seen over 100,000 unique traders and 1.1 million transactions since its launch on Aug. 10, making it one of the top-earning protocols in the crypto ecosystem.

  • Launched on Coinbase’s Base blockchain, allows its users to issue “key” tokens – previously known as “shares” – that are linked to their Twitter accounts and unlock engagements such as closed chat groups. The tokens can be bought and sold, and prices rise as their issuer’s fan bases grow.
  • charges a 10% fee for every transaction, with 5% going to account holders and the other half to the platform. At press time, DefiLlama data showed had generated almost US$7 million in fees over the past two weeks.
  • Some users have expanded their tokens’ usage beyond exclusive chat rooms and Twitter messages. Pseudonymous crypto trader and influencer RookieXBT is offering his “key” holders 33% of the revenue he receives on and other privileges such as free X (previously known as Twitter) premium subscriptions.
  • The social media application has also attracted those outside the crypto space, with U.S. basketball player Grayson Allen launching his account over the weekend.
  • On Tuesday, renamed its “share” token to “key,” explaining the new name “better illustrates their purpose as in-app items used to unlock your friends’ chatrooms.”
  • However, some speculate the change of names might be driven by regulatory concerns. “(The move was made) probably to get around being called a security,” said Forkast Labs NFT strategist Yehudah Petscher on Tuesday, after U.S. regulators recently brought a spate of lawsuits against digital asset platforms.

Forkast.Insights | What does it mean?

The rapid ascent of demonstrates the demand for a fresh social media experience combined with the allure of quick profits, a phenomenon dubbed SocialFi.

In just a few days, the platform attracted over 100,000 users, comprising celebrities, athletes, and prominent crypto influencers. Some users claim substantial earnings via, which converts a user’s X (previously Twitter) followers into private chat channels. Access to these channels is granted by purchasing shares in a social media creator’s profile.

This novel method of tokenizing Twitter profiles offers creators an alternative avenue to engage their audience. If this model gains traction, it could challenge the NFT industry. In a significant move, OpenSea, a leading NFT marketplace, announced its plan to drop mandatory creator fees by month-end.

So far this year, the NFT market has struggled. The Forkast 500 NFT Index, which tracks the market’s health, has been plummeting regularly this summer and has dropped 42% since the beginning of the year.

With NFTs’ waning popularity as a fan-engagement tool, might just be the breakthrough SocialFi needs.

However, the platform is not without its concerns. Observers have pointed out the platform’s susceptibility to phishing attacks, counterfeit tokens, and rumors suggesting that a potential token airdrop is artificially boosting its popularity.

Nevertheless, has reintroduced excitement for crypto creators looking for profits in the ongoing bear market, raking in over 1,864 Ether (approximately US$3.1 million) in protocol fees.

Will Singapore steady the stablecoin ship?

In this issue

  1. Singapore: stablecoin rules in play
  2. DeGods downgrades
  3. HKVAX: lucky third

From the Editor’s Desk

Dear Reader,

At first glance, there’s something almost too perfect about a country like Singapore deciding to embrace stablecoins. Singapore, ahem, is nothing if not big on stability.

But it’s also big on innovation, too, albeit circumscribed by certain nanny-state imperatives.

And Singapore is serious about positioning itself at the forefront of the future of finance. So long, that is, as the architecture of the finance system remains fundamentally unchanged — an approach exemplified by its central bank’s aptly named Project Guardian, which ropes in some of the world’s biggest TradFi names.

But seriously, Singapore is good at this kind of thing. In rolling out its revised regulatory framework for stablecoins, it joins a small but growing club of nations that have devised rules for the assets or are in the process of doing so.

Given the importance of stablecoins to the digital asset ecosystem and a growing acknowledgment among finance sector regulators around the world that stablecoins are here to stay, we can expect that club to grow.

It’s refreshing to see authorities recognize the limits of their power and, rather than attempt to wrestle the Hydra of the digital asset phenomenon in a death-match struggle they can never decisively win, engage and enable it to do its stuff.

Paging United States policymakers and regulators. Pay attention, please.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Finding stability

Singapore stablecoin cryptocurrency framework
Singapore advances in the global crypto race with MAS revealing a stablecoin regulatory framework. Image: Canva

The Monetary Authority of Singapore (MAS) unveiled a regulatory framework for stablecoins on Tuesday as the Southeast Asian city-state positions itself as an aspiring global nexus for the crypto sector. 

  • The framework delineates critical conditions for stablecoin issuers: ensuring value stability, maintaining a minimum base capital level, guaranteeing redemption at face value and assuring disclosure on matters like holder rights and audit findings of reserves. 
  • “When well-regulated to preserve such value stability, stablecoins can serve as a trusted medium of exchange to support innovation, including the ‘on-chain’ purchase and sale of digital assets,” MAS said in its release.
  • MAS said that the new regulations would be applicable to Singapore-issued single-currency stablecoins pegged to the Singapore dollar or a selection of 10 major currencies, such as the U.S. dollar, the euro and the U.K. pound. 
  • Implementation of the regulation will begin once approval for amendments is received from the Singapore parliament. 
  • Singapore is not alone in its pursuit of stablecoin regulation. Earlier in June, Hong Kong initiated its own regulatory framework for crypto exchanges and is now in the process of devising a licensing structure for stablecoin issuers, which could be revealed within the year. 
  • Meanwhile, the U.S. Congress has been deliberating on a stablecoin bill introduced in April 2023. The bill mandates the U.S. Federal Reserve to draft stipulations for the issuance of stablecoins, while concurrently upholding the jurisdiction of state regulators.

Forkast.Insights | What does it mean?

Singapore’s regulatory framework for stablecoins comes a week after PayPal, the global payments behemoth boasting over 435 million active users, launched its own stablecoin. 

The increasing interest of major financial institutions in these fiat-pegged cryptocurrencies, coupled with accelerating regulatory discussions, underscores the significance of these assets in the forthcoming digital economy. Asian entities are certainly not lagging behind this trend. 

In June, Mitsubishi UFJ Financial Group, the biggest bank in Japan, introduced its Progmat Coin platform to facilitate the creation and trading of stablecoins supported by Japanese banks. In July, Shinhan Bank, South Korea’s second-largest bank, and SCB TechX, the tech wing of Thailand’s oldest bank, Siam Commercial Bank, successfully concluded their second stablecoin transaction trial on the Hedera network. 

Stablecoins play a crucial role in the broader cryptocurrency realm and the decentralized finance sector of Web3. These coins offer investors liquidity and a haven from market volatility. 

However, the importance placed on these assets is not without its hazards. A case in point is the devastating Terra-Luna crash in May 2022. This incident is reminiscent of the occasional anxiety investors feel when the value of the world’s largest stablecoin USDT, issued by Tether, deviates even slightly from its peg to the dollar. 

In fact, Tether’s daily trading volume is the highest in the entire industry, surpassing even that of Bitcoin. With a market capitalization exceeding US$83 billion, it makes up 7% of the entire cryptocurrency market. The potential impact of a hypothetical collapse of USDT similar to Terra’s would be cataclysmic, leading many to believe that it could cripple the whole industry. 

This potential vulnerability underscores the importance of evolving regulatory dialogues and the proliferation of stablecoin alternatives. By diluting the dominance of a single stablecoin, these measures could prevent a singular point of failure in the industry. 

2. DeGods Decline

DeGods Downgrade NFT
DeGods faces backlash following its latest release marked by delays, uninspired art, and no female avatars. Image: DeGods

One of the top non-fungible tokens collections, DeGods, kicked off their Season III event, delivering new art and fancy rewards to their NFT holders. But the execution was close to a disaster, with delays, bland art, and the omission of one major component — female avatars. Poorly received by collectors, the DeGods collection’s floor price nosedived with the sour sentiment of the broader NFT market seeping into the DeGods community.

  • The daily average sales price of DeGods NFTs has fallen from as high as US$24,000 in July to now just above US$9,000.
  • Sales have climbed 303% in the past week from old collectors exiting the collection and new ones entering, with trades on secondary markets exceeding US$7.8 million.
  • Wash trading increased by over 1,782% with farmers taking advantage of the collection’s extra trading volume, and washing over US$21 million in NFTs.
  • While most of the NFT market finds sellers on the losing end of trades, the DeGods collection has found sellers in profit by over US$661,000 in the past seven days. 
  • DeGods holders need to pay 333 $DUST (US$333) to upgrade their NFT to Season III art, and $DUST lost half of its value since Season III
  • DeGods companion project, the y00ts, will be moving from Polygon to Ethereum to join DeGods on the same chain. Y00ts experienced similar negative sentiment and declines in prices.
  • Holders have been told to expect bugs in the art as last-minute changes can impact the final product. 

Forkast.Insights | What does it mean?

Traders still don’t know how to value NFTs, so when a project makes mistakes or missteps, traders punish them by dumping their assets. Time and again we see this play out in the NFT market, the last noteworthy example being Azuki’s disastrous late June mint that saw their collection’s floor price fall over 60%. 

Compounding the negativity in DeGods Season III, the team also announced that their companion project, the y00ts, would be moving from Polygon to Ethereum to join DeGods under one roof. While this may seem benign at first, consider that both collections just moved to their current locations from Solana earlier this year. Perhaps holders are now questioning the team’s judgment and their ability to properly plan for the future. 

There are few “blue chip” NFT projects left that have had flawless executions. But make no mistake, when (not if) they deliver something that doesn’t resonate with collectors, their collection’s floor price will suffer. Maybe it’s time for traders to rethink what exactly they value in NFTs, and how much they’re willing to spend on NFTs that offer just a jpeg.

Collections like Milady and Sproto Gremlins promise nothing, and collectors eat them up. They buy these NFTs to join communities, have a good time, and to share trading tips with each other. If that sounds exactly like what other NFTs (like DeGods and y00ts) offer, you’re not wrong. Milady NFTs floor price now threatens to leapfrog DeGods, making them the 3rd highest priced PFP NFT.

The issue with most NFT collections is that they sell the idea that they’re offering the next Bored Ape, or that they’re at the cutting edge of technology. At least, that’s what collectors hear in their heads. Projects should get honest with NFT communities about what their NFTs are so that collectors can properly value these assets. Currently, they’re not much more than a new iteration of fan clubs mixed with rewards platforms, and if projects were more up-front about that, we’d see much less volatility in NFTs.

3. Hong Kong nears third licensed exchange

HKVAX Hong Kong crypto license
HKVAX is poised to become the city’s third license crypto exchange as the SFC warns against exchanges making misleading claims about license applications. Image: HKVAX/Canva

Hong Kong Virtual Asset Exchange (HKVAX) last Friday received an in-principle approval from the Hong Kong Securities and Futures Commission (SFC) to provide virtual asset trading services, making it the third licensed crypto exchange in the city.

  • This preliminary approval permits HKVAX to operate “Type 1” and “Type 7” regulated activities in Hong Kong. Those activities include securities management and offering automated trading services to retail investors, as per a press release from the exchange. 
  • Upon receiving final SFC clearances, HKVAX plans to introduce an over-the-counter brokerage, facilitating trades between fiat currencies and virtual assets. Additionally, they will launch an institutional-grade trading platform and provide a fully-insured custody solution. The timeline for these subsequent approvals remains undisclosed. 
  • “Hopefully the full license would come out by the end of the year or hopefully early Q1,” HKVAX Chief Strategy Officer Matthew Cheung told Forkast.
  • The development is a significant milestone in Hong Kong’s revamped cryptocurrency exchange licensing regime initiated this June. This framework permits approved “virtual asset trading platforms” to offer cryptocurrency trading services to retail investors.
  • Notably, on August 4, HashKey Exchange and OSL, the first SFC-licensed cryptocurrency, were granted enhanced licenses, positioning them as the pioneering platforms authorized to cater to retail clientele. 
  • Meanwhile, the SFC has cautioned against certain crypto exchanges that have misleadingly insinuated their submissions of license applications. The regulator said that any such deceit will be factored into their assessment if and when these platforms formally apply for licenses. 

Forkast.Insights | What does it mean?

Good things come in threes, so news that Hong Kong’s securities regulator has given the nod to a third digital asset exchange is welcome.

Hong Kong’s progress in its journey to emerge (or, perhaps more correctly, re-emerge) as a crypto and digital asset hub has been somewhat stop-start, not helped by the skittish behavior of some banks that authorities rely on to provide services to the rehabilitated local industry, among other things.

The fact that just three exchanges are open — fewer than half the number in putative rival digital asset hub Singapore — testifies to those difficulties.

The emphasis of Hong Kong’s new digital asset regulatory framework is very much on consumer protection, which is understandable, given the various upside-down-Portapotty-on-top-of-a-Dumpster-fire-inside-a-train-wreck events the crypto industry has thrown at investors in recent times.

That focus is heavily underscored by the Securities and Futures Commission’s rather dark warning to crypto exchanges that any attempt to mislead potential customers with false claims of filed license applications will find their conduct counting against them when any real applications are made.

Yet it’s difficult to say with complete conviction that the regulator has struck the right balance in its risk calculation. It seems clear that there may still be some room for improvement when it comes to giving digital asset businesses the latitude they would like when it comes to parts of the regulatory framework.

As they stand, Hong Kong’s crypto rules mandate a 12-month cooling-off period between the launch of a token and its listing on an exchange. They don’t permit crypto derivatives, staking or airdrops. And for now, stablecoins remain banned. That leaves any exchanges that retail investors might use largely limited to spot market activity.

In a city that’s as sophisticated a finance hub as Hong Kong, it seems odd that such significant parts of the future of finance have been put off limits.

Protecting the public is, quite rightly, a priority. But that responsibility shouldn’t necessarily come at a disproportionate cost simply because the right regulation is still missing. 

Is PayPal’s new stablecoin a watershed moment for crypto?

In this issue

  1. Paypal launches stablecoin: A watershed moment for crypto?
  2. NFTs: Balancing NFTs and traditional gaming
  3. Huobi’s woes: Investigations, market talk of insolvency

From the Editor’s Desk

Dear Reader,

There’s never a dull moment in the crypto space.

This week, as exciting news breaks that PayPal has launched its own stablecoin, there’s also a drip-drip of claim and counterclaim — a cocktail of conjecture, rumors and denials — about whether or not Huobi, one of the world’s biggest crypto exchanges, is about to become insolvent. And if that weren’t enough, worries about Tether, the world’s biggest stablecoin, appear to be resurfacing.

The frisson of danger really does keep one on one’s toes, doesn’t it?

Anyway, PayPal’s new stablecoin, PYUSD, is a welcome addition to the crypto ecosystem, helping to bring it further into the mainstream. Even Jeremy Allaire, the boss of Circle, whose USDC stablecoin PYUSD will compete with, this week heaped praise on its launch.

Tether Chief Technical Officer Paolo Ardoino was also positive, predicting that the new coin’s launch would have no impact on USDT.

But Tether’s executives may want to pause for thought as they eye the heightened risks that their own stablecoin may be facing amid an apparent USDT selloff by Binance, the world’s biggest crypto exchange, and the fact that USDT lost its secondary market dollar peg on July 31 and spent most of the past 10 days in the red.

Tether has faced choppy conditions before, related to general concerns over its largely unregulated operations, and to specific suspicions about its reserves, which it has never submitted to an unrestricted, third-party audit, and which two years were found by a U.S. judge to have sometimes been a long way short of adequate to back USDT.

Nevertheless, in a recent Forkast Word on the Block conversation, Ardoino expressed confidence about Tether’s ability to handle redemptions. He pointed to the run that USDT experienced last year, saying that in 48 hours, Tether had been able to redeem US$7 billion, 10% of its reserves, and that in 20 days, the company had processed some US$20 billion in redemptions, 25% of its reserves. He said Tether could have redeemed yet more.

Tether may have — and need — such an existentially important buffer. Because this time around, things could get uglier.

The tremors around Tether in recent days may simply reflect worries that Huobi customers will dump their USDT holdings at rock-bottom prices if the exchange looks as though it’s about to crash and burn, leading to an extended USDT depegging. Or, more worryingly, that with Binance leading a broader selloff, a full-scale run on USDT may be in the works.

We, for one, hope that neither scenario comes to pass. But in our relatively still young industry, anything can happen.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Efficient coexistence

PayPal, a giant in the global digital payment space, will roll out its stablecoin over the next few weeks. Image: Paypal

California-based online payments giant PayPal on Monday launched an Ethereum blockchain-based stablecoin pegged to the U.S. dollar. PayPal, which reported US$7.3 billion in second-quarter revenue, said its fully-backed, regulated stablecoin can bridge the gap between fiat currencies and the blockchain for consumers, merchants and developers.

  • “Considering PayPal’s role as one of the biggest market giants in the digital payment ecosystem, the stablecoin launch is a watershed moment in the history of the crypto ecosystem,” Alex Vasiliev, co-founder and chief commercial officer at U.K.-based fintech firm Mercuryo, said in an emailed comment. He added that the launch of PayPal USD is “a testament to the fact that both crypto and the TradFi ecosystem can indeed co-exist efficiently.”
  • The new stablecoin, PayPal USD (PYUSD), is backed by U.S. dollar deposits, short-term U.S. Treasuries and similar cash equivalents. PayPal will roll out the token in the coming weeks and make it available on Venmo, a peer-to-peer payment application owned by PayPal, at an unspecified later date.
  • PYUSD users will be able to transfer the stablecoin to compatible external wallets, and use the token for person-to-person transactions, funding purchases at checkouts and buying foreign currencies. Also, any cryptocurrencies supported by PayPal can be converted to and from PYUSD.
  • PYUSD is issued by Paxos Trust Company, the U.S.-based issuer of Binance’s BUSD stablecoin. Paypal confirmed it was considering a stablecoin issuance as early as January 2022, but halted the project in February this year amid increased scrutiny from U.S. regulators toward stablecoins — including an order for Paxos to stop minting BUSD.
  • “We are interested in cryptocurrencies because we do believe that they have the ability to transform the payment ecosystem,” Jose Fernandez da Ponte, the general manager for blockchain and digital currencies at PayPal, told Bloomberg on Wednesday. “In terms of the cost of transactions, in terms of the settlement time, in terms of the programmability of the tokens, you just can do things you couldn’t do with traditional payment.”

Forkast.Insights | What does it mean?

In October 2020, PayPal spearheaded a major market shift by integrating Bitcoin and cryptocurrency services, a precursor to the successive rally that marked Bitcoin’s price above the US$11,000 benchmark. Now, nearly three years later, the fintech heavyweight is under the spotlight again with the introduction of its own stablecoin, PYUSD, targeting its base of 430 million active users, albeit with an initial focus on U.S. customers. 

While the market largely welcomed PYUSD with optimism, some features caught the attention of crypto enthusiasts and analysts. Smart contract auditors highlighted a specific function in PayPal’s stablecoin: the ability to freeze and erase users’ assets. Although this central authority isn’t entirely unique to PYUSD, Tether’s USDT and Circle’s USDC being prime examples, the power to entirely delete a user’s holdings raises eyebrows. 

For beginners, traditional finance platforms like PayPal and Robinhood can be efficient gateways into the realm of digital assets. Yet, as a beginner’s crypto journey progresses, the core ethos of cryptocurrencies — to establish financial autonomy — becomes apparent. The previous year’s events, such as the FTX bankruptcy, underscored the vulnerabilities associated with centralized systems, from freezes to potential insolvencies, driving a surge in hardware wallet adoption. 

Theoretically, decentralized or algorithmic stablecoins promise to offer immunity from censorship. However, an idealistic decentralized stablecoin — boasting significant market value and resilient peg sustainability in volatile conditions — remains elusive. The shortcomings of projects like Terra’s UST are cases in point. 

While innovations like PYUSD fortify cryptocurrency’s mainstream presence, they also emphasize the ever-present debate between centralization and true financial autonomy. As the market evolves, user understanding of these nuances will play a crucial role in shaping adoption and preference trajectories. 

2. Game on

NFT Collection Rankings by Sales Volume

The popularity of games is surging in the non-fungible tokens market, with four of the top five NFT collections on CryptoSlam this week representing mainstream adoption of gaming NFTs. 

  • Combined, the four collections traded for US$20.2 million and represented one-fifth of the week’s US$99.9 million in total NFT sales across blockchains. Coming from four unique blockchains — Mythos Chain, Polygon, ImmutableX and Ethereum — a multi-chain future for NFTs has never been more evident. 
  • DMarket’s CS:GO, Dota 2, Rust and other game skins are driving over US$6 million in secondary sales volume and show the appeal of skins in mainstream video games.
  • DraftKings Reinmakers Fantasy Football is seeing a major boost ahead of the NFL season, trading over US$5.6 million on the Polygon blockchain.
  • Gods Unchained Cards haven’t left CryptoSlam’s top 10 collections since its listing on the Epic Game Store. This is the highest volume NFT collection on the ImmutableX blockchain.
  • Sorare’s fantasy soccer and baseball has been leading the way for NFT utility in games since 2018 and together with DraftKings reflect a bright future for fantasy sports backed by NFTs.

Forkast.Insights | What does it mean?

Many thought 2022 would be the year for play-to-earn gaming in NFTs. But whether the games weren’t quite ready to be played, or if it was gamers who weren’t ready to play them, play-to-earn never materialized. Today’s NFT landscape is unrecognizable from 2022, with a market that offers almost no profits for sellers. This week, sellers are down US$2.9 million in their trades, but specific profitable ecosystems are now rising to the top, like DMarket, where sellers have seen a profit of US$188,000 so far this week.

DMarket, DraftKings, Gods Unchained and Sorare’s seven-day sales are evidence that a shift is underway in the NFT ecosystem. Each of these collections offers much more affordable NFTs (many priced at just a few dollars), huge trading volume in large supply collections, and more realistic gains that traders probably would have ignored if they were still making profits flipping NFTs. They also have major brand recognition, offering NFTs from CounterStrike Go, MLB, and the NFL. With IP that is recognizable around the world, and prices that just make sense, this is beginning to look like the vision we had for NFTs that would be adopted by the masses.

Gamers’ appetite for NFTs will be tested soon with multiple large NFT games on the horizon, like Parallel, Land of Valeria, Battle Plan!, and the newly announced Animoca-backed Wreck League. Each of these games have been incubating for years, but it’s Wreck League that may tell us the most about how gaming NFTs will fare with more typical gamers. 

Coming from nWay, the developers of Power Rangers: Battle for the Grid which saw downloads of over 80 million, Wreck League is kicking off their game in September with one of the biggest Web3 brands in the world, Yuga Labs. This will mark the first appearance of Yuga Labs’ IP outside of their own gaming world, when Kodas and Bored Apes will arrive in mech form in Wreck League. It’s a major milestone for the collection, but also for NFTs, given that there’s now a chance we’ll see these iconic NFTs next to huge traditional IP.

The real test is in the traditional gaming world, where gamers have so far shunned NFTs. Or have they? Starbucks NFTs have been extremely profitable for all primary buyers, and we’ve witnessed the success of DMarket, DraftKings, Sorare, and Gods Unchained now for months. Perhaps the key is as simple as not calling them NFTs, which is what each of the hot collections above have excelled at. 

NWay needs to find a balance between delivering a rewarding NFT experience for the Web3 audience, and keeping traditional gamers away from NFTs entirely. This is a tightrope that they will walk with two separate versions of the game, but shhh, don’t tell the traditional gamers that their version’s marketplace contains some NFT-assembled skins from the blockchain version of the game. 

If Wreck League is a success with gamers, consider the door to the blockchain blown wide open, and get ready for NFT gaming to really explode. But let’s not get ahead of ourselves yet. We’re on level 1-1, and it’s time to put our game face on and grind. 

3. Trouble ahead

Huobi Global
Seychelles-based Huobi battles rumors of insolvency and investigations of its executives by Chinese police. Image: Huobi Global/Canva

Huobi Global’s stablecoin exchange balance declined by 51% in the past seven days, an outflow of over US$105 million, according to data from blockchain analytics firm Nansen, as the Seychelles-based crypto exchange faces market talk of insolvency and investigations of its executives by Chinese police.

  • Crypto analyst Adam Cochran highlighted Sunday a potential insolvency issue in Huobi, and said Huobi advisor and stakeholder Justin Sun — who is also the founder of the Tron blockchain — had used Huobi “as a personal piggy bank to earn from user deposits.”
  • Cochran’s insolvency allegation is based on stUSDT, an investment product launched by Tron, which claims to be backed by government bonds and allows investors to stake their USDTs to earn yields. However, on-chain data showed 98% of the staked USDTs were directly held by addresses related to Sun or Huobi, with a significant proportion sent into Sun’s other decentralized finance positions, according to Cochran.
  • Although Huobi’s “Merkle Tree Audit” showed on July 1 that Huobi users held $630 million of USDT and the platform had a USDT balance of $631 million, the audit stopped updating last month and DefiLlama data showed the exchange only held a combined USDT and USDC balance of around US$93 million when Cochran posted his tweets over the weekend. This could put the exchange at risk of failing to honor customers’ withdrawal requests.
  • Adding to Huobi’s headache, Hong Kong online media outlet Techub News reported Saturday that several of Huobi’s executives were detained by the Chinese police and were under investigation, citing unnamed sources. Cochran also pointed to the news as a sign of Huobi’s potential insolvency. 
  • Huobi said in a Monday blog that “the Huobi platform is operating as usual,” but did not mention the alleged insolvency or investigation.
  • On Tuesday, an address related to Sun transferred 200 million USDT to Huobi, according to crypto data tracker PeckShield Alert, which boosted the exchange’s USDT balance to 273.54 million. Huobi later received a single inflow of 5,000 ETH (over US$9.16 million) from another address linked to Sun. However, a Huobi spokesperson has denied Sun owned the above addresses.

Forkast.Insights | What does it mean?

Crypto analyst Adam Cochran’s allegation that Justin Sun used Huobi “as a personal piggy bank” has a certain wry appeal, but it probably also creates a degree of nausea among those who paid any attention whatsoever to the sleazy goings-on associated with the collapse of Sam Bankman-Fried’s FTX exchange.

The last thing the crypto industry needs as it gains renewed traction following last year’s blowouts is another wealth-destroying (or wealth-transferring, depending on how one looks at it) catastrophe.

Yet the conclusion that it faces one is not foregone. At the moment, what we have to go on is a trail of breadcrumbs laid by Cochran — who has form when it comes to ripping crypto exchanges a new one on social media — relating to “weird” USDT balance shifts and Huobi’s predictable counterclaims. And, of course, various voices in the cryptosphere who have variously been saying that Huobi is either just fine or that it’s teetering on the precipice. So far, so inconclusive.

The apparent transfer of 200 million USDT to Huobi from an address seemingly linked to Sun, and another of 5,000 ETH, also from an address purportedly tied to him, may to some look suspiciously like an exercise in damage control. Frustratingly, however, they too are not conclusively anything of the sort.

So, all of this doesn’t get us much closer to knowing whether or not Huobi is on the verge of tanking.

If Huobi and Sun — who outdid SBF in acquiring a fraud charge even before the exchange associated with his name started wobbling — go the way of FTX, it’ll certainly be an unwelcome setback for crypto, although not on the scale of the mess that the kid with the bad hair made.

However, if the US$83.5 billion edifice that is Tether – whose reserves remain the subject of some controversy, to put it mildly – is subject to a panicked run and goes south, the industry will be in a great deal more peril.

Japan’s blockchain group lobbies for tax change

In this issue

  1. Japan’s crypto tax law: An industry group urges tax change
  2. Don’t write off Bitcoin NFTs
  3. Litecoin’s halving: Prices fall

From the Editor’s Desk

Dear Reader,

The only two certainties in life may be death and taxes – at least according to U.S. founding father Benjamin Franklin – but for the digital asset industry in Japan, those two ugly twins morph into one: death by taxes.

The Japan Blockchain Association’s recent request for a rethink of Japan’s high taxation of cryptocurrency activity can thus be seen as a cry for help, of sorts, from an industry lobby that may not have much industry left to lobby for if crypto and other digital asset businesses continue to depart Japan due to those taxes.

Yet a look around the region should also serve as a reminder that favorable tax rates are not everything. Other East Asian jurisdictions seeking to develop as digital asset hubs offer crypto taxes much kinder than Japan’s, but other ingredients of the not-so-secret sauce that can bring digital asset companies to the table aren’t always on the menu.

South Korea’s forthcoming rules framework, which is set to find expression in the country’s Digital Asset Basic Act next year, promises to go a long way toward providing regulatory certainty for digital asset businesses, yet we’re not witnessing a rush on Seoul.

Hong Kong has done much touting of its own supposedly crypto-friendly regulatory arrangements, even though in reality they’re quite restrictive.

And Singapore, true to form, has made it clear that digital assets are welcome if they’re run by TradFi and off limits to the “little people”.

If governments want to mix the sauce right, they need to take a holistic approach to supporting the digital asset ecosystem and not simply hope that lower taxes might do the trick. In short, they need to step up and do just what they would for any other promising new industry.

It seems almost too easy. So what are policymakers waiting for?

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Call for change

Japan crypto tax
Japanese policymakers have said that Web3 would be a force in transforming the global social economy, and pledged more support for the industry. Image: Canva

Japan Blockchain Association (JBA), a non-government lobbying group of the blockchain industry, last Friday petitioned the Japanese government to revise tax on crypto assets — Japan’s biggest barrier for foreign Web3 companies — as Tokyo positions itself to become a global crypto hub and center of digital innovation.

  • A crypto asset tax is the biggest barrier that Web3 companies face when setting up shop in Japan, followed by obstruction to crypto adoption among citizens, JBA said in its petition that called for three major changes to Japan’s tax system for crypto assets.
  • The first change would be to abolish the year-end unrealized gains tax on corporations holding crypto assets, which refers to profits that occur on paper but have not been realized through transactions.
  • In June, the Japanese government exempted cryptocurrency issuers from a 30% corporate tax on unrealized gains on tokens, and the petition seeks to expand the exemption to corporations holding crypto assets issued by third parties.
  • The second requested change is a revision of the taxation method for personal crypto asset trading profits, which would switch the current aggregate taxation method to a separate self-assessment method that features a uniform tax of 20%.
  • The petition also hopes to eradicate the income tax on profits generated by individual crypto asset transactions.
  • “In the borderless Web3 era, there is a high possibility that the exchange of crypto-assets will become the mainstream of the economic zone, and due to the wide variety of transactions that occur and the types of crypto-assets that are exchanged, tax calculation will be extremely difficult,” said JBA.
  • JBA’s suggested changes come as Japan seeks to become a global leader in the Web3 industry. At the WebX conference in Tokyo last week, Japanese policymakers reiterated their vision that Web3 would be a force in transforming the global social economy, and pledged more support for the industry.

Forkast.Insights | What does it mean?

Japan appears so far to have learned the hard way that if it wants to foster a digital asset industry, it needs to create a sufficiently attractive environment in which digital asset businesses can thrive and – even if only when they become growth enterprises – turn a profit.

Offering low taxes, is, of course, a relatively straightforward means of creating such an environment for crypto companies and other businesses in the digital asset space. It’s not the only one, but its importance shouldn’t be underestimated, as the JBA clearly understands.

Indeed, its importance is such that the Japanese government is understood to have been looking at potential revisions to the way in which it taxes crypto for almost a year, seemingly prompted by the departure of a number of crypto companies from its shores.

In this light, the JBA’s proposals are eminently reasonable. After all, crypto investors in Japan face a potential tax burden of more than 50% on capital gains, and some of the taxes imposed on them are controversial — in particular, the taxation of unrealized capital gains, the very constitutionality of which the U.S. Supreme Court is set to rule in its 2023-24 session.

Neighboring South Korea levies a 20% tax on capital gains pocketed by crypto investors. Hong Kong, a city renowned for its low taxes that aspires to be a crypto hub, collects no crypto capital gains tax from individuals or companies, only tax on overall income. And Dubai, arguably the brightest spot on the crypto map, famously collects no taxes at all.

Japan’s current crypto tax arrangements, by contrast, somewhat resemble those in place in India. Japanese policymakers would therefore do well to recall the result of New Delhi’s imposition of a 30% tax on digital asset holdings and transfers last year: an outpouring of digital asset enterprise and talent from the country.

If the Japanese government wants to make good on its oft-repeated desire to be a magnet for crypto and digital asset businesses, and the development of the industry that their presence brings, listening to the industry’s plea for reduced taxes would be a good place to start.

2. Bitcoin NFTs, a sleeping juggernaut?

Bitcoin blockchain's weekly value output displayed in Forkast Labs data platform
Weekly value output of NFT services, according to Forkast Labs data.
  • NFT services on Bitcoin, a measure of marketplace fees and creator royalties, fell to a three-month low this week with just 2.96 BTC or US$86,760. 
  • Bitcoin Ordinals and BRC-20’s seven-day volume fell 14.09% to US$4 million.
  • Unique sellers on Bitcoin declined 62.53%, with 5,276 sellers over the past seven days.
  • Total transactions decreased by 16.5%, with just 21,637 transactions in the past seven days.
  • Average sales prices on Bitcoin fell to US$494.79 in July, the lowest monthly average in Ordinals since the first few Ordinals sales on Jan. 31.
  • Noteworthy BRC-20 collections making moves are $SATS which rose 14.94%, $FRAM, which declined 72.05%, and $TRAC, which decreased 43.24%. The general Ordinals collection, representing most of Bitcoin’s Ordinals, lost 30.55%.

Forkast.Insights | What does it mean?

Many consider Bitcoin’s NFT ecosystem to be a sleeping juggernaut that will one day flip the sales volume of Ethereum NFTs. Whether that’s five years out, or 10, it seems (or seemed) a realistic possibility given the significance of collectibles on the historic blockchain. That outcome seems much less certain, following weak NFT sales that highlight a growing problem with Bitcoin’s blockchain collectibles.

Just a few months ago, Bitcoin Ordinals and BRC-20s transacted millions of dollars worth of NFTs per day, even reaching highs of over US$18 million in daily sales volume in May. Now, Bitcoin collectibles trade under US$500,000 in sales daily, failing to enter the top five blockchains by sales volume and revealing a glaring problem for the blockchain that many knew was always there. 

A lack of utility is causing this drastic fall in the value of NFTs on the grandfather of blockchains. Simply put, while blockchains like Ethereum, Cardano, Polygon and Solana have smart contracts that foster endless innovation and ultimately drive value to their ecosystems’ NFTs, Bitcoin simply has Bitcoin. There’s no real utility, and thus no real opportunity to drive value to an NFT, outside of any intrinsic value the image or data may hold. By all metrics, traders are showing that the intrinsic value of Ordinals and BRC-20s isn’t worth much to them. 

An ever-increasing supply of Ordinals and BRC-20s is another immediate challenge that traders face today. While the massive supply of inscriptions shows that the community still believes strongly in Bitcoin, it is also a signal that prices may fall even further. July 30 was the single highest day of inscriptions minted on Bitcoin, with over 422,000 new inscriptions, bringing the total supply of inscriptions to over 21 million. Ordinals and Inscriptions now have a major issue with supply and demand.

Writing off Bitcoin’s ecosystem now would be a mistake, and developers may be here to offer up some utility sooner than we had thought. Just this week, the Ordinals team launched a non-profit to help fund developers in the Bitcoin ecosystem, clearly seeing the need to bring utility to this Ordinals ecosystem. Ordinals were just born in February, and it took Ethereum’s NFTs years before they ever saw the type of sales that Bitcoin traded this year. Given time to cook, developers may find the recipe for success again on Bitcoin and maybe deliver that Ethereum flipping experience that almost arrived this year. 

3. Litecoin completes halving

Litecoin Halving
A Litecoin price rise is expected following its third halving event, but miners may have to swallow short term losses. Image: Canva

Litecoin prices fell after its third halving occurred Wednesday evening in Asia. The event cut the token’s mining rewards by half, reducing it from 12.5 LTC per new block mined to 6.25 LTC, slowing the issuance of new Litecoins.

  • Following the halving, Litecoin prices slid 5.46% in the past 24 hours to US$87.36 as of 12:20 p.m. in Hong Kong on Thursday, according to data from CoinMarketCap.
  • “Although the halving would normally be a positive event for the price of Litecoin, the current bearish market and recent negative industry news has had a larger impact on trader sentiment,” said Nick Ruck, chief operations officer at Singapore-based blockchain infrastructure platform ContentFi Labs. “Additionally, the halving as an event may already be priced in since traders have known about it for quite some time.”
  • Traders with Litecoin holdings of US$9,500-950,000 have aggressively accumulated the token since the middle of July, as investors had expected the halving event to fuel a bull run in Litecoin, according to crypto analytics firm Santiment on July 30.
  • Launched in 2011, Litecoin works on a proof-of-work mechanism similar to Bitcoin, where “miners” invest computing power to verify on-chain transactions and receive cryptocurrency rewards in the process known as mining. A Litecoin halving event takes place every 840,000 blocks mined, which takes about four years.

Forkast.Insights | What does it mean?

Demand has been rising among investors and miners with the halving of Litecoin rewards. This event, which reduced rewards to 6.25 LTC, has driven a surge in the demand for the digital currency ahead of the once-every-four-year occurrence. 

Data gathered by blockchain aggregator IntoTheBlock revealed a growing number of Litecoin’s long-term holders. The number of wallets that have held Litecoin for more than a year rose from 3.78 million on May 1 to 4.8 million by Aug. 1. Over the same period, wallets holding the cryptocurrency for at least a month grew by 540,000 to 3.67 million. 

However, a word of caution to Litecoin investors came from the network’s creator, Charlie Lee. In a recent podcast interview, Lee said that while Litecoin’s quadrennial cycles have historically ignited price rallies, investors may need to hold onto their assets longer to profit from the new, lower supply inflow. Litecoin, like the majority of other altcoins, has its price action tied close to that of Bitcoin. The next historic price rally may not occur until Bitcoin’s projected halving in April 2024, an event many analysts, including Geoff Kendrick of Standard Chartered Bank, believe will trigger a major price uptick. 

An indication of rising demand among miners is reflected in the network’s increasing hashrate, a measure of total computational power engaged in mining activities. This figure hit a record high of 802.04 terahashes per second on July 31, pointing to an intensifying level of competition in Litecoin mining, IntoTheBlock data show.

Throughout 2023 to date, data from IntoTheBlock revealed a shift in Litecoin miners’ behaviors. To maintain viability, miners have considerably reduced their holdings. Total miner reserves, defined as Litecoin balances held by miners, have dropped from a yearly high of 4.86 million LTC in April to around 2.28 million at the start of August, a decrease of more than 50%. 

For the first few months following the halving, Litecoin miners may continue their rough year due to the drop in revenue. However, the anticipated rise in price may result in long-term economic benefits for miners. 

Is Worldcoin’s free crypto more than just a freebie?

In this issue

  1.  Worldcoin’s free crypto: More than just a freebie?
  2. Forkast 500 NFT Index: NFTs find ways to grow
  3. Japan’s metaverse ambitions: More support ahead for Web3

From the Editor’s Desk

Dear Reader,

We’re accustomed to references to digital assets as “the future of finance.” And, since those references just happen to ring true, we rather like them, actually.

We’re less used to characterizations of cryptocurrencies, specifically, as gateway enablers of a dystopian future. If anything, the crypto phenomenon has a streak of the opposite — utopianism — deep in its intellectual DNA.

The mainnet launch of Worldcoin this week may have changed that somewhat. The first reaction of most people to schemes that scoop up their most intimate personal information — in Worldcoin’s case, through iris scans – is that it’s none of Big Brother’s damned business.

Worldcoin’s professed aim of ushering in a guaranteed basic income for everyone on the planet may be laudable, but it certainly doesn’t take much imagination to see the dystopian potential of its apparently utopian mission.

Whether it’s a trailblazing triumph, a Musk-era-Twitter-style flop, or an open door to an Orwellian future, there’s no doubt that its towering ambition involves nothing less than an attempt to reshape the world.

And reshaping the world seems to be in vogue these days, as the resources being thrown at metaverse development suggest. These efforts may harness the utility-rich potential of metaverse technology to change the world in a million smaller ways that collectively promise much more sweeping changes to the place we all inhabit.

However specific and currently small-scale, they all involve aiming big. Indeed, aiming big won us many of the best examples of innovation we enjoy today – not least digital assets. Imagine if Satoshi had said Bitcoin was just too hard.

Yet sometimes, it is good to remember that aiming big has produced not only some of humanity’s finest achievements, but also its most shameful tragedies. With this in mind, Worldcoin co-founder Sam Altman, for one, might want to ponder the fact that one person’s utopia is usually someone else’s dystopia.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. No free lunch

Worldcoin’s free crypto: More than just a freebie?
Worldcoin’s Orbs have set a path to universal basic income but it’s raising privacy and security concerns. Image: Worldcoin/Canva

Worldcoin, a cryptocurrency project co-founded in 2019 by OpenAI chief Sam Altman, launched its mainnet and WLD token on Monday, offering free crypto to eligible users for “simply for being human” in a move that is raising industry concerns over privacy, accessibility and security.

  • Regulators are also venturing into the fold, with the U.K.’s Information Commissioner’s Office saying on Tuesday that it will be making enquiries on the Worldcoin project, according to Reuters. The project is also unavailable in the U.S. due to regulatory restrictions.
  • Ethereum co-founder Vitalik Buterin expressed his concerns in a Monday blogpost, pointing out potential issues in privacy, accessibility, centralization and security. He added that the decentralized proof-of-personhood solution that Worldcoin works towards is “one of the most valuable gadgets that people in the Ethereum community have been trying to build.”
  • On Worldcoin, which aims to build a global identity and financial network, users receive a World ID by scanning their iris through hardware named “Orb” to confirm their identity and receive WLD cryptocurrency as a reward. 
  • Through this network, Worldcoin aims to build a universal basic income funded by artificial intelligence, which will be equally distributed to its users.
  • Upon signing up for a World ID, users in countries that allow the operation of Worldcoin can receive 25 WLD tokens as a “genesis grant.” Each user can then claim a free WLD token each week with no cap on the total number of tokens, according to the Worldcoin website.
  • After launching its application in May 2022, Worldcoin reached a milestone of 2 million World ID sign-ups on July 13, 2023, and now aims to increase the number of Orbs to 1,500 this summer and fall across some 35 cities in more than 20 countries.
  • The WLD token is listed on some major crypto exchanges, including Binance, Bybit, Huobi and OKX. It peaked at US$3.58 on Monday and is trading at US$2.21, moving down 6.71% in the past 24 hours, according to data from CoinMarketCap.

Forkast.Insights | What does it mean?

Worldcoin, launched on Monday, marks its distinctive presence as a digital identity venture. The modus operandi involves scanning individuals’ eyes using specially designed cameras known as “Orbs” to obtain biometric data. Users that register their data are subject to Worldcoin airdrops to their Ethereum address, the network where the cryptocurrency operates.

The goal of integrating a digital identity and economic layer is to pave the way for implementing universal basic income — a concept that Worldcoin co-founder Sam Altman firmly believes will become a necessity in light of the explosive growth of artificial intelligence.

Worldcoin’s Orbs have scanned over 2 million individuals worldwide, setting an ambitious target of reaching nearly a quarter of the global population — approximately 2 billion people. This initiative raises significant privacy concerns that Worldcoin aims to assuage with financial incentives.

The idea of “free money” may be appealing, but skeptics argue that it may not be a sufficient driver to enroll 2 billion people into the system. As per a report by the MIT Technology Review, Worldcoin’s initial batch of half a million people largely comprised the underprivileged, predominantly from developing nations.

With Orb verifications conducted in 34 countries, Worldcoin recently announced plans to expedite the distribution of Orbs in the coming months. The company plans to deploy an additional 1,500 Orbs across 35 more cities during the summer and fall.

Notably, as it stands, Worldcoin’s reach will not extend to the world’s two largest economies, the U.S. and China. While U.S. metropolises like New York and Los Angeles are on Worldcoin’s Orb tour, the firm’s terms and conditions have ruled out the availability of WLD tokens to U.S. individuals or entities.

From a market performance perspective, Worldcoin presents an interesting case. On the one hand, it’s attempting to capitalize on the growing interest in digital currencies while addressing the possible need for universal basic income. On the other hand, privacy concerns and limitations on the availability of tokens might constrain its potential. The project’s success will depend largely on how it navigates these challenges and evolves in response to market dynamics and regulatory environments.

2. Growth, but sideways

Forkast 500 NFT July 27
The indexes are proxy measures of the performance of the global NFT market. They are managed by CryptoSlam, a sister company of Forkast.News under the Forkast Labs umbrella.

The summer slump continues in NFTs, with the Forkast 500 NFT Index reflecting an NFT market with weaker volumes and sales. This week, the index declined 2.5% to another new all-time low at 2,632.66. 

  • Among blockchains tracked by Forkast Labs indexes, the Cardano NFT ecosystem was the sole chain to gain this week, with the CAR NFT Composite up 1.19%. The Ethereum, Solana and Polygon NFT Composites all declined.
  • Blockchain sales volume mostly decreased from last week, with Ethereum, Polygon and ImmutableX all falling under 10%, as Bitcoin declined 67% and Solana lost 23.4%. BNB was the only top five blockchain with higher sales volumes this week, rising 8.48%
  • Ethereum’s US$4.1 million in sales on July 21 stood at a daily low since June 10, 2021, when sales stood at US$3.3 million in sales.
  • Global sales volume shrank 40.33% this week with US$74.7 million in sales, down from US$112.4 million last week.
  • Average global sales prices declined 40.14% to US$43.17 from US$64.85 last week.
  • Sellers were on the losing end of trades this week, losing US$8.1 million across blockchains.

Forkast.Insights | What does it mean?

Growth isn’t always vertical, with up or down movement on a chart. While the indexes again reflect significant loss of value this week, some NFT collections found other ways to grow in a still young NFT asset class.

The CyberKongz announced its move to one of Ethereum’s earliest side-chains, taking part of their new NFT collection, Genkai, to the Ronin blockchain. Ronin is home to the world’s top-ranked NFT collection Axie Infinity, which has traded over US$4.2 billion on secondary markets. It’s not often that you’ll find a project of CyberKongz’s size, one that has seen over US$300 billion of action on secondary sales, move homes. You will have to look back to Gods Unchained, which moved from Ethereum to Immutable X, Axie Infinity, which moved from Ethereum to Ronin, and DeGods, which moved from Solana to Ethereum, to find moves of similar magnitude. 

This is the beginning of an acceleration towards deeper collaboration between projects, many of which may lack funds and direction. It shouldn’t be assumed that NFT builders have the experience to navigate a market that offers little profit and no margin for errors. Some even had no expectation of the success they found, but they now have the burden of collectors who demand results. Working together offers more chances for success though it may be necessary for survival for some.

Yuga Labs didn’t just show that they were ahead of the curve last year with its purchase of the CryptoPunks. They’re doing it again with the launch of a new IP licensing platform for Bored Ape holders. In another demonstration of growth this week, Yuga Labs’ new Made By Apes platform will allow businesses to lease BAYC holders’ NFT images through an on-chain license agreement. The on-chain, no-middleman-needed platform pushes a prime use case of NFTs to the forefront, and the networking that will be possible through Bored Ape branded products is a bigger deal than most that are currently appreciating. Yuga Labs deserves accolades for pushing the NFT space forward beyond what most currently give them credit for. 

The Pudgy Penguins will also release a new IP licensing platform as soon as this month. This follows a successful San Diego Comic-Con that sold thousands of physical Pudgy Penguin toys to a non-NFT audience.

OpenSea took large steps forward with the release of an NFT trading utility on its website. Traders can now offer combinations of NFTs and WETH with other NFT holders with no fees or royalties involved. From a security standpoint, after years of fake trading platforms have led to millions of dollars worth of NFTs being stolen, OpenSea’s new product is a giant value-add to the NFT space.

This week’s moves add tremendous value to NFTs, and while it’s hard to tell if the inflated market had such innovations priced in too early by speculators, there is no doubt that they add significant value to the ecosystem as a whole. It’s exciting to see building taking place in an otherwise pretty depressing market. 

3. Japan’s next big thing?

Japan metaverse
Japan is an early believer in blockchain and cryptocurrencies and faces strong regional competition in attracting talent and companies in the industry. Image: Hikky

A major Japanese firm might be on the cusp of unveiling the nation’s next big metaverse project at the WebX conference in Tokyo, said Prime Minister Fumio Kishida as he pledged stronger policy support for the Web3 industry.

  • “I have heard that a large Japanese company will take this opportunity to announce to the world a big, ambitious project that aims to create a valuable economic system in the metaverse,” said Kishida in a recorded video at the conference.
  • Japan, an early believer in blockchain and cryptocurrencies, has become increasingly supportive of emerging metaverse technology as a pillar of the country’s economic future.
  • Kishida also said that Web3 is part of “the New Form of Capitalism,” an economic strategy that he first revealed in June to boost government investment in areas including digital transformation, start-ups and technology. 
  • “The administration is proactively supporting domestic startups including the Web3 industry,” Koichi Hagiuda, chairman of the Policy Research Council of the Liberal Democratic Party, said in his opening remarks at the conference.
  • The conference is part of Japan’s efforts to become a global Web3 hub as it faces similar competition from regional economies such as Hong Kong, South Korea and Singapore.
  • Managed by Japanese Web3 media firm CoinPost, WebX is a global Web3 conference that aims to position Japan as “the Web3 center of Asia” and accelerate the mass adoption of Web3 technologies.
  • In April, a government-affiliated white paper discussed Japan’s path to widespread adoption of Web3 technology, including crypto. The East Asian nation also raised entry barriers to the crypto industry by introducing tougher anti-money laundering rules in June.

Forkast.Insights | What does it mean?

Utter the word “Metaverse” and watch people cringe. The project that Meta founder and chief executive Mark Zuckerberg promised would be the next iteration of the internet, changing the way the world worked, turned out to be nothing but an unpeopled, barren money pit.

Small-M metaverses have also underwhelmed, even if they have not (yet, at least) joined Zuck’s failed big-M virtual world on the scrapheap of bad tech ideas.

The Sandbox, launched with an immodest dose of hype in late 2021, attracted around 1,760 active users in the seven days before this edition of The Current Forkast was published, according to Web3 dApp data platform DappRadar.

Decentraland, The Sandbox’s main rival, had about 1,000 — users in both cases defined as unique active wallets transacting with the metaverses’ smart contracts — but numbers like these are hardly evidence that we’ve all quit reality for virtuality.

In this light, news that a Japanese corporate heavyweight may take the covers off a big local metaverse project might be a little difficult to get excited about.

Yet Northeast Asian countries are racing to build metaverse projects. Five months ago in Japan, a group of 10 manufacturers announced an agreement to develop a project called Ryugukoku, which will form part of a planned Japanese Metaverse Economic Zone to compete with similar projects in South Korea and China.

A number of proposals to promote and regulate the metaverse industry are awaiting decisions from South Korea’s legislature, although no proposed bills have made it to the discussion stage during plenary sessions.

China’s plan to become a leading force in metaverse technology might conjure a vision of a Communist Party-controlled virtual world even more dystopian than what the party has created in the world’s second-biggest economy and formerly free Hong Kong. But who would want to inhabit a metaverse run on “Xi Jinping thought” algos? Mercifully, it’s industry that’s the target of China’s metaverse efforts.

It’s in uses such as industry that metaverse technology might finally hit its stride. As such, although the investment and effort going into metaverse projects in Northeast Asia has an inevitable whiff of “a solution looking for a problem” about it, there’s an unmistakable glimmer of promise in the numerous applications that the technology has beyond the big, bland, empty landscape of a California tech billionaire’s childlike imaginings., messaging app Line to collaborate on crypto solutions in Asia

Cryptocurrency exchange and Line Xenesis — the crypto asset and blockchain-related business developer of Japanese messenger app Line — have signed a memorandum of understanding to boost crypto innovation in Asia-Pacific and the global industry.

See related article: Singapore-based gets preparatory license to expand services in Dubai

Fast facts

  • In a Wednesday announcement, Singapore-based said the collaboration will advance the exchange’s business solutions through Line’s network of some 200 million monthly active users.
  • The collaboration will initially focus on enhancing Line Xenesis’ licensed crypto offerings in Japan, with plans to explore NFT integrations and crypto payment capabilities.
  • “APAC and Japan are significant potential growth markets for crypto with high levels of interest and adoption already in place,” said Patrick Yoon, general manager of Korea.
  • Japan, an early believer in blockchain and cryptocurrencies, has become increasingly supportive of emerging metaverse technology as a pillar of the country’s economic future. A government-affiliated white paper released in April detailed the country’s plans for adopting Web3 technologies.
  • secured a digital token license in Singapore at the start of June. It received in-principle approval from the Monetary Authority of Singapore in June 2022.
  • In April 2022, Line launched its NFT marketplace through its Osaka-based blockchain subsidiary LVC.

Russia to launch digital ruble CBDC payments on August 1

Russian President Vladimir Putin signed a digital ruble bill into law on Monday, approving the use of its central bank digital currency for payments starting from Aug. 1.

See related article: Russia delays CBDC pilot to await new law

Fast facts

  • The Bank of Russia, the nation’s central bank, will directly manage and maintain the digital ruble infrastructure and will be responsible for all stored assets.
  • The new law states that the digital ruble is to be used for payments and money transfers and not for investments.
  • Head of Russia’s central bank Elvira Nabiullina said that the use of the currency will be optional but added that the bank hopes adoption will pick up as the currency aims to bring convenience and efficiency for businesses and consumers
  • The development comes after Russia’s State Duma — the country’s lower house of parliament — passed the digital ruble bill on July 11. The Federation Council — the upper house — approved the bill on July 19.
  • Last year, several Western nations imposed sanctions on Russia as a response to the Ukraine war.
  • The sanctions prompted Russia to seek alternative ways to carry out cross-border transactions, said Anatoly Aksakov, head of the financial committee in Russia’s lower house of parliament last year, according to a Reuters report.
  • See related article: Russia is 2nd biggest Bitcoin miner after U.S.: report 

XRP triumphs over SEC, but crypto clarity remains in the shadows

In this issue

  1. Ripple Labs: More turbulence ahead?
  2. Forkast 500 NFT Index: Entering a historically slow period
  3. Hong Kong’s goes back and forth

From the Editor’s Desk

Dear Reader,

The crypto community can be forgiven for feeling a little schadenfreude in recent days after we all watched a judge in the Southern District of New York stick it to the Securities and Exchange Commission in its case against Ripple Labs.

But, as many in the digital asset industry quickly began to realize when details of the verdict emerged, it was a little premature to pop the champagne, and the “payback time” mood was short-lived.

True, the SEC appears to have suffered a setback in its crusade to regulate (some might say crush) crypto by enforcement, and Ripple token XRP almost doubled in value on the news, with trading volumes briefly topping those of all other cryptocurrencies, but Ripple’s victory was only partial. More importantly, it failed to provide the eureka moment of unambiguous regulatory clarity that the crypto industry and many other constituencies had hoped for.

The court’s ruling that XRP isn’t a security when it’s sold on exchanges and via algorithms, but that it is when it’s sold to institutional buyers, is an unhappy compromise that, while potentially providing relief to the likes of Cardano and Solana, also targeted by the SEC, remains underwhelming.

Its most egregious failure is that it leaves the door open for further legal interpretations. That could mean more muddying of the already turbid legal waters. It could also mean an appeal of the court’s decision by the SEC when the regulator has finished licking its wounds.

Ripple’s win can therefore be described only as partial, and it begs the question of why we’re not seeing such unproductive – and indeed destructive – legal wars of attrition in other jurisdictions.

Could it be because many – notably the European Union – have come up with workable regulatory frameworks for the industry rather than blowing hot and cold on it as U.S. politicians have done while the SEC fills the policy vacuum with lawsuits?

When it comes to regulation, the U.S. has often been at the forefront of innovation, and its frameworks of rules and norms have been emulated the world over. Given that, and the fact that crypto is such an intensely innovative phenomenon, we can and should expect better.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Think twice

Ripple SEC
Despite the recent ruling, Ripple Labs’ court battle against the SEC may not be over. Image: SEC/Canva

In a Tuesday letter to SEC Chair Gary Gensler, a U.S. lawmaker urged the financial regulator to “reassess its regulatory assault on crypto assets” after the verdict on the Ripple-SEC case last week.

  • “In a landmark legal opinion, Judge Torres resoundingly rejected the regulatory overreach of the SEC, which has been indiscriminately declaring all crypto assets, except Bitcoin, to be securities,” said Representative Ritchie Torres of New York in the letter posted on Twitter, adding that “(crypto) regulation by enforcement had a dreadful day in court.”
  • Torres commented after U.S. District Court Judge Analisa Torres ruled on July 13 that Ripple Labs’ programmatic sales of its XRP cryptocurrency did not qualify as financial securities, marking a partial victory for Ripple in its almost three-year lawsuit against SEC, which accused the former of conducting unregistered securities offering. However, the summary judgment also ruled that Ripple’s direct sales of XRP to institutional clients violated the securities law.
  • At a Monday event of the National Press Club in Washington, D.C., Gensler said he was “disappointed” with the court’s ruling regarding the retail investors, and his agency was still assessing the judge’s opinion.
  • Boosted by the court ruling, the XRP price has surged over 68% since July 13 and rose past US$0.70 for the first time since April 2022, according to data from CoinMarketCap. The token traded at US$0.81 at press time.
  • “The ruling is a big win for the industry overall, offering clarity to the status of digital assets,” Jeff Mei, chief operating officer of crypto exchange BTSE, said in an emailed comment on July 14. “Although the ruling decision was based on the specific details of the Ripple case, the results will definitely support other firms who are in legal battles with the SEC regarding the classification of their products in the U.S.”
  • Despite the general optimism in the crypto industry, some advised caution as regulatory uncertainty persisted. “There will be further court proceedings on (Ripple’s XRP sales to institutional customers) … It is also not yet known if the SEC will appeal the ruling,” Caroline Bowler, chief executive officer of Australia-based crypto exchange BTC Markets, told Forkast in an email. “Potential for more insecurity ahead for Ripple.”

Forkast.Insights | What does it mean?

In a landmark court decision with implications for the global cryptocurrency industry, the verdict concerning the status of XRP has been met with both clarity and confusion by stakeholders.

For retail investors of XRP who participated in the secondary sales of the digital currency, such as those that acquired it through crypto exchanges, this legal outcome brought much-needed clarity. CoinMarketCap data indicates a noteworthy surge in the asset’s value to US$0.82, a peak not seen since pre-Terra-Luna in April 2022, which was observed shortly following the court’s decision.

The potential future ramifications of this ruling for the classification of cryptocurrencies as securities in the U.S. cannot be overstated. Lawsuits recently lodged by the SEC against Binance and Coinbase underscored this, with the agency deeming at least 12 additional cryptocurrencies, including popular coins like Cardano’s ADA and Solana’s SOL, as securities. Should the recent ruling concerning secondary XRP sales extend to these cryptocurrencies, investors may find further cause for celebration. Some leading exchanges in the U.S. that delisted XRP have already started to relist the cryptocurrency. 

Nevertheless, a cautious approach remains warranted. While some commentators have hastened to label the recent XRP ruling as a significant triumph for cryptocurrency investors, only a fraction of XRP transactions since 2017, less than 1% as court documents suggest, qualify as programmatic sales.

Notably, the court concluded that Ripple’s direct XRP sales to professional investors infringed U.S. securities laws. Despite the ruling being largely perceived as a victory for the sector, safety might only extend to 1% of XRP holders.

This leaves Ripple Labs and its executives, including Brad Garlinghouse and Chris Larsen, potentially entangled in continued legal complexities.

2. Who turned down the volume?

Forkast 500 NFT data July 19
The indexes are proxy measures of the performance of the global NFT market. They are managed by CryptoSlam, a sister company of Forkast.News under the Forkast Labs umbrella.

The non-fungible tokens market fell to another new low this week, even after positive news from across the blockchain industry following a U.S. judge’s ruling that XRP was not a security. Global NFT volumes fell to a seven-month low, with the Forkast 500 NFT Index slipping 0.64% to 2,689.33, reflecting the slow trading week.  

  • Blockchain sales volume shows Ethereum increasing 6.63%, Polygon rising 11.05%, and ImmutableX gaining 5.8%, while Bitcoin declined 54.96% and Solana lost 21.25%.
  • Global NFT sales volume shrank to a 39-week low, the lowest since October 10-16, 2022.
  • NFT weekly trade profits strengthened 66.5%, while average sales prices declined 5.41%.
  • Daily Ethereum and Solana transactions on July 16 neared a two-year low, with 13,992 total transactions on Ethereum, the lowest since the blockchain’s 13,560 transactions on July 24, 2021. Solana had 10,475 transactions, its lowest since 8,462 transactions on Sept. 19, 2021.
  • The Solana and Cardano Composites gained 4.63% and 5.38%, respectively, boosted by the increase in their platform’s token, $SOL (+18.9%) and $ADA (+8.11%).
  • The Polygon Composite declined 5.37%, with the number of unique sellers falling 50% and total transactions decreasing 12.02%.

Forkast.Insights | What does it mean?

This week, the market slowed significantly on Sunday when Ethereum and Solana, the number one and three-ranked blockchains by sales volume, fell to nearly a two-year low in transactions. Global sales also declined to a 39-week low, showing investors have throttled back from trading. And who can blame them? Trade profits are still largely negative with US$8.2 million of losses for the week ending July 16, and new mints still are failing to offer innovation for collectors.

On any given day this week, CryptoSlam’s collections ranking perfectly shows the change in the market, with the top 10 leaderboard reflecting collections that struggle to reach US$500,000 in sales in a 24-hour period. Simply put, traders have stepped on the brakes as they slow down their trading practices and have moved onto securing grails, trading crypto, or taking a break entirely.

Prices of collections like Bored Ape Yacht Club, CryptoPunks, and Azuki continue to hover around two-year laws, but they’re full of NFTs that many consider grails. These low prices attract collectors who have been waiting to enter the exclusive communities and investors who still see great financial opportunities in these collections. Noteworthy sales this week include BAYC #1734 (US$1.2 million), CryptoPunks #8531 (US$1 million), CryptoPunks #5402 (US$340,000), CryptoPunks #512 (US$311,000), and around two dozen other CryptoPunks that sold for over US$100,000. 

NFTs at the macro level show that the base of collectors in the NFT ecosystem has clearly grown over the years, even if they’re not as active now. Total transactions and supply in 2023 across blockchains dwarf what we have witnessed in years past. In fact, the increase in NFT supply, now up to some 302 million NFTs, shows the exponential growth that the blockchain collectibles ecosystem has witnessed since 2021, when fewer than 10 million NFTs existed. Total transactions in 2023 tell the same story, with over 44 million transactions just over halfway this year compared to 40 million last year, and 12.4 million in 2021.

With the NFT market heading into the historically slow August-December with little momentum behind it, NFTs seems to be falling headfirst into one of its first significant tests of traders’ conviction. This second-half stretch typically finds US collectors all but giving some NFTs for free as they look to harvest losses on their taxes. Will traders be spooked by the sale of grails at floor prices, along with volume and sales that may look closer to the period before NFTs reached the masses? 

In some positive news to end this week, Yuga Labs announced that Ape Fest 2023 will take place on Nov. 3-5 in Hong Kong. With China potentially primed to enter the NFT market in a big way, traders are hoping the can’t-miss NFT party will help close out the year with NFT fireworks. Some even speculate that Yuga Labs may launch its Othereside metaverse to make this a worldwide party that bridges the physical and digital worlds. If they pull this off, the era of the metaverse may finally be upon us and with it, a potential new NFT boom. 

3. Holding back

Hong Kong cryptocurrency
Hong Kong banks turning away crypto companies could hinder the city’s ambitions. Image: Canva

At least two global banks operating in Hong Kong have “ruled out any activity directly linked to crypto trading,” while others hesitate to open accounts for customers of crypto exchanges, the Wall Street Journal (WSJ) reported on Monday, citing anonymous sources, without naming the two banks.

  • The banks’ reluctance to service crypto-related companies can be attributed to the money laundering risks in cryptocurrencies and a lack of risk-management frameworks in the crypto industry, according to the WSJ report.
  • Local banks rejecting crypto companies could be an obstacle to Hong Kong’s economic ambition. Hong Kong aims to be a hub for the Web3 industry and in June, began its new licensing regime for virtual asset service providers.
  • Hong Kong’s new licensing rules that require a crypto exchange to establish one or more segregated accounts with a financial institution, together with Hong Kong banks’ cautious attitudes, is an issue for crypto companies seeking to expand in the city.
  • The banking issue has raised concerns among local regulators. In June, the Hong Kong Monetary Authority, the city’s central bank, reportedly pressed major lenders, including HSBC, Standard Chartered and Bank of China, to service local crypto exchanges, after issuing letters and commentaries to advise local banks not to reject crypto firms’ request to open accounts because of the industry.
  • But not all lenders in Hong Kong are rejecting crypto companies. The WSJ report said an unnamed large global bank had changed its position and was considering opening basic accounts for crypto exchanges applying for licenses in Hong Kong, citing anonymous sources. Meanwhile, local banks such as ZA Bank and the Hong Kong branch of China’s Bank of Communications started servicing crypto firms earlier this year.

Forkast.Insights | What does it mean?

Not even two months following the day that Hong Kong’s cryptocurrency regulations came into effect, it seems that some people are already spoiling the party that many – perhaps especially the city’s government, which drafted them – had been eagerly anticipating.

The Journal’s report that two or more unnamed global banks in Hong Kong have eschewed engaging with anything linked to crypto trading inevitably invites speculation as to which lenders these might be.

The fact that HSBC, one of the city’s highest-profile banks, saw fit to beef up restrictions on its UK retail customers’ access to crypto assets earlier this year may suggest to some that it’s one of them. But given the limited information currently available, speculation would be imprudent.

More important than any witch hunt for names is the fact that – at least reportedly – big banks appear to be putting the brakes on the Hong Kong Monetary Authority’s ambitious plans to turn the city into a crypto hub. And, moreover, the fact that they appear to be doing so despite exhortations by the de facto central bank to service the industry it is so keen to nurture.

It’s apposite to recall that something similar occurred in India in 2020, when the country’s Supreme Court overturned a ban on banks’ handling of crypto-related transactions imposed by the Reserve Bank of India. Lenders listened more to the central bank than they did to the court, and proceeded to continue refusing crypto-linked business.

The specifics of the two cases differ, admittedly, but could we be seeing another case of banks simply not doing what they’re told?

A curious aspect of what’s happening in Hong Kong is the fact that Chinese state banks – once considered some of the least likely lenders in the world to touch anything with even a whiff of crypto, thanks to Beijing’s blanket ban on it – appear to have warmed to the idea of servicing crypto clients in the city. The extent to which they offer crypto businesses a way of going about their affairs in Hong Kong will be something to watch.

And given Hong Kong authorities’ increased willingness to assert their agenda following their Beijing-instigated assault on the local legal and political systems, the press and more during the past four years, we could even see other lenders receiving potentially more persuasive official encouragement to follow the state banks’ lead if they don’t toe the line. 

But in the meantime, uncertainty complicates prospects for crypto enterprises trying to do business in a city where operating licenses depend on the ability to open accounts that banks are reluctant to make available.

As developers and entrepreneurs – like their counterparts in India a few years ago – weigh their options and consider more supportive financial ecosystems in which to operate, Hong Kong’s path to becoming a crypto hub seems more challenging than it ought to be.

US court rules in favor of XRP in Ripple Labs case against SEC, with caveats

U.S. District Court Judge Analisa Torres ruled on Thursday that Ripple Labs’ programmatic sales of the XRP cryptocurrency did not qualify as the offer and sale of investment contracts. This decision from the Southern District of New York brought relief to XRP investors worldwide, marking a significant milestone in the ongoing legal tussle between the San Francisco-based payments firm and the U.S. Securities and Exchange Commission (SEC).

See related article: What is XRP and what is Ripple?

Fast facts

  • Programmatic sales are automated transactions involving the selling or buying of digital assets, like cryptocurrencies, based on predetermined parameters. In Ripple’s case, it includes XRP sales in cryptocurrency exchanges.
  • The verdict came with a critical caveat that may keep Ripple and its top brass on their toes. According to the court’s document, Ripple’s institutional sales of XRP violated securities regulations.
  • “Having considered the economic reality and totality of circumstances surrounding the Institutional Sales, the Court concludes that Ripple’s Institutional Sales of XRP constituted the unregistered offer and sale of investment contracts in violation of Section 5 of the Securities Act,” the court filing said.
  • In December 2020, the SEC initiated a lawsuit against Ripple, alleging that Ripple’s sale of XRP was an unregistered securities offering. The SEC also implicated Ripple’s executive chairman Chris Larsen and chief executive officer Brad Garlinghouse as co-defendants, accusing them of aiding and abetting Ripple’s alleged violations.
  • The announcement of the court’s decision triggered a surge in XRP’s value. The cryptocurrency’s price jumped by 30% to US$0.61 shortly after the news became public. Prior to the announcement, XRP was trading at US$0.47, according to CoinGecko data.
  • The court added that it would release an order to establish the trial date and related pre-trial schedules at the appropriate time.

See related article: Ripple gets in-principle approval for Singapore digital payment license

Standard Chartered’s great expectations for Bitcoin in 2024

In this issue

  1. Bitcoin at US$120,000: Standard Chartered’s high hopes
  2. Forkast 500 NFT Index: Another week, another low
  3. Sega partners Line: From game to blockchain

From the Editor’s Desk

Dear Reader,

Remember the “laser eyes” trend that many Bitcoiners enthusiastically bought into back in 2021? Yes? Well, we’ve been trying to forget it, too.

But this week’s news that Standard Chartered sees BTC potentially soaring to US$120,000 next year brings those memories flooding back.

Given the relatively short time the crypto industry has been in full bloom, banks have managed to chalk up an impressive track record of making dramatic predictions and pronouncements on the price of the original crypto token.

In early 2021, for instance, JPMorgan – despite being headed by noted fixture of the crypto-skeptic punditocracy Jamie Dimon – outdid even the believers, predicting a rise to US$146,000. In late 2020, a leaked report by Citibank predicted an even more extravagant valuation of US$300,000 by December the following year, a figure that would have required BTC’s price to skyrocket 1,775%, or more than 18-fold.

Standard Chartered’s latest call on BTC rests on a logic of supply and demand, one of the bedrocks of established economics. As such, it has a certain degree of merit. However, while that bullish prediction may set hearts racing among long-suffering speculators in the crypto community, it relates only to one token in the space, and is predicated on only a limited number of factors.

Admittedly, BTC’s movements exercise a practically gravitational pull on the rest of the market. Yet even broad shifts in crypto prices are but a single dimension of the increasingly sophisticated digital asset ecosystem that has emerged in the past few years.

BTC may bounce back, and even outperform to live up to the lofty expectations of the latest crop of analysts bold enough to be so bullish. But the damage wrought by the fevered speculation, hype and all-too-foreseeable misery that followed the headiness of 2021 have made the industry grow up quickly, moving its focus to the source of the more demonstrable and enduring value it can create: the spirit of pioneering innovation that animated it in the first place.

It goes without saying that we want to see the crypto market back in the black, but it’s what comes next in the expanding digital asset universe that excites us most.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Great expectations

An out of focus candle graph on on a device screen with physical Bitcoin models and Standard Chartered logo layered on front.
Higher miner profitability per Bitcoin is a major factor for Standard Chartered’s projection. Image: Standard Chartered/Canva

Bitcoin prices could rise to US$50,000 by the end of 2023 and US$120,000 in 2024, U.K. bank Standard Chartered predicted in a Monday research report, an increase from its projection of US$100,000 in April.

  • Higher miner profitability per Bitcoin is one of the major factors fueling Standard Chartered’s projection, allowing miners to “sell less while maintaining cash inflows, reducing net BTC supply and pushing BTC prices higher,” Geoff Kendrick, head of foreign exchange and digital assets research at Standard Chartered, wrote in the report.
  • Kendrick noted that the 12 largest listed miners — which account for 20% of all global Bitcoin mining — sold 106% of mined Bitcoins in the first quarter of 2023, and estimated the proportion dropped to 100% in the second quarter, thanks to lower mining cost and higher Bitcoin prices that have gained over 85% since the start of the year.
  • “If the BTC price rises to around US$50,000, which we expect by end-2023, the share of newly mined being sold should fall to 20-30%. That is a net annual reduction in selling of BTC 250,000 — a large number relative to Bitcoin market turnover,” wrote Kendrick.
  • “While predicting the timing of market moves is always tricky, the case for a significant increase in the price of Bitcoin in the foreseeable future is clear,” said Bradley Duke, founder and chief strategy officer of crypto ETP provider ETC Group
  • “With Blackrock filing for a spot Bitcoin ETF in the US, given their past success rate, the belief is that this application is likely to be approved. This will enable massive pent-up demand for Bitcoin in the US and elsewhere to finally be able to flow into the market, and it’s logical that the price of Bitcoin responds in a proportionate manner,” said Duke.
  • Bitcoin supply inflow will also be further reduced by the token’s fourth halving event, expected to occur in April or May 2024, which would cut miners’ reward for mining new blocks and verifying transactions by 50%.
  • “Prior halving cycles have resulted in significant industry consolidation. This drives down the average cost of production further, increasing average miner profitability,” the report said.

Forkast.Insights | What does it mean?

Standard Chartered’s prediction is contingent on the premise that Bitcoin miners will be able to reduce the amount of freshly mined Bitcoin they put up for sale.

The rationale for this thesis hinges on Bitcoin halving, an in-built feature of the Bitcoin network which cuts the reward miners receive for verifying transactions on the blockchain by 50% approximately every four years. Consequently, this event reduces the inflow of new Bitcoins into the economy. The latest halving event in May 2020 cut miner compensation to 6.25 Bitcoins per block. The next anticipated halving in April or May 2024 will further decrease miners’ earnings to 3.125 Bitcoins per block.

Historically, each four-year halving cycle has ushered in a new record high for Bitcoin, often succeeded by a downturn. The inaugural halving in November 2012 paved the way for Bitcoin to rise past US$1,200 in 2013. But this was short-lived due to a hack in Mt. Gox hack, the largest cryptocurrency exchange at the time. In the subsequent years before the next halving, Bitcoin price fluctuated between US$200-700, according to CoinMarketCap data.

The second halving cycle, initiated in July 2016, saw Bitcoin set a new peak over US$19,000, a growth of around 1,500% compared to the prior record, propelled by the “initial coin offering boom,” a period from when the popularity and usage of ICOs as a fundraising mechanism in the cryptocurrency space significantly increased. However, within a year of this meteoric rise, Bitcoin retraced to around US$3,200.

The most recent halving cycle that started in May 2020 saw institutional entities such as Tesla and MicroStrategy bolster their Bitcoin holdings, powering the cryptocurrency to over US$69,000, roughly 250% more than its previous record. Bitcoin then declined to under US$16,000, following a series of negative incidents in the Web3 industry, notably the failure of the Terra-Luna stablecoin and the controversy surrounding FTX. The cryptocurrency traded at US$30,404 at press time. 

In light of this, Standard Chartered’s price prediction of US$120,000 for Bitcoin would see a rise of about 74% from the previous peak. While it’s observed that Bitcoin’s volatility decreases with each halving cycle, this also impacts Bitcoin’s profitability. As a result, investors remain on the lookout for the next big innovation in the blockchain space, akin to the surge of interest in decentralized finance and non-fungible tokens in recent years.

2. Refreshing new lows

Forkast 500 NFT July 13
The indexes are proxy measures of the performance of the global NFT market. They are managed by CryptoSlam, a sister company of Forkast.News under the Forkast Labs umbrella.

After another week of declines, the NFT market has found a new low of 2,703.44. The Forkast 500 NFT Index lost 2.33%, while the ETH Composite declined 1.75%, Solana slipped 0.54%, Polygon inched down 0.37% and Cardano gained 0.86%.

  • Average global sales prices across blockchains declined 32% to US$68.52 from US$99.42 in the previous week.
  • Seven-day global sales volumes decreased 20%, with US$163 million in sales this week compared to US$196 million last week.
  • Trade profits in the previous two weeks stood at a low for 2023, with traders losing US$28.4 million.
  • July 9 had 254,031 transactions, the lowest daily total since 239,742 on May 21.

Forkast.Insights | What does it mean?

The NFT market had brief periods in the green over the past week, but the broader NFT ecosystem, after partial recoveries in specific projects’s floor prices, remains on the downtrend since the market’s peak on Jan. 17. This is a perfect way to highlight why floor prices are a poor measure of the value of the market. As the index reflects floor prices, the market’s decline continues at the same rate prior to the Elementals mint

The decline in prices, global sales, trade profits, and individual daily transactions indicate that the NFT market still requires a catalyst to turn the ship around. That catalyst will need to be pretty monumental to turn around a market that has lost 46% of its value from its peak in January.

While the established projects continue their declines, recent new mints found some success this week. Projects like a new Azuki derivative called Fatzuki, SMB Gen3 and Barrels, and Parallel Avatars each traded noteworthy volumes with US$1 million, US$2.9 million, and US$1.7 million, respectively.

Collectors continue to demonstrate that they do not value established projects at the prices they currently command. However, collections priced closer to 0.1 ETH are another story. Affordable enough to engage in the hyped communities and still having potential financial upside, these newer collections are in a sweet spot that offers enough value for traders. Now we await established collections to fall to these prices so that these very same traders, and ideally brand new collectors, can return.

This week, we also have a perfect example of why collections like Fatzuki, SMB, and Parallel Avatars are not included in the Forkast 500 NFT Index.

Last month, a new collection called Ethscriptions emerged, allowing collectors to tokenize data for a fraction of the cost that you would pay to mint as a traditional NFT. Since early June, the collection of Ethscriptions has traded over US$1 million on secondary, largely from collectors trading the first 10,000 Ethscription collectibles, a collection that uses the CryptoPunks image, named Ethereum Punks.

This week Yuga Labs, who owns the CryptoPunks IP,  requested that the Ethscription team remove Ethereum Punks from their website, and scrub any mention of them from Twitter. Prices are now decimated, with the rarest NFTs in the collection being listed on the floor, and leaving the collection essentially worthless. 

Consider the Ethereum Punks now dead and possibly Ethscriptions with it, but because the index only includes collections that are established for longer than six months, wild potential price swings will not impact the measurement of projects with more tangible value. On the horizon for the NFT ecosystem are some major projects’ mints, Yuga Lab’s Ape Fest 2023 announcement, and the end of Blur’s season 2 of rewards farming. 

3. Buddy up

Sega x Line partnership sonic the hedgehog
Contradicting recent reports, Sega revs up its blockchain engine through its partnership with Line. Image: Sega/Line

Sega Corp., the Japanese gaming giant behind hit IPs including Sonic the Hedgehog, will partner social media platform Line Corp. to bring one of its top game IPs onto the blockchain. The news on Monday came days after Sega was reported to be winding down its blockchain-based gaming business.

  • Sega signed a memorandum of understanding with Line Next Inc., an NFT branch of Line, to license the latter to make one of Sega’s classic IPs into a Web3 game on Line’s Game Dosi platform. The IP in question has not been confirmed for the time being.
  • Game Dosi is Line’s Web3 gaming platform launched on May 18. Line Next will support the NFT production, digital payments, and marketing activities of the Sega title when it launches on Game Dosi, according to the announcement.
  • Days before the announcement, Bloomberg reported Sega would withhold its classic franchises from third-party blockchain-based gaming projects and pause its own plans for similar projects, citing an interview with Sega co-Chief Operating Officer Shuji Utsumi.
  • However, Utsumi later said in an email response to Forkast that the company’s strategy around blockchain had been misconstrued, and the plans to invest in Web3 projects, which includes licensing the company’s certain game titles to blockchain-based developers that it trusts to maintain its quality standards and meet the expectations of fans.
  • “We are not trying to be a Web3 company,” said Utsumi. Instead, Web3 technologies such as the blockchain and NFTs are “functions” that the company will continue to explore as a way to grow its business and expand the potential of its IPs, he said.
  • The partnership with Line is not Sega’s first Web3 initiative. In September 2022, the firm announced a partnership with blockchain game developer Double Jump Tokyo and decentralized blockchain gaming platform Oasys to bring its digital card game IP Sangokushi Taisen onto the blockchain. Meanwhile, other Japanese gaming companies, including Square Enix and Konami are also expanding in the Web3 space.

Forkast.Insights | What does it mean?

Sega is a company best remembered by some for being a casualty of the console “gaming wars” of the late 1980s and early 1990s, from which Sony’s PlayStation and Microsoft’s Xbox eventually emerged triumphant. For others, it’s the creator of “Sonic the Hedgehog” and other classic games. Either way, it’s a bit of a nostalgia trip for most people.

But Sega’s foray into blockchain and NFTs may have the potential to propel the company — which, despite its lower profile, is still a heavyweight in the business — back onto a stage currently dominated by the brands with which it previously failed to compete.

One of the reasons Sega was beaten out of the console market by its competitors was the fact that it produced a run of games that were unpopular with gamers and criticized over having poorer production values than its rivals’ high-quality 3D offerings.

Sony, PlayStation and Nintendo enjoyed a technological advantage over Sega at the time, but Sega’s blockchain and NFT plans may just turn the tables, giving it a different sort of technological edge over them.

The huge potential of blockchain and Web3 more broadly to revolutionize the games industry – and many other industries besides, as reiterated by Ninepoint Partners’ Alex Tapscott in a recent Forkast interview, is by now obvious. Despite this, games companies and developers remain suspicious of it and unconvinced of its value.

But it’s a fact that the technology is already powering a US$100 billion juggernaut projected to grow to over US$240 billion by 2026. That’s a big piece of action, and games companies that ignore it do so at their peril.

And that’s not all. If Sega’s gambit succeeds to any meaningful extent, it may drive a paradigm shift in the way that in-game assets and economies work.

At the moment, the millions of gamers devoted to offerings such as Activision’s insanely popular first-person shooter “Call of Duty” are forced by games companies effectively to forfeit the in-game assets they’ve purchased every time a new edition of each game is released. Putting those assets on a blockchain would end this cynical practice by giving players immutable ownership rights, making assets for which players currently have to fork out again and again fully transferable.

That may deprive games companies of those coerced repeat purchases, but their value is dwarfed by the potential size of the market that blockchain potentially opens up – a market that Sega, at least, believes is there for the taking.

No surprise as Singapore, Thailand step up crypto regulation

In this issue

  1. Crypto regulation: Singapore, Thailand tighten measures
  2. Forkast 500 NFT Index: Seemingly no end to declines
  3. Voyager: Shrinking portfolio

From the Editor’s Desk

Dear Reader,

Regulatory developments in the Asian cryptocurrency space have come thick and fast in the past few days, with authorities in Singapore and Thailand announcing customer protection measures that impose new responsibilities and restrictions on crypto companies.

Singapore’s requirement that companies providing crypto services ringfence their customers’ assets from their own and ensure they are held in trust is no more onerous than rules under which mainstream banks have operated for almost a century. As such, they make sense — after all, practices that flouted those norms played a role in the hugely costly demise of FTX.

Thailand’s ban on crypto companies offering lending and staking products — a prohibition that the Monetary Authority of Singapore announced it also intended to impose — amounts to a stricter application of discipline to the crypto industry.

As we observe in this week’s edition of The Current Forkast, Thai finance sector authorities may be haunted by the careening currency crisis that began in their country back in 1997 and engulfed the entire region. But that’s unlikely to be the only reason for this week’s flurry of regulatory activity in not one but two jurisdictions. Nor does it explain a vote by South Korean lawmakers last week to approve beefed-up customer protection measures in the crypto space.

In seeking to understand what lies behind all this action, we could do worse than look to the U.S., where the mess left by the collapse of crypto lending platforms Voyager and Celsius is still very much being cleaned up.

Voyager was one among a number of crypto lenders and staking services propelled into a doom loop by the downfall of Three Arrows Capital and the infamous algorithmic stablecoin run by the Terraform Labs.

The fact that both Three Arrows and Terra were headquartered in a tropical Southeast Asian finance hub that was at the time also regarded as a center for crypto doesn’t explain this week’s announcement by the Monetary Authority of Singapore, that tropical finance hub’s de facto central bank. But a certain circularity is unmistakable as regulation takes shape in the region that the two companies used to call home.

It seems that regulators in Singapore and Thailand may have learned from the kinds of problems their U.S. counterparts have so far only tried to sue their way out of.

It seems that their preferred solution to potential problems in the crypto space is regulating, not just litigating.

And it seems impossible not to ask when we might see such an approach take root in Washington.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Doubling down

Singapore, Bitcoin, Thailand
Singapore’s MAS mandates segregation of customer assets, while Thailand’s SEC has bans crypto lending and staking. Image: Canva

Crypto regulations have tightened in Singapore and Thailand this week, in measures aimed at enhancing customer assets. The Monetary Authority of Singapore (MAS) now mandates crypto firms to hold customer assets in third-party trusts, while Thailand’s Securities and Exchange Commission (SEC) has introduced bans on crypto lending and staking services. 

  • In a Monday press release, MAS stated that digital payment token service providers, — the term used by Singaporean officials for crypto assets — must safeguard customer assets under a segregated, statutory trust by year-end. The MAS said this move aims to “mitigate the risk of loss or misuse of customer assets” and facilitate asset recovery in the event of insolvency of a crypto service provider. 
  • MAS also intends to prohibit crypto service providers from offering crypto asset-based lending and staking services to retail investors, considering such services “generally not suitable for retail public.”
  • Also on Monday, Thailand’s SEC announced rules to ban crypto firms from providing custodial services that yield returns to depositors and lenders, which would cover both crypto lending and staking. 
  • Effective from July 31, the rules also require crypto firms to display a disclaimer that reads, “Cryptocurrencies are high risk. Please study and understand the risks of cryptocurrencies thoroughly, because you may lose your entire investment.” 
  • The moves by Singapore and Thailand came after a series of crypto lender insolvencies in the past year, including the collapses of Celsius Network, Voyager Digital, BlockFi and more, which involved multiple billions of U.S. dollars in crypto deposits.
  • Beyond the two Southeast Asian nations, South Korean legislators approved a bill last week aimed at protecting cryptocurrency investors, marking the country’s first step towards establishing a legal framework dedicated to the asset class. The new legislation mandates crypto service providers to implement specific measures to safeguard customer assets and maintain comprehensive records of all transactions. 

Forkast.Insights | What does it mean?

The Monetary Authority of Singapore’s (MAS’s) announcement of more stringent customer protection measures in the crypto space should have come as no surprise. 

As we noted in last week’s edition of The Current Forkast, the de facto central bank’s vision for digital assets is about as far removed as it is possible to get from the libertarian ideals that spawned the crypto and digital asset phenomenon, handing the reins almost wholly to big banks and other TradFi heavyweights.

Indeed, the MAS has made no secret of its distaste for much of the crypto industry and its activities, in particular where they involve retail crypto trading, which it has been putting a squeeze on in various ways for some time now, so its latest intervention was probably always on the cards.

But perhaps the least surprising thing about any of it is the MAS’s specific requirement that “digital payment token” service providers keep customers’ assets segregated and held in trust. This stipulation mirrors rules in widespread use around the world to prevent or limit the extent to which finance sector businesses such as banks can use their customers’ deposits to trade and engage in speculation.

These rules date back at least to the Wall Street Crash of 1929 and the Great Depression that it ushered in, and they were aired out once again following the Global Financial Crisis 15 years ago. They’re in place for very good reasons — reasons that apply as much to crypto and digital assets as they do to banks — and, as such, they’re not entirely unwelcome.

Perhaps less expected in some quarters was the other big crypto regulatory announcement from Southeast Asia this week — news that Thailand’s securities regulator is banning deposit taking and lending by crypto businesses, effectively ending crypto credit and staking.

Yet among observers, the fact that the Thai Securities and Exchange Commission (SEC) has acted so decisively shouldn’t raise any eyebrows, given how active Thailand has been in its handling of crypto in recent times.

Thai authorities last year banned the use of crypto tokens as means of payment, citing concerns over financial stability and security.

In 2021, the SEC put in place a ban on memecoins and NFTs on consumer protection grounds. And just three months before that, the country’s central bank warned against the use of Thai baht-denominated stablecoins, describing them as a threat to the country’s financial stability. It declared baht stablecoin THT, created on the Terra stablecoin platform, illegal.

The stability of Thailand’s financial and monetary system has loomed large in Thai authorities’ restrictions on crypto — as well it might, given the fact that the country was where the Asian Financial Crisis began 26 years ago, a catastrophe that saw the country’s currency all but collapse, followed by those of many others.

Nobody wants a rerun of anything like that, and Thai authorities’ institutional memory may be longer than some expect, so in that light, the abundance of caution on display when it comes to keeping things on an even keel is entirely understandable — and, for those who recall the events that unfolded in the late 1990s, equally unsurprising. 

2. No bottom in sight

Forkast 500 NFT July 5
The indexes are proxy measures of the performance of the global NFT market. They are managed by CryptoSlam, a sister company of Forkast.News under the Forkast Labs umbrella.

The NFT market continued to refresh all-time lows, falling to 2,746.88 as the Forkast 500 NFT Index reflected troubling times in the world of blockchain collectibles. The index is down 2.48%, with Ethereum NFTs are seeing a 3.43% decline, outpacing Solana, which lost 2.86%, Polygon, which shrank 1.26% and Cardano, which decreased 3.09%.

  • Solana’s sales volume hit a high of the year with US$26 million on June 30.
  • The Solana Monkey Business Barrel Raffle was the top-selling NFT collection last week, bringing in over US$29 million in sales since June 30. But most of the amount will be refunded, as this was a designed mechanic of the NFT ticket raffle.
  • Solana leapfrogged Bitcoin in seven-day sales with US$40 million compared to Bitcoin’s US$32 million. But refunded SMB Barrel Raffle sales will move Solana to third place, ahead of Polygon’s US$7.5 million.
  • Bored Ape Yacht Club’s (BAYC) average sale price extended its decline to near a two-year low. This month’s average sale price of US$70,000 reflects a floor price drop of 17% to 29 ETH over the last seven days.
  • Noteworthy seven-day floor price changes include Yuga Labs’ HV-MTL (-30%), BAYC (-17%), Azuki Beanz (-20%), Azuki (-17%), The Captainz (-14%), Nakamigos (+26%), Clone X (+20%), Doodles (+18%) and Moonbirds (+11%).

Forkast.Insights | What does it mean?

In 2021, Gary Vaynerchuk, an entrepreneur and creator of the Ethereum-based VeeFriends collection, said that 98-99% of NFT projects will see their prices go to zero. It’s not that he doubted NFTs. It’s quite the opposite. His experience from building during periods of tech innovation tells him that we would be entering a phase that he was familiar with. It feels like we’re now entering that phase.

NFT prices have taken a huge hit in the past seven days, with many of the top collections seeing their floor prices fall 25-50%. These are huge potential losses, and although NFT losses are only realized when holders sell, plenty did sell, hoping to avoid more significant damage. 

This week, prices have bounced back, though they have not fully recovered, and some may never. Was it a dead cat bounce, or are NFT traders starting to find some value in some highly regarded NFT collections?

Blur’s Blend NFT lending protocol has demonstrated its ability to prop up collections’ prices as lenders farm the platform’s rewarded points by offering loans on NFTs. But the flip side of Blend and a lending platform called BenDAO is that while they offer traders some liquidity, both help exasperate tumbling prices when collateralized NFTs are liquidated due to the loan-to-value ratio crossing a threshold. We have watched this play out in the past seven days when floor prices took steep dives from bulk NFT liquidations. Once the ball gets rolling, it only ends when enough buyers find a price point they can’t pass up and when the supply dries up. 

NFT traders are now seriously concerned about the value of their NFTs, and, maybe more importantly, how long they can hold their value. This week brings even more reason for uncertainty with Blur’s introduction of point rewards for traders who bid on traits within specific collections. While bidding on traits will likely lead to some very large individual sales, these NFTs will not end up in the hands of collectors. Instead, point farmers may acquire “grails” from select collections and sell them as soon as they need liquidity, even taking a loss. Expect large sales, possibly even those grails, selling well under their typical selling price. 

Watch the Forkast 500 NFT Index at the macro level to see if new lows are reached again over the week, or if the NFT market has found some stability at new, lower NFT collection prices.

3. Precarious position

Voyager logo on top of high voltage sign.
Global regulatory bodies are tightening the reins on crypto lending and staking services, creating a challenging scenario for customers attempting to reclaim their trapped investments. Image: Voyager/Canva

Bankrupt cryptocurrency lender Voyager has seen a US$113 million reduction in its portfolio since reopening customer withdrawals on June 23, data from Arkham Intelligence show. Prior to this reopening, Voyager held nearly US$413 million in cryptocurrencies, which was down to under US$300 million as of Thursday. 

  • Last summer, Voyager, alongside several other crypto lenders and staking service providers, fell into bankruptcy following their exposure to the demise of Singapore crypto hedge fund Three Arrows Capital and Terra’s algorithmic stablecoin. Voyager froze customer withdrawals on July 1, 2022, but recently allowed a 30-day window for its customers to partially transfer their crypto holdings.
  • Meanwhile, Celsius Network, another crypto lender that filed for bankruptcy in July 2022, received approval from a U.S. bankruptcy court last week to start conversion of its altcoin holdings into Bitcoin or Ether from July 1, marking another step towards the distribution of funds to the company’s creditors. 
  • Arkham Intelligence data show more than US$625 million worth of cryptocurrencies still belonging to Celsius, down from the US$1.59 billion it held before initiating partial withdrawals in early May. 
  • Over the past year, a string of crypto lenders including BlockFi and Genesis Global Capital have collapsed, largely due to their exposure to the failed hedge fund Three Arrows Capital and the Bahamas-based multibillion-dollar exchange, FTX. 

Forkast.Insights | What does it mean?

The financial landscape of the cryptocurrency market was significantly disrupted following the Terra-Luna collapse in May 2022. Numerous crypto staking and lending platforms that became insolvent as a result have billions of dollars worth of customer assets frozen in bankruptcy proceedings. Regulatory authorities around the world are taking unprecedented steps in response to this crisis, with a focus on securing customer assets and redefining the regulatory environment for such services.

The U.S. SEC has taken decisive action, shuttering Kraken’s staking service and filing a lawsuit against Coinbase’s equivalent program. Asian regulators, particularly in Singapore and Thailand, are taking similar measures, signaling a global shift towards stricter control of crypto lending and staking operations.

The data from Arkham Intelligence reveals that Voyager and Celsius Network, two major bankrupt service providers, still control substantial customer assets: Voyager has US$298.9 million in crypto, including US$120 million in Bitcoin, while Celsius holds a larger pool of US$631 million in crypto, with Bitcoin accounting for $300 million.

Accessing these funds remains a complex issue for customers, as highlighted by the Mt. Gox case, where approximately 138,000 Bitcoins have been trapped since 2014. However, there have been some signs of progress. Voyager’s crypto assets have seen a reduction of nearly US$100 million following the opening of limited withdrawals on June 23, while Celsius has experienced a reduction of US$878 million in its net portfolio value since initiating partial withdrawals on May 9.

There’s a ray of hope for Celsius customers as the platform has recently received court permission to convert its altcoin holdings into Bitcoin or Ethereum. Celsius is still responsible for US$638.15 million, including US$119.5 million in its own CEL token. Notably, the CEL token’s value has plummeted by 97.8% from its US$8 peak in June 2021, according to CoinMarketCap data

While the regulatory actions claim to safeguard future investors, the current scenario leaves customers of platforms like Voyager and Celsius in a precarious position as they wait to reclaim their investments. The turbulence is a stark reminder of the risks associated with yield-generating crypto services, particularly in lending and staking platforms.

Crypto gets a boost following reports of Fidelity’s imminent Bitcoin spot ETF filing

In this issue

  1. Fidelity: Close to filing its own Bitcoin ETF
  2. Forkast 500 NFT Index: Azuki disappoints
  3. Asset tokenization in Singapore: One step closer

From the Editor’s Desk

Dear Reader,

There’s a saying in gambling circles that the house always wins. It’s not an unreasonable supposition, given the fact that if casino operators didn’t bring in more cash than they paid out, they’d be forced to shut up shop.

Some in the crypto community might be applying that same saying to the bastions of traditional finance this week as Wall Street appears to be putting another move on cryptocurrencies in which the ultimate winner seems set to be itself.

Fidelity, one of the world’s biggest asset managers, is reportedly preparing to file an application to establish a spot Bitcoin exchange-traded fund. That would be a big bet on crypto — or at least on the coin that started it all. Almost by definition, it would also be a bet against the hostility to crypto shown by the U.S. Securities and Exchange Commission since the collapse of the FTX exchange last year.

The regulator’s apparent distaste for crypto has made casualties of many companies in the sector that have bet against it in recent times. Binance, Coinbase, Kraken, Genesis and Gemini have all been on the receiving end of enforcement action, and the commission has set its sights on cryptocurrencies.

Traditional finance firms have also bet against the SEC and lost, although only in terms of commercial opportunities that have gone untapped rather than actual penalties, losses and business closures. As we note in this week’s edition of The Current Forkast, Fidelity’s application for a spot Bitcoin ETF isn’t the company’s first. Indeed, the SEC has turned down every application for such a fund to date.

But traditional finance sector players such as Fidelity and BlackRock, which lodged a spot Bitcoin ETF application a fortnight ago, are now showing increased confidence about their prospects of gaining the regulator’s favor.

Perhaps it’s because they’re buoyed by judicial skepticism about the SEC’s reasoning in denying a spot Bitcoin ETF license to crypto asset manager Grayscale. Perhaps it’s also because they sense the pendulum might have swung too far against crypto and that the regulator may be minded to offer the industry a concession in the form of a vanilla financial product.

Overall, the house needs to win to keep the tables open. Yet the original question posed by crypto was: Who runs the house? Given that the SEC appears unilaterally to have made up its mind, it feels like high time others started asking that question once again.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Bull run

Logo of Fidelity layered over physical Bitcoin models.
Fidelity joins a list of financial institutions that in June submitted or updated their applications to issue spot Bitcoin ETFs, including BlackRock, WisdomTree, Invesco, Valkyrie and Bitwise. Image: Fidelity Investments/Canva

Cryptocurrencies are receiving a significant push as Fidelity Investments is reportedly nearing the filing of its own spot Bitcoin exchange-traded fund (ETF), the Block reported Tuesday, citing people familiar with the matter.

  • The move would not be Fidelity’s first attempt to file for a Bitcoin-backed ETF. In March 2021, the Wall Street giant filed for a spot Bitcoin ETF named the Wise Origin Bitcoin Trust, which was rejected by the U.S. Securities and Exchange Commission in January 2022. But it launched the Fidelity Advantage Bitcoin ETF in Canada in December 2021, which has risen 75% since the beginning of this year.
  • According to the Block, Fidelity’s application will join the list of financial institutions that have recently submitted or updated their applications to issue spot Bitcoin ETFs, including BlackRock, WisdomTree, Invesco, Valkyrie and Bitwise.
  • A spot Bitcoin ETF is a publicly traded investment vehicle tracking Bitcoin price, which allows investors to have Bitcoin exposure without directly handling the underlying cryptocurrency.
  • “Bitcoin ETF applications have supported investors’ sentiment as institutional and retail investors could show increasing interest in the market through such investment vehicles,” said Denys Peleshok, head of Asia at Belize-based financial brokerage CPT Markets, in email comments.
  • “If the SEC approves new applications, the market could record a surge in demand and in the number of buyers,” said Peleshok. “Due to the SEC’s legal stance over cryptocurrencies, the market could further concentrate on Bitcoin and Ethereum, the two largest assets in the market.”
  • Since BlackRock filed for its Bitcoin ETF on June 15, Bitcoin is up by more than 22%, peaking at US$31,389 on June 23, the highest since June 2022. Bitcoin traded at US$30,433, at press time, according to data from CoinMarketCap.

Forkast.Insights | What does it mean?

The potential foray of Fidelity, globally recognized as the third largest asset manager, into the ETF domain hardly raises eyebrows among those tuned in to the vibrant buzz of Twitter’s rumor universe. 

In the wake of the ETF application of the world’s largest asset manager, BlackRock, industry watchers projected that Fidelity, the Bostonian investment giant with US$4.2 trillion in assets under management, would be the subsequent contender to lodge and apply for a spot Bitcoin ETF. This topic also fuelled speculation that Fidelity might put in a bid for Grayscale, the digital asset manager responsible for the US$13.5 billion Grayscale Bitcoin Trust, the world’s biggest Bitcoin fund. So far, there has been no substantial evidence for the buyout. 

Fidelity has taken a proactive stance in embracing Bitcoin and other digital assets, eclipsing many of its traditional finance contemporaries. The firm claims that its research on the asset class dates back to 2014. 

In 2018, the firm launched an institutional trading platform for Bitcoin and Ethereum. A year later, in 2019, it expanded its venture into the Bitcoin mining business through Bitcoin technology firm Blockstream’s institutional mining service. Last year, it even joined the lengthy list of firms whose Bitcoin ETF applications got rejected by the SEC. And last week, EDX Markets, a non-custodial crypto exchange backed by Fidelity and other Wall Street titans, went live. 

In addition, Fidelity has shown an assertive drive in obtaining indirect exposure to Bitcoin via Microstrategy, the preeminent corporate Bitcoin holder globally. Fidelity has secured its position as Microstrategy’s third largest shareholder, possessing 6.7% of the stock, valued at over US$225 million. BlackRock follows as the fourth largest owner with 5.58%, approximating around US$185 million. 

Despite the entrance of these behemoth asset managers into the U.S. ETF race, the waiting list is long. ARK Invest Chief Executive Officer Cathy Wood claims that her firm is in position to launch the first spot-Bitcoin ETF in the world’s largest economy. 

2. Liquid dreams

Forkast 500 NFT Azuki
The indexes are proxy measures of the performance of the global NFT market. They are managed by CryptoSlam, a sister company of Forkast.News under the Forkast.Labs umbrella.

The NFT markets saw another week of decline, and again, Ethereum’s NFT ecosystem is dragging the broader market down. The Forkast 500 NFT Index is down 1.32%, as Ethereum’s decline of 1.51% stands in stark contrast to Solana, Polygon, and Cardano’s gains in value of 1.7%, 1.23% and 5.75%, respectively.

  • Ethereum sales volume rose 318% on Thursday following Azuki’s Elementals mint, which brought in US$38 million to the Azuki team in just 15 minutes.
  • Azuki’s floor price decreased 45% to 9 Ether following the Elementals mint, and the average sales price declined to US$23,000, down from US$39,000 the previous seven days.
  • Bored Ape Yacht Club’s average sales price is up in the past seven days to US$79,214. However large BAYC holders like Machi Big Brother and Franklin have combined to sell over 60 Bored Apes, applying downward pressure on the collection.
  • Solana’s 98,917 transactions on June 25 were its single highest daily total of NFT transactions in over eight months. September 2022 was the last time the blockchain had this level of activity, when the Y00ts were still surging on Solana.
  • Seven-day sales volume was up across several blockchains with Ethereum up 105%, Bitcoin 22%, Solana 24%, and Polygon 10%. Mythos Chain, BNB, and Flow were down 18%, 20% and 23%, respectively.
  • DeGods is now the third most expensive PFP based on floor price following Azuki’s falling prices. Azuki’s cheapest NFTs are selling for as low as 8.5 ETH, while DeGods is nearly 1 ETH higher at 9.5 ETH. 

Forkast.Insights | What does it mean?

This year’s biggest new NFT mint took place on Tuesday, as one of the top NFT projects, Azuki, delivered a new collection called Elementals. While some were hopeful the new collection would breathe life into the NFT markets, it instead drained liquidity from traders who sold assets across projects to afford the hefty 2 ETH mint price. The impact was visible on the Forkast 500 NFT Index even in the midst of Ethereum NFTs having its single highest day of sales volume this year with US$58 million.

Azuki’s Elementals did provide some lucky traders with rare Elementals NFTs that were flipped for over 30 ETH, but most secondary sales are taking place well below the collection’s 2 ETH mint price. Instead of Azuki’s Elementals helping the broader NFT ecosystem, it instead sucked liquidity from holders, and almost across the board, brought other collections’ sales prices down with it. 

What went wrong with Azuki’s mint is a familiar story, and shows that the NFT space may not be as mature as some would like to believe. Starting from the initial sale that left many Azuki and Beanz holders stuck on a loading page, and ultimately unable to mint, to the massively underwhelming art reveal that almost looks like duplicates of the main Azuki collection, NFT projects talk about innovation, yet time after time, fail to deliver it.

For all the talk of innovation, we have witnessed few examples of it, and other than functioning as ‘meme coins’, traders shouldn’t expect another NFT boom until we see actual innovation. 

If the Azuki team can turn around the current negative sentiment in their project and help foster the higher floor prices that their holders have come to expect, we may then see sales with profits that roll into existing collections floors. We’ll be watching.

3. Singapore calling

Singapore calling
MAS’ move comes as Singapore seeks to utilize the power of blockchains in its financial system, while minimizing risks of crypto assets. Image: Fidelity Investments/Canva

The Monetary Authority of Singapore (MAS), the city state’s central bank, has proposed a framework to design open and interoperable networks for digital assets, as the country seeks to harness the power of asset tokenization to improve its traditional financial services.

  • “The real value in the digital asset ecosystem” lies in the tokenization of real-world and financial assets through distributed ledger technologies and smart contracts,  which could “enhance the efficiency, accessibility, and affordability of financial services,” MAS wrote in its report.
  • “Unless digital asset networks are interoperable, both with each other and with traditional financial market infrastructures, fragmentation would reduce the network benefits and can create frictions such as inaccessibility, increased liquidity requirements due to separation of liquidity pools, and pricing arbitrage,” noted MAS.
  • MAS’ proposal – jointly developed with the Bank for International Settlements and other financial institutions – is part of Singapore’s Project Guardian initiatives announced in May 2022 to explore the adoption of asset tokenization and decentralized finance in the city state’s financial industry.
  • MAS also announced an expansion of Project Guardian to test the potential of asset tokenization across more financial asset classes, enlisting 11 financial institutions — including banking giants Citi, HSBC, DBS and Standard Chartered — to form the Project Guardian Industry Group to lead industry pilots in asset and wealth management, foreign exchange and fixed income. 
  • Japan Financial Services Agency, the first overseas financial regulator to join Project Guardian, will work with MAS on digital asset innovation while safeguarding against risks to financial stability and integrity.
  • MAS’ move comes as Singapore seeks to utilize the power of blockchains in its financial system, while minimizing risks of crypto assets. Last Thursday, The Asia-Pacific branch of technology firm Ripple Labs said it would start offering crypto-enabled digital payment services in Singapore after receiving in-principle approval from the MAS.
  • Also on Thursday, MAS released a whitepaper – jointly developed by the International Monetary Fund, Amazon, DBS Bank, and multiple other industry players.– for “purpose-bound” money, detailing a technical overview of digital currencies designed for specific purposes.

Forkast.Insights | What does it mean?

The Monetary Authority of Singapore’s announcement of a framework for interoperable digital asset networks stands out as an example of Singapore doing what it does best: high-tech, innovative efficiency — shepherded, of course, by the state.

The fact that the country’s de facto central bank is developing its framework jointly with the Bank for International Settlements and the International Organization of Securities Commissions simply emphasizes the establishment credentials of the initiative.

Coming less than a month after Hong Kong unveiled its virtual asset licensing framework — a cornerstone of city authorities’ plan to welcome crypto back after imposing tough restrictions on it — Singapore’s framework may have the feel of a riposte to Hong Kong’s recent punt on digital assets, even though it has long been in the works. But to view it in such a way would be mistaken.

On the contrary, Hong Kong’s rollout of digital asset licensing rules might be interpreted by cynics as a roll of the dice by the rulers of a city suffering hard times. After all, Hong Kong’s star has waned in recent years following the authorities’ crushing of its once-celebrated first-world freedoms and their handling of the Covid pandemic, both of which have prompted an exodus of talent and a collapse of foreign business confidence.

Hong Kong’s attitude to crypto has see-sawed over the years, as has Singapore’s, to a lesser extent. But overall, the Southeast Asian nation has been honing its approach to digital assets fairly steadily and for a long time, and its latest plan to develop the industry marks merely one more milestone along that road.

The MAS’s initiative has less of an air of opportunism about it than Hong Kong’s recent embrace of digital assets. In fact, the authority’s plan is so measured, technocratic, centralizing and heavy on the involvement of TradFi heavyweights that it feels more like fintech than frontier finance of the sort imagined by crypto and digital asset purists.

As a development spawned by the disruptive phenomenon of digital assets, Project Guardian, as the initiative is named — and as its name suggests —  appears to represent the very opposite of disruption. It will likely be seamless, safe and secure — and not a little dull. Right on brand for Singapore. What’s more interesting, however, is whether it will join previous initiatives implemented by the city-state as another of its successful exports.

Wall Street-backed crypto exchange a sign of lingering interest despite SEC’s crackdown

In this issue

  1. EDX Markets: Interest despite crypto crackdown
  2. Forkast 500 NFT Index: Cautious NFT traders
  3. Alibaba: New leader eyes Web3

From the Editor’s Desk

Dear Reader,

It’s been some time since established Wall Street heavyweights made headlines by wading into the cryptocurrency space, so news of this week’s launch of the EDX Markets crypto exchange is refreshing, given the gloomy tone of developments in the industry — particularly in the United States — in recent months.

The fact that said heavyweights — whose ranks include Charles Schwab, Citadel Securities, Fidelity Digital Assets and Sequoia Capital, as well as BlackRock, which last week filed to potentially launch America’s first publicly traded spot Bitcoin exchange-traded fund — are showing renewed interest in the sector following a barrage of enforcement action by the Securities and Exchange Commission may come as a surprise to some. Yet there’s almost a sense of déjà vu about the way this apparent revival of TradFi’s crypto mojo returns us to a question that has long preoccupied many industry observers: Is this the moment that crypto goes mainstream?

Given the severity of the actions taken by the SEC and the resulting turmoil in the sector, posing such a question may seem perverse, but every industry in history has undergone unintended and disruptive change — a process Austrian political economist Joseph Schumpeter characterized as “creative destruction.” 

When it comes to creative destruction, we might turn to an expression coined by another Austrian, philosopher Friedrich Nietzsche: “That which does not kill us makes us stronger.” For our purposes, let “us” refer to the crypto industry. And from this perspective, the SEC’s crackdown on crypto and the consequences to which it has given rise may in fact be said to have aided the sector’s longer-term development, despite the obvious short-term setbacks.

Schumpeter’s theory of creative destruction has been borne out time after time, so ample reason exists to have faith in further progress even amid present-moment difficulties. It’s a faith that we at Forkast are fortunate to possess and proud to nurture in our capacity as fellow travelers on crypto’s fascinating journey.

And as a mark of that faith, we’re pleased this week to launch a new section in The Current Forkast, featuring insights gleaned from our suite of digital asset indexes, which measure the market performance of non-currency digital asset trading on various blockchains. Check it out and benefit from the information these unique tools provide as a critical bellwether of market sentiment and broader market dynamics.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Lingering interest

EDX Markets Bitcoin
Backed by Wall Street, EDX Markets crypto exchange launches, offering Bitcoin, Ethereum services amid SEC scrutiny. Image: EDXM/Canva

EDX Markets, a new crypto exchange backed by major Wall Street players such as Fidelity Investments, Citadel Securities and Charles Schwab, will offer Bitcoin, Bitcoin Cash, Ethereum and Litecoin trading services. The launch, which echoes BlackRock’s Bitcoin exchange-traded fund (ETF) filing last week, reflects the institutional interest in cryptocurrencies despite SEC’s crackdown on the industry.

  • Bitcoin, Bitcoin Cash, Ethereum and Litecoin are not named securities by the U.S. Securities and Exchange Commission. 
  • New Jersey-based EDX has also completed a new funding round from investors, including options exchange operator Miami International Holdings and affiliates of proprietary trading firms DV Trading, GTS, GSR and Hudson River Trading, the exchange said in a press release Tuesday.
  • Unlike other centralized crypto trading platforms, EDX said it adopts “non-custodial model designed to mitigate conflicts of interest,” which means the exchange does not directly handle customers’ digital assets. Instead, it operates similarly to traditional stock markets where brokerage firms book orders from investors, as reported by The Wall Street Journal Tuesday.
  • EDX also plans to introduce a clearinghouse later this year to facilitate the transactions and exchange of payments, but will still refrain from directly holding investors’ assets.
  • The risks intertwined with custodial models became evident last year with the collapse of the Bahamas-based exchange FTX. The U.S. SEC also leveled allegations against Binance, the largest cryptocurrency exchange in the world, accusing it of mixing customer assets.

Forkast.Insights | What does it mean?

In a move that has sent shockwaves through the cryptocurrency world, the recent launch of Fidelity and Schwab-backed EDX Markets has raised concerns about increased regulatory pressures from the U.S. SEC and the perceived encroachment of traditional finance into the crypto space. This development, coming hot on the heels of BlackRock’s application for a Bitcoin spot ETF, signals a shift in the dynamic between the fledgling crypto industry and the established financial powerhouses.

BlackRock, as the world’s largest asset manager, is a formidable player. With an impressive track record of a 575 to 1 success rate with the SEC for ETF filings, it’s a force that’s hard to ignore. Its unprecedented move into the Bitcoin ETF space — a domain where the SEC has so far shown relentless rejection — may point to a seismic shift in crypto markets, potentially tipping the scales in favor of traditional finance, a scenario that’s not sitting well with many in the Web3 industry.

Such concerns are compounded by the recent scrutiny faced by notable entities in the crypto banking sector — Silvergate Bank, Silicon Valley Bank and Signature Bank. These events have been labeled as “Operation Chokepoint 2.0” by critics, a nod to the perception that these enforcement actions are part of a larger regulatory strategy to unbank the crypto industry.

Recent punitive measures against major U.S.-based crypto exchanges like Binance and Coinbase arguably lend credence to this narrative. The vacuum left in the wake of these actions opens opportunities for traditional financial institutions to carve out a larger piece of the lucrative crypto pie in the world’s biggest economy.

However, this trend is not confined to the U.S. shores. The interest of TradFi in digital assets is gaining momentum globally. Deutsche Bank’s application to operate as a crypto custodian in Germany and Hong Kong’s recent overtures to its major lenders to embrace the crypto industry are cases in point.

2. NFT markets smile

Forkast 500 NFT index showing a smile.
The indexes are proxy measures of the performance of the global NFT market. They are managed by CryptoSlam, a sister company of Forkast.News under the Forkast.Labs umbrella.

The Forkast 500 NFT Index declined 1.24% this week, but following double-digit losses just one week ago, the current decline can be interpreted as positive.

This week has brought plenty of bullish news, and it’s beginning to counteract the recent FUD (fear, uncertainty and doubt) across the crypto industry. But traders remain cautious with their funds, spending their money on established projects instead of new mints.

  • The Ethereum NFT Composite lost 4.31% from a lower index impacting the average sale price in some of the top NFT projects.
  • The average sales price for Bored Ape Yacht Club (BAYC) in May dipped to a low of US$80,000, unseen since July 2021, with a slight improvement this month, averaging at US$84,000.
  • BAYC spin-off Mutant Ape Yacht Club’s average sales price this week fell to US$15,000, its second lowest level since the collection’s inception in August 2021.
  • Doodles’ average sales price stood just under US$4,000 over the past seven days, nearly even with last week but down from the beginning of June when it stood at US$4,300.
  • Moonbirds’ average sales price decreased 17% from US$3,968 to US$3,364.
  • Ethereum saw a 9% decrease in total U.S. dollar sales volume, as Polygon fell 20%, while the Solana blockchain’s total sales volume increased by 4.99%. The Solana NFT Composite strengthened 2.35%, also aided by SOL regaining some of its value following the scare of the SEC labeling it as a security. 

Forkast.Insights | What does it mean?

While the index represents the value of the non-fungible tokens market, it also reflects trader sentiment. If the chart looks like it’s trying to smile, well, that’s how traders feel right now. However, only the bravest of builders would dare release a new NFT collection in this current market.

Developers often say building happens during the bear market, and that was on full display this week with a technical innovation that arrived on Ethereum in the form of Ethscriptions (Ethereum’s version of Bitcoin’s inscriptions). Providing a cheaper on-chain storage solution by using transactions’ call data, NFT traders can now store images on-chain for under US$1 as opposed to the hefty fees that NFT contract storage requires. Time will tell if the new protocol will catch on and lead to further innovation, but so far, over 150,000 ‘ethscriptions’ have been created, showing that there may be legs to this new blockchain collectible.

Yuga Labs, the firm behind top NFT project BAYC, revealed its HV-MTL forge, a mobile gaming experience in-line with their previous Dookey Dash. The HV-MTL collection saw a quick pump in sales this week, with over US$1.1 million in secondary action. This may be the start of an uptick in Yuga Labs’ and other projects’ game offerings, as many expect an explosion of p2e gaming in an attempt to win over the masses. 

Speaking of the masses, Fortnite’s 242 million-strong user base was exposed to NFTs on Tuesday thanks to the game’s new integration and mini-event with Nike’s dotSwoosh. Playing just 10 minutes in Fortnite’s new Airphoria event will unlock an achievement and NFT on the dotSwoosh platform, providing its holder with access to a future Nike dotSwoosh NFT shoe drop. Players can also purchase a new skin pack using v-bucks to unlock a bonus NFT on the dotSwoosh platform. Nike will soon enable their secondary marketplace for their digital shoes, and we’re expecting to see some impact on the Polygon NFT Composite.

These types of innovations are sometimes under-appreciated in the bear market, but in the future we will likely look back at this time as a pivotal moment for NFTs, when mass adoption was quietly happening right under our nose. 

3. A friendly face

Alibaba Web3 Joseph Tsai
Web3 investor Joseph Tsai to chair Alibaba, signaling potential shift. Image: Alibaba/Canva

China’s e-commerce giant Alibaba Group Holding Limited’s incoming chairman Joseph Tsai is a vocal proponent of Web3 technologies and has multiple investments in the crypto space. In a leadership shuffle announced Tuesday, Tsai, who is currently Alibaba’s executive vice chairman, will succeed Daniel Zhang as chairman.

  • Taobao and Tmall chairman Eddie Yongming Wu will take over from Zhang as chief executive officer, according to an Alibaba press release. The appointments will take effect on Sept. 10.
  • Tsai was one of Alibaba’s co-founders in 1999. He holds citizenships in Taiwan and Canada, and is a permanent resident of Hong Kong.
  • The crypto industry might be impacted by the appointment of Tsai, who tweeted “I like crypto” in December 2021.
  • Blue Pool Capital, a Hong Kong-based investment firm that functions as Tsai’s family office, has invested in numerous Web 3.0 companies, including Polygon Technology and NFT firm Artifact Labs, according to business information platform Crunchbase. Blue Pool was also one of several Hong Kong backers of the now-collapsed crypto exchange FTX, according to SCMP.
  • Tsai is also the governor of the Brooklyn Nets of the National Basketball Association that announced a partnership with blockchain-based fan engagement platform in October 2021, and introduced Netaverse — a virtual reality broadcast service of basketball games — in January 2022. 

Forkast.Insights | What does it mean?

The appointment of Joseph Tsai as Alibaba’s new chairman may be seen in some quarters as a sign that China’s biggest e-commerce company, which also operates the country’s largest cloud computing and digital payment platforms, is fully embracing Web3. After all, Tsai has long burnished his credentials as a Web3 booster, enhancing a reputation backed up with cash that he has invested in the industry, including in crypto.

Some of the more excitable elements in the cryptocurrency community may even regard Tsai’s appointment as a sign that China Inc. — and, by implication, the ruling regime in Beijing — may be warming up to crypto, following a lengthy period of hostility to the phenomenon that has seen it banned outright for almost two years.

That notion seems fanciful, to say the least, given the vice-like grip the Communist Party exercises over China’s financial system, in which any alternatives to its own arrangements and prerogatives are seen as threats that must be crushed without hesitation.

But leave aside crypto, specifically, and Tsai’s new role may be seen as an indication of where corporate China — and, again, the regime — is placing its bets.

China’s blanket rejection of cryptocurrency does not extend to other aspects of Web3 development. Indeed, Beijing has shown itself to be an enthusiastic proponent of blockchain technology and other elements of the Web3 universe — so long as they serve the fulfillment of its own development goals.

Alibaba didn’t attain its stellar success without making smart bets. Nor did it flourish so spectacularly without a nod and a wink from Communist Party bosses — a crucial element of success for any business that aims to thrive in China.

From this perspective, Tsai’s elevation to a top job at Alibaba (of which, incidentally, he is a founder) indeed suggests that the company is betting on sustained and increasing support for Web3 from Beijing — although that support is unlikely to extend to crypto. The outcome of this — to borrow a phrase — appears inevitably to be “Web3 with Chinese characteristics.”

Crypto in the time of cockroaches

This first-person account of a cryptocurrency hack was verified by Forkast. The writer requested not to be identified due to repeated phishing attacks.

First, let me tell you about the cockroaches.

The worst holiday I ever had started in Thailand, Phuket Island to be exact, more than two decades ago. I’d rented a motorbike, wasn’t paying attention, skidded on a patch of loose gravel — broke a collarbone and gashed up most of my left arm.

A doctor on the island dressed the scrapes and cuts, put me in a sling, but I didn’t need him to tell me the next week of what was a scuba diving holiday wouldn’t involve any time underwater. Still, I was traveling alone and had rented a bungalow on a beach at a nearby island for the next leg and decided I’d go there anyway and rest up.

The bungalow was basic, electricity fed from a garden generator, which was temperamental, said the lady at the reception hut, assuring me when the power went off, it would (eventually) come back on.

Sure enough, that night the power went out while I was reading in the room, so I dug out a dive flashlight. 

The Phuket doctor had told me to change the dressing on the gashed arm and also give the cuts time to breathe, so on the second night I took off the dressing, washed the gashes, put the sling back on and went to sleep planning to dress the injury again in the morning.

I woke up in the dark and realized something was moving and rustling under the bed sheet on my left side. I reached for the bedside light, but the power was out. I groped for the flashlight on the side table, turned it on, peeled back the bedsheet and saw a swarm of cockroaches feasting on my scraped and bloodied arm.

I reacted like I assume most people would by shouting something unprintable, jumping up and swiping and swatting at the arm. In the flashlight, roaches ran across the bed and careened across the floor. 

I spent the rest of the night in a chair by the door, dog-tired but sweeping the floor with the light every now and then to pick out roaches zipping across the room — whacking whatever came near with the sheet I pulled from the bed. The power never did come back, but when the sun eventually came up, I checked out.

In May this year — just two days before the worst birthday I ever had — two Bitcoin and a little more than two Ether I had spent about four years accumulating was stolen from a cold wallet through a phishing attack. 

Several more phishing emails and phone calls followed over the next several days. Sitting at home and shell shocked I found myself remembering that night in Thailand. Then the penny dropped: Hackers are like cockroaches. Once you are targeted, they stay in the dark, but come after you in swarms.  

I wrote this account to try and put down observations of how these hackers came at me and how I reacted (badly) to hopefully provide some red flag reminders for others. I claim no particular expertise in blockchain or cryptocurrency, but we all know the behavior of cockroaches.

After the collapse of the FTX crypto exchange last November I did what a lot of investors did and moved tokens into a cold wallet, in my case a Trezor. 

I also advised my daughter to move her Bitcoin being saved for university fees to my Trezor, thinking it would be safer.

After that, I didn’t really do anything with it — except to occasionally think how weird it was to have thousands of dollars sitting in a desk drawer. (Is this what financial freedom looks like? Should I put it in a bank safe deposit box?) 

But in December last year, I pulled the Trezor out to explore other functions and in the process, the crypto disappeared. 

That was freaky, but I messaged support at Satoshi Labs, the Trezor maker, with screenshots and they emailed back after a few days to walk me through what to do. This is the email from Satoshi Labs.

Screenshot of an email exchange between Trezor creator SatoshiLabs and scam victim.
Screenshot of SatoshiLabs’ customer service email. Image: provided

Apparently I had moved the tokens into a hidden wallet. After a reset, the missing crypto funds appeared again. I didn’t take this further, though being told by Trezor support they had “never seen wallet window” like in the screenshot I sent was troubling. 

I didn’t touch the Trezor for months after that, though I still had the occasional niggles about the crypto laying around as Bitcoin’s price jumped from the start of the year. 

Here is the phishing mail that arrived in my inbox in mid-May. It was sent to the email I used for Trezor communications, had the Trezor logo at the top, even seemed to mimic some of the lowercase lettering from Satoshi Labs. And while it has a new ticket ID, it referenced the “missing funds” which was the topic of my mail to Trezor in December.

Scam email screenshot
Screenshot of the phishing email received by the victim. Image: provided

The email arrived in the evening. I was tired, distracted, doing four things at once online. I looked at it, saw the reference to the missing funds, remembered I hadn’t opened the Trezor since the Ethereum hard fork, and did the thing we know to never, never do, clicked the link and it opened what looked like the Trezor site, I entered the seed phrase. I then watched in disbelief as the crypto was pumped out.

Beside loss of assets, theft is an act of psychological violence that leaves you in deep shock and in that state you become disoriented and in denial about what has happened. In other words, you are desperate and vulnerable, and a prime target for a second hack. 

(Binance has a link on that which I wish I’d seen at the time: How Not to Fall for a Scam Twice)

You also feel enormously stupid. Yes, “even monkeys fall from trees” but I imagine that the monkeys feel pretty stupid, too. 

I immediately messaged Trezor support in a panic, but the response was to expect a response in three days, not that they could have done anything. I went on Telegram — for reasons I still don’t understand other than desperation — seeking help and advice.  

One Telegram user was sympathetic and offered to help, wanted the transfer IDs for the hack and then asked for the seed phrase for another wallet I had, proposing to get back the stolen crypto and transfer it there.  

Of course, it was another cockroach (or maybe the same one) but I was in the state of wanting to believe there was help from the crypto community and that there was a way to get the stolen crypto back. As a result, I almost got taken a second time. 

(Telegram seems to host whole nests of these roaches. I messaged Telegram at to flag this hacker and never heard back from them. Trezor later confirmed they do not have any support groups on Telegram. Neither does Binance.)

I continued looking online for other help and found a cybersecurity company that claimed to have teams of ethical hackers that can track and expose online thieves to law enforcement and then get the crypto back. 

Problem with those services is they want thousands of dollars upfront and, of course, there is no guarantee of any success. (See above on being in shock, vulnerable and getting scammed twice.) 

Using the transaction IDs for the hack, I could see the cockroach’s wallet and that it had interacted with a Binance wallet. I got online with Binance support, gave them the transaction IDs to ask if they could freeze the wallet. They checked and were very helpful, but it wasn’t a Binance wallet and they could do nothing. 

However, I did follow Binance support’s advice not to pay thousands of dollars up front to companies offering to get the crypto back. The only real option is file a report to law enforcement — search Google, “Report a Cyber Crime + (Your country)” — and hope.

More phishing attacks followed. I received an automated voicemail telling me I needed to call the Singapore immigration department immediately at a U.S. area code number because my details were inaccurate. I don’t live in either country.  

In early June, I noticed a story online detailing the huge extent of the cryptocurrency hacking and theft that took place in May alone.

Beside the major hacks of exchanges that result in millions of dollars of losses spread across thousands of individuals, the story says hackers are shifting their attention to ordinary users. 

So how many more hundreds or thousands of individuals are being targeted and ripped off every day in other scams? Are the roaches at the gates? 

Along with the financial devastation, one of the other damaging aspects of being hacked is blaming it on blockchain and cryptocurrencies per se. Confusing the technology, and its potential, with the thieves who exploit it.

Because of the transparency of transactions, I can track where the crypto stolen from my Trezor is, but it’s problematic to keep looking because it’s difficult to not see a cockroach with a grin staring back.

Phishing attacks on Trezor users are nothing new as the company’s customer emails were hacked in April last year and Trezor put out warnings about it. 

Because of widespread and ever more sophisticated phishing attacks, some crypto platforms have introduced specific codes for customers – usually a set of numbers chosen by the customer – so any email that arrives claiming to be from the company but lacks the code can be immediately identified as fake.    

I think it would be a good idea for Satoshi Labs and other exchanges and platforms to adopt that policy to better protect customers. However, the bottom line is I did the thing Satoshi Labs warns over and over again to never do: Punch a seed phrase into a computer. 

I’ve rebooted the Trezor to start rebuilding again, but I’m also looking at other storage options. We cannot let the roaches win.

SEC lawsuit sees Binance.US wobble, trading platforms delist cryptos

In this issue

  1. U.S. crypto crackdown: Collateral damage
  2. Ripple: Mixed messages
  3. Hong Kong: Courting Coinbase

From the Editor’s Desk

Dear Reader,

Last week, I was in Hong Kong as Forkast Labs announced our partnership with The Sandbox to index the metaverse. We held the event in the trendy Sheung Wan district and we had double the capacity than we had expected. The Web3 industry crowd in the city of 7 million was excited and the room was buzzing. Much was discussed, plans were laid, and opportunities were seeded. That’s the mood halfway across the world from the chill that is only deepening in the U.S.

It’s often said that one person’s loss is another person’s gain. We are seeing that play out as U.S.’s regulatory assault on the cryptocurrency industry intensifies.

The fact that USDC stablecoin issuer Circle was granted a license to operate as a major payment service provider by Singapore’s central bank in the same week as the Securities and Exchange Commission was busy bringing the roof down on crypto in the U.S. could not have offered a clearer bellwether of gainers and losers.

If U.S. regulators’ hostility to crypto isn’t already benefiting other jurisdictions’ efforts to get a slice of the action as the industry develops, just give it time.

Not even a lot of time: Just this past weekend, a Hong Kong legislator invited SEC-targeted U.S. crypto exchange Coinbase — and indeed “all global virtual asset trading operators” — to set up shop in the city. The lawmaker’s callout came just two weeks after Hong Kong implemented a much-anticipated regulatory framework for virtual asset trading platform operators — a.k.a. crypto exchanges — that’s the centerpiece of an initiative aimed at making the city an international crypto hub.

Movement is afoot.

Dubai has been busily burnishing its credentials as a crypto hub for the past year, and continues to attract crypto exchanges thanks to a favorable regulatory environment and rapid licensing approvals.

On a grander scale, the European Commission last month approved the EU’s Markets in Crypto-Assets regulation, a comprehensive regulatory framework for the sector that will bring it into the mainstream from next year in a way that Americans might find difficult to imagine amid the cack-handedness of Washington’s punitive approach.

And let’s not forget the United Kingdom, whose prime minister, Rishi Sunak, has long been an advocate of digital financial innovation. It’s likely that the regulatory melee in the U.S. will only add to the UK’s attractiveness as a destination for crypto companies seeking regulatory refuge but which may prefer the steady hand of the Bank of England to that of less storied authorities in jurisdictions such as the Emirates.

As U.S. regulators persist with their regressive stance, it feels appropriate to quote an American pioneer from a field at least as innovative as crypto decades ago — astronaut Buzz Aldrin, who said: “For every winner, there’s a loser. And that person didn’t really need to lose. They just didn’t understand the game plan.”

The game is on. 

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Crypto-quake continues

SEC Binance
Binance.US could be an early casualty of the SEC’s crypto crackdown as the regulator pursues a lawsuit against it and its liquidity plunges. Image: SEC/Canva

Binance.US, a crypto exchange set up by Binance chief Changpeng “CZ” Zhao to serve U.S. clients, could see its operations “quickly grind to a halt” if a U.S. court rules in favor of a Securities and Exchange Commission (SEC) request to freeze its assets, the company has said in a court filing. Meanwhile, trading platforms eToro and Robinhood have delisted multiple cryptocurrencies named in SEC lawsuits as securities.

  • In the filing, Binance.US urged the federal judge to deny the SEC’s motion last week to freeze the assets of the entities that operate Binance.US after the SEC sued Binance and Zhao on June 5 for alleged violations of securities laws.
  • Binance.US said in the filing: “With a freeze of all corporate assets, banking partners would most likely cease to honor requests to transfer funds for any purpose, including customer redemptions.” The company said one of its banking partners had already informed it that it would halt services to Binance.US starting June 14.
  • On Friday, Binance.US suspended U.S. dollar deposits to “protect customers” amid intensifying regulatory pressure. The exchange’s liquidity plunged nearly 80% in a week as market makers and traders “fled the exchange en masse,” according to a note published by crypto data analysis firm Kaiko on Monday.
  • Investment platform eToro on Monday blocked its U.S. customers from opening new positions in Algorand (ALGO), Decentraland (MANA), Dash (DASH) and Polygon (MATIC), all of which have been named as securities by the SEC.
  • Robinhood announced last week that it would stop supporting Cardano (ADA), Polygon (MATIC), and Solana (SOL) on June 27. After that deadline, all of the three cryptocurrencies still held in Robinhood accounts will be sold at their market value and the proceeds will be credited to holders’ Robinhood accounts.
  • “It’s not surprising that when there is a lack of clarity, contradictory guidance, and a culture of fear instead of collaboration with regulators that some entities will choose to simply start leaving markets entirely,” Cardano founder Charles Hoskinson said in response to Robinhood’s delistings, according to a June 9 tweet by Fox Business journalist Eleanor Terrett.
  • The crackdown by the SEC, which also sued crypto exchange Coinbase last Tuesday for allegedly breaching securities rules, has hit the crypto market hard. The price of Binance’s BNB has fallen more than 9.6% in the past seven days, and Cardano, Polygon and Solana have lost more than 20% over the same period, according to CoinMarketCap.
  • The SEC’s enforcement actions have prompted some reaction among U.S. lawmakers. Representative Warren Davidson introduced a bill named the SEC Stabilization Act on Monday, seeking to restructure the regulator and remove Gary Gensler as its chair. 

Forkast.Insights | What does it mean?

The fallout from the filings against both Binance and Coinbase in the U.S. has hit crypto markets for two reasons. The first and most obvious is that the U.S. arm of the world’s largest crypto exchange by volume — and America’s most popular exchange — will no longer have access to the world’s biggest single crypto market.

The second, and likely more damaging, impact has been the SEC’s move against cryptocurrencies more broadly. For anyone who has followed the SEC’s approach to crypto, it should have come as no surprise. 

When it filed its cases against Bittrex and Kraken earlier this year, the SEC’s argument was that both exchanges were selling unregistered securities. In its most recent filing against Binance, however, the SEC’s case is more focused on the commingling of funds and other potentially fraudulent activity. Yet the Coinbase case appears to mirror those involving Bittrex and Kraken.  

This has meant the focus has shifted from the exchanges themselves to the tokens available on them, raising enough questions for companies such as Robinhood and eToro to stop offering them on their platforms. 

That doesn’t mean an end to crypto in America. Other projects that haven’t been listed as securities offer lessons for others to follow, specifically on how they raised money and from which types of investors. 

Projects that steered clear of U.S. public sales in favor of private sales to accredited investors appear to have been left alone by the SEC. Although those named in the regulator’s legal actions have a fight on their hands, a path for crypto in America is slowly emerging, most notably the use of “simple agreements for future tokens.”

These agreements avoid the thorny issue of whether tokens are securities by selling contracts for cash as opposed to tokens themselves. Although they are available only to accredited investors, they offer a tool for fundraising that’s compliant with current regulation.

2. Say one thing…

Ripple Hinman
Suggestions by former SEC official William Hinman (above) that Ether was not a security have aggravated Ripple’s legal chief. Image: SEC/Ripple

William Hinman, a former director of corporation finance at the U.S. Securities and Exchange Commission (SEC), said in a speech five years ago that Bitcoin and Ether were not securities, according to documents released on Tuesday as part of a lawsuit brought by the regulator against crypto company Ripple.

  • “We do not need to see a need to regulate Ether, as it is currently offered, as a security,” Hinman said in a June 4, 2018, email in which he added that the regulator would hold a call with Ethereum co-founder Vitalik Buterin later that week, “to confirm our understanding of how the Ethereum Foundation operates.”
  • Soon after the documents were released, Ripple Chief Executive Brad Garlinghouse tweeted Tuesday: “For the SEC to sue @chrislarsensf and me personally for allegedly selling unregistered securities when their own Division Head deliberately created confusion about this…well, I don’t have a single polite word to describe this deplorable, politically-motivated overreach.” 
  • The documents were released at a fraught moment for the crypto industry as the SEC presented a motion to freeze the assets of Binance.US as part of a lawsuit against the exchange. The SEC and Binance.US have been ordered to compromise and avoid a complete asset freeze.
  • In a speech, Hinman said that although cryptocurrencies such as Bitcoin and Ether may start off as securities, they could become more akin to commodities once they became “sufficiently decentralized.”
  • Although Hinman has argued that the speech was his personal opinion, it was published on the SEC’s official website and “touted … as guidance,” with former SEC chair Jay Clayton publicly pointing to it, Ripple’s Chief Legal Officer Stuart Alderoty tweeted on Tuesday.
  • The documents relating to the speech were published after an 18-month legal battle to have them released, according to Garlinghouse. XRP investors hope that Hinman’s remarks on Ether will mean that the XRP token would not be treated as a security.
  • Alderoty tweeted that Hinman’s speech “contained made-up analysis with no basis in law … exposed regulatory gaps … and would create … not just confusion, but ‘greater confusion’ in the market.”
  • Alderoty also said the speech should be removed from the SEC’s website, and he demanded an investigation of why the SEC had “touted” the speech, “knowing” the confusion to it would give rise.
  • Despite the initial surge, XRP had fallen 12.6% since the release of the Hinman documents, when it was trading at US$0.47, according to CoinMarketCap.
  • Gabriel Shapiro, a U.S.-based attorney and the general counsel at blockchain firm Delphi Labs, wrote on Twitter Tuesday: “​​Hinman emails are a nothingburger though great for Ether. No idea why Ripple thinks these emails help Ripple’s case.” Shapiro added that the documents were not the bombshell compared to the “huge hype” given to them.

Forkast.Insights | What does it mean?

William Hinman’s dividing line between Ether, Bitcoin and everything else might help Ripple’s defense in its legal battle with the SEC, but it does little to help others understand the commission’s confusing approach to regulating crypto markets more broadly.

Stuart Alderoty, Ripple’s chief legal officer, said on Twitter earlier this week that Hinman’s speech was flagged by his SEC colleagues because it was flawed and would muddy the waters even further on the question of whether cryptocurrencies should be treated like securities. Hinman, according to Alderoty, ignored their warnings. 

Confusion has resulted elsewhere, too. The 19 tokens named in the SEC’s lawsuits against Coinbase and Binance have found themselves on the wrong side of securities law, but others that raised capital in similar ways appear to have avoided such troubles. Why? 

In the U.S. president’s annual economic report earlier this year, the White House stated: “Regardless of the label used, a crypto asset may be, among other things, a security, a commodity, a derivative, or another type of financial product, depending on the facts and circumstances.”

The SEC, thus far, hasn’t shared its working thesis of how it decided the 19 tokens (and Ripple) were lawbreakers but not others, suggesting that it prefers legal action over regulatory clarity. Ripple will try to exploit that muddled view, but the persistent uncertainty will do little to help others. 

3. Open for business

Coinbase logo layered on top of Hong Kong skyline.
Hong Kong’s courtship of crypto companies such as Coinbase forms part of the city’s efforts to position itself as a global crypto hub. Image: Coinbase/Canva

A legislator in Hong Kong has encouraged Coinbase and other international cryptocurrency exchanges to set up operations in the city, following the implementation of its new regulatory framework for retail crypto trading on June 1.

  • Johnny Ng, a member of Hong Kong’s Legislative Council and the Chinese People’s Political Consultative Conference, an advisory body to China’s ruling Communist Party, tweeted Saturday that he welcomed all global virtual asset trading platform operators, citing Coinbase by name, to expand to Hong Kong.
  • Ng, known for his advocacy of Web3, in January said that Hong Kong should consider developing the e-HKD, the city’s planned central bank digital currency, as a stablecoin linked to decentralized finance.
  • Last week, the U.S. SEC sued Binance and Coinbase, two of the world’s biggest crypto exchanges, for allegedly breaching securities rules.
  • As the U.S. regulator targets crypto, it has been suggested that Hong Kong might function as a sandbox in which China can assess the industry. 
  • Bank of China International Holdings Limited, an investment bank wholly owned by state-owned Bank of China, has issued 200 million yuan (US$27.9 million) of digital structured notes on the Ethereum blockchain in Hong Kong, making it the first Chinese lender to issue a tokenized security in the city. Bank of China reportedly started to service crypto firms in Hong Kong in March, according to a Bloomberg report.
  • Hong Kong’s rollout of new rules for virtual asset trading platform operators, otherwise known as crypto exchanges, could set an example for other jurisdictions looking to open up to retail crypto trading, according to Gary Tiu, executive director and head of regulatory affairs at Hong Kong-based crypto exchange OSL.

Forkast.Insights | What does it mean?

Hong Kong lawmaker Johnny Ng, who includes “Web3” and “smart city” as part of his Twitter profile description, has contacted Coinbase about its potential expansion to Hong Kong, he said on Twitter on Wednesday.

Although one might view Ng’s words as political rhetoric, his pro-cryptocurrency stance reflects Hong Kong’s overall regulatory attitude: a risk-based approach toward regulating crypto assets and stablecoins.

Coinbase has eyed opportunities outside the U.S. as it faces legal jeopardy from the SEC. In May, the Nasdaq-listed crypto exchange opened an offshore derivatives exchange in Bermuda to allow institutional clients to invest in Bitcoin and Ether via perpetual futures contracts that can offer leverage up to a factor of five.

Coinbase may have some serious thinking to do if it wants to expand globally, given its heavy reliance on a U.S. revenue stream. In the first quarter of this year, its U.S. earnings accounted for US$686.8 million of total earnings of US$772.5 million, according to its latest financial report.

Binance has a strong presence in Asia, while most of Coinbase’s operations remain in the U.S. That means it would be complex for Coinbase to shift the focus of its operations outside the world’s largest economy, especially if moving to Hong Kong would not necessarily put it out of the reach of U.S. regulators. Given that, it remains to be seen how the SEC’s crackdowns on Binance and Coinbase will play out on an operational level, and what actions two of the world’s biggest crypto exchanges will take to mitigate their legal risks. 

Pudgy Penguins CEO unveils licensing platform, pushes for NFT revenue beyond airdrops

Luca Netz, the chief executive officer of intellectual property firm and non-fungible token (NFT) collection Pudgy Penguins, is set to launch a Web3 licensing marketplace named Overpass as early as late June.

See related article: Japan’s ANA airline launches NFT marketplace, sees future in metaverse projects

Fast facts

  • Netz unveiled his plans for the platform in a recent interview with Web3-focused media firm nft now, claiming NFT licensing will shift the industry from the “Ponzinomics” model and foster sustainable growth by focusing on tangible, real-world revenue.
  • Overpass has been developed as a solution to the complex and often cumbersome licensing procedures currently in place, according to Netz. The platform aims to streamline licensing in the NFT space by leveraging blockchain technology, allowing the process to be completed in “a couple of clicks.”
  • In contrast to creating virtual assets and airdrops, which Netz claims are liabilities, the Overpass model represents a paradigm shift. The platform allows companies to license the IP directly from holders for use in their products and tools, providing holders with a scalable means of deriving monetary gain.
  • “So the only way I can give monetary gain right now is through the floor price going up, which I also can’t control outside of me just executing and showing up every day,” Netz said. “The only other option is to create a real business and share that revenue… through licensing because [holders] own their digital asset.”
  • Pudgy Penguins is an Ethereum-based NFT collection of 8,888 unique digital assets. It is the 19th largest collection in all-time sales, with more than US$257 million traded, according to CryptoSlam data. Netz acquired the company for roughly US$2.5 million in April 2022. 

See related article: New owner gives Pudgy Penguins NFTs happy feet