Plus, what will happen to copycat DeFi projects?
Bitcoin took another step towards mainstream adoption this week, with Fidelity showing it is serious about the digital currency as a long-term investment opportunity. Meanwhile, the SEC took steps of its own to lower the barrier of entry to private markets.
Fed Chairman Jerome Powell gave a highly anticipated speech that detailed the Federal Reserves’ changing view on inflation. Many have viewed Powell’s comments as a further example of an unreliable monetary policy in the U.S. and the growing case for Bitcoin as long-term protection against inflation.
We’ve also got big news on a significant investment in North American Bitcoin mining and the biggest acquisition in crypto so far this year.
On Unchained, the Why Bitcoin Now series continues with Saifedean Ammous discussing why he thinks Bitcoin is the most advanced form of money. Plus, on Unconfirmed, Joe Lubin of ConsenSys talks about the firm’s acquisition of Quorum from JPMorgan.
This Week’s Crypto News…
Forbes reports that Fidelity president and head of consulting Peter Jubber filed paperwork Wednesday for a new Bitcoin dedicated fund with a minimum investment of $100,000, likely aimed at institutional and accredited investors. Called the Wise Origin Bitcoin Index Fund, it does not yet have investors, and it’s unclear what the relationship is between Fidelity Digital Asset and an organization called Wise Origin Funds. However, Fidelity Brokerage Services LLC is to be the fund’s custodian. Fidelity’s intellectual property vice president has filed a trademark application for the name Wise Origin Funds.
Frank Chaparro of The Block wrote that a Bitcoin fund by Fidelity could be the next best thing to a Bitcoin ETF, because although the fund will not be available to retail investors, it could potentially be available to investor advisors to sell to their own clients.
A new policy unveiled Thursday by Federal Reserve Chairman Jerome Powell would lead interest rates, and thus, the costs of borrowing, to stay low for longer. The change would allow inflation to run higher than usual for certain periods to target an average inflation rate of 2% over time. Bitcoiners such as the Winklevoss twins pointed to the change to bolster their contention that the U.S. dollar is an increasingly unreliable store of value, and coming inflation will devalue the dollar further, allowing Bitcoin, with its capped supply to potentially overtake gold.
Bitcoin jumped in value briefly after Powell outlined the Fed’s new tolerance for higher inflation, but so far, there has been an otherwise muted reaction to Powell’s comments. Analysts previously speculated Powell’s speech could help boost Bitcoin and lead to further drops in the power of the dollar, but the long-term effect of the new policy remains to be seen.
The Securities and Exchange Commission revised the definition of accredited investor, which determines who is able to participate in private investments such as token sales. Now, not only are income or net worth acceptable qualifications, but so are certain designations or credentials based on professional knowledge, experience or certifications. For instance, holders of series 7, 65 and 82 licenses, which have to do with private securities sales and investment advising, are now included.
However, because this would not significantly increase the pool of accredited investors, the response to the news was mixed. Athena Blockchain general council Drew Hinkes tweeted that the new policy is “not meaningful at least not yet.” Cardozo School of Law Professor and OpenLaw co-founder Aaron Wright tweeted, however, that the news was “a big step in the right direction,” setting up a framework for technical accreditation in the future.
SEC Commissioner Hester Peirce issued a statement calling for even greater expansion to the definition. She said, quote. “Why shouldn’t mom and pop retail investors be allowed to invest in private offerings? Why should I, as a regulator, decide what other Americans do with their money?”
Crypto derivatives exchange FTX has acquired popular crypto data app Blockfolio in a $150 million attempt to expand its retail footprint. The deal came out of initial discussions between the companies about how they might collaborate and is one of the largest acquisitions in crypto space this year. Blockfolio, which has six million users and receives 150 million impressions a month, will receive a mix of equity, FTX’s native token and cash. It remains unclear how Blockfolio will fit into the FTX ecosystem, although the firms are working on a retail trading feature, and the deal is seen as akin to Binance’s acquisition of Coinmarketcap, in that Coinmarketcap and Blockfolio could bring in a lot of traffic that then funnels down to their respective exchange partners.
Digital Currency Group revealed a new mining subsidiary called Foundry that will invest $100 million in mining Bitcoin and other cryptocurrencies in North America. Foundry has been operating its own mining operations since 2019, plus offering crypto startups mining equipment and financing, and it plans to move into staking. DCG founder and CEO Barry Silbert hopes to increase the U.S.’s share of global Bitcoin production, especially compared to that of China, as there are currently few significant mining operations in North America. However, a number of failed efforts here indicate it could be a hard road ahead. The firm expects DCG’s network, deep experience in crypto and support from federal and local officials who may also not want to cede production of Bitcoin to China, to help it succeed.
The yield farming craze has raised a question: If it’s so easy to fork code and launch a project that promises advantages over the original, and if it’s so easy for users to move from project to project, chasing the highest yield, then what will survive? The Block’s Steven Zheng notes that August saw a number of copycat projects that “piggybacked” off other projects’ code to launch their own tokens along with catchy memes and enticing yield farming schemes. yEarn and YAM are great examples, and in the area of dexes or automated market makers, Mooniswap and Sushiswap are near clones of current heavyweight Uniswap. Mooniswap claims to improve on Uniswap by preventing arbitrageurs from taking all the slippage and instead keeping most of it in the pool to redistribute to liquidity providers. Meanwhile, Sushiswap has a governance token, $SUSHI, part of which will be set aside to fund development, which at Uniswap is funded by VCs.
Arthur Hayes of BitMEX, or now, 100x Group, is always entertaining to read, and his latest missive on his adventures in DeFi, as well as what drives demand and supply in crypto credit, is no exception. He begins, QUOTE, “I lack access to nightclubs and most other forms of revelry; therefore, I decided to become a crypto peasant.” After describing the main players in the crypto ecosystem: miners, speculators, borrowers, lenders, exchanges, etc., he talks about how DeFi has decentralized all of it and then says that he is enjoying yield farming meme tokens. However, he fully expects to lose all his money. QUOTE “In my head I like to believe I can read market sentiment and get out at the top of the bull market. But in reality, like most other traders, I will buy high, hold, hold, hold, and sell well after the top.”