Binance U.S Opens Account Registrations, Vitalik “Confident” about Phase 0 of Ethereum 2.0, and Coinbase Launches a DeFi Fund
Weekly Investor Letter
Sept 12 — Crypto assets decreased 3% this week, bringing the total market cap down to $259 billion. The Crescent Crypto Market Index (CCMIX) was down 3.3% while BTC lost 4.4 % over the same period.
The crypto market saw a small drop after a decent increase last week. The total value of the crypto market has dropped around 12% month-to-date, with Bitcoin dropping 11%. Bitcoin performed in the bottom portion of digital assets as a whole this week. Bitcoin only outperformed the CCDARK index and the CCMIX BSV constituent.
Bitcoin vs. CCMIX vs. CCALT vs. CCDARK vs. CCSMART
Sep 6th — Sep 12th, 2019
Market Index Constituent Performance
Sep 6th — Sep 12th, 2019
- BTC underperformed all other large-cap constituents besides BSV, finding itself down 4.5% on the week. BTC was the best performer last week up more than 10%.
- The CCMIX saw bifurcated gains this week, with 5 out of nine constituents ending the week in the green. BTC was one of the four constituents ending the week in the red and tipped the overall index performance into the negative.
- EOS was the best performer this week with a 12% gain. EOS ended the week as the only constituent with double-digit gains.
- The CCSMART increased by 2.38% in value outperforming CCALT, CCMIX, and CCDARK indices. The CCALT index performed second best with a 0.3% gain.
- EOS and ETH performed in the top 3 this week up 12% and 2% respectively. This comes right after both assets posting small gains last week. Smart-contract platforms, in general, saw the strongest results. However, XLM tilted returns downwards posting a 4.2% loss.
- XLM was the worst performer last week down 2.6% and the second-worst performer this week. This is the third week in the red as XLM dropped 8% two weeks ago.
- BTC dominance dropped to 70.0% of the total crypto market cap compared to 70.8% last week. While a slight drop this week, BTC continues to trend upwards in total market cap dominance.
Binance U.S will start accepting account registrations deposits beginning September 18th. In a blog post by the company, Binance stated that the “first phase” will only support six assets: BTC, ETH, XRP, BCH, LTC, and USDT. In August, Binance U.S announced a list of 30 cryptocurrencies that will be open to trade on launch. However, this recent announcement says otherwise. Binance will allow customers to pick a verification level that determines their withdrawal limit. Unlike Binance, the Binance U.S KYC process requires uploading a valid government ID and a social security number. The next phases of Binance U.S will roll out other assets on its platform. As reported previously, Binance U.S will initially be unavailable for New York State residents.
Why Does This Matter?
Binance, notably, does not include their own BNB cryptocurrency on their shortlist of assets. This possibly suggests regulatory concerns surrounding the BNB token, as well as the other assets taken off the list of 30 cryptocurrencies. This move comes after Crescent Crypto removed Binance as an eligible exchange, after removing access to U.S domiciled investors. All the recent constituents removed from the Crescent Crypto Market Index (ADA, TRX, DASH, NEO, ATOM, ONT, LINK, ZEC) are not on the shortlist of Binance U.S tokens. It remains to be seen if Binance U.S will be considered as an “eligible exchange” when evaluating constituents. There will need to be substantial trading volume, but most importantly more regulatory clarity surrounding Binance U.S.
Vitalik Buterin, poster child and co-creator of Ethereum, stated on the 80,000 hours podcast that he is “very confident” about the technical aspects of phase 0 of Ethereum’s Eth 2.0 scaling project. However, he had notable concerns surrounding the people using proof-of-work in real-world settings. Per Vitalik, “For example, are people just going to be lazy and run all their staking nodes on AWS,” Buterin asked. “Are people going to be lazier and just do all their staking by sending their money to Binance, and Binance is going to stake for everyone? Are people going to stake in ways that are insecure and lead to a bunch of people getting hacked at the same time? And how decentralized is it going to be?” Then again, he went on to say that many of his concerns are already starting to be resolved. As a precaution, he stated, “When, Ethereum 2.0 launches, we’re taking this kind of multi-pronged strategy where we first launch proof-of-stake, then we let it run for a bit, prove itself, then do sharding.”
Why Does This Matter?
As with most Ethereum investors, Vitalik is simply “really excited about turning Ethereum into a system that we can really, fully be proud of.” After serious scaling challenges in recent years and Ethereum never quite fulfilling investor expectations of a decentralized “world computer”, it is refreshing and bullish to hear the technical progress behind Eth 2.0. With that said, Ethereum’s plans are still highly ambitious and as Vitalik has noted many real-life attack vectors are hard to simulate and parameterize for. With the emergence of Defi applications and the millions of dollars staked upon the Ethereum network, Ethereum’s phase 0 transition has extensive implications on the entire cryptocurrency ecosystem. It will be important to track the technical progress of the Eth 2.0 team and to see if they can hit their markers on time.
Coinbase plans to deposit $2 million worth of USDC to cryptocurrency lending protocols Compound and dYdX as a bet on the Decentralized Finance (DeFi) space. This move is part of a larger fund that invests directly in DeFi protocols. As its first investment, Coinbase’s USDC Bootstrap Fund will contribute $1 million to each lending pool. This fund will earn return via the interest paid when counterparties borrow form their USDC. This is unlike Coinbase Ventures traditional equity stake approach. The head of operations at dYdX, Zhouxin Yin, notes that the limiting factor in DeFi lending growth is the attraction of borrowing demand. Coinbase’s USDC will help grow the lending pool, and as a result, lower the interest rate and encourage more users to borrow the stablecoin.
Why Does This Matter?
For Coinbase, the USDC Bootstrap Fund is another step to support the growth of DeFi. This has been a vertical that Coinbase has sought to grow, and the vertical that has seen the most attractive user growth. Coinbase Ventures is already invested in several DeFi products, including Dharma and Compound. As it stands Dai is the most popular asset locked in DeFi protocols and USDC coming in as the distant second, $320,000,00 and $40,000,000 respectively. Zhouxin Yin sees the benefit and need for both: “I think about one of the challenges in DeFi being the facilitation of connecting fiat onramp into DeFi. The fact that you can do so 1 to 1 with USDC is actually very useful for someone coming into DeFi looking to trade and also want to be in and out of fiat quickly. It’s much easier to do so using something like USDC than Dai.” In order for De-Fi to flourish, there needs to be real market demand on the borrowing side — adding liquidity is helpful — but it does not increase demand in a vacuum.