Welcome to the January 13th edition of Digital Asset Friday!
Before jumping in be sure to register for our 2023 Digital Asset Market Outlook set for Tuesday, January 17th at 1 pm ET. We look forward to seeing you there. Register here.
Also, couldn’t agree with you more Robin Vance.
Let’s dive in…
Run of the Numbers Sponsored by Digital Asset Research
*Data Provided By: Digital Asset Research
TOTAL CRYPTO CAP
TOTAL CRYPTO CAP (7-day Change %)
Top 5 Fee Generation (Source: Cryptofees.info – 1/13/2023, 12:00pm CT)
- Gemini and Genesis Sued by SEC Over Crypto ‘Earn’ Program – Bloomberg
- Crypto Lender Genesis Owes Creditors Over $3B: FT – CoinDesk
- FTX Has Recovered ‘Over $5B’ in Assets, Bankruptcy Attorney Says – CoinDesk
- UAE Investor Groups Launch Billion-Dollar Web3 Fund – The Block
- Judge Allows Binance.US Bid to Buy Voyager Assets to Advance – CoinDesk
Week in Review
Markets have rallied along with traditional risk assets this past week. Internally, markets are reacting to Ethereum’s next major upgrade, the Shanghai Hard Fork. Ethereum network developers are targeting March 2023 which has created momentum for ETH and other ERC-20 tokens. One of the major pieces to this is EIP 4895, which will allow validator withdrawals of staked ETH. Popular places where individuals have been staking their ETH are Lido (you will notice it is now the #1 DeFi protocol measured by TVL), Coinbase, and Kraken to name a few. These are the validators that will start to make available to individuals who staked their ETH via their platform.
This won’t all be at once but will be released systematically with approximately 43,000 staked ETH allowed to be withdrawn per day across validators. Given there is roughly 15.9 million staked ETH, it would take at least one year to release it all. Doing it this way will prevent market shocks. The best place to understand the process and differences of the various ways to stake ETH is their website.
All the while the DCG/Genesis & Gemini situation continued to play out very publicly via Twitter this week. Currently, the fact is there is no resolution for Gemini Earn customers who have funds locked up or at any other platforms that were utilizing Genesis. One creditor rejected DCG/Genesis’s proposal for a return of 70% of funds. DCG & Genesis are also now being investigated by the SEC. Gemini has multiple lawsuits relating to their Gemini Earn product, most recently from the SEC for offering unregistered securities.
Gemini Earn and other business lines are segregated specifically from Gemini BITRIA, with whom Arbor Digital uses for digital asset custody on behalf of clients, as required by the New York Division of Financial Services. This is a value add and benefit for those looking for help in managing digital assets. For a catch-up, and staying up to speed in detail, we highly recommend following Ram Ahluwalia on Twitter.
While the bear market rally is nice it is important not to lose sight of the reality. The reality is there is low liquidity among digital asset markets, digital assets continue to follow the macro, and there are a lot of enforcement actions coming from the SEC and other entities.
The most important thing is to have a disciplined process for navigating digital assets based on reality and not on emotions or wishful thinking; or worse, a random YouTube influencer who is not accountable for anything they do or say. To learn more about how we help financial advisors and investors navigate digital assets be sure to schedule time with us here.
Crypto Security Alert
Source: MetaMask Twitter
Wallet Address Poisoning: Meant to take advantage of users who don’t pay close attention to details of their activity and transactions. General users of DeFi and crypto have been coached to check the beginning and ending characters of a wallet address to confirm transactions prior to sending. This is done to mitigate the potential of sending tokens to the wrong address. This is important because in crypto there is no recourse for erroneous transactions. There is no one to call or help get your crypto back. Scammers know this and have developed address poisoning. Scammers will use wallet addresses generated from address generators and match the first and last characters of a potential victim’s wallet address. This gets unsuspecting users to send their funds to the wrong copycat address.
What to do: Check every single character of the wallet address to ensure the funds are sent to the correct wallet. Be wary of random tokens or transactions showing up in your wallet that you don’t know where they originated. A quick scan of the address via Etherscan is also a best practice.
Digital Asset Learning
Reading: CFA Institute – Cryptoassets: Beyond the Hype
Written By: Stephen Deane, CFA, and Olivier Fines, CFA
Abstract: This research paper is a practitioner analysis of the manner in which investment professionals have considered crypto assets and cryptocurrencies for integration purposes into their investment decision process or asset allocation portfolios. It is based on a series of interviews held with industry experts and investment practitioners over the course of 2022.
Thank you for your continued trust. Be sure to tell someone today you care about them
The content presented is for information purposes only and should not be considered specific or individualized financial advice. Arbor Digital is a Division of federally registered Arbor Capital Management, Inc. (ACM) CRD # 111362. Registration does not imply a level of skill or knowledge. Past performance is no guarantee of future results. The digital asset class is speculative and has unique risks compared to traditional assets. See our regulatory disclosures or contact us for more information.