Crypto Fundamentals #021

gm folks, congrats on making it through another week.

here’s what happened in crypto 👇

🫥 Coinbase is served a Wells Notice, Brian Armstrong responds

🤪 Bitcoin sees the highest weekly spot trading volume of all time

🫡 Arbitrum airdrop hits

The crypto markets saw a lot of chop throughout the week with average and median WoW price declines of 7.1% and 8.7%, respectively. The Fed continued its assault on inflation with another 25 bps rate hike while UBS acquired CS for $3.2bn, changed some Swiss laws and wiped out some bondholders.

Let’s jump right in

🤔 Coinbase is served a Wells Notice, Brian Armstrong responds

Brian Armstrong tweeted on Wednesday that Coinbase received a Wells Notice from the SEC focused on staking and asset listings.

A Wells Notice is a “letter that the U.S. SEC sends to people or firms at the conclusion of an SEC investigation that states the SEC is planning to bring enforcement action against them.” In this case the SEC appears to refer specifically to Coinbase’s staking business and specific asset listings.

Brian responded that the SEC had reviewed the business in detail prior to the Coinbase IPO and the S1 document walked through the firm’s asset listing process and included “57 references to staking.” He then goes on to state that he’s expecting the go-forward process to provide an “open and public forum before an unbiased body where we will be able to make clear for all to see that the SEC has not been fair, reasonable, or even demonstrated a seriousness of purpose when it comes to its engagement on digital assets.”

The Coinbase team makes it clear that they will plan to take the issue to court to defend “the rule of law.” This upcoming legal battle will no doubt have huge implications for the future of crypto in the US.

🤪 Bitcoin sees the highest weekly spot trading volume of all time

Amidst the volatility rocking the western banking world, Bitcoin saw an all time high in weekly spot trading volume.

Where is this liquidity coming from? While it seems that Binance saw its highest level of weekly volume in its BTC-USDT pair this week, some crypto native investors believe that institutional capital has also flown into the space 👇

This week, Jonah Van Bourg and Avi Felman came on Empire’s podcast to speak about the recent crypto market movements. The participants noted that there believe there were Bitcoin inflows from institutional macro funds who have begun to recognize that the US banking system is less stable and secure than they had previously thought. While Avi acknowledges that the US Fed is still the best positioned entity in the world to manage this form of crisis, recent events have become more clear that the centralized banking system as a whole is not infallible.

Also regarding Binance: the behemoth exchange halted trading on Friday for several hours.

While there was some short term volatility in the market associated with the halt in Binance trading, the market appeared to pick back up with no major issues. CZ tweeted during the event that he didn’t expect prices to move much while they halted trading, and even if they did, Binance’s deeper orderbook would bring the prices back once systems came back online.

🫡 Arbitrum airdrop hits

The long awaited Arbitrum airdrop started with a bang with a small amount of trading at the ~$7 dollar level on March 23rd which immediately dropped to to ~$1.3 after the first few hours of trading. Arbitrum now boasts a circulating market cap of $1.6bn and a FDV of $12.9bn.

Arbitrum also saw heavy congestion on its network as users attempted to trade into other major tokens / USDC immediately following the airdrop. Tokens such as Ethereum saw high levels of slippage on exchanges such as UniSwap, and bridges to Arbitrum including Synapse saw longer than usual transaction times.

Polynya notes that execution continues to be primary bottleneck for scaling solutions such as Arbitrum. While users utilizing roll-ups pay a consolidated transaction fee, roll-up fees (a component of the consolidated transaction fees) still work the same way they do on monolithic blockchains (negligible until the rollup’s limit is hit, and then scales with further usage). In this case, despite the fact that Arbitrum One targets ~7x L1 throughput, that level of targeted capacity still became saturated and led to congestion + gas fees spiking.

Detailed L1 dashboard for people who love more numbers in smaller font:

Note: Revenue represents fees that go to the protocol’s treasury or are returned to tokenholders via a burn mechanism (source: Token Terminal). Weekly commits and weekly dev activity as of 3/17/23.

The content is for informational purposes. None of the content is meant to be investment advice. Use your own discretion and independent decision regarding investments.