January 25, 2023

The biggest crypto news and ideas of the day

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Welcome to The Node. This is Daniel Kuhn, here to take you through the latest in crypto news and why it matters. In today's newsletter:

In the news: Celsius can process some withdrawals, courts determine. Luno, a London-based crypto exchange, is cutting 35% of its workforce. And DeFi giant Aave is voting to deploy "V3" on the Ethereum mainnet.
The takeaway: David Z. Morris writes about the recent crypto rally, and how it may be supported by macroeconomic changes.

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Court Matters

Bankrupt crypto lender Celsius Network can process withdrawals for customers who transferred assets to the platform after it filed for bankruptcy protection on July 14, 2022, subject to certain conditions, as well as tokens from the Flare airdrop to eligible owners of XRP tokens that are locked on the platform, according to new court orders. Meanwhile, Genesis Global, the crypto lender that filed for bankruptcy protection in New York last week, claimed Bitcoin Cash supporter Roger Ver, aka "Bitcoin Jesus" based on his early evangelism for the industry, failed to settle cryptocurrency options trades, in a court filing. Finally, Circle said the U.S. Securities and Exchange Commission (SEC) scuttled the payment company's $9 billion plans to go public by delaying approval of Circle's registration documents.

Contagion Effects

The crypto exchange owned by CoinDesk parent Digital Currency Group (DCG), Luno, is cutting 35% of its workforce due to an "incredibly tough year," as trouble plagues Barry Silbert's crypto empire. Luno, headquartered in London, had approximately 600 employees before the event. CoinDesk estimates that over 29,000 jobs have been cut across the crypto industry since April of last year. In brighter news, Cosmos-based layer 1 blockchain Injective has partnered on a $150 million ecosystem initiative with crypto investment firms Pantera Capital and Kucoin Ventures, market maker Jump Crypto and others to support the DeFi ecosystem. Finally, Bitcoin infrastructure firm Blockstream raised $125 million to invest in the battered mining market as Layer 1 blockchain, Canto, catches the attention of traders.

Still Building

DeFi giant Aave is voting to bring the third version of its protocol to the Ethereum mainnet, which could bring further capital and security to the largest decentralized lending market after already going live on Optimism, Polygon, Arbitrum and Avalanche. Although the vote is not closed, it's looking like it'll execute on Jan. 27. That comes as crypto credit market Maple Finance unveiled a liquidity pool for trade receivables – advancing the protocol's strategy to bring traditional financial investments on chain. Meanwhile, Cardano's overcollateralized stablecoin, djed, is on track to launch next week. Elsewhere, Binance has introduced an optional function to help its API users prevent self-trading on their platform while Web3 gaming studio Mythical Games is rolling out its new digital game asset marketplace. Mythical acquired gaming-focused DMarket to help build out "Mythical Marketplace 2.0."

Correction: In yesterday's newsletter I incorrectly wrote that the European Commission must approve new restrictions on banks in crypto. In fact, the changes apply once a version of the bill is agreed by parliament and the Council of the European Union.

NEAR Protocol: Primed for the Crypto Winter

Navigating Web3 right now is no walk in the park. As the world continues to feel the effects of an economic slowdown and a swelling of prices from inflation, Web3 is experiencing a contraction in participants and venture capital. This can be disheartening for those looking to invest in crypto projects, as many are struggling to secure sufficient funding or seeing slower monthly Web3 developer activity than in 2020 or 2021.

Despite this adversity, there remains considerable potential both now and in the future. Continue reading.

*This is sponsored content from NEAR

Sound Bites: Setting Policy

"Whoever is a first mover gets to influence the regulations of the rest of the world."

– Crypto Council for Innovation Chief Global Regulatory Officer Linda Jeng, on CoinDesk TV's "First Mover."

The Takeaway: Soft Landing?

Blue-chip cryptoassets including bitcoin (BTC) and ether (ETH) have had a very nice 2023 so far, with BTC up roughly 36% since the New Year and ETH up close to 30%. There's growing reason to think that "the bottom is in" for crypto markets, and some macroeconomic data suggests this year will be much brighter for the sector than 2022's 50-car pileup of scams and catastrophes.

That's probably the most compelling argument for the crypto bottom: that bad actors and the consequences of their contagion-spreading leverage plays have been flushed out. Certainly on an emotional level, getting rid of the likes of Alex Mashinsky, Do Kwon, Three Arrows Capital and Sam Bankman-Fried feels like the chance for a new beginning.

That new beginning, crucially, is starting from a stronger baseline thanks to the wave of pandemic-driven education and enthusiasm, despite the wave of frauds that closed out the last bull. Bitcoin hit a local bottom of just under $16,000 back on Nov. 9, 2022, which despite the huge drawdown from late 2021 highs, was still 66% up from prices as recently as September of 2020.

That's a lesson well worth learning – cryptoassets have continued their decade-plus trend of steady, though volatile, growth. While there are some significant regulatory risks on the table this year, that basic trend appears to be continuing, minus the spike of 2021's mania and the leverage-thirsty grifters who rode it into oblivion.

– David Z. Morris

david.morris@coindesk.com

@davidzmorris

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