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Friday metrics watch, Bitmex woes

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Satoshi&Co Daily Crypto Newsletter

July 19 · Issue #213 · View online
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As we head into the weekend, there is news coming in that Bitmex is the subject of an investigation by the CFTC in the US. We actually predicted that something like this would happen, barely two weeks ago, on the 4th of July. The ‘Tangle in Taipei’, Bitmex CEO Arthur Hayes’ debate with perma-crypto bear (and perma-bear) Nouriel Roubini played a small part in bringing the derivatives market into sharper focus globally. Surging derivative volumes, increasing institutionalization and the resulting need for further sophistication in crypto risk management options are all likely contributory factors as well.
Expect a dichotomy to emerge in the derivatives exchange space as well, like the one that exists in spot exchanges with Coinbase and other western exchanges on the one end of the spectrum, and Binance and other Asian exchanges on the other. Bitmex will likely continue to be an unregulated venue catering primarily to retail speculators in the near term.
The CFTC is perhaps being a bit disingenuous in claiming that it is worried about protecting the proverbial grandma from frittering away her pension on a 100x leverage position on bitmex. How tech savvy does the aforementioned grandma need to be get the VPN going to log in to Botmex, get past the clunky Bitmex UI and then place a 100x YOLOO trade. If said grandma can actually pull this off, does the regulator really think she needs their protection? 
The bigger aim here is two-fold; Threaten punitive action, get some fines going, and likely sizeable ones at that, given how much money Bitmex has made over the past couple of years, thanks to its early-mover advantage in crypto, and let Arthur tighten his game, with perhaps some sort of KYC/AML requirements and/or a move to a more regulated geography. This is akin to one of the numerous fines that Wall Street Banks are periodically hit with  by SEC, where the eventual outcome is something that is settled “without admitting or denying wrong doing”. This also likely serves as a warning to other Bitmex wannabes sprouting out of off-shore regimes that want to provide more casinos for crypto speculators. At the very minimum, the cost of doing business goes up. 
In our view, this is a good development. While the crypto derivatives market doubtless needs to develop, what is really needed is more regulated venues, with proper KYC and AML procedures. This is the only route for crypto to gain wider acceptance from regulators across the globe.
Have a great weekend, and before we log off, here is a selection of our favorite reads from this week before we get to the DeFi metrics for the week
Ethereum Locked in DeFi
MakerDAO still accounts for a lion’s share of ETH locked up in collateral, with more than 1.48 million of ETH locked up. Compound showed a tremendous w/w growth of 68% in ETH locked up, while Uniswap and Maker have registered modest w/w growth.
Lightning Network Growth:
Capacity per channel fell by 2% w/w. The total number of nodes increased w/w by 1%, and the total number of channels decreased by 1%.
(For reference, some previous articles on LN, here).
DEX Tracker:
Trading volumes on DEXs have increased on a w/w basis, with the average daily trading volume averaging 35k ETH for this week. IDEX remains the biggest DEX in terms of trading volume and DAI is the highest traded cryptocurrency on DEXs.
(For reference, some previous articles on DEXs, here and here).
Crypto Loans Tracker:
Compound Loans:
Total loans issued on Compound for the last week stands at approx. $13.4 million for the week, a strong increase from $3.2 million in the previous week. WETH is the most borrowed cryptocurrency on Compound followed by DAI and BAT.
Dharma Loans:
Total loans issued on Dharma Lever for the last week stands at approx. $737k for the week, in line with the previous week’s numbers. DAI is the most borrowed cryptocurrency on Compound followed by WETH and USDC.
MakerDAO Loans:
DAI loans issued on MakerDAO for this week stand at ~$9.8 million, a strong increase from $6.4 million last week. The total outstanding DAI debt currently stands at ~$91 million.
(For reference, some previous articles on MakerDao, here and here).
You can also check out last week’s Metrics Watch here.
Meanwhile in Crypto Wonderland....
“German Central Bank President Comes In Support of Libra”
Jens Weidmann, president of Germany’s central bank, the Deutsche Bundesbank, has come out in favor of Facebook’s planned cryptocurrency, Libra. “There’s no reason to be alarmed but there’s reason to be vigilant,” Weidmann said at a recent G7 meeting, according to a report from Reuters on Thursday. The president, who is also a European Central Bank policymaker, reportedly said that Facebook could go ahead with Libra only after answering all questions. The social media giant’s blockchain lead David Marcus recently committed to U.S. senators and congressional representatives that Libra will go ahead only after addressing all concerns, including regulatory.
“CFTC Investigating BitMEX”
The U.S. Commodity Futures Trading Commission is investigating crypto exchange BitMEX, according to people familiar with the matter, a platform that’s become wildly popular in Asia for letting people make big bets with little money down. The months-long CFTC probe is focused on whether BitMEX broke rules by allowing Americans to trade on the platform, which isn’t registered with the agency, said one of the people who asked not to be named discussing the investigation, which hasn’t been made public. The regulator considers virtual currencies like Bitcoin to be commodities, and it has jurisdiction over futures and other derivatives based on them.
“Binance To Airdrop Stellar Worth $775k”
Binance is set to introduce staking rewards for Stellar Lumens and will be airdropping 9,500,000 XLM, worth $775,000, to users of the exchange. Stellar is a proof-of-stake cryptocurrency designed for cross-border payments. This means holders can choose to “stake” their coins and receive staking rewards, as an alternative to mining. Binance will distribute staking rewards to its customers based on how many Lumens they hold on a daily basis–there is a minimum requirement of 10 XLM in order to qualify.
“Former Crypto Exchange CEO Arrested In Italy”
Former CEO of now-defunct crypto exchange WEX, a spin-off of controversial BTC-e exchange, was arrested in Italy. Dmitri Vasilyev, who reopened BTC-e exchange as in September 2017, was detained by Italian prosecutors. While no official statement has been disclosed to date, BBC Russia reported the arrest on July 19. In the report, the publication cited an unnamed friend of Vasilev and two anonymous WEX investors. The reason for detention remains unclear.
Crypto Twitter Pick
Anthony Zhang 🎉
Since launching the @compoundfinance / @MakerDAO bridge just ~10 days ago, @InstaDApp has increased their Total Value Locked ($USD) from $4.6mil to $40mil 💰💰💰

Really clean product execution on a clear lender pain point by @sowmay_jain & @smykjain 👏🏽👏🏽
What We Are Reading / Listening To
Overnight Performance of Top 10 Currencies
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