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Friday Metrics watch; thoughts on crypto regulation, Bakkt launch etc

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Satoshi&Co Daily Crypto Newsletter

October 4 · Issue #238 · View online
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Check out past issues of the newsletter along with more interesting crypto content as well as short (but great) conversations with leading crypto industry participants at our newly-launched website

In a recent article in Quartz, my good friend @AnirudhRastogi (incidentally one of India’s top tech lawyers @ikigai) and I argue that Bitcoin should not be seen purely as an asset class in the Quartz magazine.
Briefly, the article tries to make the point that bitcoin is also a technology, and a network. Focusing on just the ‘cryptocurrency’/transactional aspect of it ends up creating regulation like the one we see in many nations around the world, including India. Which is a loss, especially because some of the smartest projects in the space, especially in the DeFi space, are coming out of India. Instadapp, for instance, just closed a round led by leading investors and angels, and Getnuo is also on a tear, growing exponentially. Instadapp is 4th and Nuo is 7th on the list of DeFi lending platforms with almost 40m in USD contracts locked up between these two, as collateral.  
Tepid Bakkt Trading Volumes
In spite of the much-anticipated launch of its institutional-grade crypto derivatives exchange, Bakkt’s trading volumes since the launch have been nothing to write home about.
 Over the past 7 days, just 743 BTC contracts, which equates to ~$5 million, changed hands. To get a sense of how small that figure is, unregulated BitMEX registers around $2B trading volume on a daily basis, while Bakkt’s closest rival CME averages around ~$200 million in daily trading volume. 
While we think it’s too early to throw in the towel for Bakkt, BTC sentiment is going to take a hit if Bakkt fails to deliver the same level of success that CME has managed to, where the trading volumes ramped up to $170 million or 3200 BTC per day within a month after the launch.  
The anticipated rush of institutional investors into crypto trading with the launch of Bakkt futures had for long been touted as one of the bullish factors behind BTC’s price rally earlier this year. And the lukewarm response to the launch has been quoted as one of the reasons for BTC’s flash crash last week when the price declined by over a $1000 in less than an hour.
It is interesting to point out the key difference between Bakkt and CME contracts. Bakkt futures are physically settled, so buyers receive bitcoin in their wallets upon expiration, while CME contracts are cash settled, and are essentially side bets on the price of crypto.
Source: Bakktbot
Source: Bakktbot
On to our Friday metrics…
Ethereum Locked in DeFi
MakerDAO still accounts for a lion’s share of ETH locked up in collateral, with more than 1.53 million of ETH locked up. Compound and Uniswap showed a strong w/w growth of 10% and 24% respectively in ETH locked up, while Augur and Nuo remained flat w/w. Instadapp also showed a w/w growth of 1%.
Lightning Network Growth:
Capacity per channel fell by 2% w/w. The total number of nodes was flat w/w, and the total number of channels decreased by 3% w/w.
(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. $5.2 million for the week, a modest increase from $5.7 million in the previous week. WETH is the most borrowed cryptocurrency on Compound followed by DAI and BAT.
dYdX Loans:
Total loans issued on dYdX for the last week stands at approx. $14M for the week, a 200% increase from $5.6M last week. 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 ~$4.9M, a 50% decrease from $8.8M last week. The total outstanding DAI debt currently stands at ~$86 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....
“New York State Hiring More Crypto-focused Regulatory Staff”
New York state is looking beef up its cryptocurrency-focused regulatory staff, according to a job advert posted online on Thursday. As outlined in the ad, the new Deputy Superintendent for Virtual Currency will be tasked with creating and maintaining compliance measures for virtual currencies including markets, involved businesses and other regulatory bodies for the New York Department of Financial Services (NYDFS). Specifically, they’ll work for the specialized business unit for cryptocurrencies and blockchain – the Division of Research and Innovation – created by the NYDFS this July.
“Cosmos Discloses A Security Vulernability”
In a forum post published on Oct. 1 blockchain interoperability platform Cosmos has disclosed a “high-severity security vulnerability” that was found in consensus engine Tendermint Core. According to the announcement, an update patch was released the following morning. The vulnerability reportedly affected all versions of Tendermint, on which Cosmos is built. All validators and service providers on Tendermint-powered networks are encouraged to update their software as soon as possible. The Cosmos platform allows individual blockchains to communicate and transact with each other. Developed by the Tendermint team, it employs an inter-blockchain communication protocol to establish blockchain interoperability.
“Consensys Acquires Infura”
Ethereum-focused software firm ConsenSys has fully acquired Infura, the company that’s previously been described as the network’s most centralized layer. While the acquisition may indeed spell good news for both companies involved, it’s likely it will ruffle feathers among decentralization supporters, following claims about Infura’s alleged centralization. For one, ConsenSys was founded by Ethereum co-founder Joseph Lubin, who had previously invested in Infura.
“Moningstar to Rate Crypto Real-world Assets”
Morningstar has experience in rating some of the most prominent mutual funds by giants like Prudential, Morgan Stanley, and TD Ameritrade. Now, the ratings agency prepares to assess a basket of blockchain-based securities, or crypto tokens backed by real-world assets. Unlike Weiss Ratings, Morningstar will not deal with rating open networks, or already issued utility tokens. Weiss Ratings has also looked into stock-backed blockchain assets. Instead, the firm will focus on security tokens – a new type of asset that is much rarer within the crypto ecosystem. Security tokens saw limited sales in 2019, with several issuances backed by real estate or stock.
Crypto Twitter Pick
Nadav from Dharma
Nothing has made me more cynical about the American financial system than learning about how credit cards work today.

A 2+% implicit tax on basically everything. Truly wild.
What We Are Reading / Listening To
Overnight Performance of Top 10 Currencies
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