This week in The Context, we untangle a UN report on Tether, track the early response to Bitcoin ETFs, and lock our eyes on Hashkey.
[USDT: Teflon Tether? 🪙]
The United Nations Office on Drugs and Crime this week issued a report claiming that Tether, a stablecoin designed to always be worth $1, is “fuelling transnational organized crime” in East and Southeast Asia. 🦹♀️
What Journalists Said 🧑💻:
According to the report, the cryptocurrency, together with black market casinos, enable mass money laundering, wrote Scott Chipolina (Financial Times). 🎰 In just one law enforcement operation targeting Tether-based money laundering, Singaporean authorities recovered funds worth $737 million. 🇸🇬
This isn’t the first time the UN has criticized USDT, reported Protos. Several internet scams utilize Tether, “with gangs reportedly selling slaves in exchange for the stablecoin while scammers are told to encourage their victims to deposit the currency as it is ‘untraceable.’”
The report is baloney, according to Tether. 🐂💩 The company, said Amitoj Singh (CoinDesk), “was ‘disappointed’ that the report had singled out its stablecoin and ignored the role it played in helping developing economies in emerging markets, and its record of collaborating with law enforcement.”
Why It Matters ⁉️:
Tether, which has a market capitalization of $95 billion, has the highest daily trading volume of any cryptocurrency. Because of its ubiquity and utility (traders find it extremely useful because they don’t have to cash out to dollars in between trades)‚ USDT is the Teflon Don of crypto; bad press only seems to make it stronger.
[Bitcoin: ET(eh)F? 😐]
The introduction of spot Bitcoin exchange-traded funds, approved by the U.S. Securities and Exchange Commission for the first time last week, led to a rise in BTC prices to above $48,000—then a quick 10% drop.
What Journalists Said 🧑💻:
This was a “’sell-the-news’ event,” wrote Shaurya Malwa (CoinDesk), a term that “describes how asset prices, leverage and sentiment run-up in the lead-up to a bullish event, only for prices to tumble shortly after.” However, the long-term outlook for BTC is still bullish.
Looks pretty successful to me, said Jeff John Roberts (Fortune): “$4.6 billion worth of Bitcoin ETF shares changed hands, suggesting demand for the product was both broad and deep”—although we’ll have to wait a bit longer to see “whether the first-day enthusiasm for the new Bitcoin ETFs translates into long-term demand.”
The early winners are BlackRock and Fidelity, claimed Sebastian Sinclair (DL News), accounting for “$498 million and $422 million respectively in total flows over the first two days of trading.” Meanwhile, Grayscale, which converted its Bitcoin trust to an easier-to-trade ETF, dominated trading volume but watched half a billion flow out of its coffers.
PR Perspective 🔎 :
While billions might be piling into the industry, the price of Bitcoin dropped a lot. Thus, even with the legitimization that an ETF ostensibly brings, Bitcoin is, for now, still prone to liquidations and volatility. In other words, the cryptocurrency landscape has not been immediately transformed. Instead, we are faced with a perpetual cycle of the industry hyping “sell-the-news” events.
[HashKey: Unlocking Hong Kong Crypto? 🔑]
HashKey Group, which runs a Hong Kong-based crypto exchange of the same name, became the latest tech unicorn after reporting that it had raised $100 million at a $1.2 billion valuation. 🇭🇰
What Journalists Said🧑💻:
HashKey is one of just two regulated exchanges in Hong Kong, which “offers a local market and a conduit to Chinese wealth,” wrote Zheping Huang (Bloomberg). But HashKey’s trading volume is about 0.1% of market leader Binance and “it remains unclear just how many crypto exchanges the city can really support.”
Twelve companies have applied for crypto trading licenses, reported Xinmei Shen (South China Morning Post). All are “banking on Hong Kong’s push to embrace the virtual asset industry, even as public perception of the sector has plunged following scandals involving companies including FTX and JPEX.”
The funding represents “renewed optimism in the rattled digital assets market,” said Zinnia Lee (Forbes), with venture funding dipping after a scandal-filled few years. Even more startling is the location: The company is “a rare unicorn startup from Hong Kong, which is better known for its family-controlled property giants.”
Why It Matters ⁉️:
This is an early sign that 2024 could see some significant raises. It could also be a sign that a larger share of funding will go to companies in Hong Kong, which, unlike the U.S., has a clear regulatory framework in place for digital assets.
[Tweet Of The Week]
Credit: @AxelarIntern
[DeFi Definitions]
A segment exploring one particular aspect of DeFi.
This week: ‘Restaking’ by Leila Stein.
Staking, the act of locking crypto assets up to support a proof-of-stake blockchain (mostly on Ethereum) in return for rewards, is among the most popular uses of crypto. Now, restaking is emerging as a new way to leverage staked tokens for other applications, with projects like EigenLayer spearheading these developments.
Restaking allows staked ETH to be used as security for other protocols outside of Ethereum in exchange for fees and rewards. New or smaller protocols can use this restaked ETH as a security layer, rather than building a host of validators—thereby significantly lowering costs. The payoff for stakers is that they receive even more rewards for their staked ETH.
The benefit of this mechanism is that it allows projects to build quickly without having to grow and develop a community to support the network through native staking. However, there are risks. Ethereum founder Vitalik Buterin has warned that restaking utilizes the network's social consensus and could “increase the scope” of this consensus too far beyond Ethereum’s core rules. This could cause conflict for validators because of outside influence on votes and decisions, which would hamper the security benefits Ethereum is meant to provide.
The usual disclaimer: This newsletter collates the main themes and headlines of the week in DeFi/crypto/metaverse/Web3/NFT land and tries to provide unbiased context. It's aimed at anyone who wants to keep an eye on the space. It's put together by a team at YAP and doesn't contain any promotion of our clients (if one is mentioned, we'll flag that).
The team: Founder Samantha Yap and consulting editor Jeff Benson, Sam O'Donohoe, Ewan Brewster, Andrew Wickerson, Tiffany Mac Sherry, Liam Quinn, Becky Corbel and Delon Chan. Your feedback is, as always, welcome. Ping us at thecontext@yapglobal.com. Old newsletters can be found here.
This newsletter is prepared by YAP Global, an international P.R. Consultancy focusing on helping cryptocurrency, Decentralised Finance (DeFi) and brands through impactful storytelling. Find out more about us here.