Lukewarm ETH Futures ETFs, Fading BTC Transactions, Euro Crypto Vision and Turing Bitcoin Contracts

• Week-one demand remained soft for ETH futures ETFs
• Bitcoin's potential for Ethereum-style smart contracts unveiled in 'BitVM' Plan
• Komainu received approval from the UK Financial Conduct Authority (FCA)

Lukewarm response to ETH Futures ETFs and vanishing transactions

The crypto markets experienced a decline, yet managed to maintain a market cap above the $1 trillion mark. Bitcoin's dominance also inched close to 50%. Among the major cryptocurrencies, Bitcoin recorded a 3.3% weekly drop, while ether fell by 5%. This lackluster performance coincided with the introduction of ether futures ETFs in US markets last week, suggesting a lukewarm market response.

Examining on-chain data, there has been a notable drop in Bitcoin network transactions following an all-time high reached last month. This retracement brings us back to levels not witnessed since the initial surge in interest surrounding Ordinals, which can function as either individual NFTs or fungible BRC-20 tokens. Throughout the period from May to mid-September, the average weekly transaction count for Bitcoin oscillated between 400,000 and 500,000. It reached its pinnacle on September 20, hitting an unprecedented 600,000 transactions. However, as of October 10, the average weekly transaction volume hovered around 280,000—a level reminiscent of late February.

Coincidentally, this decline coincided with a reduction in activity related to Ordinals inscription. The creator of the Ordinals protocol has proposed a refined version known as Runes, aiming to potentially replace BRC-20. This upgrade is distinguished by its reduced on-chain footprint. In addition, concerns have emerged regarding the fluctuating numbers of inscriptions, prompting discussions about the possibility of re-indexing Ordinals. This development may have caused apprehension within the Ordinals community, particularly regarding its impact on existing Ordinals collections. While these factors may be influencing the decline in activity, there isn't enough concrete evidence to confirm this hypothesis.

Europe's crypto regulation scene, and Turing contracts on Bitcoin

A recently published research paper introduced BitVM, a new computing approach that aims to bring Ethereum-style smart contracts to the Bitcoin network. BitVM's primary objective is to enable Turing-complete Bitcoin contracts while maintaining network simplicity for other users. Turing completeness refers to a system's ability to perform any possible computation or program. BitVM operates by conducting computations off-chain and subsequently verifying them on-chain, much like the mechanics of optimistic rollups on Ethereum. This design theoretically allows for highly complex computations off-chain, reducing network congestion.

The BitVM protocol revolves around two key roles: the "prover" and the "verifier." The prover asserts a specific function's ability to produce a particular output when provided with specific inputs. Through a sequence of pre-signed transactions, they establish a challenge-response dynamic, including making on-chain deposits to a Bitcoin address to activate the contract. Following activation, the two parties engage in off-chain data exchange, with the verifier having the capability to claim the prover's deposit in the event of an erroneous claim, effectively discouraging attackers from attempting fraud. While the idea holds significant breakthrough potential, it remains in its early stages, and numerous unknown and known limitations necessitate thorough testing and exploration.

While the markets are still seeking direction, Europe is actively consolidating its position as a regulated hub for crypto-related businesses. In a recent development, Komainu announced it received approval from the UK Financial Conduct Authority (FCA) to register as a custodian wallet provider under the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) regulations of 2017. This regulatory green light empowers Komainu to extend its crypto custody services in the UK, including offering collateral management through its Komainu Connect platform.

At the start of this week, prominent European cryptocurrency exchange Bitstamp revealed that it is currently in discussions to assist three major European banks in launching cryptocurrency services, expected to debut in the first quarter of the upcoming year. This development is seen as a significant sign that the European Union's comprehensive crypto regulatory initiative, known as Markets in Crypto Assets (MiCA), is paving the way for traditional financial institutions to venture into the realm of digital assets. 

Macro pulse 

US equities posted a 2.7% gain compared to the previous week, with traders seemingly unfazed by a higher-than-expected inflation report. Instead, they directed their attention to the less hawkish statements made by Federal Reserve officials. In contrast, oil futures declined 0.9% during the week, initially spiking but ultimately surrendering gains on supply concerns.The US Dollar index fell 1% and the 10-year US treasury yields slipped 18bps while the Gold & Silver rallied 8.5% week on week.

*Note: Weekly (7 calendar day) performance figures are as of 8am SGT on October 12, 2023 

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