IBIT Optimism, Solana's Rise, and Ledger's Clear Sign

• BlackRock added “IBIT” ticker, confirming initial cash redemption model in spot bitcoin ETF update
• Fueled by meme coin mania, Solana surpassed XRP as the fifth-largest crypto
• Ledger pledged to compensate victims after supply chain attack

BlackRock's IBIT sparks market optimism

The cryptocurrency markets rallied this week, registering a 5.8% gain in total market capitalization with bitcoin leading the upswing. However, bitcoin dominance remained below 53%. Among the blue chips, bitcoin experienced a 1.8% increase, while ether exhibited a weekly decline of 2.6% compared to the preceding week. Notably, bitcoin encountered a decline in price during the early hours of Monday in Asia, reminiscent of the previous week's pattern but with a milder gradient. During US trading hours, a noteworthy resurgence in bitcoin's price occurred after the release of an amended S-1 filing. The update revealed that BlackRock's proposed spot bitcoin ETF has been designated with the ticker symbol “IBIT” as well as revisions to the language surrounding the creation/redemption model.

The recent update seems to allude to the consideration of a “cash redemption” model as a viable option. However, the update keeps open the possibility of an "in-kind" model – which BlackRock appears inclined towards – contingent on regulatory approval. The “in-kind” redemption model would afford asset managers increased flexibility in portfolio management. Conversely, the SEC appears to prefer a “cash redemption” model where BlackRock would need to transfer bitcoin out of storage, promptly sell it, and then return the resulting cash to investors in the event of share redemption. Internal memos indicate that firms, including BlackRock and Fidelity, engaged in discussions with the regulatory agency in recent weeks and delved into the intricacies of how the redemption process would function for a spot-bitcoin ETF. On the same note, Ark 21Shares and WisdomTree also submitted amended S-1 filings to the SEC for their proposed spot bitcoin funds on Monday. While the SEC has yet to approve any applications, market sentiment remains optimistic amidst speculation that a decision may be imminent.

Furthermore, representatives from BlackRock, Nasdaq, and the Securities and Exchange Commission (SEC) convened for their second meeting in a month to deliberate on necessary rule adjustments crucial for the potential listing of a spot bitcoin ETF, as revealed in a published memo. The focal point of the discussion centered on The Nasdaq Stock Market LLC's proposed rule change designed to facilitate the listing and trading of shares of the iShares Bitcoin Trust under Nasdaq Rule 5711(d). This rule delineates specific criteria and regulatory guidelines governing both the initial and ongoing listing and trading of Commodity-Based Trust Shares on the Nasdaq Exchange, incorporating surveillance and compliance measures aimed at ensuring market integrity and safeguarding against fraudulent activities. The memorandum notes that the incorporation of a surveillance-sharing agreement is a strategic measure to address the SEC's heightened concerns regarding market manipulation risks associated with cryptocurrency trading.

Solana's ascendance from meme mania to blockchain stability

Solana exhibited notable strength among Layer 1 (L1) coins, registering a 16.1% gain for the week. Presently trading at a 20-month high, this upswing can be attributed to the growing DeFi ecosystem and heightened interest in meme coins. During the week, Solana's total value locked (TVL) surpassed $1 billion for the first time since the collapse of FTX in November 2022 driven by rising asset values and consistent inflows into DeFi protocols.

Decentralized exchanges on the Solana network have experienced a substantial boost in trading volume. For instance, on December 15, Orca printed an impressive $746 million in volume, a stark contrast to the period before November when it exceeded $100 million only once. The surge in activity is notably linked to meme coins like Bonk, a dog-themed token that has now garnered a market cap exceeding $1.2 billion. As speculators actively seek the next meme coin, traders often acquire Solana as the underlying asset before converting it into their preferred meme coin.

However, the recent focus has not solely been solely on meme coins but on Solana itself. The blockchain has demonstrated improved network stability following a series of outages last year. Additionally, Solana distanced itself from FTX after the exchange's collapse – FTX had acquired $1 billion worth of Solana-based tokens before filing for bankruptcy. These factors collectively contributed to Solana's notable rise in the cryptocurrency landscape.

Clear Sign, Ledger's pledge for transaction security 

Ledger has committed to compensating affected users in the aftermath of last week's security breach where an attacker successfully phished a former Ledger employee and gained unauthorized access to the company's package manager. The malicious code was then uploaded to ConnectKit, resulting in the attacker absconding with $600,000. Ledger is actively collaborating with law enforcement to trace the perpetrator and recover the funds.

Following the security breach, Tether took measures to freeze the attacker's address which was subsequently disclosed to Chainalysis. The attacker's code remained active for approximately five hours, impacting decentralized exchanges SushiSwap and Revoke.cash. Ledger promptly implemented a corrective solution later the same day. Additionally, the company has outlined plans to discontinue blind signing by June 2024. Blind signing involves signing a transaction without the wallet having complete visibility or understanding of the transaction details.

In communications following the security incident, Ledger strongly advised users to exclusively utilize Clear Sign for their transactions. The company acknowledged that its small display often necessitates users navigating through numerous screens displaying encoded transaction details, leading to the adoption of blind signing. However, recognizing the persistent threat of front-end attacks, Ledger emphasized that the most foolproof countermeasure involves users consistently verifying transaction details on their devices. This verification process is achievable through Clear Sign exclusively, ensuring users have a secure display to observe and confirm the precise content of the transactions they authorize.

Looking back: from collapse to clarity 

Rewind to the summer of 2022 when the crypto markets embarked on a significant deleveraging journey. Initially over-committed institutions had extended substantial funds to hedge funds, like Three Arrows Capital, which grappled with considerable losses following the Terra failure. As the dominoes fell, over-leveraged hedge funds defaulted on loans owed to numerous lenders, triggering a chain of bankruptcies. Lending platforms froze user funds leaving retail investors in limbo. Major platforms then, such as Celsius Network and Voyager Digital, failed resulting in user fund losses.

Just as market stability seemed within reach, FTX's collapse siphoned substantial capital from the crypto sphere. A year ago, sentiment hit a local cycle low accompanied by discussions hinting at the demise of bitcoin.

Entering 2023, the tourist exodus left the market significantly underbought, setting the stage for a tumultuous March marked by a classic bank run. In a single day, depositors withdrew a staggering $42 billion, precipitating the collapse of Silicon Valley Bank (SVB). Subsequently, Silvergate and Signature, key banks facilitating fiat support to crypto, also faced bank runs and eventual collapse. US regulators intervened to manage the crisis, but the incident left many customers questioning their faith in regulated banks. Bitcoin's decentralized structure and its capacity for the self-custody of funds emerged as a compelling narrative, pushing BTC's price to surpass $30,000 in April.

Shortly after this mini bull run, the SEC levied multiple charges against the largest crypto exchange Binance and its CEO and founder, Changpeng Zhao. The immediate market response was a sell-off, but a subsequent surge ensued with the initiation of the race for spot bitcoin ETF applications, albeit cautiously due to lingering Binance litigation concerns. In November 2023, Binance pleaded guilty to criminal charges, agreeing to a substantial and unprecedented $4.3 billion in fines to resolve a protracted Department of Justice investigation. Zhao also pleaded guilty to violating US anti-money laundering rules and agreed to resign. At present, the market appears to have successfully purged itself of any remnants of bad debt from the previous cycle, centering its attention on the impending approval of the spot-bitcoin ETF.

Macro pulse 

In the realm of traditional financial assets, Oil futures experienced a notable surge of 6% compared to the previous week, primarily due to a larger than anticipated weekly depletion of US crude storage and heightened concerns surrounding the security of Middle East oil supplies following a tanker incident in the Red Sea. Conversely, US equities exhibited a modest decline of 0.1% compared to the preceding week, despite positive developments in consumer confidence and existing home sales. Meanwhile, the US Dollar index witnessed a drop of 0.4% and the 10-year US Treasury yields declined by 17 basis points, while the Gold & Silver index rallied 3.2% week on week.

*Note: Weekly (7 calendar day) performance figures are as of 8am SGT on December 21, 2023 

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