Eterna's Insights - February 2022

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Fast, Anonymous, and Creative Donations

The month of February was not one to remember. The invasion of Ukraine by Russia wreaked havoc on all markets while they were attempting to recover from a rough January. Even in the gloom of what was February, there were some silver linings. One highlight has been seeing the power of cryptocurrencies in allowing Ukraine to quickly raise $52m for its war effort. $6.5m was raised through a Ukrainian Flag NFT auction by the Ethereum-based group Ukraine DAO, which marked the 10th most expensive NFT ever sold. A highly sought after CryptoPunk NFT worth $200,000 was also donated. Through using cryptocurrencies, they could directly raise funds from individuals all around the world without having to use systems such as SWIFT that take time.

The Takeover of the Superbowl

The Superbowl was taken over by crypto ads, with major cryptocurrency companies such as Crypto.com, FTX, eToro, and Coinbase all advertising themselves at the biggest media event of the year. The Coinbase ad, which reportedly cost $14m, featured just a QR code bouncing around a black screen for 60 seconds. Following the ad, Coinbase’s website was overloaded, forcing it to throttle traffic. It also caused its app to surge from 186th place to 2nd on the App Store.

Banking in the Metaverse

The Metaverse has had an exciting month. JP Morgan recently became the first bank to enter the Metaverse after they opened a virtual lounge in Decentraland. At the time of the announcement, the bank also issued a report stating that “The metaverse will likely infiltrate every sector in some way in the coming years, with the market opportunity estimated at over $1 trillion in yearly revenues.” South Korea has also announced that it plans to invest $187m to create a broad metaverse ecosystem to support the growth of digital content and corporate growth within the country.

Cryptocurrencies Becoming a Legitimate Asset Class

We have seen further institutional interest into the space. BlackRock is reportedly planning to offer cryptocurrency trading services. Clients would be able to trade crypto though the firm’s Aladdin platform and would also be able to borrow from BlackRock by pledging crypto assets as collateral. KPMG Canada also announced that it has added crypto assets to its corporate treasury through the purchase of Bitcoin and Ethereum.

Cops and Robbers

February was both a positive and negative month for hacks within the space. The positive was the recovery of a large portion of funds stolen from the 2016 Bitfinex cryptocurrency exchange hack. In 2016, 199,756 Bitcoin, worth $72m at the time, was stolen from Bitfinex. At the beginning of this month, a large portion of this, now valued at $3.6bn, was recovered by the United States Justice Department. On the negative side, crypto experienced one of its largest exploits ever. A DeFi platform called Wormhole was hacked for $320m. The parent company of the developers of Wormhole, Jump Crypto, replenished the $320m stolen from the hack.

As these hacks and exploits continue, governments are starting to take notice of the need for anti-crime units in the cryptocurrency space. As such, the Deputy Attorney General of the US announced that the FBI will be launching the National Cryptocurrency Enforcement Team. It will focus on crypto exchanges, mixers, tumblers and other types of digital asset infrastructure providers that might allow for "the criminal misuse of cryptocurrencies". In addition, the EU is seeking to give its new Anti-Money Laundering watchdog oversight into cryptocurrency firms.

Regulation, Regulation, and no Regulation

Last month, we were expected to see the release of Biden’s Executive Order on cryptocurrencies and CBDCs. The Executive Order was reported to be released end of February, but with everything going on in the world, it has unsurprisingly been pushed back. The EU has been talking a lot about regulation, but recently postponed the vote on crypto regulation indefinitely. This came after a leaked draft received criticism for including a provision that sought to ban the use of cryptocurrencies that rely on Proof of Work, such as Bitcoin.

 

Disclaimer: this newsletter was put together for informational purposes only based on our review and analysis. This should not be construed as a solicitation, offer, or recommendation to acquire or dispose of any investment or engage in any transaction.




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