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Valour Monthly Update – July ’23



Crypto markets fared favourably throughout most of July experiencing little overall volatility. Indeed, the Fed’s quarter percentage point rate increase did little to move markets despite taking interest rates to their highest point in 22 years. Whilst BTC did see a slight increase in intraday volatility towards the end of the month, it is worth noting its considerably lower standing than the volatility experienced by traditional financial markets including the S&P 500, Nasdaq, and perhaps more surprisingly, Gold.

Crypto markets fared favourably throughout most of July experiencing little overall volatility. Indeed, the Fed’s quarter percentage point rate increase did little to move markets despite taking interest rates to their highest point in 22 years. Whilst BTC did see a slight increase in intraday volatility towards the end of the month, it is worth noting its considerably lower standing than the volatility experienced by traditional financial markets including the S&P 500, Nasdaq, and perhaps more surprisingly, Gold.

Given Bitcoin’s current near zero correlation with traditional assets, institutional interest has unwavered, with the SEC accepting refiled ETF applications from the likes of ARK, BlackRock, WisdomTree and Fidelity. With preliminary responses expected between mid August and early September, the SEC’s decision will undoubtedly play a large role in how market liquidity will shape up following a predominantly stagnant trend since late last year.

Notwithstanding low BTC spot volumes, July saw positive trends in daily aggregate volumes and total AUM figures for digital asset investment products reaching a total of $33.7bn. This second consecutive month of AUM growth comes in parallel to the discount on Grayscale’s GBTC trust falling some 26% amidst the growing institutional sentiment. Seemingly, the paradigm shift surrounding crypto markets has continued to gain momentum, with both retail and institutional investors optimistic about future regulatory developments ahead of next year’s Bitcoin reward halving.

In the News:


  • U.S.-based exchange Kraken has been ordered by a district court to provide the IRS with user data on activity exceeding $20,000 within a calendar year for tax compliance purposes.
  • Crypto exchange, Bittrex, has submitted a motion to dismiss its case with the SEC regarding the trading of investment contracts.
  • Hong Kong’s government has formed a Web3 task force to oversee the development and ethical growth of the region’s innovation and exploration relating to Web3 technologies.
  • Singapore’s Monetary Authority (MAS) has introduced new requirements for crypto service providers to hold customer assets in statutory trusts to further protect investors.
  • Lawmakers in the EU have moved forward with the European Data Act which aims to ensure smart contracts include a kill switch option allowing them to be safely terminated, drawing criticism from the wider crypto community.
  • The capital of Eastern China’s Shandong province has increased its efforts to encourage adoption of the country’s CBDC by introducing digital Yuan payments across its bus routes.
  • The UK’s House of Lords has moved forward with its planned Economic Crime and Corporate Transparency Bill aimed at increasing the ability of authorities to target crypto funds used for illicit purposes.
  • South Africa’s Financial Sector Conduct Authority (FSCA) announced that all crypto exchanges operating in the country will need to obtain licensing by the year’s end.
  • India’s reserve bank (RBI) is assessing the feasibility of using its digital rupee CBDC as a means of a cross-border payment, with banks from 18 other countries having been onboarded since 2022.
  • United Arab Emirates’ crypto free zone has partnered with the HBAR Foundation to assist its ecosystem members via a grants program, providing technology, marketing and business support for wider Web3 adoption.
  • The European Commission’s blockchain sandbox has unveiled the first 20 projects in its cohort to receive legal and regulatory guidance as part of its efforts in bridging the gap between European nations and crypto companies.
  • Israel’s parliament has passed a preliminary reading of a crypto bill seeking to exempt foreign residents from paying taxes on cryptocurrency gains to attract foreign investments in the country’s evolving crypto market.
  • Namibia’s government has passed a bill regulating cryptocurrencies and virtual assets with the new legislation introducing a framework to oversee the use and trading of digital assets within its jurisdiction.
  • The NYIC Federal Reserve bank has successfully completed a proof-of-concept for a regulated liabilities network via the use of the wCBDC central bank digital currency.
  • Ripple Labs celebrated a landmark ruling against the SEC as the judge presiding over the case established that Ripple’s token sale did not violate securities laws as well as determining that the XRP token is not a security.
  • Ripple Labs announced its pilot program to tokenise real estate assets for use as loan collateral while leveraging the blockchain-based payment network’s CBDC platform.
  • Several Korean banks have announced plans to research the use of tokenised deposit technology as an alternative to stablecoins and CBDCs, addressing uncertainties surrounding stablecoins following their tumultuous year in 2022.
  • Russia has officially introduced the digital ruble, with Russia’s central bank digital currency being passed into law for roll out to real consumers as of August 1st.
  • The Financial Stability Board (FSB) has published its global regulatory framework for crypto-asset activities aimed at promoting a comprehensive and consistent international approach to crypto related regulation and supervision.
  • The Pacific Island nation of Palau has launched a pilot project for a USD-backed stablecoin that utilises Ripple’s CBDC platform.
  • Google Cloud has partnered with Bitcoin Lightning infrastructure provider Voltage to roll out Bitcoin-based services worldwide and explore other Bitcoin related solutions.
  • Launched by OpenAI founder, Worldcoin has deployed its token that aims to distinguish humans from bots for online verification, enhancing online security and issues relating to bot-driven interactions.
  • Professional services giant Deloitte has partnered with blockchain analytics firm Chainalysis to enhance compliance and law enforcement efforts in the crypto industry, addressing issues related to illicit activity and overall improvements in the ecosystem.
  • Celsius Network received approval to convert its altcoin holdings into BTC and ETH to enhance accessibility and liquidity for the distribution of funds to creditors, emerging from bankruptcy after its recent settlement agreement.
  • The premium for Bitcoin futures reached an 18-month high, reaching 6.3% amidst increased demand for leveraged BTC longs, in light of refiled Bitcoin ETF applications.
  • Crypto-friendly DBS Bank announced the launch of its e-CNY merchant solution in China, allowing businesses to receive payments in the CBDC and have it automatically settled in their CNY deposit accounts.
  • The OPNX crypto futures exchange has launched its own oUSD currency for margin trading, with the second phase of its implementation aimed to solve the challenge of bankruptcy remoteness.
  • Crypto exchange BitgetX has joined Hong Kong’s Virtual Asset Consortium (HKVAC) to provide ratings services and indexes for cryptocurrencies.
  • HSBC has started trialling quantum-resistant cryptographic solutions on the BT-Toshiba metro network, exploring solutions for a quantum-safe financial transaction network in the UK.
  • The decentralised dYdX exchange has launched its v4 testnet, offering full decentralisation with increased user control, improved transparency, and fewer risks of central points of failure.
  • Bitcoin miner fee revenue surged during Q2 of 2023 reaching a high of $184m, surpassing the total revenue earned throughout 2022.
  • A report by PwC and Aspen Digital highlighted the rise in crypto staking as total value of custodied funds rose to $447.9bn in 2022, with 120 providers identified.
  • The U.S. Department of Justice has moved roughly 10,000 BTC seized in connection with the Silk Road marketplace, with the DOJ having announced its plans to sell the remainder of its seized coins over four tranches this year.
  • Securitize has started tokenising equity in the Spanish real estate investment trust Mancipi Partners, with secondary trading on Avalanche soon to come. The trading platform is set to implement the first natively tokenised equity issuance as part of EU’s DLT pilot regime supervised by the ESMA.
  • Hacker(s) exploited a vulnerability in Curve Finance liquidity pools that leverage the Vyper programming language, resulting in losses of $52m across several DeFi protocols.


  • Layer-2 infrastructure provider StarkWare has deployed its StarkNet Quantum Leap testnet upgrade, aimed at achieving a 50x increase in throughput alongside a 10 second ‘time to inclusion’.
  • Blockchain infrastructure developers, ConsenSys, has launched its zero-knowledge Layer-2 scaling solution to further increase Ethereum’s throughput, with the Linea network integrating directly into the company’s MetaMask browser wallet for bridging and swapping functionality.
  • Binance completed its integration of the Bitcoin Lightning network to enhance the speed and efficiency of bitcoin deposits and transactions on the exchange, offering users faster settlement times and reduced fees.
  • Layer-2 scaling solution, zkSync, has launched a new STARK based proof system (Boojum) for increasing transaction scalability, able to run on consumer-grade general processing units (GPUs).
  • Chainlink Labs announced the launch of its cross-chain interoperability protocol (CCIP) on the Ethereum, Avalanche, Polygon, Arbitrum and Optimism mainnets to enable the transfer of data between public and private blockchain environments from backend systems.
  • Bitcoin marked a significant milestone after the 800,000 block was mined. With block rewards halving every 210,000 blocks, the next block halving will take place at block height 840,000, reducing the block reward size to 3.125 BTC.

Valour’s Monthly Overview

July signified several exciting developments marked by Valour’s launch of the Valour Digital Asset Basket 10 (VDAB10) ETP on the Nordic Growth Market (NGM), as well as its groundbreaking collaboration with crypto-native, Bitcoin Suisse AG, reflecting exciting developments across the company’s pipeline of innovative products.

July 18: Valour Inc. Announces its Collaboration with Bitcoin Suisse AG on Physical Backed Digital Asset Exchange Traded Products

Valour Inc. announced its collaboration with Swiss crypto-finance and technology pioneer Bitcoin Suisse AG to list, operate and distribute physically backed ETPs in the international and Swiss market. Founded in 2013, the Swiss-based trusted gateway to crypto asset investing offers institutional-grade services at the forefront of technical innovation. The new partnership will leverage Valour’s ABS issuance platform and operational know-how, whilst simultaneously benefiting from Bitcoin Suisse’s established brand and longstanding experience in the crypto sector both within Switzerland and internationally. Commenting on the partnership, DeFi Technologies CEO and Valour Director Olivier Roussy Newton highlighted the significance of this development in the digital asset space, contributing towards creating more robust and diversified opportunities for investors. The news follows Valour’s launch of its first physical backed ETP with the 1Valour Bitcoin Physical Carbon Neutral ETP (ISIN: GB00BQ991Q22), with the ETP’s respective digital assets being physically secured by regulated custody providers.

July 12: Valour Inc. Announces the Launch of the Valour Digital Asset Basket 10 ETP on Nordic Growth Market (NGM)

Valour Inc. announced the launch of its Digital Asset Basket 10 (VDAB10) ETP in the Nordics, offering retail and institutional investors diversified exposure to the digital asset ecosystem via one single product. Providing access to 10 of the largest cryptocurrencies by market capitalisation, the multi-asset ETP undergoes quarterly rebalancing to facilitate investor access to the rapidly developing digital asset landscape. Comprising several prominent digital assets including Dogecoin, Binance BNB, and Polygon, the launch in the Nordics reflects the company’s commitment to innovation and diversification, continuing to offer products that meet the diverse needs of its investors.

Venture Spotlight:

Valour’s portfolio companies have been diligently building out their products and developing new partnerships. Here are some of their highlights over the month of July.

Boba Network celebrated a milestone as BobaBNB surpassed the 10M transaction count. This comes as the network announced a new partnership with Uniswap v3 powered Oku Trade, allowing users to seamlessly deploy and manage positions as well as utilise limit and market orders for every v3 pool pairing.

Blocto announced that it has officially integrated Polygon into its native app to offer email/social login, hybrid mode, cross-device integration, amongst other features. Launching its ecosystem program for Polygon, the company is offering $1m in rewards over the next 3 months to foster the growth of the next million users within the Polygon ecosystem.

CLV highlighted some of their progress from Q2 of 2023, drawing attention to the technical upgrades and ecosystem partnerships. Wallet upgrades aside (mobile and extension), integrations with GateKeeper, Humanode, Arteus, and PolygonID have expanded the CLV partner ecosystem, increasing dApp functionality and enabling verifiable credentials for identity management via their enhanced security and privacy technologies.
Sovryn released support for AMM swaps on its native web app, signifying the company’s continued progress away from Sovryn Alpha. Having completed a system-wide security audit, improved onboarding experience, and its lending curve update, its roadmap ahead includes transitioning to Bitocracy 3.0 before finally implementing the remaining Sovryn Alpha functionality on the new and updated app interface.

Valour ETPs

Concluding the month of July, Valour disclosed assets under management (AUM) totalling $149.3m. Meanwhile, the company reported that aggregated net sales continued to increase, rising to a total of $357.7m. Alongside the launch of Valour’s VDAB10 basket on NGM and its collaboration with Bitcoin Suisse AG, the company has a growing pipeline of products across both its certificates and physically backed issuance programs that will contribute towards its continued growth in the ever growing digital economy.

Valour offers fully hedged digital asset ETPs with low to zero management fees, with product listings across European exchanges, banks and brokers. Valour’s current product suites includes 12 unique ETPs including, Cardano (ADA), Polkadot (DOT), Solana (SOL), Uniswap (UNI), Avalanche (AVAX), Cosmos (ATOM), Enjin (ENJ), Binance (BNB), Bitcoin Carbon Neutral, and Valour Digital Basket 10 (VDAB10). Valour’s flagship Bitcoin Zero (BTC) and Ethereum Zero (ETH) products are the first fully hedged, passive investment products with 0% management fees.

For more information on products and offerings, visit: https://valour.com/.


This Newsletter is for informational purposes only and does not constitute, either explicitly or implicitly, any provision of services or products by Valour Inc or its subsidiaries, nor does it constitute investment advice. Valour Inc, and its affiliates, is not soliciting any action based on the content provided. Investments involve risk and investors should determine whether any particular product or service is suitable for their particular situation and/or seek professional advice. Past performance is not an indicator of future results and your capital is at risk.

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Den nordiska ETF-marknaden november 2023



Handeln på den nordiska ETF-marknaden november 2023 uppgick till cirka 9,1 mdkr (11,8 mdkr i oktober) varav cirka 8,6 mdkr omsattes i den svenska marknaden. Av den totala nordiska ETF-omsättningen var XACTs marknadsandel cirka 97%.

Handeln på den nordiska ETF-marknaden november 2023 uppgick till cirka 9,1 mdkr (11,8 mdkr i oktober) varav cirka 8,6 mdkr omsattes i den svenska marknaden. Av den totala nordiska ETF-omsättningen var XACTs marknadsandel cirka 97%.

Av den totala börsomsättningen i Sverige i november svarade ETF-handeln för cirka 2,2.%.

Den nordiska ETF-marknaden november 2023

Som vanligt var det XACT som hade störst marknadsandel på den nordiska ETF-marknaden i november 2023, med en marknadsdel på 96,78 procent. Finska Seligson & Co hade en marknadsandel om drygt 2,6 procent, vilket faktiskt gör att detta företag hade 100 procent av den finska ETF-marknaden. Resterande andel, 0,57 procent, svarade norska DNB OBX för. DNB är, sedan XACT lagt ned sina norska ETFer, den enda aktören som är verksam i Norge.

Statistik för den nordiska ETF-marknaden för perioden: 2023-11-01 – 2023-11-30

Antal handelsdagar: 22

Under november 2023 var den mest omsatta börshandlade fonden den traditionella XACT OMXS30 ESG (UCITS ETF).

Den näst mest omsatta börshandlade fonden hävstångsfonden Xact Bear x 2. Xact Bear x 2 tillsammans med Xact Bull x 2 handlas frekvent, och på kort sikt, vanligt förekommande i till exempel daytrading.

På fjärde plats hittar vi XACT Svenska Småbolag, en fond som sällan hamnar så pass högt på denna lista,

På femte plats finns Xact Norden Högutdelande, en ETF som oftast ingår i varenda utdelningsjägares portfölj, just för att denna börshandlade fond delar ut varje kvartal. Denna ETF lämnade årets fjärde utdelning under november vilket kan ha bidragit till det stora intresset.

Av de mest omsatta ETFerna på den nordiska ETF-marknaden oktober 2023 var elva av de tretton mest handlade börshandlade fonder emitterade av XACT. Utöver ovanstående ETFer finns även två börshandlade fonder från Lyxor, numera Amundi samt en från isländska Landsbréf, som handlas på den nordiska marknaden.

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WDGE ETF investerar i amerikanska utdelningsaktier och valutasäkras i euro



WisdomTree US Quality Dividend Growth UCITS ETF - EUR Hedged Acc (WDGE ETF) försöker spåra WisdomTree US Quality Dividend Growth (EUR Hedged)-index. WisdomTree US Quality Dividend Growth (EUR Hedged)-index spårar utdelningsbetalande amerikanska aktier med tillväxtegenskaper. Aktierna som ingår filtreras enligt ESG-kriterier (miljö, social och bolagsstyrning). Indexet är ett fundamentalt viktat index. Valuta säkrad till euro (EUR).

WisdomTree US Quality Dividend Growth UCITS ETF – EUR Hedged Acc (WDGE ETF) försöker spåra WisdomTree US Quality Dividend Growth (EUR Hedged)-index. WisdomTree US Quality Dividend Growth (EUR Hedged)-index spårar utdelningsbetalande amerikanska aktier med tillväxtegenskaper. Aktierna som ingår filtreras enligt ESG-kriterier (miljö, social och bolagsstyrning). Indexet är ett fundamentalt viktat index. Valutasäkrad till euro (EUR).

Denna börshandlade fond har en TER (total cost ratio) som uppgår till 0,35 % p.a. WisdomTree US Quality Dividend Growth UCITS ETF – EUR Hedged Acc är den enda ETF som följer WisdomTree US Quality Dividend Growth (EUR Hedged) index. ETFen replikerar det underliggande indexets prestanda genom samplingsteknik (köper ett urval av de mest relevanta indexbeståndsdelarna). Utdelningarna i ETFen ackumuleras och återinvesteras i den börshandlade fonden.

WisdomTree US Quality Dividend Growth UCITS ETF – EUR Hedged Acc är en mycket liten ETF med tillgångar på 0 miljoner GBP under förvaltning. ETF lanserades den 31 juli 2023 och har sin hemvist i Irland.

WisdomTree US Quality Dividend Growth UCITS ETF – EUR Hedged Acc

Fonden strävar efter att spåra pris- och avkastningsutvecklingen, före avgifter och utgifter, för WisdomTree U.S. Quality Dividend Growth UCITS Index. Andelsklassen strävar efter att leverera exponering mot indexet samtidigt som den neutraliserar exponeringen mot fluktuationer i euron genom att implementera en valutasäkringsmetod.

Varför investera?

• Få tillgång till högkvalitativa, utdelningsväxande företag från globala utvecklade marknader som uppfyller WisdomTrees ESG-kriterier (miljö, social och styrning)

• Dra nytta av riskscreening för att utesluta företag baserat på egenutvecklade kvalitet och momentum

Direktavkastning och inkomstpotential kan vara högre än ett börsvärdesindex

• Används som ett komplement till globala högavkastande utdelningsstrategier eller som en ersättning för aktiva tillväxt- eller kvalitetsstrategier med stora bolag

• Valutavolatiliteten minimeras genom användning av valutaterminskontrakt

• ETFen är fysiskt uppbackad och UCITS-kompatibel

Potentiella risker?

• Utdelningsviktade index kan prestera annorlunda än ett börsvärdevägt index

• En investering i aktier kan uppleva hög volatilitet och bör betraktas som en långsiktig investering

Direktavkastning och inkomstpotential kan vara högre än ett börsvärdesindex

• Investeringsrisken kan vara koncentrerad till specifika sektorer, länder, företag eller valutor

• Avkastningen av valutaterminskontrakten, som rullas på månadsbasis, är utformade för att minimera valutafluktuationer men kanske inte perfekt kompenserar de faktiska fluktuationerna.

Denna lista täcker inte alla risker – ytterligare risker beskrivs i KIID och prospekt


WisdomTree US Quality Dividend Growth UCITS ETF – EUR Hedged Acc (WDGE ETF) är en europeisk börshandlad fond. Denna fond handlas på flera olika börser, till exempel Deutsche Boerse Xetra och Borsa Italiana. Av den anledningen förekommer olika kortnamn på samma börshandlade fond.

Det betyder att det går att handla andelar i denna ETF genom de flesta svenska banker och Internetmäklare, till exempel DEGIRONordnet, Aktieinvest och Avanza.


Borsa ItalianaEURDGRE

Största innehav

NamnKortnamnLandVikt %
1. Microsoft CorpMSFT USUS8.49%
2. Apple IncAAPL UQUS6.12%
3. Johnson & JohnsonJNJ UNUS3.98%
4. Broadcom IncAVGO USUS3.57%
5. Procter & Gamble Co/ThePG USUS3.16%
6. Home Depot IncHD UNUS2.78%
7. Coca-Cola Co/TheKO UNUS2.54%
8. Merck & Co Inc/NJMRK UNUS2.50%
9. Cisco Systems IncCSCO UQUS2.34%
10. Walmart IncWMT USUS2.24%

Innehav kan komma att förändras

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Bitcoin Expands Utility and All Eyes on Polygon: What Happened in Crypto in November?



Bitcoin Expands Utility Markets flourished in November. The total crypto market cap increased by ~13%, month-over-month, with increased institutional interest in this burgeoning asset class.

Markets flourished in November. The total crypto market cap increased by ~13%, month-over-month, with increased institutional interest in this burgeoning asset class. Stocks also had a comeback last month, with S&P 500 and Nasdaq recording their best performance since July 2022. In line with the market sentiment, Europe’s inflation dropped more than expected to 2.4% in November, down from 2.9% in October, the lowest over two years. The cost of living has eased with plummeting energy prices, but higher interest rates limit the economy’s ability to grow. However, with a cooling inflation towards the ECB’s 2% target, markets are hopeful that interest rates will stop by April 2024. In the U.S., inflation data is coming out on December 12, with indicators like the personal consumption expenditures price index (+0.2% month-over-month) already pointing towards cooling inflation and potential interest rate cuts in 2024.

Ahead of the historically calm holiday season, Bitcoin and Ethereum increased by 9.31% and 13.38% in November, respectively, as shown in Figure 1. The biggest winners of last month were Solana (+69.28%), Avalanche (+86.72%), and Uniswap (+42.34%). Additionally, in this report, we’ll explore what Argentina’s new president could mean for South America’s troubled, second-largest economy. We’ll also discuss Bitcoin’s expanding utility and how it reflects on its fundamental metrics; exchanges looking at Polygon for deploying their own custom blockchain; Avalanche aiming to position itself as the platform for financial institutions; and Lido decentralizing its node-infrastructure operations.

Figure 1: Price and TVL Development of Major Crypto Sectors in November 2023

Source: 21shares, CoinGecko, DeFi Llama. Data as of November 30, 2023.

5 Trends to Remember from November

Argentina’s New President

Bitcoin rallied back to pass the $37K mark as Argentina elected a pro-Bitcoin, right-wing president, Javier Milei. Although the president-elect made no promise to make Bitcoin a legal tender, the volumes indicate some hope that Milei’s appointment could mean economic revitalization for South America’s second-largest economy with the help of Bitcoin, a la El Salvador. El Salvador’s GDP is expected to reach $33.4B by the end of 2023, a ~20% increase from when it declared Bitcoin as a legal tender in 2021. With an inflation rate exceeding 140% in 2023, Argentina’s GDP growth has been sluggish, averaging 0.51% from 1993 until 2023, as shown in Figure 2.

“The central bank is a scam. What Bitcoin represents is the return of money to its original creator, the private sector,” Argentina’s president-elect said as part of his presidential campaign, vowing to shut down the central bank, replacing the Argentine peso with the US dollar, and embracing decentralized finance. Samson Mow, CEO of JAN3 (a startup scaling Bitcoin) and an advisor to El Salvador during its adoption of Bitcoin, has said he’s planning to meet with Argentina’s new president. Indicators of whether Milei’s plan will work in Argentina’s favor are yet to be discovered.

Figure 2: Argentina’s GDP Growth Rate

Source: Trading Economics

Bitcoin Fees Skyrocket While the Network Expands its Utility

Bitcoin’s fees have increased by 593.94% over the past month, mostly driven by Ordinals, a protocol that allows users to inscribe digital assets akin to nonfungible tokens. Ordinals have had the most inscriptions since May 2023, as shown in Figure 3. With the backdrop of Ordinals’ success rate, Bitcoin developer Robin Linus introduced BitStream, a decentralized file hosting on Bitcoin, where users can upload unique files, enabling anyone to monetize their excess bandwidth and data storage capacities without relying on trust or heavy-weight cryptography. BitStream’s pay-to-download approach allows the server to charge for each download, ensuring that the revenue scales with the popularity and demand for the media, creating a balanced and profitable ecosystem. This development is another expansion of Bitcoin’s burgeoning use cases and would onboard a diversified audience. With BitStream’s promise, Bitcoin can capture the total addressable market of data storage, which stands at at least $230B. Although BitStream’s pricing scheme is not clear yet, decentralized data storage solutions, like Filecoin and Arweave, have been proven to be a lot cheaper than Google Cloud, Amazon S3, and its other centralized peers, varying by usage, as showcased extensively in the tenth issue of our State of Crypto, which you can find here.

Figure 3: Fees from Ordinals and non-Ordinals (%)

Source: 21.co on Dune Analytics

Exchanges Looking at Polygon for Deploying their Own Custom Blockchain

Kraken and OKX are strategically eyeing the Polygon network, aiming to capitalize on its CDK framework for constructing their individual blockchains. This strategic move aligns with Coinbase Base’s remarkable success, amassing approximately $5.4M in profit since inception, translating to an annualized profit of around $20 million. Boasting 9M and 50M monthly users, respectively, Kraken and OKX processed a daily average of ~$1B in 2023 and would potentially foster substantial growth within the on-chain ecosystem. Both moves would contribute to Ethereum’s revenue via anchored networks paying security costs to settle their transactions. Additionally, leveraging CDK modules proves advantageous for Polygon, empowering network stakers to bond POL and enhance earnings amid escalating network usage — a positive demand loop for the POL token within the new Polygon 2.0 staking layer design. Notably, Polygon’s efforts to onboard diverse companies are gaining traction, surpassing BNB and Ethereum in supporting new applications (Figure 4).

Figure 4: Total number of new applications on the five leading Smart-Contract Platforms

Source: Artemis

Avalanche Aiming to Position themselves as the Platform for Financial Institutions

For instance, Citibank and Fidelity unveiled a foreign FX exchange solution operating on a private permissioned Avalanche Subnet to enable instantaneous settlement and cost-effectiveness. Further, JP Morgan and Apollo Global collaborated on an asset-agnostic portfolio management solution. The latter empowers fund managers to tokenize portfolios using JP Morgan’s ONYX and the Oasis Pro asset-issuing platform while leveraging multiple crypto interoperability protocols to seamlessly exchange and rebalance portfolios across various blockchains, bridging EVM and non-EVM, private and public chains.

The experiment demonstrated the power of smart contracts in automating over +3000 operational steps and reduced costs by almost 20% via programmatic settlement despite involving multiple parties in the asset management process. The experiment also demonstrated the benefits of interoperability, providing a holistic solution for managing traditional and alternative assets in a single discretionary portfolio spanning multiple asset classes.

Both initiatives underscore Avalanche’s unique value proposition, positioning it as a standout choice among smart contract platforms. The Evergreen subnets, designed for compliance with KYC and AML checks, offer native privacy and customizability, providing enterprise-level blockchain support without the constraints of a siloed private blockchain system. The model also facilitates a pioneering connection between traditional finance’s proprietary software and native crypto railways, potentially fostering synergies and accelerating ecosystem integration. Ultimately, despite the initial surge in Avalanche’s transaction volume following these integrations, reaching its peak since inception, as illustrated in Figure 5, the network activity sharply declined after that. This underscores the imperative for the network to intensify its initiatives in onboarding high-demand projects as subnets.

Figure 5: Total number of transactions on the Avalanche Network

Source: Subnets.avax.network

Lido is Decentralizing its Node-Infrastructure Operations

Lido DAO, the largest non-custodial staking provider, approved two proposals to adopt Distributed Validation Technology. DVT refers to a mechanism spreading out key management and signing responsibilities across multiple parties to reduce single points of failure and increase validator resiliency. That said, Lido will integrate DVT modules with Obol and SSV protocols, which is set to introduce a more diverse profile of node operators beyond its current list of 38 validators and help address a key concern around centralization. This is a key development as Lido stirred a debate since it’s close to accounting for a third of staked ETH (see Figure 6); it could have undesired influence over the network’s validation process and block production. This implementation is crucial to ensure the diversification of the protocol’s node operators and increase their reliability in case of validator failures or censorship attempts. Conversely, SSV and Obol networks represent new primitives, so they must remain vigilant regarding any unforeseen vulnerabilities they could introduce.

Figure 6: Dominance of Entities Staking on the Ethereum Network

Source: 21co at Dune

What to Expect

Binance, CZ, and the softening headwinds leaning into 2024

On November 21, Binance pleaded guilty and agreed to pay over $4 billion to resolve the Justice Department’s investigation into violations related to the Bank Secrecy Act, failure to register as a money-transmitting business, and the International Emergency Economic Powers Act. Binance’s founder and CEO, Changpeng Zhao (commonly known as CZ), also pleaded guilty to failing to maintain an effective anti-money laundering program and has resigned as CEO of Binance. The world’s biggest crypto exchange by assets under management has experienced $47.3B in outflows and $44.6B in inflows in November, as seen in our Dune Analytics dashboard tracking Binance’s proof of reserves.

What should we expect in 2024? CZ could face up to 18 months in prison after his sentencing in February 2024. Binance’s new CEO Richard Teng, has outlined his vision to continue building on Web 3, with a special focus on decentralized applications that empower data ownership. With Binance’s Greenfield venturing into decentralized file storage, we can expect more investment in this space to diversify revenue streams and return Binance’s brand image to industry leadership. One catalyst for that is the fact that Teng is a member of the World Economic Forum, which can yield further institutional interest in the broader industry of decentralized finance. One challenge remains untackled: Binance’s dwindling market share, especially in derivatives. In the first weeks of November, the Chicago Mercantile Exchange (CME) toppled Binance in Bitcoin futures following speculation around a spot Bitcoin ETF in the U.S.

Figure 7: Binance Asset Flow

Source: 21.co on Dune Analytics

Interoperability Protocols are Rethinking Strategies to Remain Relevant

Polkadot, for instance, is replacing its long-standing parachain auction system with Bulk Coretime and Instantaneous Coretime. For context, the existing auction system is a model for applications to enter into a competitive bidding war to lease a slot on the Polkadot network as an interconnected network known as a parachain. That said, the new two models would introduce either a pay-as-you-go model where developers rent blockspace as needed for their projects or alternatively use the conventional lease model with shorter rent periods that make it more cost-effective for projects.

Polkadot’s imminent 2.0 system redesign, slated for the second half of 2024, incorporates the aforementioned modules and introduces a trustless bridge to link with the Ethereum ecosystem. These enhancements, addressing the network’s waning interoperability against competitors like Chainlink, are pivotal for Polkadot to sustain its relevance and fortify its accessibility towards more vibrant ecosystems such as Ethereum.

On the Cosmos side, the community approved a proposal to decrease the network’s inflation from 14% to 10%, reducing the staking APR from 19% to 13.4%. While the proposal addresses the challenge of ATOM’s high inflation, which dilutes the token’s value, it highlights a utility conundrum. ATOM lacks a clear role in facilitating access to the Interchain security economy powered by its InterBlockchain Communication protocol (IBC). This absence of a distinct value proposition beyond its attractive yield may prompt smaller validators to unstake, potentially leading to increased centralization and compromising IBC security.

That said, the discord led the founder to propose a hard fork of the network into ATOM1, as he argues the inflation rate cut compromises the security of the Cosmos hub due to the network’s interoperability design, which is more crucial than elevating ATOM as a sound medium of exchange currency akin to ETH. Further, Cosmos’s interoperability technology has also been exported to the Avalanche network on testnet, a significant milestone marking the first integration outside the Cosmos ecosystem and bringing crypto closer to a trustless multichain future. Finally, Cosmos is experiencing heightened chain activity, likely driven by the launch of dYdX and USDC on Cosmos and evidenced by increased fees and active users, reaching a YTD peak, as illustrated in Figure 8, which we’ll be closely monitoring over the next few weeks.

Figure 8: Growth of Active Users and Fees on the Cosmos network

Source: Token Terminal


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Next Month’s Calendar

These are the top events we’re closely monitoring in December.

Source: 21shares, Forex Factory, CoinMarketCal

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Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com


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