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Eterna's Insights - October 2023

Key Takeaways:

- Bitcoin’s impressive rally

- Celestia goes live

- UK publishes its final proposal for the crypto industry


Bitcoin’s Moment


This month marked the 15th anniversary of the Bitcoin Whitepaper. This significant milestone coincided with a month of positive developments in the crypto industry. Notably, Bitcoin gained an impressive 20%, largely attributed to the buzz generated by rumours about the approval of Blackrock's spot Bitcoin ETF. These rumours initially surfaced through the crypto news outlet Cointelegraph, but were subsequently refuted by Blackrock, who clarified, "The iShares Bitcoin ETF application is still under review by the SEC." Surprisingly, this setback did not dampen traders' enthusiasm, as Bitcoin prices surged to over $34,500. Adding to the excitement, the Depository Trust and Clearing Corporation (DTCC) temporarily listed a ticker for a Blackrock Bitcoin ETF on their website. While this listing does not signify approval in any way, it provided further fuel to the optimism surrounding this potential development.


Institutional Progress


The DTCC has furthered its eventful month in the crypto industry through its acquisition of Securrency. According to the DTCC, the deal is meant to quicken the development of a platform designed to “unlock the power of institutional DeFi,”. The Hong Kong Stock Exchange has followed in the steps of the London Stock Exchange in launching a Blockchain-based platform called Synapse. Synapse is set to transform post-trade workflows by seamlessly integrating smart contracts to mitigate settlement risks, thus ushering in a new era of efficiency and transparency in the world of financial transactions.


Meanwhile, the Chicago Mercantile Exchange (CME) Group has solidified its position as a major player in the cryptocurrency space, boasting a record-setting third quarter for Bitcoin and Ethereum futures and options contracts trading. In the Bitcoin Futures market, it now stands as the second-largest player, trailing only behind Binance, underscoring the growing engagement of institutional investors in the crypto derivatives market. During Q3, the average number of Bitcoin futures contracts surged to a record-breaking 15,800, representing an 11% increase compared to the previous quarter. Additionally, the open interest for Ether futures and options contracts surged by 22%, with Ether options contracts alone witnessing a 75% uptick.


Tokenisation Momentum Continues


The institutional adoption of crypto has continued to gain steam, particularly around tokenisation. JP Morgan carried out its first live blockchain-based collateral settlement transaction involving BlackRock and Barclays. It was done using JP Morgan’s Onyx Blockchain and its Tokenized Collateral Network (TCN) where Blackrock tokenised shares in one of its money market funds, which were then used as collateral for an OTC derivatives trade with Barclays. According to JP Morgan, the tokenisation occurred within a matter of minutes through connectivity between the fund’s Transfer Agent and TCN. Euroclear has ventured into the realm of tokenisation, unveiling a tokenised issuance service alongside the World Bank's 100 million Euros digital bond issuance. The World Bank Group's International Bank for Reconstruction and Development has earmarked the bond for financing sustainable development activities and it is now listed on the Luxembourg Stock Exchange.


Anticipated Mainnets Go Live


Celestia, the first modular data availability network, has finally launched its Mainnet. Data availability refers to the capability network nodes have to download transaction information, store the information and ensure that participants can access the information to verify or dispute its accuracy. Celestia offers a data availability layer that can verify transactions through a novel technique known as data availability sampling, without the need to download data from the entire block. This can increase the efficiency of a blockchain by improving transaction speeds and minimising costs. In addition, Layer 2 scaling solution, Scroll zkEVM, went live on Mainnet. Scroll zkEVM is a Zero Knowledge rollup that is compatible with the Ethereum Virtual Machine computing environment, or EVM. The compatibility makes it easy for developers to redeploy applications built for Ethereum onto the new zkEVM network.


UK Leaps Forward, SEC Stumbles Backward


The UK has published its final proposal for the crypto industry, announcing plans for a phased introduction of the regulation in 2024. While it is still unclear what the precise rules will look like, the government will bring a number of crypto-asset activities under the same regulations that govern banks and other financial services firms. Legislation for fiat-backed stablecoins will be introduced early next year, while other areas, such as algorithmic stablecoins will follow. These plans fall in line with an April 2022 policy set out by Prime Minister Rishi Sunak to make the UK a crypto-asset hub.


The SEC encountered yet another hurdle this month as a federal judge rejected its bid to appeal its loss against Ripple. The SEC had sought to challenge the judge's previous ruling in July that while Ripple violated federal securities laws in selling the XRP token to institutional investors directly, it had not done so by making XRP available to retail customers through programmatic sales to exchanges. However, the decision is not final, as the judge set a trial date of April 2024 for other issues in the matter that still need resolving.


Eterna Portfolio Company Spotlight


Linera enjoyed an eventful month, marked by several noteworthy achievements. The company participated as one of the key sponsors at the ETH London Hackathon, where they not only provided valuable support but also hosted a developer workshop. CEO and Founder, Mathieu Baudet, took centre stage to deliver an insightful presentation, shedding light on the remarkable capabilities of Linera. In addition to their involvement in the hackathon, Linera announced the winners of their Autumn Developer School, in partnership with Dorahacks. The winning projects included a Peer-to-peer content publishing application, a P2P chat solution emphasising anonymity through end-to-end encryption, and an application that simplifies social connections while empowering creators to reach new heights. To cap off this impressive month, Linera was selected by Suipiens as one of the top 5 new L1 blockchains to watch in 2023.


Disclaimer: this newsletter was put together for informational purposes only based on Eterna Capital's 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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