The big Web3 Ripple effect

Dear member,

This week, crypto markets demonstrated robustness with BTC and XRP performing well on positive news. The crypto market cap surged by $73.5 billion following a U.S. judge's favorable ruling on XRP's non-security status. This uplift extended to BTC, achieving a yearly high of $31,686, and ETH breaking past the $2,000 mark.

BTC inflows remained positive for the fourth week, reaching $74m, highlighting ongoing investor interest. Despite this, ETH experienced outflows, leading in total outflows year-to-date. Yet, an increase in global ETP exposure in BTC equivalent shows a rise in investors' risk appetite, especially after BlackRock's spot-based ETF filing last month.

Despite a slight downturn in VC funding for Web3 compared to last year, significant investments in Worldcoin and LayerZero underscore ongoing support for Web3 startups. This slowdown offers a chance for market consolidation and reinforcement. Ripple's legal win may also serve to boost confidence in digital currencies, possibly prompting increased investment and risk management reassessments.

The ongoing shift from Web2 to Web3 is spurring innovation and adoption in surprising areas, from NFT use in customer engagement and digital art, to Web3 integration by traditional Web2 giants. This trend is presenting lucrative investment opportunities for venture funds and potential growth paths for Web3 startups. Furthermore, the development of interoperability protocols like Chainlink's CCIP is enhancing cross-chain transactions, forecasting a seamless Web3 future. For Web3 enthusiasts, these advancements signal a promising shift towards mainstream acceptance of Web3 technologies.

From a regulatory standpoint, the U.S. has seen a positive shift with the Ripple ruling, potentially marking a precedent that could lead to a more favorable environment for cryptocurrencies. Globally, countries like Russia and China are pushing towards digitizing their economies, underscoring the worldwide trend towards digital currencies.

While the crypto landscape continues to evolve at a breakneck pace, this week's market buoyancy, the move from Web2 to Web3, and the shifting regulatory sands provide fascinating points for discussion and consideration. Remember, even in a rollercoaster, there are a lot of value during the ride that are ripe for the picking.

Best regards from the Future,
RFTF.ai 

Market Intel

Crypto market cap added $73.5B in the 24 hours following a U.S. judge's ruling that XRP is not a security (in certain cases.) XRP led other altcoin rise, while BTC reached a new yearly high of $31,686 and ETH moved above its psychological resistance level of $2,000.

Web3 funding from venture capital funds plunged 76% in Q2 compared to the same period a year ago. In 2022, Web3 startups raised nearly $16B in the first half of the year, but this year’s fundraises have totaled just $3.6B — a 78% drop. Despite the drop, some significant funding rounds were still seen, with Worldcoin and LayerZero raising $115m and $120m respectively.

BTC sees $137m inflows, positive movement for the 4th consecutive week. This brings the four-week total to $74m. BTC carried 99% of all inflows with a weekly total of $14m. However, ETH saw outflows of $2m and remains the asset with the highest total outflows YTD.

Crypto trading fell by 43% by Q2 2023, based on a report by CoinGecko. NFT trading volume also declined by 35.0%, from $4.84B in Q1 to $3.15B in Q2.

BTC-equivalent exposure of ETPs listed worldwide increased by 25,202 BTC ($757m) to 196,824 BTC in 4 weeks to July 16. This is the 2nd-highest monthly net inflow since 2021. Crypto investors have poured money into BTC ETF at a record pace ever since BlackRock filed for a spot-based ETF on June 15.

Liquid-staked ETH on derivatives protocols saw a 16.98% rise in the past 2 months, with an addition of 1.5m ETH across 23 platforms. The sector's value swelled by almost $3B, with the total ETH held increasing from 8.87m to 10.3m. Lido Finance experienced a significant inflow of about 1.1m ETH, increasing its TVL to around $15.4B. The quantity of ETH locked in liquid staking now represents 8.63% of the total circulating supply.

Funding Trends

Skyplay raised $10m from LDA Capital to expand its gaming portfolio. The South Korea-based blockchain platform offers various games, including Clashrow, and allows users to earn coins and trade NFTs. The platform has approximately 300,000 monthly users and operates in over 170 countries.

Crypto venture capital firm Polychain Capital secured $200m in its fourth funding round. The firm aims to raise $400m in total, with more funding rounds underway. Despite a bearish crypto market and regulatory uncertainties, Polychain Capital has raised over $2.6B in assets under management across 3 funds.

RISC Zero raised $40m in a Series A round led by Blockchain Capital. The developer of infrastructure for building zero-knowledge proof software will use the funds to bring its Bonsai computing platform to market.

Investment firm CoinFund has raised $158m for its Seed IV Fund LP, surpassing its original target of $125m. These funds will primarily support early-stage ventures in the web3 ecosystem. CoinFund has recently invested in several web3 and AI projects.

Ethena raised $6.5m in a seed round led by Dragonfly Capital. The funding will be used to launch Ethena's decentralized stablecoin, expected in Q3 2023. Ethena views its permissionless savings return product as a significant opportunity, with a potential market of more than $130B. A later phase will introduce the "internet bond", a globally accessible, permissionless crypto savings instrument.

Superblock raised $8m in two funding rounds from prominent South Korean companies and VCs including SK, Netmarble, DSC, E&Investment, Schmidt, SpringCamp, and NaverZ. Superblock runs on Over Protocol, a L1 blockchain that facilitates low-storage node operation and home-based staking for passive income. Superblock is developing supportive products and applications for this protocol.

3rd-largest lending protocol on Arbitrum Radiant Capital received a $10m investment from Binance Labs. The funds will be used for tech and product development, including expanding oracle support, collateral expansion, Ethereum mainnet deployment, cross-chain liquidations, dual-emissions support, abstracted repayments, and full LayerZero messaging support.

Web2 → Web3 Immersion

Sidechains have the potential to provide scalability and flexibility needed for real-world applications, claimed Rob Viglione, CEO of Horizen Labs. He highlights the ability of sidechains to process transactions off the main blockchain, reducing congestion and improving speed, while maintaining security and decentralization.

6 countries account for over 90% of Africa's crypto interest in H1 2023, a study reveals. South Africa, Morocco, Ghana, Egypt, and the Ivory Coast accounted for 23.8% of the continent’s interest in crypto YTD.

CoCreate released a Web3 loyalty app on Shopify, allowing customers to earn and spend loyalty points as NFTs. The app, called "Loyalty NFTs", enables businesses to create unique, branded NFTs that customers can collect, trade, or sell.

“The Flash” NFT will be released by Warner Bros. which will be minted on the Ethereum blockchain, will include exclusive behind-the-scenes content available for purchase on Rarible platform.

Gucci partnered with Christie's to auction off NFTs of its iconic fashion designs. The auction, titled "The Future is Unwritten", features digital interpretations of Gucci's designs by various artists and is part of the brand's push into the metaverse.

Olyverse and the Thyssen Museum collaborated to bring a Van Gogh masterpiece to the metaverse. The project involves the creation of a digital replica of Van Gogh's "The Starry Night", which users can explore in a 3D environment.

Jay-Z and Puma teamed up to release NFT sneakers, which represent ownership of a physical pair of sneakers to be auctioned off on the platform Sotheby's Metaverse.

Chainlink's CCIP interoperability protocol is now live. The protocol connects blockchains to bank chains, allowing for the seamless transfer of data and value across different blockchain networks, facilitating more efficient cross-chain transactions.

One of South Korea's oldest banks Shinhan Bank successfully conducted a stablecoin remittance trial on the Hedera network. The test targeted solutions for high fees and long settlement times in cross-border payments involving the Thai Baht, New Taiwan Dollar, and South Korean Won.

Doodles NFT project will host a pop-up experience at a new Camp theme park in Chicago. The park, which will mix Doodles’ pastel-themed NFT ecosystem with Camp’s family experience business, is part of Doodles' integration into mainstream media and consciousness.

NARS Cosmetics will release an NFT collection inspired by the colors and textures of a shade the company calls “Orgasm,” and will be auctioned on the SuperRare platform, with all proceeds and royalties going to the creators.

A Ferrari F40 sports car worth $2.5m has been sold as a Polygon NFT on the Altr platform. The platform issues digital proof of ownership for all luxury items sold in the form of NFTs and secures the physical item until the new owner is ready to claim it.

McDonald’s Hong Kong will build its first Web3 experience, opting for The Sandbox. McNuggets Land, a virtual world dedicated to celebrating Chicken McNuggets’ 40th anniversary, will take users to a virtual store with a hidden factory and a tour through the history of the chicken snack, allowing gamers to play and complete quests to win rewards.

Regulatory Round-up

APAC

China's digital yuan has recorded over $39B worth of transactions. The digital yuan is part of China's efforts to digitize its economy and reduce its reliance on the U.S. dollar.

Indonesia’s commodities futures regulator has established an official cryptocurrency exchange and a clearing house for digital assets. The move is part of the regulator's efforts to regulate the fast-growing digital asset space in the country.

National Australia Bank has banned payments to high-risk crypto exchanges. The move is part of the bank's efforts to protect its customers from potential fraud and scams associated with these platforms.

EU

Societe Generale's division Forge has received a crypto services license from the French financial markets authority, AMF. The license allows Forge to provide services related to digital assets, including custody, trading, and advisory services.

The French central bank believes that distributed ledger technology (DLT) will enhance financial stability due to its transparent nature. The bank stated in a report that DLT has the potential to enhance the efficiency and effectiveness of the monetary and financial system.

The UK's Financial Conduct Authority (FCA) has announced the launch of a permanent Digital Sandbox aimed at supporting tech firms in the early stages of product development.

Ripple has applied for a crypto asset firm registration with the UK’s FCA and is seeking a payment institution license in Ireland. This move underscores Ripple's commitment to navigating and embracing the regulatory landscape, especially after its recent legal victory against the SEC in the US.

The European Union has outlined a strategy for Web3, the Metaverse, AI, and crypto, which includes fostering innovation, promoting the digital economy, and ensuring the digital transformation is inclusive and sustainable.

International

Russia is set to start testing its digital ruble CBDC in August, barring a veto from President Putin. The digital ruble is part of Russia's efforts to digitize its economy and reduce its reliance on the U.S. dollar.

G20’s Financial Stability Board proposed 9 measures to regulate the crypto industry. These include stricter supervision of crypto service providers, anti-money laundering initiatives, measures to combat terrorist financing, and systems to manage stablecoin-related risks.

SA

Argentina's Central Bank approved the country's first Bitcoin-based futures. The move is seen as a significant step in legitimizing cryptocurrencies in the country, potentially paving the way for further integration of digital assets into Argentina's financial system.

US

A Bernstein report suggests that the recent ruling in favor of Ripple could weaken the SEC's stance against cryptocurrencies. The report indicates that the ruling could set a precedent for future cases, potentially leading to a more favorable regulatory environment for cryptocurrencies.

The U.S. Federal Trade Commission (FTC) has ordered Celsius Network to pay $4.7 billion in fines for alleged deceptive practices. However, the fine will be reduced to $600,000 if Celsius can prove it has returned all funds to affected customers and implemented necessary changes to prevent future violations.

The SEC has acknowledged the application for a Bitcoin ETF by Valkyrie. This marks a significant milestone in the crypto industry, as more ETF applications have followed suit.

Republican lawmakers in the U.S. are preparing a new crypto bill in the wake of the Ripple decision. The bill aims to provide clarity on the regulatory status of cryptocurrencies and protect consumers and investors.

Instant payments system FedNow has been launched by the Federal Reserve has launched FedNow. The system, which is supported by 33 banks including JPMorgan and Wells Fargo, aims to modernize the U.S. payment infrastructure and provide faster, more efficient payment services.

The Raven Also Spotted

JP Morgan sees the recent Ripple court ruling as a potential game-changer for crypto regulations, and could create a safer investment environment. Barclays suggests this positive precedent could also lower regulatory risk for entities like Coinbase, boosting business growth and investor confidence.

US Presidential candidate RFK Jr. pledged to eliminate crypto capital gains tax boost crypto innovation and investment. Meanwhile, potential candidate Ron DeSantis vowed to outlaw CBDCs, fearing they could heighten government financial control and jeopardize privacy rights. Their stances may shape investor sentiment, the pace of innovation, and the overall growth of the crypto sector.

Cathie Wood, ARK Invest founder, foresees Bitcoin hitting $1.5m by 2030 due to its limited supply and growing demand. The ARK Next Generation Internet fund (ARKW) had strong Q2 2023 performance, partly driven by the success of Grayscale Bitcoin Trust (GBTC).

8 billion people may come on-chain in the next decade, claims Coinbase's protocol lead Jesse Pollak. He believes that blockchain technology will progressively change billions of people's lives by providing access to the same products and services, regardless of where they were born or live.