Maven's Insight August

31 August 2021

As mentioned in the previous edition of Maven’s Insights, August 5th saw the long-awaited ‘London’ upgrade of the Ethereum network take place. The upgrade contained one of the most important improvements to the network of recent years, called EIP-1559. It fundamentally changed the economics of the network, as a portion of ETH fees is now burned - amounting to more than 100.000 ETH (~316M USD) so far. In the context of the other drastic change coming to Ethereum, specifically the move towards a Proof-of-Stake Ethereum, the changes introduced by EIP-1559 may very well make Ethereum deflationary to some degree. For a deeper dive into the specifics of the upgrade, head on over to our latest blogpost.

August was also rife with regulatory chatter, with crypto having an extended stay on the political stage during negotiations around the $1 trillion magnum opus of Biden’s presidency, the Infrastructure bill. The Infrastructure bill would be partially funded through a new crypto-tax, although the language used in the bill was confusing and unfeasible. Despite a large and intense lobbying process and the introduction of crypto-friendlier amendments, the Infrastructure bill ultimately passed in its original state. Crypto was also in the regulatory spotlight as SEC chairman Gensler spoke about further institutionalization and regulation of crypto, noting his openness to a possible Bitcoin ETF.

On the back of positive comments about Bitcoin ETFs made by Gensler, August also saw a large uptick in activity and interest in crypto from traditional finance. JPMorgan launched their in-house Bitcoin fund for HNWI’s and Neuberger Berman ($400B AUM) filed to expand their fund into Bitcoin and Ethereum. A large number of ETF requests were filed (VanEck, Invesco, amongst others) and Melanion Capital saw their EU Bitcoin-tracking ETF approved. Additionally, this month further confirmed interest in central bank digital currencies (CBDCs), with a US bill being proposed to authorize the Fed to issue a CBDC, and multiple national central banks piloting or proposing the issuance of their CBDCs. Additionally, large institutional players announced purchases of Grayscale’s BTC Trust (GBTC); Morgan Stanley purchased $240M in shares, while robo-advisor Wealthfront ($25B AUM) enabled users to get Bitcoin exposure through GBTC as well.

NFTs were one of the main narratives dominating the crypto-sphere during August, coinciding with weekly record volumes surpassing $1B on NFT exchange platforms like OpenSea, which contributed to high levels of activity on the Ethereum network. Shopify started to allow merchants to directly sell their NFTs on their platform, and digital payment giant Visa purchased a CryptoPunk NFT for $150,000.

The amount of interest in trading by retail traders in the cryptocurrency markets was also underlined once more: Coinbase published their Q2 earnings, with a net profit of almost double Q1 and reporting an increase of 44% in monthly transacting users. Robinhood’s Q2 earnings showed crypto is now the driving force behind their revenue stream: crypto transaction revenues increased by a massive 4282% in Q2 QOQ accounting for more than half their total revenue. eToro found themselves in a similar spot, with their Q2 income multiplied 23x QOQ to a total of $362M, of which 73% was derived from cryptocurrency trading while last year that was only 7%.

Institutional interest also showed in a flurry of crypto-related vacancies this month. Previously Apple and PayPal were looking to hire for crypto positions, and this month retail giant Walmart demonstrated they’re looking to prepare themselves for broader crypto adoption by looking for a digital currency and cryptocurrency product lead to drive their digital currency strategy and identify crypto-related partnerships and investments. We are convinced we’ll see more of this type of institutional adoption in the near future.

Our pool on Maple Finance grew to 50M USDC from July this year. As a Pool Delegate, we issued 11 loans so far to the most prominent crypto companies in the space. We are planning to scale the pool to at least 100M at the end of this year. We’re also looking to increase diversification of our borrowers to DAOs, crypto mining companies as well as node operators. For more information on our role as Pool Delegate in the Maple Finance ecosystem, have a look at our previous monthly update. If you would like to learn more about being a lender on Maple Finance, you can reach out to us directly.

Portfolio company Shyft Network announced they will be supplying key KYC technology to 35 leading crypto service providers, including Binance, Deribit, Bitfinex, and stablecoin issuer Tether. To expand our portfolio, we also participated in the fundraise of Chainflip, a permissionless cross-chain AMM, which was covered by Coindesk.