Welcome to The Node. This is Daniel Kuhn and Prachi Vashisht, here to take you through the latest in crypto news and why it matters. In today’s newsletter:
The total open interest in bitcoin futures has reached a yearly high of $12 billion, marking a 7% gain for the month, according to Coinglass data. The rise indicates increased speculative interest as well as the possibility of later price volatility. Meanwhile, with Arbitrum set to airdrop its ARB token this week, traders on derivatives platform Hotbit have already priced an “I Owe You” for the token at $9.74. Additionally, futures powerhouse BitMEX has introduced its own ARB token futures product on Monday, offering leverage of up to 20 times.
Gains, Not Blame
Following the recent collapse of several U.S. banks, the medium to long-term outlook for the crypto market has been “reinforced to the upside,” states a Coinbase report on Friday. “Cryptocurrencies have exhibited some resilience, in part due to technical reasons,” said David Duong, head of institutional research, adding that more people now “appreciate the fundamental value proposition of having an alternative to the points of failure inherent in the traditional financial system.” This comes as a Bernstein research report released Saturday said the banking crisis is a golden opportunity for a decentralized financial system to stand out from traditional banking. Furthermore, the report states the First Republic Bank’s deposit rescue package by multiple institutions should make it obvious the collapse was a “generic banking problem” where crypto shouldn’t be blamed.
Going Overseas
Coinbase, the largest U.S.-based crypto exchange, is considering opening a non-U.S. trading platform, and is presently exploring the idea with institutional clients, people familiar with the matter told Bloomberg. The search comes as the United States ramps up its actions against the crypto sector following FTX’s collapse and the closure of three crypto-friendly banks, Silvergate Bank, Signature Bank and Silicon Valley Bank. Coinbase already has a footprint in Europe and Asia, and may be trying to compete more directly on its largest competitor, Binance’s, overseas presence. In a recent interview with Consensus Magazine, Senator Cynthia “Crypto Queen” Lummis (R-Wyo.) predicted the recent regulatory backlash would drive out the domestic U.S. blockchain industry.
Sound Bites
“Driving any actors in cryptocurrency and other financial markets to have centers of gravity outside of the United States is a counter to U.S. national security objectives.”
– Former White House advisor, Carole House, on CoinDesk TV’s “First Mover”
Of the other participants that were actively involved in the conference, no other made an impact quiet like Near Protocol. Until recently, Near was a super-charged, proof-of-stake platform designed for speed, security, and scalability. Building on such a strong platform, people too often view Near as a competitor to Ethereum. However, Near’s presence at ETHDenver showed that the blockchain is not out to compete against Ethereum, but instead compliment the blockchain and support Ethereum for its shortfalls. Continue reading.
*This is sponsored content from Near Protocol.
The Takeaway: Not Crypto’s Fault
Time to add Credit Suisse (CS) to the list of bank failures we’ve seen so far in 2023.
Over the weekend UBS agreed to buy Credit Suisse for what equates to about $3.25 billion of UBS stock complete with the Swiss government helping absorb some of the coming writedowns of CS’s loan book. UBS had to step in to save CS after last Wednesday’s 50 billion Swiss franc liquidity injection from the Swiss National Bank proved insufficient to buoy the bank’s operations once the Saudi National Bank (CS’s largest shareholder) said it wouldn’t provide any more assistance.
We’ve come full circle: During the last financial crisis in 2008 it was UBS that was saved by the long arm of the Swiss government. This time the government needed UBS to lend a helping hand.
There are many financial system and banking system takes to be had here, but here’s a crypto-focused one.
Despite its lofty side quest to disrupt finance, it wasn’t crypto that upended these banks and it certainly didn’t upend Credit Suisse. Bankers were so busy laughing at crypto’s unraveling they didn’t realize their banks were also unraveling.
Instead of failing because bitcoin made banking services obsolete, Credit Suisse failed because it wasn’t good at being a bank. Remember in 2021 when Credit Suisse took $5.5 billion of losses on loans in connection to Archegos? And remember how it was embroiled in enough fraud in 2014 that it had to pay $2.6 billion to the United States Department of Justice?
Some other stuff happened and then Credit Suisse was forced to sell itself to a competitor at a steep discount.
All the while, bitcoin’s price is trending up as banks fail simply because they are being banks. This is really the first time the narrative of bitcoin as a way to opt out of unadvisable banking practices is playing out as we would have expected.
Banks are failing because they are bad at being banks and the Bitcoin blockchain is completely separate from those failures. Bitcoin is genuinely on the outside looking in on the mess and offers itself as a genuine means to opt out.
Banks don’t have a crypto problem, banks have a banking problem.
‘Be Your Own Bank’ Mantra More Relevant Than Ever (Blockworks)
We know that the recent events with the U.S. banking system have put many in the crypto and Web3 community in a challenging situation. That’s why we have decided to extend our current prices for Consensus 2023. This means that you have a few more days to take advantage of these savings on your registration for the most important event in crypto and Web3.
Kudos for making it this far! On occasion, we’ll give our loyal Node readers the opportunity to claim DESK, our social token, which is a mechanism for returning the value of engagement directly to the users who create it.
