First Mover Asia: Solana Market Shrugs Off TVL Fakery With Price Rebound; Ether Climbs on Merge Anticipation

The SOL token has climbed over the past week, despite a scheme by developers that artificially boosted the value of Saber and the Solana blockchain.

AccessTimeIconAug 12, 2022 at 12:30 a.m. UTC
Updated Nov 14, 2022 at 5:59 p.m. UTC

James Rubin is CoinDesk's U.S. news editor based on the West Coast.

Good morning. Here’s what’s happening:

Prices: Bitcoin spends most of Thursday above $24K before declining; ether jumps even higher.

Insights: SOL gains ground despite a scheme that juiced the value of Saber and the Solana blockchain.

Prices


Bitcoin (BTC): $23,781 −1.0%

Ether (ETH): $1,860 +0.3%

S&P 500 daily close: 4,207.27 −0.1%

Gold: $1,804 per troy ounce +0.5%

Ten-year Treasury yield daily close: 2.89% +0.1


Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.

Ether's Fine Day

By James Rubin

Bitcoin climbed most of Thursday. Ether climbed faster.

The second-largest cryptocurrency by market capitalization continued a two-month surge to crack $1,900 for the first time since late May. Ether was recently trading at about $1,850, about flat over the previous 24 hours as investors continued an early celebration of the Merge, which will shift the Ethereum protocol from a proof-of-work to less energy-sapping, more environmentally friendly proof-of-stake protocol. The token price has jumped more than 85% since dipping below $1,000 in mid-June.

On Wednesday, developers completed the third and final test environment network (testnet) merge. The mainnet Merge is expected to occur sometime at the end of September.

"I'm bullish on Ethereum," Dan Weiskopf, portfolio manager for Amplify ETFs, told CoinDesk TV's "First Mover" program.

Bitcoin

Bitcoin, the largest crypto by market cap, was recently trading at roughly $23,800, down slightly from the previous day but still near the upper end of the roughly $19,000 to $24,000 range its occupied since June. Crypto investors have responded favorably to the latest economic indicators suggesting that the worst of inflation is behind us and the global economy may not plummet into a steep recession.

"People are excited about taking on risk again because it seems as if inflation is under control," Weiskopf said. "We'll see if that actually proves out. That bitcoin bottomed and now we're at $24,000, a lot of people are excited about that."

Equities

Crypto prices veered from major stock indexes, which were flat a day after gaining enough ground for the tech-heavy Nasdaq to re-enter bullish territory. The Nasdaq, which is still down 18% for the year, fell 0.6%, while the S&P 500, declined 0.1% as investors seemed to discount the latest evidence of waning inflation, a drop in the Producer Price Index (PPI). The 0.5% drop was the first negative turn since April 2020.

Crypto news

The crypto industry's latest indignities included a report that India regulators were investigating at least 10 crypto exchanges for allegedly assisting foreign firms launder money via crypto. Separately, Canadian bitcoin miner Hut 8 (HUT) posted a C$88.1 million (US$69 million) loss for the second quarter, compared with a loss of C$4 million in the same quarter a year ago and withdrew its revenue estimate for next year that it had made in its first-quarter earnings report, saying it was reorganizing parts of its business.

And Coinbase, which has suffered its share of knocks this week including a disappointing second quarter earnings report, saw credit ratings agency S&P Global drop the crypto exchange giant's long-term issuer credit rating and senior unsecured debt ratings to BB from BB+ and call the company's outlook "negative."

S&P Global cited "weak earnings and competitive pressure" in its note.

Biggest Gainers

Asset Ticker Returns DACS Sector
Ethereum ETH +0.3% Smart Contract Platform

Biggest Losers

Asset Ticker Returns DACS Sector
Gala GALA −6.0% Entertainment
Polkadot DOT −5.3% Smart Contract Platform
Terra LUNA −5.1% Smart Contract Platform

Insights

SOL's Price Rebound

By Sam Reynolds

Dylan and Ian Macalinao built an elaborate network of, in their own words, “protocols that stack on top of each other, such that a dollar could be counted several times” on top of a Solana stablecoin exchange called Saber. They used 11 aliases in their scheme.

At its peak, their double-counting protocols amounted to $7.5 billion in total value locked (TVL) at a time when the TVL of Solana was $10.5 billion. One has to wonder how much of the "Solana Summer" – last year’s meteoric rise of the protocol – was actually authentic or artificial.

But the market doesn’t seem to care.

Ever since CoinDesk reported that a good proportion of Solana’s TVL was effectively a blockchain version of a Russian nesting doll, Solana’s token is up. SOL is up 15% over the last week and was most recently trading at about $43.

CoinDesk - Unknown

SOL price chart (CoinDesk)

All this comes as the Solana TVL – the actual TVL – has decreased significantly. As a result of CoinDesk’s reporting, decentralized finance (DeFi) data service DeFiLlama switched off its default display of protocols’ double-counted crypto assets.

DeFiLlama “will spend the next few days reviewing all protocols again to check again against double counting,” its founder told CoinDesk.

Right now, Solana’s TVL is $1.94 billion while its double-counted TVL is $2.48 billion. As the year began, on Jan. 1, its double-counted TVL was $11.2 billion while its actual TVL was $8.1 billion.

Important events

ETH LATAM (Buenos Aires)

CoinDesk TV

In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:

MakerDAO Founder Rune Christensen joined "First Mover" to discuss the U.S. Treasury Department's ban of mixer Tornado Cash and his concerns should it lead to broader action against DeFi and MakerDAO's popular stablecoin DAI. Also, Dan Weiskopf, portfolio manager at Amplify ETFs, provided his markets analysis.

Headlines

Ethereum’s Third and Final Testnet Merge Goes Live on Goerli: Ethereum’s mainnet Merge with the proof-of-stake Beacon Chain should happen sometime next month.

After Brutal Q2, Coinbase Needs to ‘Get Smart’ About Revenue Streams: Analyst Says: Michael Safai, managing partner at Dexterity Capital, joined CoinDesk TV’s “First Mover” to discuss Coinbase's second-quarter earnings and the outlook for the crypto exchange.

South Korea Arrests 3 in Multibillion-Dollar Crypto-Linked Probe: Report: Authorities are investigating $3.4 billion in "abnormal transactions" involving foreign exchange and crypto investments, according to a local media outlet.

India Regulator Probes at Least 10 Crypto Exchanges on Money Laundering Allegations: Report: The Enforcement Directorate believes approximately 1,000 crore rupees (US$130 million) could have been laundered in the case.

JPMorgan: Ethereum Miners Face an Abrupt Change Following the Merge: Ethereum Classic miners are likely to be among the main beneficiaries of the shift to proof-of-stake validation, the bank said.

Longer reads

10 Crypto Sports All-Stars: For each Crypto All-Star, we tried to calculate what you would have gained – or lost – if you invested $1,000 in the All-Star's chosen project at the time of his or her announcement. This piece is part of CoinDesk's Sports Week.

Said and heard

"This is a new era for DeFi. That's happening now because the pendulum is swinging ... we can't really rely on the legal systems and we should prepare for a more adversarial environment that hasn't really, truly been the case. Up until this point, decentralization has been more of a meme than reality for many projects." (Rune Christensen, founder of MakerDAO, on CoinDesk TV's First Mover program) ... "In our February 2022 Proof of Reserves audit, Kraken led the industry by verifying the balance of our clients’ BTC and ETH holdings. The addition of five more leading cryptocurrencies expands the verification of our client balance coverage to 63% of the total assets held on Kraken. We plan to continue including additional assets in our future Proof of Reserves audits." (Crypto exchange Kraken blog)

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James Rubin is CoinDesk's U.S. news editor based on the West Coast.

CoinDesk - Unknown

James Rubin is CoinDesk's U.S. news editor based on the West Coast.