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Welcome to The Node! This is Ben Schiller to take you through the latest crypto news. In today's news: U.S. government moves "Silk Road" tokens; miners take stock 100 days after Bitcoin Halving; Polymarket election betting moves past $400M; Senator Lummis proposes bitcoin buy to pay down national debt.
The Takeaway: The range of returns available across digital asset markets offers unique opportunities for investors, says Alex Botte, Partner at Hack VC, a crypto-native venture capital firm.👇 |
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Government Sells Silk Road |
The U.S. government moved $2 billion worth of seized bitcoin (BTC) on Monday, tanking already retreating prices and sparking investor concerns of selling the assets just two days after presidential hopeful Donald Trump's promise to begin stacking BTC. Blockchain data by Arkham Intelligence shows that a wallet tagged as "U.S. Government: Silk Road DOJ" transferred 29,800 BTC related to the Silk Road website to an unlabeled address with no prior history of transactions. Then, the address forwarded 19,800 BTC and 10,000 BTC to two different addresses. Arkham analysts suspected that the 10,000 BTC transfer worth $670 million was a deposit to an institutional custody or service. |
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Moving past Republican presidential candidate Donald Trump's appearance at the Nashville Bitcoin conference, the crypto community will likely remember that July 29 marks the 100th day since the Bitcoin blockchain implemented its fourth mining reward halving. The bullish impact of the halving-led slowdown in bitcoin's (BTC) supply expansion tends to kick in after 100 days, new research by ETC Group shows. Bitcoin mining reward halving is an inbuilt code that takes effect every four years or after 210,000 blocks are mined on the blockchain. The quadrennial event reduces the reward miners receive for validating transactions by 50 percent. The primary goal is to control the supply of bitcoin and ensure it becomes scarce over time, unlike fiat currencies, which have ever-increasing supply (monetary inflation). Bitcoin's supply is capped at 21 million, and reward halving helps to manage how fast that limit is hit. The first halving, implemented in 2012, reduced the per-block reward paid to miners to 25 BTC from 50 BTC. Over the next two halvings, the per-block supply fell to 6.25 BTC. The latest halving, implemented on April 20, reduced it further to 3.125 BTC. The previous halvings paved the way for multi-fold price rallies, with most gains coming after the first 100 days. "Today marks exactly 100 days after the Bitcoin Halving event on April 20. The market tends to have a short memory, but the halving-induced supply deficit should just start taking effect from now on," Andre Dragosch, head of research at ETC Group, said on X. Dragosch reached that conclusion after scanning the performance data before and after the previous three halvings implemented in 2012, 2016, and 2020. |
Polymarket Moves Past $400M |
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In the week since President Joe Biden stepped down as the Democratic party candidate, his running mate Kamala Harris has effectively doubled the chances of a Democrat taking the White House, moving the odds to 38% from 18%. Harris' gains in the Polymarket polls appear to be from small, individual bets entering the market. Trump's bettors, however, seem to have more conviction: the top five holders of the 'Yes' side of Trump's contract hold a collective 9.1 million shares, which will resolve to a pot of $9.1 million if Trump wins. Meanwhile, the top five holders of the 'Yes' side of the Harris contract have a total of 4.7 million shares. All-in-all bettors have staked $423 million on the outcome of the Presidential race. The largest holder of the 'Yes' bet of the Trump contract is also the biggest holder of the 'No' side of the Harris contract. |
Lummis Proposes BTC to Pay Down Debt |
U.S. Senator Cynthia Lummis plans to introduce legislation calling for a "strategic bitcoin reserve" that will reduce the national debt of the United States by buying 1 million bitcoin (BTC) over the course of five years. The bitcoin would be held for at least 20 years, she said. "This is the solution. This is the answer. This is our Louisiana purchase moment,” the Wyoming senator said on stage after former President Donald Trump spoke and endorsed the idea of a bitcoin reserve. At current prices, 1 million bitcoin are worth about $68 billion. |
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Being Compliant is the Key: Understanding the Growth of Fastex There’s a new art gallery in Yerevan, Armenia. You’ll find a sleek space, tasteful lighting, and creative works of art. Sculptures that look like eyeballs are emblazoned with bursts of color — fiery reds, bold yellows, soothing blues. But there’s a twist. Each eyeball is linked to a corresponding NFT, meaning it’s a blend of the physical and the digital. The art galleries are “phygital.” Continue reading. |
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The Takeaway: Dispersion Rules |
One of the most interesting features of the current crypto markets is the elevated level of dispersion, or range of returns across different parts of the market. In today's liquid markets, sectors focused on infrastructure and technology have significantly outperformed more consumer-oriented categories like gaming, metaverse, and entertainment-related tokens. CoinDesk sector indices' performance since November 2021 (the peak of the last bull market) reveals this trend. The "range" value, which shows the difference between the maximum and minimum cumulative returns at each point in time, highlights the level of dispersion. Dispersion started high in the fourth quarter of 2021 due to a surge in culture and entertainment-related developments. It then dropped in 2022 as the market collapsed, correlations rose, and assets largely traded in sync. However, dispersion has been rising since 2023, picking up meaningfully in the fourth quarter of last year, with Currencies and Smart Contract Platforms (infrastructure) breaking away from the rest of the market. In 2024, dispersion is at a high over this period, with tokens in the Culture & Entertainment sector continuing to draw down, while BTC, ETH, and other smart contract platform tokens are outperforming. Take a few examples to illustrate this last point. The overall market’s current maximum drawdown (using the CoinDesk Market Index) was -33% over this period. Compare that to some of the largest consumer tokens in the Gaming and Culture & Entertainment sectors, including Axie Infinity (game), Decentraland and The Sandbox (metaverses), and Apecoin (token associated with the NFT collection Bored Ape Yacht Club). These tokens’ maximum drawdowns were -96%, -94%, -96%, and -96% respectively. They have not participated in the market’s recovery this cycle. Another way to view dispersion is through the rolling 30-day average of the daily standard deviation of returns across the CoinDesk sector indices. Since the fourth quarter of last year, sector dispersion has mostly been above average. This elevated level of dispersion indicates that the market is no longer moving in unison, and individual sectors are experiencing different growth trajectories based on their underlying fundamentals and investor interest. To delve deeper, we examine the number of billion-dollar-valued tokens in each sector (sectors are defined by Hack VC) as of five years ago compared to today. In 2019, Currencies dominated the market: BTC and BTC competitors. Today, half of the tokens are in the infrastructure sector (layer 1 and layer 2 blockchains). This sector has seen massive growth over the past five-plus years. We also see new sectors emerging. AI, for example, is a relatively new part of the market that brings together two of the most exciting emerging technologies: crypto and AI. While there is a lot of hype and promise, real benefits exist today. In the next five years, we expect additional sectors and sub-sectors will emerge. This dispersion and development of new sectors over time is positive for active managers. It indicates growing market sophistication, with value being rewarded and fundamentals becoming increasingly important. Dispersion also offers significant opportunities for generating alpha. It makes it easier for active managers with alpha to outperform the market, though it also increases the risk of underperformance without a strong strategy. In this environment, investors must be more selective and knowledgeable about the sectors and projects they invest in. Active management becomes crucial as the market rewards those who can identify and capitalize on trends. These markets are also particularly favorable for investors with a deep understanding of technological advancements and the ability to discern long-term value from short-term hype. |
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