Ondo

Casey Wagner

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forwardguidance">subscribe</a>.



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The artificial intelligence craze is alive and well — at least, if Alphabet earnings and investments in Elon Musk’s new venture are any indication.&nbsp;



Alphabet (GOOG and GOOGL) stock surged almost 7% in the first hour of trading Wednesday on better-than-expected <a href="https://blockworks.co/news/major-earnings-week-stocks">earnings</a> from Google’s parent company Tuesday evening.&nbsp;



Alphabet said Tuesday its AI investments are “paying off,” as demonstrated by an increase in its Cloud and Search businesses, which jumped 35% and 12%, respectively, during Q3 2023.&nbsp;



“This business has real momentum, and the overall opportunity is increasing as customers embrace gen. AI,&#8221; Google CEO Sundar Pichai said Tuesday of the company’s Cloud product.&nbsp;



The earnings report comes as fundraising in the AI space continues to explode.&nbsp;



<a href="https://www.wsj.com/tech/ai/elon-musks-xai-in-talks-to-raise-funding-valuing-it-at-40-billion-af808b9e">Reports</a> swirled yesterday that Elon Musk is in the midst of a funding round for xAI that would value the startup at around $40 billion. The news comes just months after the company closed a $6 billion round over the spring, which valued xAI at $24 billion.&nbsp;



OpenAI earlier this month secured a $6.6 billion round, putting the company at a $157 billion valuation.&nbsp;



On tap after the close today we have earnings reports from two more of the Mag 7: Meta and Microsoft.&nbsp;



Analysts expect Meta to post an 18% increase in year-over-year revenue, largely driven by the company’s growing use of AI-driven advertising strategies.&nbsp;



Microsoft’s third quarter report comes just after the company announced its GitHub product will bake in AI models from Anthropic and Google into its coding assistant.&nbsp;



Should be an exciting day in after-hours trading. We’ll be back tomorrow unpacking all the details.



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AI boom boosts Alphabet earnings, bumps Elon Musk’s xAI valuation

Nishad Singh, former director of engineering at FTX, has been sentenced to time served with three years of supervised release for his role in the exchange’s collapse. He will not serve any prison time.



Singh, who was a government witness in FTX founder Sam Bankman-Fried’s criminal trial last fall, in February 2023 pleaded guilty to six charges, including conspiracy to commit money laundering and conspiracy to commit campaign finance violations.&nbsp;



His lawyers earlier this month asked the court to sentence Singh to no prison time.&nbsp;



“I’m not foolish enough to think there was no self interest involved, obviously,” Judge Lewis Kaplan told Singh of his cooperation. “But you did the right thing.”&nbsp;



Singh’s parents, fiancé and numerous extended family members and friends filled the gallery Wednesday afternoon. After handing down his sentence, Kaplan addressed Singh’s parents.&nbsp;



“This is purely personal,” he said. “I don’t see anything you did wrong.”&nbsp;



Singh’s mother mouthed “thank you” to Kaplan in response.&nbsp;



The guideline sentencing for Singh’s offenses and criminal history suggested 75 years in prison, court filings show. Kaplan on Wednesday told Singh that his cooperation was “remarkable.”&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Judge Kaplan: Your cooperation has been remarkable. You are a very important cooperator. It has contributed to an appropriate outcome all around. Caroline Ellison got credit, but you deserve more. I sentence you to time served, 3 years supervised release&mdash; Inner City Press (@innercitypress) <a href="https://twitter.com/innercitypress/status/1851715916553437315?ref_src=twsrc%5Etfw">October 30, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Prosecutors in a letter to the court last week emphasized Singh’s “exemplary cooperation” that contributed to the “successful prosecutions” of Bankman-Fried and former FTX Digital Markets CEO Ryan Salame.&nbsp;



Read more: <a href="https://blockworks.co/news/sam-bankman-fried-final-statement-sentenced">SBF’s ambitions went too far, judge says when handing down 25-year sentence&nbsp;</a>



<a href="https://blockworks.co/tag/sam-bankman-fried">Bankman-Fried</a> is currently serving a <a href="https://blockworks.co/news/sam-bankman-fried-sentenced">25 year sentence</a> after being convicted of two counts of wire fraud, two counts of conspiracy to commit wire fraud, one count of conspiracy to commit securities fraud, one count of conspiracy to commit commodities fraud and one count of conspiracy to commit money laundering.&nbsp;



Salame is currently serving a <a href="https://blockworks.co/news/former-ftx-exec-ryan-salame-sentenced">7.5 year sentence</a> after he pleaded guilty to two counts of campaign finance violations and operating an unlicensed money-transmitting business. Salame entered his guilty plea just ahead of Bankman-Fried’s jury trial but did not serve as a witness for either the defense or prosecution.&nbsp;&nbsp;&nbsp;



Singh’s sentencing comes roughly a month after former Alameda Research CEO Caroline Ellison was sentenced to <a href="https://blockworks.co/news/caroline-ellison-sentenced-to-24-months">24 months in prison</a>. Ellison in December 2022 pleaded guilty to seven federal counts and served as a key witness in Bankman-Fried’s 2023 trial. Prosecutors had requested Ellison serve no jail time in exchange for her “extraordinary cooperation.”&nbsp;



<a href="https://blockworks.co/tag/caroline-ellison">Ellison</a> deserved leniency for her cooperation, Kaplan told the court Wednesday, but Singh “deserved more.”&nbsp;



FTX co-founder Gary Wang, who also testified against Bankman-Fried, is scheduled to be sentenced next month. Wang in 2022 pleaded guilty to four counts of fraud and conspiracy in December 2022.



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Ex-FTX engineering head avoids prison, sentenced to 3 years supervised release

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forwardguidance">subscribe</a>.



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Gross domestic product came in marginally softer than expected for the third quarter of 2024, but the pace of growth still indicates that a soft landing is within reach — or, according to some analysts, already here.&nbsp;



<a href="https://www.bea.gov/news/2024/gross-domestic-product-third-quarter-2024-advance-estimate">GDP</a> in the third quarter rose at a 2.8% annualized pace, according to advanced estimates, coming in just below expectations of 3%. The figure was boosted by strong consumer and government spending. Personal consumption increased to 3.7% during Q3, marking it the strongest quarter since the beginning of 2023.&nbsp;&nbsp;



Quarterly personal consumption expenditures index increased 1.5% annually vs. 2.5% during the second quarter. The monthly PCE index for September is scheduled to be published tomorrow.&nbsp;



Today’s GDP reading comes after the Atlanta Fed’s <a href="https://www.atlantafed.org/cqer/research/gdpnow">GDPNow</a> model lowered its third quarter estimate from 3.3% to 2.8% Tuesday.&nbsp;



Kathy Jones, chief fixed income strategist at Charles Schwab, <a href="https://x.com/KathyJones/status/1851603140040098087">called</a> Wednesday’s figures “soft landing numbers.”&nbsp;



James Bullard, former president of the St. Louis Fed, told CNN earlier this month he thought we should already “declare a soft landing.”&nbsp;



I’ll hold off on making any declarations for now. Tomorrow’s PCE numbers and Friday’s US employment report are going to be very telling. Plus, the JOLTS data we got yesterday doesn’t paint the prettiest picture.&nbsp;



The JOLTS report showed that US job openings in September fell to the lowest point since the beginning of 2021. Available positions also declined to 7.44 million from 7.89 million in August, missing economists’ expectations of 8 million.&nbsp;



Tom Essaye, founder of Sevens Report Research, said the report “was not enough to derail the soft landing thesis by itself, but it was a step in that direction as investors will want to start seeing the decline in headline job openings slow as part of a soft landing dynamic and still-healthy labor market.”



Like I said, the September jobs report is going to be key. 



Markets are, unsurprisingly, still all but certain (96% sure) the Fed will <a href="https://blockworks.co/news/fed-rate-decision-tightens-financial-conditions">opt for</a> another 25-basis point interest rate cut next month, according to <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html">data</a> from CME Group.



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GDP estimates boost hopes for a soft landing 

Katherine Ross

Kraken announced layoffs Wednesday as the crypto exchange looks to shift its organizational structuring.&nbsp;



It wasn’t immediately clear how many roles were impacted, and a Kraken spokesperson declined to comment.



New York Times reporter Mike Isaac said 15% of roles were impacted, citing sources.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">kraken just cut 15% of its workforce, per two people inside&mdash; rat king 🐀 (@MikeIsaac) <a href="https://twitter.com/MikeIsaac/status/1851680598534033815?ref_src=twsrc%5Etfw">October 30, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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“As we’ve grown north of $1 billion in net revenue as a remote organization worldwide, we fell into the trap of building organizational layers. We put managers in charge of the successes or failures of the groups they controlled, and we predicated success based on siloed P&amp;Ls,” a blog post <a href="https://blog.kraken.com/news/a-new-day-for-kraken">said</a>.



“At its best, this structure can provide clear paths for ‘managers’ whereby they can move from smaller, less complex areas of focus to progressively larger and more complex ones. So, ‘managers’ are incentivized to do the wrong thing.”



The exchange said that it needed to get “leaner” as it moves forward, echoing a sentiment heard from Consensys CEO Joe Lubin when he announced that his firm laid off 20% of its staff on Tuesday.



Read more: <a href="https://blockworks.co/news/dydx-consensys-industry-layoffs">dYdX, Consensys layoffs shake up the space</a>



“Looking ahead, I see a next generation economy not dominated by large monolithic companies; instead, smaller, agile, AI-supercharged companies with Web3-based coordination tools will operate more efficiently. To stay competitive in this fast-growing space, we need to reshape ourselves and be more agile, more effective and even higher-performing,” Lubin said.



Additionally, Kraken <a href="https://www.businesswire.com/news/home/20241030235650/en/Kraken-Appoints-Arjun-Sethi-as-Co-CEO-to-Accelerate-Company-Mission-and-Growth">appointed</a> Arjun Sethi as co-CEO of the firm, who will join Dave Ripley in helming the exchange. Sethi previously served on Kraken’s board.&nbsp;



Perp exchange dYdX also announced layoffs on Tuesday, announcing a reduction of 35%. According to its website, dYdX employed roughly 50 employees.



Blockworks <a href="https://blockworks.co/news/helium-parent-company-layoffs">reported last week that Helium’s parent firm</a> laid off 40% of its staff back in August and Matter Labs <a href="https://blockworks.co/news/matter-labs-layoffs-incoming">told Blockworks that it let go of 16%</a> of its staff back in September. 



The <a href="https://blockworks.co/news/base-dex-volume-decentralization">news comes after Kraken announced</a> it was launching its own layer-2 called Ink, somewhat following in the footsteps of a competitor. Coinbase launched its own layer-2, Base, last year. Unlike Base, Ink plans to bring new users to DeFi.



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Kraken lays off staff, announces new co-CEO

Macauley Peterson

In a newly released report, the Proof of Stake Alliance (POSA) and co-authors Khushi Wadhwa, Nikhil Raghuveera and Jane Khodarkovsky urge the Ethereum community to assess the legal and policy ramifications of unconditional inclusion lists, a mechanism proposed to ensure censorship resistance on Ethereum.&nbsp;



The paper calls for a nuanced discussion on whether such lists genuinely preserve Ethereum’s principles of credible neutrality and censorship resistance.



Ethereum inclusion lists, in essence, ensure that specific transactions are included in blocks, preventing validators from excluding them based on their content or origin. The idea is that by mandating inclusion, Ethereum can better guarantee its principles of censorship resistance and credible neutrality, which are foundational to a <a href="https://blockworks.co/tag/decentralization">decentralized</a> blockchain.



Read more: <a href="https://blockworks.co/news/empire-newsletter-ethereum-blockchain-innovation">Ethereum is looking more like the “Microsoft of blockchains” every day</a>



However, inclusion lists raise concerns around regulatory compliance and potential legal liabilities.



“The censorship resistant aims might be undermined by the policy and legal implications of [inclusion lists],” Raghuveera, CEO at <a href="https://docs.predicate.io/essentials/introduction">Predicate</a>, told Blockworks.



As they push Ethereum toward more formalized transaction processing, inclusion lists might expose validators, builders and other network actors to stricter regulatory scrutiny. The debate now centers on balancing this technical solution with Ethereum’s ethos and practical implications for network participants, particularly those in regulated markets.



The report, which was also reviewed by the Ethereum Foundation, goes beyond purely technical discussions on inclusion lists to scrutinize potential regulatory outcomes.&nbsp;



As Wadhwa, head of product research at Predicate, emphasized, “The paper ultimately emphasizes the critical need to define credible neutrality in order to assess all proposed changes to Ethereum.” Defining this neutrality, she added, is essential for sustaining Ethereum’s stability and participant protections.



The concept of &#8220;credible neutrality&#8221; in Ethereum largely <a href="https://nakamoto.com/credible-neutrality/">derives from</a> Vitalik Buterin, who has been its most vocal proponent. It&#8217;s also been <a href="https://www.youtube.com/watch?v=azjpYTB7PVE">expanded upon</a> by other key figures in the Ethereum community, such as Justin Drake. Vitalik initially introduced credible neutrality as a guiding principle for Ethereum to maintain fairness and impartiality. In a decentralized environment, bias or preference for any participant or transaction could undermine trust. Under this vision, credible neutrality is essential to building an open and decentralized network where all participants have equal access and opportunities, free from censorship or favoritism.



A key consideration raised is the inherent tension between Ethereum’s censorship resistance goals and the regulatory landscapes many participants navigate. That tension is at the heart of the report, according to POSA executive director Alison Mangiero.



“The Ethereum community has certainly been having a number of debates about inclusion lists, but not along these dimensions, and then in crypto legal and policy world — which is where I hang out — people have not talked about this at all,” Mangiero told Blockworks.



This creates an imperative for the network’s developers and policymakers alike to consider how inclusion lists might impact regulated entities, potentially pushing some participants out of certain markets or introducing liability risks.



Read more: <a href="https://blockworks.co/news/0xresearch-newsletter-ethereum-tps">Ethereum wants to scale to 100K TPS</a>



The report draws an analogy between Ethereum and TCP/IP as &#8220;a protocol that remains fundamentally neutral as to the data it transmits.”



“Regulators might recognize that targeting the Ethereum base layer or infrastructure providers is ineffective, as these entities are merely facilitating the neutral transmission of data — similar to the role of TCP/IP on the internet,” the report states.



This could bolster the argument that inclusion lists may help Ethereum’s base layer remain unregulated, focusing regulatory attention on applications instead.



“Policymakers and regulators may shift focus to the application layer, which might be seen as a more appropriate place for regulation,” noting that decentralized apps “often have centralized points of control, administration, or participation, which could make them more susceptible to regulatory oversight.”



This approach mirrors traditional regulation in technology and offers Ethereum a pathway to remain credibly neutral.



On the other hand, there are risks that regulators don’t see inclusion lists in this light. “Inclusion lists involve proposers making deliberate choices about which transactions to include in a block — something that is inherently opinionated,” the authors note.



Read more: <a href="https://blockworks.co/news/building-credible-neutrality-mev">Building credible neutrality in the MEV battleground</a>



Which way the chips fall may depend on how a potential Harris or Trump administration views Ethereum. Under the status quo, “inclusion lists may bring additional scrutiny,” they argue.



If network participants, particularly block builders, are forced out of the US or other apparently hostile jurisdictions, that would decrease Ethereum’s geographic diversity and form another threat to censorship resistance.



Further research should focus on finding a structured approach to Ethereum’s credible neutrality principles with an eye towards minimizing legal challenges, the report states. Researchers can design solutions that inherently enforce neutrality, ensuring that Ethereum treats all transactions equally and maintains a decentralized, unbiased protocol.



Finally, the report advocates for active engagement with policymakers to clarify the distinctions between blockchain infrastructure and specific applications. By educating stakeholders on blockchains’ benefits and fostering collaborative frameworks, Ethereum can support innovation while addressing regulatory concerns.



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Report scrutinizes impact of inclusions lists on Ethereum’s credible neutrality

This is a segment from the Empire newsletter. To read full editions, <a href="https://blockworks.co/newsletter/empire">subscribe</a>.



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Both dYdX and Consensys announced hefty layoffs yesterday.



dYdX CEO Antonio Juliano said that 35% of the core team was let go, while Consensys CEO Joseph Lubin said his firm had cut 20% of staff.



For Consensys, that’s 162 positions. According to dYdX’s <a href="https://dydx.notion.site/Work-at-dYdX-79a4cd612ec9476fb2734d8f3b4f8d1c">site</a>, the company had around 50 employees and is still hiring new positions.&nbsp;



The two have very different stories about how they got to this point. Lubin was quick to cast some of the blame on the SEC. Consensys, a powerhouse in the Ethereum space, has notably been locked in multiple legal battles with the regulator and — if we’re going off the timelines we’re seeing for Ripple, Coinbase and Binance — then this might be a multi-year court case.&nbsp;



“Such attacks from the US government will end up costing many companies that have been investigated, sued, or sent Wells Notices, many millions of dollars,” Consensys said in a <a href="https://consensys.io/blog/consensys-path-to-long-term-sustainability-and-decentralization">blog post</a>.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">3/5 To stay competitive, we need to reshape ourselves to be more agile, more effective, and even higher-performing. Today, we are making the tough but prudent decision to streamline our operations to position Consensys for ongoing rapid innovation, long-term sustainability…&mdash; Joseph Lubin (@ethereumJoseph) <a href="https://twitter.com/ethereumJoseph/status/1851253506574790674?ref_src=twsrc%5Etfw">October 29, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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But the blame isn’t all on the SEC, and that’s where the similarities between the dYdX layoffs and what happened with Consensys come into play.&nbsp;



“Looking ahead, I see a next generation economy not dominated by large monolithic companies; instead, smaller, agile, AI-supercharged companies with web3-based coordination tools will operate more efficiently. To stay competitive in this fast-growing space, we need to reshape ourselves and be more agile, more effective, and even higher-performing,” Lubin said.



For Juliano, the decision was made after he rejoined the perps DEX firm earlier this month — he previously <a href="https://blockworks.co/news/empire-newsletter-dydx-founder-comeback#:~:text=The%20CEO%20of%20seminal%20perps,after%20he%20left%20the%20project.">stepped down months ago</a> after seven years at the helm — and realized that “the company we’ve built is different from the company dYdX must be.”



This wasn’t, Juliano clarified on X, a financial decision for the company. He also teased an “explanation” sometime today.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">This wasn’t a financial decision&mdash; Antonio (@AntonioMJuliano) <a href="https://twitter.com/AntonioMJuliano/status/1851360965658624417?ref_src=twsrc%5Etfw">October 29, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Lubin said the decision at Consensys focuses the organization on the “core revenue drivers,” while Juliano told <a href="https://blockworks.co/podcast/empire/d8258b50-9027-11ef-905e-1b5c3f6ba4c6">Empire</a> just last week that he planned to go full “founder mode.”



Consensys and dYdX aren’t the first crypto companies to cut jobs this cycle — Helium Mobile’s parent company <a href="https://blockworks.co/news/helium-parent-company-layoffs">cut 40% of its staff</a>, while Matter Labs <a href="https://blockworks.co/news/matter-labs-layoffs-incoming">cut 16%</a> — it shows that some firms are starting to get lean as we head into what many think will be a bull run at the beginning of next year.



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dYdX, Consensys layoffs shake up the space

David Canellis

This is a segment from the Empire newsletter. To read full editions, <a href="https://blockworks.co/newsletter/empire">subscribe</a>.



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How can you tell when a bull run is over?



After all, bitcoin is seemingly on the verge of breaking its price record from March. If it keeps going, then at some point it’ll reach another obvious local peak, and we’ll soon start to wonder whether that was it.



All we can do is look backward, and even then, it’s more entertainment than meaningful prediction. The crypto market is just astrology for dudes and so on.&nbsp;



Who cares, let’s lean into it.



We know that ETH has lagged behind bitcoin so far this year. Great fodder for think-y threads on X about the demise of Ethereum in favor of Solana, but ETH has always lagged behind BTC when it comes to setting new price records.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeuM2xEQp2r1CCCo-pDrvg4gh3dPngEIklxbhNPC1z1GV0Bn42azMpASZRe3DzhAkZpdB8Fcx08wgrQzejCfId_7wy-zTxvtyvWsKllyveZ0F2VOJH6fCXf-GN_0KIo_TMieRhKyGaUI7j9eSLS51S3IrDu?key=H5fYsss7bEGQsA8C11vqHBQ-" alt=""/><figcaption class="wp-element-caption">The lines (ETH in purple, BTC in orange) start at bitcoin’s all-time high in Dec. 2017 and finish when they return to beat those records.</figcaption></figure>



ETH capped off the 2017-2018 bull run with an all-time high on Jan. 13, 2018 — 27 days after bitcoin had peaked at almost $20,000. 



It took BTC 1,080 days to blow past those levels in early December 2020 while ETH was still 60% below its own price record.&nbsp;



ETH would go on to more than double over the next 56 days, hitting an all-time high toward the end of January 2021.



This time is different. It’s been 238 days since bitcoin broke its previous high from November 2021, and ETH hasn’t been within 20% of beating its peak. Currently, it&#8217;s 45% below.



Although, SOL is doing just about as well as ETH over the same period.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfOtIicEE0AEeDfkc9wEokh4tIeVfKDNVKinbmxkKGFUYfhFn9hOmvpUUXE_1S4yGcclh3frd2XgqXDJNPuuZDqnYAad0QNTofb9xg7H6ed_3ZFd0Bgc8nqYT_27bFQBQ6BbqKJUnRBoojNAYIRe9G90eRK?key=H5fYsss7bEGQsA8C11vqHBQ-" alt=""/><figcaption class="wp-element-caption">SOL is the faded blue line — it’s a slightly more volatile ETH</figcaption></figure>



ETH and SOL have even been tightly correlated since bitcoin’s peak in March, with SOL still 31% below its November 2021 record high.



Whether ETH and SOL will catch upon confirmation of a bitcoin bull run is a question for your paid group leader.&nbsp;



I will give you this instead: BTC, ETH, SOL (and dozens of other tokens) may be out of sync right now. And that’s bullish, going by the palmistry of the prior four-year cycle.



How you tell the end of a bull run is when the major assets converge at all-time highs.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc9zp459A0p8--ZhhEbG_3sW9mGnOlxMnxkVjuT1iASbwf8L8uX6Jx7UoY9wIuKnnSwt61nvlAv2O6bUJc8oroNHqCfexqjcGsF5ZFZSMyCjCVoWy2mn3Ho3xPaAzGoUPYxf09mCZ1dsg9J3221L46JCzdA?key=H5fYsss7bEGQsA8C11vqHBQ-" alt=""/><figcaption class="wp-element-caption">Cycle peaks shown by the green dots</figcaption></figure>



BTC and ETH were not in lockstep during their drawdown recoveries between cycle tops. Returning to those highs was a staggered process.



But they were almost exactly aligned when they reached new peaks nearly a year later: BTC and ETH hit all-time highs on the same day, while SOL topped out a few days earlier.



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ETH and SOL are playing catch up with BTC

Rumors have been circulating that Tether may be the subject of a federal investigation.&nbsp;



The Wall Street Journal is alleging that the US government is investigating Tether. In an <a href="https://www.wsj.com/finance/currencies/federal-investigators-probe-cryptocurrency-firm-tether-a13804e5">article</a> published last week, citing unnamed sources, the Journal reported that federal investigators in Manhattan are looking into alleged anti-money laundering violations and whether illicit actors have used the cryptocurrency to fund illegal activities.&nbsp;



Tether categorically denies the allegations.&nbsp;



“It is wildly irresponsible for WSJ to write articles with reckless allegations with such certainty when no authorities have gone on the record to confirm these rumors, and no sources are named,” a Tether spokesperson said in a statement on Friday. “These stories are based on pure rank speculation despite Tether confirming that it has no knowledge of any such investigations into the company.”



Read more: <a href="https://blockworks.co/news/doj-binance-tether-terror-funding">Lummis, Hill push for ‘swift’ DOJ action against Binance, Tether&nbsp;</a>



The report comes months after conservative nonprofit Consumers’ Research launched a campaign against Tether, alleging the stablecoin is “used by the world’s worst actors.” Executive director of Consumers’ Research Will Hild told me Tuesday that the WSJ article is “yet another confirmation of the need for Tether to undergo and release an audit by a credible third party.”&nbsp;



“Consumers should be wary of Tether&#8217;s involvement with unsavory and criminal actors from across the world, and it raises questions as to why they are so desperate to keep them on the platform,” Hild added.&nbsp;



<a href="https://blockworks.co/tag/tether">Tether</a> CEO Paolo Ardoino over the <a href="https://cointelegraph.com/news/tether-ceo-breaks-down-reserves-backing-usdt-stablecoin">weekend</a> assured the public that Tether’s reserves for USDT are safe and plentiful. He said the company has around $100 billion in US Treasurys and 82,000 bitcoin, plus 48 tons of gold.&nbsp;&nbsp;



Read more: <a href="https://blockworks.co/news/tether-q2-2024-earnings-report">Tether reports net profit of $5.2B in H1 2024</a>



To be clear, the WSJ article makes no allegations that Tether has lied about or violated any laws regarding its reserve assets. The company in 2021 <a href="https://www.cftc.gov/PressRoom/PressReleases/8450-21">settled</a> with the Commodity Futures Trading Commission <a href="https://blockworks.co/news/tether-settles-with-cftc-for-42-5m">for $42.5 million</a> over its “claims that USDT was fully backed by US dollars.”&nbsp;



Ardoino added that Tether has <a href="https://blockworks.co/news/tether-freezes-funds-doj">historically worked with law enforcement agencies</a> to combat fraud. He said the company has “voluntarily blocked” almost 2,000 wallets associated with suspected illegal activity.&nbsp;



Tether in September <a href="https://blockworks.co/news/vc-vet-joins-abra-board">brought in Jesse Spiro</a>, a PayPal veteran, to head up its government affairs team.&nbsp;



“Jesse will be responsible for leading policy and engagement efforts with lawmakers, regulators and key stakeholders,” Tether wrote in its <a href="https://tether.io/news/industry-leader-jesse-spiro-joins-tether-as-head-of-government-affairs/">announcement</a>.&nbsp;



Sounds like he might be very busy.



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Tether denies it is being investigated by US government 

Ben Strack

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forwardguidance">subscribe</a>.



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Bitcoin’s price reached roughly $73,500 after 3 pm ET on Tuesday. It dipped to about $72,600 by 4 pm ET — up 4% from 24 hours ago.&nbsp;



This surge to just below BTC’s <a href="https://blockworks.co/news/bitcoin-all-time-high">record high</a> (above $73,700, set in March) comes as capital continues to pour into US spot bitcoin ETFs. Another $479 million of net new money entered that category on Monday, Farside Investors <a href="https://farside.co.uk/bitcoin-etf-flow-all-data/">data</a> shows.



Those funds have seen $22.5 billion worth of net inflows since launching in January — with nearly $3.9 billion, or 17%, of those gains coming since Oct. 11.&nbsp;



“I think that is people recognizing that the train may leave the station sometime around the election,” Bitwise CIO Matt Hougan said during an X space late last week.&nbsp;



Hougan’s firm — a crypto-focused asset manager that offers <a href="https://blockworks.co/news/bitwise-europe-acquisition-crypto-etps">both</a> a BTC and ETH ETF — regularly meets with institutions about possible crypto allocations. The number of meetings that have led to such an allocation have gone up “significantly” in recent weeks, he explained.



A portion of these institutional players have embraced what he called “crypto sleeves,” Hougan added during the X space — exposure not just to a bitcoin fund, but perhaps an allocation to another that holds ETH and additional exposure to MicroStrategy or bitcoin miners. “[It’s] the idea of treating crypto the same way you treat stocks, which is you don’t just buy Nvidia; you buy a basket,” he said.



Beyond institutional buy-in, bitcoin investors are betting on governments continuing to debase fiat currencies, Hougan noted in a CIO <a href="https://experts.bitwiseinvestments.com/cio-memos/the-dual-drivers-of-bitcoins-value?utm_medium=email&amp;_hsenc=p2ANqtz-8ck3N09VZri0LX3rA64nBW4B89ao6lIJcHGfga_g3H9Y03Am_2nUP7gXl19-P4DQYFOvfL-b9adq_qxWTMIBXQas320g&amp;_hsmi=331329998&amp;utm_content=331329998&amp;utm_source=hs_email">memo</a>. But, he argues, BTC does not need the dollar to collapse to hit $200,000, adding: “It can get there just by capturing a sliver of gold’s existing market.”



Thoughts differ on <a href="https://blockworks.co/news/bitcoin-price-predictions-election">the trajectory</a> of crypto prices from here in the case of a Trump or Harris victory. But perhaps we won’t have to wait for the election to wrap up before seeing BTC notch a new all-time high.



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Record BTC price in sight as bitcoin ETF flows surge

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forwardguidance">subscribe</a>.



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A week out from the US election, the CEO of blockchain infrastructure firm Paxos is imploring the next presidential administration to be better than the last (when it comes to crypto).&nbsp;&nbsp;



Charles Cascarilla’s open letter to Donald Trump and Kamala Harris doesn’t say much that hasn’t been said before.&nbsp;



But perhaps the letter hits a little different as voters — millions of which <a href="https://blockworks.co/news/political-candidates-cannot-ignore-crypto-voters">own crypto</a> — get set to cast their ballots next week. And, just days ago, Stripe’s $1.1 billion <a href="https://blockworks.co/news/stripe-bridge-acquisition-stablecoin-infrastructure">acquisition</a> of Bridge sends a signal that non-crypto companies recognize the <a href="https://blockworks.co/news/empire-newsletter-dydx-founder-comeback">compelling benefits</a> of stablecoin-based payments.&nbsp;



Cascarilla’s <a href="https://paxos.com/2024/10/28/letter-to-vice-president-kamala-harris-and-former-president-donald-trump/">letter</a> addresses familiar key points: While the US is an “inhospitable” place for financial innovation, <a href="https://blockworks.co/news/micar-foreign-stablecoins-advantage-in-europe">the EU</a>, UAE and others have capitalized on those “missteps” via regimes “that support safe innovation.”&nbsp;



The “<a href="https://blockworks.co/news/sec-overreach-failure-debt-box">regulatory overreach</a>, questionable <a href="https://blockworks.co/news/banking-sector-uncertainty-crypto">banking policies</a> and onerous and <a href="https://blockworks.co/news/nft-artists-sue-sec-regulatory-uncertainty">needless</a> legal actions” in the US have resulted in “enormous costs in <a href="https://blockworks.co/news/sec-wrong-about-crypto-asset-securities">wasted time</a> and money,” Cascarilla adds.&nbsp;



To that point, Consensys on Tuesday revealed cuts impacting 20% of its workforce.



“Multiple cases with the SEC, <a href="https://blockworks.co/news/consensys-lawsuit-against-sec-dismissed">including ours</a>, represent meaningful jobs and productive investment lost due to the SEC&#8217;s abuse of power and Congress&#8217;s inability to rectify the problem,” Consensys CEO Joe Lubin <a href="https://consensys.io/blog/consensys-path-to-long-term-sustainability-and-decentralization">wrote</a>. “Such attacks from the US government will end up costing many companies that have been investigated, sued or sent <a href="https://blockworks.co/news/uniswap-responds-to-sec-wells-notice">Wells Notices</a>, many millions of dollars.”



While Trump has said he would <a href="https://blockworks.co/news/donald-trump-speaks-bitcoin-2024">fire</a> SEC Chair Gary Gensler, Harris has not made any such statement. Blockchain Association’s Ron Hammond <a href="https://blockworks.co/news/forward-guidance-newsletter-interest-rate-cuts">previously told me</a> the industry is waiting for more clarity on that from the VP.&nbsp;



In the meantime, digital dollars will continue to move offshore until there is a stablecoin framework that drives innovation, Cascarilla wrote.



The positive note from the Paxos CEO: “Thankfully, there is bipartisan interest in fixing this broken status quo.”



Hammond said earlier this month he believed the chance of a stablecoin bill getting passed by the end of 2024 was 30%. That’s not exactly great. But at least it’s higher than the Yankees’ World Series title odds at this point.



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An industry CEO’s final plea to Trump, Harris 

Jack Kubinec

This is a segment from the Lightspeed newsletter. To read full editions, <a href="https://blockworks.co/newsletter/lightspeed">subscribe</a>.



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The crypto-friendly asset manager VanEck has partnered with Kiln to begin staking SOL, the pair told Lightspeed exclusively.



Kiln is an enterprise staking service that boasts integrations with outfits like <a href="https://blockworks.co/news/coinbase-cloud-partial-staking-kiln-eth">Coinbase</a> and <a href="https://blockworks.co/news/institutions-get-in-line-for-staking-bitcoin-with-babylon">Babylon</a>.&nbsp;



With the move, VanEck will now offer regulated access to solana staking rewards on top of the price of SOL. VanEck is one of a few firms offering regulated solana funds in Europe.&nbsp;&nbsp;



2024 has been a bullish year for crypto, and the fresh market cycle was largely driven, at least initially, by the long-awaited approval of spot bitcoin ETFs in the US. The products — which give investors exposure to bitcoin’s price in a regulated wrapper — have already seen <a href="https://blockworks.co/bitcoin-etf">tens of billions</a>-worth in inflows since getting the SEC’s approval in January. The ETFs trading partly drove bitcoin to a <a href="https://blockworks.co/news/bitcoin-all-time-high">new all-time high</a> this year, the only major crypto to set a new mark during this market cycle.&nbsp;



Ether ETFs were also approved this year, though the second crypto to get a spot ETF had <a href="https://blockworks.co/news/education-required-to-spur-eth-etf-outflows">less inspiring flows</a>. Still, altcoin ecosystems are hoping to catch some of the ETF magic, and firms are lining up behind what looks like a logical next crypto ETF in solana.&nbsp;



VanEck and 21Shares both <a href="https://blockworks.co/news/lightspeed-newsletter-spot-solana-etf-filing">applied for spot SOL ETFs</a> this summer, though talks have <a href="https://www.theblock.co/post/311937/sec-talks-etf-issuers-concerns-solana-security-source">reportedly</a> stalled over the SEC’s concerns that solana is a security. The filings have been <a href="https://fortune.com/crypto/2024/07/09/vaneck-and-21shares-file-for-solana-etfs-a-bet-on-a-trump-victory/">cast</a> as a bet on a Trump victory and a more crypto-friendly regulatory regime taking over sometime in 2025.&nbsp;



For the moment, the major market for regulated solana products is in Europe. 21Shares’ solana staking ETP is currently the third-largest in Europe with over $1 billion in assets under management (AUM), <a href="https://www.etfbook.com/dashboards/crypto-etp-eu">according</a> to etfbook.com. CoinShares and Valour also have solana ETPs with AUMs of around $300 million.&nbsp;



VanEck’s European solana fund is more minor, <a href="https://www.vaneck.com/fi/en/solana-etn/">with</a> around $84 million in AUM. Adding staking rewards via kiln may be a play to grow that number. Notably, neither of the US solana spot ETF applications contained staking rewards after approved ether ETFs had staking stripped out.&nbsp;



VanEck head of digital asset research Matthew Sigel told me he agrees staking rewards will become table stakes for solana ETPs in Europe. In the US, “tell me who wins the election” first, Sigel said in a direct message.



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VanEck begins SOL staking with Kiln partnership

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Stacks, a Bitcoin-adjacent network often referred to as a layer-2, executed a scheduled hard fork early Tuesday following the September <a href="https://blockworks.co/news/stacks-nakamoto-upgrade-bitcoin-layer-2s">Nakamoto upgrade</a> activated by network miners.



“I think it went as smoothly as we could have hoped,” said Muneeb Ali, Stacks co-founder, on a live <a href="https://x.com/Stacks/status/1851267796706943449">X space</a>. He added that developers in New York were up all night monitoring the fork.



The Nakamoto upgrade increased the alignment of Stacks with Bitcoin’s finality by further binding Stacks blocks to Bitcoin blocks. Stacks uses a consensus mechanism called <a href="https://docs.stacks.co/concepts/stacks-101/proof-of-transfer">Proof of Transfer</a> (PoX), where transactions and Stacks blocks are anchored to Bitcoin.



With the Nakamoto upgrade, this connection is strengthened. So a reorg in the Stacks blockchain would now require changes in the Bitcoin blockchain, according to Rena Shah, VP of product and operations at Trust Machines.



“It is a fundamental shift,” Shah told Blockworks. “You have to try to <a href="https://app.blockworksresearch.com/glossary##">51% attack</a> Bitcoin L1 before you&#8217;re able to do the same activity on Stacks.”



This dependency on Bitcoin makes the Stacks blockchain more secure, as Bitcoin’s high security and resistance to reorgs (given the substantial <a href="https://app.blockworksresearch.com/glossary/#hash-ratepower">hash power</a> of bitcoin miners) provide Stacks with added resilience.&nbsp;



Attempting a reorg of the Bitcoin blockchain is extremely challenging, due to both the financial and computational costs involved. This means Stacks is indirectly protected by Bitcoin’s immutability, so the Nakamoto upgrade effectively made Stacks reorg-proof.



“That might be the beauty of Stacks as an L2 for Bitcoin because it’s always kind of adhered to the ethos of Bitcoin,” Shah said. She noted the upgrade paves the way for sBTC, Stacks’ version of bitcoin, the asset.



Other features of the upgrade include faster transaction processing — Stacks now produces blocks approximately every six seconds — which enhances usability for developers and users, and improves the overall experience on the Stacks network. The upgrade also limits opportunities for miners to profit from rearranging or prioritizing transactions (<a href="https://app.blockworksresearch.com/glossary/#miner-extractable-value-mev">MEV</a>), which contributes to a fairer, more transparent network.



<h2 class="wp-block-heading">The future of sBTC</h2>



Granite, a new Bitcoin-focused DeFi protocol incubated by Trust Machines, <a href="https://www.granite.world/blog/granite-bitcoin-defi">came out of stealth</a> last month, aiming to address the limitations of custodial BTC offerings for use in DeFi. The not-yet-launched app will leverage the sBTC Bitcoin bridge enabled by the Nakamoto upgrade.



The platform should allow BTC to interact directly with DeFi dapps in a decentralized and permissionless manner. Like <a href="https://blockworks-research.beehiiv.com/p/bitcoin-defi-expands-bob">other new noncustodial offerings</a>, sBTC users will be able to lend, borrow and earn yield on their bitcoin while minimizing counterparty risk.



Traditionally, using BTC in DeFi has required custodial solutions or <a href="https://blockworks.co/news/bitgo-wbtc-custodial-changes">wrapped BTC</a> assets, exposing users to substantial counterparty risks.



More recently, Babylon has <a href="https://blockworks.co/news/0xresearch-newsletter-babylon-btc-staking-deposits">attracted interest</a> as a way to direct staking yields to BTC holders, albeit with a risk of <a href="https://blockworks.co/news/bitcoin-staking-babylon">slashing</a>.



Granite, however, follows a no-rehypothecation model. User collateral remains untapped and fully controlled by the owner, ensuring that BTC does not become entangled in protocol dependencies, or what its developers call a &#8220;borrower-centric&#8221; DeFi model.



Granite also introduces &#8220;soft liquidations,&#8221; an approach <a href="https://resources.curve.fi/crvusd/liquidations/">pioneered by Curve</a> that allows collateral to be liquidated only enough to maintain solvency and prevent catastrophic losses. Additionally, position tracking and push notifications allow users to manage positions without constant monitoring, a quality-of-life feature that’s uncommon in DeFi.



Another defining characteristic of Granite is its risk-tranched liquidity provisioning, which allows liquidity providers (LPs) to tailor their risk exposure. By choosing junior or senior tranches, LPs can manage their participation according to risk tolerance, with a reserve protecting all LPs as a first line of defense against market downturns.



Historically, only about 1% of BTC has been engaged in DeFi due to security concerns, according to Ali. “Granite’s security-oriented approach creates an opportunity to begin unlocking the remaining 99% of BTC capital,” he said. As with many other “<a href="https://blockworks-research.beehiiv.com/p/bitcoin-defi-is-heating-up">Bitcoin DeFi</a>” endeavors, Granite aims to make bitcoin a productive asset within the DeFi space, rather than merely “digital gold,” driving new waves of adoption in the process.



“The base case of bitcoin as money becomes more solidified when things like Stacks happens, so this is going to be good for Bitcoin,” Ali said.



Stacks is also <a href="https://x.com/Stacks/status/1837125070453403845">working</a> to bring sBTC to Solana.



The launch comes as <a href="https://blockworks.co/news/bitcoin-price-predictions-election">BTC is retesting</a> its June highs above $71,100. Stacks’ native token, STX, is up over 5% on the day, although it is still down about 50% from its all-time high of $3.84 reached April 1 this year.



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Stacks fortifies Bitcoin ties with Nakamoto upgrade

This is a segment from the Empire newsletter. To read full editions, <a href="https://blockworks.co/newsletter/empire">subscribe</a>.



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$71,000.



Bitcoin’s managed to retake $70K after months of trying. We haven’t seen it above this level since it carved out a fresh all-time high in spring.



And now — just a week before the US election — we’re enjoying a small breakout. However, Ledn’s John Glover believes that we need to see a two-day close above $73,000 before he expects any real moves higher.&nbsp;



But if bitcoin manages to hold on to that level, expect a “rapid move towards $80,000.”



Still, he’s not so sure we’ll go any higher. When <a href="https://blockworks.co/news/btc-price-action-technical-analysis">we previously chatted with him</a>, he thought he could see a move toward $87,000. That’s off the table as of right now, though he still believes there’s a possibility of hitting $100,000 by the end of Q1 next year, or into the start of the second quarter.



Here’s the thing though: There’s a lot of volatility to digest.&nbsp;



“Notably, option premiums and estimated daily volatility for both the US stock market and bitcoin are projected to rise significantly around 6-8 November, when the results of the elections are expected to be delivered,” Bitfinex analysts <a href="https://blog.bitfinex.com/wp-content/uploads/2024/10/Bitfinex-Alpha-128.pdf">wrote</a> in a report yesterday.&nbsp;



“Bitcoin, in particular, may experience even greater volatility than other risk assets, largely due to its perception as the ‘Trump Trade.’ This term, which has gained considerable traction in recent weeks, serves to reflect the market’s view of how BTC will fare dependent on the outcome of the election,” they continued.&nbsp;



According to a Kaiko report, a sentiment shift recorded in September could show a potential price move just days after the election.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXd-1N9-62_jAKbNAu6593wf7e-UDxXZ4OG9zsh36_-KqNHWJjFuLYyWwfFN1kDz1zbvwciFLeHLPPfBVCCN7HK4yUSoQ1Y3lj5UlWslz_SmwVfZj3RGxoxWiPCgF-nUin6c-x7TOOp6guew7PX_UTx8HLKB?key=GfK9FWXi4y-1hEFhsyYgOcAa" alt=""/></figure>



In the chart above, “a steeper right skew on the November 8 expiry (orange) suggests increased demand for call options and expectations of rising prices,” Kaiko analysts said.



One thing’s for sure, with just one week until the election, there’s still a lot of time to see some serious price action.



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Bitcoin is enjoying a small breakout, but election volatility still to come

Carl Vogel

Opinions are like assholes; everyone has one. Polls have long been the predominant method to capture public opinion and collective insight, largely because they offer a quick and scalable way to gauge public sentiment on a variety of topics. However, they are also subject to low engagement, spam and chicanery. Just ask the UK how it ended up with a research vessel named “Boaty McBoatface.”



Opinion markets offer an alternative way to address the flaws in traditional polling. They can be a superior method to gauge market sentiment because they obviate the failure modes of traditional polls through blockchain-enabled capabilities like economic incentives, social credibility and credentialing.&nbsp;



Beyond gauging sentiment or merely wagering on the outcome of events in prediction markets, opinion markets can be used to influence the outcomes themselves. Everyone from AI agents to big brands can use them to mine insights and make decisions in a way that is transparent, efficient, globally accessible and highly engaging.



Read more from our opinion section: <a href="https://blockworks.co/news/without-web3-media-credibility-will-crumble">Implement Web3 solutions now, or the media’s credibility will crumble</a>



Opinion markets are not new. One famous example is the “Keynesian Beauty Contest,” which was popularized by economist John Maynard Keynes. In this thought experiment, contest participants were shown photographs of people in a newspaper and asked to select the faces they believed others would find the most attractive. Participants who successfully chose the most popular faces were awarded a prize.



For the sophisticated, the goal was not to choose based on individual preferences, but to predict which faces would be the most popular overall.



When applied to the stock market, one of Keynes’s core insights was that participants can get trapped in an “infinite loop” of trying to out-predict what others will select, showcasing the challenges of investing based on market sentiment vs. fundamentals.&nbsp;



However, I posit two more insights. The polls effectively codified the UK’s collective definition of beauty, and people loved playing the game! Unlike the largest opinion market in which few have an edge — the stock market — everyone believes they have an advantage in many aspects of regular everyday life, such as determining who’s prettiest. For example: “Who is a better match for Taylor Swift than Travis Kelce?” (We all know they are an odd match.) “What is the best French restaurant in Manhattan?” “Which of these outfits is best for a first date?” These are all examples of markets where certain individuals believe they have an advantage, making them more likely to participate.



While the stock market represents a narrow goal of economic valuation with well-defined frameworks for valuation (e.g. discounted cash flow models and P/E ratios), opinion markets can have a broad range of subjects, objection functions and analysis methods. This of course creates a much more qualitative (vs. quantitative), relatable set of markets for broad appeal.



Beyond the fun market examples discussed above, opinion markets represent a major opportunity for businesses to gauge sentiment and build loyalty with their customers in a hyperlocal way.



For example, Starbucks could submit, “What street corner would be best for a new store?” Netflix could ask, “What should be our next city for ‘Love is Blind’?” A creator may ask, “What product should I review next?”&nbsp;



Today, corporations spend billions of dollars trying to identify these answers with advanced analytics teams. Opinion markets could provide a fast (and in many cases more accurate) answer while simultaneously creating direct meaningful engagement with customers.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/crypto-innovation-suffering-inside-closed-networks">Crypto is becoming the same broken system it promised to fix</a>



In addition to the shortcomings of polls discussed earlier, they do not have intrinsic virality the way economic markets do. In an age of infinite content, gamification of opinion markets with economic outcomes will drive radically more engagement and virality than polls.



What will these opinion markets look like, and can we trust their outputs? The “wisdom of the crowd” is a well researched phenomena, suggesting that collective decision-making, when aggregated, often leads to more accurate outcomes than individual judgments. Unlike traditional polls or one-off surveys, crypto-based markets offer new primitives, such as economic incentives and participation history, to increase accuracy. We don’t know what the end-state will be, but the most effective form-factor will be determined by an explosion of research and experimentation, and the crypto advantages will undoubtedly produce better outcomes.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/political-candidates-cannot-ignore-crypto-voters">Political candidates can no longer ignore crypto voters</a>



The next generation of crypto builders will have the opportunity to create products that transform how we engage with public sentiment, forecast trends and make decisions — both as individuals and as communities.



The final question is: How will opinion markets <a href="https://blockworks.co/news/ai-future-is-decentralized-compute-networks">evolve in an age of AI</a>, where advanced algorithms can sift through massive datasets to predict social outcomes? AI agents will undoubtedly participate alongside human users, contributing their data-driven insights to the mix. I think rather than replacing human judgment, AI will compete with it to create a dynamic interplay between machine intelligence and human intuition. This will make opinion markets a unique arena for collaboration and competition between AI and human participants.



Opinions are like assholes; everyone has one. Does yours stink? Wanna bet?



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



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The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Forget polls — crypto-based opinion markets are the future of collective wisdom

This is a segment from the Empire newsletter. To read full editions, <a href="https://blockworks.co/newsletter/empire">subscribe</a>.



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The exchanges are decentralizing.



Kraken is positioning its upcoming Ethereum layer-2, Ink, as a venue built specifically to onboard new users to the DeFi space. Existing Kraken customers would form the bedrock of that brave new world.



Coinbase’s own blockchain, Base, meanwhile has carved out its existence by encouraging anyone to build anything and everything onchain — “literally anything under the sun,” as Ink founder Andrew Koller put it to Jason Yanowitz on <a href="https://blockworks.co/podcast/empire/04ce2c92-9583-11ef-80ce-7f8336a83820">today’s Empire podcast</a>.



Rather than shaping a place to run your ice cream truck or dog walking service onchain, Ink is opting to focus more on specific DeFi use cases.&nbsp;



“We want to take our decade-and-a-half experience of centralized order books and get those things onchain somehow, make it so that onchain users tap into that, and vice versa,” Koller said.&nbsp;



That means good UX, less clicks and increased security.&nbsp;



“Sequencer-level security so that people don’t even know that rugs exist, or don’t even know that drainer contracts exist. That would be an absolute dream come true, so I think the hyperfocus on the DeFi theme first is where we’re going to take ours.”



It could all lead to blurred lines between CeFi and DeFi. Perhaps offchain and onchain balances could be connected in some way, so that Kraken users could use their CEX balances as collateral in DeFi lending apps running on Ink, for example.&nbsp;



We’ve seen the early effects of this convergence already. Coinbase began shifting all user USDC deposits over to Base earlier this year, pushing the network’s stablecoin supplies from under $1 billion to almost $4 billion today.&nbsp;



And so begs the question: Could exchange chains grow so successful that they accidentally render their parent exchanges obsolete?&nbsp;



Going by trading volumes, it’s not such a crazy thought.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXe__UQoNKAVwcwVyOZUT6oIQ6ffXQNoWeK6cKV5G2cpX-1sMCV30Fr6wegdh-DcSyRp9N9ctHk0yKzHCxh0dVhF5stdWEJaHz2tfHmcb-s4CTpBr3EPXyIvIDeQrRWJFTu9OG90g2sxubt6fJ1oZub7Vs0?key=GfK9FWXi4y-1hEFhsyYgOcAa" alt=""/><figcaption class="wp-element-caption">Base eclipsing Coinbase = the snake eating its tail?</figcaption></figure>



Base DEX volumes — which mostly come from Aerodrome and Uniswap — have actually now eclipsed Kraken’s, as shown on the chart above.



The 30-day moving average of Base DEXs (in blue) is currently about $873 million, compared to $630 million for Kraken (in purple), per CoinGecko data.&nbsp;



Granted, reading too much into trading volumes on super-cheap chains like Base can be a bit silly, given how prevalent wash trading can be (one academic paper <a href="https://dl.acm.org/doi/10.1145/3689631">claims</a> to have identified $27.5 billion in wash trading on Uniswap v2 and v3 Ethereum pools — where it’s much more expensive than Base).



User assets could be another way through. We probably won’t get to see how much cash and crypto Kraken custodies on behalf of its users until it potentially goes public.&nbsp;



From SEC filings, we know that Coinbase safeguarded user assets worth over $273 billion at the end of June.&nbsp;



Barring $4.2 billion in cash, practically all of it was digital assets, the equivalent of over 11% of all cryptocurrency in existence at the time.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcpZXFotQPUrxOTIiwY6-4JSavNV8BCJrNWUVzDeUDiebkoK4tqtvwQREiVHkmPAOOZdRNDUH2YqlLdkKsc_ftRoyptGtspzr9gfki3PSmaIzIWRXxDklZhbUMaZIvQ6UFhuiWF928s1WkXuGDF4BAhq79h?key=GfK9FWXi4y-1hEFhsyYgOcAa" alt=""/><figcaption class="wp-element-caption">Slowly, then all at once</figcaption></figure>



Base, meanwhile, had $7.2 billion economic value onchain — equal to 70% more than the Coinbase user cash, but less than 3% of the crypto kept on the exchange itself.



It’s not exactly possible to port the entirety of Coinbase user crypto over to Base, considering how much of it would be in bitcoin, ether and other layer-1 assets.&nbsp;



Still, it’s not unrealistic to see the gap closing more rapidly from here. Especially now that Kraken is spurring a competitive and friendly rivalry. 



And if just one of them succeeds, it could make CEXs a Web2 relic, just like the rest of it.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Could exchanges decentralize themselves out of existence?

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forwardguidance">subscribe</a>.



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It’s a big week for stocks, with five of the Mag 7 companies slated to report earnings this week: Alphabet (Tuesday), Microsoft (Wednesday), Meta (Wednesday), Apple (Thursday) and Amazon (Thursday).&nbsp;



The Qs will be a good proxy to watch this week, as about 32% of QQQ’s holdings are in the above five stocks. The fund has lagged the Nasdaq Composite over the past 30 trading days (1.8% returns for QQQ vs. the Nasdaq’s 2.4%), but strong earnings reports from these tech giants could be enough to bring the index out of this resistance zone.&nbsp;



Corporate earnings generally have a packed schedule this week, with 169 companies in the S&amp;P 500 due to publish quarterly results. Ford, Visa, Uber, Exxon and Mastercard are among the big names also sharing reports in the coming days.&nbsp;



Of the roughly one third of S&amp;P 500 companies that have already reported, 75% published earnings per share that were above analysts’ estimates, FactSet data shows. Meanwhile 59% have reported better-than-anticipated revenue for the third quarter.&nbsp;



“Q3 earnings season is thus far marginally better than the recent past in terms of revenue and earnings beat amounts, but it still lags long-run averages by a considerable margin,” DataTrek Research co-founder Nicholas Colas said. “Even still, earnings are good enough to support current S&amp;P levels since they support expectations for further improvement in Q4 and into 2025.”



We’ll have to wait and see if this rally can last.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

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