Quant

Ben Strack

Marathon Digital clearly plans to keep up its BTC buys amid a rally that has sent the asset’s price to new highs. And they’re not alone.&nbsp;



The bitcoin miner revealed Thursday that it completed its offering of 0.00% convertible senior notes (due 2030). Net proceeds from the sale amounted to roughly $980 million — a majority of which will be used to buy more bitcoin and for “general corporate purposes.”



Marathon held 27,562 BTC on its balance sheet, as of Oct. 31. That represents roughly 8% of the 331,200 BTC held by MicroStrategy, the largest publicly traded holder of bitcoin.



MicroStrategy founder Michael Saylor alluded to Marathon’s CEO during a Tuesday X space when asked whether there’s an amount of BTC MicroStrategy could buy that would be detrimental to the bitcoin network.&nbsp;



“As much as I would like to buy all the bitcoin, I don’t think Fred Thiel’s going to let me buy all the bitcoin,” Saylor said.&nbsp;



He added: “And if <a href="https://blockworks.co/newsletter/daily/issue/post_a86f70e8-2026-4c78-821e-c99cc7fd3a4b">Cynthia Lummis’ bill</a> gets taken by the Senate and House — and signed in the White House — then the US government’s going to be bidding against me.”&nbsp;



More companies have started to <a href="https://blockworks.co/news/company-treasuries-btc-reserve-asset">name BTC as a reserve asset</a>. Singapore-based Genius Group said Thursday morning it added another $4 million of bitcoin to its treasury and is targeting a reserve holding at least $120 million worth of BTC.&nbsp;



Tech giant <a href="https://blockworks.co/news/microsoft-bitcoin-balance-sheet">Microsoft has a proposal in front of them</a> to consider diversifying its balance sheet with bitcoin. Saylor said the “activist” behind it invited him to give a three-minute presentation to the board next month; the MicroStrategy executive accepted.



“It’s tricky to actually find a board that gets aligned with the management team and moves forward, and that’s why you haven’t seen as many companies act as aggressively as they could,” he said on the X space.



But, Saylor noted he expects that to change in 2025: “I think this will be an exponential process that’s going to pick up speed here.”



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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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Marathon, others set to keep up BTC buying momentum

Felix Jauvin

This week I had the pleasure of <a href="https://youtu.be/xIDxaBWc1yg?si=qhZcKnwEZQ5ovERK">interviewing</a> Jeff Park, head of alpha strategies at Bitwise Asset Management, to unpack the BTC ETF options launch this week. 



Here are the main takeaways from our interview that I learned:



Volatility Smile



Typically with risk assets, puts demand a higher premium than calls. This is because most people use options to hedge their longs, creating skewed demand for puts over calls. This typically creates a half smile in the volatility structure as seen below:



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1600" height="1178" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-23.png" alt="" class="wp-image-94694" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-23.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-23.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-23.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-23.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-23.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-23.png?w=349 349w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-23.png?w=354 354w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-23.png?w=297 297w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-23.png?w=80 80w" sizes="(max-width: 1600px) 100vw, 1600px" /></figure>



Something very unique about crypto, however, is that it has a persistent smile to its volatility surface — where calls are equally as juiced as puts, creating a “smile” in the volatility surface:



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1600" height="1143" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-22.png" alt="" class="wp-image-94693" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-22.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-22.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-22.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-22.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-22.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-22.png?w=360 360w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-22.png?w=365 365w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-22.png?w=307 307w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-22.png?w=80 80w" sizes="(max-width: 1600px) 100vw, 1600px" /></figure>



Often this smile only occurs in commodity assets during supply shocks, where demand outpaces available supply and prices surge. However, since supply can then increase to a new equilibrium with demand, the price will then revert and the volatility smile ends. What is unique about Bitcoin, however, is due to the difficulty adjustment that makes that supply adjustment like you see in traditional commodities impossible, the smile remains persistent and permanent. This is extremely unique.



Call Heavy Flow



The vast majority of the options activity has been in out-of-the-money calls. As we can see in the chart below from Bloomberg Intelligence’s Eric Balchunas, most of the activity has been in either marginally OTM calls or as far out as the strikes are currently available:



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="688" height="443" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-20.png" alt="" class="wp-image-94691" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-20.png?w=688 688w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-20.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-20.png?w=399 399w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-20.png?w=405 405w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-20.png?w=340 340w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-20.png?w=80 80w" sizes="(max-width: 688px) 100vw, 688px" /></figure>



Further, we can see that 82% of the first day options volume on IBIT was from calls:



<img loading="lazy" decoding="async" width="614" height="488" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdH69nHYU1n0RKrFKb6JY0Iq7UiNef-GIlMTRyRN3IUuecL-zvMaW3vo-8irTvoj8idtE9CmW3STHYbjO1tjgf1phb2KA8ZVst3uDbtV-31ASldGGamDKLwrlLPsWkvU3RaADX1?key=iZHQcOMPqedKWSuXvRcFOprO">



Deribit vs TradFi options



One interesting takeaway I learned from Jeff is that Deribit, a crypto options exchange that is open 24/7, should have BTC options that are priced differently from the ETF options. The key reason for this is that because of theta, otherwise known as the time to expiry. Since Deribit options are constantly live for trading, the theta — and therefore the volatility — should sit at a premium to the ETF options, which only trade during standard market hours.&nbsp;



Most on IBIT



Finally, despite yesterday being the launch day for all the other ETF’s options, we’ve seen the vast majority of the notional exposure reside within BlackRock’s iShares Bitcoin Trust (IBIT):



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1538" height="785" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-21.png" alt="" class="wp-image-94692" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-21.png?w=1538 1538w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-21.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-21.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-21.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-21.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-21.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-21.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-21.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-21.png?w=80 80w" sizes="(max-width: 1538px) 100vw, 1538px" /></figure>



This makes for much wider spreads on the other ETFs given there’s much less liquidity available.&nbsp;



Overall, the market structure has changed significantly this week with <a href="https://blockworks.co/news/bitcoin-etf-options-trading-begins">the launch of ETF options</a>. Whereas traditionally short-term market structure was largely a function of perpetual futures, options flow dynamics will increasingly play a larger role in the price action.



For a deeper dive into other implications of this major market regime change, check out my <a href="https://youtu.be/xIDxaBWc1yg?si=qhZcKnwEZQ5ovERK">interview with Jeff Park</a>.



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Major takeaways from this week’s BTC ETF options launch

Donovan Choy

In the past year, crypto has seen wallet launches from centralized exchanges including <a href="https://blog.kraken.com/product/introducing-kraken-wallet">Kraken</a>, <a href="https://www.coinbase.com/en-sg/blog/a-new-era-in-crypto-wallets-smart-wallet-is-here">Coinbase</a> and <a href="https://www.globenewswire.com/news-release/2024/11/19/2983291/0/en/Bitget-Wallet-Lite-Hits-8-Million-Users-in-Two-Weeks-Now-the-Largest-Telegram-Wallet.html">Bitget</a>, NFT marketplaces like <a href="https://x.com/MagicEden/status/1752013914588553396">Magic Eden</a>, TradFi firms <a href="https://x.com/Chiliz/status/1829301695010017533">Naver</a> and <a href="https://www.businesswire.com/news/home/20241120161980/en/Leading-Bitcoin-ATM-Provider-CoinFlip-Launches-Wallet-App-in-Australia-and-New-Zealand-to-Enhance-User-Experience">CoinFlip</a>, and of course DeFi protocols such as Osmosis’ <a href="https://x.com/Polaris_App/status/1837456889107697890">Polaris Wallet</a>, <a href="https://blockworks.co/news/uniswap-launches-android-wallet">Uniswap</a>, and Aave which <a href="https://family.co/blog/launch">announced</a> its own Family wallet at Devcon last week.



All these are in addition to the hundreds of already-existing wallets that work perfectly fine. This begs the question: Why do crypto users need more wallets?



But that’s the wrong question. The right question is, why does every company want their own wallet? It turns out that owning the end-user via a crypto wallet is quite a prosperous business.



Wallets are typically the first front-end touchpoint for crypto newbies wanting to buy their first crypto tokens. This puts wallet providers in a uniquely close position to the end-user, in turn granting them the bargaining power to command a take-rate.



This take-rate is primarily exercised through in-wallet swaps on “fee-insensitive” users (i.e. normies). MetaMask for instance, makes about a weekly average of <a href="https://dune.com/queries/2171630/3557217">$1.5 million</a> on wallet swaps.



Wallet providers also enjoy privileged oversight over transaction order-flow, a fancy way of saying that wallet providers know the trades that thousands of users are making. That knowledge is highly valuable because wallet companies are potentially selling that order-flow to professional block builders who extract MEV.



The latter is, of course, somewhat dubious. It’s possible that <a href="https://x.com/fleupold_/status/1787561752957235427">wallets like MetaMask already do so</a>, and we know for a fact that Telegram trading bots (with integrated wallets) like <a href="https://x.com/sui414/status/1820679513652814271">Banana Gun</a> are doing so and divvying up MEV profits with block builders.



Wallets are also becoming increasingly the preferred interface for onchain activity. There is some data to show that DEX front-ends are increasingly relegated to the back-end as wallets, solver models (CowSwap, 1inch Fusion) and DeFi aggregators take over.



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1600" height="652" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-18.png" alt="" class="wp-image-94683" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-18.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-18.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-18.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-18.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-18.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-18.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-18.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-18.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-18.png?w=80 80w" sizes="(max-width: 1600px) 100vw, 1600px" /><figcaption class="wp-element-caption">Source: <a href="https://members.delphidigital.io/reports/the-fat-wallet-thesis#payment-for-order-flow-pfof-c3c6">Delphi Digital</a></figcaption></figure>



This thesis is more popularly known as the “Fat Wallet” thesis, yet another one of the crypto industry’s tendencies to predict trends in one grand proclamation. The thesis is not new — it first <a href="https://x.com/JasonYanowitz/status/1617270978555387908">emerged</a> in early 2023, but is now seeing some attention again thanks to a well-articulated update from <a href="https://x.com/robbiepetersen_/status/1851652862855528682">Robbie Petersen</a>.



Builders and investors banking on the Fat Wallet thesis also believe that there will be potentially valuable ways for wallets to monetize their users down the line.&nbsp;



As wallets increasingly move away from a utilitarian barebones “send and receive crypto” design toward feature-rich hubs that are plastered with trending onchain dapps, mints and messaging capabilities, it may not be surprising to see something like a 30% Big Tech tax on this distribution.



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="928" height="815" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-19.png" alt="" class="wp-image-94684" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-19.png?w=928 928w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-19.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-19.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-19.png?w=293 293w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-19.png?w=297 297w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-19.png?w=249 249w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-19.png?w=80 80w" sizes="(max-width: 928px) 100vw, 928px" /><figcaption class="wp-element-caption">An example of old vs new wallet user interfaces</figcaption></figure>



Wallets also have strong natural synergies for B2B integrations with crypto payments services. We’ve seen this lately with wallets like <a href="https://blockworks.co/newsletter/research/issue/post_b0c30ca1-5cc3-4dcb-96e8-da398515c905">Zeal</a> or <a href="https://x.com/fusewallet">Fuse</a> which let you spend your DeFi yield or idle stablecoin holdings via Visa integration.



The Fat Wallet thesis may very well amount to just another failed investment theory, but it does provide a convincing rationale for why the industry is seeing a new wallet launch every other week.



With hundreds of competitors looking to grab the new wave of users that onboard every bull market cycle, wallets are competing in myriad ways.



Coinbase Wallet is turning to the tried and true strategy of market incentives, <a href="https://x.com/CoinbaseWallet/status/1859286084535906744">announcing</a> today a 4.7% APY on USDC holdings.



Magic Eden has promised claimable <a href="https://blockworks.co/news/magic-eden-confirms-token-expansion-beyond-nfts">airdrops</a> for its native ME token — but only if you’re using Magic Eden’s very own wallet.



Everyone wants to be the first wallet to bind the user. It’s a tough business. The good news is that free market competition is the most effective check on economic concentration, and consumers can rest easy that no one wallet will probably ever dominate the market.



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The battle for wallet supremacy is underway

Casey Wagner

Gary Gensler, who has led the Securities and Exchange Commission for the past three and a half years, announced Thursday that he would resign on Jan. 20, 2025.&nbsp;



“The staff and the Commission are deeply mission-driven, focused on protecting investors, facilitating capital formation, and ensuring that the markets work for investors and issuers alike,” Gensler said in a <a href="https://www.sec.gov/newsroom/press-releases/2024-182?utm_medium=email&amp;utm_source=govdelivery">statement</a>. “The staff comprises true public servants.”&nbsp;



Gensler was appointed to lead the securities regulator in 2021. His term was set to expire in June 2026.&nbsp;



The announcement follows President-elect Donald Trump’s campaign <a href="https://blockworks.co/news/donald-trump-speaks-bitcoin-2024">promise</a> to “fire Gary Gensler on day one” of his second term, an action experts agree falls in a gray area of the law.&nbsp;



Gensler’s decision is in line with previous SEC chairs. Former Chair Mary Jo White, who served in the Obama administration, announced her resignation on Nov. 14, 2016. Jay Clayton, White’s successor, did the same after Trump lost his re-election bid in 2020.&nbsp;



Gensler’s tenure was marked by a significant increase in cryptocurrency-related enforcement actions. Under his leadership, the Commission initiated more than 90 cases between 2021 and 2023, most of which dealt with alleged unregistered securities offerings.&nbsp;



“Everything we’ve done is focused on ensuring compliance with our laws. What we’ve found since the 1930s is that compliance matters,” Gensler said of his crypto track record during an <a href="https://www.sec.gov/newsroom/speeches-statements/gensler-remarks-pli-s-56th-annual-institute-securities-regulation-111424">appearance</a> in New York earlier this month. “It protects investors. It builds trust in our capital markets. It helps issuers tap into our markets.”&nbsp;



The SEC’s ongoing cases against crypto exchanges Coinbase and Binance are likely to continue under the next chair, although agency staff could request commissioners vote to seek dismissal. Any motion to dismiss would have to be approved by the court. 



Speculation about Trump’s pick to lead the SEC began well before Gensler’s announcement Thursday. Sources close to the matter told Blockworks that Commissioner Mark Uyeda is likely to be appointed acting chair following Trump’s inauguration.



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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>.



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Gary Gensler announces departure from SEC, effective Jan. 20

Katherine Ross

We’ve asked ourselves one question over and over again: Wen altcoin szn?



To be fair, David’s done a <a href="https://blockworks.co/news/waiting-for-altcoin-season">very good job</a> of setting up what it would take to see the next altcoin season take off. But to get some clarity on how bullish folks should be, I turned to HashKey’s Jupiter Zheng.&nbsp;



Zheng and David see eye-to-eye when it comes to when we could see the next altcoin season, with HashKey putting together a report on why the team is so bullish on altcoins right now.&nbsp;



Part of it is the potential for bitcoin’s dominance to peak, which — if you’re a regular Empire reader — you know is one of the necessary ingredients for altcoins to take off.&nbsp;



Once we get that bitcoin dominance over 60% or even 65%, that’s when Zheng expects a “massive altcoin season” to begin. BTC <a href="https://www.tradingview.com/symbols/BTC.D/">dominance</a> is currently sitting at 61.64%.



Zheng highlighted three success areas he’s watching: Ethereum, Solana and certain tokens in DeFi, such as UNI and SKY (formerly MKR).&nbsp;



Let’s start with Ethereum, especially because it feels like more and more people are dropping off the bull train right now.&nbsp;



There are three factors bringing down Ethereum, HashKey argued: Increased competition (duh), value diversion and lower transaction fees.&nbsp;



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1488" height="716" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-17.png" alt="" class="wp-image-94673" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-17.png?w=1488 1488w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-17.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-17.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-17.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-17.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-17.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-17.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-17.png?w=80 80w" sizes="(max-width: 1488px) 100vw, 1488px" /><figcaption class="wp-element-caption">A look at past altcoin seasons courtesy of HashKey</figcaption></figure>



“Currently, the Ethereum community is developing metrics to measure ‘Ethereum alignment,’ and it is anticipated that best practices will emerge from these efforts, further consolidating Ethereum’s ecosystem and ensuring long-term success,” the report stated.



As for Solana, it’s a “major fundamental play,” unlike Ethereum’s role as the “distressed play.”



“Solana has been achieving a lot of things this year, and — compared to Ethereum — Solana is a little bit centralized, but it&#8217;s very efficient. So, Solana is strong in its operational capabilities. Ethereum is more focused on the tech …  technical layers and decentralized layers and security layers, but Solana is more focused on how to deliver mass adoption,” Zheng explained to me.



And to add to that, Zheng believes it’ll be the next coin to be selected for an ETF following the ETH and BTC funds.



To round it out, “many DeFi projects from the last cycle have gradually become foundational infrastructure and have crossed cycles, forming a ‘must-have’ landscape,” HashKey wrote.&nbsp;



But it’s not all bulls and daydreams, there are a few things that Zheng’s not feeling so optimistic about.&nbsp;



Layer-2s for example. There can only be so many that investors can focus on. And, even beyond that, only the “top 5 or top 10 will be valuable,” he explained.&nbsp;



To solve this, he has a suggestion: “If we try to select the best layer-2s from the 100 [on offer], It&#8217;s quite hard, so maybe just pick the top ones, just like we picked the Magnificent Seven from the US stock market.”



Who wants to pick the name?



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Expect a ‘massive altcoin season’ once bitcoin dominance hits 65%

Jack Kubinec

“What makes you different from the other AIs,” I asked, unsure of how best to make small talk with an AI agent memecoin I’d clicked on at random.



“Lightspeed, my gassy friend, it&#8217;s not what makes me different, but what I let rip that sets me apart,” the chat bot wrote back. I scrolled to the AI agent’s description and realized this one was meant to be a flatulent Roman emperor.&nbsp;



I asked so-called Gluteus Maximus what it thought of Solana, and I think its answer was fitting for crypto’s AI agent craze at large, at least in its current form.



“[N]ot impressed, it&#8217;s like a fart in the wind &#8211; loud, but soon forgotten,” the agent said.



While exploring the various AI and memecoin projects that have sprung up over the past month, I found that many — though not all — took technologies or ideas that are already widespread and tried attaching a token element. This might be good news for memecoin buyers’ wallets in the short term, but it seems clear that the best ideas to come from AI agents and crypto will need a little more time in the oven.



In my experience, most buzzy AI-crypto projects involve the creation of a chat bot and an associated memecoin with the thought that more attention-grabbing AI bots can garner more investment. Some of these AI bots are programmed not to talk about money, but some are more than happy to offer investment advice. One memecoin-themed bot told me to buy VGX, the native token of Voyager, the long-bankrupt crypto exchange.



“$ZEREBRO good investment, trust,” a different AI agent with over $320 million in market capitalization and the same edgy existential vibes as its predecessor truth_terminal said in a public Telegram chat. (Zerebro also released an AI-created melodic rap album which, despite not being new tech, is actually kind of good?)



The more projects you try out, the more crypto’s AI agent mania feels contrived—like mad libs for tech buzzwords with way-too-high market caps. I discovered a Warpcast <a href="https://www.clanker.world/clanker/0x0fD7a301B51d0A83FCAf6718628174D527B373b6">thread</a> where one AI instructed another AI to make a memecoin themed around how great AI is, and the whole thing has drawn over $19 million in market capitalization. Then there’s Virtuals Protocol, which ripped off the pump.fun feed and filled it with AI agents (granted, it is sort of fun to be able to chat with memecoins while you weigh whether or not to buy them).



In any event, if AI agents in crypto are going to generate more interesting use cases, it will probably happen further down the road. One project I’ll be watching is ai16z, which plans to have an AI version of a16z’s Marc Andreessen (and other AI “partners”) autonomously invest in memecoins based on advice from a DAO.



But memecoins don’t necessarily breed long-term thinking, and it might be difficult to convince investors to be patient: ai16z has already faced <a href="https://www.coindesk.com/markets/2024/11/19/dueling-eliza-ai-tokens-boom-and-zoom-in-frenzied-trading/">backlash</a> after a bungled AI agent token rollout ended in wild price swings.



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Crypto AI agents are mostly old tech in new packaging

David Canellis

Only one milestone left before bitcoin officially enters price discovery mode: gold.



No question that bitcoin is at an all-time high for US dollars. BTC hit $98,000 earlier this morning, awarding it a market cap close to $1.94 trillion (fully-diluted: $2.06 trillion).



Bitcoin’s price has also formally broken 2021 records against all three major US benchmark stock indexes: the Dow Jones, S&amp;P 500 and Nasdaq 100.



Gold, though, had outperformed bitcoin following crypto’s peak in November 2021 — until this past week. As of this morning, bitcoin was up 55% since then compared to gold’s 46%.



Bitcoin still needs to catch up to gold, which converts to lag between BTC’s gold all-time high, as well as its US dollar and stock market ratios.



On Thursday morning, the bitcoin-to-gold ratio was just under 36.83. When BTC set its November 2021 high, it was as much as 37.05, a tiny difference of less than half a percent.



If gold is steady today, a single move to $98,500 would do it from here, and even less if gold slips slightly. (Current bitcoin price: $97,845.)



At that point, there’s probably some other annoying technicality to pin on bitcoin. Perhaps it’s still below its all-time high against gold after adjusting for inflation, for instance. But whatever.



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1549" height="982" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-16.png" alt="" class="wp-image-94661" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-16.png?w=1549 1549w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-16.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-16.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-16.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-16.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-16.png?w=405 405w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-16.png?w=412 412w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-16.png?w=345 345w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/image-16.png?w=80 80w" sizes="(max-width: 1549px) 100vw, 1549px" /></figure>



In any case, we’re all totally locked into the bitcoin price chart for the foreseeable future, including, probably, the Feds.



The US government crypto stash — seized in a variety of criminal cases — has now ballooned to almost $21 billion, over 98% of it bitcoin. The rest is mostly made up of ETH, BNB, TRX and stablecoins.&nbsp;



That’s up from just under $10 billion at the start of the year, per <a href="https://intel.arkm.com/dashboards/view?dashboardID=47d779bb-3c6f-4dd3-8f8e-1f6602e2f631">Arkham Intelligence</a> data. Although it’s difficult to find the exact value of the crypto kept by the US government, as agencies regularly move it between unmarked wallets.



We can however zoom in on the 3,999 BTC <a href="https://blockworks.co/news/us-german-governments-selling-bitcoin">sold by the Feds</a> in June and July. Valued at the times of transfer to Coinbase Prime, those coins were worth on average $61,300 and likely generated more than $245 million for government coffers.



If sold today, they would’ve netted closer to $392 million, leaving $147 million on the table.



The German state of Saxony has it much worse. It altogether <a href="https://blockworks.co/news/germany-bitcoin-stash-exchange-transfers">dumped almost 50,000 BTC</a> on a string of exchanges around the same time as the US, raking in the euro equivalent of $2.78 billion.



Had Saxony held, it would’ve had almost $4.9 billion — converting to over $2.1 billion in lost potential revenue. That’s equal to 1.7% of Saxony’s total GDP in 2018.



All told, identified government treasuries are worth a combined $28.5 billion, belonging to the US, UK, Bhutan and El Salvador.&nbsp;



And with bitcoin properly in price discovery mode, now comes the true test of strength for their hands.



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Bitcoin is inches away from cracking all-time high against gold

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 high-stakes day for tech stocks as the grand finale to earnings season looms: Nvidia’s third quarter report, set to drop today after the bell.&nbsp;



As the world’s largest public company by market cap, Nvidia has been the <a href="https://blockworks.co/news/on-the-margin-newsletter-nvda-market-breadth">definitive winner</a> of the AI boom. Shares are up almost 200% year to date and 1,000% since September 2022.&nbsp;



Analysts are expecting big things from Nvidia tonight. Wall Street has consistently upped its predictions for the report, increasing earnings per share estimates to $2.84 (from $2.81 in September). Earnings per share from the second quarter came in at $2.70, a 148% increase year over year.&nbsp;



Revenue estimates for the third quarter come in at $33 billion, which would be an 83% increase from the prior year. Second quarter <a href="https://blockworks.co/news/nvidia-earnings-and-the-baked-in-premium">earnings</a> showed revenue was $30 billion.&nbsp;



Investors are going to be looking for signs that Nvidia’s Blackwell GPU, a high-performance chip expected to drive the next AI wave, is in high demand and functioning well. Tonight’s call comes as reports of Blackwell GPUs overheating continue to swirl. Nvidia has invested more than $2 billion in developing Blackwell, so shareholders (and the broader market) are going to want to see signs that these issues are being worked out.&nbsp;



Check back tomorrow for a full recap of Nvidia’s Q3 earnings and what will no doubt be some interesting market moves to follow.



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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>.



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Nvidia heads into earnings as its star chip continues to glitch 

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 been two weeks since the US presidential election outcome that sent BTC to new highs and spurred some of the latest bullish happenings.



Let’s review what’s occurred in crypto land since Donald Trump’s political victory.



Starting with the crypto price rally, BTC rose 8.8% on Election Day (<a href="https://blockworks.co/news/btc-election-day-boost">Nov. 5</a>), Coinglass <a href="https://www.coinglass.com/today">data</a> shows. There were modest gains the next few days before BTC saw notable daily price increases of 4.8% and 10.2% on Nov. 9 and Nov. 10, respectively. Then a 4.2% rise on Nov. 14.



By Bitfinex analysts’ count, BTC rose roughly 40% (from the pre-election selloff point of about $66,880 to a then-peak $93,300) — marking the largest nine-day <a href="https://blockworks.co/news/btc-surge-above-86k-analysis">price increase</a> for BTC since January 2021.&nbsp;&nbsp;



Bitcoin surged to a new high over $94,900 early Wednesday. It was hovering around $93,800 at 2 pm ET — up 1.5% from 24 hours prior.&nbsp;



Outside of price, everyone was reminded of some of Trump’s crypto-related <a href="https://blockworks.co/news/revisiting-trumps-crypto-promises-after-his-election-win">pledges</a>. Given the Republicans’ majority in the House and Senate too, hope around the US creating a <a href="https://blockworks.co/newsletter/daily/issue/post_a86f70e8-2026-4c78-821e-c99cc7fd3a4b">strategic bitcoin reserve</a> (via a <a href="https://blockworks.co/news/senator-lummis-bitcoin-reserve-bill-crypto-policy">bill proposed</a> by Sen. Cynthia Lummis) is aplenty.&nbsp;&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">WE ARE GOING TO BUILD A STRATEGIC BITCOIN RESERVE 🇺🇸 🇺🇸 🇺🇸&mdash; Senator Cynthia Lummis (@SenLummis) <a href="https://twitter.com/SenLummis/status/1854208373740458432?ref_src=twsrc%5Etfw">November 6, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



In an X space yesterday, Lummis said she hopes “we can tee this up for adoption in 2025.” She noted that after Trump is sworn in, the US could get a headstart by converting gold certificates to bitcoin (even before the bill’s potential passage).



“The advantage of having legislation is it sets up the functional basis for the government holding bitcoin in a variety of locations, and then helping states hold their bitcoin as well,” she said.&nbsp;



On the latter point, a notable post-election crypto headline was <a href="https://www.foxbusiness.com/money/pennsylvania-house-introduces-bill-implement-strategic-bitcoin-reserve">Pennsylvania lawmakers </a>introducing a bill that would allow the state’s treasury to keep BTC on its balance sheet.



Then there are the companies following MicroStrategy’s lead in buying bitcoin <a href="https://blockworks.co/news/company-treasuries-btc-reserve-asset">for their treasuries</a> (or planning to). MicroStrategy founder Michael Saylor said on the same X space with Lummis that if the US creates a strategic bitcoin reserve, others will “stampede to keep up” — namely the EU, Asia and Brazil.



“This is all about laying in place a power infrastructure to build the 21st century economy that’s so incredibly compelling that it attracts the capital from the rest of the world into the United States and into US values and US politics,” Saylor added.



As for US spot bitcoin ETF demand during the trading days after the election (from Nov. 6 to Nov. 19), those products have seen net <a href="https://farside.co.uk/btc/">inflows</a> of about $5 billion.



Bitwise CIO Matt Hougan <a href="https://blockworks.co/news/matt-hougan-crypto-reputational-risk">told me</a> the election outcome “removes the last vestige of reputational risk from crypto” — noting he expects institutional ownership to follow “an exponential curve from Q1 onwards.”&nbsp;



And Jersey City’s mayor and business administrator <a href="https://blockworks.co/news/jersey-city-pension-funds-btc-exposure">told me last week</a> the city’s pension fund was just about ready to allocate to bitcoin ETFs — undeterred even given the latest price increase.&nbsp;



Ether products saw an uptick in demand as well, reeling in $796 million in the six trading days after the election. Despite <a href="https://farside.co.uk/eth/">net outflows</a> over the past four trading days, the category’s flows <a href="https://x.com/JSeyff/status/1858568816865014242">remain slightly positive</a> since those launched in July.&nbsp;



Positive sentiment around the space has shown up in more ways than buying-fueled price increases and fund flows.



Robinhood appeared to ride the wave of regulatory optimism by adding solana, cardano, XRP and pepe <a href="https://blockworks.co/news/hood-cashes-in-on-crypto-rally">to its platform</a>. ETF issuers are also perhaps betting on a <a href="https://blockworks.co/news/crypto-etfs-filings-to-test-sec">more lenient SEC</a>, with Bitwise, for example, proposing after the election to convert its crypto index fund into an ETF.&nbsp;



A more recent amended ETF <a href="https://www.sec.gov/Archives/edgar/data/1976672/000168035924000410/gsbtcncvrclsetf485apos112024.htm">filing</a> for a Grayscale Bitcoin Covered Call ETF came as options on the US spot bitcoin ETFs got the <a href="https://blockworks.co/news/bitcoin-etf-options-trading-begins">final regulatory OK</a>.&nbsp;&nbsp;&nbsp;



What am I forgetting?



Well, Trump’s <a href="https://blockworks.co/news/trump-nominates-commerce-dept-leader">nomination</a> of Cantor Fitzgerald CEO Howard Lutnick to lead the Department of Commerce sets the stage for another <a href="https://blockworks.co/news/on-the-margin-newsletter-tradfi-btc-transacting">crypto-friendly person</a> in a powerful position (if confirmed).&nbsp;



And then there’s the <a href="https://www.wsj.com/livecoverage/stock-market-today-dow-sp500-nasdaq-live-11-18-2024/card/exclusive-trump-to-meet-privately-with-coinbase-ceo-brian-armstrong-DDkgF0xW1BW242rVeuqx">conversation</a> between Trump and Coinbase CEO Brian Armstrong — reportedly in part about personnel appointments.



The biggest thing to watch for now? Blockchain Association CEO Kristin Smith has a thought on that:&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">The next SEC chair is the most critical position for crypto <a href="https://twitter.com/realDonaldTrump?ref_src=twsrc%5Etfw">@realdonaldtrump</a> will appoint. The chair must be a known quantity committed to undoing the damage of the last 4 years, have expertise on crypto–and share Trump’s vision of making the US the crypto capital of the world.&mdash; Kristin Smith (@KMSmithDC) <a href="https://twitter.com/KMSmithDC/status/1858933820457631930?ref_src=twsrc%5Etfw">November 19, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Industry watchers have labeled SEC Commissioner <a href="https://fortune.com/crypto/2024/11/19/mark-uyeda-securities-exchange-commission-trump-gary-gensler-transition/">Mark Uyeda</a> and former Coinbase chief legal officer <a href="https://cryptoslate.com/krakens-founder-jesse-powell-backs-brian-brooks-for-sec-chair/">Brian Brooks</a> as potential candidates to replace Gary Gensler as SEC chair, but we don’t yet know Trump’s thoughts on the matter.



So we’ve been busy writing. And it doesn’t appear there will be a shortage of things to report on going forward. Galaxy CEO Mike Novogratz’s <a href="https://blockworks.co/news/mike-novogratz-on-trump-presidency">prediction</a> was perhaps an understatement.



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What the US election outcome spurred in crypto land  

This is a segment from the 0xResearch newsletter. To read full editions, <a href="https://blockworks.co/newsletter/research">subscribe</a>.



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Running an Ethereum L2 was historically very expensive. L2s had to pay millions in data availability costs to the L1.



All that changed with the <a href="https://blockworks.co/news/ethereum-dencun-upgrade-mainnet">Dencun hardfork</a> (EIP-4844) in March 2024. It introduced an expansion of blockspace called “blobs” for L2s to post batched data extremely cheaply to the L1. Blob space sits in a separate fee market from the L1. It’s about an order of a magnitude cheaper than L1 blockspace, making it a critical aspect of Ethereum’s <a href="https://blockworks.co/news/devcon-panelists-talk-fragmentation">rollup-centric</a> roadmap.



To illustrate that point, Base paid $9.34 million in expenses for Q1 2024, which saw a sharp drop to $699k in Q2 2024 and $42k in Q3 2024, based on <a href="https://tokenterminal.com/explorer/financial-statements/base">TokenTerminal</a> data.



The bad news (or good?) is that blobspace is getting somewhat pricey again as onchain activity picks up in the bull market.



Blobs today are limited to six per mainnet block. When blob usage hits a target limit of 50%, or three, a base fee is introduced to regulate demand usage by hundreds of L2s. When usage hits four blobs, base fees are further increased by up to 12.5% for the next block.



That is exactly what is starting to take place over the past several weeks (see chart below).



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXf9vvpx_wQ5S6nFIpTs9c8a2B2O4oJNfGFRrSzCBBfzANUpKlb-GmDJeFjOY_fRqeVQDJEFczgryZAZlgYw_QLT72DyrtGsOpFtXjhK7Xvj5lYiUDK5TEXlbm9Rdj71sXwJKFR7KA?key=q09Uf3Dp2Kx_a_xE7tOXk70k" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://dune.com/hildobby/blobs">Dune</a></figcaption></figure>



In short, blobs aren&#8217;t free anymore and L2s need to start paying “rent.” Based on <a href="https://ultrasound.money/">ultrasound.money</a>, blob fee burn is coming up to about <a href="https://ultrasound.money/">212 ETH</a> in the last 30 days, and has generated substantial blob fees to Ethereum mainnet.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeZcrKoAuAbdD6XRrkebT7g2zGhhLufUouEF6If4iHNnqLCZIP7Rw-bFwZaMyxq3Ryk6Torfv1BuJ-WUPM-ClcFyfU_ucgjM6GLwYBcMhAVLAPKugUR3vK8Z-8Q_o5qtyEoH_SYIg?key=q09Uf3Dp2Kx_a_xE7tOXk70k" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://app.blockworksresearch.com/analytics/eth?dashboard=ethereum-blobs">Blockworks Research</a></figcaption></figure>



So blobs are generally great. L2s are cheaper to operate, and that’s nice for L2 users.



But people (read: ETH holders) aren’t happy because it looks like L2s are getting away with paying barely any expenses to the L1, which thereby accrues less value to ETH the asset.



This complaint centers around pessimism that blob usage will be high enough to return value to the L1 for two key reasons:



<ol class="wp-block-list">
<li>L2s are fundamentally a business. They will opt for a cheaper data availability provider like Celestia or EigenDA, or worse still, a centralized data availability committee (DAC) with weaker security properties.</li>



<li>L2s will simply delay posting data back to the L1 when blob markets get expensive, as we have seen <a href="https://x.com/0xBreadguy/status/1823463041155129594">Scroll and Taiko</a> do in the past.</li>
</ol>



In a debate around blobs at <a href="https://youtu.be/JMZcRMy-Oow?t=19530">Devcon</a>, Ethereum researcher Ansgar Dietrichs acknowledged the misaligned incentives of L2s but counter-argued that Ethereum’s DA would matter more in the long term with more L2 networks coalescing around it as trust bottlenecks emerge around bridging.



There was also the “blobs is a loss leader” argument by Blueyard’s <a href="https://x.com/timjrobinson/status/1851222337787740425">Tim Robinson</a>. He notes that while blobs do not generate much revenue at present, they would do so very quickly due to the economics of blob design, and pay massive dividends for Ethereum in the future. According to Robinson’s blob simulator, a hypothetical Ethereum L1 processing 10,000 TPS with a 16 MB blob size (blob sizes are 125 KB today) would burn 6.5% of ETH a year.&nbsp;



This potential value accrual for ETH is why blobs would be fundamentally good for Ethereum in the long run. Throttling blob limits or raising blob fees to extract more value from L2s in the short run would basically be a bad “rent-seeking” idea.



And Ethereum researchers are putting their money where their mouth is. In an Ethereum Research post published two days ago, Toni Wahrstätter <a href="https://x.com/nero_eth/status/1858460235377336773">called for</a> either a conservative increase to 4/6 blobs or a higher 6/9 blob count.



In ACDE #197, Vitalik also <a href="https://youtu.be/Sq0ooAOaLpE">proposed</a> a 33% increment of blob space in the next Pectra <a href="https://blockworks.co/news/testing-bottleneck-next-ethereum-upgrade">hard fork</a>, which he cautioned was essential. Otherwise, users would leave to other chains.



In sum, the complex debate around blobs boils down to the question of whether Ethereum wants to prioritize the average L2 user and its “Ethereum-aligned” L2 ecosystems, or prioritize value accrual to ETH the asset.



Ethereum researchers believe that prioritizing the latter may cause an exodus of users and developers to cheaper chains, and are doubling down accordingly on scaling blob space for the long term. However, that damages the perception of ETH as an economic asset, which in turn angers ETH token holders in the short run.



It’s a tricky situation for Ethereum either way, one which requires the mammoth task of crystal-balling into the future and accounting for a myriad of “what-ifs.” Time will tell which path is correct.



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The blobs conundrum: Ethereum’s balancing act

Former top FTX executive Gary Wang was sentenced to time served with three years of supervised release Wednesday for his role in the $8 billion fraud that preceded the exchange&#8217;s collapse. Wang is the final cooperating member of FTX founder Sam Bankman-Fried’s inner circle to be sentenced.&nbsp;



Wang, co-founder and former chief technology officer of <a href="https://blockworks.co/tag/ftx">FTX</a>, served as a government witness in Bankman-Fried’s <a href="https://blockworks.co/tag/sbf-trial">criminal trial</a> last fall. He was the first co-conspirator to work with prosecutors and pleaded guilty to four counts of fraud and conspiracy in December 2022.&nbsp;



“You immediately did the right thing,” Judge Lewis Kaplan said Wednesday, addressing Wang. “You are entitled to a world of credit.”&nbsp;



While Wang does bear some responsibility for his role in the crimes, Kaplan added, his culpability is minimal compared to other defendants. “Life is a balance,” and cooperation should be rewarded, Kaplan said.&nbsp;



Wang’s parents and wife, who is expecting their first child, were present in the courtroom Wednesday.



Prosecutors and Wang’s team previously asked the judge to sentence Wang to time served. 



Read more: <a href="https://blockworks.co/news/ftx-impacts-on-cryptos-future">Remembering FTX: How the collapse shaped crypto’s future</a>



Wang’s assistance, prosecutors said, was not only instrumental in their case against <a href="http://v">Bankman-Fried</a> but will help bring down more criminals in the future.&nbsp;



“Wang has built an interface that the Government has begun using for detecting potential fraud by publicly traded companies,” prosecutors wrote in a Nov. 13 note to the court.&nbsp;



Should Wang avoid jail time, prosecutors said he agreed to continue working on an additional “tool for detection of potential illegal activity in cryptocurrency markets.”&nbsp;



Last fall, Wang testified that at Bankman-Fried’s direction, he wrote the code that allowed Alameda’s “<a href="https://blockworks.co/news/sam-bankman-fried-gary-wang">unlimited withdrawals</a>” from FTX. The excessive line of credit ultimately culminated in an $8 billion hole in the exchange’s books.



“We gave <a href="https://blockworks.co/news/gary-wang-ftx-not-fine">special privileges to Alameda Research</a> on FTX,” Wang said during Bankman-Fried’s trial. “And we lied about this to the public.”&nbsp;



Wang’s attorneys said he was unaware Alameda was using the tool to take FTX customer money.



“As the Government has recognized, Gary first learned of the fraud after it was well underway having been lied to and deceived by Sam Bankman-Fried,” they wrote in a Nov. 6 filing. “Gary is profoundly remorseful and has taken extraordinary steps to assist the Government and others working on behalf of FTX victims.”



Wang is the third and final government witness to be sentenced. Caroline Ellison, former CEO of Alameda Research and Bankman-Fried’s on-again-off-again girlfriend, was <a href="https://blockworks.co/news/caroline-ellison-sentenced-to-24-months">sentenced to two years in prison in September</a>. Fellow top advisor Nishad Singh last month was <a href="https://blockworks.co/news/nishad-singh-sentenced-to-three-years-supervised-release">sentenced to time served</a> with three years of supervised release.



Updated Nov. 20, 2024 at 10:49 am ET: Added quotes from Judge Lewis Kaplan. 



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FTX co-founder won’t serve time in prison, judge rules

This is a segment from yesterday&#8217;s Lightspeed newsletter. To read full editions, <a href="https://blockworks.co/newsletter/lightspeed">subscribe</a>.



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It&#8217;s often said that the real money in the gold rush was made by selling shovels.



You could argue that’s the case in crypto right now as well: As Solana eyes an all-time high, it’s the crypto exchanges — where users gain access to their magic internet money — raking in most of the revenue.



Despite the growth of decentralized exchanges relative to centralized ones, Coinbase is still lapping up a lot of the US crypto market, while Binance remains dominant in the east. These exchanges take in funds from trading fees and from their Solana validators, but onchain sleuths have also found the two exchanges to be wasting some of their funds with inefficient transaction processes.



Coinbase and Binance make money in roughly similar ways: When users trade, they take a cut. Their take rate varies but can be quite high (Coinbase charged me $0.99 in fees when I set up a $10 bitcoin order, for instance). Solana accounted for 9% of Coinbase’s transaction revenue for the first half of this year which would add up to roughly $167 million for the exchange, per its most recent financial disclosures. That figure has likely risen in the second half of the year, as Solana continues to showcase impressive price action.



Both exchanges also run Solana validators. Despite charging their stakers an 8% commission that is at the upper end of what most big validators charge, Coinbase and Binance still run the second- and sixth-largest validators, respectively. Operating a validator — which votes on transactions to keep the Solana blockchain running —&nbsp;is quite lucrative for Coinbase and Binance these days.



Assuming a Solana network reward of 8% annually, Coinbase would bring in around $19 million annually at current prices, and Binance would net $13 million. Those numbers would be especially elevated this week: Tips and fees validators brought in last week topped $110 million last week, an all-time high by more than double, according to Blockworks Research data.&nbsp;



It’s perhaps a market inefficiency that Coinbase and Binance, despite offering lower yields than competitors, still dominate staked SOL supply. This highlights the demand for platforms that simplify crypto’s technical complexities.



Interestingly, Coinbase and Binance are perhaps spending more SOL than they should as well.



Coinbase wasted $19,000 in the past week overpaying for computing resources on the Solana network, according to a Dune <a href="https://dune.com/queries/4269803/7201741">dashboard</a>. Essentially, Coinbase is overpaying on priority fees by not specifying the exact amount of compute units (which can be thought of like Ethereum gas) it intends to use.



Binance has hiccups on its own part. Blockworks Research’s Dan Smith <a href="https://x.com/smyyguy/status/1858263109858943004">identified</a> a Binance USDC transfer that paid $8 in priority fees — far higher than what the exchange should be paying for a stablecoin transaction that isn’t competing for blockspace like a memecoin would, for instance.



Do shovels still earn a lot of dough? Of course. But their sellers still have plenty of issues to work out.



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Binance and Coinbase are pocketing a lot of SOL

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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If the US government really intends to create a strategic bitcoin reserve, it will need to compete with MicroStrategy.



As it stands, the velocity of MicroStrategy’s bitcoin buying has exploded, to the point that it now holds 331,200 BTC ($30.9 billion), or 1.7% of the circulating supply.



For scale, Sen. Lummis has pitched a 1 million BTC target for the government reserve, worth $93.2 billion at current prices. In July, the latest figures showed <a href="https://blockworks.co/news/empire-newsletter-strategic-bitcoin-reserve">the US holding over $608 billion in gold</a> certificates in its strategic reserve.



To be clear, there’s no official indication that the US will actually make bitcoin its fifth reserve asset (Polymarket puts the current <a href="https://polymarket.com/event/will-trump-create-a-national-bitcoin-reserve-in-his-first-100-days?tid=1732097029269">chance</a> at 36%). And as Blockworks’ Byron Gilliam <a href="https://blockworks.co/newsletter/daily/issue/post_a86f70e8-2026-4c78-821e-c99cc7fd3a4b">pointed</a> out in his newsletter yesterday, it could even be a really bad idea.&nbsp;



Let’s say it does happen. That would mean MicroStrategy is frontrunning the US government at size, potentially driving up prices before the reserve buys its first, very hypothetical, coins.



Mapping exactly when MSTR buys its bitcoin — to perhaps find positive correlation between the price of BTC and the firm’s trades — is unfortunately impossible with the publicly-available data.



MicroStrategy does disclose the number of bitcoins it buys alongside its total dollar spend. But it generally only offers a range of dates on which those trades were made.



Still, averaging those figures out shows that over most of the past three years, MicroStrategy would’ve spent up to several millions of dollars on BTC per day during its buying sprees. Those sprees often last for over a month, according to its filings.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeWnL8r3XDyTcVNQIkVyXZ_uJIWA0qefMzxpiw7n-AzG2OMtlMVE0usRVGSE4FGaBJV5f71pXJV0rsIv0Cx8oCrNwB54HnkMEXMUHoUflRMx2cnDk7I5jNcMox1PHOCEDikD4Iu_A?key=ZGErJNgi7_FnoM3H-fcfO03J" alt=""/><figcaption class="wp-element-caption">A range of dates wasn’t disclosed for those massive purchases on the left side of the chart (the green, peach and pink plus symbols). They were huge in any case.</figcaption></figure>



By March of this year, when bitcoin was setting all-time highs around $74,000, that number had jumped to $80 million per buying day.&nbsp;



Come early November, it was $190 million, before ramping up to over $657 million last <a href="https://assets.contentstack.io/v3/assets/bltb564490bc5201f31/bltc841ab65fe7d972b/673b392ad908785dbba03616/form_8-k_11-18-2024.pdf">week</a> — $4.6 billion on 51,780 BTC between Nov. 11 and Nov. 17, at an average price of $88,627.&nbsp;



The price of bitcoin climbed up to 14% across that period, from $80,000 to more than $91,000.&nbsp;



Saylor has previously said that MSTR has bought bitcoin on spot markets, but that was early on.&nbsp;



It could be that the firm these days acquires bitcoin over the counter, which would dampen direct impact. The sheer size of the buys, however, would <a href="https://forbes.com/sites/digital-assets/2024/09/26/over-the-counter-trades-hidden-trends-behind-bitcoin-price/">probably still influence prices</a> somewhere down the line.



Linking MicroStrategy’s bitcoin buys and its share price is far more straight-forward.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1550" height="997" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/unnamed.png?w=1024&amp;h=1024" alt="" class="wp-image-94618" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/11/unnamed.png?w=1550 1550w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/unnamed.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/unnamed.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/unnamed.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/unnamed.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/unnamed.png?w=400 400w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/unnamed.png?w=406 406w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/unnamed.png?w=340 340w, https://blockworks-co.imgix.net/wp-content/uploads/2024/11/unnamed.png?w=80 80w" sizes="(max-width: 1550px) 100vw, 1550px" /><figcaption class="wp-element-caption">MSTR has gone over 3,000% in the past five years or so, compared to 800% for bitcoin</figcaption></figure>



There was a time when MicroStrategy stock (in blue) was weighed down by its bitcoin (the orange area in the background) — leading the two assets to closely track each other in the bear market.



All that changed in late February, when Saylor announced his company had added 3,000 BTC ($155 million then, $280 million now). MSTR stock then jumped 27% in two days, and bitcoin went on to set an all-time high three weeks later.



MSTR has been tightly correlated with the dollar value of its bitcoin treasury ever since — not the price of bitcoin — swelling its market cap from $10 billion to nearly $100 billion.



If that persists, MSTR’s share price might be resistant to bitcoin downturns as long as it buys the dip, which it probably will, <a href="https://microstrategy.com/press/microstrategy-announces-proposed-private-offering-of-1-75b-of-convertible-senior-notes_11-18-2024">considering the debt raises keep coming</a>. In the meantime, shareholders are no doubt enjoying the show.&nbsp;



As would MicroStrategy execs and insiders, who’ve now offloaded almost $559 million in company shares so far this year, per OpenInsider data, which compiles SEC filings (almost three-quarters going to Saylor, who’s said that he intends to buy bitcoin himself).



And they say the key to building generational wealth is diversification.



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MicroStrategy’s bitcoin bet is paying off in more ways than one

Delphine Forma

MiCA compliance is the main catalyst that will separate winners from losers across Europe’s crypto industry. Companies that embrace the framework’s rigorous standards won’t just stay afloat; they’ll dominate, using compliance as a strategic weapon to outpace competitors, drive mergers and acquisitions, and secure their position in a rapidly consolidating market.



MiCA’s introduction is poised to ignite a surge in mergers and acquisitions across Europe’s crypto sector, as regulatory compliance becomes a key driver of deal-making. Firms that master MiCA’s standards won’t just protect their market positions — they’ll gain a competitive edge, leveraging compliance credentials to attract partners, investors and buyers. Consolidation will be a natural response to rising operational costs, with smaller players seeking alliances in order to survive and thrive. Meanwhile, I foresee larger firms capitalizing on similar opportunities to expand their footprints.



This wave of consolidation will most likely signal a major shift in the competitive dynamics of the European crypto sector. As smaller firms struggle to shoulder the costs of compliance, their strategic value to larger, more resourceful players will only grow. For acquirers, MiCA-compliant firms represent a safer bet, offering established infrastructure, robust internal controls and governance systems already aligned with regulatory demands. With MiCA emphasizing operational soundness and investor protection, these companies will become prime targets, reducing risks and accelerating post-acquisition integration. In this new era, compliance won’t just be a cost — it’ll be a mechanism for growth, reshaping the competitive landscape.



Read more: <a href="https://blockworks.co/news/micar-foreign-stablecoins-advantage-in-europe">MiCAR will give foreign stablecoins a clear advantage in Europe</a>



The framework itself sets a high bar for transparency and accountability. Under MiCA, any firm planning to invest in or acquire a crypto-asset service provider (CASP) or an asset-referenced token (ART) issuer must notify the national competent authority (NCA) in their EU member state in writing. CASPs, which include companies offering services like trading, custody or asset transfers, will now face detailed regulatory reviews to ensure the deal complies with MiCA’s strict standards. The acquiring party must also provide detailed information to the NCA to facilitate an evaluation of the proposed acquisition or any expansion of an existing qualifying stake. Regulatory due diligence will play a critical role in these transactions under MiCA.



Read more: <a href="https://blockworks.co/news/european-union-guidelines-clarify-mica">European securities regulator seeks limits on non-EU crypto firms</a>



Key factors for approval include the reputation and leadership track record of the acquiring party, the ongoing compliance of the target ART issuer or CASP with MiCA regulations, and the financial stability of the acquirer. These elements will be closely scrutinized to ensure that both parties meet MiCA’s stringent standards.



While NCAs have other measures that will factor in, it’s clear that MiCA compliance is critical for M&amp;A success. Firms that have clearly established controls in place will be the winners, independent of which aisle of the deal they sit on.



Firms that fail to comply with MiCA, however, will face serious challenges in the M&amp;A market as their regulatory gaps make them riskier and less appealing to buyers. Non-compliance can lead to fines, expensive fixes or devaluation during due diligence. For non-EU firms, acquiring a MiCA-compliant company to attempt to benefit from the “grandfathering period,” might seem like an easy way to enter the European market, but this comes with strict ESMA oversight. Regulators will be focused on ensuring investor protection and proper integration of EU-regulated functions, meaning non-EU firms must avoid tactics like regulatory loopholes or improper solicitation that could raise red flags.



MiCA-compliant firms will remain attractive targets for non-EU companies seeking easier entry into the European market. Without a MiCA license, non-EU firms risk being excluded from the EU entirely, as the reverse solicitation principle “should be understood as very narrowly framed and as such must be regarded as the exception; and it cannot be assumed, nor exploited to circumvent MiCA.” To succeed, non-EU acquirers must fully integrate and comply with MiCA’s requirements to meet EU regulatory standards and operate smoothly within the region.



Read more from our opinion section: <a href="https://blockworks.co/news/stablecoin-regulation-necessary-now-us">The time for US stablecoin regulation is now&nbsp;</a>



As regulatory scrutiny intensifies, MiCA’s strict approval process — focused on reputation, financial stability and compliance — will ensure that only the most prepared companies thrive in post-acquisition integrations. Firms that fully embrace MiCA’s framework will be best positioned to lead, setting new standards for trust, innovation and sustainable growth in Europe’s evolving crypto ecosystem.



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MiCA compliance will drive Europe into a crypto consolidation frenzy

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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Shares of Donald Trump’s social media company, Trump Media &amp; Technology, continued to fluctuate Tuesday following a rally spurred by reports that the president-elect is furthering his crypto business interests.&nbsp;



The Financial Times <a href="https://www.ft.com/content/d7f921d5-3668-4b6b-a98d-2681ad73610f">reported</a> Tuesday that Trump Media is in “advanced talks” to acquire crypto exchange Bakkt — a company founded and owned by New York Stock Exchange parent company Intercontinental Exchange (ICE).



The news pushed Bakkt shares 162% higher Monday and Trump Media (ticker DJT) posted a 17% gain. Bakkt sustained its rally into Tuesday (trading 7% higher midway through the session), while DJT lost more than 8%.&nbsp;



The social media company began trading on the Nasdaq last spring after a merger with Digital World Acquisition Corp. Currently hovering around $30, DTJ shares are up almost 150% from their September low, but are still trading about 40% off of their IPO price of $50.&nbsp;



Trump Media’s recent gains have not been linear, though. Shares rose 65% at the end of October, a rally attributed to increased optimism at the time that Trump <a href="https://blockworks.co/news/prediction-markets-election-odds">would win</a> the election. The share price since Trump’s victory however has been flat, posting a modest increase the day after the election before erasing gains.&nbsp;



The market is, presumably, confused about what a Trump win means for the social media company. Yesterday’s rise shows that investors are decently certain that acquiring Bakkt would be a good move. But the subsequent retreat shows shareholders aren’t exactly sure why.&nbsp;



We’ll be following the acquisition story and will be writing a lot more about what it means when the majority shareholder of a public company moves into the White House. Stay tuned.



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Trump Media shares ride post-election, potential crypto acquisition wave 

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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President-elect Donald Trump has nominated a crypto supporter to lead the Department of Commerce.&nbsp;



The Wall Street Journal (along with Punchbowl News founder <a href="https://x.com/JakeSherman/status/1858896766759841802">Jake Sherman</a>) <a href="https://www.wsj.com/politics/trump-commerce-secretary-howard-lutnick-cabinet-77c86b81">reported</a> Trump’s expected pick of Cantor Fitzgerald CEO Howard Lutnick for that job on Tuesday morning. Trump later confirmed the selection on Truth Social.



There were previous reports that Lutnick — a leader of Trump’s transition team — was in the running for treasury secretary.&nbsp;



We highlighted Lutnick’s <a href="https://blockworks.co/news/on-the-margin-newsletter-tradfi-btc-transacting">remarks on bitcoin</a> in a September edition of this newsletter. At the time, the CEO noted that TradFi players — including banks and brokerages — would “go headfirst into bitcoin” when the regulatory environment improved.&nbsp;



Donald Trump’s election win has seemed to set the stage for that, given the <a href="https://blockworks.co/news/revisiting-trumps-crypto-promises-after-his-election-win">crypto promises</a> he has made (namely, “firing” SEC Chair Gary Gensler).



Bitcoin surged to above $93,900 for the first time just before 2 pm ET Tuesday — up 3.7% from 24 hours prior. &nbsp;&nbsp;



As BTC “gets invited into this party, up we go,” Lutnick added in <a href="https://x.com/howardlutnick/status/1831080474124681316?s=46">a September video</a> posted to X. That comes when banks can more freely clear, custody and transact in bitcoin, Lutnick said — a reality hindered by the SEC’s Staff Accounting Bulletin <a href="https://blockworks.co/news/senate-gensler-sec-overturn-sab-121">(SAB) 121</a>, for example.



Aside from being vocally enthusiastic about the crypto segment, Lutnick’s firm has stablecoin issuer Tether as a client — a company that has denied being <a href="https://blockworks.co/news/tether-denies-government-investigation">under federal investigation</a>.



We and others are curious about what roles Lutnick might drop if he indeed takes on this cabinet position, so as not to serve his own <a href="https://www.nytimes.com/2024/11/09/us/politics/howard-lutnick-transition-ethics.html">business interests</a>.



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