APPROVED, FINALLY: ProShares will launch a bitcoin futures exchange-traded fund (ETF) that will start trading on the New York Stock Exchange tomorrow, the company confirmed in a U.S. Securities and Exchange Commission (SEC) filing on Monday. The SEC approved bitcoin futures ETFs on Friday, with Chairman Gary Gensler still showing hesitance regarding potential funds settled in bitcoin directly. Meanwhile, Grayscale (CoinDesk’s sister company) reiterated plans to convert its BTC trust, the world’s largest investible crypto vehicle, into a spot-based ETF.

FUTURE MARKETS: The amount of money locked in the bitcoin futures contracts on the global derivatives giant Chicago Mercantile Exchange (CME) surged to record highs on Friday. Open interest, the value of non-liquidated contracts, in BTC futures surged to $3.64 billion on Friday, twice the value from Oct. 1 and more than the previous all-time high of $3.26 billion set last February. Analysts are speculating the emergence of BTC ETFs could revive the famed “cash and carry” arbitrage strategy (buying BTC while simultaneously selling futures contracts) which could put buying pressure on spot markets.

FALL BAKKT: Cryptocurrency exchange Bakkt, which is majority-owned by Intercontinental Exchange (ICE), was trading down more than 4% in its first day of trading after completing a SPAC transaction with VPC Impact Acquisition Holdings. Bakkt gained prominence for its bitcoin futures product and has since expanded into a fledgling consumer points and loyalty rewards market.

CRYPTO CRIME: Crypto fraud has accounted for losses of more than £146 million ($200 million) in the U.K. this year, according to the City of London Police. The figure is 30% higher than for all of 2020 and “unsurprising,” given the increased time that people are spending online, Detective Chief Inspector Craig Mullish said. Speaking of time well spent online: Genopets, a Solana-based non-fungible token (NFT) “move-to-earn” game where players are rewarded for the steps they take in real life, has raised $8.3 million in a seed funding round.

ENTERPRISE FOCUSED: Hedera Hashgraph, the enterprise-focused, blockchain-like network, has integrated the USDC stablecoin. This is part of a push by the Hedera governing council, which includes representatives from Google, IBM, Boeing and Deutsche Telekom, to bolster native decentralized finance (DeFi) and asset securitization on the network.

Don't subject stablecoins to new rules, crypto lobby tells U.S. regulators (Reuters)
Infinity is Going After OpenSea With 600M Free Tokens (The Defiant)
DeFi 2.0 Wave of New Projects Test Liquidity Mining Alternatives (The Defiant)
Square’s Jack Dorsey Says Company Looking to Build Bitcoin Mining System (Blockworks)
Steam banned NFTs while Fortnite publisher Epic Games says it’s planning to allow digital collectibles in games (Protos)
New York joins crackdown on crypto lending, seemingly targeting Nexo and Celsius (The Block)
“Big three” credit rating agency Fitch Ratings has warned that stablecoins could impact securities markets (Decrypt)
NBA Top Shot Sales Up 128% After New Drop Features Shaquille O'Neal (Decrypt)
The number of bitcoin “whales” holding 10,000 BTC or more has hit the lowest point since 2012 (Wu Blockchain/Twitter)
Decent editorial on NFTs, arguing they’re more playthings for the ETH rich and another industry for VCs to overhype (TechCrunch)
“So, even though this penalty suggests that regulators will go after stablecoin issuers that aren’t being upfront with investors, a concern for them is also assets that are relatively safe, and how they might interact with the payment system and funding markets,” Politico’s Victoria Guida and Aubree Eliza Weaver write in a very short piece about crypto legislation

A message from ADALend

The NFT Market Is Already Centralized

One of the problems non-fungible tokens (NFTs) purport to solve is the idea of “platform risk.” Buy an in-game add-on for a video game and your purchase really exists only on the publisher’s platform; files are hosted on company servers until the game is retired, at which point everything vanishes into the ether.

By contrast, NFTs interact directly with a blockchain, which means each computer in the network retains a complete record of what’s actually going on with the files. If one front-end interface crumbles, the thinking goes, another can step in, because no one company is responsible for storing the data.

But there’s a difference between how decentralized systems are supposed to work and how they are working in practice. In fact, the market is already highly centralized. Take NFTs on the Ethereum network.

Foundation, KnownOrigin, Nifty Gateway, Rarible, SuperRare and Zora are among the major marketplaces vying to become a sort of Web 3 eBay, but as any NFT enthusiast will readily admit, there’s only one site that’s even close to getting there.

That would be OpenSea, the site backed by venture capital firm Andreessen Horowitz that was valued at $1.5 billion this past summer. According to blockchain data aggregator DappRadar, OpenSea has facilitated more than $600 million in trades since last Monday. SuperRare, the next comparable marketplace on the list, had $6 million in trading volume during the same span.

Part of the reason for OpenSea’s incumbency is that it’s more like a listings aggregator than a gallery. While platforms like Foundation and SuperRare support trades only with specific, curated NFT collections, OpenSea supports a much wider range of projects. You can’t trade SuperRare NFTs on Foundation, or Foundation NFTs on SuperRare, but you can trade both on OpenSea. (Rarible has the same kind of cross-project flexibility, but isn’t nearly as popular.)

OpenSea is also a little more lawless than either Foundation and SuperRare, both of which are trying to cultivate a reputation for dealing in digital artworks. OpenSea is where you go for your Lazy Lions, your Bored Apes – the more self-consciously arty stuff tends to start on other platforms before finding its way to OpenSea’s secondary market.

As a few publications pointed out last week, OpenSea briefly played host to a collection of Hitler-themed NFTs, which were created using the marketplace’s own template. (Sophisticated developers might code their own NFTs, but everyone else can just opt for OpenSea’s “Shared Storefront” smart contract, which simplifies the process with a handy interface.) And although the site has delisted the tokens, the smart contract remains live on the Ethereum blockchain.

This is the other side of the platform risk question – the so-called “uncensorability” prospect. Because that data lives on the blockchain, not on OpenSea, any Hitler-lovin’ developer could just build a front end that specifically supports those tokens. The Hitler tokens aren’t even gone from all the major marketplaces; they are still available to view on Rarible, along with their original accompanying description, which refers to Hitler as an “antihero.”

Two major centralized crypto exchanges, Coinbase and FTX, just announced their own NFT marketplaces last week, which will no doubt bring more moderation to the market. But top-down moderation is controversial in the more libertarian corners of crypto. We can all probably agree that NFTs venerating Hitler shouldn’t be sold on the open market, but is giving individual platforms that sort of discretion a slippery slope?

To that I’d say, the reality is that these platforms already have that discretion. The vast majority of NFTs are passing through OpenSea, a private company that’s clearly game to make those sorts of calls. Open markets tend to centralize in tech. It’s true of Web 2, where Amazon and Microsoft have come to dominate, and it’s true in the NFT market, at least so far.

I think there’s a good chance Coinbase and FTX’s marketplaces could accelerate this trend, drawing more potential traders toward centralized systems. More than 2.3 million people have already joined the waiting list for Coinbase’s NFT platform, no doubt thanks to the company’s cachet in the crypto sector. And FTX has the benefit of working with the Solana blockchain, which does away with Ethereum’s cost-prohibitive fee system.

Decentralized computing doesn’t necessitate a decentralized market structure, as Andreessen Horowitz, Coinbase and FTX and others have proven. The trajectory of the NFT market may just bear that out, too.

–Will Gottsegen