Red Alert!! Wall Street Coming for Your Bitcoin 

In This Issue

• David shares his thoughts on the Fidelity ETF rumours, Bitcoin dominance hitting 50%, Asian crypto news, European crypto news & Polygon’s zkEVM Validium upgrade.
• Rekt Capital has the latest technical analysis for you on the market. 
• Erik has an article on Solana Firedancer and how they’re on the way to 1 million transactions per second.
• In case you missed it by Rebecca.

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The News Now

Fidelity ETF Rumors; Wall Street Launches Crypto Exchange

To All Plebs: HODL with everything you’ve got. Wall Street is coming for your bitcoin, and they like their sats cheap.

In less than a week after BlackRock, the world’s largest asset manager, filed a spot bitcoin ETF, several other news developments have hit the wire confirming that Wall Street is coming in hard. 

First, Crypto Twitter is buzzing with rumors that Fidelity Investments is about to file their own spot bitcoin ETF. Fidelity, the world’s 3rd largest asset manager ($4.2T AUM), has long been friendly to crypto. In 2015, they mined bitcoin. In 2018, they launched Fidelity Digital Assets, a subsidiary that offers crypto custody and trade services for institutional clients. 

The Fidelity ETF news is unconfirmed. It appears that @AP_Abacus first made the claim on June 18th. Bitcoin Magazine ran with it the next day. And before we depart with ETFs, breaking as of yesterday, both Invesco ($1.4T AUM) and Wisdom Tree ($87B AUM) have each re-applied for their spot bitcoin ETFs. The BlackRock filing has really reignited this ETF push.

Second, and this is confirmed, a new US based cryptocurrency exchange – EDX Markets – launched on the 20th. And would you guess who’s backing it: Citadel, Fidelity Investments, and Charles Schwab. All Wall Street big boys. 

The EDX details are noteworthy:

1. EDX only offers BTC, ETH, LTC, and BCH. I think we all know why.
2. It’s been in the works since September 2022. 
3. EDX is a non-custodial trading platform. Third party banks and crypto custodians hold and settle customers’ assets. The SEC seemingly approves of this model given the agency dinged Coinbase for operating as a 3-in-1 exchange, custodian, and clearinghouse. Having said that, according to The Block, EDX plans to launch their own clearinghouse later this year. Interesting. 
4. For now, EDX functions as an exchange between brokers only. So the order flow is as follows: investor to broker, then broker to EDX. 

Due to the timing of all this news, Crypto Twitter is awash with speculation that all of this was a coordinated plan between the US Government and Wall Street suits: i.e. sink the outsider pioneer crypto companies so that the Wall Street insiders can swoop in, buy up, and operate the industry at a discount.

Bitcoin Dominance Hits 50%. Why? 

Bitcoin dominance is now breaking above 50%, and is at its highest point within the last two years. 

Dominance is the percentage measure of how much a particular asset comprises out of a larger asset class. The total crypto market cap is currently $1.14 trillion. So given bitcoin’s dominance is 50%, that means half of that $1.14T is held in bitcoin. 

Why is this happening now, and what does it mean for the larger market?

First, bitcoin’s current dominance uptrend provides further confirmation that we’re in the depths of a larger crypto bear market. Generally, bitcoin dominance increases during bear markets (investors liquidate their risk-on altcoins and move into bitcoin) and decreases during bull markets (investors go risk-on and speculate on altcoins). 

This same pattern played out during the 2018 – 2019 bear market. As bitcoin’s price fell from $19K to $3K from January 2018 to January 2019, its dominance rose from 30% to 50%. Then from January 2019 to September 2019, bitcoin dominance went from 50% to just over 70% as price approximately tripled from $3K to $10K. 

Here’s the take-away. If history rhymes again, then bitcoin’s price should range sideways and grind upwards, with dominance continuing to rise, into the 2024 halving event. 

The other catalysts adding fuel to this dominance fire is all the bullish bitcoin ETF news and the bearish US regulatory pressure applied against altcoins. 

Asian News Wrap-Up 

Here’s the breaking news coming out of Asia. 

1. Gemini is expanding to Singapore, which will serve as the company’s base of Asian operations. Apparently, Gemini’s Singapore office will increase to over 100 employees within the next year, and the company is also building an engineering hub in India. All signs indicate Gemini is moving to greener pastures given they aren’t part of the Wall Street / US Government Cool Kids Club. 
2. Crypto enthusiast Joseph Tsai is set to become Alibaba’s new chairman. Alibaba is China’s e-commerce giant and the country’s third largest company by market cap. Tsai co-founded Alibaba and has been serving as the 2nd in charge. Tsai’s fondness for crypto became apparent in 2021 when it was reported that his family office had been investing in multiple crypto and Web3 startups. 

3. The Hong Kong government has just released a report stating that it lags behind other East Asian and Gulf jurisdictions in terms of Web3 development. The report recommends the development and execution of a government-led plan to make the jurisdiction more competitive. 

European News Wrap-Up

Here’s what’s happening in Europe. 

1. The UK’s Upper House of Parliament has approved the “Financial Services and Markets Bill”, which recognizes crypto as a regulated activity and stablecoins as a legitimate form of payment. The bill will go through a final revision process before becoming law. UK regulators will use it as a framework to establish crypto rules. It’s believed this bill is the UK’s effort to remain competitive with the EU, given the recent passage of the EU’s MICA regulations. 
2. Deutsche Bank has just applied for a digital assets license in Germany. Such a license would give the bank the ability to operate as a German crypto custodian, with institutional clients as the target market. It’s reported that Deutsche eventually wants to give their clients the ability to exchange crypto via prime brokers. As of 2021, Deutsche is Germany’s largest bank by total assets (1.3T euro), having more than double that of its nearest banking competitor. 

Polygon Labs Proposes Polygon zkEVM Validium Upgrade

Polygon Labs has submitted a proposal to upgrade the Polygon POS chain to a zkEVM Validium system. 

According to the team, the Validium upgrade should significantly lower fees and increase scalability, because it makes transaction data available off-chain. This is opposed to the current system which publishes transaction data to the Ethereum mainnet for validity (which therefore costs Polygon ETH gas fees). Polygon Labs says the existing set of 100 validators will serve up the transaction data off chain. 

The team further states that on the front end, the only difference users will notice is lower fees. Smart contract developers will not need new tooling for the upgrade. 

Polygon’s Validium proposal comes on the heels of last week’s Polygon 2.0 announcement – a ZK L2 chain ecosystem that infinitely scales on the back-end, but on the front end for users, appears to be one unified system. The Validium upgrade is supposed to work in concert with the Polygon 2.0 architecture. 

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Market Analysis by Rekt Capital

In today’s edition of the Rekt Capital Newsletter, the following cryptocurrencies will be analysed and discussed:

• Woo Network (WOO)
• Stacks (STX)
• Litecoin (LTC)
• Coti (COTI)
• Cosmos (ATOM)
• TomoChain (TOMO)

Let’s dive in.

Woo Network — WOO/USDT

As a preface to today’s analysis, it’s important to keep in mind the technical developments that WOO has made over the past week or two.

A few weeks back, we spoke of how WOO could be setting itself up for a rejection:

That rejection of course transpired and price dropped very strongly and deeply into the orange support area which led me to my analysis from last week:

And price indeed held the orange area as support before finally breaking to the upside:

WOO has since rallied almost +30% from that orange support area, essentially performing its consolidation inside this black wedging structure.

So what’s next for WOO?

Here is today’s analysis:

WOO has successfully rebounded from the orange area; the orange area which is now a support and was months ago a resistance.

That’s a positive psychological shift in how investors are reacting to this region; before, people were selling around the orange area (late 2022) and now people are buying at this same exact region.

Now this recent +30% move from WOO means that WOO has managed to even position itself for a potential reclaim of a multi-month support that is the black dashed horizontal.

Interestingly, this black horizontal is the mid-point of the this black wedging structure and if it is reclaimed as support, then WOO will simply rally to the top of the wedge at around $0.26 for a breakout attempt into the red resistance area.

Stacks — STX/USDT

As a preface, let’s check out my analysis on STX from a few weeks back for added context:

And here is today’s update:

As suggested in the previous post, STX dropped right into the Range Low (blue) for a picture-perfect rebound, rallying an astonishing +77% in the process.

In doing so, STX has revisited the black Range High and is once again at a crossroads, like it was last month.

However this time, with the downside via the red path having occurred already, there is a chance STX is able to reclaim the black level as support to rally via the green path.

Really important for STX to retest the black level as support soon; at the moment, black is figuring as resistance.

Waiting for confirmation.

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Solana Firedancer: On the Way to 1 Million Transactions Per Second by Erik

Solana, like any other chain, has to choose their spot on the blockchain trilemma. That is the balance a chain has to pick between scalability, security, and decentralization. Ideally, a blockchain is super scalable, secure, and decentralized. In practice, you can’t have it all. For example, Web2 – the old-fashioned internet – doesn’t care about decentralization. A centralized server and database system can scale to millions of users without problems. In blockchain terms: they only need to keep one node synchronized: easy peasy.

Web3 has taken on the challenge of replicating that scalability across distributed servers and decentralized databases. There are two main approaches to achieve this: a modular and a monolithic approach. Ethereum’s rollup approach, for example, scales by separating transaction execution from transaction settlement. Transactions are executed on Layer-2s. 

So, modularity means a division of labor. Solana, on the other hand, takes the monolithic approach: it doesn’t outsource but tries to take on more and more transactions per second on the base layer.

How does Solana pull it off? They are working on several optimizations. The biggest of which is a new validator client: Firedancer. Solana believes that a combination of design choices and hardware and software optimizations can achieve a 10x to 20x boost of transaction throughput. The current maximum throughput is 50,000 transactions per second. The upper limit of the Firedancer upgrade would bring a million transactions per second within reach. This is not pie in the sky. Jump Crypto already demoed these feats last year at Solana’s Breakpoint conference.

What Are Firedancer’s Improvements?

Firedancer, in development within Jump Crypto, revolves around validator client software. A validator is a special kind of full node that participates in consensus. According to the Solana website, there are currently 1800 validators online.

Being a Solana validator is not an easy task. A validator not only verifies transactions and updates that account state but also propagates and broadcasts transactions to validators across the network. The network is only as fast as you can propagate transactions. 

The first technical breakthrough of Firedancer is that it implements the QUIC transaction propagation protocol. QUIC replaced Solana’s earlier and plagued transaction propagation protocol. This suffered from downtime issues resulting from a lack of proper spam filtration.

A second breakthrough comes from new ways to load balance: splitting up the processing of transaction propagation across several CPU cores within one validator, for example. Without going into details – which, frankly, your author doesn’t grasp – Firedancer uses both hardware and software-based improvements to scale load balancing to the 1 million transactions-per-second mark. In the mentioned demo, Jump Crypto showed transactions coming through at 1.08 million per second, using just four CPU cores (impressive, as Solana validators are recommended to run 12 cores or more).

The Advantage of Having a Second Client 

There is another advantage besides pure volume. With Firedancer, Solana will be only the second chain after Ethereum with more than one client. Having a second set of code that can “run” the chain from scratch decreases the risk of a bug causing damage to the network. After all, it’s unlikely that the second client has the same bug.

New Possible Use Cases

Speed is nice, it’s cool. One… milliooonnn transactions… But what does it mean in terms of use cases? Well, two big ones come to mind.

• Faster DeFi: currently, making a coin swap on your typical dex takes many seconds. while centralized exchanges are ten times faster. With Firedancer, a trade could be executed in a few tenths of a second, finally making Solana defi competitive with centralized exchanges.
• New Application Possibilities: Web2 applications become feasible on chain via 1+ million transactions per second throughput enabled by Firedancer scaling. Think social media and gaming. These require high transaction throughput (and low costs). Chains like Ethereum will use Layer 2’s and apps on Layer 3’s. But this comes with its own risk of composability: stacking complexity on complexity can result in unforeseen errors.

Overview of the Solana Ecosystem

Let’s take a step back and look at the broad Solana ecosystem. How is it doing after the horrendous year of 2022? It’s no secret that Solana suffered a lot of price and image damage from the fall of FTX.  The chain also struggled with maintaining uptime, particularly in June 2022. Block times fell to one second between blocks on average. This is slow compared to Solana’s typical performance. Solana struggled with spam on the network – which Firedancer is supposed to solve – as mentioned.

But now that the dust has settled it looks like Solana is pulling trough ok. It has become clear that Solana doesn’t outright depend on FTX’s former CEO – whose name we don’t even wish to utter…

Some vital signs that Solana is looking good:

• Solana validators are distributed across more than 25 countries and 138 data centers.
• The price seems to have bottomed. Despite the bad news of Robinhood delisting SOL (among other projects deemed a security by the SEC in a lawsuit against Binance) SOL didn’t make a new low.
• Developer count is lower than in 2022 but not catastrophic. It’s still in the top 10.

Upcoming Technical Innovations

According to Solana Labs CEO Anatoly Yakovenko, Solana’s biggest challenge ahead is how to have multiple block producers operate at the same time. Should this be solved, it would let the network operate much faster.

Yakovenko also said he would also like to see the block production process become separated from the transaction execution process. This should let users of the Solana blockchain know their transaction has been processed more quickly.

Another major technical milestone was recently deployed: Jito-Solana. It is a validator client optimized for facilitating MEV. It creates more efficient MEV markets and is like Flashbots’ MEV Boost on Ethereum.

Conclusion

Jump Crypto isn’t done with Firedancer. They want to rewrite each validator component to scale it. Next on the list at some point will be the scaling of the consensus and execution layers. The upper transactions-per-second limit is unknown but immense.

If successful, Firedancer could unlock new markets for the Solana ecosystem that were previously not realistic to be built on blockchain. The combo of high throughput, composability, and low costs will make applications such as Social media and gaming possible.

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In Case You Missed it by Rebecca

Crypto Market News

• BlackRock has filed the paperwork for a spot Bitcoin ETF which will be using Coinbase for custody. Source
• Voyager is set to reopen its app to allow customers to finally withdraw an initial 35.72% of funds from June 20. Source
• Prime Trust’s payments subsidiary, Banq, has filed for bankruptcy protection in the US whilst the BitGo acquisition deal is still ongoing. Source
• Bybit is integrating with ChatGPT allowing users to access AI-powered trading tools. Source
• Bakkt has reportedly suspended trading of SOL, MATIC, and ADA after eToro and Robinhood did the same.Source
• Australian payments provider, Cuscal, has imposed new restrictions on crypto. Source
• TradFi-backed crypto exchange called EDX Markets has launched and has backing from Citadel Securities, Fidelity Investments, and Charles Schwab. Source
• Deutsche Bank has applied for a digital asset custody license in Germany. Source

Coins and Projects

• Bitcoin dominance has increased to over 50% since BlackRock’s Bitcoin ETF application. Source
• Bitcoin supply on exchanges has fallen to its lowest levels since February 2018. Source
• Apple has rejected the latest version of Bitcoin Lightning wallet called Zeus. Source
• Block’s Bitcoin wallet called Bitkey opens in beta and includes support from Coinbase. Source
• Binance has set up Lightning nodes on the Bitcoin network to offer Bitcoin deposits and withdrawals in the future. Source
• Jack Dorsey’s fund will distribute $5M to Bitcoin developers over the next 5 years in $1M instalments via the Bitcoin development non-profit called Brink. Source
• Ethereum developers are contemplating increasing the amount of ETH required to become a validator from 32 ETH to 2048 ETH. Source
• Ethereum has launched Ethscriptions, inspired by Bitcoin Ordinals and will offer a new way to mint NFTs on the network. Source
• Etherscan has integrated ChatGPT into its suite of tools for analyzing the network with the beta launch of Code Reader. Source
• Amazon Web Services (AWS) suffered a small outage but the Ethereum network wasn’t affected. Source
• The Graph has started migrating its settlement layer over to Arbitrum from Ethereum. Source
• Binance is set to exit Cyprus to focus on its larger European markets in France, Italy, and Spain. Source
• Binance’s UK subsidiary has canceled its registration with the country’s financial regulator Source
• Binance has announced it will be launching Bitcoin mining cloud services from June 15. Source
• Binance, Binance US, and the US Securities and Exchange Commission (SEC) has agreed to temporarily limit access to customer funds just to employees. Source
• BNB Chain has launched an EVM-compatible testnet on Optimism’s OP Stack called opBNB. Source
• USDT slightly deviated from its peg due to a Curve pool imbalance and fell to $0.997. Source
• Cardano has upgraded its node to boost the network’s performance, especially for stake pool operators. Source
• Polygon has released an open database of blockchain use cases which will effectively be a “Wikipedia for use cases.” Source
• Polkadot has streamlined its governance model allowing users to vote on multiple issues at the same time. Source
• Osmosis has cut its token inflation by 50% and is planning an important update to its tokenomics. Source
• Ripple has partnered with Columbia’s central bank to explore blockchain use cases. Source
• Sweat Economy DAO has voted to repurpose over 2 billion SWEAT tokens that were locked in inactive user wallets following a token airdrop event. Source

Macro News

• US interest rates remain unchanged at 5-5.25% as the Fed pauses but promises two more rate hikes are still to come. Source
• The European Central Bank has raised interest rates by 25 basis points to 3.5%, the highest in 22 years. Source
• The Bank for International Settlements (BIS) and a group of central banks have completed Project Rosalind testing over 30 CBDC use cases. Source
• The UK’s House of Lords has voted through a bill that would recognize crypto as a regulated activity and stablecoins as means of payment and is one step closer to becoming law. Source

The IMF has announced its developing a concept for a global CBDC. Source

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Final Notes

Watch the video below for the truth about buying Bitcoin in 2023.👇

Thank you so much for your support, and I truly hope that today’s issue will give you insights needed to help you master your wealth.

If you are reading this it means you are on the free version of the Wealth Mastery Investor Report, which is great for news and tips on the crypto markets.

If you really want to take advantage of fastest growing asset class EVER, I highly recommend you to check out my new Altcoin course: Mastering Altcoin Investing

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See you next time!

Lark and the Wealth Mastery Team

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Legal Disclaimer

Wealth Mastery (Lark Davis, and the Wealth Mastery writing team) are not providing you individually tailored investment advice. Nor is Wealth Mastery registered to provide investment advice, is not a financial adviser, and is not a broker-dealer. The material provided is for educational purposes only. Wealth Mastery is not responsible for any gains or losses that result from your cryptocurrency investments. Investing in cryptocurrency involves a high degree of risk and should be considered only by persons who can afford to sustain a loss of their entire investment. Investors should consult their financial adviser before investing in cryptocurrency.

You can find a full disclosure of all my crypto & venture investments here.