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Weekly Crypto Wrap

Friday, June 9, 2023

Welcome to MRP's Weekly Crypto Wrap, a look back at news reports, on-chain metrics, and other data that moved digital asset markets over the past week. These reports will be delivered every Friday morning, provided free of charge by MRP, and packed with useful information for those just beginning their research into Bitcoin and other cryptocurrencies, as well as investors with more experience in digital asset markets.

Click here to see everything we covered in the last iteration of the newsletter.

Aggregation of key events and breaking stories monitored by MRP

Exchanges: Moody’s warns Coinbase faces serious consequences

Custodians: Crypto Custody Firm BitGo Reaches Preliminary Agreement to Buy Prime Trust: Sources

DEXs: Spot volumes on CEXs plunge to 2019 levels, but there is a silver lining

Miners: El Salvador’s Bitcoin miner Volcano Energy launches with $250M investment

Staking: Ethereum Staking Is Highly Centralized: How to Address the Risks?

Breaking down the most critical trends and transaction patterns on the blockchain

Digital asset markets experienced an earthquake of regulatory activity over the past week, but the price action for many tokens would not suggest as much. Binance, the world’s largest cryptocurrency exchange, and Coinbase, the US’s largest domestic crypto exchange, were hit with back-to-back suits from the SEC, accusing both of dealing unregistered securities. The SEC named 19 of the assets they consider unregistered securities explicitly for the first time, including several top-20 cryptocurrencies like Cardano (ADA), Solana (SOL), Binance Coin (BNB), Polygon (MATIC), and Cosmos (ATOM). Many or all of the trading pairs for these assets have been delisted on Binance’s US arm, Binance.US, as well as other brokers like Robinhood. When added to other tokens separately targeted by the SEC, like Ripple Labs’s XRP token, Bloomberg notes that the agency has now categorized over $120 billion of coins and tokens specifically as unregistered securities.

The Commission also charges that Binance and its CEO Changpeng Zhao engaged in fraud and deception by commingling customer assets or diverting customer assets to third parties, as well as misleading US investors about non-existent trading controls over the Binance.US platform. Binance.US announced that it will be halting US dollar deposits and its banking partners are preparing to close US Dollar withdrawal channels as early as June 13, after regulators said they supported freezing Binance's assets. As they head toward litigation MRP will continue to examine the developing cases against top crypto exchanges, as well as certain cryptocurrency issuers. We utilize our Daily Intelligence Briefings to analyze SEC enforcement actions, as well as their potential implications for the broader crypto industry.

The market capitalization of all cryptocurrencies tracked by CoinMarketCap fell by roughly $36 billion throughout the past seven days, equivalent to a -3.2% decline, but managed to hang onto the $1.1 trillion threshold by the time Friday morning rolled around. The relatively muted reaction was likely due to long-standing expectations that SEC enforcement action against cryptocurrency exchanges was inevitable – especially after the SEC took action against Binance’s in-house stablecoin (BUSD) earlier this year, and subsequently delivered a Wells Notice to Coinbase.

The reaction was even less climactic for Bitcoin (BTC), the world's largest cryptocurrency, which only fell by -1.5% throughout the past week, now trading near $26,600. As SEC Chairman Gary Gensler himself has said in the past, Bitcoin is a commodity and, therefore, outside of the Commission’s purview. Gensler has been more ambiguous about other large cryptocurrencies like Ethereum (ETH), the second largest cryptocurrency by market cap, but the SEC’s choice to avoid naming it as part of these ongoing suits – as well as past comments made by SEC officials, referring to Ethereum as a commodity – suggests ETH may be more sufficiently decentralized than similar protocols. Several large Bitcoin forks, including Dogecoin (DOGE) and Litecoin (LTC), also avoided scrutiny in the suits, which was not unexpected.

Per Cryptoquant’s Crypto SECurities and Commodities Index, which compares the performance of assets the SEC has deemed securities against Bitcoin and Ethereum, shows the Crypto SECurities index falling -14.4% since the SEC announced their suit against Binance on June 6. Meanwhile, the Crypto Commodities index has declined by just -1.1%.

On-chain metrics show that, for the most part, Bitcoin holdings are staying where they are. Per Glassnode data, the percentage of BTC’s circulating supply that has not been transacted in a year or more just hit a new all-time high at 68.41%. The portion of Bitcoin’s supply that is on the move has largely flowed out of exchanges altogether, as the balance of BTC held on 21 exchanges tracked by Glassnode just hit its lowest level since mid-March. Moving funds off exchange into a privately-held wallet device or other form of self-custody solution typically indicates the owner of the assets does not intend to sell them in the near-term, which is why this process is also commonly known as sending to “cold storage”.


MRP's latest Daily Intelligence Briefings on everything from BTC to DeFi and NFTs

May 22, 2023: Tether Expands Profits, Dominance, and Bitcoin Holdings as T-Bills and Reverse Repo Become Reserve Standards →

February 22, 2023: Ethereum May Face Contagion from SEC Crackdown on Crypto Exchanges’ Staking Services →

February 14, 2023: Staking Services and Stablecoins in SEC Crosshairs as Crypto Industry Preps for Court Battles →

January 24, 2023: Bitcoin Mining is Back to Profitability, Hash Ribbon Shows Peak Capitulation May Have Finally Passed →

October 18, 2022: Fallout From Ethereum “Merge” Bolsters Bitcoin’s Hash Rate as Some Criticisms Still Linger →



Moody’s warns Coinbase faces serious consequences

Ratings agency Moody’s slashed Coinbase’s outlook to “negative” from “stable” two days after the Securities and Exchange Commission alleged that the exchange operated as an unregistered broker and sold unregistered securities since 2019. Berenberg analyst Mark Palmer slashed the company’s price target from $55 to $39.

Read the full article from Blockworks +


Crypto Custody Firm BitGo Reaches Preliminary Agreement to Buy Prime Trust: Sources

BitGo confirmed in a blog post that it had signed a term sheet to acquire Prime Core Technologies, Prime Trust's parent company. Prime Trust is a crypto custody specialist regulated in Nevada. The deal is preliminary, and still requires regulatory approval, according to one source. Las Vegas-based Prime Trust raised $107 million in funding midway through 2022, before the crypto bear market really began to bite. 

Read the full article from CoinDesk +


Spot volumes on CEXs plunge to 2019 levels, but there is a silver lining

According to a report by CCData, spot trading volume on centralized exchanges (CEXs) plunged to its lowest monthly level since March 2019. The volume on decentralized exchanges (DEXs) also contracted. However, DEXs market share rose for the fourth straight month in May, reaching an all-time high of 12.8%.

Read the full article from AMB Crypto +


El Salvador’s Bitcoin miner Volcano Energy launches with $250M investment

A public-private partnership in El Salvador pledging to pump $1 billion into creating a Bitcoin mining farm has received its first $250 million. Tether is among the investors in the first funding round to develop Volcano Energy, the company behind a 241MW power generation park in the country’s Metapán region. The Salvadoran government has secured preferred participation equivalent to 23% of revenues.

Read the full article from Cointelegraph +


Ethereum Staking Is Highly Centralized: How to Address the Risks?

Lido Finance’s popularity has been a double-edged sword. It dominates the Ethereum ecosystem’s liquid staking derivatives and raises concerns about its impact on Ethereum’s decentralization as it experiences rapid and exponential growth. “Lido running 38% of validators is more than double that of which Vitalik said is too much for any single entity to control,” Justin Garland, co-founder of Asymmetry Finance, said in a discussion with BeInCrypto.

Read the full article from BeInCrypto +


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MRP focuses on identifying change in the global economy and offering an investment thesis whenever an opportunity arises that has not yet been recognized by the market. The DIBs are MRP's compilation of articles and data from multiple sources on subjects reflecting change that have potential investment implications for an industry or group of securities. We share these with our clients who may already have or may be considering exposure in the industries affected. The subjects change daily and constitute an excellent update on featured topics.

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Managing Director

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