2024-03-12 23:28

The convertible notes Coinbase wants to sell include provisions aimed at aiding its stock investors. Coinbase plans to raise $1 billion through a convertible debt offering, following the path of Michael Saylor's MicroStrategy. The offering has an extra provision, "negotiated capped call transactions," which will ensure less dilution at the conversion. The raise comes after Wall Street analysts threw in the towel on their bearish stance on the stock. The only publicly traded cryptocurrency exchange in the U.S., Coinbase (COIN), announced a plan to cash in on the recent rally in digital assets by raising $1 billion through selling convertible bonds, avoiding an equity sale that could hurt its stock price and also following the path Michael Saylor's MicroStrategy has taken to fund its crypto aspirations. Coinbase said on Tuesday that it will offer the unsecured convertible senior notes via a private offering. Convertible bonds can be turned into shares of the issuing company (or cash) at a certain point. For the notes Coinbase plans to offer, that conversion year is 2030. Had the company chosen instead to raise money by selling new Coinbase shares, that would dilute the ownership interest of existing shareholders – something investors may view unfavorably. By tapping the debt market to fund its crypto business, Coinbase is pursuing a strategy Saylor has pursued at MicroStrategy over the past few years. Saylor's company has purchased 205,000 bitcoin, which are now worth nearly $15 billion, much of which is funded by MicroStrategy's sale of more than $2 billion of convertible notes. Just this month, MicroStrategy sold $700 million of them, and there was enough demand that the company could sell more than the originally anticipated $600 million. Coinbase is taking an extra step to reduce the dilution when its debt is converted into equity by offering "negotiated capped call transactions" – essentially a hedge to prevent dilution during the conversion of notes. (MicroStrategy did not include such a provision in its most recent deal.) Issuers use these hedges with convertible debt to prevent dilution to existing shareholders, even when their share price rises above the conversion price, though they have to pay a fee. During its breakneck rally, fitness company Peloton famously raised $1 billion in convertible debts in 2021, including a capped call option. "The capped call transactions will cover, subject to customary adjustments, the number of shares of Coinbase's Class A common stock that will initially underlie the notes," Coinbase said. The move comes after a massive rally in bitcoin, which has taken the price of the digital asset to an all-time high above $73,000. Bitcoin is up 67% this year, while Coinbase's stock soared by 48% in the same time period. Publicly traded companies often take advantage of bull markets by raising money by selling new securities such as equity, convertible notes, etc. Coinbase said it may use proceeds from its transaction to repay debt, pay for potential capped call transactions and possibly to acquire other companies. Coinbase's $1 billion offering comes after some Wall Street analysts ditched their bearish stance on the stock. Raymond James and Goldman Sachs are bears that have upgraded the stock, citing the massive rally in the digital asset markets. https://www.coindesk.com/business/2024/03/12/coinbase-plans-1b-bond-sale-that-avoids-hurting-stock-investors-copying-michael-saylors-successful-bitcoin-playbook/

2024-03-12 16:37

The U.K. started a consultation on its money laundering rules on Monday. NFT providers may need to be registered with the Financial Conduct Authority, the Treasury said in a consultation on money laundering regulations. NFTs are unlikely to be covered by the rules for financial services, which will have a separate authorization regime. The deadline for responses is June 9. Crypto businesses that issue non-fungible tokens (NFTs) in the U.K. rather than providing financial services will probably need to register with the Financial Conduct Authority even after the government introduces a new authorization regime for the industry, according to a consultation on money laundering issued by the Treasury on Monday. The government has been refining its crypto regulation environment, and last year said it planned to bring crypto exchanges and custody providers into the new crypto authorization regime. Currently, the firms must be registered with the FCA, which covers money laundering and terrorism financing safeguards, to be able to operate in the country. Once the new regime is up and running, that won't be necessary. However, crypto assets that are not used in relation to any regulated financial services, such as NFTs, are likely to fall outside the regime, according to the consultation. NFTs are unique tokens that are tied to the blockchain that usually represent an asset like art. "These crypto asset firms will still need to be registered and supervised by the FCA for anti-money laundering and counter terrorist financing purposes," the document said. The Financial Services and Markets Act passed last year and paved the way for crypto to be treated like a regulated financial activity. In a consultation response from October, the government said NFT's "were not appropriate for regulation as a financial service." They would fall within the financial services regime only if used for regulated activities. The number of firms that may need to get registered may "widen as the industry continues to develop," the new consultation document said. The U.K. government wants to collect responses on the proposed regime by June 9. https://www.coindesk.com/policy/2024/03/12/nft-providers-may-need-registration-to-comply-with-uk-money-laundering-rules/

2024-03-12 16:34

The Crypto Open Patent Alliance said it will ask U.K. prosecutors to consider pursuing Wright for “perjury” over his defense of forgery allegations. Closing statements in the U.K. trial probing Craig Wright’s claims of having invented Bitcoin kicked off Tuesday. In its closing arguments, the Crypto Open Patent Alliance (COPA) accused Wright of committing perjury in addition to committing forgeries. A crypto alliance accusing Craig Wright of committing forgeries in attempting to prove he’d invented Bitcoin plans to ask U.K. prosecutors to consider if the computer scientist perjured himself during an ongoing trial. The weeks-long trial is nearing the end, and the outcome – to determine whether Wright is pseudonymous Bitcoin inventor Satoshi Nakamoto – could influence several other cases by Wright against members of the crypto community. Counsel for the Crypto Open Patent Alliance (COPA) – made up of Twitter founder Jack Dorsey’s Block and crypto firms like Coinbase and Kraken – began closing statements on Tuesday by saying the evidence shared during the trial shows “beyond doubt” that Wright isn’t Satoshi. “Following the evidence in this trial, it is clearer than ever – clear beyond doubt – that Dr. Wright is not Satoshi Nakamoto. He did not write the Bitcoin white paper, produce the Bitcoin code or implement the Bitcoin system,” COPA Counsel Jonathan Hough said. Wright was accused by COPA and a group of Bitcoin developers of committing forgeries in his attempts to prove he was Satoshi. On Tuesday, COPA also accused Wright of being a “dishonest witness” and attempting “very serious fraud” while testifying in court. COPA said emails concerning Wright’s former lawyers submitted to the court during the trial (that Wright later defended were “spoofed” by unnamed bad actors) and admissions that he edited the Bitcoin white paper as recently as November 2023 are “vivid emblems” of his lies. The alliance hopes the trial will once and for all prove Wright isn’t Satoshi and has said it will seek “injunctive relief” to prevent Wright from pursuing further action against members of the crypto community on the basis that he’s Satoshi. To defend the “fiction” that he’s Satoshi, Wright has “committed perjury and forgery to an extraordinary extent,” COPA said in its closing arguments. COPA warned the alliance will ask to refer the files in this case to U.K. prosecutors “for consideration of prosecution for the offenses of perjury and perverting the course of justice.” Counsel for a separate group of Bitcoin developers is set to begin closing statements on Wednesday. Wright’s team will start its statements after that in a final push before presiding Judge James Mellor’s ruling. https://www.coindesk.com/policy/2024/03/12/craig-wright-committed-perjury-in-uk-trial-over-satoshi-claims-copa-says/

2024-03-12 16:13

Liquid restaking protocols like Ether.Fi are designed to reuse Ethereum's proof-of-stake blockchain to secure other networks and protocols, and have quickly become one of the hottest types of projects in crypto. Ether.Fi, the biggest among a fast-growing new breed of blockchain projects known as "liquid restaking protocols," will have its new token ETHERFI offered next week on crypto exchange Binance's Launchpool. Binance made the announcement on its website, adding that the exchange would be the first to list the token. Launchpool is a Binance platform that allows users to stake existing crypto assets to earn new tokens when they become available. It is a way for users to participate in the early stages of a new project and earn rewards. "Users will be able to stake their BNB and FDUSD into separate pools to farm ETHFI tokens over four days," with farming starting at 00:00 UTC on March 14, Binance said. "Binance will then list ETHFI at 12:00 UTC on March 18." Trading pairs will be available in ETHFI versus bitcoin (BTC), stablecoin (USDT) and BNB TOKEN, among others. According to the post, there will be a maximum token supply of 1 billion ETHFI, and Launchpool token rewards of 20 million, or 2% of the max token supply. The initial circulating supply will be 115.2 million, or 11.5%. Watch: Ether.Fi CEO Mike Silagadze Joins The Protocol Podcast as Guest Host Liquid restaking protocols are designed to reuse Ethereum's proof-of-stake blockchain to secure other networks and protocols – piggybacking off the original restaking protocol, EigenLayer to give users another source of yield for their staked ether (ETH) tokens but adding to risks. Crypto traders have piled deposits into the protocols because of the extra yield available as well as the potential for reaping rewards, such as points or airdropped tokens. Ether.Fi is the biggest liquid-restaking protocol based on the crucial metric of total value locked, or TVL, according to the data site DeFiLLama. The project has $2.3 billion of TVL – similar to deposits – versus $1.5 billion for the second-biggest, Puffer Finance. https://www.coindesk.com/tech/2024/03/12/etherfi-to-introduce-ethfi-token-on-binance-launchpool-next-week/

2024-03-12 15:11

The upgrade is designed to usher in a new era of cheaper fees for the growing array of layer-2 networks that operate on top of Ethereum. Ethereum developers are preparing for Wednesday's much anticipated Dencun upgrade, set to bring the biggest code change to the blockchain in over a year. Dencun – a portmanteau for the project names Deneb + Cancun – consists of two upgrades happening simultaneously on Ethereum’s consensus and execution layers Technically known as a "hard fork" in blockchain terminology, it's expected to initiate around 13:55 UTC (9:55 a.m. ET). The upgrade is designed to usher in a new era of cheaper fees for the growing array of auxiliary networks that operate on top of Ethereum, called layer-2 (L2) "rollups." Those changes will come with the activation of a new Ethereum Improvement Proposal (EIP) called “proto-danksharding,” or EIP-4844, which is designed to improve the chain's ability to handle data from L2 networks. Elements of the Dencun upgrade have been planned for several years, but developers delayed it from an original target of late 2023 due to some engineering concerns. Since then, developers have tested the package on three separate test networks (testnets), and most of those tests ran smoothly. (The first test on Goerli did not finalize for a few hours, but once a bug was patched, things began running smoothly again.) Some Ethereum fans are marking the occasion of Dencun's official launch by joining watch parties, with the EthStaker developer community and Nethermind, a leading Ethereum infrastructure team, each hosting livestreams. “We are making sure all our client and bootnodes are fully updated, and ready for fork,” said Barnabas Busa, a DevOps engineer at the Ethereum Foundation. “Our monitoring infrastructure is scaled up to ensure we don’t miss anything important.” What is Dencun? Dencun will be Ethereum's biggest update since April 2023's Shapella upgrade, which enabled withdrawals of staked ether (ETH). Dencun includes a number of code changes, but the biggest one comes with “proto-danksharding,” which introduces a new method for storing transaction data onto Ethereum, called "blobs." Layer-2 networks like Arbitrum, Optimism and Polygon will benefit the most from Dencun. The networks help to scale Ethereum by bundling up transactions from users and then passing them to Ethereum where they're settled in big batches. Over the past year, they've become the primary venues for transacting on top of Ethereum, amassing billions of dollars in deposits and consistently boasting higher transaction volumes than the main Ethereum chain. After Dencun, L2s will be able to post data to Ethereum within the dedicated blobspace, rather than be forced to pay a higher cost for squeezing the data into conventional transactions. In theory, this could help L2s settle more data, more efficiently – thereby reducing fees for end-users. Proto-danksharding is Ethereum's first swing at "sharding," which is a set of techniques to break up the blockchain into mini-shards (or mini-chains), to process more transactions for cheap.. A fully-formed version of sharding is still years away, but proto-danksharding could help solve some of Ethereum’s high gas fees in the short term by reducing fees for L2 networks. 'Proto-danksharding' Proto-danksharding will also benefit a new class of blockchains that have entered the Ethereum fray called data availability (DA) layers. DA layers like Celestia, EigenDA and Avail help networks store large amounts of data; L2s frequently use them to store transaction data. Proto-danksharding could make the costs of downloading DA data cheaper. Polygon co-founder Jordi Baylina told CoinDesk in an interview previously that “prices should go down mainly because it's a matter of supply and demand. Your supply is bigger, the data availability on Ethereum is going to be bigger, so the price should go lower." “By how much? We don't know, it's difficult to predict,” Baylina added. After Dencun, Ethereum developers will start to tackle what will go into the next upgrade, now called Electra + Prague (Petra.) As of right now, developers have not decided what will make it into that package, but a strong contender is an upgrade called “Verkle Trees,” which is a new type of data category that should help nodes store large amounts of data. “Scalability is the fundamental unlock that enables permissionless collaboration between developers across projects and teams," said Karl Floersch, CEO of OP Labs, the primary developer firm behind the Optimism network. "With EIP-4844 and Dencun, devs across the Ethereum ecosystem can more seamlessly build together.” The upgrade "will enable a group of loosely coordinated devs to actually build systems that provide overall experiences that will rival the user experiences we’re used to from top-down, centrally planned platforms,” he said. Layer-2 transaction data Currently, the average transactions per second (TPS) figure over the past seven days across layer-2 networks is 93.18, compared to Ethereum's average of 14.42. These figures generate a scaling factor of 8.37x, according to L2Beat data. A Fidelity report on the upgrade states that layer-2s account for roughly 10% of the total layer-1 fees. That portion is expected to "drop significantly" after the upgrade, the money management firm said. Data from L2fees shows that the average cost of sending ETH on Arbitrum is $0.24 and it costs $0.67 to swap tokens. Optimism's fees are $0.47 and $0.92 respectively whilst Polygon's are $0.78 and $2.85. These figures are expected to fall following the upgrade. Representatives of the Starknet Foundation, an organization that supports the Starknet chain, issued a press release Tuesday claiming that its users would "get the highest savings of any layer 2," because a "higher proportion of Starknet fees go on DA than of any other layer-2 fees." The foundation said planned innovations would bring further savings, and that it planned to charge fees "at future rates, covering the difference until the improvements are in place." https://www.coindesk.com/tech/2024/03/12/ethereum-blockchain-counts-down-to-dencun-upgrade-set-to-reduce-fees/

2024-03-12 09:25

By locking in the right to sell ETH at a specified price, options traders are preparing for short-term weakness after the cryptocurrency hit a two-year high. Ether puts expiring in 30 and 60 days traded at a premium to calls a day after the cryptocurrency's price broke above $4,000, crypto options data from Deribit show. The relative richness of puts likely stems from concerns that the U.S. SEC may not approve the highly anticipated ether spot ETF by May. Ether (ETH) options traders are bracing for near-term price weakness a day after the cryptocurrency convincingly rose past $4,000 to the highest since late 2021. Ether's one-month call-put skew, an options market measure of sentiment, has turned negative, hinting at the relative richness of puts, or options used to protect against bearish price trends. The 60-day gauge has also flipped in favor of put options, while the 90-day and 180-day metrics remain positive, according to crypto options flow on Deribit tracked by Amberdata. Deribit is the world's leading cryptocurrency options exchange, accounting for over 85% of the global activity. A put option gives the purchaser the right, but not the obligation, to sell the underlying asset at a predetermined price at a later date. A put buyer is implicitly bearish on the market, often looking to protect spot market holdings from potential price slides. A call option offers protection against bullish moves. Investor interest in near-term ether puts likely stems from the dwindling probability of the U.S. Securities and Exchange Commission (SEC) approving a spot ether exchange-traded fund (ETF) by May, QCP Capital explained in its latest market insights post. The 75% year-to-date gain in ether, the token of the Ethereum blockchain, has been catalyzed mainly by hopes the SEC will greenlight a spot ETF, opening the doors for traditional financial institutions to take exposure to the second-largest cryptocurrency without owning it directly. The SEC approved nearly a dozen spot bitcoin ETFs in January. Since then, billions of dollars have been poured into these ETFs, sending bitcoin to record highs above $70,000. On Monday, ETF analysts at Bloomberg reduced their estimates for a spot ether ETF approval in May to 30% from 70%. The probability has dropped from over 70% in January to 31% on decentralized betting platform Polymarket. Earlier this year, investment banking giant JPMorgan said that the probability of the SEC approving an ETH ETF by May is no more than 50%. Last week, the regulator delayed its decision on BlackRock and Fidelity's applications for spot ETH ETFs. Still, some observers are hopeful that BlackRock's ETF will win approval on May 23, when the final decision on VanEck's ETH ETF application is due. https://www.coindesk.com/markets/2024/03/12/ether-put-demand-signals-weakness-after-4k-price-breakout/