Gryphsis Cryptocurrency Weekly: Digital Leap in Hong Kong - Advancing the Electronic Version of the Hong Kong Dollar, Safeguarding the Future of Finance

Author: Gryphsis Academy

Market and Industry Snapshot:

Layer 2 Overview:

Last week in the Layer 2 network space, Arbitrum and Optimism continued their previous momentum, with their total locked value (TVL) increasing by 5% and 3.28% respectively, while the TVL of Bae, zkSync, and Starknet continued to show negative growth. Protocols like Locus Finance, Interport, Sablier, and CairoFi demonstrated notable TVL growth rates.

LSD Sector Overview:

In the LSD sector, the growth rate of Ethereum staking has continued to stagnate, with no significant changes in indicators. In terms of market share, rETH has seen growth, while others remain stable.

RWA Sector Overview:

Last week, with a more optimistic sentiment in the broader market, the real-world assets (RWA) sector continued its previous growth. Additionally, the tokenized treasury value also saw significant growth. Notable gainers included $LMR, $OPUL, and REGEN. Tokens like $DETF, $POLYX, and $LEOX experienced the largest losses.

Main Topics

Macro Overview:

• US Stock V.S. Crypto

Major Events This Week:

• Hong Kong Crypto Leap

Weekly Protocol Recommendation:

• Lodestar Finance

Weekly VC Investment Focus

• Modulus Labs ($6.3M)

• Topos ($5M)

Twitter Alpha:

• @ViktorDefi on recent narratives

• @poopmandefi's token unlocks breakdown

• @0xTindorr on $COIN

• @TheDeFISaint Layer 2 roundup

Macro Overview

Last week, the crypto market closed on an upward trend, with ETH starting to outperform BTC. Notably, the stock market also reversed its previous downward trend, with the SPX and NASDAQ ending the week with gains of 5.8% and 6.4% respectively. Key events to watch in the coming week include Powell's speech, crude oil inventories, and initial jobless claims.

Major Events This Week

Hong Kong's Digital Leap: Advancing the Electronic HKD and Safeguarding the Financial Future

Last week, Hong Kong took a significant step in digital finance as the Hong Kong Monetary Authority (HKMA) launched the second phase of the electronic Hong Kong dollar (e-HKD) pilot program. This phase builds on the success of the first phase's programmable payments and Web3 transactions, further highlighting Hong Kong's commitment to integrating digital currency into its financial system to promote innovation and efficiency.

The second phase not only acknowledges the future of smooth transactions but also positions Hong Kong at the core of the global fintech landscape, preparing for enhanced cross-border payments and financial inclusion. The adoption of distributed ledger technology emphasizes the push for interoperability, which is crucial for international financial integration and has the potential to attract substantial fintech investments.

In response to the recent JPEX scandal, Hong Kong is strengthening its cryptocurrency regulatory framework to restore investor confidence and prevent future fraud. By implementing stricter oversight of cryptocurrency exchanges, the region is reinforcing its stance on creating a safe and transparent digital asset environment.

The Securities and Futures Commission (SFC) of Hong Kong has also introduced guidelines for the tokenization of digital assets, bringing clarity and security to this emerging field. These guidelines facilitate the entry of traditional financial institutions into the token economy, bridging the gap between traditional finance and blockchain innovation.

From the advancements of the electronic HKD to the regulatory updates from the SFC, these strategic moves showcase Hong Kong's robust and prudent approach to fintech. The city's strategy sets a precedent for combining digital currency innovation with stringent regulatory oversight, providing a replicable model for global financial markets. This combination of progress and protection is expected to further solidify Hong Kong's leadership position in the world of digital financial transformation.

Weekly Protocol Recommendation

Lodestar Finance is an innovative algorithmic money market protocol on the Arbitrum network, designed to facilitate trustless lending of assets. It aims to carve out a niche in the DeFi space by providing a platform where users can earn income on their tokens, particularly those native to Arbitrum that lack dedicated protocols.

The protocol stands out by integrating increasingly popular yield derivatives within the Arbitrum ecosystem. These derivatives, typically locked through yield swaps, earn income through inflation incentives and protocol fees, thus increasing in value over time. What sets Lodestar Finance apart is its allowance for these yield derivatives to be used as collateral for borrowing, providing users with a safer and more capital-efficient lending experience. The use of these derivatives also applies downward pressure on loan-to-value ratios, enhancing the security of lending.

Lodestar Finance allows users to take long or short positions on different assets by depositing collateral and borrowing against it. For example, if a user expects an asset to appreciate, they can deposit it as collateral, borrow USDC, and purchase more of the asset, aiming to profit from the appreciation after deducting net interest. Conversely, if a user believes an asset will depreciate, they can borrow that asset as collateral, sell it immediately, and repurchase it later at a lower price. The protocol also supports "looping" operations, which allow users to increase their exposure and potential returns, although this comes with increased risk.

Our Insight

In the thriving Arbitrum ecosystem, Lodestar Finance has emerged as a significant player in the native money market, competing with heavyweight rivals like Radiant Capital and Aave V3. Despite a lower total locked value (TVL), Lodestar's TVL has doubled over the past month, contrasting sharply with the moderate growth of 10-20% witnessed by Radiant and Aave.

What makes Lodestar noteworthy is its continuous growth in lending metrics and user base, indicating a healthy platform operation. With the upcoming grants from Arbitrum expected to drive another wave of activity, protocols like Lodestar, which are poised to receive substantial funding support, may experience significant increases in TVL and token valuations. Lodestar's current annual percentage rate (APR) is already competitive, and additional grant inflows could enhance yields, attracting more users. In turn, this could increase the income allocated to $LODE token holders, enhancing the token's appeal.

While Lodestar Finance is gaining attention for its recent strong momentum and potential benefits from Arbitrum grants, it is important to remain cautious. The price of $LODE has surged over 80% in the past week alone, and smaller market cap tokens are often prone to high volatility. Investors are advised to conduct thorough due diligence and approach such opportunities with a measured strategy.

Weekly VC Investment Focus

Welcome to our weekly investment focus, where we reveal the most significant venture capital dynamics in the crypto space. Each week, we highlight the protocols that have secured the most funding.

Modulus Labs

Modulus Labs, an AI startup that combines AI with cryptographic security technology, has completed a $6.3 million seed round led by crypto venture capital funds Variant and 1kx, with participation from Bankless, Blockchain Builders Fund, Inflection, and angel investors from the Ethereum Foundation, Worldcoin, Polygon, Solana, and Microsoft. The company specializes in integrating zero-knowledge proofs (ZK-Proofs) with AI models to enhance the scalability and security of smart contract developers and on-chain services. With this new funding, Modulus plans to expand its product line, including an Ethereum-based AI application and a dedicated AI ZK prover, advancing the synergy between blockchain security and AI capabilities.

https://x.com/ModulusLabs/status/1719749763753730118?s=20

Topos

Toposware, a company focused on zero-knowledge cryptography, has secured $5 million in strategic seed round extension funding. This round was led by Evolution Equity Partners and received investments from Triatomic Capital, K2 Access Fund, and Polygon co-founder Sandeep Nailwal, aimed at strengthening Toposware's infrastructure to address challenges of interoperability, privacy, and scalability in blockchain. The company is preparing for its enterprise early access program and plans to use these funds to form more partnerships and continue expanding in the Americas and Europe, particularly by enhancing its engineering team to deliver core zero-knowledge infrastructure and promote ecosystem adoption.

https://x.com/Toposware/status/1719702762189947220?s=20

Protocol Updates

Derivio launches mainnet on zkSync Era

Voyager token surges after nearly one-third of supply is burned

Uniswap user lost $700,000 to an MEV bot

Lido approves proposal to enable Obol decentralized staking module

SafeMoon executives arrested after DOJ, SEC allege they misappropriated millions

Pyth Network unveils retrospective token airdrop for over 75,000 eligible wallets

Worldcoin 's crypto wallet claims more than 1 million monthly active users

Aptos and Avalanche dominate among $450 million in November token unlocks

Industry Events

Georgia 's central bank taps Ripple for digital currency pilot project

US authorities seize $54 million in crypto from darknet narcotics scheme

Block 's Q3 bitcoin gross profit jumps 22% year-over-year to reach $45 million

SEC seeks summary judgment in lawsuit against Terraform

Treehouse acquires Origins to expand NFT data

ProShares launches first short ether futures ETF for bearish traders

Nym ventures into decentralized VPN realm

PayPal hit with SEC subpoena over its PYUSD stablecoin

Twitter Alpha

There is a wealth of Alpha in crypto Twitter, but navigating through thousands of tweet threads can be challenging. Each week, we spend hours researching to curate insightful threads and bring you a weekly selection. Let's dive in!

https://x.com/ViktorDefi/status/1720427627826065524?s=20

https://x.com/poopmandefi/status/1721042521219027068?s=20

https://x.com/TheDeFISaint/status/1720898811525038544?s=20

https://x.com/0xTindorr/status/1720836875123064944?s=20

Upcoming Events

News Sources/References:

https://www.theblock.co/

https://cointelegraph.com/news/hong-kong-issues-asset-tokenization-rules

https://cointelegraph.com/news/jpex-scandal-wont-impact-hong-kong-crypto-vision-financial-secretary

https://cointelegraph.com/news/hong-kong-cbdc-pilot-e-hkd-trials-phase-2

https://www.theblock.co/post/260335/modulus-raises-6-3-million-to-bring-crypto-security-to-ai

https://www.coindesk.com/tech/2023/11/01/crypto-venture-funds-variant-1kx-lead-6m-funding-round-for-zk-meets-ai-startup-modulus/

https://cryptonews.com/news/modulus-labs-completes-6-3-million-funding-to-integrate-cryptographic-security-into-ai.htm

https://www.nftgators.com/zero-knowledge-infrastructure-provider-toposware-secures-5m-seed-round/

https://www.cointime.ai/flash-news/toposware-completes-44861

This weekly report is for informational purposes only. It should not be considered investment advice. You should conduct your own research and consult independent financial, tax, or legal advisors before making any investment decisions. Past performance of any asset is not indicative of future results.