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Crypto asset funds clocked the worst year since 2018, with inflows plummeting 95%.

Funds tracked by CoinShares netted a total of just $433 million in 2022 compared to a massive $9.1 billion in the previous year, a decline of 95%. The price of bitcoin fell about 60% over the same period, as a crypto winter engulfed the market amid U.S. Federal Reserve interest rates hikes to combat red-hot inflation.

Source: CoinShares

3iQ experienced the most significant net outflows, which totaled $529 million during the year. CoinShares’ XBT product saw outflows of $446 million, while ProShares crypto funds experienced the most inflows, reaching $320 million.

CoinShares Head of Research James Butterfill said it was difficult to predict what the new year would look like. The collapse of crypto exchange FTX kicked off a crisis of confidence in crypto, and questions remain over the liquidity of some key crypto platforms and lenders, he added.

“Sadly, we expect it will take many years for investor confidence to improve to match the levels seen in 2021 and early 2022,” Butterfill said in a report from the asset manager. “We believe a continued weaker U.S. dollar and a pivot from the Fed in the second half of 2023 are likely to be very supportive for bitcoin due to it being an interest rate-sensitive asset, but until this happens, the market is unlikely to see significant investor inflows.”

source: CoinShares & Bloomberg

Bitcoin was the best-performing cryptocurrency of the year, with inflows of $287 million. That’s still its worst year since 2018, when inflows totaled $146 million, and a decline of 95% from the previous year. 

Ether saw its worst year ever with outflows of $402 million, with CoinShares attributing the tumultuous year to “investor concerns over a successful transition to proof of stake and continued issues over the timing of un-staking” that could occur in the second quarter of this year. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto lender Genesis told clients on Wednesday that it’s continuing to work toward finding a solution for its troubled borrowing and lending unit but that it will need more time to do so. 

“While we are committed to moving as quickly as possible, this is a very complex process that will take some additional time,” interim CEO Derar Islim said in a letter to clients obtained by The Block. “We believe we can arrive at a solution.”

Progress has been made in refining business plans for client offerings that include cost reductions and “driving efficiencies,” he said, adding that the company’s derivatives and spot trading businesses are fully operational

Genesis Global Capital, the lending business of Genesis Trading, had to halt withdrawals and new loan originations in November amid fallout from the collapse of the FTX crypto exchange. It has warned about  potential bankruptcy, and the company said last month that a solution could take weeks.

Digital Currency Group

“We continue working with our advisors, in collaboration with DCG and advisors appointed by various client groups, to evaluate options to preserve client assets and move the business forward,” Islim said, referring to parent company Digital Currency Group.

DCG has been facing heat involving other subsidiaries including Gemini, whose Earn program has been frozen since mid-November. Gemini co-founder Cameron Winklevoss earlier this week accused DCG head Barry Silbert of “bad faith stall tactics” and comingling funds in an open letter he posted on Twitter.

Islim, former Genesis COO , stepped into the role of interim CEO after Michael Moro resigned as CEO in August. The company’s active loans fell over 80% in 2022 from a peak of $14.6 billion in March to $2.8 billion in September, The Block’s Data Dashboard shows. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Coinbase reached a $100 million settlement with the New York Department of Financial Services following investigations into failures in its compliance program.

The NYDFS fined Coinbase $50 million and required the company to invest another $50 million into its compliance program following a settlement with the regulator, which found gaping holes in the crypto exchange’s review of customer identities and alerts on transactions. Particularly, it noted that the exchange failed to keep up with the growth in its customer base from 2020 through 2021. 

“Coinbase lacked sufficient personnel, resources, and tools needed to keep up with these alerts, and backlogs rapidly grew to unmanageable levels,” the settlement reads. “By the end of 2021, Coinbase had a backlog of unreviewed transaction monitoring alerts grew to more than 100,000 (many of which were months old), and the backlog of customers requiring enhanced due diligence (‘EDD’) exceeded 14,000.”

Coinbase has had a digital asset business license with the NYDFS — more commonly called a BitLicense — since 2017. By reputation the most rigorous regulatory regime in U.S. crypto, the BitLicense entails ongoing examinations, including one in 2020 that kicked off its issues with Coinbase. In February 2022, the company hired an independent monitor in an effort to resolve these concerns, but their initial efforts did not fully appease the NYDFS. 

Noting that the NYDFS investigation was initially revealed on a filing with the Securities and Exchange Commission, Chief Legal Officer Paul Grewal said in a statement that “Coinbase has taken substantial measures to address these historical shortcomings and remains committed to being a leader and role model in the crypto space, including partnering with regulators when it comes to compliance. We believe our investment in compliance outpaces every other crypto exchange anywhere in the world, and that our customers can feel safe and protected while using our platforms.”

Coinbase shares gained 6% in early trading. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto prices rose, with solana experiencing the most significant gains. Coinbase rose in pre-market trading after slumping 5% yesterday. 

Bitcoin was trading at $16,803 at 8 a.m. EST, up 0.6% from Tuesday, according to data via TradingView. Ether experienced a more significant jump, tacking on 3% in the same period to trade at $1,250. 

BTCUSD chart by TradingView

Altcoins also traded higher. Binance’s BNB and Cardano’s ADA rose more than 4%, and Polygon’s MATIC gained 2.7%. Solana led the way, jumping 14% to $13.49 from $11.82. 

Last month NFT trading volumes on Solana showed signs of strength. The week of Dec. 25 saw the most activity for Solana NFTs since September. Amid the rout in NFTs, Solana never lost its second spot to Ethereum throughout 2022, according to The Block’s Data. 

The U.S. Federal Reserves meeting minutes from its December meeting will be released at 2 p.m. EST. 

Crypto stocks and structured products

U.S. stock indices futures were trading higher, with the S&P 500 up 0.4%, and the Nasdaq 100 gaining 0.6% by 8:20 a.m. EST. 

Coinbase gained 1.2% to trade around $34 in pre-market, according to Nasdaq data. The company’s shares fell 5% on Tuesday, closing at $33.60. 

Block shares were trading up in the early session, adding 1.1%.

Crypto bank Silvergate and software firm MicroStrategy were both unchanged.

Grayscale’s bitcoin fund saw its discount to net asset value (NAV) widen yesterday. Shares in the GBTC fund now trade at a discount of 46% to the value of the bitcoin in the fund. The discount to NAV had narrowed to around 45% from 48% ahead of the new year. 

The asset manager’s ether trust (ETHE) is trading at a record-high discount of around -60%. The Block’s VP of Research, Larry Cermak, attributed the decline in ETHE to a lack of faith in the fund being redeemable anytime soon, a spot ETF being approved anytime soon, alongside the general crypto-market outlook.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

An anonymous DeFi user fell victim to a phishing attack and lost $3.4 million in gmx, the native token of decentralized trading protocol GMX. The tokens were then sold on the open market.

An administrator of GMX’s Telegram group confirmed the phishing incident, making it clear that the incident had nothing to do with any security issues on the GMX platform itself. When asked how they knew for certain that a hack had occurred, a moderator in the group said the team was in direct contact with the victim of the attack.

On-chain data show that the attacker started taking out funds from the victim’s wallet at 7 pm UTC on Jan. 3. The attacker sent out gmx worth about $3.4 million to another address and swapped them for ether, security analysts PeckShield estimated. These stolen funds were bridged onto the Ethereum mainnet at an address believed to be owned by the hacker. 

Such phishing attacks becoming increasingly common in the crypto space. They are also a major concern because signing only one malicious signature may result in the loss of all assets stored in a wallet. Earlier today, a hacker stole about $175,000 in NFTs in a phishing attack targeting Nikhil Gopalani, the chief operating officer at RTFKT, while another crypto user lost four CryptoPunk NFTs worth more than $330,000.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The UK’s National Crime Agency is recruiting a group of law enforcement officers to investigate crypto crimes, after a year where crypto hacks globally totalled $3 billion.

As part of the national cyber crime unit “crypto cell,” investigators “will be dedicated to a proactive cryptocurrency remit with the right tools and capabilities to target UK based subjects,” according to a job advert posted on the government’s website, first reported by Financial News. 

The Financial Conduct Authority found that crypto was the leading sector for financial scam alerts in the UK between March 2021 and April 2022. The regulator opened 432 cases looking into crypto-related scams during that period.

When Rishi Sunak was elevated to Prime Minister in late-October by members of the Conservative party, there was speculation that could mean that the UK was on course for more crypto-friendly legislation under his leadership term.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Indonesia plans to establish a national crypto exchange amid broader financial sector reform.

Crypto assets are supervised by Indonesia’s Commodity Futures Trading Regulatory Agency, Bappebti. Over the next two years, the Financial Services Authority will take over the supervision of crypto, Didid Noordiatmoko, Bappebti’s acting head, said on Wednesday.

The national crypto exchange should be set up by the time the agencies switch regulatory power over crypto, Noordiatmoko added, as reported by Bloomberg.

Indonesia is making broader strokes to take a stance on crypto. In November, the central bank published a report on central bank digital currencies and started its plan to launch one in 2021.

Cryptocurrencies are currently banned as a payment method in the country, but it is legal to trade them.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Israel’s financial regulator proposed draft amendments to sweep digital assets into existing financial laws and expand the definition of securities. 

The proposals look to protect investors from risks, which the regulator notes have been abundant in the past year. The document referred to the downfall of the crypto exchange FTX while pointing out that collapsed crypto lender Celsius — which triggered a crypto market slide last summer — is Israeli-owned.

The draft amendments also seek to maintain the flexibility to change laws to suit the fast-paced technological development in the crypto industry.

The Israel Securities Authority proposed to bring digital assets under the roof of laws governing securities, joint investments and investment consultation, marketing, and portfolio management. In each case, digital assets are defined as a “digital representation of value used for the purpose of financial investment, and can be transferred and stored electronically by using distributed ledger technology or another technology.”*

Public commentary on the proposed amendments is open until Feb. 12. The ISA suggests six months from publication before the laws are enacted to allow entities and the regulator to prepare for supervision. 

Israel sees crypto opportunities

The regulator sees an opportunity in crypto for investors and the Israeli economy, allowing more diverse sources of capital and encouraging innovation and growth. 

“The advanced technology in these assets can lead to economic efficiency in many areas, reduce costs, save the need for intermediaries and optimize the way information is transferred between entities,” the document reads. According to the ISA, more than 200,000 Israelis are investing in crypto, and around 150 crypto firms are operating in the country. 

Israeli officials have shown further interest in crypto in recent months, with the national stock exchange planning to launch a platform to trade digital assets.

*Quotes have been translated from Hebrew.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The COO of RTFKT, a crypto brand owned by Nike, fell victim to a phishing scam and lost almost all of his NFTs.

“I was hacked by a clever Phisher (same phone # as apple ID) & sold all my clone x / some other nfts,” Nikhil Gopalani said in a tweet addressed to the Clone X community.

OpenSea activity suggests the apparent phisher used two wallets to drain Gopalani’s wallet of NFTs — including double-digit amounts of CloneX, RTFKT, Loot Pods and Crypto Kicks NFTs — worth upwards of $175,000 at floor prices. The affected wallet currently shows a total asset value of $0.11 on Etherscan after a slew of withdrawals.

“Obviously pretty upset and hurt by this and I haven’t really been able to move all day,” Gopalani said, adding: “Hope people who bought my clones love them (being positive).”

RTFKT’s CTO responded to the loss by stating that the brand “won’t be able to go in deeper details until further notice,” citing legal reasons.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Solana’s largest NFT marketplace, Magic Eden, displayed incorrect images for some non-fungible tokens yesterday. Some of the misplaced stills included “unsavory” adult content — the result of a compromised third-party image cacher, it claims.

“Hey guys our image provider, a 3rd party service we use to cache images, was compromised,” Magic Eden tweeted. “Your NFTs are safe and Magic Eden has not been hacked. Unfortunately you might’ve seen some um, unsavory images. Make sure you do a hard refresh on your browser to fix it.”

Magic Eden’s explanation followed tweets from various users about the incorrect images, which also included stills from TV show Big Bang Theory.

Aside from this latest news, Magic Eden has been busy. It recently extended support for the Polygon network in an effort to add multi-chain functionality and future possibilities for blockchain gaming. It also recently announced a rewards system that allows users to receive rewards, discounts and other perks based on their activity on the platform. Additionally, the marketplace hired its first Chief Gaming Officer. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.