The Week Ahead - 23/10/2023

Hashblock Capital is an independent Crypto research firm. We deliver actionable, institutional-grade analysis across listed tokens.

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TLDR;

• ETF-driven Bitcoin dominance is likely to provide a tailwind for ecosystem tokens including Bitcoin Cash, Bitcoin SV, Stacks, and Threshold.

• Fantom is teasing the testnet of ‘Fantom 2.0 / Fantom Virtual Machine’, with details due to drop on 24th October.

• Dates of Polygon’s anticipated $MATIC to $POL token swap were leaked from Bybit’s launch pool announcement. This is a major step in the roll-out of the Polygon 2.0 vision, set for October 25th.

• $FLOKI, a community cryptocurrency project inspired by Elon Musk's dog is set to launch staking on October 27th. The token has rallied nearly 50% in anticipation of the release.

• Radiant Capital is still due to launch on the Ethereum Mainnet before month-end. We believe this could add $2.75bn-$7.15bn in TVL to the protocol.

• Open interest in $LINK has risen to a 2-year high as the market attempts to break out of a 17-month range. The token will remain volatile until the next leg or a failure is confirmed.

Bitcoin Dominance

Over the last week, Bitcoin has rallied significantly back towards the key $30,000 level, taking its outperformance against Ethereum to over 32% year-to-date. One of the key drivers of this rally is the expectation that the US Securities and Exchange Commission (SEC) will approve a spot Bitcoin ETF in the near future.

Last week, several events caused this pricing to accelerate. Starting with the SEC allowing a crucial date to appeal Grayscale’s GBTC conversion to pass without comment, the market then was forced to digest a fake news story posted by Cointelegraph on Monday. This tweet apparently confirmed the SEC had approved the iShares spot ETF, sending Bitcoin higher by 7%, before fading once it became clear the report was falsified.

Whilst the market initially retraced the move, animal spirits returned on Blackrock updating offering documentation, and comments from JP Morgan suggesting the ETFs could all be approved at once. This added to the $BTC rally which has begun to spread to other tokens closely associated with the Bitcoin ecosystem.

Whilst the lack of smart contract functionality in the first listed cryptocurrency has resulted in a small universe of listed tokens, we’ve identified several projects worth watching that are currently trading ‘Bitcoin Beta’ plays. These include:

Stack's ($STX)

Stack's (STX) innovative approach to the Bitcoin ecosystem has brought a new dimension to blockchain technology. Designed to extend the functionality of Bitcoin, Stacks focuses on building a secure, decentralized ecosystem for smart contracts and decentralized applications (dApps). By anchoring its blockchain to Bitcoin's network, STX provides developers with a powerful platform to create a range of applications while maintaining the robust security features of the Bitcoin blockchain. With its unique consensus mechanism and focus on user-owned data, Stacks represents an exciting addition to the Bitcoin ecosystem, expanding the possibilities for decentralized innovation.

Bitcoin SV ($BSV)

Bitcoin SV (BSV) is a prominent player in the Bitcoin ecosystem, often referred to as the "Satoshi Vision." This cryptocurrency emerged as a result of a contentious hard fork from Bitcoin Cash, with the goal of scaling Bitcoin's blockchain to accommodate large transaction volumes and enabling microtransactions. BSV is characterized by its commitment to larger block sizes and the restoration of the original Bitcoin protocol, emphasizing on-chain scaling and data management. It has garnered both support and controversy in the crypto community, making it an intriguing aspect of the evolving Bitcoin landscape.

Bitcoin Cash ($BCH)

Bitcoin Cash (BCH) is a significant and widely recognized cryptocurrency within the Bitcoin ecosystem, created to address the scalability limitations of the original Bitcoin network. BCH distinguishes itself through larger block sizes, allowing for faster and more cost-effective transactions. This digital currency has attracted a dedicated user base, emphasizing peer-to-peer electronic cash transactions and enabling businesses and individuals to transact in a manner more aligned with Satoshi Nakamoto's original vision for Bitcoin. BCH continues to play a vital role in the ongoing debate over the future of Bitcoin's scalability and utility.

Threshold (T)

Threshold (T) is a dynamic and multifaceted cryptocurrency within the Bitcoin ecosystem, bringing a unique set of features and functionalities to the table. Designed to address the need for increased privacy and security in cryptocurrency transactions, Threshold leverages advanced cryptographic techniques to implement threshold signatures, a form of multi-signature authentication. This innovative approach allows for the creation of more secure and private transactions on the Bitcoin network. Threshold is a promising addition to the Bitcoin ecosystem, offering users enhanced protection and control over their digital assets, ultimately advancing the ethos of decentralization and financial sovereignty that underpins the broader cryptocurrency movement. As Bitcoin continues to evolve, Threshold contributes to the ongoing development of a more secure and privacy-conscious ecosystem for all users.

As a result of the renewed bid into Bitcoin, these tokens have all outperformed significantly against the wider market since the beginning of the month, and are likely to remain volatile whilst the narrative remains in play.

Fantom 2.0 details are set to be released - October 24th

Fantom is a high-performance, scalable blockchain platform that enables developers to build fast and secure decentralized applications (dApps). It uses a unique consensus mechanism called Lachesis, which allows the network to process transactions quickly and efficiently.

In July 2023, Multichain, a cross-chain bridge that supported Fantom, was hacked for $132 million. The attackers exploited a vulnerability in the Multichain bridge, which allowed them to mint and steal a large number of Fantom tokens. As a result, the Fantom ecosystem saw significant outflows, and the $FTM token remains down over 20% against the wider market.

Since this event, the Fantom team has taken a number of steps to address the security issues that led to the hacks, including:

• Implementing a new security audit process for all Fantom projects

• Launching a bug bounty program to reward researchers who find and report security vulnerabilities

• Upgrading the Fantom bridge to a more secure version

Against this backdrop, the team recently set a date to unveil ‘Fantom 2.0’ on October 24th. This has been widely circulated on social media as a testnet release of the Fantom Virtual Machine (FVM).

Whilst current details remain scarce, our view is that Fantom 2.0 is a major update to the platform that will likely introduce a number of new features and improvements, such as:

• Improved scalability: Fantom 2.0 will lean on a new consensus mechanism that allows it to process thousands of transactions per second without sacrificing security.

• Lower fees: The introduction of a dynamic fee model will adjust fees based on network congestion. This means that users can expect to pay lower fees during less congested times.

• Enhanced security: Additional security features to protect the network from attacks will likely be included to reduce the chance of future hacks, including sharding and a new signature scheme.

• New features and functionality: More general support for Ethereum Virtual Machine (EVM) bytecode will make it easier for developers to migrate dApps from Ethereum to Fantom.

Polyon 2.0 - Token swap details leaked? - October 25th

Polygon is a layer-2 scaling solution for the Ethereum blockchain. It is designed to address the scalability and cost issues of Ethereum, while still maintaining its security and decentralization.

In June 2023, Polygon announced Polygon 2.0 - a series of upgrades aiming to better address a number of key challenges facing the Ethereum network today, including:

• Scalability: Ethereum is currently struggling to scale, with high transaction fees and slow transaction times. Polygon 2.0 aims to address this challenge by using ZK-rollups technology to achieve unlimited scalability.

• Security: Polygon 2.0 will be secured by a highly decentralized network of validators. This will make the network more secure and resilient to attacks.

• Usability: Polygon 2.0 will provide a unified experience for users, regardless of which scaling solution they are using. This will make it easier for users to interact with the Polygon ecosystem.

• Governance: Polygon 2.0 will be governed by a decentralized community. This will give users a say in the future of the network.

Polygon is proposing a new native token, $POL, which is a technical upgrade of the current token $MATIC. $POL is designed to become the major tool for the coordination and growth of the Polygon ecosystem and the main driver of the vision to become the Value Layer for the Internet.

With the $POL token parameters outlined, the team has defined initial tasks to bring the 2.0 vision to life in PIP-18. This process starts with a $MATIC to $POL migration, allowing the protocol to adopt the new standard as the native gas token for Polygon PoS. Once completed, the staking layer can be implemented so validator rewards will be carved out of the new token supply, which lays the foundation for the remainder of the 2.0 structure to be unveiled.

Token swap date

On the 20th of October, Bybit announced a launch pool date for the token $POL. Whilst currently unconfirmed from the Polygon team or company accounts, this would pull forward the launch of their 2.0 vision from the currently anticipated ‘end of Q4’, to the 25th of October. As we outlined in our 20th September report, we believe this is a significant development that could lead to strength in $MATIC into the 25th October launch.

Floki Staking Launch - October 27th

FLOKI is a community & utility-driven cryptocurrency project that is inspired by Elon Musk's Shiba Inu puppy of the same name. While the project has a large and passionate community, it is important to note that $FLOKI is a meme token. Meme cryptocurrencies are digital assets that are created and traded primarily as a form of speculation or social commentary. They often have little or no real-world utility, and their prices are often highly volatile.

Earlier this month, the Floki Inu team released a teaser and pre-announced a release scheduled for October 17th. On this date, a proposal went live in the DAO titled ‘Launching Floki’s staking program’. The proposal aims to implement a staking mechanism without increasing the inflation rate, using a reward token to incentivize various lockups. Here’s our overview of the proposal:

• Users will be able to stake FLOKI and earn the reward token, with 56% of the supply distributed over a 4-year period. Additionally, 10% will be added to the Liquidity Pool, 22% will be allocated to the treasury for operations, development, marketing, and more, and 5% will be designated for user incentives to accelerate platform adoption.

• The primary method to acquire the new token is by locking up FLOKI tokens, with 56% of the supply distributed in this manner. This encourages people to purchase FLOKI tokens and stake them to earn the new token, ultimately enhancing the liquidity of the FLOKI token and reducing its circulating supply.

• The Floki staking program will commence on October 27, 2023.

Since the October 12th teaser tweet, the market has front-run the staking launch, with $FLOKI currently trading up nearly 50%. With the program going live on October 27th, we anticipate significant volatility this week and given similar moves have been sold post-event, it’s a market we’ll be watching closely in the coming days.

Chainink’s 17-Month range - Will it break?

We rarely flag technical levels within our research, however, $LINK is worth mentioning as open interest in the token has risen to 15.34m contracts (around $141,982), representing a 2-year high.

This comes as $LINK is testing the top of a 17-month range which has been held since May 2022. These levels tend to be significant, and given the extent of accumulation between $5.50 - $9.50, it’s a token that has the potential to see high volatility either way as traders position for a continuation or mean-reversion price action around this level.

Radiant Capital to Launch Mainnet on Ethereum - N/A

Initially set for October 3rd but later delayed to give developers time to ‘optimize gas payments’, Radiant Capital’s anticipated Ethereum Mainnet launch is expected by month-end.

As we wrote about in our September report, we believe this could add $2.75bn-$7.15bn in TVL to the protocol. Overall, this move will make the protocol more accessible to a wider audience and open up a larger pool of assets, making it a significant opportunity for Radiant Capital to grow its user base and TVL.

Here we outlined this event in more detail, but we believe Radiant Capital's launch on Ethereum Mainnet is a major milestone for the protocol, that is not yet being priced in and is likely to result in increased volatility.

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