Blockchain analytics firm Coin Metrics has raised $15 million in a funding found led by financial giant Goldman Sachs.
In an announcement today, Coin Metrics said Goldman Sachs, Castle Island Ventures, Highland Capital Partners, Fidelity Investments, Avon Ventures, Communitas Capital, Collab+Currency and others had contributed $15 million to the analytics firm to “accelerate the company’s global expansion” as well as reach more places in the crypto market. Coin Metrics co-founder Nic Carter called the funding a “huge validation” for the firm as a provider of crypto data for institutions.
“Data is critical for the mainstream adoption of cryptoassets by traditional investors and financial services players,” said Goldman Sachs Global Head of Digital Assets Mathew McDermott, who will also be joining Coin Metrics’ board of directors.
Goldman Sachs is continuing to seemingly warm to more companies and financials innovations of the crypto space this year. Last week, the firm identified 19 stocks from crypto and blockchain firms that had outperformed the S&P500 in the year to date. The financial giant is also reportedly preparing to make Bitcoin (BTC) and other cryptocurrencies available to its clients in the second quarter of 2021.
According to Bloomberg, Goldman Sachs led a $15 million investment round in Coin Metrics, a bitcoin data provider for institutional investors. Goldman’s global head of digital assets, Mathew McDermott, will also join the analytics firm’s board of directors.
Coin Metrics, founded in 2017 as an open-source project to determine the economic significance of public blockchains, provides clients a variety of Bitcoin data, including information on historical datasets, market research on liquidity and transaction costs, futures contracts, open interest and liquidations.
With the proceeds of the investment round, Coin Metrics plans “to grow in Europe and Asia, create new products and expand current offerings,” the firm’s CEO Tim Rice told Bloomberg. He reportedly declined to give a valuation for the company based on the latest investment.
According to Rice, traditional banks have recently been demonstrating interest in the cryptocurrency market due to customer demand after remaining on the sidelines for so long.
Goldman Sachs in particular has been showing growing interest in Bitcoin this year. In mid-March, the financial institution filed with the U.S. Securities and Exchange Commission regarding a note tied to an exchange-traded fund (ETF) capable of investing in bitcoin and bitcoin-adjacent technology. And, later that month, the leader of the bank’s private wealth management division declared that it would soon offer clients bitcoin investment vehicles.
Crypto data aggregator CoinMetrics has compiled a list of 100 insights into the recent performance of the digital asset markets — and the figures add up to a very bullish picture for the ecosystem.
Released to celebrate the 100th issue of its State of the Network report, the list notes that a $100 investment made into Dogecoin 100 days ago would be worth $2,742 today — outperforming the same $100 investment in Bitcoin (which would be valued at $135 today), Ethereum ($186), and Uniswap ($401).
Price performance of BTC, ETH, UNI, and DOGE over past 100 days: CoinMetrics
The report states that Bitcoin has seen $14.5 billion worth of “trusted trading volume” in 100 days, alongside $6.1 billion worth Ether, $2.4 billion worth of XRP, $2.3 billion worth of DOGE, and $1.3 billion worth of Cardano (ADA) over the same period.
When looking at recently active addresses, veteran networks appear to still be the most popular — with nearly 611,000 active daily Ethereum addresses over the past 100 days, and 1.12 million active Bitcoin wallets. Bitcoin set a new record for daily activity on April 14 with 1.36 million wallets engaging with the network.
Over the past 100 days, a total of 1.4 million addresses have engaged with the top DeFi protocols — Uniswap, Aave, Compound, MakerDAO, and Synthetix — while the Litecoin network has hosted 24.4 million active wallets.
Users are paying to access the Ethereum mainnet at an accelerated pace, with $2.3 billion of the $3.17 billion in total fees that have ever been generated by Ethereum, having been recorded since the start of 2021. By contrast, Bitcoin has generated roughly $2 billion fees over the network’s lifetime.
The average Bitcoin transaction fee was $20.68 over the past 100 days, while Ethereum transactions averaged $16.68 over the same period. Bitcoin’s average transaction size of $30,000 has been almost double Ethereum’s $15,660 since the start of 2021.
Despite Ethereum’s impending transition to Proof-of-Stake, Ethereum hash-rate has grown at 4.5 times the rate of Bitcoin since the start of the year, with Ethereum up 89% while Bitcoin’s hashing power has increased by 20%.
The report also notes the surging popularity of stablecoins, with Tether’s supply on Ethereum increasing from 13.5 billion to 24.4 billion this year— however that was outshone by the amount of USDT on TRON, which grew from 6.8 billion to 26 billion. USDC expanded 234%, from 4.1 billion to 13.7 billion, and circulating DAI was up 192%, from 1.2 billion to 3.5 billion, since the start of the year.
“It took about 2.5 years for stablecoin supply to grow from 1B to 10B. It took less than a year to grow from 10B to over 75B,” CoinMetrics wrote, adding:
Total stablecoin supply is on pace to pass $100 billion before the end of 2021.”
The co-founder of crypto data and insights firm Coin Metrics has fired back at yet another article in mainstream media claiming that the “Bitcoin bubble” has been driven by Tether.
Nic Carter, a former Fidelity crypto asset analyst and Castle Island Ventures partner, slammed the Wall Street Journal article titled “Behind the Bitcoin Bubble” by Andy Kessler, alleging that it verged on “journalistic malpractice”.
“Normally, if you are a columnist writing in one of the most respected financial publications, you might try and evaluate the data behind that claim, instead of just uncritically accepting it. But Mr. Kessler did no such thing. He just blindly repeated a fanciful claim from an anonymous blogger in order to imply that Bitcoin’s price was somehow dependent on Tether.”
The award-winning WSJ writer based some of his fairly extensive criticism on the work of a blogger called “CryptoAnon” in a viral post called “The Bit Short: Inside Crypto’s Doomsday Machine”. Kessler wrote the blogger had “found that as much as two-thirds of Bitcoin buys on any given day were purchased with Tether” based on CoinLib data.
Raising questions over Tether and its lack of audits and the idea USDT was being employed to buy Bitcoin to “jack up its price,” Kessler added;
“Normally I wouldn’t care. Bitcoin is nothing, it’s vapor, a concept of an idea. Transactions using Bitcoin are few and far between. It’s not a store of value—anything that drops 30% in a week can’t play that role.”
Kessler said he must also note that “wallet provider Coinbase, the largest holder of Bitcoin, says it ‘does not support USDT.’ Do they know something? (Coinbase offers its own stablecoin USDC, in partnership with Circle.)
Carter, who is now board chair at Coin Metrics, wrote that assessing trade between USDT and Bitcoin using data called CoinLib was “indefensible” as it included tens of billions of wash trading data from exchanges that reputable data sources ignore.
He said any serious trader knows that “many of the exchanges composing the CoinLib sample are not credible, and that the resultant data was thus completely unreliable.”
“As I will demonstrate, this data is not sufficient to make the case that Bitcoin liquidity is dominated by Tether, and relying on it is liable to mislead. Unfortunately, the mainstream financial press is now amplifying these erroneous claims.”
Carter stated that CoinLib is taking the data outputs from marginal and often non-fiat connected Tether based exchanges as face value, and “unsophisticated analysts like CryptoAnon” are using it to disseminate FUD about Bitcoin’s liquidity.
He argued that highly regulated exchanges and institutional fund providers do not rely on or even support Tether in some cases and they all facilitate an on-ramp to Bitcoin and support the price.
“Other entities like Cash App, Paxos, Paypal, BlockFi, Robinhood, Bitwise, and Grayscale all facilitate various forms of exposure to Bitcoin and are connected to the commercial bank system and in some cases publicly-traded companies. No Tether present.”
Carter concludes that Kessler needs more research and called for a retraction and a correction by the WSJ:
“Wild theories relying on data that everyone in the crypto industry knows to be erroneous do no one any good.”
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. Source
“Miners are selling” is a popular trope used to explain bitcoin’s occasional downward price action. But on-chain data doesn’t support this narrative, according to analysts and mining pools themselves.
After bitcoin’s correction earlier this week to the tune of nearly 30%, miners were a popular scapegoat. But miners have been extremely consistent in their selling habits for months, according to network data collected by Glassnode and analyzed by CoinDesk.
For the past six months, weekly bitcoin flows from mining wallets to exchanges have been steady despite the cryptocurrency’s more than 330% gains over the same period. The only anomalous activity seen among mining wallets happened well before bitcoin’s correction.
Since July 2020, miners have sent an average of 2,100 coins per week to exchanges, per CoinDesk Research. Miners are currently on track to finish another extremely average week with only nearly 1,200 coins transferred from their wallets for cryptocurrency exchanges.
Total bitcoin transfers from mining wallets to exchange addresses.
Source: Glassnode, CoinDesk Research
Confirming this observation, Coin Metrics senior analyst Karim Helmy told CoinDesk there isn’t any on-chain data supporting increased miner selling.
“BTC-denominated gross inflows and outflows out of mining wallets have both remained stable, as have net flows,” Helmy said in a direct message.
The timing is off
An unusually large reduction in mining wallet supply, however, did occur over a recent four-day period from Dec. 26 to 30. During this period, the aggregate balance of mining wallets dropped by 21,000 BTC, a 1% decrease.
But instead of possibly causing a correction, these transfers happened while bitcoin was climbing from $26,000 to $29,000. Over the next nine days, moreover, bitcoin’s price gained another 43% before temporarily topping out just below $42,000 and falling nearly 30% into Monday morning.
These coins don’t appear to have ever been sent to exchanges, per Glassnode data. Over the four-day period, exchange addresses received a total of less than 2,400 coins from mining wallets, an amount far less than the 21,000 withdrawn from mining wallets.
Total BTC balance of bitcoin miner addresses
Source: Glassnode, Coin Metrics, CoinDesk Research
Even if every coin sent by miners exchanges were instantly sold at market, however, their order would represent a tiny percentage of daily trading volume.
Miners sent 1,890 BTC to exchanges on Dec. 26, 2020, worth roughly $48 million at the time and the largest single-day transfer in the past year. That same day, Binance – currently the largest cryptocurrency exchange by volume – reported over 148,000 BTC in volume on its BTC/USDT pair, the exchange’s largest bitcoin market.
Assuming miners sold all their coins on one market at one exchange, they would represent 1.3% of its daily volume.
Pools are stacking, not selling.
Leading mining pools are in fact increasing their bitcoin holdings, not liquidating them, with the balances belonging to miners at F2Pool and Lubian – the two largest mining pools by their individual holdings – steadily increasing for the past eight months, per Glassnode.
“I’m not sure what addresses they’re watching,” said Poolin CEO Kevin Pan, calling anything showing a significant increase in miner selling “maybe fake data.”
Even though Slush Pool doesn’t closely track what their miners do with their bitcoin payouts, engineer and technical writer Daniel Frumkin told CoinDesk, “We know that many of our miners are long BTC and only sell the portion of their revenue that’s needed to cover costs and manage risk.”
Thus, when the price drastically increases, Frumkin explains, miners are able to and in fact do sell fewer bitcoins, not more since the price appreciation boosts their profit margins per coin mined.
So, who is selling?
More than likely, recent price dips are primarily caused by U.S. investors realizing some profits.
Read more: Guggenheim CIO Says Bitcoin ‘Should Be Worth’ $400,000
For example, Guggenheim CIO Scott Minerd took to Twitter Sunday saying it’s “time to take some money off the table,” referring to bitcoin, after telling CNBC a month ago that bitcoin “should be worth” $400,000. Significant selling activity on Coinbase over the weekend and Monday also signaled profit taking from U.S. investors.
Regardless of what catalyzed it though, bitcoin’s latest correction wasn’t from miners selling their bitcoins. In fact, they’re accumulating more.
Tether printed two billion dollar-backed tokens last week, a new record for the leading stablecoin project.
Over 24.6 billion tethers now circulate across Ethereum, Tron and Bitcoin’s Omni Layer, per data from Coin Metrics, up from 4.8 billion one year ago.
The growth comes from a variety of factors, said Sam Trabucco, quantitative trader at Alameda Research. “Some [people] don’t put trust in their local banks or currencies,” he said, in which case using USDT is the “most liquid USD-like exposure the market has access to.”
Growth also comes when traders start to “aggressively sell BTC into USDT” or vice versa, Trabucco noted, which can cause the dollar-pegged token to temporarily trade above or below its peg.
For nearly all of January so far, USDT has traded slightly above $1 until early Monday morning when it dropped below the mark, per market data from U.S.-based cryptocurrency exchange Kraken.
Per Tether and Bitfinex CTO Paolo Ardoino, new deep-pocketed institutional bitcoin investors like MicroStrategy or Ruffer Invest executing over-the-counter (OTC) buy orders has also cause significant USDT supply growth.
“Among Tether customers are all the major OTC desks and high frequency trading firms in the space,” Ardoino told CoinDesk in a direct message. Taking the buyer’s funds, OTC desks will routinely convert to USDT and spread the buying pressure across all possible liquid venues, creating demand for more stablecoins.
Trabucco also noted “heightened volumes” across all cryptocurrency trading venues over the past few weeks combined with “the ability to use USDT as collateral for an increasing number of derivatives products” as additional reasons for tether’s substantial supply growth.
For Tether, all of these combined market dynamics “have led to an increase in creation”, Trabucco said.
Concurrent with its meteoric supply growth, increased attention has been paid to questions about Tether’s backing, an issue that is even the subject of an inquiry by the New York State Attorney General’s office.
Per prior court statements, Tether reserves include cash, short-term reserves and other cryptocurrencies. But no bank statements or legal documents supporting this claim have been published since 2018, when Bahamas-based Deltec Bank published an unsigned letter affirming that Tether held $1.8 billion in reserves, matching the amount of USDT issued at the time.
In April 2019, Tether’s supply was only about 74% backed by fiat equivalents, per a statement from its general counsel. But, reiterating a later statement made in November 2019, Ardoino took to Twitter on New Year’s Eve saying, “Tether is fully backed, full stop.”
