Trading volume were boosted by trend events, such as the rise of “Chinese” coins. And also etherium Arbitrum, led to an increase in cryptocurrency trading activity

In the first quarter of 2023, the total trading volume of the 15 largest exchanges reached $10.8 trillion, with an increase of more than 40% compared to the fourth quarter of 2022. This is stated in the report of the analytical platform TokenInsight.

Changes in trading volume and market share of exchanges. These are parameters that directly indicate the rise or fall of the crypto industry. Bitcoin’s price recovery in the first quarter of the year was the most important factor. Which caused an active increase in trading volume.

Binance still holds the largest market share with 55% of trading volume. This is despite a slight decline in its share – it was 60% in the fourth quarter of 2022. OKX and Bybit, as at the end of last year, occupy the second and third places, respectively.

Spot trading volume on the top ten exchanges totaled $2.4 trillion between January and March, up 16% from the previous period. Derivatives trading volume on the top 10 exchanges totaled $7.8 trillion, up 30%.

In addition to the rise in the price of Bitcoin, many trending events occurred in the first quarter. For example, the growth of “Chinese” coins and the Arbitrum Airdrop (ARB). This led to increased activity in derivatives trading, according to our experts.

Binance, OKX and Bybit exchanges collectively accounted for 85% of the cryptocurrency derivatives market in the first quarter of this year.

The report also noted that most native crypto exchanges’ tokens closed the first quarter with an increase in price. Only LEO Token (LEO) from Bitfinex and HT from Huobi fell in price.

The only exchange token that outperformed Bitcoin and Ethereum in growth was BGB (Bitget exchange). And it was up 120%. The token Gate (GT) of the exchange Gate.io and OKB (OKB) from OKX rose in price by more than 50%.

In addition, our experts note that in early April it became known. That the monthly trading volume on decentralized exchanges renewed the maximum since May 2022. Rapid growth of cryptocurrency trading on DEX platforms began in March amid the bankruptcies of U.S. banks.

The Hong Kong Monetary Authority (HKMA) will issue a circular to banks to clarify account opening rules for cryptocurrency companies.

The Hong Kong regulator will explain how banks should conduct customer due diligence (CDD). The announcement was made by HKMA Deputy Executive Director Arthur Yuen.

Although the Hong Kong authorities actively support the development of the crypto-business. Then this industry is experiencing difficulties with access to banking services. But it is necessary for companies to store fiat assets, pay staff and pay suppliers.

The authority reviewed reports from industry participants that there may be difficulties with the account opening process and banks may reject applications. The HKMA then decided to explain to banks the rules for vetting customers. The regulator expects that crypto-service providers will be able to successfully open accounts using simple procedures.

The HKMA actively discussed the issue with banks and reminded them that there are no legal requirements. That prohibit Hong Kong banks from providing services to virtual asset (VA) related entities. The department also advised banks to avoid unnecessary processes. And refrain from adopting a “one-size-fits-all” approach to rejecting account applications.

On April 28, the HKMA and the Hong Kong Securities and Futures Commission (SFC) will co-host a roundtable discussion for the banking industry and crypto-service providers. This is done to exchange views on account opening and other information.

Our experts note that as of June 1, a new regime will come into effect in the region. According to which all cryptocurrencies operating in Hong Kong or with local investors must obtain an SFC license. Many major crypto exchanges, such as Huobi, OKX and Bitget, have already applied for a license. Or have announced the establishment of a local licensed unit.

Blockchain researchers note the “incredible diligence” of the developers of scam dubious coins. And they note that every day several new cryptocurrencies are released from the address scammer.

One scammer launched 114 scam meme cryptocurrencies in the past 45 days, a blockchain researcher under a nickname ZachXBT reported on Twitter. According to him, each time the funds received as a result of the fraudulent scheme were sent to the same address.

“I suspect that there are even more of them [issued cryptocurrencies]. These are just the ones sent to the same address,” ZachXBT added.

He attached a diagram that shows the “scam tokens” with names. Which refer to famous brands, such as KingKong, BBC, TrumpMind, Arbitreum, Mozilla, SpeechAI, PEPAPIG, are redirected to one address on the Coinbase exchange.

Users on social media noted that the scammers are acting like “criminal geniuses,” sending funds to a large centralized exchange, thereby giving themselves away. ZachXBT suggested that Coinbase had not detected the fraud because the transfers were coming in small amounts.

On April 27, a social network user under the pseudonym Guru also reported another similar case. In doing so, pointing to the address of a cryptocurrency wallet, which allegedly launched 2-5 memcoins daily for almost two years in a row.

“These developers have an incredible work ethic. Make sure you take note of their address on Etherscan. So you don’t fill their pockets with your money. Absolute insanity,” he wrote.

Our experts point out that scammers take advantage of the fact that meme tokens are popular in the cryptocurrency community. And in doing so, despite the fact that they do not bear any practical benefit. For example, new meme coins were launched in mid-April. Which are associated with famous Internet memes – Pepe the frog and Wojak the character. Their value rose by hundreds of percent after the launch. And now dozens of projects are launched every day that use PEPE, etc. in the name. Be careful 99% of these projects will be shut down within days of launch.

Stablecoin USDT from Tether maintains leadership and grows in volume despite criticism and regulatory attention. Crypto Upvotes expert review

Tether is preparing to release its Q1 earnings report. USDT’s market capitalization reached $85 billion and recovered to its all-time high before the collapse of the Terra ecosystem in May 2022.

Since the beginning of the year, the company has issued $15 billion in new USDT. And stablecoin’s market share has grown another 15%. This growth was partly due to the fact that its closest competitors, Circle’s USD Coin (USDC) and Paxos’ BUSD, were struggling. The former suffered after the collapse of Sillicon Valley Bank. The second was banned by U.S. regulators. The outflow of funds from both stablecoins was in the billions of dollars. And investors probably switched from them to USDT. Which proved to be a more “stable” asset in the period of turbulence in the markets.

According to Blockworks Research, Tether has a 63% market share. Which is the highest in the last two years.

Last week, the company issued another 1 billion USDT, though they have yet to go into circulation. According to Tether’s CTO Paolo Ardoino, this batch of USDT will be used for further USDT issuance requests and inter-network conversions. Tether has a long history of issuing USDT before funds are actually received into accounts. Stablecoin is issued in large volumes at once. And the inclusion of coins in circulation is done as requests are received from users or exchanges.

USDT is issued on 13 blockchains, including Solana, Algorand, BNB Chain or Polygon in addition to Ethereum. There are 35 billion tokens issued on Ethereum. But the largest amount of Stablecoin is on the Tron network – 45 billion USDT. It is USDT in TRC20 standard token format that has become the most popular “stablecoin” due to lower commissions and transaction processing speeds compared to other networks.

Geographical advantage of USDT

Tether is registered in the British Virgin Islands, while the issuers of the other “stablecoins” from the first three are registered in the United States. The approach to regulating stablecoins is particularly acute on the agenda of U.S. lawmakers.

Last week, USDT was discussed at a House Financial Services Committee hearing in Congress. Where the main topic was the lack of federal regulations for stablecoin issuers in the US. Representatives from the local crypto business also took part in the hearing. And including, chief issuer strategist behind USDC Circle Dante Diparte. As well as Austin Campbell, former chief risk officer at Paxos, which previously issued BUSD.

Explaining the dominant position of USDT, the invited experts referred to the “advantage of the first project as a stablecoin” Tether. But they also cited the fact that the issuer is registered outside the U.S. among the main advantages.

Speaking to Bloomberg reporters, Henry Elder, head of the American fund Wave Digital Assets, told DeFi. About the fact that among large investors there is a mass shift from USDC to other, less U.S.-oriented stablecoins. And this will continue as long as the United States remains “irrationally hostile” to cryptocurrencies in general and to Stablecoins in particular.

New players in the market of stablecoins are expected

Kai Sheffield, head of cryptocurrency at Visa, said that the company “has an ambitious roadmap for cryptocurrency products”. In doing so, he published a link to a job page for developers. According to him, the introduction of payments in Stablecoin is what the finance company intends to focus on.

Despite the obvious dominance of USDT, the landscape of the “stablecoin” market is changing. The Binance exchange has refocused on the little-known TrueUSD (TUSD) token after it banned BUSD issuance until this year. The leading platform canceled all zero trading fees. But made an exception for Stablecoin TUSD. The token now represents the largest asset by trading volume on centralized exchanges, paired with Bitcoin.

Analysts suggest that TUSD, which has a 9% share of total trading volume on centralized crypto exchanges. In the coming months, it could take the second place in this indicator after Tether.

Our experts explained why the market is reacting to rumors about the sale of Bitcoin by the bankrupt Mt.Gox exchange. And how it could actually affect the price of the cryptocurrency.

Bitcoin dropped sharply by 8% on rumors that wallets holding Mt.Gox coins were making transactions. It quickly became clear that the information was caused by a technical error. But this incident clearly demonstrated the market reaction to the possible sale of thousands of coins of the bankrupt exchange.

Mt.Gox was one of the largest cryptocurrency exchanges in the world. It operated from 2010 until it declared bankruptcy in 2014 after a series of hacks. At its peak, Mt.Gox accounted for about 70% of total Bitcoin trading volume. The 2014 hack resulted in 850,000 bitcoins stolen from Mt. Gox, worth $17.8 billion at current exchange rates.

The bankruptcy of the exchange led to a 7.5-year legal battle. Before a solution in the form of a plan to rehabilitate the affected users was developed in 2021. Since not all of the stolen coins could be recovered. They will be compensated only a part of the original amount – about 200 thousand BTC. The deadline for payment is set for September 30. $1.7 billion, 141 thousand BTC and 142 thousand more Bitcoin Cash (BCH) coins will be distributed under the civil recovery plan. Which is designed for 10,000 customers worldwide.

In the afternoon of April 26 bitcoin rate exceeded $30 thousand. However, in the evening the value of the asset began to decline sharply and fell to $27.6 thousand. By the morning of April 27, the price of the asset has recovered to $29 thousand. In the cryptocommunity bitcoin decline was associated with rumors of bitcoin sales Mt.Gox.

However, later analytics platform Arkham Intelligence. which initially sent out such warnings, reported that the data had been misinterpreted.

“Mt. Gox Bitcoins” have been a hot topic for retail traders for years

This is largely due to the fact that trading robots react to headlines of this kind. As the April 26 incident showed, the mere mention of an exchange’s name is enough for the market to react. In this case, even if the assets are not directly related to the wallets where Bitcoins of hacked users are actually stored.

The system of payments is “rather confusing”, and does not provide some kind of one-time payment to all victims. In addition, it may be profitable for the fund manager to delay the process. At the same time making sure that the payment of compensation does not happen quickly and at one time.

Some of the affected users have chosen compensation in cryptocurrency. And the other part of them chose to receive a bank transfer at a rate several times lower than the current market rate. Some chose to get a smaller amount at an early date. And others chose to get a larger amount within a few years, and so on. Thus, it is impossible that the entire mentioned amount of 140 thousand BTC will somehow be sold at one time on the exchange, our experts explain.

Payments to affected users

In February 2014, when Mt.Gox went bankrupt, Bitcoin was trading at about $550. Given the payouts at the current rate, customers could theoretically get their coins back at a high profit. But given that the affected users will receive payouts in installments. How they will use them is a big question. It is not the fact that they will decide to sell them at once. And not to take advantage of the OTC-platforms without affecting the open market.

Fears about selling cryptocurrency confiscated by the U.S. government should be perceived in the same way. Such coins are sold at auctions. And, as a rule, afterwards, they do not go directly to the exchange glass. For the amounts of such an order and there is a market OTC, explains our expert.

The first official buyer of confiscated Bitcoins is investor Tim Draper. In 2015, he managed to win an auction to distribute Bitcoins to Silk Road, the first ever illegal online marketplace. Draper has never disclosed at what rate he got the coins. He is an outspoken supporter of cryptocurrencies and predicts the first cryptocurrency will rise to the $250,000 mark in 2024.

The inflow of funds into staking Ethereum exceeded 570 ths ETH in the last week. And that was maximum for the two and a half years that passed since the launch of this program

During the week from April 17 to April 23, 571.9 thousand ETH ($1.05 billion) were deposited in staking on the Ethereum network. And this was a record volume since the launch of the service two and a half years ago. According to data presented by 21Shares investment analyst Tom Wang on the Dune platform. The figure has only reached such close values twice – after the launch of staking in November 2020 (556,000 ETH) and in March 2022 (532,000 ETH).

On the night of April 12 to 13, the Shapella update was successfully activated on the Ethereum network. This, for the first time, allowed Ethereum owners who deposited coins in staking to withdraw all or part of their funds.

Users began actively withdrawing funds from staking, but also depositing. According to TokenUnlocks, a platform that tracks cryptocurrency unlocking information. By April 25, 1.6 million ETH (worth a total of $2.9 billion) had been withdrawn from staking since the fork (in 13 days). And 1.09 million ETH ($2 billion) had been deposited.

Most of the funds that are withdrawn are not the coins themselves, which were blocked when they were deposited. But the rewards in Ethereum earned by users for depositing assets. Validators must block exactly 32 ETH in order to open a node and receive rewards for keeping the network running.

Keeping the accumulated rewards in the node does not increase returns. Therefore, many validators withdraw the amount of rewards without touching the initially deposited 32 ETH. In order for the rewards to be profitable as well, they are withdrawn and re-run nodes with them.

Our experts note that since the Shapella update, five major institutional-level stacking service providers. These include – Bitcoin Suisse, Figment, Kiln, Stakefish and Staked.us – have staked a total of over 230k ETH ($425 million).

Curve protocol developers say that no one can forbid anyone to make deposits. And the platform code is unchangeable

A cryptocurrency hacker has become the leader among liquidity providers in Curve Finance’s DeFi-platform pool. In doing so, using the $160 million he stole from the Wintermute protocol.

Wintermute is a major cryptocurrency market maker, providing liquidity to more than 50 crypto platforms. Such as Binance, Kraken, Coinbase and many others were attacked in September 2022. Ninety different digital assets totaling about $160 million were withdrawn from the protocol.

The attacker placed the stolen funds in the Curve Finance trading pool. These assets now represent 28% of the roughly $400 million placed in Curve’s decentralized liquidity pool, Curve 3pool.

Curve is the largest decentralized crypto exchange (DEX) deployed on the Ethereum network. According to DeFiLlama, its Total Value Locked (TVL) is about $4.5 billion.

Also Curve allows users to trade digital assets without intermediaries. They trade tokens through liquidity pools. Another part of the users provides this liquidity, for which they are charged a commission.

The liquidity providers get a small commission every time someone uses the pool to exchange tokens. The Curve 3pool platform is focused on exchanging stablecoins Tether (USDT), USD Coin (USDC) and Dai (DAI).

Because the code of Curve protocol cannot be changed after its deployment in the Ethereum blockchain. Its creators have no control over who uses the protocol or provides liquidity in the pools.

Our experts point out that even the managers of the protocol cannot change the code where the funds are stored. DEX exchange officials also noted that it is impossible to disable protocol without completely shutting down the Ethereum blockchain.

KYC on cryptocurrency exchanges is becoming a trend. But there are still ways to use cryptocurrencies while maintaining privacy and relative anonymity

Cryptocurrency exchange Bybit announced that by May 8, all of its customers will have to pass KYC in order to use any of the platform’s products and services. For the minimum level of verification, users will need to provide identification documents. Also pass identification by photo. The exchange is one of the top 5 largest crypto trading platforms. And before that, it did not impose restrictions, allowing to use the services relatively anonymous.

Governments and regulators around the world are systematically tightening anti-money laundering (AML) compliance requirements for cryptocurrency. Wallet operators and cryptocurrency exchanges are forced to take steps to comply with ever-changing regulations.

Most often, when talking about regulation, the U.S. is mentioned. But the trend toward stricter requirements is not only there, our experts say. The Global Financial Action Task Force (FATF) has been talking about the need to curb the use of cryptocurrencies for money laundering for years. In this case, any crypto-exchange, even if it is not registered in the U.S.. And does not formally work with U.S. users, is at risk if it does not comply with U.S. regulators.

Anonymity and privacy are a thing of the past ?

Non-big crypto exchanges have the ability to adhere to a more flexible KYC/AML policy. But at some point this issue is likely to affect them as well. Therefore, truly anonymous channels for converting cryptocurrencies into fiat money are likely to be gone soon.

Our experts point out that we can already say that there are no more. Because both the bank and CEX see the transaction activity on the bank card. And if it belongs to the person making the transaction, all his activity is already available for viewing.

Small transactions with cryptocurrencies traditionally took place in online exchanges and not on cryptocurrency exchanges. Large p2p services are also seeing a strong tightening of anti-money laundering requirements.

There are OTC (over the counter) exchanges – analog of p2p for large investors. Here coins are sold by big lots. But our experts believe that in the next year or two platforms with low AML and KYC requirements will be forced to at least tighten the requirements. Cryptocurrency has become too visible to leave such freedom for it. Considering that all areas of human life are being totally tightened.

For a really large number of users, privacy as the original ideology and value of cryptocurrency is important. Both in the meaning of “anonymity” and in the context of control over their funds. And the ability to dispose of them as they see fit. Such possibilities still remain, thanks to small CEXs, decentralized exchanges (DEX), private exchanges and OTC services, including those with cash.

This is an advantage of such services, but there are also risks. Because the responsibility and check the reliability of services lies on the user himself. Under these conditions, many users will choose not to be anonymous for the sake of convenience and security. But there will always be choices for those for whom privacy is more important.

The DEX Merlin hack occurred despite a positive assessment from leading Certik specialists who analyze the code of blockchain projects.

On the morning of April 26, hackers withdrew about $850,000 worth of USD Coin Stablecoins (USDC) from Merlin. As well as several other relatively illiquid tokens. The data in the blockchain shows that a certain entity was able to withdraw the funds. Who controlled the exchange’s liquidity pool. This may suggest that the attack was not technically sophisticated. And the theft itself may have been the work of an insider of this project.

The attack occurred despite the fact that Merlin was audited by Certik. Which is the market leader in auditing the software code of blockchain projects. The service’s conclusion from the Merlin audit stated that there were “no critical bugs” in the exchange’s code.

Certik representatives wrote on social media that they are investigating the incident. Their initial findings point to a potential problem with the management of the project’s private cryptographic keys giving access to funds. “An audit can’t completely prevent problems with keys. But we always call projects’ attention to best practices,” Certik said.

Merlin developers have asked users to revoke the permissions of wallets connected to its site. They say they are analyzing a possible vulnerability in the protocol.

Matter Labs is behind the development of the zkSync “second-tier” blockchain. In November 2022, it led several investment rounds totaling $258 million with LightSpeed, Andreessen Horowitz. And major crypto venture capital firms Blockchain Capital and Dragonfly.

Our experts note that Merlin is considered a potential candidate for token distribution in the form of an airdrop for activity in its ecosystem projects, which include the hacked Merlin platform.

Our experts tell us what sandwich attacks are. And how trading bots generate millions of dollars for their creators by tracking profitable transactions on the blockchain

An anonymous trader who owns an Ethereum wallet with the address jaredfromsubway.eth became a star in the cryptocurrency community in one day. This became known thanks to the tactics of the so-called sandwich attacks. It earned more than $4 million in just one day and became the leader in terms of network commissions, displacing the largest cryptoservices.

Such attacks are not a new concept in decentralized finance (DeFi). The sandwich metaphor is used because a trader’s tactics are based on two-way use of information about someone else’s bid to buy a particular cryptoasset. By using special bots, the trader tracks transfers in the pool of unconfirmed Ethereum or other blockchain transactions.

When the bot finds a large order that will inevitably lead to an increase in the price of an asset. It buys the asset in advance at a lower rate, “pushing” its transaction at the expense of an increased commission. And after the order is executed and the price rises, he sells it with a profit. The process is automated and takes place in seconds.

Memes and commissions

The most attractive targets for such attacks are usually low-liquid assets. For example PEPE, a new token named after the famous meme of Pepe the frog, has become just that. PEPE quickly gained popularity when a story broke in the community about How a certain early buyer of the token turned $250 into $1.8 million at a thousand-fold increase in its price.

In search of quick profits, thousands of other traders began buying up PEPE. In parallel, similar tokens named after famous memes – CHAD, WOJAK and others – started to be launched. Due to the low liquidity of the tokens, any large purchase order pushed their prices up. And such bids were hunted by bots of traders making money on sandwich attacks.

According to analytics service EigenPhi, PEPE and WOJAK have become the most popular assets on the Ethereum network over the past week. But after the stablecoins USDC and USDT with transaction volume of more than $250 million and $120 million, respectively. The wallet owner jaredfromsubway.eth had about $1.6 million in revenues from sandwich attacks in pairs with PEPE and more than $2.8 million in transactions with WOJAK.

However, the implementation of this strategy in such volumes requires high costs to pay higher commissions to ” push transactions “. The owner of jaredfromsubway.eth spent about $1.3 million on gas on the Ethereum network in just one day. That’s about 1.8% of the network’s total commissions over the same period. At the moment, only the Arbitrum network contract was ahead of the trader in terms of commissions. Which has an entire ecosystem of applications with millions of users.

Community observers estimate that jaredfromsubway.eth has spent about $7 million in commissions on more than 180,000 transactions over the past two months. When it sought to make a profit ahead of other users’ transactions.

Sandwich attacks are not an ethical tactic

Sandwich attacks are just one tactic within the larger phenomenon of Maximal Extractable Value (MEV). It is a technique that manipulates the sequence of transactions in the blockchain for profit. For example, by arbitrage or by outperforming other people’s transactions. The profits from MEV usually go to the creators of transaction blocks on the Ethereum network. They are the ones who determine the order of these transactions and then pass it on to validators. Ordinary users cannot influence their own transactions. And wallets and applications do not have the necessary tools to use MEVs to their advantage.

It takes the Ethereum blockchain about 12 seconds to validate a single block of transactions. Bots have enough time to scan each of the unvalidated transactions in a block and get ahead of the time to close someone else’s transaction. The process whereby the bot puts its own transaction in front of another’s (which will cause the price of the asset to rise) is called frontrunning. Repositioning a transaction with a bid to sell an asset already at a higher price is called backrunning. The combination of both processes creates a sandwich attack.

Traditionally, these tactics are considered unethical. But it is not prohibited either. The lack of a central supervisory body for DeFi plays into the hands of MEV traders. Most of their transactions take place on decentralized exchanges (e.g., Uniswap). This was the case with the owner of the wallet jaredfromsubway.eth. Similar to how high-frequency trading market players lead in profits on traditional markets. So do crypto traders in the MEV segment, using a variety of tactics to generate billions of dollars in crypto-assets revenue.

How to combat this

Our experts point out that Flashbots has been fighting for a fair market in the MEV field for years, creating software and infrastructure to reduce manipulation in this area. On April 20, the developers presented a beta version of their MEV-Share protocol. The purpose of which is to distribute a portion of the profits from maximum recoverable value to Ethereum users. According to the developers, it will give users the ability to control their transactions.