Tag: Cryptocurency

Risk appetite in Bitcoin spurs enormous leveraged ETF flows

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Demand for the investment vehicles that offer leveraged exposure to Bitcoin is soaring as the digital asset hits record highs.

Leveraged futures-based exchange-traded funds such as VolatilityShares’ 2x Bitcoin Strategy ETF (BITX) are seeing flows rivaling spot Bitcoin ETFs. The fund raked in $630 million in net monthly inflows, beaten only by BlackRock and Fidelity, according to data compiled by K33 Research.

Futures-based Bitcoin ETFs currently hold an all-time high equivalent exposure of 83,300 tokens and leveraged Bitcoin ETFs represent nearly 25% of the open interest on CME, which is one of the largest marketplaces for crypto derivatives. Futures premiums on the platform have climbed toward 20% amid record-high open interest, K33 said.

“The massive uptick in flows to 2x leveraged BTC ETFs illustrates the huge demand for leveraged long exposure in BTC of late and is consistent with the increased risk appetite witnessed in BTC derivatives,” according to a note on Tuesday. “Enormous inflows” to the fund are the main catalyst for the surge in open interest on CME.

VolatilityShares’ 2x fund currently holds a Bitcoin equivalent exposure of 36,025 tokens after more than doubling the crypto currency under management 11 days into March, K33 data show.

The increasing interest in such funds has prompted a flurry of new offerings. ProShares is expected to launch five leveraged long and short BTC ETFs within the next month to cater to new market demand and Valkyrie recently launched its 2x leveraged product.

The rise of such funds comes as an influx of investors seek a variety of channels to make leveraged bets on the latest bull run in the crypto market. The US-based institutions tend to use regulated offerings such as crypto futures on CME and spot ETFs from traditional asset managers, while offshore entities turn to the options contracts on Deribit and perpetual futures without an expiration date on Binance, which are among the most popular products for crypto traders.

The funding rates for Bitcoin perpetual futures — a key indicator for leverage in crypto — remain elevated across major offshore exchanges, with Deribit, the leading crypto options trading platform, seeing record open interest and a surge in bullish bets on Bitcoin.

“Perps continue to highlight an immense risk appetite in the market, with funding rates staying exorbitant while open interest fluctuates vividly,” the note said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Exclusive | RBI Governor Shaktikanta Das: ‘There is never a dull moment as a central banker’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Reserve Bank of India (RBI) Governor Shaktikanta Das said on Thursday, January 18, that the country has navigated the myriad challenges very well despite a challenging journey in the last four years like every other country. Das was speaking to CNBC-TV18 at Davos on the sidelines of the annual World Economic Forum 2024 meet.

“India has navigated well in terms of macroeconomic stability, growth, and financial stability; in terms of monetary policy actions and their outcome and bringing inflation under control.”

On global uncertainty, particularly the recent attacks on cargo vessels in the Red Sea causing disruptions and delays in the global supply chain and increasing logistics costs, Das acknowledged that it makes policy-making “complex.” The RBI Governor added that while India will be able to deal with the existing challenges, we have to see how it all plays out in the next few weeks or months.

On interest rate cuts, Das dashed hopes of a cut in interest rates anytime soon.

“Our policy has to remain actively disinflationary till we reach the target of 4% on a durable or sustainable basis, and that is our current stance.” A premature pivot in policy can prove costly for the economy, he added.

On the economic growth estimates, Governor Das said when the RBI raised its projection for the current year to 7% from 6.5%, it was seen as being too optimistic, even though the RBI considered it a conservative estimate. However, the first advance forecast for gross domestic product (GDP) released by the National Statistics Organisation (NSO) has now pegged the growth at 7.3%, he highlighted.

For the next year too, the central bank expects growth to touch 7%, and this would mean four successive years of growth at 7% or more, Das noted.

Governor Das also stated that the regulator has not prescribed any credit-deposit (CD) ratio for banks to maintain, nor does it propose to do so at the moment.

His comments come after there were indications over the past few weeks that the banking regulator is uneasy about the elevated CD ratio of certain banks, which could potentially pose a credit or liquidity risk.

On cryptocurrencies, the RBI Governor made it clear that the tech part of cryptocurrencies and tokenisation needs to grow. However, this aspect has to be differentiated from crypto, which is a speculative product and marketed as an asset.

“The technology part of it needs to grow. But the product, which is bought and sold in the market, which is traded, is a highly speculative activity; it has several downsides, which can pose risks to financial stability,” Das told CNBC-TV18.

Explaining the stance that institutions such as the IMF need to take a much more balanced, nuanced view of emerging markets, Das said, “Individual emerging market economies have to insulate and protect their economies from the spillovers of the global currency movements and the fluctuations there, to ensure the stability of their currencies… The Reserve Bank’s intervention in the currency market is only to prevent excessive volatility.”

On the capex cycle, Das said that the RBI is actively supervising all aspects of the sector and will act whenever we see a risk anywhere.

On his five years as the RBI governor, Das said, “There is never a dull moment as a central banker.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Bitcoin’s Jet-fueled 16% six-day jump takes prices past $44,000

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Bitcoin’s longest winning run since May lifted the token past $44,000, sparking questions about whether the breakout increasingly reflects a conviction that looser Federal Reserve monetary policy lies ahead.

The largest digital asset climbed for six days through Tuesday, adding roughly 16%, and was consolidating the gains in early Asian trading on Wednesday. Its 2023 rebound from last year’s crypto rout now stands at 165%.

Much of the rally is pegged to the prospect of the US allowing its first spot Bitcoin exchange-traded funds, paving the way to a wider investor base. BlackRock Inc. and Fidelity Investments are among those awaiting the outcome of their applications, with some analysts expecting a green light by January.

But ETF hype has shadowed Bitcoin since June, when asset managers began seeking approval to roll out the funds. That’s leading some to ask if the token’s surge is now drawing more succor from wagers on Fed rate cuts next year.

“Surely the ETF story is well and truly priced?” said Tony Sycamore, a market analyst at IG Australia Pty. The high volatility, “jet-fueled” move up in Bitcoin is instead a reminder that crypto is “more responsive to a Fed pivot and policy than other asset classes,” he said.

For now Bitcoin momentum is overshadowing any concerns that the surge is at risk of becoming too stretched. Smaller virtual currencies such as Ether, Avalanche and meme-crowd favorite Dogecoin have also been advancing.

The bullish overall mood is evident across a range of countries. Bitcoin on South Korea’s Upbit and Bithumb exchanges was trading about 4% above the prevailing global price on Wednesday, a return of the so-called “kimchi premium” that made headlines during the pandemic-era bull run in digital assets.

In Abu Dhabi, crypto mining hardware retailer Phoenix Group Plc jumped 35% on its debut on Tuesday. The firm is the first crypto-related listing in the Middle East. In El Salvador, Nayib Bukele said in a posting on X this week that the nation’s Bitcoin investments had turned profitable. He’s running for reelection after stepping down as president last week.

Another prop for sentiment is the so-called Bitcoin halving due next year, which will cut in half the amount of tokens that Bitcoin miners receive as reward for their work. The quadrennial event is part of the process of capping Bitcoin supply at 21 million tokens. The coin hit records after the last three halvings.

“Both micro and macro factors are currently lining up for Bitcoin,” said Zach Pandl, managing director of research at crypto fund provider Grayscale Investments LLC.

Bitcoin was little changed at $43,851 as of 10:16 AM in Singapore, still some $25,000 below its 2021 record of almost $69,000.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Bitcoin hits $40,000 level for the first time since May 2022

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Bitcoin hit $40,000 for the first time since May 2022 as the largest digital asset extended this year’s rebound on expectations of interest-rate reductions and greater demand from exchange-traded funds.

The token traded at $40,099 as of 6:35 AM on Monday in Singapore, taking its 2023 jump to 142%. Bitcoin was last at $40,000 before the TerraUSD stablecoin collapse that contributed to a rout in digital assets and a daisy chain of collapses in the crypto sector.

Investors are increasingly convinced the Federal Reserve is done with rate hikes as inflation cools, turning the focus to the likely extent of cuts next year. The changed backdrop has fueled a rally across global markets.

The digital-asset industry is also awaiting the outcome of applications from the likes of BlackRock Inc. to launch the first US spot Bitcoin ETFs. Bloomberg Intelligence expects a batch of such funds to win Securities & Exchange Commission approval by January.

“Bitcoin continues to be supported by optimism around SEC approval for an ETF and Fed rate cuts in 2024,” Tony Sycamore, a market analyst at IG Australia Pty, wrote in a note. Technical chart patterns point to $42,330 as the next level to watch for, he added.

Bitcoin’s rebound from last year’s crypto crash has weathered a US crackdown that put Sam Bankman-Fried behind bars for fraud at FTX and handed top crypto exchange Binance and its founder Changpeng Zhao rap sheets and big fines. For optimists, the drive to curb questionable practices and the flurry of ETF applications point to a maturing industry and the potential for wider crypto adoption.

Even so, Bitcoin as well as smaller tokens such as Ether and BNB remain some way below the records they hit during the pandemic-era bull run in crypto. The largest token peaked at almost $69,000 in November 2021.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Bitcoin miners make money ahead of ‘halving’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Bitcoin miners are making hay while the sun shines.

The business has been yanked out of the doldrums by the cryptocurrency’s recent rally—and now mining companies are racing to lock in profits before bitcoin’s “halving” when rewards for producing the tokens are cut in half.

The next halving is expected in April 2024, a process designed to slow the release of bitcoin, whose supply is capped at 21 million—of which 19 million have already been mined.

“You’re seeing a lot of urgency to plug rigs in ahead of the halving,” said Gregory Lewis, analyst at brokerage BTIG that covers the 13 biggest US-listed bitcoin miners.

Bitcoin’s hashrate—a measure of the computational power needed to mine a coin—has spiked to an all-time high, according to crypto platform Blockchain.com. That means miners are having to use more and more power and speed to crack the complex maths puzzles that earn them a bitcoin.

Analysts at J.P. Morgan estimate the hashrate has hit record highs for 11 consecutive months, including a historic surge in October.

Playing the game

Bitcoin has risen about 37% in the past month to around $37,000 after months of listlessness, a rebound that’s encouraged miners to hook up their powerful computers to crack the puzzles and sell newly minted coins.

The 30-day average of revenue earned by miners has improved steadily this year to hit an 18-month at $32.46 million on November 11, blockchain.com data shows.

However, mining—a highly energy-intensive process—is still not as profitable as in its 2021 heyday.

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A measure of miners’ earnings from using 1 petahash per second of computing power in a day has risen to over $81 from $70 at the start of November but remains well below a peak of $127 in early May, according to mining data platform Hashrate Index.

With six months to go till miners’ share of rewards is slashed, they are looking for ways to keep their margins from shrinking in the highly competitive environment.

“Every halving forces miners not playing that game at a high enough level to get washed out,” said William Szamosszegi, CEO of mining company Sazmining.

Halving opportunity

Bitcoin prices have typically rallied in the past following halvings. Six months after the first halving in 2012, the price jumped to $126 from $12. After the second halving in 2016, it went to $1,000 from $654 within seven months and in 2020 it shot up to $18,040 from $8,570 in the same time period.

Bitcoin’s third halving in 2020 brought down miner rewards to 6.25 bitcoin per block and the upcoming one is set to push it down to 3.125 in April.

At current prices, mining each block reaps $231,250.

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Matteo Greco, analyst at digital asset investment company Fineqia International, said many mining companies were upgrading their equipment and boosting their hashrate power to stay competitive.

To conserve their profit margins, some players have resorted to moving their operations to Central American countries where energy prices are more affordable, and governments friendlier to cryptocurrencies.

“It’s too early to say if all bitcoin miners are out of the wood,” said Ludovic Thomas, portfolio manager at Swiss-based Criptonite Asset Management that invests in digital assets. “Profitability increase always leads to network hashrate and difficulty increase.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

ED seizes Rs 6.47 crore in assets, including crypto, in China-linked job fraud

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Directorate of Enforcement (ED) on Thursday (September 14) attached movable assets worth Rs 6.47 Crore, which includes a substantial amount of Rs. 71.3 lakh in the form of cryptocurrency, in a part-time job fraud case linked to China. This enforcement action comes under the Prevention of Money Laundering Act (PMLA), 2002.

The ED launched its investigation following an FIR filed by the South CEN Police Station in Bengaluru City, which uncovered a web of deceit and fraud perpetrated against gullible Indian youth.

According to ED’s findings, certain Chinese individuals operating through a mobile app called “Keepsharer” lured young Indians with promises of part-time job opportunities. They collected money from these unsuspecting individuals and went on to establish companies in India, recruiting Indians as directors, translators, HR managers, and telecallers. The “Keepsharer” app, which was linked to an investment platform, duped the youth into investing money.

The fraudulent scheme involved having the victims like celebrities’ videos and share them on social media platforms. Once the task was completed, Rs. 20 per video would be credited to their “Keepsharer” wallets. However, the app was later removed from the Play Store, leaving victims empty-handed.

The attached assets totaling Rs. 6.47 Crore are associated with six companies: Toningworld International Private Limited, Ansol Technology Private Limited, Redraccoon Services India Private Limited, Energico Digital Private Limited, Bridge Tera Technologies Private Limited, Ashenfallous Technologies Private Limited, and nine individuals.

It has been revealed that the scammers channeled the ill-gotten gains from these entities through bank accounts and subsequently converted them into cryptocurrency before transferring the funds to Chinese crypto exchanges.

In a prior operation, the ED had conducted searches on 12 entities involved in the case, leading to the seizure of Rs. 5.85 Crore under Section 17 of the Prevention of Money Laundering Act.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Founder of bankrupt crypto lender Celsius must face NY fraud lawsuit

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Alex Mashinsky, the founder and former chief of the now-bankrupt cryptocurrency lender Celsius Network, must face a lawsuit by New York Attorney General Letitia James accusing him of civil fraud, a Manhattan state court judge ruled on Friday.

Justice Margaret Chan said the attorney general sufficiently alleged that Mashinsky defrauded investors by touting Celsius as a safe alternative to banks and concealing its risks, including hundreds of millions of dollars of investment losses.

Chan also said James could pursue some claims under the Martin Act, a powerful state securities law, and that the ”earned interest accounts” that Celsius offered customers qualified as securities under state law.

The attorney general’s lawsuit ”supports a reasonable inference that the harm suffered by investors flowed, at least in part, from Mashinsky’s alleged misrepresentations made in New York concerning Celsius’ overall financial health and investment safety,” Chan wrote in a 25-page decision.

Mashinsky has separately pleaded not guilty to criminal fraud charges brought by the U.S. Department of Justice tied to Celsius’ demise.

He also faces related civil lawsuits by the U.S. Securities and Exchange Commission, U.S. Commodity Futures Trading Commission and U.S. Federal Trade Commission.

Lawyers for Mashinsky in the New York civil case did not immediately respond to requests for comment.

James, in a statement, said the decision ”should serve as another reminder to crypto companies that we will use the full extent of the law against those who defraud investors.”

Cryptocurrency lenders such as Hoboken, New Jersey-based Celsius grew rapidly as digital asset prices surged higher during the COVID-19 pandemic.

The lenders promised easy loan access and high-interest rates to depositors, and lent tokens to institutional investors, hoping to profit from the difference.

Celsius was founded in 2017 and had offered 17 percent interest on some deposits, but had a $1.19 billion balance sheet deficit when it sought Chapter 11 protection in July 2022, according to regulators and court filings.

The bankruptcy came one month after Celsius froze withdrawals and transfers for its 1.7 million customers, citing what it called ”extreme” market conditions.

The case is New York v. Mashinsky, New York State Supreme Court, New York County, No. 450040/2023.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Income tax return filing: How to report cryptocurrency income in ITR

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Income Tax Return (ITR) filing is compulsory for individuals earning a specified amount of income in a year. However, there is confusion among taxpayers on how the earnings from investments in cryptocurrencies such as bitcoins, and Ethereum should be disclosed in the ITR.

To understand this, it’s foremost important to note that Virtual Digital Asset (VDA) covers cryptocurrencies, non-fungible tokens (NFTs) and any
other notified digital asset. It does not cover Indian currency, CBDCs, foreign currency, and notified digital assets. So, if taxpayers generate any income from the transfer of VDAs, it must be reported in Schedule VDA in the ITR form.

“The income generated from the transfer of virtual digital assets will be subject to taxation at a rate of 30 percent and applicable surcharge and cess. Taxpayers cannot avail of deductions for any expenses, except for the cost of acquisition, if applicable, when calculating such income,” said Naveen Wadhwa, Deputy General Manager at Taxmann.

Schedule VDA requires details such as the acquisition date, transfer date, category of income for taxation, acquisition cost in case of a gift, and consideration received. Those who have income from VDA, cannot file ITR-1 or ITR-4. Instead, such income can be reported in ITR 2 or ITR 3. Such income can be taxed either under the head of business income or capital gains.

The due dates are also determined based on the chosen category:

Capital gains: If taxpayers report the income as capital gains, the due date for filing the ITR will be July 31.

Business income: If taxpayers report the income as business income, they need to compute the turnover to determine whether they must get their accounts audited. If the turnover exceeds the specified limit, they must have the accounts audited, and in that case, the due date for filing ITR will be October 31. However, if the turnover is below the specified limit, the
due date for filing ITR will be July 31 only.

Currently, more than a month is left for the deadline to end. However, it’s advisable to file ITR as soon as the taxpayers get their Form 16s. It must be remembered that last-minute hurry can lead to mistakes, which might have a negative impact on the outcome of filing returns.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Crypto stocks drop after US SEC sues Coinbase for failing to register

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of Coinbase Global fell on Tuesday and were on track for their biggest one-day percentage decline since late March after the cyrptocurrency exchange found itself in the crosshairs of the U.S. securities regulator along with Binance.

The U.S. Securities and Exchange Commission sued Coinbase, accusing it of illegally operating without registration with the regulator. That happened a day after the SEC filed a lawsuit against Binance and its CEO, Changpeng Zhao.

In a complaint filed in Manhattan federal court on Tuesday, the SEC said Coinbase has since at least 2019 operated as an unregistered broker by handling cryptocurrency transactions, evading the disclosure requirements meant to protect investors.

Coinbase shares were down 13.4% at $50.81 after earlier hitting their lowest level since January. The stock, however, is up nearly 43% on a year-to-date basis.

Global regulators have been keeping a close watch on the crypto world after a string of high-profile collapses wiped out more than a trillion dollars from the digital asset industry’s market capitalization last year.

”For a lot of companies specifically within the crypto ecosystem, this is the regulatory response that investors have been concerned (about) for years now. These were largely unregulated,” said Matt Stucky, senior portfolio manager at Northwestern Mutual Wealth Management Company.

While the Coinbase news helped drag down Blockchain farm operator Bitfarms earlier on Tuesday, the stock has since recovered and was last up 1.8%.

Crypto miner Riot Platforms was down 0.7% while Hut 8 Mining fell 1.2%. Marathon Digital reversed earlier losses and was last up 1.6%.

Also, after falling earlier, Bitcoin, the world’s biggest cryptocurrency, was up 1.4%. Binance’s cryptocurrency was up 0.24% after falling 9.2% on Monday.

Coinbase had disclosed in March that it received a ”Wells notice” from the SEC threatening a potential lawsuit over certain products.

Paul Grewal, chief legal officer and general counsel at Coinbase, issued a statement on Tuesday saying the ”SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness and companies like Coinbase that have a demonstrated commitment to compliance.”

”The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation. In the meantime, we’ll continue to operate our business as usual,” Grewal said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

OpenSea Vs LooksRare – what you need to know

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Non-fungible tokens (NFTs) have gained significant traction in the past two years, especially during the 2021 boom in which the NFT market accounted for $40 billion in transactions. While the entire crypto market was in the red last year, NFT trading volume nearly matched that of its 2021 peak. In fact, 101 million NFT trades were recorded in 2022, compared to 58.6 million in 2021, reflecting that lower prices did not stop market players from trading NFTs.

Meanwhile, marketplaces such as OpenSea and LooksRare reflect the unprecedented growth of NFTs, helping people facilitate a spade of transactions over the years. But what is the difference between these platforms and which one is more dominant? Continue reading to find out who wins the battle between OpenSea and LooksRare.

OpenSea Vs LooksRare

With many brands, celebrities, and businesses making waves in the NFT frenzy, NFT marketplaces have emerged as the centre stage for carrying out NFT trades. However, some NFT marketplaces are built differently and offer diverse features and services. Although there are several marketplaces, OpenSea and LooksRare have particularly caught the eye of NFT enthusiasts for several reasons.

Also Read: Why the crypto community is targeting SEC Chair Gary Gensler?

Marketplace Infrastructure

OpenSea, which began in 2017, facilitates NFTs including art, music, antiques, and photography, supporting over 150 cryptocurrencies as payment methods. On the other hand, LookRare, a relatively new marketplace, quickly made a name for itself by promising faster NFT transactions and by offering its native token LOOKS and a rewarding system.

In contrast to OpenSea, which retains trading fees because it is a centralized marketplace, LooksRare distributes trading revenue to its customers. On that front, LooksRare has emerged as a community marketplace since its inception in January 2022. It even toppled OpenSea in terms of daily volume during the same month of its launch. More specifically, in January 2022, LooksRare made $385.38 million in sales as opposed to OpenSea’s $109 million.

Trading fees

As mentioned earlier, LooksRare returns trading fees to those who stake the native token LOOKs to earn more LOOKs and Wrapped Ether (WETH).

At one point, OpenSea charged a 2.5 percent commission fee on every transaction, which depended on the gas price on the Ethereum network. In contrast, LooksRare charged a slightly lower trading fee of 2 percent. However, in light of the changing NFT landscape, OpenSea announced its plan in February to eliminate its 2.5 percent fee on sales and cut down creator royalties that were typically around a 5 percent to 10 percent cut from the NFT sale price.

To gain a competitive edge, OpenSea recently removed trading fees from the platform, its primary source of revenue, but only for a “limited time”. Instead, it enforced a mandatory creator royalty fee of 0.5 percent on NFT trades. This fee can also be paid in larger percentages according to the seller’s preference and is applied to NFT projects that do not have an on-chain enforcement method.

Meanwhile, LooksRare also reduced its trading fees to 0.5 percent this month with the launch of a V2 Protocol. Another prominent feature of LooksRare V2 is that sellers will receive Ether instead of wrapped Ether (WETH) for most sales performed through the platform.

Native token and rewarding system

The tokenomics of LooksRare is appealing to NFT enthusiasts because it offers rewards on top of the profits generated from NFT sales. The platform rewards stakers by utilizing trading fees in two ways. First, standing staking allows users to earn WETH and LOOKS. Second, LOOKS compounders have the option to convert their earned WETH into more LOOKS and earn a higher yield than those offered by some other platforms.

LookRare even launched a “Vampire attack” on OpenSea in January 2022, a term used when a protocol snatches away a rival’s users by providing incentives or unique features. A quick recap – LookRare distributed 120 million native tokens to OpenSea users in an airdrop parallel to the launch of its platform.

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Conclusion

Despite LooksRare’s growing popularity, the platform is yet to dethrone OpenSea’s position as the largest NFT marketplace. Many argue that the bulk of LooksRare’s trading volumes are a result of wash trades, wherein a user buys and sells the same NFT to inflate statistical data. Even so, Dune Analytics shows that OpenSea has 2.6 million total active users on its platform in 2023, compared to 165,962 on LooksRare.

Additionally, OpenSea’s trade volume is significantly larger, averaging 40,000 trades per day in the first three months of 2023, compared to the daily average of under 400 trades for LooksRare.

Although LooksRare offers distinct services and features compared to OpenSea, the latter’s early-mover advantage, and current trading volumes make it difficult to beat in the present scenario.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow