Two lawyers for the U.S. Securities and Exchange Commission (SEC) were forced to resign after a federal judge sanctioned the agency last month for committing a “gross abuse of power” while attempting to secure a temporary restraining order against Utah-based crypto company Debt Box, according to a Monday report from Bloomberg.

Michael Welsh, a former lead attorney on the Debt Box case, and Joseph Watkins, an investigative attorney whose declaration served as the foundation for the SEC’s case against Debt Box, were reportedly forced to step down or else be terminated, according to the report, which cited people familiar with the situation.

A spokesperson for the SEC declined to comment, but an April 15 court filing declared that Welsh “is no longer employed by the Securities and Exchange Commission.” Watkins’ LinkedIn page says he is still employed by the agency.

Last December, U.S. Chief District Judge in the District of Utah Robert Shelby, wrote that he was “concerned the Commission made materially false and misleading representations” in their pursuit of the restraining order that “undermined the integrity of the proceedings.”

Following Shelby’s order, the SEC filed a response with the court admitting that its team “fell short” of standards but called sanctions “unwarranted.” In addition to apologies from Welsh and Watkins, the SEC’s Division of Enforcement Director Gurbir Grewal personally apologized for his agency’s “shortfall” in the case in a Dec. 21, 2023 court filing.

The agency also moved to dismiss the case without prejudice – meaning they would retain the ability to refile the case against Debt Box – but Shelby denied the motion, arguing that his court had “not yet had occasion to evaluate the underlying merits of [the] action.”

Apologies were not enough to get the SEC out of hot water – in February, five Senate Republicans sent SEC Chairman Gary Gensler a letter blasting the agency for conducting itself in “an unethical and unprofessional manner” and suggesting that “other enforcement cases brought by the Commission may be deserving of scrutiny.”

In March, Shelby ruled that the SEC had committed a “gross abuse of power” and ordered it to pay legal costs for Debt Box.

The case is ongoing.

UPDATE (April 22, 2024 at 19:50 UTC): Adds that the SEC declined to comment.

Welcome to “Epoch V” of Bitcoin. On April 20 Bitcoin underwent its fourth successful halving, the programmed slashing of the amount of new bitcoin {{BTC}} that enters into circulation via mining. While the event itself is a bit of a barnburner — a moment for people around the world to celebrate virtually and in person — many eyes are on what is to come.

This is an excerpt from The Node newsletter, a daily roundup of the most pivotal crypto news on CoinDesk and beyond. You can subscribe to get the full newsletter here.

The launch of Runes, a new protocol that enables the creation of meme coins on Bitcoin, coincided with the halving. Already hundreds of tokens have launched, contributing over $80 million in fees to bitcoin miners. This increased trading activity has also driven up the costs associated with sending a transaction on Bitcoin, with the current average price over $70, an increase of 1,395.8% over the trailing 30 day average, according to TokenTerminal.

While it’s hard to say whether this activity will level out, there are some who think “Epoch V,” or the period of time leading up to the next halving in 2028, will be when Bitcoin layer 2s like the Lightning Network will finally catch on. On April 20, bitcoin fees hit an all-time high of $128.

“Anything that causes fee rates to spike will probably drive people to seek out other solutions,” Bitcoin Core developer Ava Chow said in an interview with CoinDesk. “Lightning is one option. Also there are side chains like Fedimint, Ark and a bunch of layer 2s. High fee environments will prompt people to look into them.”

See also: Bitcoin Transaction Fees Come Crashing Down Post Halving

It’s a point echoed by a recent Messari report, which argued that with the rising level of on-chain activity, “layer-2 solutions for Bitcoin are not just a luxury but a necessity,” analyst Nikhil Chaturvedi wrote. Bitcoin is no longer just “digital gold,” but a platform on which to build.

This shifting mindset was stirred by the launch of the Ordinals protocol last year, which enabled new ways of storing data on the smallest units of BTC, called satoshis. There have already been over $3 billion in NFT-like Ordinal “inscription” sales, and trading activity is trending up with the average number of transactions approaching 2 million.

But Ordinals is hardly alone in driving up Bitcoin fees. BitVM, a way to move computation off-chain, enables people to build Ethereum-like smart contracts on Bitcoin. Babylon is building a way to stake and earn yield on BTC holdings. And layer 2s like Stacks and Merlin are becoming home to a number of decentralized apps and meme coins.

Interestly, in the days since the halving, tokens associated with Bitcoin L2s have outperformed BTC. For instance, Elastos’ ELA token has risen 11%, and SatoshiVM’s SAVM climbed 5%. Stack’s STX token has gained nearly 20% to $2.87 — though that may also have been driven by the network’s anticipated Nakamoto upgrade, which began rolling out today.

While market forces will likely drive action to Bitcoin’s secondary layers, that may not always be a good thing. For one thing, those with low bitcoin balances may be priced out from using platforms like Lightning, if they want to use it non-custodially and set up their own channels, Chow suggested.

“The problem is, all of these layer 2s require an on-chain transaction,” Chow said, referring to something like the “inbound capacity” needed to fund a Lightning account. Lightning users also have to pay for an on-chain closing transaction. “In a high fee environment that means it's going to be a little bit hard to actually start using those things.”

See also: OG Bitcoin L2 Stacks Is Getting a Major Overhaul

Of course, there are workarounds to this: custodial Lightning companies that subsidize these surprisingly expensive transactions.

“I am concerned higher BTC fees will drive users to custodial Lightning services … giving BTC users no sovereignty or anonymity over their BTC holdings,” pseudonymous bitcoiner and Lightning critic Sovereign Matt told CoinDesk. “Custodial Lightning services will become the new banks/middlemen that people will have to trust with their life savings as it will be too expensive to self-custody and transact using mainchain bitcoin.”

To some extent, all of this is downstream of the so-called Blocksize Wars over how to scale Bitcoin years ago, where it was decided that instead of ramping up the size of Bitcoin blocks to scale the chain through layer 2s. That set Bitcoin down the path it’s currently on.

“There's basically two schools of thought on increasing the number of transactions per block. You can make blocks bigger, or you can make transactions smaller,” Chow said, adding that expanding the block size is like “brute forcing” a solution.

There are ways of making bitcoin transactions smaller, and more compact, but until that happens, it’s like layer 2s will grow.

Sam Bankman-Fried has inked a settlement agreement with a group of FTX customers who have agreed to drop their class action lawsuit against him in exchange for his help going after celebrity promoters of the collapsed exchange.

The agreement, filed in a Miami court on Friday, has not yet been approved by a judge. If approved, the settlement would release Bankman-Fried from both current and future civil liability tied to the collapse of FTX.

Bankman-Fried's end of the bargain will see him providing the plaintiffs’ attorneys with information – including both testimony and documents in his possession – to “aid in victim recovery” and assist their litigation efforts against a host of celebrity promoters and venture capital firms who endorsed FTX. He has also agreed to provide the attorneys with financial information and documents, including a total of his remaining personal assets and his firm’s 2021 investment in AI startup Anthropic.

The pending settlement agreement comes shortly after Bankman-Fried was convicted of fraud and sentenced to 25 years in prison for his role in FTX’s implosion. Bankman-Fried has appealed his sentence and conviction.

Bankman-Fried’s one-time friends, colleagues and co-defendants Caroline Ellison, Nishad Singh and Gary Wang, as well as FTX lawyer Dan Friedberg, have made similar settlement agreements with the plaintiffs’ attorneys.

Several of the smaller celebrity promoters – including finance Youtubers Andrei Jikh, Graham Stephan, Jaspreet Singh, Tom Nash, Brian Jung and Jeremy Lefebvre – have also settled, contributing to a common fund of $1.4 million to fund the lawsuit, according to court documents.

Jacksonville Jaguars quarterback Trevor Lawrence, who was paid $500,000 in 2022 to endorse FTX subsidiary Blockfolio, also settled with the plaintiffs last year.

But most of the big name promoters of FTX – like athletes Tom Brady, Steph Curry, Shaquille O’Neill, Naomi Osaka and Shohei Otani and supermodel Gisele Bundchen – are fighting the lawsuit, as are over a dozen domestic and international venture capital firms.

The New York Stock Exchange is seeking opinions from market participants about shifting the U.S. stock market to a 24/7 operating schedule.

Round-the-clock trading became popular during the Covid-19 pandemic, when the trading of cryptocurrencies picked up and retail investor interest blew up.

A Steve Cohen-backed trading platform, 24 Exchange, is currently awaiting a decision from the SEC on whether it can launch the first 24/7 exchange.

The New York Stock Exchange has asked market participants about how they'd feel if the market operated 24 hours a day, the same schedule that cryptocurrencies use, the Financial Times reported.

NYSE, whose roots stretch back to the 18th century, famously signals the start and end of daily trading with bell-ringing ceremonies in the morning and afternoon – though, because of electronic trading, buying and selling has for decades actually taken place before the first bell at 9:30 a.m. and after the second one at 4 p.m. New York time.

But a startup, 24 Exchange, which is backed by billionaire hedge fund manager Steve Cohen, wants to take that a step further as the first stock exchange to allow 24/7 trading. Several retail brokers like Robinhood already let clients trade day and night.

And cryptocurrencies never stop trading. “Anyone who wants to trade crypto 24/7 would also like to trade Apple or Microsoft 24/7,” 24 Exchange’s founder and CEO, Dmitri Galin, told Bloomberg in 2023.

Round-the-clock trading became a popular idea after interest in crypto blew up and retail trading grew tremendously during the Covid-19 pandemic. Increased investor interest from Asia and Europe in U.S. financial assets has also picked up in recent years.

“The world changed with the pandemic and with crypto trading 24/7. Everybody has the infrastructure and the support to handle trading overnight now,” Brian Hyndman, chief executive of Blue Ocean, an overnight-trading provider, told the Financial Times in December.

Questions in NYSE’s survey included whether participants would prefer overnight trading to take place seven days a week, how investors should be protected from price fluctuations as well as opinions on the staffing of overnight sessions, according to the FT.

The SEC has several months to make a decision on 24 Exchange’s application.

Investors participating in the round purchased $12 million worth of the new blockchain's upcoming utility and governance token TREAT.

Investors include Animoca Brands, DWF Ventures, Polygon Ventures and others.

Shiba Inu, the Ethereum-based ecosystem represented by the second-largest canine-themed token SHIB, raised $12 million in a token sale round for building its privacy-focused blockchain, according to a Monday press release.

The list of investors participating in the round are Comma 3 Ventures, Big Brain Holdings, Cypher Capital, Shima Capital, Hercules Ventures, Animoca Brands, Morningstar Ventures, Woodstock Fund, DWF Ventures, Polygon Ventures, Stake Capital, Illuminati Digital Capital, Primal Capital, Mechanism Capital and Spirit Dao, who all purchased the new network's upcoming utility and governance token TREAT.

The deal was completed by Shiba Inu Mint S.A., an ecosystem development firm incorporated in Panama, the press release added.

The fundraising came after CoinDesk reported in February that Shiba Inu developers are working with cryptography company Zama on a privacy-focused new network on top of Shibarium, the ecosystem's Ethereum-based layer-2 blockchain. The network will be powered by Fully Homomorphic Encryption (FHE), a privacy tool that lets developers use data on untrusted domains without needing to decrypt it.

Read more: Shiba Inu Adopts Tech to Bring More Privacy to SHIB Token Holders

SHIB gained 2.2% over the past 24 hours, in line with the broad-market CoinDesk 20 Index's advance. It's the 12th-largest cryptocurrency with a nearly $16 billion market capitalization.

Columbia University president's job is probably safe, Polymarket traders signal.

Taylor Swift's new album is unlikely to break her record, Kalshi odds say.

Traders are betting on a DeFi controversy.

The president of Columbia University is facing a growing backlash regarding pro-Palestinian protestors who continue to occupy the campus, which coincides with her scheduled Capitol Hill testimony on antisemitism on college campuses.

But the Polymarket hive mind doesn't think she'll be another Claudine Gay – who resigned from her role as Harvard president after a double-whammy of plagiarism accusations and institutional criticism to the university's response to protests targeting Jewish students after the Oct. 7 attack on Israel.

Right now, "yes" shares for the crypto-based betting platform's "Minouche Shafik out as Columbia President in April?" contract are trading at 7 cents, signaling a 7% chance of her ouster in that timeframe. Each contract pays out $1 if the prediction turns out to be true, and zero if it's false.

Keep in mind there's not a lot of liquidity in the contract, and while the protests have recently been in the press because of their newfound intensity, they aren't occupying the same place in the national psyche as the ousting of Harvard's Gay.

But also keep in mind that there was a fair degree of volatility in the contract predicting Gay's exit. The "yes" side began at 26 cents – or 26% odds of her leaving – then pushed up to the mid-50s, before dropping to the low-40s, then rallying up to 100%.

It was so volatile that one of the journalists who broke the story of Gay's plagiarism lost money betting on her ouster.

Read more: He Exposed Harvard President's Plagiarism, Then Lost Money Betting on the Story

Chart-Topping Taylor?

Taylor Swift's Era's tour broke records as the world's highest-grossing concert tour, so, naturally, expectations are sky-high about her latest album, "The Tortured Poets Department." Launched on Friday, the album has already broken records by becoming Spotify's most-streamed album in a single day with 300 million streams in a 24-hour period.

Considering all of this, one would expect that the album would sail through prior records set by the Swift Empire and dominate the Billboard 200 charts for months.

But bettors on Kalshi, the regulated U.S. prediction market platform, aren't so sure.

Right now, the market sees the album owning the charts for two to three weeks, with an edge chance of it going four to five weeks and a wall of unlikeliness hitting at the six-week mark.

If the album does not break the six-week mark, it won't be a record-setter for Swift. Currently, Folklore holds the record for the longest Swift album to hold the top spot. It was released during the early months of the Covid-19 pandemic; the isolation effect of quarantine may have fueled its popularity, some critics argue.

Coming in at the three-to-four-week mark at the top of the charts would make this a fairly average album for Swift, and one has to wonder if the market is underpricing the impact a global multi-billion-dollar sell-out tour has on sales.

Just asking?

Sometimes a question is an accusation.

Consider a Polymarket contract concerning the decentralized finance, or DeFi, gambling project ZKasino which raised $26 million from some well-known investors, including the MEXC exchange, at a valuation of $350 million.

Its launch party was scheduled for Token2049 this month in Dubai, but was canceled because of historic floods. When it came time to launch the actual project, there were outages and bugs.

Now, it turns out that $33 million in Ethereum's ether {{ETH}} that users deposited at the virtual gambling house, to earn its native token, ended up being directed to Lido, the staking protocol, rather than returned to them as ZKasino originally said would happen.

Read more: ZKasino Users Plead for Refunds as $33M of Bridged Ether Sent to Lido

Users are furious, and many are not giving the project the benefit of the doubt. Hence the Polymarket contract asking: Will the two founders, known by their handles Derivatives_Ape and XBT_Prometheus, be arrested this year?

But it's premature to draw conclusions about whether this was a costly blunder or a rug pull, which is probably why Polymarket bettors give only a 27% chance of it happening, with only two users holding tokens on the "yes" side.

Hut 8 now has a more diversified business model following its merger last year with US Bitcoin Corporation, the report said.

Benchmark initiated coverage of the bitcoin mining stock with a buy rating and a $12 price target.

Its bitcoin stash of 9,102 coins provides it with a sizable liquidity cushion, the report said.

The new Hut 8 (HUT), resulting from the merger with US Bitcoin Corporation (USBTC) that closed last November, features a diversified business model with multiple revenue streams, broker Benchmark said in a research report on Monday.

Benchmark initiated coverage of the bitcoin {{BTC}} miner with a buy rating and a $12 price target. Hut 8 was trading 5.2% higher at $8.47 at publication time.

These revenue streams include self-mining, managed services, hosting, and high-performance (HPC) computing and artificial intelligence (AI).

“Hut trades at a discount to its bitcoin mining peers that we expect to shrink as the company executes on its self-mining expansion plans,” analyst Mark Palmer wrote.

As of March 31, Hut 8 ranked second among listed miners in terms of bitcoin holdings with 9,102 held in reserve, the report said.

This bitcoin horde provides the company with a “sizable liquidity cushion as well the ability to capture upside during bitcoin price rallies,” the report added. Its crypto holdings are valued at around $592 million, which is equal to about 82% of its market capitalization.

Since the merger closed, “management has focused on actions aimed at reducing the company’s cost of mining bitcoin and its realized cost of energy and increasing its cash flow,” Palmer wrote.

Read more: Bitcoin Miner Hut 8 Has Larger, More Diversified Business Model Following USBTC Merger: Canaccord

More than 10,000 users deposited $33 million worth of ether to earn ZKAS, ZKasino’s native token.

Despite initially saying that the bridged ether would be returned, ZKasino said it had converted the ether for ZKAS.

Blockchain data shows that the ether has been deposited to Lido.

Cryptocurrency casino ZKasino went live over the weekend, but the launch was met with dismay from investors, who are calling foul on the company for sending $33 million worth of user deposits to staking platform Lido.

ZKasino is an on-chain gambling platform that uses zkSync and EigenDA as well as Chainlink and Randomizer’s Verifiable Random Functions to ensure fairness. In March, it raised $26.2 million at a $350 million valuation.

In the lead-up to going live, ZKasino opened up a token bridge that allowed investors to deposit ether {{ETH}} to earn ZKAS, the platform’s native token. Originally, the website said that bridged ether would be “returned” once the bridging period was over, that wording has since been removed.

In a blog post on April 20, ZKasino wrote that “all bridged ethereum has been converted to our native gas token, ZKAS, at a discounted rate of $0.055.”

“This conversion was done as a favor to our users who have bridged to participate in the ecosystem,” it added.

The $33 million worth of ether that was deposited by more than 10,000 users was subsequently sent by ZKasino to restaking platform Lido, blockchain data shows.

ZKasino is yet to respond to a wave of criticism from depositors, who are vocally requesting a refund on social media platform X.

ZKasino did not immediately respond to CoinDesk’s request for comment.

The primary developer behind the Celo blockchain has been on the hunt since last year for the technology for its planned layer-2 network atop Ethereum – and the selection process had turned into a surprisingly competitive bake-off between leading providers.

On Monday, the team officially proposed using Optimism’s OP Stack for the transition. The proposal will be discussed on a couple of community calls and then go to a vote among holders of the project's CELO tokens, under the chain's governance rules.

CLabs, Celo’s developer, has spent the past couple months evaluating technical proposals from various layer-2 teams on why they may be the best fit for their new blockchain. The big idea is that the Celo team sees a more prosperous future as a part of the broader Ethereum blockchain ecosystem, as a layer-2 chain, than in its current form as a standalone, or layer-1, chain.

When Celo originally announced it would migrate to a layer 2, cLabs had originally suggested choosing the OP Stack. That's where the team ended back at, eight months after its initial announcement, following extensive consideration of all of the competing layer-2 tech providers.

“We know a lot more than we knew back eight months ago when we first started really zooming in on this,” Rene Reinsberg, co-founder of Celo and president of Celo Foundation, said in an interview with CoinDesk. “I'm very happy we didn't just make a decision last year, but did all this due diligence.”

Optimism wins another

During the selection process, cLabs was considering whether to deploy on OP Stack, Arbitrum Orbit, zkSync’s ZK Stack or Polygon CDK.

In a blog post sent to CoinDesk, Celo mentions that ultimately OP Stack fit their needs, and that it could be compatible with components from other layer-2 teams, specifically including Polygon’s Type 1 prover.

“Even some of the stuff we learned on the other stacks, I think it's going to be helpful as the entire architecture kind of gets built and deployed over time,” Reinsberg told CoinDesk.

The OP Stack has become quite popular over the last few months among blockchain projects, with Coinbase tapping the technology last August to build out its own layer-2 chain, Base. Just last week, Worldcoin announced plans for a layer 2, World Chain, also built with OP Stack.

“It's super cool to actually see them [Celo] be keen on OP Stack, do deep due diligence and look at all these chains,” said Ryan Wyatt, chief growth officer at the Optimism Foundation, in an interview with CoinDesk. “I mean, there's a lot of opportunities around this build-a-blockchain out of the box. So I love that they did it and then ultimately concluded that we're going with OP Stack.”

Read more: Celo, Shopping for Blockchain Partner, Turns to the Delicate Issue of Money

This article originally appeared in First Mover, CoinDesk’s daily newsletter, putting the latest moves in crypto markets in context. Subscribe to get it in your inbox every day.

Latest Prices

Top Stories

Tokens associated with Bitcoin layer 2 solutions have outperformed bitcoin (BTC) since the Bitcoin blockchain's highly-anticipated mining reward halving took effect early Saturday. STX, the native token of leading Bitcoin layer 2 network Stacks, has risen nearly 20% to $2.87 since quadrennial halving reduced the per block coin emission to 3.125 BTC from 6.25 BTC, according to data source CoinGecko. Bitcoin, meanwhile, has gained just over 4.7% to $66,300. STX is one of the best-performing top 25 cryptocurrencies of the past 24 hours, per Velo Data. Other layer 2 coins, like Elastos’ ELA token and SatoshiVM’s SAVM, have risen 11% and 5%, respectively, since halving. Bitcoin layer 2 solutions are projects that address scalability and transaction speed limitations on the Bitcoin blockchain. They are built on top of the Bitcoin blockchain and bring scalability by processing transactions off the main chain.

Grayscale, which currently offers the most expensive spot bitcoin ETF, revealed that it is planning a spinoff version of the fund with a 0.15% fee, which would be the lowest of them all, according to pro forma financials in its latest filing. The existing Grayscale Bitcoin Trust (GBTC) has a 1.5% fee. When Grayscale's Bitcoin Mini Trust (BTC) is introduced, the filing says the company will contribute 10% of the assets in GBTC to the BTC Trust. Shares of the BTC trust are to be issued and distributed automatically to holders of GBTC shares. (The pro forma financial statements are projections of future expenses and revenues based on a company's past experience and future plans.) Grayscale’s Bitcoin Mini Trust was conceived to offer GBTC investors a lower fee option that’s more competitively in line with other bitcoin ETFs approved back in January. Currently, the Franklin Bitcoin ETF (EZBC) at 0.19% is the lowest-cost spot bitcoin ETF.

Woo X is claiming bragging rights for being the first cryptocurrency exchange to offer retail customers exposure to tokenized U.S. Treasury bills. The yield-bearing product, unveiled on Monday, called RWA Earn Vaults (as in real-world assets) has been built in partnership with London-based institutional tokenization platform OpenTrade. The product's arrival was described as a “significant milestone” by Woo X Chief Operating Officer Willy Chuang. “For the first time, retail users on a centralized exchange can instantly access an interest-bearing account backed by U.S. Treasury Bills,” Chuang said in an email. “This initiative bridges a crucial gap between traditional financial securities and the dynamic world of cryptocurrency, offering our users an unprecedented opportunity to engage with low-risk, high-quality financial assets in a seamless, secure, and efficient manner.”

Chart of the Day

The chart shows the average annualized three-month basis or spreads between prices in bitcoin futures and spot markets on Binance, Bybit, Deribit, and OKX.

The premium has declined sharply to under 10% from 30% on March 31, denting the appeal of the cash and carry arbitrage strategy.

Source: Glassnode

Trending Posts

Bitcoin's Unique Volatility Profile in Focus as VIX and MOVE Spike

Binance Exec Who Escaped From Nigeria Has Been Found in Kenya, Faces Extradition: Reports

Thailand to Block Access to 'Unauthorized' Crypto Platforms

Total miner revenue is currently about triple the pre-halving level, the report noted.

The spike in network fees indicates the level of developer interest in Bitcoin, and the fee revenue potential for miners, Bernstein said.

The broker expects 15% of miner revenues to be network transaction fees on a sustainable basis.

Since the reward halving of bitcoin {{BTC}}, miners have earned about 19 BTC per block on average, which is over and above the standard block rewards as a spike in network fees led to a tripling of revenue, broker Bernstein said in a research report on Monday.

The quadrennial halving, which slows the rate of growth in bitcoin supply, occurred on Friday evening.

“This is driven by speculative activity to mint new tokens (mostly meme tokens) by retail traders,” analysts Gautam Chhugani and Mahika Sapra wrote.

The Runes protocol allows people to etch and mint tokens on the chain. The launch of the protocol over the weekend triggered a spike in network fees on the Bitcoin blockchain.

The report said that the total miner revenue is currently about triple the pre-halving level, at around 22 bitcoins versus 7 bitcoins before. Bernstein noted that daily revenues exceeded $100 million, with more than about $80 million coming from transaction fees, which is clearly abnormal, it said.

“Investors should not extrapolate these fees into the future, but it indicates the level of developer interest on the Bitcoin blockchain, and the fee revenue potential for miners,” the authors wrote.

The broker notes that Runes token launches have been speculative meme tokens so far, and such speculative activity may be short-lived.

Still, the fungible token market is largely untapped on the Bitcoin network, the report noted, and decentralized tokens and other utility tokens on the Ethereum network exceed more than $200 billion.

“We expect 15% of miner revenues to be network transaction fees, on a sustainable basis,” the note said, adding that seen as “speculative fervor” on blockchains can last for 6-18 months, the miners may continue to enjoy the above normal windfall for now.

Read more: Bitcoin Miners May Shift Focus to AI After Halving, CoinShares Says

BTC's implied volatility index, DVOL, has recently declined, maintaining a positive correlation with the cryptocurrency's price.

Stock and bond market volatility indices, VIX and MOVE, have ticked higher amid risk aversion.

A continued rise in MOVE may weigh over bitcoin, one analyst said.

Bitcoin's {{BTC}} price has recently corrected after weeks of unstoppable rally, tracking weakness in U.S. stocks and bonds.

BTC's pullback again stands out, exhibiting little fear or panic compared to stocks and bond markets, where expected or implied volatility indices, often called fear gauges, witnessed notable spikes.

Bitcoin's price has declined by 7% this month. Still, crypto exchange Deribit's BTC DVOL index, an options-based measure of expected price volatility over the next 30 days, has decreased from 75% to 70% on an annualized basis. That's an extension of the pullback from March highs at around 80%, according to data from TradingView.

In other words, despite the price drop, there has been little panic buying of put options or derivatives offering downside protection, which is usually the case in traditional markets. Implied volatility is influenced by demand for options.

Meanwhile, the Chicago Board Options Exchange's CBOE Volatility Index (VIX), a measure of expected price turbulence over four weeks, has significantly increased from an annualized 87% to 110%. The index is based on options tied to the S&P 500 index, which has experienced a 5.4% decline this month.

The MOVE index, which measures expected volatility in U.S. Treasury notes, has increased from 94% to 111% alongside a decline in bond prices (and an uptick in yields).

The diverging trend in the BTC DVOL does not necessarily mean bitcoin is seen as a relatively safe asset and is a bull market feature. BTC's implied volatility has been positively correlated with its price since 2023.

"Bitcoin, in this bull market is still very much in a positive spot/vol correlation regime. With the potential parabolic moves to the upside, BTC vol picks up as price starts to rally and softens as we sell off," David Brickell, head of international distribution at Toronto-based crypto platform FRNT Financial, said.

"Tradfi risk skew is still very much to the downside as the sell offs are typically sharper than the slower grinding rallies," Brickell added.

BTC's unusual implied volatility profile means traders may be better off taking bullish implied volatility bets during price rallies than during market swoons.

MOVE spike matters

Bitcoin bulls anticipating a resumption of the uptrend might want to watch out for a continued rise in the MOVE index.

That's because heightened volatility in U.S. Treasury notes, which dominate global collateral and securities and finance, often leads to tighter financial conditions and investor risk aversion.

"Treasuries are often the collateral that are used by markets to borrow and gain leverage to trade in stocks and other riskier investments," the founders of newsletter service LondonCryptoClub said in Monday's edition.

"When bond volatility spikes, then a greater haircut is applied to that collateral, meaning less leverage is able to be taken against it, which means reduced liquidity in the system. Alongside the strengthening dollar, this has been a squeeze on stocks and also on bitcoin," the founders added.

Nigeria wants the Binance executive who custody and fled to Kenya to be extradited.

Local media outlets have reported that Nigerian government officials are expecting Nadeem Anjarwalla to be returned to the country within the week.

Nadeem Anjarwalla, an executive at crypto exchange Binance who recently escaped Nigerian custody, has been located in Kenya and faces extradition, multiple local media outlets have reported.

Nigerian authorities have found Anjarwalla in Kenya and are working with Kenyan authorities to bring the executive back to the country, Nigeria’s Daily Post reported last week, citing government sources. Nigerian newspaper The Punch reported on Monday, citing unnamed government sources, that Anjarwalla could be returned to Nigeria within the week via the international criminal police organization (INTERPOL).

CoinDesk has reached out to INTERPOL, Kenya’s foreign ministry and Nigeria’s police force for comment.

Anjarwalla was detained alongside another Binance executive, Tigran Gambaryan, in February, as Nigerian authorities accused the crypto exchange of manipulating the local exchange rate, tax evasion and money laundering.

Anjarwalla, a British-Kenyan dual national, reportedly fled the country in March using a concealed Kenyan passport. Gambaryan, still in Nigeria, pleaded not guilty to money laundering charges during an April court appearance.

Crypto exchange Woo X says this is the first time tokenized T-Bills will be available to retail customers.

The exchange recently began offering index-linked meme-coin perpetuals with market maker Wintermute.

Woo X is claiming bragging rights for being the first cryptocurrency exchange to offer retail customers exposure to tokenized U.S. Treasury bills.

The yield-bearing product, unveiled on Monday, called RWA Earn Vaults (as in real-world assets) has been built in partnership with London-based institutional tokenization platform OpenTrade. The product's arrival was described as a “significant milestone” by Woo X Chief Operating Officer Willy Chuang.

“For the first time, retail users on a centralized exchange can instantly access an interest-bearing account backed by U.S. Treasury Bills,” Chuang said in an email. “This initiative bridges a crucial gap between traditional financial securities and the dynamic world of cryptocurrency, offering our users an unprecedented opportunity to engage with low-risk, high-quality financial assets in a seamless, secure, and efficient manner.”

Tokenization – especially involving bank-grade assets like U.S. Treasuries – has become popular, partly in response to interest rate increases, and now dovetailing with the current crypto bull run. Last year, crypto investment platform Finblox said it was planning to offer retail users access to tokenized T-Bills.

OpenTrade has links to Center, the now-dissolved collaboration between USDC issuer Circle, and, going further back, the Marco Polo enterprise blockchain project.

Woo X recently introduced index-linked perpetuals covering crypto meme coins and layer-2 tokens, in association with market maker Wintermute.

Bitcoin miners may shift towards AI due to the potential for higher revenue, CoinShares said.

The average bitcoin production cost post-halving is about $53,000.

Some miners are actively managing financial liabilities and are using excess cash to pay down debt, the report said.

Crypto miners may shift towards artificial intelligence (AI) in energy-secure locations following the bitcoin {{BTC}} halving due to the potential for higher revenue, CoinShares (CS) said in a report on Friday.

The quadrennial halving, which slows the rate of growth in bitcoin supply by 50%, occurred on Friday evening.

Coinshares notes that mining companies like BitDigital (BTBT), Hive (HIVE) and Hut 8 (HUT) are already generating income from AI. At the same time, TeraWulf (WULF) and Core Scientific (CORZ) have existing AI operations or plans to grow in the space.

“This trend suggests that bitcoin mining may increasingly move to stranded energy sites while investment in AI grows at more stable locations, authors led by James Butterfill wrote.

The miners will be faced with substantial cost increases as a result of the halving, with electricity and overall production costs almost doubling, the report said. Mining companies can try to mitigate these higher costs by optimizing energy costs, increasing mining efficiency and buying better-priced hardware.

“The weighted average cash cost of production in Q4 was approximately $29,500; post-halving, it is projected to be about $53,000,” the authors wrote. The average electricity cost of production in the fourth quarter was about $16,300 per bitcoin, which is expected to increase to around $34,900 post the halving.

The hashrate could rise to 700 exahash by 2025, according to the asset manager’s forecasts, but may drop by 10% after the halving as miners turn off unprofitable machines. Hash prices are expected to fall after the event to $53/ph/day.

Hashrate refers to the total combined computational power that is used to mine and process transactions on a proof-of-work blockchain.

CoinShares notes that the miners are actively managing financial liabilities, and some are using excess cash to pay down debt.

Read more: Bitcoin Miners Are Better Positioned for the Halving This Time Round: Benchmark

Top Bitcoin Layer 2 coins have risen 5% to 20% since halving, leaving BTC behind.

The BTC-beating rise comes amid Runes-led spike in transaction fees on the Bitcoin blockchain.

Tokens associated with Bitcoin Layer 2 solutions have outperformed bitcoin {{BTC}} since the Bitcoin blockchain's highly-anticipated mining reward halving took effect early Saturday.

STX, the native token of leading Bitcoin Layer 2 network Stacks, has risen nearly 20% to $2.87 since quadrennial halving reduced the per block coin emission to 3.125 BTC from 6.25 BTC, according to data source CoinGecko. Bitcoin, meanwhile, has gained just over 4.7% to $66,300. STX is one of the best-performing top 25 cryptocurrencies of the past 24 hours, per Velo Data.

Other Layer 2 coins, like Elastos’ ELA token and SatoshiVM’s SAVM, have risen 11% and 5%, respectively, since halving.

Bitcoin Layer 2 solutions are projects that address scalability and transaction speed limitations on the Bitcoin blockchain. They are built on top of the Bitcoin blockchain and bring scalability by processing transactions off the main chain.

While Ethereum Layer 2 solutions mainly focus on scaling the Ethereum smart contract blockchain, Bitcoin Layer 2 projects aim to scale and introduce programmability features to the main blockchain, which doesn't operate an Ethereum-like virtual machine.

The market-beating move of Bitcoin Layer 2 coins comes amid the post-halving surge in transaction fees on the Bitcoin blockchain. Data tracked by Glassnode show the mean transaction fee soared to nearly 0.0020 BTC after halving, reaching the highest since early 2018.

The spike in fees could be explained by the launch of a new protocol called Runes that allows users to “etch” and mint tokens on the Bitcoin blockchain. Runes' debut saw speculators rush to mint tokens and trade meme coins, catalyzing increased transaction activity and higher transaction costs.

According to data source Ord.io, the total number of Runes inscriptions on the Bitcoin blockchain was 3,700 at press time.

Bitcoin transaction fees have significantly come down post-halving

The floor price for the Runes NFT collection has also come down. Runes was supposed to be the tool that maintained fee revenue post-halving

Bitcoin {{BTC}} started the week stable, changing hands above $65,800, as transaction fees have significantly lowered following the halving.

On-chain data from Mempool.space shows that medium-priority transactions are now costing $8.48 while high-priority transactions cost $9.32.

In the initial aftermath of the halving, these fees spiked to over $146 for a medium-priority transaction and $170 for a high-priority transaction.

The hashprice index, a metric created by Luxor to quantify how much a miner can expect to earn from a specific quantity of hashrate, has also dropped from $182.98 per hash/day to $81, a level below where it was at pre-halving.

While bitcoin miners anticipated that the halving would significantly cut revenue, the introduction of Casey Rodarmor’s Runes protocol – designed to create fungible tokens on Bitcoin – which went live at the halving, was supposed to be the antidote to this, given the level of activity it would create on-chain.

Instead, in the initial days after the event, floor prices for the runestone NFT collection have dropped by almost 50% in the last 24 hours with a floor price of nearly 0.037 BTC, according to Magic Eden, while ordinal collections like Bitcoin Pullets and NodeMonkes are up 11% and 8% respectively according to CoinGecko data.

It should be noted that these ordinal collections also generate considerable transaction fees but don’t appear to be the same revenue source as many hoped Runes would be.

Bitcoin's once-every-four-years "halving," which took place late last week, was supposed to bring a steep cut in revenue for crypto miners, since their rewards for new data blocks would drop by 50%.

Instead, the simultaneous launch of Casey Rodarmor's new Runes protocol – for minting digital tokens on top of the oldest and largest blockchain – has proven so popular that it's caused massive network congestion, sending transaction fees to record levels and showering Bitcoin miners with a windfall like never before.

Bitcoin transaction fees averaged a record $127.97 on April 20, when the halving took place and Runes launched, based on coordinated universal time. That's more than seven times the average fee rate on the day before, and roughly double the previous record set three years ago.

Total revenue for bitcoin miners, which includes the block rewards as well as transaction fees, soared to a record $107.8 million for the single day, according to YCharts.

The development could be bullish for big bitcoin mining firms including Marathon Digital Holdings ($MARA), Riot Blockchain ($RIOT), Hut 8 Mining (HUT) and Core Scientific (CORZ). (Marathon announced separately on Friday that it was rebranding to "MARA," which happens to be its stock ticker.)

#Bitcoin Miner pre-halving block reward: 6.25 + some small fees = ~6.5-7 BTC per blockBitcoin post-halving reward (w/ ordinals and runes): 3.125 + larger fees from demand for block space = 7+ on average so farSo total block subsidies for miners post-halving look to be higher…

— 300DollarMARA (@dollar_mara) April 20, 2024

The quadrennial halvings were part of Bitcoin creator Satoshi Nakamoto's original design when it was launched in 2009, an effort to harden the original cryptocurrency's resistance to inflation with an ever-decreasing pace of new issuance. But with the rewards shrinking for miners, the question has been whether they would see adequate incentives to continue mining on the blockchain – crucial since their efforts are essential to the blockchain network's security.

"We expect the particular frenzy pushing fees to these levels to die down in the relatively near term, but this episode is the latest indication that concerns about bitcoin’s long-term 'security budget' are misplaced," the Bitcoin-focused investment firm Ten31 wrote in a newsletter on Saturday.

Ordinals sequel

Rodarmor's new Runes protocol can be used to spin up new digital tokens like those common on the Ethereum blockchain but thus far mostly absent from the Bitcoin ecosystem.

The launch was highly anticipated because Rodarmor was the primary developer behind Ordinals, which became extremely popular after it debuted last year as a novel way to mint NFTs on Bitcoin, previously unthinkable.

Rodarmor himself worried aloud on a recent episode of his Hell Money podcast whether Runes might be a flop; if the main use of Runes was to spin up "meme coins" for fickle traders whose speculative interests can shift quickly, why would these traders instinctively gravitate toward a blockchain optimized for security rather than for speed or low costs?

Come, they did, however, and Runes may have outstripped even some of the most ambitious expectations.

According to the website RuneAlpha, as of April 21 some 4,923 runes had already been etched, with 801,124 runes transactions and 68,548 holders.

Jimmy Song, an independent Bitcoin developer and commentator, wrote in a blog post on Saturday that the Runes frenzy has made it nearly possible to get a transaction included into certain fees without paying an exorbitantly high transaction fee.

"The Runes asset issuance has overridden almost every other use case at the moment," Song wrote.

The Bitcoin Layer substack wrote that Runes appears to be a "game of greater fools in which essentially everybody loses," but it does take up block space and may "accentuate the need for hastening the development of and further expansion of liquidity on layer-2 scaling solutions like the Lightning Network."

Transaction fees as a percentage of the total miner revenue per block jumped to their highest level ever of 75%, according to the authors Joe Consorti and Nik Bhatia.

'Preview of what's to come'

It's "a preview of what’s to come in Bitcoin mining economics decades from now, as Bitcoin monetizes into a $10 trillion+ asset, demand for the network is orders of magnitude larger than today, and we’ve had a few more halvings," they wrote.

Grayscale, the money manager behind the Grayscale Bitcoin Trust (GBTC), remarked on the potentially dramatic change in outlook for miners in an emailed newsletter on Saturday.

"If transaction fees normalize at a level higher than in the past, the impact of the halving on miner revenue will be dampened," Grayscale wrote.

Grayscale’s new ETF product, the Bitcoin Mini Trust has set fees at 0.15%

Grayscale said it will contribute around 10% of GBTC assets to the Mini Fund, some 63,204 bitcoin.

Bitcoin ETF provider Grayscale has provided some details of its spin-off fund, the Bitcoin Mini Trust (BTC), including a more competitive 0.15% fee than the uplisted mothership GBTC product, according to a pro forma financials in its latest filing.

The filing also provides an illustrative example of the amount of Bitcoin {{BTC}} Grayscale will contribute to the mini fund: 63,204 bitcoin, or 10% of existing assets in GBTC, as per the filing. Shares of the BTC trust are to be issued and distributed automatically to holders of GBTC shares. (Pro forma financial statements are projections of future expenses and revenues, based on a company's past experience and future plans.)

Grayscale’s Bitcoin Mini Trust was conceived to offer GBTC investors a lower fee option that’s more competitively in line with other bitcoin ETFs approved back in January.

This spinoff is also considered a non-taxable event for GBTC’s existing shareholders, so those investors will not be expected to pay capital-gains tax to automatically transfer into the new fund. Some early stage GBTC investors with gains in the thousands of percentages would face a significant taxable event to switch to a competitor product with a lower fee.

Grayscale’s GBTC, which charges a relatively high fee of 1.5%, appeared over a decade ago originally offered through a private placement. In mid-2015, shares began trading publicly on an over-the-counter basis. This continued until January 2024 when GBTC uplisted to NYSE Arca as a spot Bitcoin ETF.

Grayscale’s current assets under management stands at around $19.6 billion; its nearest rival, which is BlackRock’s IBIT fund, has grown to just over $17.5 billion.

Despite this being the most anticipated Bitcoin halving yet (at least according to Google search history), it was the launch of the high-profile Bitcoin builder Casey Rodamor’s latest creation – Runes – that turned heads, even among long-time blockchain developers who despise the digital tokens that can be minted on the platform.

Rodamor is known for the release of Ordinals, a protocol that allows people to “inscribe” data on the smallest units of bitcoin (i.e. satoshis) to create highly valued assets on Bitcoin. Ordinals is largely credited for inspiring a renewed developer ecosystem on Bitcoin.

Runes is similar to Ordinals, in that it allows people to “etch” and mint tokens on-chain – the main difference is that ordinals are “non-fungible” (i.e. one-of-a-kind) while Runes will function more like meme coins, which have recently taken crypto markets by storm.

The first Runes project to mint was Rodamor’s own UNCOMMON•GOODS project, which was announced well in advance of the halving, as were many of the projects looking to etch themselves on these highly coveted satoshis.

See also: The Bitcoin Halving Is Here, and With It a Giant Surge in Transaction Fees

Impossible to know in advance, however, is what other projects would be able to find space on these scarce satoshis. There are already quite literally hundreds of Runes projects that are currently being minted and looking for prospective buyers.

About nine blocks after the halving, Runes minters had already paid 78.6 BTC in fees (~$4.95 million) in order to buy the rarest of the rare. This suggests that, like Ordinals, the Runes protocol could be a boon to Bitcoin’s burgeoning fee economy.

What makes a Runes project potentially viable is something of a subjective measure: being an early project to list — like DOG•GO•TO•THE•MOON, which has the honor of being “Rune Number 3” — is one measure. But buyers are also judging projects based on the “quality” of its ticker.

A number of Runes projects were already starting to mint before the halving happened, including DOG•DOG•DOG•DOG•DOG, MEME•ECONOMICS, SHORT•THE•WORLD and PEPE•WIT•HONKERS, including dozens others, according to runebtc.xyz.

Prior to the halving block being mined, prospective buyers in an X Space hosted by Leonidas, a well-regarded Ordinals collector, users and speculators alike were discussing which Runes to mint and trading ticker names.

Among the names dropped were Taproot Wizards, the Ordinals project co-created by Bitcoin OG influencers Eric Wall and Udi Wertheimer, and a project called Satoshi Nakamoto, named after Bitcoin’s creator, which at press time had over 5,000 holders who minted about 19,000 tokens.

Which projects will actually prove to have long term value is hard to judge.

“Yeah, I don't see any good memes, like, I mean, I'm just trying to figure it out,” one trader said. “To be quite frank, I haven’t minted anything yet.”

See also: Runes DEX Secures $2 Million in Seed Investment to Pioneer AMM on Bitcoin

“I’m trying to understand the space in general right now,” someone else responded. “These projects are like early Runes. Do you guys think that these are actually going to be the most valuable ones?”

“I think it depends what happens with them,” someone responded.

Another aspect to consider: how many of the tokens were “pre-mined,” or held in reserve for project creators to potentially release on the market later. Prior to the halving, Leonidas shared guidelines that suggested projects that pre-mine more than 10% of the token supply were “greedy.”

“I think the pre-mines are going to be the ones that win,” one trader said. “Because like, it's so hard to come up with a good meme with a 13 character limit,” he said, referring to the hardcoded naming system Rodamor added to Runes to try to prevent “ticker squatters.”

In time, Runes tickers will be able to list with shorter names. Within three years, there could be Runes projects with three-letter tickers, for instance.

Though it’s unclear how well this strategy will play out. According to data source Ordiscan, one forethinking developer has already blocked off a series of tickers, including ZZZZ (which will be the “first four letter Rune” to mint in two years), ZZ and Z (the first two letter and one letter Runes to mint in three years) and A (the last single character Rune to mint in four years).

In other words, with something so new, it’s hard to determine what to value.

“As everybody is scrambling to figure out what the hell's going on, I want to just take a moment to say it's awesome being here with all of you,” Leonidas told his audience. “This is essentially the start of a new protocol that kicked off about 30 minutes ago. So let's see what happens. I think it's going to be very chaotic.”