As we've helped DeFi teams get their companies off the ground over the past year, we've seen first-hand the challenges that DeFi teams face in sourcing liquidity and navigating a complex regulatory landscape. On the other side of the equation, many established trading firms have been eager to dive into crypto and learn more about companies in this emerging space.
We saw a huge market need to facilitate the relationship between both emerging crypto teams and established trading firms in a more organized fashion. So, we rolled up our sleeves and got to work on launching CDA.
Is it only for teams based in Chicago?
To be clear, the CDA helps DeFi companies around the world, but its founding members are based in Chicago. Chicago is a financial powerhouse that accounts for a fifth of the world's global derivatives trading market. There’s a real opportunity here to leverage financial and trading expertise from Chicago to support DeFi products globally.
A little bit of background on some of the founding members, who are all based in Chicago:
Cumberland DRW is the largest OTC provider for crypto.
Jump Trading is the largest order flow provider for Robinhood and many other platforms.
CMT Digital is one of the largest prop trading desks in Chicago.
Though many parts of the economy are grinding to halt, the startup ecosystem has not. The CDA helps entrepreneurs get their DeFi startups up and running during the crisis then stay as insulated from macro conditions as possible.
We are looking to partner with early-stage founders building the next generation of financial products. These products will help solve the gaps we have in our legacy financial infrastructure.
Being accepted into the program allows startups to leverage CDA’s expertise in sourcing liquidity and product strategy to scale their offerings to users globally.
If you are part of a DeFi startup that wants to be considered in the next CDA cohort, please fill out this form.
⚡️ A Lightning-Only Bitcoin Derivative Exchange
LN Markets launched a new type of Bitcoin derivatives exchange, one that can only be accessed via the Lightning Network. A few product details to note: margin positions are funded using LN transactions. The exchange implements a Contract For Difference (CFD) derivative product which tracks the difference in BitMEX BTC-USD price (between entry and exit). Because the product is still in alpha, the maximum margin per position is limited to 0.01 BTC. Despite the small-trade size, LN users have executed more than 2000 trades, aggregating over $400K of volume in the first month of operation. Currently, the exchange doesn't require personal information in order to trade.
⚡️ Bitcoin Cash-Back Rewards: A Double-Edged Sword?
Last week, Fold announced a new partnership with Visa to offer a debit card with Bitcoin cash-back rewards. Though we are excited to see high-executing companies like Fold and Lolli bring bitcoin to the mainstream via bitcoin cash-back rewards, we need to stay sensitive to what the public understands bitcoin to be. In the long run, bitcoin should not be conflated with or analogized to perks like reward miles. We trust the team at Fold will anticipate this potential issue and couple their cards with comprehensive educational materials about bitcoin.
🔹 Ethereum-based Reddit's Community Points
According to Coindesk, Reddit confirmed that their team is experimenting with "Community Points" to give power users extra benefits. However, the team declined to comment as to whether Community Points will use Ethereum. Yalls.org, Cent.io, and Steem/Hive are platforms that have been trying to integrate cryptocurrencies into social media with limited success so far. If the rumor is true, Reddit will be the first major social media platform to utilize public blockchains and cryptocurrencies to reward its users.
Bitcoin on Tezos
Building a bridge to BTC is a common trick in many new blockchain's playbook. Doing so often increases adoption of the chain and its DeFi use cases. The newest effort in this vein is tzBTC, which brings BTC into the Tezos ecosystem through a multi-sig wallet structure similar to Bitgo's WBTC on Ethereum or Blockstream's LBTC. The project can initiate some interesting use cases on Tezos. However, it is unclear what the minted tzBTC can be used for, given the current lack of DeFi projects on Tezos.
How COVID-19 Affected Crypto Scammers
New research from blockchain analytics company Chainalysis found that, yes, even scammers have been affected by COVID-9. Though the number of scammed individuals has stayed roughly the same, the value transferred to scammers has decreased by about 33%. In spite of the dip, it is mind-blowing that these scams, particularly investment ponzi schemes, are still netting around $3M per week in revenue from their victims during the crisis.
Cryptocurrency transfers to crypto investment scams. Source: Chainalysis
Disclosure: Volt Capital and/or its partners may have exposure to some of the cryptocurrencies mentioned in this newsletter.