What's Driving Token Prices? (August 10, 2022)

Katie Talati
Aug 10, 2022
Join Katie Talati, Arca’s Head of Research, weekly on Wednesday at 4PM EST / 1PM PST as she shares notable token activity over the past week and her insights on what market events drove these token price movements.
 

  • TORN (-25%) - On Monday, the U.S. Treasury officially added Tornado Cash to the U.S. sanctions list effectively blacklisting it from use by individual wallets. In a more shocking follow up to this announcement, Circle blacklisted 75,000 wallet addresses holding USDC that had interacted with Tornado Cash in the past and wallets that had donated to the protocol’s Gitcoin grants wallet. Tornado Cash is a “mixing service” which allows users to deposit tokens which are then “mixed” with the tokens of other users until the original ownership cannot be discerned. Mixing services are frequently used by hackers to conceal stolen funds. However, these services are also used by individuals who simply value privacy and do not want their funds tracked across the blockchain. The regulatory action and follow up by Circle has sparked an ethical dilemma and conversation within the crypto community. In response to blacklisting wallets, some have stated they will no longer use USDC in favor of other more “decentralized” stablecoins; one user even started dispersing funds from Tornado Cash to every famous crypto wallet they can identify on Twitter (effectively tainting the wallet). 
  • SOL (+2.9%) - Users of layer 1 protocol Solana, last week reported that funds were being drained from their wallets despite not having interacted with any dapps recently. The uncertainty around what exposures users faced left many scared as funds were drained from multiple individual wallets. After several days, it was revealed that Slope, which claimed to be a non-custodial wallet, had carelessly left the private keys of its users’ wallets in plaintext files. When Slope suffered a breach, private keys were readily available and the attackers were able to drain funds. Initially, Solana dipped 5% as no one could understand where the attack stemmed from and it was branded a “blockchain hack,” but has since recovered and is up just 2.9% for the week.
  • FLOW (+57%) - Last week, Meta (formerly Facebook), announced it would roll out NFT support across 100 countries on Instagram. In addition, Meta will accept the Coinbase Wallet and Dapper Labs Wallets as third-party wallet providers and will expand to Flow as a supported blockchain. For those who aren’t familiar, Flow is a layer 1 blockchain built and designed to support games and Dapper Labs is the for-profit entity that supports development of its ecosystem. We believe that this marks an important step in bridging the web 3 and web 2 worlds as traditional companies explore how to incorporate blockchain and digital assets into their existing products.
DISCLAIMER: This commentary is not intended to be investment advice, investment research, or a recommendation. Please consult your investment professional for your own circumstances."

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Disclaimer: This commentary is provided as general information only and is in no way intended as investment advice, investment research, a research report or a recommendation. Any decision to invest or take any other action with respect to the securities discussed in this commentary may involve risks not discussed herein and such decisions should not be based solely on the information contained in this document.