5MF: END OF CRYPTO BAN ERA, 260K SEIZED BTC TO BE RELEASED, SUPER BOWL NFTS
The 5-minute newsletter on the important stuff in finance — explaining what’s going on, and why.
Let’s see what’s going on this week:
- Consensus: Crypto Bans Mean Economies Get Left Behind
- DOJ Seizes 119k BTC — How Will it Impact Prices?
- Is Decentralized Social Media Too Sophisticated to Thrive?
- Game Over: Even Super Bowl to Feature NFTs
- More Money Thrown on Ethereum’s Congested Back
The Era of Crypto Bans Coming to an End
- Russia to Recognize Crypto but With “Strict Obligations” For its 12M+ Users (link)
- Myanmar’s Military Junta Explores Cryptocurrency as its Economy Shrinks (link)
Crypto Bans Are Increasingly Thrown Off the Table in Favor of Various Benefits
It’s no secret that central banks don’t exactly see cryptocurrencies as a best friend. After all, Bitcoin — the first digital asset created — was largely designed to counter their centralized monetary power. However, central banks now seem to be afraid of economic isolation than the threat of digital assets or currencies.
We’ve already seen Iran using Bitcoin to penetrate economic sanctions. In perennial geopolitical strife, the West has also been tightening Russia’s screws, with occasional threats to be cut off from SWIFT. Now, the world’s largest country by land size is set to regulate cryptocurrencies.
Just behind Ukraine, Russia is the second country with the largest percentage of crypto holders, at 17.3 million. However, while the US is ranked 5th, it has 27.5 million crypto holders (8.3%) as a more populous nation. Image courtesy of triple-a.
Though we’re waiting for precise details, Russia is likely to designate cryptocurrencies as analogs to currencies, but not at the level of El Salvador’s legal tender. Moreover, the entrenched financial sector will want their cut from a new revenue funnel worth $13 billion. Not only will banking intermediaries have the exclusive privilege of crypto trading, but if transactions above $8k are not reported, hefty fines will follow.
Meanwhile, Myanmar’s military junta is in a tight spot. It unsuccessfully tried to ban USDT because the deposed shadow government is using it. Hunta now wants to have its own digital currency to undermine USDT and boost the starving economy. It just goes to show how both India and Russia chose wisely to not ban something that is not technologically very difficult, if not impossible, to ban (with desired results).
Overall, these moves mark a new era in which crypto investors can rejoice. As the reality sinks in that the regulation of digital assets is preferable to making an exercise in futility, new markets are opening up.
More Selloff Pressure Incoming? Mixed Signals
- Betterment’s Customers Can Explore Passive Crypto Investing with Latest Acquisition (link)
- Law Enforcement has Seized Over $3.6 Billion in Bitcoin of the Total $4.5 Billion Drained in the 2016 Bitfinex Hack (link)
- Binance, Led by the World’s Richest Crypto Billionaire, is Taking a $200 Million Stake in Forbes (link)
Asset Manager Titans vs. Selloff Pressure
On January 18th, Fidelity openly sided with digital assets in its Bitcoin First report. Now, Betterment, with $32 billion AuM, is opening up a gateway to crypto trading to its 700k clients. Although a far cry from Fidelity’s $4.2 trillion AuM, Betterment is closer to younger generations: Millennials and GenZ want robo-advisors, not boomer financial advisors who still need help with their iPhone.
Further, the king of asset managers, BlackRock with $10 trillion AuM, is now rumored to integrate crypto trading as well. It’s no wonder then that both FSInsight and Fundstrat forecast a 5x Bitcoin price increase this year.
These tailwinds are further empowered by Binance becoming a seemingly influential stakeholder in Forbes, thanks to its $200M investment. Could this be akin to taking control of a loudspeaker on a global stage, only to advocate for the various use-cases of crypto adoption? Remember, the latest inflation rate of 7.5% is no joke. Corporate cash will seek a way out, and Binance’s newly-gained influence could point the way.
A tiny fraction out of $268 trillion on-hand corporate cash can make all the difference for the proverbial ‘to the moon’. Image courtesy of fred.stlouisfed.org.
What about the negative flow then — the selling pressure? We all know how much of an impact the Fed can have on risk-heavy assets. At the mere announcement of interest rate hikes, it made Bitcoin tightly correlate with the tech-heavy Nasdaq stock index — ultimately resulting in selling pressure.
At the time of the Bitfinex hack in August 2016, Bitcoin was worth $625. Now, imagine waiting all those years, seeing Bitcoin’s ebbs and flows, and feeling the relief of having those funds returned at +70x gains. Would you miss the opportunity?
On-chain data revealed an anomaly which led to the arrest of eccentric BitFinex hackers. Image courtesy of David Puell.
The Department of Justice (DOJ) will have just over 119k BTC to return or auction off. Together with the approved Mt.Gox reimbursement (141k BTC) to happen this year, both make around 1.5% of Bitcoin’s circulating supply (260k BTC in total). In other words, imagine Michael Saylor ditching all of his bitcoins, and then multiply that figure by two.
Would that upset the market? This is the input-output flow to be accounted for. At the same time, the eternally finite supply of Bitcoin will live as long as the internet itself lives. In contrast, the impact of the Fed’s activity is much more temporary.
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Web3 Integrates with Social Media, but What Will Make Users Switch en Masse?
- Aave’s Lens Protocol Plans to Redefine Social Media With Web3 (link)
- 5 NFT Trends That Will Bring Social Media Audiences into Web3 (link)
Own Roads Can Be Built, But Who Will Use Them?
The censorship and control of free speech through social media is a never-ending hot topic. Many Web3 advocates say they have the answer: creating decentralized platforms where users take full ownership of their data.
For the most part, these are still in early conceptual phases. One example is Aave’s Lens Protocol, which tokenizes all elements of existing platforms (to simplify, just think of a ‘token’ as a representation of ownership or access, much like the physical world where a key provides access to a house, and a deed proves ownership of a house, though neither the key nor the deed are the house):
Lens Protocol’s tokenized tree of social media engagement. Image courtesy of lens.dev.
In turn, elements such as content, engagement, and followers are decentralized and portable, as their ownership and access is tokenized. This means the control of such tokens (access to and ownership of content, engagement, and followers) is maintained by users, not corporate entities.
With that said, although Aave is one of the top lending protocols with $13.75 billion TVL, it hasn’t exactly put banks out of the game (nor has it come close).
The same applies to social media platforms; it’s up to the users to take advantage of what is available. If users prioritize convenience, we may be looking at a large, centralized social media landscape vs. tiny decentralized bubbles that take data privacy in a different manner.
There are many factors at play, including celebrity influence. We have seen how celebrities nudged the Bored Apes Yacht Club NFT collection to over $1.3 billion in sales. Can celebrities bring the same influence to Web3?
A recent TechCrunch article claims five trends among NFTs will ultimately bring the social media masses to Web3:
- NFT verification
- Sidechains
- Music
- Wearables
- Dynamic avatars
Virtual Beverage and Fast Food
- NFTs Go Mainstream as Bud Light to Feature Nouns NFT in SuperBowl Ad (link)
- Trademark Filings by McDonald’s Reveal its Plans For the Metaverse (link)
Will Online Ordering Become More Cumbersome?
It’s becoming a trope to say that NFTs have gone mainstream. Nonetheless, it’s still remarkable how fast this market continues to grow. If earlier cryptocurrencies had experienced the same corporate adoption rate, Bitcoin would now have at least a $10 trillion market cap.
The latest NFT bigwigs are Anheuser-Busch (Budweiser beer) and McDonald’s.The next Super Bowl, notable for its ads as the real stars of the show, will feature Bud Light’s Next, the company’s latest beer. With it will come pixelated Nouns NFTs.
Interestingly, Nouns are run by a DAO, Decentralized Autonomous Organization. 1 Noun NFT is auctioned every day, into infinity, filling up its DAO treasury. Image courtesy of Nouns.WTF.
Nouns holders voted to give Bud Light an NFT worth $394k (Noun 179) in exchange for the prominent Super Bowl spectacle boost. Not a bad deal given that the average 30-second slot costs $5.6 million. While Bud dabbles with pixel-starved NFTs, McDonald’s is taking a more comprehensive approach to tokenize its brand.
McDonald’s trademark filing for virtual goods means that we will soon see a virtual restaurant filled with fast food goodies. Does it make sense to have inedible virtual food? Apparently it does, as the virtual McCafe combines home delivery, by simply replacing a website with a more immersive experience.
And this isn’t McDonald’s first foray into this space. Back in November, the fast food giant launched its first McRib NFT to mark its 40th anniversary.
This leaves all of us with one (golden) overarching question: Will Elon Musk eat a happy meal now?
Ethereum in Lockstep with Bitcoin Rally
- Ethereum’s Daily Options Volume Matches Bitcoin’s for the First Time at $1.1b (link)
- Sequoia Makes a Big Bet on Web3, Leading $450 Million Investment in Polygon Blockchain (link)
Ethereum Flippening, When?
Ethereum has less than half the market cap of Bitcoin, at $388.7B vs. $849.36B respectively. Yet, even with this gap, Ethereum equalized with Bitcoin when it comes to derivatives trading. This is another impressive notch on Ethereum’s belt after outperforming Bitcoin last year:
Ether (ETH) achieved 9 positive consecutive quarters compared to Bitcoin’s 4 between Q2 2020 to Q1 2021. Image courtesy of Skew Analytics.
However, this is not necessarily good news as there are more bets on ETH price moves. More often than not, a growing put-call ratio (put-bearish, call-bullish) indicates bear market sentiment. Thus far, the ratio is fluctuating, indicating uncertainty.
Image courtesy of Kaiko.
What is good news is that traders are shifting from inverse to linear derivative contracts. The latter are less prone to liquidations because stablecoins remove price volatility inherent in cryptos. Even more tellingly, massive funds are flowing into Ethereum.
Specifically, its layer-2 network relieving Ethereum of congestion — Polygon. Not too long ago, a $450 million investment could have accounted for the entire crypto market. And now, the crypto market has matured so much that a single L2 protocol can harness that amount to build up Web3.
Tweets of the Week
Bitcoin in a prolonged regime of both aggregated spot premium over perps and Coinbase spot premium over Bybit perps.
Might be too much alpha for Twitter tbh
What do:
• $4 billion in missing $BTC
• Female rapper RAZZLEKHAN
• Forbes magazine
• the US Department of Justice
Have in common?
A thread on the 2016 Bitfinex hack, its resolution, and the implications.
The strangest crypto story of the year (so far, at least):
BREAKING:
Wall Street is coming towards the markets, as BlackRock is planning to offer #crypto trading to clients.
Institutions are coming.
Countries are regulating.
That’s a sign of strength for the future of #blockchain & #crypto & #bitcoin.
There was $4bn more crypto VC funding in Q4–21 than in all of 2019 & 2020 combined and people will still swear to you we’re going into a deep bear market bc muh Fed tightening.
1/ The future of crypto is multi-chain.
Not convinced? Alternatives to Ethereum took off in 2021: TVL increased from $18 to $250B.
The result: there is a need for cross-chain connectors. This is where bridges enter the scene.
Thread on the bridge landscape and
@Allbridge_io
.
But there’s more
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