This week, was dominated by another 40 year high CPI print (9.1% inflation). The Treasury curve flattened as bets for further rate hikes were pulled forward, while chances of a resulting recession in 2023 increased. Markets now expect the Fed to hike 100bp at the end of the month, and for rate cuts to begin as soon as Q1 2023. This initially crushed crypto. We have never see anything like this whiplash before. I expect the knock-on effects to create some massive dislocations in the market for durable goods, autos, and housing with early Q4 likely a great time to buy any of these things if you have the powder to do so.
And while the Crypto price action over the weekend has been strong, the US trading session is the widow maker. If the current strength persists through tomorrow’s open, then it becomes increasingly likely that the lows are in for now and chatter around the ETH merge coming as soon as September 19th, could continue to propel us higher. The run in blue chip NFTs are also likely contributing to the ETH price acceleration.
However, I maintain my overall thesis that we’ll have time to accumulate in this range through the summer. Horribly researched stories like this one by english majors who don’t understand the first thing about crypto are good for helping establish the bear market but we need many more of them. We need Crypto to once again be terminally uncool, with no sign of use cases, for an extended period of time (and you know, GS to dissolve their crypto-derivatives desk). Only then will the bulls run once more.
Normally I’d put this under Podcasts/Watches but I feel it’s important enough to pull to the top this week. This Peter Zeihan lecture may be one of the more significant videos you’ll watch this year. You have to listen to the part about demographics at minute 40 before you make any geopolitical forecasts for the 2020s.
Besides, what else could go wrong?
Thanks and good luck this week.
-Dan
News
3ac Liquidators look to secure assets, including an incredible NFT collection, the fight over them, and Su Zhu says they’re being mean
Celsius files Ch11, w/ a $1.2bn hole in the balance sheet and we learn Equitiesfirst owes celsius $493mm
Voyager thinks they can return clients USD. Crypto? Not so much
JPM says it nows costs $13k to mine one BTC
S&P looking for a place in Defi
RIAA bullies Opeansea on ENS names
Polygon Chosen for Disney Accelerator Program and begins receiving Terra refugees
Down goes Celo and Celo’s back
STEPN Activity continues to plummet yet took in $122mm in profit
Crypto Increasingly Used To Pay Salaries in Developing Economies as the BIS turns the eye of Sauron on Stablecoins
Brian Armstrong’s own-goal of the week
Liquidity
Mysten Labs is looking to raise $200mm Series B at $2bn valuation
Multicoin raises $430mm for new fund
Gnosis Safe Raises $100mm And Rebrands As Safe
Animoca Raises $75mm at $5.9bn valuation
Ex-Coinbase exec raises $30mm led for decentralized social network protocol
Arrivals and Departures
PROOF Acquires Ethereum NFT Team Divergence
Opensea lays off 20% and imagine being fired by a cool cat, and Looksrare is hiring
MoonPay Adds Range of Senior Execs
Fraud
Uniswap Liquidity Pool Hit With Phishing Attack Totaling $8mm
Alpha
50 Brutal truths from being a VC
Good intro to Generative Art, on-chain
Route2Fi on using the Kelly Criterion to size trades. I follow this myself
Arthur says the US will buy Japanese Govt bonds
Trade Peg deviations onchain w/ y2k
Apparently Crypto is just 10 or so of us trading with each other
Fixed Income and DAO Treasury Management
Bitcoin and evangelical Christianity. A match made in heaven
“It is possible that we are watching a new capital stack get built in real time, with over collateralized smart contract debt right at the top.”
Dig a little deeper though, and that’s when the problems start to become apparent:
~85% of DAOs store their treasuries in a single asset (!!)
Only 23% of DAOs surveyed by Chainalysis had stablecoins
Of these, ~130 had <10% of their assets in stables, while only 40% had >75%
If you have consistent dollar-denominated liabilities (personnel, AWS costs, vendors, etc…) and your balance sheet is 50% ETH, you risk becoming a forced seller of ETH to meet your obligations.
Delphi
GameStop’s NFT marketplace launched its public beta on Jul 12. It is a non-custodial marketplace built on Loopring Layer 2. In less than 48 hours from launch, it has already achieved:
>2,000 ETH in trading volume (>$2M)
>45,000 transactions made
260+ collections listed
It has exceeded the total volume for Coinbase NFT (~1702 ETH since inception). This is quite remarkable, especially given that the launch was relatively low-key compared to Coinbase NFT.
Art blocks summer : Looking deeper at the ownership of Squiggles, it is worth noting that the top 5 holders collectively own 23% of the entire collection, yet none of them have sold a single Squiggle on the open market. At current floor prices, their holdings are collectively worth ~30,000E (or ~$33M). Most of these Squiggles were acquired at the mint and not touched since then.
On June 26th, we saw the largest outflow of BTC, with 153k BTC (worth approximately $3.2 billion) scurrying for an exit from centralized exchanges. Presumably, these withdrawals were to eliminate custody risk after multiple centralized brokers and lenders halted client withdrawals and filed for bankruptcy.
Messari: Decentralized VPNs
Simetri:
On July 6, 2022, the creditors received an email regarding the beginning of payments soon. Currently, the creditors are sitting at a 35x profit to the price of Bitcoin in 2014, when the Mt. Gox hack occurred… The trustees hold 137,000 BTC worth around $3 billion at current prices on paper, accounting for 0.72% of the current circulating supply of Bitcoin. It creates a possibility of a massive market dump…The repayment is expected to begin in August.
Another prominent sell pressure may arrive from Grayscale unlocks starting this week. The GBTC unlock will begin on July 14, which means buyers can sell their GBTC shares in the market. A total of 41.6k BTC (worth $852 million) will enter the market in July via Grayscale shares.
Podcasts/Watches
Johnny Carson, 1967 - Interviews Ayn Rand. When you think you know which way it’s going, wait for minute 15 and the discussion of the draft
Bankless: Lynn Alden and the state of play
Pomp: Balaji on the Network State
Solana: Jason Keats on building a crypto phone and here’s Anatoly and Raj on Bankless discussing it on hostile ground, and Anatoly on the Chopping Block