Week in Review | Week #8, 2021
The market experienced some violent swings this week, with BTC dipping below $50K and ETH under $1500. There was a lot for the community to speculate about, including whether Elon Musk’s tweet caused a pullback and what led to the flash crash on Kraken. The developing rivalry between Ethereum and Binance Smart chain has expanded to the NFT sector, and with gas fees remaining high, alternative networks may start to get more and more traction.
Dealing with the aftermath of the hack
After last week’s exploit, Alpha Hamora and Cream needed to figure out a way to deal with the outstanding loan to Iron Bank. It appears that a solution has been found. Alpha Hamora will, over time, repay the remaining loan amount (after factoring in funds received from the exploiter by the two affected protocols) using the V1 and V2 reserves.
It is impressive how quickly the two projects have come to a resolution. Both projects may be considered part of the Yearn ecosystem, which may have simplified the process of mitigating the exploit. The threat of hacks is not going away, and it will be important for teams to figure out a way to deal with their effects, such as not to damage the long-term prospects of any of the affected projects.
Badger experiments with the “yield-dollar” concept
Badger DAO, a recent newcomer to the Yearn ecosystem, is a project focused on Bitcoin adoption in the Ethereum DeFi ecosystem. Its new product CLAWS utilizes UMA’s “yield dollar” concept, where the minted “dollar” fluctuates in value until its expiration date when it reaches $1 and can be redeemed back for collateral assets. Badger will start by accepting wBTC and ETH SLP tokens as collateral.
It appears that one of the enticing elements for LPs will be the multi-level yield, as it will be possible to stake CLAWS in SushiSwap, another member of the Yearn ecosystem.
iFinex reaches settlement
iFinex is the parent company that owns Tether and Bitfinex, and it has been mired in a legal battle with New York State since 2019. A settlement was finally reached, something that is important for the entire industry given the widespread use of USDT in the industry. iFinex will have to pay $18.5M, be subject to quarterly reporting, and restricted from working with “any New York persons or entities”.
The relatively low fine may remind some of Block.one’s $24M settlement with the SEC in 2019. Lack of regulatory clarity is one of the biggest challenges for the crypto industry, and any settlements that don’t severely impair and/or significantly limit operations for involved projects are likely a positive for the space. USDT is a number 5 asset by market capitalization according to CoinGecko, and a negative turn in the case against iFinex would have negatively impacted the industry in the short term.
Traditional market powerhouses are looking towards crypto
As the crypto industry gets more attention from the likes of Elon Musk and Mark Cuban, more traditional market players may start to take the industry seriously. It looks like Goldman Sachs, JPMorgan and UBS have now got some exposure to DOT through an ETP. While institutional investors have been warming up to Bitcoin, interest in L1s for dapps may become a gateway to dapp ecosystems.
There is also some speculation regarding Amazon launching a new cryptocurrency product. Given the size and influence of the company, such a move could significantly increase awareness and adoption of blockchain technology.
Flow is coming to OpenSea
OpenSea, one of the top NFT marketplaces on Ethereum has announced that it is working on supporting Flow. While it remains unclear when and how this will be realized it could create an opportunity for the NBA Top Shot ecosystem to open up. The project has already become the leader in all-time sales with over $225M.
The Binance question
The growth of Binance Smart Chain over the past months has sparked a lot of conversation regarding the value of decentralization, transaction costs, and paths to commercial success. BSC has mostly been about DeFi to this point, but now NFT projects are starting to make some noise and create controversy.
The Binance Punks project, at the moment, looks scarily similar to the Larva Labs’ Crypto Punks, enough so that the team issued a warning regarding it. One of the criticisms of the current BSC ecosystem has been that it simply copies Ethereum projects without adding much to them. The Binance Punks project plays into that argument.
It also raises a number of important questions. The NFT market has been enjoying a lot of growth, and part of the narrative has been the provable scarcity of collectibles. However, when it comes to dealing with open source technology it is unclear how IP rights can be protected, and what stops other projects from launching copies and potentially diluting the value of the originals. Binance Punks are not the only play-off of the Crypto Punks idea. The Polkadot ecosystem has SubstraPunks.
BSC has another project that raises similar questions. For those familiar with Hashmasks, Lil Moon Rockets may look very similar. While the name of the project and the art are different the concept is very close. The market has gotten used to these sorts of forks in DeFi, but it is unclear how the dynamic will play out with NFT collectibles.
It will be important to monitor how the market values these items and how iterations on different chains affect the original. A lot of the value of the collectibles is tied to their scarcity. However, if there are a thousand 1/1 versions of the original 1/1 will the market still see it as a unique collectible?
The link between the physical and digital worlds
One of the biggest players in the traditional collectibles market, Topps, is bridging the gap between physical and digital items. It will start adding redemption codes for NFT collectibles to its Garbage Pail Kids box sets, which may lead to greater awareness for NFT collectibles.
If Topps is able to start onboarding traditional collectors into the NFT collectibles ecosystem, it may lead to a significant increase in adoption for the space as a whole.
The information provided here is for informational purposes only. This is not investment advice and should not be treated as such. Strategic Round Capital and/or the author of this article holds a position in BTC, ETH, YFI, Hashmasks, NCT.