Crypto Is No Longer a $2T Asset Class ~ CEOM Coin

The biggest crypto news and ideas of the day

Jan. 24, 2022

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Welcome to The Node.

In today's newsletter: Crypto's market cap drops below $2 trillion. Biden administration's executive order to spy crypto risks and opportunities. And Fantom overtakes Binance Smart Chain.

Questions? Feedback? We'd love to hear from you – simply reply to this email.

–Daniel Kuhn

Today's must-reads

Top Shelf

FORWARD GUIDANCE? The Biden administration is looking to orchestrate policies and regulations for crypto, Bloomberg reported Friday, citing unnamed sources. A forthcoming executive order, due as early as next month, may ask federal agencies to determine crypto's risks and opportunities for the U.S. Meanwhile, the U.S. Securities and Exchange Commission told MicroStrategy, the enterprise software company that just so happens to hold 124,391 bitcoins, it cannot use unofficial accounting measures to smooth out bitcoin's fluctuations in its public filings.

BIG BUYERS: As of last Friday, crypto is no longer a $2 trillion asset class. Most major cryptos suffered double-digit losses amid a market correction that also saw tech stocks drop. According to CoinDesk's markets guru Omkar Godbole, large investors – the whales holding at least 1,000 BTC – have yet to buy back in. That is except for El Salvador's President Nayib Bukele who bought $15 million worth of bitcoin with public funds on Friday. Meanwhile, Fantom overtook Binance Smart Chain to become the third-largest DeFi chain, Coinbase thinks Ethereum could remain dominant among smart contract platforms and ATOM, Cosmos' native asset, gained 8% ahead of a bridge implementation to Polkadot (with some speculating about airdrops).

GOING DIGITAL? The Bank of Korea wrapped up the first phase of a central bank digital currency (CBDC) simulation project in December, according to a new report. Based on the results of the first phase, the central bank will further explore offline payments and privacy enhancements – though it is unsure whether a CBDC would work effectively in a real environment. Separately, China is rejecting trademark applications related to the metaverse, potentially to reduce hype and prevent copyright squatters. NetEase, iQiyi and Xiaohongshu's applications were rejected, while Tencent and Alibaba are pending review.

STAKING BETS: Crypto mining company Luxor is launching an Ethereum mining pool even as the ETH developers work to abolish mining from its network, saying there is a "high probability" ETH 2.0's transition will be delayed. The company is working with large institutional and retail miners in North America to provide this U.S.-based pool. Luxor is also ramping up advocacy efforts to keep Ethereum as is, rather than transition to proof-of-stake consensus, which it called an inferior way to secure blockchains.

NFTS FORWARD, REVERSE: Twitter, on the heels of its NFT verification rollout, posted a job offering for a senior crypto role whose responsibilities include, "NFT tooling, membership tokens, DAOs and more!" Elsewhere, pseudonymous user jpegdegenlove has exploited a buggy discrepancy between the front and back ends of dominant NFT marketplace OpenSea to buy expensive digital assets for less than the sticker price and flip them for a profit. Bored Ape Yacht Club, Mutant Ape Yacht Club, CyberKongz and Cool Cats were among the targeted NFT brands. Finally, crypto venture company Pluto Digital will buy NFT Investments in a reverse takeover and list on the Aquis Stock Exchange Growth Market in London.

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Overheard on CoinDesk TV...

Sound Bites

"The fact that [NYC Mayor Adams] has embraced [crypto] in such a significant way may suggest this could be a trend we see in democratic politics."

–Nyca Partners Executive-in-Residence and former New York financial regulator Matt Homer, on CoinDesk TV's "First Mover"

What others are writing...

Off-Chain Signals

Traders are complaining about Solana's performance, raising questions about its status as a Wall Street darling (The Block)
Let me be blunt: Don't buy crypto unless you're fully prepared to lose your shirt (ZDNet)
Vibe killers: Here are the countries that moved to outlaw crypto in the past year (Cointelegraph)
Aave founder Stani Kulechov is teasing a decentralizing social media app (The Defiant)
OpenSea Competitor LooksRare Surges to $7B Valuation as Torrid Volumes Fuel Staking Rewards (The Defiant)
Tether has recovered $87 million in USDT sent to wrong addresses since its launch (The Block)
Police Investigation in India Reveals Link Between Crypto Hack and Hamas (Decrypt)
NBA Top Shot NFTs Have Quietly Surged 72% in 30 Days (Decrypt)
Decrypt editor Stephen Graves is funding a short film with NFTs

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Putting the news in perspective

The Takeaway

JPEGs On Sale, Baby

The global crypto market lost over $1 trillion in value last week as the price of nearly every major token took a precipitous nosedive.

ETH, the native asset of the Ethereum network, is down to around $2,200 for the first time since July. Bitcoin hit a similar six-month low in the $33,000 range. Altcoins SOL, DOT and AVAX are all down around 40% just in the last seven days.

With a dip in the market comes a wave of "takes" from crypto's armchair prognosticators. Depending on whom you trust, these are either short-term macro trends (tech stocks like Peloton and Netflix are way down, too) or the first rumblings of a promised "crypto winter," the kind of thing last seen during the post-crash environment of 2018.

Well, here's another take – it's a bad time to be a day trader, but it's also a bad time for NFT flippers, whose gains and losses are typically priced in ETH. Even as the price has fallen, the average amount of ETH exchanged for non-fungible tokens in top collections has stayed relatively consistent.

The Consumer Price Index (CPI), which tracks an aggregate price of certain consumer goods, is a useful real-world analog here. People like to think of the CPI as a rough gauge for inflation – when the dollar is worth less, you'd expect dollar-denominated prices to go up. It rose 7% in 2021, through December, in the biggest spike since 1982.

That is to say, you're probably going to be paying a little more for some of the consumer goods you use everyday.

Somehow, this logic doesn't seem to apply to crypto's top NFT collections.

A week ago, the "floor prices" (the lowest listed price for a token in a given NFT collection) for CryptoPunks and the Bored Ape Yacht Club, now the two priciest projects in the space, were 60 ETH and 82 ETH, respectively.

They've each crept up a little, from 60 ETH to 66, and 82 ETH to 86 – but these minor increases aren't doing much to offset the massive dip in the price of ETH, which lost 30% of its value over the past seven days.

The same goes for other top NFT collections. The floor for Meebits, a 3D collection from the developers of CryptoPunks, has actually dropped over the past week, as has the floor for CyberKongz.

Average sale prices for tokens over the past seven days tell a similar story; minor increases and decreases here and there, but nothing that could really offset the dip.

So, why is everyone accepting less for these valuable NFTs across the board?

My sense is that it has to do with who's actually buying this stuff. At this point, CryptoPunks and Bored Apes are the domain of hardcore crypto enthusiasts (VCs, full-time investors) and rich celebrities. Your average ETH trader, maybe a little less risk tolerant, probably isn't focusing on these collections.

Hardcore ETH people tend to think of ETH on its own terms. Spend enough time in crypto and 1 ETH just starts to look like 1 ETH, as opposed to $2,200.

If you really believe in the thesis behind NFTs (and, by extension, the ETH backing most of the market), you believe in the viability of the tokens themselves. And if ETH is going up and we're all going to the moon, you may not care about a short-term price correction.

What looks like a loss today could be seen as a bet on the long-term value of ETH. Also, nothing's ever real until you sell, right?

For now, JPEGs are on sale, baby.

–Will Gottsegen

Sponsored Content

Wax: Can NFTs Be Issued at Scale?

On Jan. 19, Worldwide Asset eXchange, or WAX, celebrated the opening of its 10 millionth cloud wallet by dropping 10 million non-fungible tokens.

To celebrate its community loyalty and underscore how this is intrinsically linked to WAX's success, each account holder will get their own provenance-proven digital pin.

If you've ever minted and sold an NFT, then you know there's complexity to the process. Now imagine doing that 1x107 times. WAX had to figure out how to do that before the platform crossed this milestone. And considering it's the global number one blockchain site by daily transactions, and number two blockchain site by daily users second only to Binance, that moment was coming up fast.