Carbono Insights #60 | Memecoin Season
It’s been a few days of extremes. We’ve had a lot of progress on the regulatory side, with wins for crypto in different shapes and sizes. Gary Gensler was cornered during a Congressional hearing for his inability to provide clear guidelines to the crypto industry, and the EU finally passed its MiCA framework. The framework is imperfect, but it’s finally set in stone. That’s what progress looks like.
In the meantime, within the walls of crypto, things got a little crazy with memecoins stealing the show. A step further than the euphoria-induced altcoin season we reviewed last week.
But euphoria is likely to cool off. Macro is back with news of upcoming rate hikes, draining liquidity from risky investments. Memecoin mania will probably take a breath.
We asked Dall-E to show us what a dramatic Western-like standoff between a Shiba Inu and a frog would look like.
In today’s issue of Carbono Insights
- After Altcoin Season comes Memecoin season
- Russia and Coinbase show the US the consequences of careless regulation.
- Gary Gensler starred in a cringey deposition before Congress, proving what a lack of regulatory clarity looks like.
- The EU continues with its slow-but-steady regulatory pace with MiCA.
- Ondo and Maple design how TradFi yield can trickle down to crypto.
- We explain ve(3,3), the trending Dex design model.
1. Markets | Memecoin Season
Altcoin season gave way to memecoin season. Memecoins are cryptocurrencies with no reason to exist other than being bought and sold for fun. They have no intrinsic value, no utility, and no fundamentals. their price reflects only the forces of supply and demand, which in their case, rely on fun, identity, and greed. And these are not necessarily negative values in crypto. They are worn with pride.
A new star was born in the memecoin galaxy. Pepe the Frog, probably the biggest representative of meme culture online, didn’t have a coin yet. The memecoin space was dominated by dog-themed coins (championed by Elon Musk), so an anonymous team finally launched it.
Took me hours of research to draw this chart
Pepe has been on a wild ride for days now, and it will probably survive, just as the rest of the memecoins, coming back to life at random times. It has been a trending topic on Twitter, made some people millionaires along the way, and created a trail of copycats that have fed on the buzz.
2. Regulation | The US is pushing crypto away
The crypto industry has long warned about regulatory uncertainty in the US, and this week regulators in Congress echoed those concerns. During a House Financial Services Committee oversight session, regulators — particularly from the Republican side — raised the issue of regulatory clarity.
This is no longer an empty threat. Russia is creating favorable regulations for crypto to reduce the relevance of the US dollar-based economy. Meanwhile, Coinbase — a champion of clean crypto entrepreneurship — has been courting UK regulators, obtaining offshore licenses, and openly discussing the possibility of moving its operations out of the US.
As other countries develop favorable regulatory environments and seize the opportunity to become leaders in the crypto space, the US may find itself left behind. It’s time for regulators to provide clarity and support for the crypto industry rather than driving it away.
3. More regulation | Gary Cornered
The proof is in the pudding. See Gary Gensler providing regulatory clarity.
Gary Gensler probably had one of his worst days as SEC Chairman during the House Financial Services Committee oversight session on his work at the Commission. This video pretty much sums up what’s wrong with the SEC’s position these days: the SEC chair dodged for minutes a yes or no question about whether he considered Ethereum a security and then shamelessly claimed that regulation is clear nevertheless.
4. Even more regulation | MiCA
EU regulators claim they’re ending with the “wild-west” crypto has been going through. The EU has taken quite a long time to produce its Markets in Crypto Assets regulatory framework, but it’s finally here. We’ll get into some detail in a minute, but before, let us just say that whatever the content, having a finished framework by which 27 nations must abide is something to be excited about.
MiCA adds obligations to crypto-asset providers, from registration to disclosure (expect the EU to request serious white papers now), centralizes authority on ESMA (Europe’s SEC), places heavy surveillance on stablecoin issuers and the way they manage their reserves, and avoids, for now, the issue of NFTs. And, in a separate vote from MiCA, the EU also voted in favor of the Transfer of Funds regulation, containing anti-money laundering measures that will require crypto operators to identify the sender and receiver of payments.
5. TradFi | Real World Yield coming to crypto.
Ondo Finance and Maple Finance are two of the most relevant projects bringing solid approaches to tokenizing Real World Assets.
Ondo, founded by ex-Goldman Sachs, has launched a yield-generating stablecoin. Ondo has tokenized a money-market fund investing in US government securities. The token, called OMMF, will be minted and redeemed for $1. The interest earned will be distributed to OMMF holders daily as new tokens.
Maple has launched a pool that invests in US Treasuries. Investors deposit stablecoins in a Maple pool, the pool lends money to a hedge fund Room40 the hedge fund invests in T-Bills. Investors get a 3,2% annual yield (T-Bills’ 3,7% minus 0,5% management fees).
They have found ways to turn the tables and bring real-world yield to crypto products.
6. Decentralized Exchanges | ve(3,3) model
Crypto has a way with words (NOT!). If things were not complicated enough, we keep giving stuff indecipherable names.
ve(3,3) is one of those names. The monicker given to a certain design for decentralized exchanges is behind some of the most successful Dexes lately, such as Velodrome.
A decentralized exchange involves different groups of people: users who provide liquidity, users who trade, and users who steer the protocol through governance. Dexes, in order to be sustainable and work autonomously and permissionlessly, rely on software and game theory to keep all actors involved.
In this article, we explain the operation of ve(3,3) exchanges for various levels of understanding.
