All Been Crypto — Week 27 May 2022
Another down week in crypto pushing market cap closer to 1tn and despite BTC down 5% WoW dominance continues to creep up 44% an indication of bearishness in the market. The other obvious sign of course are our top performers of the week XMR, ETC and TRX. ETH had a particularly bad week -13% after we saw some hiccups with beacon chain and transition on testnet. But of course alt L1s were down even more as money seems to be flowing out of the system. On the news front however things are not bearish (yet?). We had multiple new funding rounds announced at record valuations and a couple of high profile funds raised their war chest . All suggesting that things are very different now vs 2017/18. Outside of valuations and prices, Luna snapshot of 2.0 launch happened with the chain launch imminent while the aftermath of the meltdown is now moving to real world Korea. Portugal scrapped a proposed crypto tax and regulators in the US are actively working on a stable coin legal framework now which i’m sure was also topic in Davos at the world economic forum. Enjoy reading!
Bat Tai Chi — firstname.lastname@example.org
Ethereum POS transition hiccups
The POS beacon chain of Ethereum (the main chain after a successful POS transition) had a 7 blocks reorg this week after a client update boosted some clients but caused confusion among validators who hadn’t bothered to upgrade. Core Ethereum developer Preston Van Loon suggested the reorg was due to a “non-trivial segmentation” of new and old client node software and was not necessarily anything malicious. This however could also potentially have been an attack vector and so we cant rule out that there won’t be any further delays of the transition.
Same time you are seeing at least some miners deciding to act funky on the Ropsten testnet causing devs to react. Both events likely reminding market that there is still risk involved with the POS transition and I got the sense it had been mostly priced out/ignored. If you got strong views apparently there’s also an oracle that lets you bet on wen merge.
Bear Market (?) Time to Raise (the bar)
We have seen tokens give in line with equity market and broader risk assets. We see economic indicators slowing down and a recession in the US is unavoidable. We had major VCs warning their projects about switching to survive mode. Coin announced a hiring freez yet if you look at capital commitments and raisins you’d think we are in deep bull market. Yea i know you going to say these are lagging indicators and that’s probably right. These deals were in the pipeline for months but still could have been killed over the last few weeks since LUNA (and who knows how many actually did get pulled). I know many ALT L1s are in Korea pitching to LUNA ecosystem players to come over and luring with incentives. But yea no doubt we will see impact on private market valuations too — it’s just a very different vibe from 2017/18 when funding dried up completely within a very short period of time. Here’s some of the major events this week which is obviously not an exhaustive list. Funds: A16z raising 4.5bn, Standard Crypto 500mm; Projects: StarkWare raising at 8bn valuation, Bable at 2bn, Elliptic raised 60mm
Luna new year
It’s the luna year of the bull but not sure about the rebirth of Luna 2.0. The hasted proposal of a hard fork was not uncontroversial but of course speed was of essence given the looming exodus of projects. Luna eco system had actually a good junk of builders, programmers ect that literally lost their soil (terra evanuit — excuse the pun). So the hard fork had to happen sooner rather than later and so the economics of the airdrop and distribution were probably not the most equitable but the quick consensus major VCs, Exchanges, Training Shops and the DAOs as well as other stakeholders in the ecosystem could agree on. Snapshot of the airdrop was yesterday so could see more dumping of Luna Classic assets now in the market as the old chain becomes even less valuable. The success of the new one will depend on how many projects will actually stay. If you are an optimist there was (is?) a lot of brand value to Luna and despite all the examples of people sending their LUNA classic and UST to a ‘burner address’ shows two things. How little people know about tokenomics and how much faith some still have in the leaders and the ecosystem. Then of course there is the aftermath of the collabs that could bring hurdles to the reboot. Korean police had seizing LFG assets and Do Kwon is facing legal prosecution in South Korea. On an overall note I’m honestly less optimistic Luna 2.0 could work out but would be happy to proven otherwise. And i have to admit I don’t have enough insights to what some of the major Luna projects thinking in terms of ‘should I stay or should I go’. I’m just wearing my overall crypto hat and in our industry it’s usually easier to start over from a blanc page than with historic baggage. Just my 2cents
This [Beacon Chain] reorg is not an indicator of a flawed fork choice, but a non-trivial segmentation of updated vs out of date client software
Core Ethereum developer Preston Van Loon
If you create a virtual world with virtual money and give it to your virtual friends so they can secure a virtual network with virtual devices and virtual energy, you have virtually won, until one of your virtual friends copies your virtual idea, which is virtually certain. #PoS
Michael Saylor, MicroStrategy CEO
A host of companies, including Circle, have leveraged blockchain technology to support trillions of dollars of economic activity with fiat-referenced stablecoins. The introduction of a CBDC by the Federal Reserve could have a chilling effect on new innovations.
Circle’s response letter to the Fed’s invitation to comment