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| The biggest crypto news and ideas of the day Jan. 25, 2022 If you were forwarded this newsletter and would like to receive it, sign up here. Sponsored by Welcome to The Node.
In today’s newsletter: Kazakhstan cut energy supply to crypto miners. Fantom network transactions exceed Ethereum. And Ethereum money markets AAVE, Compound and MakerDAO saw $200M of liquidations.
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Today’s must-reads Top Shelf CUTTING SUPPLY: Kazakhstan crypto miners will have their energy supply cut off until the end of the month, three people in the local industry told CoinDesk. A memo from national grid operator KEGOC sent to 196 power companies said power supply to digital mining is “completely canceled" until midnight Jan. 31 unless the current energy crunch improves. Separately, Bithumb, one of South Korea's largest crypto exchanges by trading volume, will stop accepting unregistered wallet addresses – including MetaMask – as it enforces FATF’s international "travel rule.”
BANS & LIMITATIONS: Russia needs to regulate cryptocurrencies, not ban them, according to the head of the financial policy department at Russia's Ministry of Finance, bucking the central bank’s recent call to “ban” trading and mining. "We need to let these technologies develop,” the minister said. Meanwhile, Thailand's financial authorities will regulate the use of digital assets as a means of payment, citing adverse risks to financial stability, consumer privacy and cybercrime. Finally, Indonesia's Financial Services Authority warned firms against marketing crypto sales, though trading remains legal in the country.
INVESTMENTS: Syndicate Protocol, a social-media inflected investment platform, launched its first crypto-native investing tool: Web3 Investment Clubs. The startup is marketing the idea of traditional “investment clubs,” loosely regulated groups where groups of people meet up socially, discuss investments and pool capital, to DAOs. Doola, a platform to incorporate businesses in the U.S., joins as a partner to help DAOs become legal entities, open bank accounts and even file taxes and issue K-1s to members. Meanwhile, Singapore-based Blockchain Founders Fund raised $75 million for its latest fund.
TRANSACTION COUNT: Transactions on the Fantom network exceeded those of Ethereum for the first time on Monday, though both blockchains are below peak use. Fantom has totaled over 170 million transactions since its 2019 launch, a fraction of Ethereum’s 1.4 billion transactions, and offers different opportunities for yield. Meanwhile, Ethereum money markets AAVE, Compound and MakerDAO processed a total of $200 million of liquidations on Friday – a record single-day tally; typically, DeFi protocols see less than $10 million of daily liquidations – amid the price crash that forced margin calls.
STAYING THE COURSE: NFT marketplace OpenSea launched a new listing manager to mitigate a “user interface flaw” that saw over $1 million worth of NFTs sold at prices far below their market value. On Monday, three attackers exploited a bug to buy popular NFTs at older, lower prices, and sell them for a massive profit. ZenGo security expert alleges OpenSea’s fix only solves the issue of “new users.” Elsewhere, predictions market Polymarket has launched new betting markets three weeks after being fined $1.4 million by regulators, and has barred U.S. users. And, MicroStrategy’s chief financial officer said the software firm’s plan is still to "buy and hold” bitcoin amid the dip.
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What others are writing... Off-Chain Signals Fearing revolution, Myanmar’s military gov’t wants to ban crypto and VPNs (Protos) Grayscale considers 25 new digital assets, including “metaverse” tokens (Blockworks) Crypto art collector PleasrDAO, after taking undisclosed a16z funding this summer, is raising $69 million (The Block) YouTube CEO Hints at NFT Integration in Letter to Creators (Decrypt) Trump Family Discovers TrumpCoin: ‘Legal Action Will Be Taken’ (Decrypt) Solana User Experience 'Not What It Should Be', Says Co-Founder as Network Struggles (Decrypt) NFT Scams Are Everywhere. Here's How to Avoid Them (Rolling Stone) GPU Prices Drop Along With Crypto (Tom’s Hardware) Cracking a $2 million crypto wallet (The Verge) The Ethereum Foundation redfines Eth2 as the “consensus layer” (Ethereum.org) Orange DAO, a crypto collective made up of 1,000+ YC founders, invested in ~30 Web 3 startups (TechCrunch)
Putting the news in perspective The Takeaway Put Away Your Tears: Crypto Is About More Than Prices Take off that McDonald’s hat, boyo, and return to the screen: Bitcoin is up 10%. Favorite altcoins of day traders ETH, LUNA and ATOM are also up and to the right. The trading lines are green, even if your total investment is in the red. This is not financial advice.
Today’s market bounce, which may or may not be of the dead cat variety, is just another data point in crypto’s historically volatile lifecycle. It’s this volatility that many investors are after when they enter the market, the same volatility that causes so much pain for unprepared, over-leveraged buyers.
Some will look at the past six weeks of crypto market spasms at wonder, “when should I buy in?” Crypto was once a $3 trillion asset class, and even ex-Goldman Sachs CEO Lloyd Blankfein said today this stuff is not going away. Others will declare, “I’m staying away forever, it’s irrational.”
There is likely a middle ground, a sound opinion to hold. I’m not an investment wiz, I’m a reporter who covers fake internet money, but I can say the only appropriate way to invest in crypto is to invest with conviction.
This seems obvious, but crypto’s structural attributes – tokens are unmediated, globally accessible 24/7 buying opportunities – make it so scams often appear to be the more attractive buys. If you could only time the market, you’ll be part of the pump rather than the dump.
So far, we’ve been talking around the idea of FOMO, the fear of missing out. When do you buy in? Should you, could you avoid FOMO forever? It’s the critical mechanism that drives so much of the modern economy – the admixture of desire inculcated by branding, speculation driven by envy and the human urge to have a good time.
There are a lot of hype machines in crypto, and a few projects that exist beyond the spectacle. Ponzinomics are baked into these techno-economic tools: the way to align incentives and attract the right kind of self-interested buyers to build communities. But cutting out the middleman and relying solely on behavioral economic mechanisms means just about all tokens are subject to hyper-capitalistic exploitation. Unfettered markets: a blessing and a curse.
Moreover, as an asset class, crypto lives and dies in almost heroic narrative arcs. When it goes down, it has a tendency to crash and burn. When it goes up, a gaggle of smart-money suits will write Twitter threads about how decentralized tech will disrupt everything from finance to vidya (games).
It’s hard to find the time to think critically about crypto-economics and product-market fit when commentators are so breathless, when the numbers are going gangbusters or driving into the dirt, but you must. You cannot time the markets, and you should know you’re often buying into an adverse environment where early adopters hold more than you could ever afford.
Right now, from what I can piece together, the Federal Reserve, the U.S. central bank, is pulling the ultimate put on the entire economy. It seems like many retail crypto investors are still holding, but they also haven’t been accumulating for the past couple of months. Whales, those bitcoin holders with at least 1,000 coins, by and large rotated their wealth in stablecoins.
What do you do with that information? It is too much to handle, too much to make sense of, at least for me. I don’t want to throw money into crypto even if it seems like a discount, only for the market to tank, and potentially never recover. But my savings account is also moth-eaten by inflation.
Risk is either volatility’s close cousin or alter ego depending on how you look at it. The term “beta” captures both without assigning a value judgment. Saying crypto is a high-beta asset class threads the needle between its systemic hazards and insane price fluctuations. But buying crypto’s beta could be more than a speculative bet, if you have conviction.
Crypto is not an investment for everyone, and you should never, ever risk more than you can afford to lose. Promise me you won’t. But there are a few projects that I have the misfortune of actually believing in. No crypto will ever, or should ever, be central to the majority of economic activity, but it can present viable solutions to real problems.
Decentralization is a powerful force. Some cryptos could rise to that level and become something akin to modern-day public goods infrastructure, meaning they’re accessible to all and under the sway of influence to none. Investing in crypto, for the long haul, is investing in that idea – that’s its beta. But you don’t actually need to own anything to, one day, hopefully benefit.
Be smart, read further: Buying Your First Crypto? 10 Things You Should Know Compounding and Saving in Bitcoin: The Power of a Dollar Cost Averaging 4 Things to Do in a Crypto Bear Market
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