Nov 28th, 2022: Weekly Web3 Newsletter by Sujith Godavarthi

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Gm! sujith.eth is back with another interesting issue on crypto. Hope you had an amazing week. But not for crypto. The chaos continues…

This Week in Web3

Let’s begin the show…

1. The FTX Drama Continues..

  • US prosecutors secretly investigated FTX months before its collapse, Bloomberg reports.
  • Sam Bankman-Fried’s parents purchased 19 properties worth $121 million in the Bahamas over the past two years, Reuters reports.
  • Crypto influencer Ben Armstrong (aka Bitboy) went to Bahamas to catch SBF 😅
  • SBF sends a letter to FTX employees.
  • Alameda Research withdrew $200 million before filing for bankruptcy.
  • FTX hot wallet now only has $5.2k of funds.
  • And the media went crazy (gets paid by SBF??)

And more on that..😂

  • FTX owns 99% of shares of the Indonesian cryptocurrency exchange Bitocto.
  • Alameda Research invested $11.5 million in the parent company of Farmington State Bank, which has a single branch and, until this year, just three employees, per NYT.
  • Bankrupt hedge fund Three Arrows Capital founder Su Zhu says the FTX collapse set crypto back years. True! But I am still LMAO 😂, considering that who is saying this..
  • Ok, how is the SEC doing?
  • State regulators are turning their attention to troubled crypto firm Genesis Global Capital for potential securities violations.
  • FTX is undergoing an active criminal investigation, the Bahamas attorney general has said per Reuters.
  • And finally…

2. JP Morgan is into crypto

America’s largest bank, JPMorgan officially registered a trademark for cryptocurrency wallets. Although the CEO Jamie Dimon isn’t a crypto believer, the bank continues it’s efforts in crypto.

Also, this:

JP Morgan issues latest report: “The collapse of FTX is likely to increase investor and regulatory pressure on crypto entities to disclose more information about their balance sheets”

3. Genesis Struggles

On November 21, Crypto Lender Genesis revealed that it’ll go bankrupt without the money ($1B). But let’s have a look at some things they have done in the past:

  • Genesis previously lent $2.36 billion to bankrupt hedge fund Three Arrows Capital.
  • Genesis handed Do Kwon $1B in Bitcoin – real, hard money – in exchange for 1B UST tokens that TFL printed out of thin air.
  • Genesis received over $1B worth of $FTT from Alameda, FTX in last 3 months.
  • Genesis Asks Binance and Apollo for Cash: WSJ. Binance Decided Not to Invest, Fearful That Some of Genesis’s Business Could Create a Conflict of Interest Down the Line: Source: BBG.

Will it go bankrupt? If so, the markets are gonna go way low.

4. NFT Washtrading..

Wash trading is a form of market manipulation where an investor simultaneously sells and buys the same financial instruments to create misleading, artificial activity in the marketplace.

The month of October saw more than $850 million in global NFT sales and over roughly 3 million total transactions. All good, but here is what happened.

Traders seeking to artificially inflate the price of collections or earn marketplace trading rewards generated $389 million in wash trades out of October’s total of $758 million in NFT trading volume. That tells us that roughly 48% of Ethereum NFT trades in October were fake.

The number of wash trading users accounts for nearly 46% of total users.

5. Ethereum is Profitable

How do we know whether a network is profitable or not? Subtract the token issuance with the token burn count.

Ethereum is the first blockchain in history to go profitable and that happened during a harsh bear market. Of course, this doesn’t benefit the ETH holders in any way.

What benefits ETH holders is the ultrasound money metric. And yes, ETH is deflationary

6. Market Overview

Let’s have a look at some weekly performances:

  • Bitcoin: +0.76%
  • Ethereum: +3.7%
  • Polygon: +1.3%
  • Solana: +12.13%
  • BNB: +14.85%

Up only from now on? Haha! Just kidding. More pain is coming my fren.

Quick Bites

  • Bitcoin mining difficulty hit a NEW ALL-TIME HIGH this week.
  • WETH is (and will be) fine despite all the FUD and jokes on the crypto twitter. It’s just a wrapped token and it’s not gonna lose the peg like Terra Luna’s UST.
  • We all know that users cannot withdraw their staked ETH from the Beacon Chain until Ethereum’s next major upgrade, Shanghai, which is expected to take place late next year. Now, Ethereum Foundation is about to test withdrawals of Staked ETH.
  • Coinbase holds ~2M Bitcoin worth $39.9B as of 30th of September.
  • New York becomes the first state to restrict cryptocurrency mining.
  • Over $3.5 Billion in stablecoins were redeemed in the last two weeks following FTX
    explosion.
  • Belgium’s financial regulator does not consider crypto-assets such as Bitcoin (BTC) and Ethereum (ETH) to be securities.
  • Cathie Wood says Bitcoin will be worth 1 million per coin by 2030. And also Ark Invest (investment management firm founded by Cathie Wood) is buying millions of Coinbase and GBTC shares, per Bloomberg.
  • NFT trading has remained relatively strong despite the current crypto market conditions. OpenSea saw ~$40M in volume last week, Magic Eden ~$10.3M, and, Blur ~$8.1M.
  • Fenbushi Capital Bo Shen lost $42 million in personal funds, including $38 million of USDC because of the hack that was caused by a private key compromise.
  • Mattel Creations, the toy giant is launching an NFT marketplace (Flow Blockchain) to enable fans to buy digital art tied to classic products like Hot Wheels and Barbie.
  • “I wonder how many times I will have to repeat this one in the future (thanks to SBF’s media/lobbying power)…Binance is not a Chinese company” – CZ Binance.
  • CoinDCX Publishes Proof-of-Reserve! We have published our on-chain and off-chain assets and are also working on implementing cryptographic proof of liabilities in addition to certified audits of our financial health. With this, we want to instill complete trust in the users,” says Sumit Gupta, co-founder and CEO of CoinDCX.
  • Porsche is stepping into web3. They set up new Twitter account “eth_porsche” and tweeted that more info is coming in November 29th.
  • Binance releases ‘Proof of Reserves’ System: Every user can verify the Bitcoin they own on Binance using a Merkle tree – and have it verified by a third-party audit agency, says Binance.
  • Tornado Cash developer Alexey Pertsev to stay detained until next year’s hearing.
  • With 10 days to go, Uniswap monthly volume on Polygon chain (as of Nov 20th) reached a new ATH.
  • Three US Senators have urged Fidelity to stop its 401(k) sponsor partners from offering bitcoin exposure.
  • “I was initially a crypto skeptic, but after studying some of the more interesting crypto projects, I have come to believe that crypto can enable the formation of useful businesses and technologies that heretofore could not be created” – Bill Ackman.
  • Japan to launch a digital yen (CBDC) pilot in 2023.
  • New Harvard University economics paper was released explaining why banks should hodl Bitcoin.
  • Ethereum is currently settling 6x more value than Bitcoin.

Numbers Of The Week

95%

Ethereum makes up about 95% of all the transaction fees collected across the top 8 chains.

$2B

Binance allocates $2 billion to its crypto recovery fund. This fund will be used to buy distressed crypto assets and support the industry.

7.9%

Only 7.9% of institutional investors surveyed by Coinbase think crypto prices will trend higher in the next 12 months.

Interesting Tweets

  • This needs to be said again: Alexey Pertsev (Tornado Cash dev) is sitting in prison without having been charged with a crime or a date to appear before a judge for writing code. Sam stole billions, Alexey wrote code. [Andrew]
  • Before 3AC and FTX filed for bankruptcy and attempted to pay back angry creditors they returned their DeFi loans first. [Jason Choi]
  • It is worse, entire crypto ecosystem is leaking cash. Salaries, data center rent, electricity, podcast advertising, flights to Miami, and gaudy conferences must be paid in fiat. This has to come from selling coins (exit liquidity) or raising VC money. [Mani]
  • In my view, EIP-4844 is the most promising EIP contributing to the future of ethereum after The Merge. Several L2 teams, various core devs from the EF, large crypto businesses, and major new projects all contributing to it because WE WANT TO SEE ETHEREUM WIN. [Liam.eth]

Interesting Reads

Do You Know?

If you had invested 10,000$ in Coinbase shares when Jim Cramer tweeted “We like Coinbase to $475”, you’d have $1200 right now 😂

Meme Of The Week 😂

Disclaimer: None of this is financial advice. This newsletter is strictly educational and is not investment advice. Please be careful and always do your own research.

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