January 24, 2022       /       Unchained Daily       /       Laura Shin

Daily Bits ✍️✍️✍️

  • Bitcoin’s network mining difficulty jumped ~9% to an all-time high on Friday.

  • One hacker returned ~$800,000 in ETH after exploiting Multichain last week.

  • NBA Top Shot volume is up 72% in volume over the past 30 days.

  • Binance CEO Changpeng Zhao reportedly ignored senior employee concerns about weak KYC checks on the exchange.

  • Uniswap and dYdX are pioneering lower fees for DEX trades; Uniswap is processing more ETH/stablecoin volume than any centralized exchange.

  • Crypto trading firm Tantra Labs was liquidated after the Grayscale Bitcoin Trust discount widened to a record gap.

  • Solana’s network performance has drawn the ire of many traders recently.

  • Lens Protocol could be Aave’s latest social media play.

  • $600 million worth of ETH was almost market sold on MakerDAO on Friday.

  • Over $1 billion in short and long positions were liquidatedon January 20th.

  • The total market capitalization of cryptocurrencies fell to a low of $1.54 trillion this weekend (it traded above $2 trillion last weekend).

Today in Crypto Adoption…

  • El Salvador purchased 410 BTC.

  • The UFC is expanding into NFTs through a partnership with Dapper Labs.

  • Twitter is seeking a senior product manager for crypto.

  • BlackRock filed for an ETF that tracks the performance of blockchain and crypto-focused companies.

The $$$ Corner…

  • Hedge fund Brevan Howard launched a dedicated crypto fund.

What Do You Meme?

What’s Poppin’?

MicroStrategy’s GAAP Filings Nixed by the SEC

 

In a letter released on Friday afternoon, the Securities and Exchange Commission rejected MicroStrategy’s bitcoin accounting method found in its Q4 2021 earnings report. In its previous filings, MicroStrategy reported non-GAAP numbers for its bitcoin holdings. “​​MicroStrategy believes that these non-GAAP financial measures are also useful to investors and analysts in comparing its performance across reporting periods on a consistent basis,” explained the company in its Q2 2021 statement.

The SEC’s letter, which was dated December 3, went as follows:

“We note your response to prior comment 5 and we object to your adjustment for bitcoin impairment charges in your non-GAAP measures. Please revise to remove this adjustment in future filings. Refer to Rule 100 of Regulation G.”

MicroStrategy, which reported holding 124,391 on December 30, 2021, saw its stock drop 17% on Friday.

Background on GAAP Accounting + BTC

As currently constituted, companies are required to adjust the value of bitcoin on its balance sheet when the price falls. In accounting language, this is called “impairment.” However, when the price of bitcoin rises, the company is not allowed to readjust the price of bitcoin on its balance sheet. This quirk in GAAP (Generally Acceptable Accounting Principles) essentially forces companies with bitcoin on its balance sheet to record its BTC holdings at the price it paid for it or lower.

While this is only a paper quirk (as one could easily look up the number of bitcoin a company holds and the current value of BTC), recording bitcoin as an impairment does affect the net worth of a company and, therefore, its value to investors.

Recommended Reads

  1. a16z’s Chris Dixon on web3 and decentralization:

  1. The Generalist on crypto trends in 2022:

  1. Mikel Ippolito, the co-founder of Blockworks, on the bear market:

On The Pod…

Why a Coinbase Listing May Not Be a Good Thing for a Token

Fais Khan, author of the Startups and Econ newsletter, dives into his recently published research report, “You Don’t Own Web3″: A Coinbase Curse and How VCs Sell Crypto to Retail. Show highlights:

  • whether tokens perform better before or after being listed on Coinbase

  • what relationship a16z, a venture capital firm, has to Coinbase

  • why Fais believes that the poor performance of VC-backed tokens after being listed could be the result of insiders dumping

  • other reasons for a token’s poor performance after being listed on Coinbase besides insiders dumping

  • what type of coin/token went up 1,800% in 2020

  • why Fais is suspicious of how quickly certain VC-backed tokens were listed on Coinbase

  • whether Fais believes Coinbase or a16z is actually doing something nefarious

  • what sort of regulatory actions he believes would improve crypto

  • what advice Fais has for token investors

Book Update

My book, The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze, is now available for pre-order now.

The book, which is all about Ethereum and the 2017 ICO mania, comes out Feb. 22. Pre-order it today!

You can purchase it here: http://bit.ly/cryptopians