Plus, the indicators of an upcoming BTC bull market
This week, MicroStrategy has reiterated its faith in Bitcoin, adding a $175 million purchase of BTC to its prior $250 million investment. We’ll see if the publicly traded company’s conviction persuades other firms to keep their savings in digital gold.
DeFi users have gone mad for Uniswap’s $UNI token, saying it is yet another token representing what some call “the dawn of the ownership economy.” The community acted as expected at the news of the coin’s airdrop, flooding the Ethereum network with requests, and causing Uniswap’s market cap to skyrocket toward $600 million.
Also in this week’s newsletter, we’ve got a roundup on the current state of all things Bitcoin, from its performance compared to other financial assets this year, to the current state of the network’s decentralization. Plus, we follow up on the latest developments in the SushiSwap saga, fill you in on the newest drama threatening to shake the foundation of Bitcoin Cash, and more.
On Unchained, we have a fascinating conversation with the developer of the hottest DeFi community, Yearn Finance/YFI, Andre Cronje, who displays a heartening level of humility and level-headedness. Plus on Unconfirmed, we talk with David Kinitsky, the CEO of what will be the first crypto bank, Kraken Financial. He explains why this is such a big deal, and what it means for users and crypto businesses. Both of these episodes are not to be missed!
This Week’s Crypto News…
MicroStrategy, the business intelligence firm that made waves in crypto a few weeks ago after it added $250 million worth of Bitcoin to its investment strategy, has now converted an additional $175 million of its cash reserves to Bitcoin. To date, the firm has purchased over 38,000 bitcoins and has committed the majority of its holdings for what CEO Michael Saylor has said will be the long term. “I want something that I could put $425 million into for 100 years. If my successor is staring at this thing, it’s still working,” Saylor said.
Saylor’s confidence in Bitcoin is a decisive turn from comments he made in the past, including an infamous tweet from 2013 where he declared Bitcoin’s days numbered. Saylor said he’d taken advantage of the COVID-19 lockdown to go “down the rabbit hole.” He’s come out of the other side a true believer as he sees the dollar’s inflationary risks only increasing. Now, MicroStrategy has adopted Bitcoin as the alternative to a bank account where inflation might slowly whittle its cash reserves. Saylor said, QUOTE “We just had the awful realization that we were sitting on top of a $500 million ice cube that’s melting.”
Uniswap has launched its long-awaited governance token, dubbed the UNI. One billion tokens have been minted, which will become available over four years, with 15% airdropped to all users prior to September 1. Anyone who interacted with Uniswap before then received 400 tokens, which immediately became worth more than $1,000. UNI’s market cap immediately ballooned to almost $600 million as of press time, with the coin itself trading at $3.50, and volume exceeding $1.6 billion.
The community went wild from the news, with pending transactions on the Ethereum network jumping 30% after the token claim began. Coinbase listed the token on Coinbase Pro less than four hours after it was launched, the fastest listing for any coin on Coinbase. Binance also listed it in mere hours. For a while, Uniswap was responsible for 50% of all gas use on the Ethereum network.
In a Twitter thread, Fabric Ventures co-founder Max Mersch wrote, QUOTE, “With the $UNI distribution, @UniswapProtocol has consolidated an army of missionaries that were early users and are now stakeholders incentivised in the protocol’s success.” And in his Daily Gwei newsletter, Anthony Sassano wrote, QUOTE, “This is a clear example of what people are calling the “ownership economy”.”
Bitcoin Roundup: Key Indicators for Bitcoin Are Bullish
On Twitter, Pantera Capital CEO Dan Morehead posted a chart of the year’s best-performing assets so far. Although gold is at a 5,000-year high and close to the top of the list, the top five performing assets this year have all been cryptocurrencies: 0x, Ethereum, Augur, Bitcoin and Maker.
In his September newsletter, Morehead describes how, for periods in which inflation has been running below 2%, The Fed has promised to keep printing money until inflation averages to a 2% target. Morehead wrote, “Wow — that’s wild,” and then notes that Bitcoin appears to be at the beginning of its next large bull market.
Coin Metrics looked at key figures showing how decentralized Bitcoin is and found that it continues to rise across variables such as the network hashrate and the number of active addresses — which currently near one million. Research also suggests that Bitcoin’s supply is becoming more evenly dispersed, with more than half of addresses controlling less than $100 worth of Bitcoin.
Shortly after we published our interview with co-founder 0xMaki last week, the SushiSwap saga took another unexpected turn when cofounder Chef Nomi returned the money he had originally cashed out of the developer fund — a surprise move that had generated controversy and criticism. The reproach he received from the community prompted him to return 38,000 ETH to the project’s treasury fund. Nomi wrote in a post, “I would like to apologize to everyone who I have caused troubles to. I was emotional, I was greedy, I was afraid. I made bad controversial decisions under pressure. And it hurt everyone. I failed your expectation and I am sorry.” Nomi went on to say that whatever reward he deserves for creating the project should be decided by the community.
As you may recall from last week, Nomi transferred control of the admin keys to Sam Bankman-Fried, who had been one of his harshest critics. Bankman-Fried has since earned praise for ultimately turning control of the project over to the community. The future of SushiSwap remains uncertain, with Bankman-Fried admitting to Decrypt that he is concerned about the damage done to the young DEX’s reputation due to Chef Nomi’s actions. He said, QUOTE “Given its weird narrative, that it crashed almost all the way down and then came back up somewhat, it’s still not totally clear which arc is going to win out in the public narrative around it.” And now, after the launch of $UNI, liquidity on Uniswap is at $850 million, while liquidity on Sushi is at $630 million. We’ll see what future twists and turns this saga takes.
Unikrn, an eSports gaming and gambling company, has agreed to pay $6.1 million to the SEC in a settlement announced this week. The SEC had accused Unikrn of raising $31 million through its UnikoinGold token sale in violation of securities laws. In a press release, the SEC said that while the firm promised to use the funds to add more features to the platform, it failed to register the sale of the tokens, which the SEC alleges were offered as investment contracts.
SEC Commissioner Hester Peirce, who has long been an advocate for cryptocurrencies, dissented the resolution, pointing out that Unikrn was not accused of committing fraud, but rather a registration violation and that its punishment will effectively force the company to cease operations due to this registration violation. As she has in the past, she advocated for a three-year safe harbor for token issuers, saying that in Unikrn’s case, it would have been able to use the time to identify new uses for the token and expand its user base.
A contentious disagreement within the Bitcoin Cash community threatens to split the network at the time of the upcoming semi-annual upgrade. One side called Bitcoin ABC created a funding plan that would redirect 8% of the block reward to an address controlled by Bitcoin ABC for infrastructure development — but only as long as the miner was using the ABC client. Any block not redirecting funds to the ABC address would be orphaned, or not added to the chain, by the ABC miners.
A new, forked node called BCH Node, instead follows the chain with the most proof of work and does not redirect 8% of the block reward to the ABC Wallet. That, of course means, that blocks mined by the BCH Node client will be considered invalid by the ABC miners. Hence, the risk of a split.
More than 50% of BCH blocks are currently being mined using the BCHN client, giving the BCHN miners confidence they will have the chain with the most proof of work. However, the question remains of how the BCH network might continue to fund itself without this infrastructure funding. Bitcoin ABC is essentially responsible for creating Bitcoin Cash and has tried to rely on donations for funding over the past three years, with little success. The faction that created BCHN is protesting that Bitcoin ABC hasn’t proven enough value to the community to warrant what they argue is a tax. Furthermore, they say the IFP will give too much power to a single developer team. We will see if Bitcoin Cash splinters yet again …
CoinDesk’s Leigh Cuen gives us glimpses of the newbs rushing in to farm YAM, SUSHI, UNI, etc. For instance, Joe, a math student at a Canadian university, is now one of the top users of a certain DeFi protocol. He’s made hundreds of thousands of dollars yield farming in 2020. Another anonymous yield farmer made $15,000 from YAM alone, despite the fact that it was over in three days and imploded due to a bug.
But since there are so many new people, a number of crypto stalwarts have taken to educating them. Tony Sheng laid out the risks inherent to new users rushing into DeFi in a tweetstorm. While he did say, “unlike the ico era, this cohort of profit seekers are becoming quite sophisticated,” he cautioned them not to let their FOMO rush them into following influencers. He wrote, QUOTE, “it takes time to get sophisticated but people don’t think they can afford to take that time … they’re afraid of missing out … people are constantly losing money.” Kinjal Shah of Blockchain Capital posted a Twitter thread that summed up all the goings-on in DeFi so far this summer, with definitions of terms like liquidity mining and composability. It serves as a great explainer for people just entering the space.