#6 The Context 18.02.2022
Tipping points, data points and entry points
Hope you’re well. This newsletter collates the main headlines of the week in DeFi/crypto/metaverse/web3/NFT land and offers some context. It’s aimed at anyone who wants to keep an eye on the space but isn’t following it too closely, or is on the hunt for story ideas and angles.
This week: Breathless crypto ads on the Super Bowl have assured that no-one on the planet has not heard of DeFi, NFTs and DAOs. Though whether they understand it all is another matter. Is this the beginning, or the beginning of the end, or the end of the beginning? We also look at how investment money is moving into crypto, around crypto, and out of crypto into the real world. And finally, how crypto is being policed.
As usual, a note: We’re not here to evangelise or criticise, but hopefully to add perspective, context and a bit of insight about the week’s moves within DeFi, as well as on its fringes.
It’s put together by a team at YAP, and doesn’t contain any promotion of our clients. Your feedback is welcome, and if there’s anything we can help more on, don’t hesitate to ping us at thecontext@yapglobal.com
[Tl;dr]
The appearance of multiple DeFi ads at the Super Bowl wasn’t the only sign that crypto might be heading for mainstream adoption. Or are they the interference colours of a bubble about to burst?
Crypto is all about flattening the landscape so anyone can get involved. But is that also shutting some players out? Some headlines about investments in, by and with crypto.
Crypto has always been vulnerable to scams. But who is uncovering them? Think Batman rather than Policeman.
[Pinpointing the tipping point]
Some interesting things happened this week that might, in hindsight, be remembered as significant:
Crypto apps soared in popularity after a splurge of Super Bowls ads, and while Larry David got plenty of eyeballs the one that got crypto’s attention (not all of it positive) was eToro’s, which gave more than passing nods to several memes close to the community’s heart. Coinbase probably got a bit too much attention when their ad crashed their site.
Of course, it might end up being Peak DeFi, but if history has taught us little else, crypto confounds “top signals”, and, more importantly, when Apple makes a move that’s usually a good sign (think wireless charging, Bluetooth earbuds, etc etc), so news of an upcoming Apple iPhone feature that will give merchants a way to accept crypto payments, we should probably take note.
Oh and (alleged) crypto hackers being Hollywood fodder is another leading indicator, as Netflix announces a new series on the Bitfinex hack. (A good place to follow the trial is via Matthew Russell Lee of Inner City Press, who does a great job of transcribing and reporting much of the trial itself. You can support him via Patreon.)
[Crypto investing cuts both ways]
How fiat money move in and out of crypto is a decent barometer of the industry. Is it one entirely separate from the rest of the economy, or is it beginning to have an impact beyond that? Is DeFi a platform for building beyond crypto, and if so what, when, how and who?
Expansion beyond its borders: Binance, led by a crypto billionaire, has taken a significant stake in Forbes. And members of Bored Ape Yacht Club members want to build an empire, starting with weed, according to the Verge
Money moving in: Sovereign wealth funds tend to be conservative, and sometimes highly ethical, in what they choose to invest in. So it’s interesting that South Korea’s US$200b wealth fund is talking about betting on the metaverse and AI startups, though they don’t mention crypto. They wouldn’t be alone: One UAE sovereign wealth fund has been looking at crypto and there are murmurs that some funds are interested in buying “green bitcoin” from renewables-powered miners like Iris Energy. Such a relationship might work both ways: Binance hopes that if they can get a sovereign wealth fund to invest, it would put them in a better position with regulators.
But there’s another side to the coin. While there’s plenty of investor interest in crypto, via listed companies, ETFs and directly, that doesn’t mean the interest is always reciprocated. Venture capitalists invested more in DeFi last year than they did in the previous 10 years combined, and there have been some impressive rounds in recent days, but some more traditional VC players don’t always find a warm welcome. In Southeast Asia, for example, Tech in Asia crunched the numbers and found that while Southeast Asia’s crypto startups collectively raised funding from over 150 investors last year, only 11 of which were conventional tech VCs based in the region. The rest? Mostly global VC firms specializing in crypto. (Subscription required).
[As the industry matures, so do the exploits and scams]
It might be a bit unfair to liken crypto to a venereal disease, as Charlie Munger did, but it would also be wrong to think that the victims of crypto scams are all DeFi virgins. Or that there’s no-one policing the space: it’s just more likely to be done by someone wearing a cape rather than a uniform:
Self-described “on-chain sleuth” zachxbt earned fame – and trolls – for their investigation of Wonderland, but they have been investigating scams for a while, and collect their finds for posterity. That includes (alleged) influencer scams, VC scams and project scams.
Coinbase may not have made it to the Super Bowl if it wasn’t for a white hat, who found a vulnerability in their code and notified the company.
And “Thomas”, who is working on open-source vertical-takeoff aircraft, documented what he called an extremely thorough social engineering scam that nearly unburdened him of all his Ethereum.
It’s not that the space is not above trying to regulate itself. A coalition of US crypto firms has created a centralised platform governed by participating exchanges to share customer data to increase compliance with anti-money laundering
[Tidbits]
El Salvador’s president wasn’t too happy with U.S. Senators introducing a bill requiring the State Department to assess his country’s adoption of Bitcoin as legal tender. “OK boomers… Don’t try to control something you can’t control 😉”, he told them.
JPMorgan says it’s the first bank Into the Metaverse.
Are NFTs really unique? OpenSea suspends most NFT sales, citing ‘rampant’ fakes and plagiarism.
[Interesting reads]
A thoughtful piece by Anthony Sassano, founder of the Daily Gwei, on why more in crypto should move from trading and speculating to building products and services: PvP vs PvE - The Daily Gwei #432 - by Anthony Sassano.
How much should you allocate of your nest egg to crypto? Tim Johnston, managing director at Australia-based Apollo Capital, takes a closer look at their own Capital Fund, which was launched four years ago. Surprisingly conservative assessment.
Oh, and a piece from the New York Times on how crypto is making divorces even messier. Prenups as smart contracts, perhaps?
It’s also a meeting of the minds this week as the web3 community gathers in the Rocky Mountains of Colorado for ETHDenver, one of the largest crypto conferences in the world for a week of conversation, creativity and innovation.
Thanks for reading.
The YAP Context team
This newsletter is pulled together by a team led by Jeremy Wagstaff, formerly of the WSJ, BBC and Reuters and Samantha Yap, founder of YAP Global. Other members: Farhan Musa, Rebecca Campbell and Ruby Wu. Many thanks to Joey Woo for production. Any views expressed here are not necessarily those of the writers, YAP Global or its clients.