Is China Setting Up to Pump Web3?
In This Issue
- Sam shares his thoughts on the Chinese metaverse, macro is a hot mess, Avalanche snowballing, crypto’s kickoff in Hong Kong & Celsius being snapped up.
- This week on chain.
- This week’s trending coins by Rebecca.
The News Now
Get Ready for the Chinese Metaverse
Commentary suggesting the metaverse hasn’t taken off as planned sometimes dwells on Meta and the fact that we’re not yet all living in a virtual Zuck-world.
This doesn’t capture the global picture though, as we can see if we take a look at what’s happening in China. Over in the world’s second biggest economy, various cities and regions are providing incentives and investment to actively encourage metaverse development and research into AI, VR, AR, and brain-computer interfaces.
- The Beijing municipal government is reported to have released a whitepaper focused on the importance of Web3 technology, and which demonstrates intent to support the Web3 industry.
- Zhengzhou, the capital of Henan province, has established plans for a $1.42 billion fund to support companies involved in relevant tech, although it emphasizes private, rather than public, blockchains.
- Zhejiang Province, home of e-commerce company Alibaba, announced plans last year for a metaverse development strategy, with talk of creating a $28.7 billion industry, and now the region’s Shangcheng District (in Hangzhou City) is offering financial support and benefits to metaverse startups and other tech ventures.
- Nanjing City in Jiangsu Province has launched a state-backed group called the Blockchain Technology and Application Innovation Platform of China, which maintains a focus on metaverse research.
- There are also metaverse strategies already in place in Shanghai and several other provinces around China.
While China is a relatively opaque place, it seems clear that despite on/off animosity towards Bitcoin, it’s not sitting still on blockchain technology in general. Also, the country is treating the metaverse and technologies such as AI and advanced interfaces as being closely related, and this all demonstrates that the anti-crypto sentiment that’s emerged in the US recently is not echoed around the world.
That all said though, the state of existing metaverse projects is relevant, and it’s certainly true that prices on famous virtual land NFTs are way down from where they were at their peak.
To be fair though, these price drops aren’t too out of line with the rest of crypto and NFTs at this stage of the crypto cycle. And while not every project will stick around long-term, it will be interesting to see how they perform when the next sustained bull phase rolls around, particularly with China upping its interest in the sector.
Macro Outlook: It’s a Hot Mess
If you follow macro goings-on then at this point you’ve probably got used to a sense of ongoing chaos, and in that case, you won’t be shocked to learn that inflation has come in hotter than expected.
April core PCE inflation in the US is reported at 4.7% year-on-year, rather than at the market expectation of 4.6%. Core PCE refers to personal consumer expenditure, and measures prices on goods and services excluding food and energy. This is considered better at identifying underlying inflation, since food and energy tend to be more prone to fluctuation.
These most recent figures are far higher than the Fed’s target level of 2% for core PCE, and the probability of a further 25 basis point rate hike in June is now being put at 65%. It’s worth noting also though, that CPE inflation news had a negligible effect on the BTC price.
Avalanche Snowballing
Over on Ethereum challenger Avalanche, an alternative Layer 1 that’s known for speed and efficiency, there has been plenty of activity indicating potentially very positive long-term prospects.
- The creator of the Avalanche blockchain, Ava Labs, is establishing a Web3 launchpad called Ava Cloud. It will be a no-code platform designed to make it easy for users to deploy their own custom, smart contract blockchains.
- The full-reserve, Euro-backed stablecoin EuroCoin (EUROC)–issued by Circle–went live on the Avalanche network last week. EUROC also operates on Ethereum.
- Two new NFT marketplaces are coming to the Avalanche network, with Superchief Gallery–which is innovative and influential in the NFT art space–planning a marketplace, and an incoming new “cultural discovery and distribution engine” called Zeroone partnering with Ava Labs.
- Avalanche has seen significant recent growth in monthly active users, with numbers rising from 416,758 in March, to over 840,000 in April, and over 891,000 as we approach the end of May.
Crypto Kicks Off in Hong Kong From June
From June 1st, crypto exchanges in Hong Kong will be able to apply to the SFC (Securities and Futures Commission) for a license to allow retail customers to access trading platforms, and this has–perhaps surprisingly–been accompanied by a crypto pump from Chinese state TV.
There is a caveat to these developments though, as the SFC will prohibit what are being called ‘gifts’, which will likely include airdrops designed to incentivize investment and protocol use. Also, as Hong Kong is currently working on stablecoin regulations, it appears that until any new rules come into force, retail investors will not be permitted to trade stablecoins.
Additionally, the SFC has not actually approved any applications yet, although during a consultation period it received 152 written submissions from industry players.
Overall, it looks like a cautiously conservative approach from the Hong Kong authorities, but it offers a clear indication that the SFC is taking crypto seriously and looking to integrate the industry, and there is plenty of talk of Hong Kong being well positioned to become a crypto and Web3 hub.
Celsius Snapped Up (Along With Its Mining Rigs)
Beating off rival bids, a consortium going by the thoughtfully matching name Farenheit has successfully bought bankrupt crypto lending platform Celsius. The group, which includes Arrington Capital, will now take control of Celsius’ loan portfolio, staked crypto and any other investments, and its mining fleet.
Back in April, Michael Arrington, the founder of Arrington Capital, tweeted his proposal for Celsius assets, stating that they should “be placed into a new company and [it] is run with the sole goal of growing those assets to make stakeholders whole”. How that plays out, we’ll now be able to see.
Bitcoin mining firm US Bitcoin Corp is also part of Farenheit, and will take control of and operate the Celsius mining rigs, which will make it one of the biggest bitcoin mining entities in the US, alongside the likes of Riot Platforms and Marathon Digital Holdings.
This Week On Chain
An area of crypto that has seen tremendous growth this year, relative to where it was a few months ago, is tokenized securities. This refers to real-world assets, such as Treasury Bills, ETFs and stocks, which are then represented as crypto tokens that can be traded on-chain.
A collective market cap below $500,000 at the beginning of February has grown to break the $200 million mark in May, now sitting just below that level. Of the companies providing tokenized securities, Ondo Finance and Matrixdock, a subsidiary of Matrixport, are currently taking the bulk of market share, and the majority of activity is taking place on Ethereum.
This is a sector with a lot of potential for wider adoption, but is currently not available to traders in the US as these tokens are securities and issuers have not registered with the SEC.
Turning our attention to leading DEX Uniswap, there’s been a steady increase in monthly active users since August last year, taking off especially sharply over the past month to approach 1 million active users.
However, if we compare this with the market cap of the Uniswap token, UNI, we find no recent positive correlation, as in fact, the UNI market cap has been moving in the opposite direction. There are multiple theories about why this might be the case, including observations that the token brings no yield generation and has little utility, and also the possibility that its price is correlated with the state of crypto in general rather than with the protocol it is attached to.
Moving over to Bitcoin and Ethereum, a shared characteristic of the two is that amounts of both BTC and ETH being held on exchanges are falling.
It’s an interesting picture if we look at the BTC balance on exchanges with Bitcoin epochs in mind (epochs are the periods between halvings). Here we can see we’re in the first epoch where exchange balances have fallen significantly for a sustained period. Does this mean something is different this time? Arguably so, as self-custody should become more common as adoption grows.
And over on Ethereum, we have the amount of ETH being kept in exchanges falling to a 5-year low, while value in the ETH 2.0 Deposit Contract is, by contrast, at an all-time high, all of which, taken together, paints a clear picture of ETH being put to work staking.
Back to Bitcoin, there’s a recent curiosity in its correlation with equities. We’ve grown used to hearing that Bitcoin has, in the past few years, behaved like a high risk US tech stock, but right now–for the first time since April 2021–the BTC price is more closely correlated with the Chinese CSI 300 (the Chinese equivalent of the S&P 500) than with the S&P 500.
This coincides with the Chinese authorities displaying strong interest in Web3, and as Hong Kong’s regulators start getting to grips with crypto and allowing exchanges to open up to retail traders. That in mind, could the current flip in correlation indicate the start of a longer-term trend? If Asia really is becoming a future hub for crypto and Web3 development, then it’s a possibility to consider, at least.
And finally, zooming out to the wider tech environment, it’s been observed recently that just seven tech stocks have been holding up the S&P 500. The stocks in question are META, AMZN, MSFT, AAPL, GOOGL, NVDA, and TSLA, and they’re up 44% while the S&P is up 10%, but take them out of the equation, and the S&P is up just 1%.
This indicates how influential AI excitement has been, and might bode well for crypto as Web3 perhaps begins to overlap with AI, VR and AR. Either way, it’s notable that markets are being strongly powered by tech development.
This Week’s Trending Coins by Rebecca
Here are my key takeaways from the trends this week and we’ve seen milestones, mishaps, and memecoins.
- Pepe is a memecoin that’s gone multichain and launched on LayerZero. The project has also tweeted a meme about the US debt ceiling resolution.
- Arbitrum is an Ethereum Layer-2 scaling solution that’s seen the Jimbos protocol hacked just three days after its V2 launch. The hack resulted in a $7.5M loss and the JIMBO token dumped by 40%.
- Bitcoin has jumped to more than a two-week high as the US debt ceiling resolution brings relief to markets and Bitcoin braces for Hong Kong opening the floodgates for retail investors on June 1.
- Ethereum has seen a dormant address become active after 8 years, moving a total of 8,000 ETH in just two minutes.
- tomiNet is a Web3 infrastructure company on Ethereum that’s teasing the launch of its upcoming decentralized domain system (tDNS).
- ORDI is the Bitcoin Ordinals token which has seen the Ordinals inscriptions reach a new milestone of 9 million. Charles Hoskinson has said in an AMA that Ordinals would be better on Cardano.
- Stargate Finance is a cross-chain DeFi bridge solution built on LayerZero that’s crossed 10 billion in lifetime volume. PEPE bridging is also live on Stargate Finance allowing users to bridge PEPE between BNB Chain, Arbitrum, and Ethereum.
- Sui is a newly launched Layer-1 blockchain that’s teasing the launch of Sui domains launching on May 30. Sui has also shouted out Alibaba on Twitter as a Platinum Sponsor for its upcoming Builder House in Seoul on June 4.
- TENET is a liquid staking Layer-1 blockchain built on Cosmos that’s just been listed on 7 exchanges including Bybit, KuCoin, Bitfinex, Huobi, Gateio, MEXC, and Bitmart.
- Render is an image and video rendering protocol that’s launched a new Render Foundation website and reached a market cap of $1 billion.
- Conflux is an Asian-focused blockchain that’s pumped by 16% on the anticipation of Hong Kong welcoming crypto retail investors from June 1.
- Lybra Finance is a stablecoin issuer that’s seen its total-value locked (TVL) skyrocket almost 400% in the past two weeks to around $100M, after only launching a month ago.
- Ben is a memecoin that’s undergoing a rebrand as Bitboy Crypto takes a leadership role—the project has updated its logo and Twitter handle. BEN has also been listed on Bitget.
- Multichain, previously known as Anyswap, is the fourth-largest crypto bridge and it’s been hit with technical issues stopping users from withdrawing funds from specific pools. Binance suspended deposits for 10 bridged tokens on May 25.
- Fetch.ai is a blockchain-based AI platform that’s launched ChatGPT-powered proposal summaries in Leap Wallet.
Final Notes
China Bitcoin, Ethereum, and Crypto news pump. Plus a debt ceiling update. Watch the video below to learn more. 👇
Thank you so much for your support, and I truly hope that today’s issue will give you insights needed to help you master your wealth.
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