Warning: Devs Dump Pepe
GM all, we’re starting this week with a look at some sketchy shenanigans at everyone’s favorite amphibian asset (as in, it features frogs and it’s halfway underwater).
We’re talking about Pepecoin, a project where the devs have been busy, but very much not in the way that holders would’ve liked.
Here’s what’s in today’s issue:
- Sam shares his thoughts on Pepe devs rugging funds, the new crypto tax proposal in the US, Omen backing Bitcoin, Hasdex taking a new angle on a spot BTC ETF & OnlyFans hops on Friend.tech.
- This week on chain.
- This week’s trending coins by Rebecca.
Pepe Devs Plunder Funds
If I told you breakout memecoin Pepecoin–which soared over 1,500% to a $1.5 billion market cap earlier this year–was now embroiled in controversy, then you might not be that surprised, but still, waves were caused recently around the crypto ecosystem by some weird goings-on with Pepe.
It started when the project’s multisig wallet, controlled by Pepe devs and containing 6% of token supply, transferred 4% to several exchanges to sell, dumping the price in the process. And shortly after, the same project wallet was altered so the number of dev signatures required for transactions was reduced.
This all appeared to be somewhere squarely on the rug pull spectrum, but then was followed by a tweeted announcement from the Pepe account, alleging that the funds were stolen from the multisig wallet by rogue team members who grabbed the cash and ran.
According to part of the official explanation,
“The multi-sig was setup to require 3/4 signers present for an approval. Yesterday these 3 ex-team members came back behind my back, logged onto the multi-sig, stole 16 Trillion (60% of the 26 trillion multi-sig tokens) and sent them to exchanges to sell.
They then removed themselves from the multi sig in an attempt to absolve any association to $PEPE, deleting all of their social accounts and leaving me behind nothing but a message stating ‘the multi-sig has been updated, you are now in full control.’”
And as for the left-over funds in the wallet?
“The remaining 10 trillion tokens left in the multi-sig will be transferred out of the old multi-sig and into a new wallet where they will safely rest until a use or burn arises.”
Does that all make sense?
To me, it looks like this story, revolving around that kind of brazen theft, may have more still to unfold.
New Crypto Tax Rules Under Fire
Over in the US, the perception that the current authorities really don’t like crypto was again reinforced, this time by new crypto tax proposals that, let’s say, haven’t been well received by the crypto community.
The proposed new rules come from the Treasury Department, are aimed at dealing with capital gains on crypto tokens, and would introduce a specialized reporting form for crypto brokers to file.
This means defining who exactly is a broker and what information they need to gather on their users, and that’s where the situation gets messy.
Critics maintain that because the IRS is actively looking for brokers where they don’t exist (because crypto is not centralized), components of the crypto ecosystem like DeFi protocols and wallets are being dragged in and misclassified as brokers.
The upshot of that is that products like UniSwap and MetaMask, along with a range of sites that communicate with user wallets, might–if the proposals go ahead–find themselves categorized as as brokers that have to KYC users and report user activity to the IRS.
On the more positive side, the new rules largely exclude mining operations, and the proposals are still just that: proposals, which can be altered, and which aren’t scheduled to take effect until 2025 for exchanges and 2026 for brokers.
Also, we should acknowledge that crypto taxes are a real issue, and that clarification can help bring in new users.
The question though, is whether US authorities will adapt to a sector that doesn’t fit neatly into existing standards, or whether, on the other hand, they’re aiming for some kind of regulatory capture.
Oman Backs Bitcoin
Nation state adoption has been a major narrative driver for Bitcoin in recent years, with El Salvador leading the way when it comes to utilizing BTC as legal tender. And nation states are back in the Bitcoin spotlight at the moment, as oil-rich middle-eastern nation Oman announced that it will be investing $1.1 billion to support private Bitcoin-mining company Exahertz International.
This is big news in itself but an added positive is that before going ahead with this move, regulatory discussions in Oman found Bitcoin to be compatible with Islamic law.
Considering that Islam is the official religion in 26 countries, and almost a quarter of the world’s population identifies as Muslim, this sounds like a big plus point in favor of truly global Bitcoin adoption.
Hashdex BTC ETF Takes New Angle
Yet another spot Bitcoin ETF application has been filed with cheerfully easygoing (/sarc) regulators the SEC, this time from crypto asset management firm Hashdex.
It’s actually an update on their Hashdex Bitcoin Futures ETF, which is to be renamed Hashdex Bitcoin ETF and will (if changes are approved) hold a mixture of spot BTC, BTC futures, cash and cash equivalents.
Unlike recent ETF applications from BlackRock and others, Hashdex’s fund will not use Coinbase (or any other exchange) for its spot BTC. Instead, it will make use of Exchange for Physical (EFP) transactions on the CME Market.
The EFP mechanism allows for exchange between futures and spot, and this, according to Hashdex, addresses the issue of detecting fraud and market manipulation (which are among the SEC’s problems with spot BTC ETFs.)
From the Hashdex filing (page 9)
Overall, this means we now have a variety of ETF approaches being put to the SEC (using Coinbase and surveillance sharing agreements, or using EFP transactions) which, you’d have to think, increases the odds of something eventually getting approved.
Friend.tech and OnlyFans: A Moneymaking Match?
The Friend.tech platform has gained interest lately, as it allows for the buying and selling of keys to other users’ private groups, with these tradable access tokens going up and down in price, while providing revenue for the accounts they give access to.
The concept seems kind of strange, but where there are profits, there’s attention, and since Friend.tech introduced the capacity to share photos there’s been an influx of users from OnlyFans.
This means there’s now speculative trading around accounts producing the adult content OnlyFans is famous for, which is fine, but it seems like crypto-natives are passing the time trading whatever novelty comes round next while waiting for markets to pick up.
Maybe we’re being too cynical though, what do you think? Can Friend.tech establish a long-lasting platform, and if OnlyFans accounts are showing interest, does that mean platforms like Friend.tech can onboard other newcomers from Web2?
As always, reply to this email and let us know your thoughts.
Starting with a look at bitcoin supply, the ongoing trend is that it’s becoming less and less liquid. In fact, the amount of BTC circulating supply that’s illiquid has now hit 80%. This kind of decreasing liquidity would usually increase the likelihood of volatility and big price moves, and it also suggests that the HODL mentality is strong.
And when it comes to bitcoin whales, big holders are increasing, with the number of addresses holding over a thousand coins experiencing a sharp spike upwards towards the end of August. Notably, this corresponds with the fact that BTC open interest and leverage are not rising, suggesting that the BTC price is being held in place by these large buyers.
Moving our attention over to Ethereum, we can find that the L2 ecosystem looks healthy, with TVL on Ethereum L2s continuing to grow steadily throughout this year, regardless of what’s occurring in crypto more widely.
And focusing in on Base in particular, the new network from Coinbase is continuing its strong start since launch, growing rapidly to reach over 100,000 daily active users more quickly than any other L2 ever has, an achievement managed in just 56 days.
And if you were wondering what exactly all those users are actually doing on Base, then you need to factor in the Friend.tech effect. The new Social-Fi app (are we calling it Social-Fi?), which has generated a lot of hype and recently attracted users from OnlyFans, is currently dominating Base volume, taking up over 50% of transactions, with noticeable bumps in activity at weekends.
Now, Immutable, which is a specialist gaming blockchain, launched its new zkEVM Testnet earlier this month, and has subsequently experienced a 10X surge in game developer signups, which looks especially positive considering how much potential there is in Web3 gaming, and how important it is to have teams actively building out products on working rails.
Another area of huge potential is RWAs (real world assets and their tokenization), and here we can find plenty to be positive about, with a big surge in TVL starting especially in July, and continuing to increase to, currently, over $1.2 billion.
As for which RWA products and protocols are leading the way, in terms of TVL, we can find stUSDT, Ondo Finance, RealT, Matrix Dock, and Maple RWA up at the top of the rankings.
RWA TVL
RWA Protocol Rankings
Moving on to look at the wider crypto landscape, decentralized protocol UniSwap has, for the first two quarters of this year, been leading centralized exchange Coinbase in spot trading volume. This reflects how, since peak activity in 2021, Coinbase has seen much larger falls in volume than UniSwap has, with the latter proving more resilient at times like these, when mainstream attention is diverted away from crypto.
And speaking of the world away from crypto, to get some wider perspective, US tech stocks are now massively outperforming global equities. In fact, even the 90s/00s dot com bubble didn’t come close to these levels of relative performance, so, whatever you’re currently investing in, don’t underestimate what unusual times we’re experiencing.
Here are my key takeaways from the trends this week and whilst price action continues to chop sideways there are lots of new developments happening behind the scenes.
- Pepe is a memecoin that’s confirmed $16M was withdrawn from its multisig wallet by three ex-team members who have been doxxed on X (Twitter).
- Sei is a brand-new Layer-1 blockchain built using the Cosmos SDK that’s already being dubbed the fastest Layer-1 blockchain after launching just two weeks ago. Sei is also hosting token giveaways with Binance and CoinGecko.
- Optimism is an Ethereum Layer-2 scaling solution that’s announced a revenue-sharing and governance-sharing agreement with Base and Coinbase to prevent Base from becoming centralized.
- Unibot is an automatic trading platform for Uniswap that’s become the first Layer-2 network to launch on Coinbase’s Base network.
- GMX is a DeFi perpetual exchange that’s seen a trader make over $1M from shorting and then longing Ethereum on the platform. GMX V2 contracts with Chainlink real-time feed integration have also launched on Arbitrum’s Goerli testnet.
- Arbitrum is an Ethereum Layer-2 scaling solution that’s seen a proposal put forward for voting that would integrate Arbitrum One with Rarible to allow NFT applications within the ecosystem.
- Klaytn is an enterprise blockchain that’s announced a partnership with Singapore’s Blockchain Association to explore educational initiatives. Klaytn is also teasing a launch coming on September 1 in collaboration with SafePal.
- Kadena is an L1 blockchain that’s seen its KDA token integrated into Ledger’s wallets and Ledger Live app.
- Akash Network is an open-source cloud network that’s launching its AI Supercloud on August 31.
- Worldcoin is a biometric digital ID that’s seen an alleged former employee claim the project may have committed illegal acts during their employment. The WLD token has dropped 44% in the past 30 days due to data privacy concerns.
- Sui is a Layer-1 blockchain that’s launched its Sui Kiosk allowing commerce apps to build on the network and has announced an NFT collection is launching in early September called Tails by Typus.
- Rollbit is a lottery token that’s gained almost 35% in two days as Rollbit sees its largest hourly Buy and Burn to date.
- USDC is a US dollar-backed stablecoin issued by Circle that’s seen Solana Pay integrate with Shopify to launch USDC payments. Coinbase has also invested directly in Circle to further strengthen the stablecoin market.
- Chainlink is a decentralized oracle network that’s announced Staking V2 is on track to launch later this year.
- Ethereum has seen OnlyFans purchase $19.88M worth of ETH as published in official company documents.
Stay up to date with all of the latest happenings in the crypto markets with “The Lark Davis Podcast”. Whether you’re a seasoned investor or a curious beginner, this podcast is your guide to navigating the ever-changing crypto landscape.
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