Why Are Holders BURNING $100K NFTs?
In This Issue
- Sam shares his thoughts on BitGo terminating the Prime deal, the SEC doing SEC things, Layer 3s, & Bitcoin Ordinals
- This week on chain.
- This week’s trending coins by Rebecca.
The News Now
BitGo Terminates Prime Deal
Crypto sometimes seems like a constant cycle of financial blowups and regulatory roadblocks on the one hand, and then tech innovation and official green lights on the other. The regulatory situation depends on which country you happen to be looking at, and the financial drama is outweighed by the opportunities, but anyway, the latest implosion is at Prime Trust in the US.
Prime Trust is not exactly a bank, it’s a fintech-focused trust company offering infrastructure and custodial services to crypto companies, meaning that among other things it takes care of their funds, and it’s had some famous/infamous customers, including FTX, Binance US, and Celsius.
Earlier this month, amid speculation that Prime Trust was on the brink of insolvency, another trust company, BitGo, stepped in with news that it was to acquire Prime Trust, through acquiring equity in parent company Prime Core Technologies.
That was great news but… it isn’t happening now, as BitGo has terminated the acquisition, and the abrupt change of mind comes as Prime Trust, which is based in Las Vegas, was issued a cease and desist order by Nevada officials who identified shortfalls in customer funds, which is not great for a company whose critical role is taking care of customer funds.
Deposit and withdrawal of both fiat and crypto have been halted at Prime Trust, and we’ll have to wait and see where clients go now and what happens to their funds, but it’s fair to say that establishing reliable links between crypto platforms and traditional banking services is an ongoing issue, especially in the US.
SEC Doing SEC Things
All the huge news recently has been around BlackRock’s application for a BTC spot ETF, which fired a powerful message at the SEC and bolstered the case for crypto in general and Bitcoin in particular, setting off a welcome price run that currently sees BTC trading above 30K.
Admittedly, we still don’t actually know what the decision will be on that application, but the prevailing opinion is that BlackRock doesn’t waste time on processes that won’t go its way. In the meantime though, the SEC has gone ahead and authorized an application from Volatility Shares for the US’ first ever leveraged bitcoin futures ETF, which will open for trading this Tuesday.
The ETF will offer 2x leverage, and is launching on the Cboe BZX exchange. So has the SEC finally chilled out and does this bode well for the prospect of BTC spot ETFs in future? It’s possible, but this also underlines how inconsistently–or even suspiciously–the SEC has acted around Bitcoin and crypto.
After all, why approve a leveraged futures ETF before a straight spot ETF, on a famously volatile asset, if one of your main priorities is consumer protection?
Layer 3s on Layer 2s
There’s lots of developer activity happening around Layer 2s, an area likely to expand and innovate rapidly as crypto looks to scale and onboard new users around the world.
Optimism Rebrands
One of the biggest players is Optimism, which last week changed its name to OP Mainnet. This comes soon after the launch of the Bedrock upgrade, and the Optimism team has explained that the name change is part of a long-term vision of enabling an interconnected superchain of compatible networks.
OP Mainnet currently has over $1.3 billion of value locked in, and is attracting plenty of use and attention, with, most notably, the new Binance Layer 2 network, called opBNB, recently launching an Optimism-powered testnet.
Arbitrum Layer 3s
If a mere two layers just isn’t satisfying your blockchain layering needs, then why not try a Layer 3? Offchain Labs, the developers of the Arbitrum Layer 2 solution, recently launched a toolkit for developers to build and deploy new Arbitrum Orbit chains, and has a guide to launching on DevNet (a sandbox environment), with guides for TestNet and MainNet to follow.
Orbit allows projects to create their own customized Layer 3 chains, which settle to the Arbitrum Layer 2, while the Layer 2 in turn settles to Ethereum, and the whole stack should allow for security with increased throughput and scalability.
Toasting and Poasting on Bitcoin Ordinals
Strange things happen in the NFT corner of crypto, and Bitcoin Ordinals have ramped up the chaos, with some developers encouraging CryptoPunks holders to burn their historic PFPs, while at the same time touting Bitcoin as a hyper-secure publishing platform.
Would You Burn a CryptoPunk?
CryptoPunks are currently valued at a minimum of 49.9 ETH, or around $96,000, and, incredibly, total supply is now down forever by two items, as a couple of Punks have been tossed maniacally into the JPEG incinerator.
These radically degen moves were initiated by an Ordinals project called Ordinal Maxi Biz, which offered whitelist spots for its upcoming PFP drop to anyone who burned a punk. Also, the destructive process results in the CryptoPunk being inscribed as an Ordinal on Bitcoin (a process called teleburning), although the new item no longer has any official connection to the original project.
There may actually be method to the madness, as the Bitcoin-based PFPs released up to now by Ordinal Maxi Biz currently command a floor price of 3.25 BTC, which is around $99,000 (although that’s based on a supply of only 191 items, while the incoming last part of the collection has a supply of 1900). What’s more, one of the teleburned Punks, #8611, has been fractionalized into 576 pieces, and they’re currently listed at a floor price of 0.017 BTC, giving a total value, on paper, of about $300,000.
Crazy times, but keep in mind that liquidity on Ordinals collections is much lower than that on big Ethereum collections.
Is Bitcoin a Publishing Platform?
Besides prompting insane NFT traders to destroy six figure JPEGs, Ordinals innovators have been working on ways to utilize Bitcoin as a censorship-resistant publishing platform, where content can be permanently etched onto the blockchain and accessed by anyone, anywhere, forever.
The ord.io Ordinals platform has launched a Markdown feature (which enables text to be formatted for publishing online without using HTML), and there are plans also to make use of recursive Ordinals technology, meaning an inscribed item can call on and make use of the content in another inscribed item, creating a network of content, which sounds very much like… the early web, but decentralized. Overall, it looks like an experimental idea that might remain niche, but also could have interesting potential.
This Week On Chain
Let’s start with something simple but striking: performance up to now this year shows Bitcoin, which is up 81%, outperforming Ethereum, which is up 57%, and hugely outperforming the Nasdaq (up 32%) and the S&P 500 (up 15%).
And Bitcoin’s strength specifically within the crypto sphere is underlined by the Bitcoin dominance figure, which now sits at 51.5%. Basically, right now, it’s all eyes on orange coin, and with Bitcoin ETF applications one apparent trigger for current bullishness, it might stay that way for some time to come (although that said, it arguably wouldn’t take much to set off an altcoin season).
At the same time though, it seems like traders are not taking risks with their profits (prolonged, catastrophe-scarred bear markets tend to make people cautious), as the year’s second-largest profit securing event occurred, in which $537 million in realized bitcoin profits were firmly banked.
Further bullish data for BTC sees illiquid supply at an ATH, with exchange balances trending downwards, meaning, basically, that BTC is currently in relatively short supply should any large entities be looking to load up in the near future.
That all said, Bitcoin appears not yet to have captured mainstream attention the way it definitely can during full-blown bull surges, judging by data looking at web traffic and social media. Here, we see Google search volumes for Bitcoin, Ethereum and NFTs remaining flat, although there’s an uptick in crypto-related tweet volume, especially relating to Bitcoin.
This all suggests that while the crypto sphere itself, which is especially active on Twitter, may be warming up after a tough year or so, wider retail FOMO–which accompanies and accelerates crypto bull markets in their later stages–is not playing a major role in current price movements.
blue = Bitcoin, red = Ethereum, yellow = NFT (on Google Trends)
When it comes to Ethereum, we can find staking migrating away from centralized exchange Coinbase in favor of decentralized options, with Lido taking by far the biggest share, tying in with current sentiment leaning away from big platforms that are at odds with US regulators.
And in the rapidly growing world of Layer 2 scaling solutions, Matter Labs’ EVM-compatible zkSync Era, which went live in public alpha in March, hasn’t slowed down after soaring past the $500 million TVL mark around a week ago, continuing rapidly upwards to beyond $600 million.
When it comes to development taking place on Layer 2s, data tracking numbers of monthly average core developers shows healthy-looking, gradual but steady overall growth from across four major networks: Polygon, Optimism, Arbitrum, and StarkNet.
Finally, when it comes to NFTs we can find a curious situation in which new wallet first time interactions with NFTs are increasing, but new wallet transactions with marketplaces are not growing at a corresponding rate (and marketplace transactions on the whole remain comparatively low). This scenario–wallets that are newly acquiring NFTs but not actively trading–suggests a shift away from the quick flipping for profit that has often defined the NFT space up to now.
And while we’re on the subject of NFTs, with prices being dragged down across major collections, the focus has been on Bored Apes, Mutant Apes, and the rest of the Yuga Labs ecosystem. If catching falling knives is your thing and you can apply your skills to PFPs, then these prestigious apes have seen their prices dropping rapidly, followed by a small recent bounce, leaving NFT flippers wondering where the bottom might lie.
This Week’s Trending Coins by Rebecca
Here are my key takeaways from the trends this week and there has been some big announcements throughout the industry.
- Polygon is an Ethereum side chain that’s announced its plans for Polygon 2.0, a network of ZK-powered L2 chains. A proposal has been published to upgrade the PoS chain to zkEVM Validium.
- Trust Wallet is Binance’s official cryptocurrency wallet partner that’s been giving away a free Formula 1 digital collectible ahead of the Canadian Grand Prix.
- ApeCoin is the utility token for the Bored Ape Yacht Club (BAYC) community. The first round of voting has opened for its Special Council and Governance Working Group.
- 0x0 ai is a privacy hub and AI smart contract auditor that’s starting to break out of its current triangle trading pattern.
- Aave is a lending protocol that’s exploded 25% in a day and has announced an upgrade to staked AAVE allowing users to redeem and restake AAVE rewards in one transaction.
- Waves is the native token for the Waves DEX and blockchain that’s seen DWL Labs commit 500K of WAVES tokens to the WavesDAO. The WAVES token skyrocketed 91% upon the news.
- Pepe is a memecoin that’s re-emerged and surged 79% in the past week. Futures contracts had more than $13M in liquidations which may have caused the price spike.
- Ethereum balances on exchanges have reached a new all-time low of 12.6%. Ordinals-inspired “Ethscriptions” have reached 170K in less than a week after launching.
- Arbitrum is an Ethereum Layer-2 scaling solution that’s seen Binance announce support for USDC deposits and withdrawals on the network.
- Bitcoin has hit a one-year high after soaring above $31K due to the flurry of ETF applications. The IMF has also said a ban on Bitcoin may not be effective and Federal Reserve Chair Jerome Powell has said crypto has staying power in the US.
- BNB is the native coin for the Binance chain that’s seen Binance ordered to stop all crypto services in Belgium. Binance has also launched the testnet for its Layer-2 network, opBNB on Optimism’s OP stack.
- Synthetix is a synthetic assets protocol on Ethereum that’s launched V3 spot markets and now supports Lido’s staked ETH for leveraged trading.
- USDC is a US-dollar-backed stablecoin issued by Circle that’s doubled its reward to 4% and has overtaken USDT as the most liquid stablecoin on centralized exchanges. Circle has also restarted buying US Treasuries as backing for USDC.
- Radiant Capital is a decentralized, non-custodial lending protocol on Arbitrum that’s published a proposal to deploy on the Ethereum mainnet.
- Injective is an L1 blockchain and DEX protocol that’s announced nearly $50K in INJ tokens will be burned by the community in one of its biggest burns yet.
Final Notes
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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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