Welcome to this 26th issue of the Chain Reaction newsletter published on the 11th May 2022.
What you can expect in this newsletter
In the News
What we're reading/watching
Editor's Note (from Captain DeFi)
KYC (know your customer) issues and fixed price on entry fee were blamed for the issues behind Yugalabs controversial metaverse land sale last week. Otherdeeds tokens (required to get into the land on the Otherside metaverse setup by Yugalabs) highlighted an economic issue we see in the crypto space especially when demand outstrips supply. Whilst there were a tonne of opinions on this topic, it looked less like technical issues since the site remained up the whole time and brough in $300m in sales (a similar size to the Square Enix sale of the Tomb Raider game franchise last week). It showed there are still a lot of issues in this space to be figured out as there were many who lost out not on transaction fees (those lost fees were refunded) but rather, they sold other NFTs to be able to buy into the Yuga sale and ended up with nothing. Education is certainly key to all of this and when the next hype wave comes, we’ll hopefully avoid this type of situation.
In other news this week we saw continued mainstream adoption not just from banks getting into crypto but with the a DeFi protocol receiving a credit rating from S&P. Compound can clainm victor for being the first but it’s not overly positive as it only received a B-grade. This equates to "speculative" but "currently has the capacity to meet financial commitments.”
In any case, this space and its builders, investors and supporters march forward despite the volatility we’re seeing again.
In the news
The following comes from BetaShares weekly crypto focused newsletter - check it out in full over here for more data analysis and other insights: https://www.betashares.com.au/insights/bitcoin-backed-loans/
Also check out Justin's latest article on Livewire here: https://www.livewiremarkets.com/wires/prices-fall-but-conviction-grows
"Italian high-end luxury fashion house Gucci announced that it will begin accepting cryptocurrencies at some of its stores this month, with plans to accept crypto for all of its directly operated North American stores by this summer. Gucci joins other luxury retailers such as Off-White and Phillip Plein to offer this service. In-store shoppers will be sent a link via email with a QR code that would allow them to pay directly from their crypto wallet. More than ten cryptocurrencies will be accepted, including Bitcoin, Bitcoin Cash, Ethereum, Wrapped Bitcoin, Litecoin, Shiba Inu, Doge and five stablecoins pegged to the US dollar. Marco Bizzarri, the president and CEO of Gucci, commented: “Gucci is always looking to embrace new technologies when they can provide an enhanced experience for our customers.”
Gucci has already released some NFTs and is also establishing a presence in the metaverse and will be developing digital real estate in The Sandbox.
A survey conducted by the Bank of International Settlements (BIS) revealed that 73 out of 81, or 90%, of central banks are exploring how to release their own central bank digital currency (CBDC) and half of those financial institutions are already developing or in experimental phase. Besides China, which recently ran an experiment with the digital Yuan as a payment method during the Beijing Winter Olympic Games, other countries exploring the potential launch of such a project or conducting trials include Malaysia, Thailand, Zambia, Indonesia, and Mexico. The BIS stated: “Globally, more than two-thirds of central banks consider that they are likely to or might possibly issue a retail CBDC in either the short or medium term. Central banks consider CBDCs capable of alleviating key pain points such as the limited operating hours of current payment systems and the length of current transaction chains.”
A report released by Coinbase shows that crypto adoption in the United Kingdom has continued to rise, with a reported 33% of the country’s consumers having invested in such assets. The figure is up 4% from six months prior, and is second in Europe only to the Netherlands’ huge 47% statistic. Other European countries reported less crypto investment overall, with the UK’s ownership figures ahead of Spain (26%), Italy (25%), Germany (24%), and France (17%). The report found that 61% of Britons who already own cryptocurrency plan to increase their positions within a year, up from 54% in October 2021. Of that group, about two-thirds plan to increase their position in the cryptocurrency they are already holding, versus just 23% who wish to expand into new assets."
This week we're showcasing the Katalyst.Earth project which is all about fighting climate change.
The Dark Horse
The Dark Horse is a groundbreaking NFT Access Pass supporting 17 year old Filipino racing driver, Bianca Bustamante. The project is a brave new take on the traditional talent agency and early sponsorship functions – reimagined through web3. It supports the dreams of drivers like Bianca – by eliminating the fiscal hurdles of a racer’s career through NFT sales. In return, The Dark Horse enables Bianca to utilise her NFT collection to grow her community and find unique ways to deliver content, interaction and exclusivity to the users' experience. The project also allows her inner circle, BiaCrew, to reap the immediate benefits of airdrops, tokenization, metaverse integration and beyond.
This week we asked our community the following question:
Are you bullish or bearish on regulation coming to this space and what's the reasoning behind that opinion?
Here's some of the responses from our Discord
Bullish! I think more legal clarity will drive both adoption and inflow. Will make it more palatable to instos (their compliance dept) to enter the market as direct players.
From Concrete Pigeon | Jeremy:
Bearish. First, web3 is a space with no borders and it moves fast. From a practical point of view I think that any centralised institution will have a hard time applying rules consistently across the entire space (if they can even keep up). It would also be tricky for multiple centralised institutions (that have jurisdiction over different physical locations) to align their views.
Second, I want to believe that the web3 community will develop a way to self-regulate in a decentralised manner (like the vision for TCRs back in 2017-2019?). I think if we can do this it's a win for everyone.
from Mitch (katalyst.earth)
Bullish. We are building katalyst.earth in a grey zone and as much as we want to think we can work around the lack of regulations they will come. The sooner we can have clarity the better for the local web3 scene or we move to jurisdictions where there is clarity (Im speaking on our necessary tax, financial services and legal DD which we are still in the process of completing).
Data as at 10th May 2022 - 9:00pm
Market Moves (from CoinGecko)
NFT Moves (from CoinGecko)
What we've been watching/listening to
[Video] Unchained Podcast - bringing in Andre Cronje with his supporters and critiques on this show to go through the journey he's had since leaving DeFi and now potentially coming back in - https://www.youtube.com/watch?v=CA41gQt24tk&ab_channel=UnchainedPodcast
[Video] Glassnode video looking at the capitulation the markets have been showing lately and how the former HODLers appear to be weakening their grip - https://www.youtube.com/watch?v=szhyWHDmuG4&ab_channel=glassnode
[Podcast] Tapping into Crypto is a show we've been on talking DeFi vs CeFi a few episodes ago and in this episode it's a call back to a great chat with Raoul Pal and host Alycia about inflation and macroeconomic trends - this is from a few months ago but much of it still holds true - https://open.spotify.com/episode/1Fz7qdFjnoEYkalbeLtLtO
[Podcast/Video] Our Aus DeFi interview with JTC (Josh Talks Crypto) going through how he got involved in this space and much more - https://www.youtube.com/watch?v=m6O6lgApVSo - it's also available on Spotify now too - https://open.spotify.com/episode/0zraGZ0goJJwkyN4JIg5bK
Get in touch
If you would like to dig deeper into why and how is the blockchain relevant to international matters and to get more insights on regulations and Defi knowledge , join us on our Discord: https://discord.com/invite/ZRCTDdsVEF