Cryptogram - 18NOV2022

How to save crypto from crypto bros?

November 18, 2022

18 November 2022

In this issue

Hello, You would think looking at the subject of this that we are offering solutions. No, we are asking, like really, tell us – how to save crypto from crypto bros?And how to save crypto from ourselves? Because…

It’s these existential questions that we, as well-meaning believers in crypto, have been asking ourselves as the FTX saga unravels itself in painfully slow-motion, consuming one institution after another, ravaging through customer and investor money. So much so that Binance CEO CZ, the now undisputed king of crypto ecosystem, has announced an industry recovery fund. But can we trust another crypto bro with this?

Beside self-reflection, there has been anger. Anger that SBF turned out to be such a di…sappointment. We wouldn’t blame you for wanting to fly to the Bahamas and tear him a new one if you read his DMs to a Vox reporter.The clouds are so dark that any silver lining seems to be inconsequential, but there is at least one we can take note of: crypto users’ decisive shift towards private wallets, away from centralized exchanges. It wouldn’t be too wrong to ask if this is the end of the “centralization era” of crypto. In this issue of Cryptogram, we do a post-mortem of last week’s casualties, and cull out five trends we see emerging in the market which can help you guide through what promises to be a long, cold winter.

The newsletter is put together by Giottus Crypto Platform and The News Minute’s Brand Studio. You can read all the previous issues of Cryptogram here.

Was this newsletter forwarded to you?

WEEKLY PRICE TRACKER

Price movements from last Friday

BTC:  1.7% as contagion risk looms post FTX collapseETH:  1.8% as its price movement is correlated to BitcoinUSDT: 

0.22% as uncertainties begins to settle down after huge amounts of USDT owned by FTX were frozenMATIC: 

 15% because heavy bear market resistanceUNI: 

4.9% as decentralized exchanges continue to attract investors

NEW KIDS ON THE BLOCK

New coins to watch out for:Toncoin - official token of telegram that shows major potential in terms of price action in bear market Algorand - alternative layer-1 that is getting some attention due to partnerships with FIFA world cup

Project to watch out for:Lens protocol - A permissionless, composable, & decentralized social graph that makes building a Web3 social platform easy

Was this newsletter forwarded to you?

THE BIG STORY

FTX: 5 trends amidst the contagion

There is that voice in one deep corner of our head which is whispering, “perhaps this won’t get any worse”. But every other noise and signal in the past week has spelt doom – at least in the short run. FTX downfall has led to a disastrous contagion.Here’s how money is likely to all but vanish.

One of the biggest fallouts has been BlockFi. In July, 2022, FTX offered a revolving credit facility to the struggling crypto lender up to $400 million with option to buy BlockFi for as much as $240 million.Now, BlockFi is preparing to file for bankruptcy due to “significant exposure” to the FTX fallout, The Wall Street Journal reported. The $2.8 billion lending arm of Genesis Global Trading, a crypto investment bank, suspended redemptions and loan originations on Wednesday because of its exposure to FTX. Genesis owner, Digital Currency Group (DCG), is also the parent company of CoinDesk which started the Alameda story that led to the downfall of FTX. Last week, Genesis disclosed that its derivatives unit had about $175 million in locked funds in its FTX trading account. As a result, DCG opted to strengthen Genesis’ balance sheet with an equity infusion of $140 million. In Feb 2021, Gemini, the crypto exchange and custodian, partnered with crypto lender Genesis to launch their earn program that promised 7.4% yield on customer deposits. After the FTX fiasco, they have suffered a rush of withdrawals. Data by blockchain intelligence platform Nansen shows that Gemini saw $485 million in net outflows in one day, the largest among crypto exchanges. And then, there was the FTX “hack”. On the same day FTX, FTX US, and Alameda Research filed for bankruptcy, more than $600 million was reportedly drained from the cryptocurrency exchange. A sizeable portion of the stolen funds contained USDT. After FTX’s announcement, Tether immediately blacklisted $31.4 million worth of USDT linked to the transactions. The hack is believed to be an insider’s job. Amidst all this misery, here are five key trends emerging from the last week.  1. Calls for tighter regulations are being mooted across the globe. Politicians in the US are calling for tougher laws and more visibility into the crypto ecosystem. The Australian treasury has promised regulations by next year. 2. DeFi activity surges: Activity on DeFi protocols and Decentralized exchanges (DEXs) platforms are growing even as investors withdraw tokens from global centralized exchanges (CEXs). Here’s a snapshot of how much crypto is flowing into DeFi, courtesy Blockanalia. 

Tokens associated with such projects such as DYDX (dYdX DEX) and TWT (TrustWallet Token) are among the top performing cryptocurrencies in the last week.3. A new phrase is added to crypto investor’s lexicon, Proof of Reserve. CZ of Binance started this trend and many global and local exchanges have followed path

Since the announcement, a range of marketplaces, Gate.io, KuCoin, Poloniex, MEXC Global, Bitget, Huobi, OKX, Deribit, and Bybit, have all announced that they will provide their Merkle Tree reserve certificates in an effort to encourage further transparency. Giottus, in India, has also committed to the same.4. Cold wallets are ‘hot’ now: Investors are flocking to find personal wallet options to safeguard their cryptocurrencies including buying hardware wallets such as Ledger or Trezor (which are expensive and take weeks to ship) and software/mobile based wallets (Exodus, TrustWallet, Metamask etc). Investors in India are advised to store their crypto assets on reputed top local exchanges that have promised a 1:1 reserve ratio or transfer to a personal wallet.5. There is no real God/Godfather/Saviour/Superstar in crypto: Investors finally begin to realize that no individual or corporate is infallible in the crypto ecosystem – this goes with the original Bitcoin whitepaper which laid the foundation of a peer-to-peer network that doesn’t work on trust or third party involvement. Decentralization may become a theme that will drive value of projects across the ecosystem in the next bull run.

That’s all we have for this issue, see you next week! 

If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.

Was this newsletter forwarded to you?