3AC’s Favorite Trading Strategy is Back

SEC Might Ban DeFi | Web3 Community Analytics

Marco Manoppo
April 17, 2023

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GM folks 👋🏻 — Happy Monday,

DWF Labs name is everywhere lately. The fund allocated $232M across 25 fundraising rounds. On 18 of those rounds, DWF was the only investor.

On Friday, The Block published an article outlining DWF Labs’ “opaque, non-standard” deal structures — arguing that the deals weren’t actual investments, but OTC deals instead. However, so long as the two parties involved in the deals signed the agreement, DWF didn’t do anything wrong. Its founder seemed to agree with this sentiment.

Never a dull weekend in crypto.

In Today's Email:

What Matters: SEC might ban DeFi platforms 👨‍⚖️
Products: AhoyConnect, web3 community analytics 📊
Charts: BTC futures premium is back, ARB momentum 💪

Check out our weekend issue, Breaking Down Businesses, covering Aave, here.

Reply to this email to let us know what protocols/companies you want us to cover!

Narratives: Pay attention to mid-cap high quality crypto tokens for a market beta play.

WHAT MATTERS

SEC Might Ban DeFi Platforms

State of play: The US SEC declared that rules governing exchanges in the US will also apply to DeFi. Chairman Gensler made a strong statement:

“Make no mistake: many crypto trading platforms already come under the current definition of an exchange and thus have an existing duty to comply with the securities laws,”

“Yet these platforms are acting as if they have a choice to comply with our laws. They don’t.”

Although there’s no change in rules, the action was an effort by the SEC to explicitly state that existing rules for traditional exchanges apply to DeFi platforms.

Unsurprisingly, many aren’t happy with the SEC’s action. Even SEC’s own Commissioner Hester Pierce publicly stated her criticism.

In just 60-something words, SEC Commissioner @HesterPeirce has managed to articulate all that hits awfully close to home. Thank you.
— paulgrewal.eth (@iampaulgrewal)
9:36 PM • Apr 15, 2023

What’s next: There’s a 30-day comment period for the SEC to hear public opinion. However, there will be voting to finalize the proposed clarification and amendments to the definition of an “exchange” — and it’s predicted to pass.

Our take: Crypto regulatory debate will always involve an ideological aspect. It’s a controversial technology by nature. There will be differing views that aren’t exactly black-and-white clear that one side is at fault.

“Gensler understands crypto, but he might just have a different view towards it” — this is a reality that most crypto participants might not be able to accept.

Is Gary Gensler wrong or does he just disagree with you?
🗣️ @laurashin sounds off on a very crypto phenomenon.
unchainedcrypto.com/podcast-choppi…
— Laura Shin (@laurashin)
3:54 PM • Apr 15, 2023

For builders: You need to hedge your risk. If possible, build outside of the US, find your PMF and target other markets that can get you to revenue (or even profitability) ASAP. Don’t launch a token if there’s not a good reason for it yet.

For investors: If you’re a large investor, help the industry fight for better regulations by educating policymakers. If you’re a smaller investor, help your founders navigate the current situation via strategic move.

Take a peek at our new referral reward at the bottom of this issue. Share this newsletter and receive our list of 100 smart crypto investors' wallet addresses 👇

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PRODUCTS OF THE WEEK

AhoyConnect: Web3 Community Analytics

AhoyConnect

What is AhoyConnect: It’s a community analytics tool specialized for crypto projects. With AhoyConnect, crypto projects can better manage their community and truly understand users behavior.

AhoyConnect raised a $3M Seed Round in September 2021.
Its products include on-chain data dashboards, integration with other social platforms such as Discord, and pre-built reports.
AhoyConnect is used by notable projects including Near, Dapper Labs, and Livepeer.

Other cool products:

Changer, an altcoin-focused decentralized exchange.
TransferChain Send, a blockchain-based private file sharing tool.
WalletOS, an API to easily integrate with 18 blockchains.
Leto, a phone-based crypto payment wallet.
Highloop, a tool to create NFTs and manage digital communities.

CHARTS OF THE WEEK

BTC Regulated Futures Show Positive Signs (3AC Play)

NYDIG

The price difference between BTC spot market and US-based regulated futures has been in the positive territory (futures trading at a premium). On the contrary, offshore unregulated futures have not been consistently positive in the past few months.

Our take: Since Q2 2022, BTC futures has been trading at a discount. The return of the premium signals positive signs for the crypto market — and once again enable traders to do the “cash and carry trade”.

To watch: US inflation is predicted to reach 2-3% sooner than later. If that prediction comes true, appetite towards risk assets, hence BTC futures premium, should persist.

Arbitrum Continues Its Momentum

Token Terminal | @expctchaos

State of Play: Arbitrum accounts for 40%+ of all L2 fees on Ethereum.

Polygon and Optimism are the close seconds with around 20%+ of market share.
Starknet’s market share jumped to ~15% in the past few months.

Our take: Altnernative L1s will continue to find difficulty in garnering users and liquidity. Although there are many L2s being launched, they benefit from easy capital flow from the Ethereum main chain.

These L2s are also dependent on successful dApps, Arbitrum’s success can partially be attributed to GMX’s success as a decentralized perpetuals trading platform.
When Starknet launches its token, we can expect the marketshare dynamics to shift significantly.

QUICK BITES

SEC increases scrutiny towards DeFi exchanges.
SEC targets Bittrex, might sue the exchange.
Eurex to launch first EU Bitcoin Index Futures.
US House publishes its draft stablecoin bill.
Mysten Labs buys back stake from FTX for $96M.
Shaquille O’Neal served in FTX class action.
Silk Road hacker sentenced for multibillion dollar BTC fraud.
Arbitrum voted against returning 700M in ARB tokens.
Uniswap approves deployment of v3 on Polygon zkEVM chain.
Bitrue exploited for $23M.
Zipmex faces rescue investor problem.

MEME & NOTEWORTHY READS

Joel John’s read on applications built on the Bitcoin Ordinals ecosystem.
Martin Casado’s read on the modern transactional stack.
CryptoCred’s thread on swing trading.

@DegenSpartan

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.