[CRITICAL] If You Own Stablecoins, You NEED to Read This 💵

ChatGPT for Crypto | Arbitrum $1.2B ETH

February 13, 2023

GM, folks 👋🏻 - Happy Monday.

📉 Crypto markets fell over the weekend, with BTC and ETH breaking $21,800 and $1,510 respectively. Honestly, seems like we’ll be seeing more ugliness in this coming week, with stablecoin regulations being the primary culprit. Let's get into today's issue 👇

Also, we’re launching a referral program! Receive our list of “Must Follow Up-and-Coming Crypto Twitter Account” 👩🏻‍💻 — scroll down to the end to check it out 👇

In Today's Email:

What Matters: CRITICAL USD stablecoin update! 💵
Products: ChainGPT, AI model optimized for blockchain 🤖
Charts: Arbitrum leads L2 growth, NFT wash trading 📊

WHAT MATTERS

USD Stablecoin Update

State of play: Stablecoin, specifically USD stablecoin, is under a lot of fire. Over the weekend, Paxos is sued by the SEC over its involvement with Binance USD (BUSD). Not long after, Paxos was ordered to stop the issuance of BUSD.

Binance Coin (BNB) fell ~5% on the news.
Binance USD (BUSD) has a market capitalization of over $16 billion.

The ripple effect has already started, with PayPal pausing its stablecoin project and many notable legal figures in the space opining on the fact that centralized stablecoin providers might indeed be dabbling in securities.

don't hate me but custodial stablecoins are probably all securities
I have said this consistently
US securities laws are just insanely broad...
— _gabrielShapir0 (@lex_node)
1:17 AM • Feb 13, 2023

1/5
This is what people don't realize.
Howey test = precedent for investment contracts.
"Securities" is a much broader category defined by the 1933 Securities Act.
Honestly, if the SEC wants to, with how vague the act is, its fairly easy to put anything under it.
— Adam Cochran (adamscochran.eth) (@adamscochran)
1:43 AM • Feb 13, 2023

What’s next: On one side, the US government’s move in trying to have full control over its currency makes sense. This is a typical move in any Emerging Market with capital control. However, this will also stunt the growth of USD stablecoin, which doesn’t make much sense amidst raising competition from BRICS countries 🤷

Our take: Most developing countries in the world are increasing their bilateral or geographically specific FIAT rails, in order to trade with one another without depending on the USD. USD stablecoin will help the US maintain the dollar dominance, but this move from the regulators will set the US back for at least a couple years.

For builders: We’re in an increasingly risky regulatory environment for web3 builders. Make sure that even if you’re a coder or a product person at heart, you understand how close to a financial service your product is. Invest in legal resources and try to not issue tokens until it becomes necessary 📜

For investors: Help founders build their products without risking their necks against regulators. A legal resource for your portfolio companies will go a long way in differentiating your fund, and in increasing the likelihood of successful returns for your LPs 👨‍⚖️

Wise words from @DegenSpartan

flee the dangers of illegal stablecoin securities into the safety of bitcorn and ethiririum!
— 찌 G 跻じ MBA, CFA, FRM, CFP, NGMI, HFSP, HENTAI (@DegenSpartan)
7:59 AM • Feb 13, 2023

PRODUCTS OF THE WEEK

ChainGPT: Blockchain Focused AI Model

What is ChainGPT: ChainGPT is an AI model optimized for crypto and blockchain technology. In essence, it’s taking a playbook from ChatGPT, but takes up the level of efficiency and effectiveness for web3 specific tools such as writing smart contracts, crypto markets analysis, curating news, and much more.

The project is in its early stages. Token sale hasn’t started and many products are in still in the pipelines. That said, ChainGPT has stated the followings products for its roadmap — AI Chatbot, Dev Assist, AI Generated News, AI Generated NFTs, AI Trading Bot, Layer 1 Virtual Machine, Layer 2 zkRollup.
$GPT token. It will be used as a medium of exchange for users of ChainGPT’s products. $GPT will also be used to access new AI models and for tokenholders to accrue values from ChainGPT’s burning mechanism.

ChainGPT is basically claiming to be working on everything under the sun, we shall see if they actually execute.

Other cool products:

DL3ARN, a tool to distribute and verify digital credentials.
Angelope, an NFT crowdfunding tool for creators.
Layr, a DeFi super app
Sharpminter, an NFT minting app.
FlauntNFT, an enterprise loyalty management platform.
Abyiss, a platform to find, track, and research crypto.
Mava, a customer support platform for web3 entities.
Degenda, a direct-to-community engagement platform.

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CHARTS OF THE WEEK

Arbitrum Leads ETH Bridge

Our Network

Arbitrum undoubtedly leads Ethereum L2 scaling solution. The chart above shows that the number of ETH bridge towards Arbitrum eclipses all other Ethereum scaling chains combined. More than 850,000 ETH, or approximately $1.275 billion has been bridge to Arbitrum 🤯

Our take: Arbitrum has done an amazing job in growing its ecosystem without relying on airdrops or fancy tokenomics growth hacking strategy. However, the main contributors to its growth is arguably the rise of GMX, a decentralized perpetuals trading platform on Arbitrum. Without a popular dApp like GMX, Arbitrum would lose its lead 📉

To watch: Arbitrum needs to attract popular dApps to bolster its growth. Like it or not, speculation means adoption 🎰 — the chain can expand its usage by incubating gambling-related projects or by partnering with one, doubling-down on decentralized options (Dopex), and launching a user-friendly crypto wallet.

NFT Wash Trading

Dune Analytics | @hildobby

Wash trading has always been a huge problem in crypto. It’s even more apparent for the NFT markets because of lower liquidity and fragmented markets. The chart above shows that 45% out of the $30B NFT trading volume in Ethereum can be classified as wash trading.

State of Play: Most of the wash trading happened on LooksRare and X2Y2 NFT marketplaces. This is unsurprising given both platforms famous tokenomics design which incentivized fake volumes for token rewards.

The concept — trade x amount of volume, and you’ll be receiving rewards in the form of our native tokens. You’ll be making a profit if the token rewards in $ value is larger than the gas and tx fees you pay.

Our take: Unique tokenomics design to incentivize growth has always been a dominant theme in crypto. From airdrops to liquidity mining, projects relied on promise of a future token reward as a way to bootstrap their growth. This isn’t a bad strategy, but the key is to ensure that you’re rewarding the right behavior and target users that will stay.

QUICK BITES

SEC sues Paxos over Binance USD.
Tether uses Cantor Fitzgerald to oversee $39B in Treasury Holdings.
PayPal pauses stablecoin work.
Coinbase will go to court over US stance on staking, if necessary.
G20 explores crypto regulation.
Uniswap completes vote to deploy on BNB Chain.
Nexo will stop earn product for US clients in April.

MEME & NOTEWORTHY READS

Celia Wan’s article on how NFT become more fungible.
@DataFinnovation article on USDC’s massive mint-burn cycles.
Coinbase’s thread on why staking services are not securities.

— gigabear🧸 (@2170cell)
1:19 AM • Feb 12, 2023

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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.