The White House Crypto Roadmap 📜

Plus: Web3 Growth Tools, Friday Crypto Returns

January 30, 2023

GM, folks 👋🏻 - Happy Monday. Crypto whipsawed over the weekend 📈📉, seems like the Friday weekend pump didn’t happen three times in a row 🤷. BTC and ETH hit a high of $23,900 and $1,650 but failed to break above. Both are currently trading at a level that needs to hold for further upside continuation.

In Today's Email:

What Matters: The White House crypto roadmap 🏛️
Products: Raleon, growth tools for web3 teams 🛠️
Charts: Friday crypto returns, CEX layoffs and volume 📈

WHAT MATTERS

The White House Crypto Roadmap

Pixabay | tiburi

State of play: 🏛️ The White House has released its roadmap to address the risks associated with crypto. The document highlights the fact that the fallout of crypto hasn’t had material impact on the broader financial system, and provides guidance to ensure proper regulations are in place before the two systems become more intertwined.

The document cites LUNA and FTX implosion, albeit not by their exact names, as well as the $1 billion North Korea hack, to highlight the risks of the cryptocurrency industry.
The document repeatedly states that the Administration supports technological innovations, citing that “the technology powering cryptocurrencies may offer ways to make payments faster, cheaper, and safer” — but with proper safeguards.

The White House also outlines the work that Congress can contribute to. This includes:

Expand regulators’ powers
Strengthen transparency and disclosure requirements
Strengthen penalties for violation
Fund law-enforcement capacity to partner internationally
Addressing risks of stablecoins

What’s next: In the coming months, we should see clarity surrounding these rules. The White House has been encouraging Congress, Banking regulators, as well as enforcement agencies to take more actions 👨‍⚖️

If US regulators overcorrect, we’ll see a flight of crypto innovation and talent to emerging markets. These countries have their own reasons to support an alternative financial system that is somewhat disconnected from the US Dollar, although that’s a topic that’s deserving of its own essay.

Our take: Crypto is fascinating because it's open and directly touches capital. That said, the era of the extreme wild west in crypto might have been over 🤠, recklessly building crypto-related products that touch the livelihoods of many people, will no longer be possible without proper disclosures and risk management. As we want crypto to gain more adoption and practical use cases, it will be more intertwined with the broader financial system, which will undoubtedly come with more regulations.

For builders: Founders need to understand and keep an eye on these regulatory developments. Not only would it be for protecting themselves, but having a proper grasp over various regulatory developments can potentially create unique moats around your products. This is especially true for crypto as it transcends multiple jurisdictions, and many countries, even if your products are fully digital 👩‍💻

For investors: You obviously want to ramp up your diligence and compliance related practices 📝, after FTX, we saw for the first time that the SEC is investigating FTX investors’ due diligence. This is an unprecedented move. Sequoia is already distancing itself and will begin auditing investments in emerging markets after previously writing a puff piece about SBF. In short, enhance your diligence and implement proper structures.

PRODUCTS OF THE WEEK

Raleon Web3 Marketing Analytics

What is Raleon: Raleon is a web3 marketing analytics and engagement tool. It helps web3 teams acquire and retain their users by using AI to analyze users' behavior on and off-chain. To do this, Raleon processed more than 2 billion transactions, 2,400 decentralized applications, and 2 million off-chain actions to gain unique insights.

In essence, Raleon provides many tools that would take time and capital resources if a web3 project decides to build it in-house. It might even be less effective. Raleon's tools include multiple dashboards such as ROI on your marketing campaigns, user-revenue growth, reputation-based airdrops, and more.
The founder, Nathan Snell, is a successful entrepreneur with a prior exit. He founded nCino, which went public in July 2020 at a ~$2B valuation. nCino currently has a market cap of $3.1B.

Other cool products:

Swapped Finance, a DEX on the Shardeum ecosystem.
Liquidus Wallet, a crypto wallet focusing on earning interest.
Zenland, an escrow smart contract platform and marketplace.
Offramp.xyz, a no KYC decentralized on/offramp protocol.
AutoPay, an automated payments tool in web3.
Chaininsight, an API for web3 background checks.
Circle, a social wallet for Bitcoin.
101, a web3 learning platform.

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Crypto Friday Performance

NYDIG

NYDIG posted a very interesting chart highlighting that crypto returns on Friday tends to be significantly higher than any other days. While there’s no clear evidence of the cause, many have pointed to: 🏦 closure of the FIAT banking system over the weekend, fund subscriptions, and derivatives contracts expiry as part of the reasons for this pattern.

Our take: Understanding flows continues to be a significant differentiator for crypto market participants. Even though crypto trades 24/7, correlations that come with institutional participation such as equities market open-close and derivatives contracts expiry will become more crucial as the total market cap of crypto asset grows.

To watch: Crypto often trades akin to a very high beta of the equities market, particularly risk-on tech stocks. As the US Federal Reserve decides on its macro action for the year of 2023, its impact towards the crypto market will be felt first, even prior to the equities market. Dynamics between emerging markets, US Dollar-index and appetite for risk will be important to watch to decide what comes next for crypto.

CEX Layoffs and Volume Data

Kaiko

It has been a tough year for professionals in crypto. Massive layoffs are happening alongside the broader tech layoffs, with crypto exchanges, in particular, getting hit hard. In total, we’ve seen more than 23,000 people in crypto losing their jobs 😟

State of Play: Binance and Gemini are the anomalies as shown by the chart above. The largest crypto exchange in the world, Binance, didn’t lay off any employees while its trading volume went down by almost 40%. Gemini laid off the least amount of employee compared to its competitors (Coinbase, Kraken), while its trading volume went down significantly 📉

Our take: Exchanges are picks and shovels business. A proper exchange business should always generate profit regardless of any market condition, akin to the NYSE for equities market. When trading volumes are down, product differentiators will be key. Exchanges that own specific markets such as Bitcoin options (Deribit) and liquid staking derivatives (Coinbase) will be much more likely to have a high revenue-to-burn ratio.

QUICK BITES

DOJ seeks to ban SBF communications.
Jane Street backed DEX came out of stealth.
Custodia Bank denied Federal Reserve system membership.
Silvergate dumps as it suspends preferred dividend.
WazirX-Binance debates continues.
CoinTracker cuts 20% of staff.
BH Digital gets the whole Dragonfly liquid team.
Silvergate suspends preferred dividend.

MEME & NOTEWORTHY READS

Leighton’s article on not companies, not DAOs; what are crypto protocols?
Matti's (Zee Prime Capital) article on commerce in web3.
Justin Sun’s thread on China crypto regulation.

Will the Friday night pump repeat for the 3rd week in a row?
— db (@tier10k)
2:51 PM • Jan 27, 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.