Weekly Report: May 16 – May 22, 2022

M3TA Recap

Sorry we're late! Read on to learn about last week's market updates and top headlines.

Author

Clara Lee

Published

23 May 2022

GameFi

Metaverse

Web3

Crypto VC

DeFi

NFT

Regulation

Crypto Crash

SOL

AVAX

Inflation Rate

BTC

SUMMARY

1. Cryptos Drop As Market Volatility Sets In

CoinDesk – May 21, 2022 at 3:47am

The past week saw a continuation of the market volatility that affected cryptocurrencies the week prior, with Bitcoin ($BTC) trading in a choppy range from $28,665.90 to $30,600.63. The price of $BTC has danced around the $30,000 mark for nearly two weeks now, ever since Terra Luna caused a tumbling market crash with its de-peg incident.

On the altcoin frontier, however, an underperformance is noticeable, with Solana ($SOL) down 5% and Avalanche’s $AVAX down 4% after Friday trading. DeFi tokens, in particular, have underperformed the greater crypto market over the entirety of May. This is typical, as DeFi projects maintain a higher risk profile relative to Bitcoin.

A similar trend is visible within the stock market, with the S&P500 posting its longest weekly losing streak since the dot-com bubble burst, closing out at an index of 3,901.36, which is 18.7% lower than its record high of 4,796.56 in early January.

The performance of both cryptos and stocks this week certainly corroborates the notion that stocks and cryptos are performing increasingly alike, as both appear to decline in bouts of market volatility, while traditional safe-havens like gold perform better.

As has been on many investors’ minds this year, the prospect of rapid interest rate hikes as a measure to combat inflation still imposes a significant deterrent to risk-on investment strategies. That being said, some analysts, like those at BlackRock, believe that equities are being priced in relative to a few weeks ago when many were sold off. As a result, the selling pressure on equities may decrease in the short term, benefitting cryptos as well.

2. USDT Updates Reserves with Healthier Assets

The Block – May 19, 2022 at 11:31am

Tether, the issuer of the $USDT stablecoin, has published its latest quarterly assurance opinion, in which it delineates the latest updates of its asset reserves which were independently affirmed by accountants at MHA Cayman.

According to this quarter’s Consolidated Reserves report, Tether has not only secured sufficient collateral for its staggering $78B+ USDT in circulation but also improved the quality of those assets as well.

One of the concerning discoveries in Tether’s previous transparency report was the relatively high proportion of Commercial Papers (CP) on their balance sheet. CPs are debt security that can be issued by a variety of enterprises; hence, the risks associated with holding CP are greatly dependent on the credibility of the issuer. An unsecured asset like this has a risk profile that is very difficult to identify.

In this quarterly report, Tether reduced the CPs on its balance sheet to $19.9 billion from $24.2 billion in the previous quarter. In its stead, they increased the proportion of U.S. Treasury Bills holdings from $34.5 billion to $39.2 billion. U.S. Treasury Bills are considered a safe haven of liquid assets with the lowest, almost non-existent, risk rating.

The report comes at a much-needed time when the TerraUSD collapse is casting fear over the crypto market in general, especially for stablecoins. Since Terra Luna’s demise, $USDT has recorded a $9B plunge in market capitalization.

Along with the report, Tether continues to reassure investors that they “honour all redemptions” on their official Twitter account.

Twitter Tether

3. Robinhood Takes Greater Strides into Crypto with FTX’s Sam Bankman-Fried

Decrypt – May 13, 2022

FTX CEO Sam Bankman-Fried recently acquired a 7.6% share of Robinhood according to a filing with the SEC, and news of the purchase increased the commission-free stock trading app’s share price by over 30% in after-hours trading.

The purchase itself, which consisted of just over 56 million shares for a combined value of $600 million dollars, was conducted through Emergent Fidelity Technologies, Bankman-Fried’s holding company. In the SEC filing itself, Sam shared that he has no plans to change or influence the direction Robinhood is heading, instead indicating that Robinhood “represents an attractive investment.”

The deal comes at a time when Robinhood has been performing poorly, having witnessed an 18% decline in revenue for the first quarter of 2022 and just prior to its shares hitting an all-time low of $7.71. That being said, this new investment follows 13% increase in crypto trading activity on Robinhood, which has added assets like Solana, Shiba Inu, Polygon, and Compound in the recent months.

Furthermore, Robinhood recently launched a non-custodial wallet that allows users to have total control of their crypto assets. This new offering indicates that Robinhood is not only looking to expand its revenue-generating product line but also to compete directly with similar firms like the Nasdaq-listed exchange Coinbase.

4. Terra Luna Under the Sickle of Korea’s “Grim Reapers of Yeouido”

The Block — May 18, 2022 at 11:11am

In the aftermath of Terra Luna’s downfall, South Korea’s Financial and Securities Crime Joint Investigation Team, known colloquially as the “Grim Reapers of Yeoui-do”, have been assembled for the first time in over two and a half years to investigate Terra co-founder Do Kwon.

The Seoul Southern District Prosecutors’ Office, as its officially known, is a special investigative team comprised of members from various financial regulatory bodies specifically assembled to prosecute securities fraud and unfair trading schemes. According to SBS News, Terra will be the first case for the team after its resurrection, which earned the nickname “Grim Reapers” for its extreme accuracy and calculated approach. After a hiatus, the “Grim Reapers” are back to investigate Do Kwon and Chin Hyun-Seong for alleged tax evasion and Terraform Labs’ methods of attracting investors.

This investigative team comes together as Do Kwon and Terra come under further legal scrutiny, receiving a legal complaint from LKB & Partners who are representing five individual $LUNA hodlers with an aggregate loss of $1.4M caused by its market crash. Their accusations are one civil suit for damages and another criminal count for fraud. These accusations follow news that Kwon faces a $78M bill for corporate and income tax evasion.

It is worth mentioning that the legal team at LKB & Partners, who filed the complaint directly with Seoul Southern District Prosecutors’ Office, also has a personal stake in $LUNA, as mentioned by LKB partner Kim Hyeon-Kwon. “Some attorneys at this law firm were investors in Terra.”

5. OpenSea Launches New Seaport Protocol to Promote Decentralized NFT Trading

Atareh.eth on Twitter – May 21, 2022 at 5:33pm

OpenSea, the largest current NFT marketplace, announced the creation of its newest protocol called Seaport, a web3 market protocol designed to promote flexibility and transparency within the NFT transaction space.

The protocol maintains a number of characteristics that serve to promote accessibility. For one, it serves to decentralize the buying and selling process of NFTs by returning the users’ agency back to them. For starters, Seaport utilizes an open-source code, allowing anyone to use the protocol to build their own NFT marketplace. Over time, this will propel a surge in the number of useable marketplaces, thereby facilitating competition and thus growth within the space. According to OpenSea, Seaport also has no contract owner, meaning that anyone can freely update or fork the code. As such, Seaport serves to decentralize NFT buying and selling by an order of magnitude over OpenSea as it is today, a centralized organization that controls its marketplace platform unilaterally.

Most importantly, Seaport also presents new trading features for NFT users. Currently, NFTs on OpenSea can only be exchanged for Ethereum ($ETH) or other fungible tokens like $APE, $DAI, etc. With the implementation of Seaport, users will have the freedom to trade using a combination of tokens and NFTs in their wallets. Coupled with a feature to filter specific traits among prospective buyers, sellers can more easily and more painstakingly target their ideal buyers. In practice, this change will even allow people to pick the exact NFTs that users must custody of in order to trade with them for their assets.

In addition to these new trading elements, people can now create a Dutch auction for their NFTs. Dutch auction listings allow for the manual adjustment of start and end bids, as well as auction duration. This is a valuable addition, especially for users who are unsure of the value of their assets, as they allow sellers to gauge their NFTs’ market value in correspondence to the current social sentiment.

To garner attention for the Seaport release, OpenSea will conduct a two-week auditing contest with a $1 million prize pool. The contest is open to any and all developers, who will be rewarded for auditing the protocol’s code and submitting any errors they encounter.

The Seaport release presents a slew of ecosystemic improvements over OpenSea, offering greater decentralization, personalization, and agency to its users. Seaport may serve as a turning point for NFT marketplace operations and usher in a new era of decentralized asset trading.

6. A16z Introduces New $600M Fund Dedicated to Gaming, Web3, and Metaverse

Bitcoinist – May 22, 2022

Andreessen Horowitz, better known as A16z, has launched a new investment fund focused on gaming and metaverse industries. Implementing a new internal structure designed to locate acquisitions in the gaming sector as well as a dedicated cash pool, the fund exists to support startup companies and initiatives that serve to establish a fully-fledged metaverse.

The fund, called Games Fund One, will focus in particular on three key services: game development studios, consumer applications like Discord that congregate player communities, and infrastructure providers. Supporting this venture are a number of backers with veteran experience in the industry, including the co-founders of King, Roblox, Discord, Twitch, Blizzard, Riot Games, and Zynga.

Being the first fund by A16z that is exclusively for the purpose of augmenting the gaming sector, Games Fund One represents the firm’s belief that “gaming infrastructure and technology will be essential components of the metaverse.”

A16z’s new fund is representative of a greater trend toward a growing metaverse-centric industry. Epic Games, for example, raised $2B last month from Sony and LEGO as backers to create their own metaverse. Horowitz, citing nascent technologies in Web3, quick games, and VR/AR, believes that it should follow suit by dedicating not only more money but also operational expertise to innovation in this space.