In this patch of your weekly Dispatch:
- The Bull Market is back and people disagree as to why
- A near miss on the Infrastructure Bill, but perhaps also a larger victory in DC
- The biggest hack in DeFi history lasts only three days
The Big Idea
The Bull Market Is Back
As you’ll see in our update below, after a valiant effort, the crypto industry was not able to fight back the problematic crypto provision in the US Infrastructure Bill. Yet despite that setback, prices rallied this week, making many ask if the bull market is back on or perhaps even more saliently, if it ever left?
There were a number of interpretations for why markets were performing this week. One had to do with the Infrastructure Bill itself. While the crypto tax reporting provision remains, the battle to fight it revealed far more crypto allies in the US government than many might have previously guessed. US crypto feels in store for battles, yes, but none existential. That de-risking may be contributing to price action.
Others pointed to the elimination of other types of FUD as a reason. We got the most detailed Tether reserve attestations yet. Grayscale GBTC unlocks ended up having no large impact on Bitcoin. Hashrate is recovering from China bans and moving elsewhere, leaving a crypto industry that is less tied to China risk.
Of course, others point to the return to NFT mania as a causal factor. Volumes are exceeding the previous March peaks. The price floor of many OG crypto art collections including Crypto Punks has soared well into the six figures. Shopify announced that merchants could sell NFTs directly on their platform. And right now, everything in that space just keeps going up.
Then, there’s the boring answer, which is that too many people had convinced themselves that we were going lower. When they were wrong, their liquidations helped crypto escape their bear paws and resume its merry bull market journey.
The Latest In…
The Crypto Lobby and the Infrastructure Bill
Over the course of last weekend, the crypto lobby and its allies in the Senate fought to find a compromise between two amendments. Ultimately, majority leader Chuck Schumer declared there would be no voting on amendments, nullifying all of that hard work. The only chance was unanimous approval in the Senate this week, which – in spite of all odds – seemed possible.
That was until Senator Shelby of Alabama demanded that his $50B defense spending amendment was also added. That objection meant that the original, hugely problematic crypto language in the bill, remains. Still, many in the industry are extremely bolstered by the galvanizing force this process has been, and look to the future with optimism.
The Latest In…
Should you watch the new episode of the #NexoBrainer? That’s a no brainer! 🧠
In this episode, our Business Development expert George unpacks the redesigned Nexo App and our new Referral Program that allows you and every friend you refer to get $10 in BTC with a few clicks.
The Latest In…
This week saw the biggest hack in history. On Tuesday, a hacker drained Poly Network of approximately $613M in funds. The protocol operates on the Binance Smart Chain, Ethereum, and Polygon blockchains and the attack hit each of them. In response, Tether froze approximately $33M. A number of addresses started effectively digitally panhandling, asking the attacker for a little bit. The episode was a reminder to some of how early DeFi remains, but it doesn’t seem to have dampened enthusiasm overall, especially after the hacker (who started the #DearHacker trend on Twitter) returned nearly all of the funds on Thursday.
The Latest In…
As the only large US publicly traded crypto exchange, the markets were always going to pay close attention to Coinbase’s Q2 results. They were, in a word: massive. Coinbase booked $1.6B in net profit, up nearly 4,900% from a year earlier. Monthly transacting users grew to 8.8 million monthly transacting users. Finally, Coinbase reported more than 9,000 financial institutions are using them to build their own crypto products, including SpaceX, Tesla, Third Point, and WisdomTree. Meanwhile, over in Bitcoin ETF land, VanEck has filed again. One day, friends, one day.
The Week’s Most Interesting Data Story
Is ETH Deflationary Now?
Last week the Ethereum community kicked off a new era with the implementation of EIP-1559. The nominal goal of the shift is to smooth out gas prices, particularly in times of high demand. Part of the new mechanism for combatting excess gas fees is to burn a part of the fee in ETH with each transaction. This means, in theory, that more ETH could be burned than is actually issued. In aggregate, that would make the total supply of ETH deflationary. Of course, this wouldn’t happen right away, right? Wrong. Within hours of EIP-1559, the world’s first deflationary block had been confirmed and that just continued. A week later more than $100M of ETH has been burned. Maybe there’s something to this Ultra Sound Money meme after all?
What the Community Is Discussing
A ton of debate on this one that actually greatly improved upon the normal Bitcoin vs. Ethereum tribal discourse.
Tell them like it is, Scott.
A fascinating look at the transition to Web 3.0
What to Watch for Next Week:
- Will ETH continue on a deflationary path?
- Will markets continue to rebound?
- Will Janet Yellen find any new ways to interfere with crypto?