RelayNode NYC #45 - March 23 - I got 99 systemic problems but bitcoin ain't one, what doesn't kill DeFi makes it stronger

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Written By David Gogel
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Welcome to RelayNode NYC Area edition! The NYC blockchain ecosystem is growing. Our goal is to harness its energy and innovation for the benefit of New Yorkers and provide a weekly curated list of interesting content, upcoming events, and local jobs.

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RelayNode NYC is curated by:  

David Gogel

Founder @GogelX/Definancier, Advisor @Paperchain.io, fmr Associate @Techstars' Blockchain Accelerator, Co-president @Wharton FinTech, Corp Dev @LinkedIn @AIG

Hsin-Ju Chuang

Founder @Dystopia Labs. Former-Head of Growth @Stellar / Lightyear, Solana. Ex-Director at Tezos (TQ)



Market Stats (as of Sunday, March 22, 9PM EST)

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Another bloody week. The crypto market pared back earlier losses and closed the week higher. According to Coinbase, although Bitcoin has recently sold off alongside the S&P 500, recent positive correlation may be temporary. S&P Futures are down another 4.8% on Sunday evening, as the stimulus package failed a procedural vote in the Senate. More volatility ahead.

1 Big Thing: New York Has Roughly 5% of Coronavirus Cases Worldwide

According to the New York Times, the number of cases in New York continues to increase exponentially and stems from both the rapid growth of the outbreak and significantly increased testing in the state.

As of Sunday, confirmed Cases: 

  • New York State: 15,168

  • 18- to 49-year-olds make up more than half of all cases in the state!!!!!

  • New York City: 9000+

  • Hospitalized: 1,974

  • Statewide Fatalities: 114

Beginning Sunday evening, New York State mandated that all non-essential businesses close and that people remain home to the greatest extent possible. On Friday, the federal government declared New York a "major disaster" so the state is now eligible for FEMA aid. FEMA is helping to get temporary hospitals up and running.

Cuomo said the state anticipates that between 40-80% of New Yorkers will be infected with coronavirus, however, authorities hope to spread out the rate of infection in order to not overwhelm the state's health system. Stay at home!!!!!!

Economic Policy Responses:

  • Support financial stability via liquidity injections: The Fed broadened its program of support for the flow of credit to households and businesses by taking steps to enhance the liquidity and functioning of crucial money markets. Through the establishment of a Money Market Mutual Fund Liquidity Facility, the Fed of Boston will make loans available to eligible financial institutions secured by high-quality assets purchased by the financial institution from money market mutual funds.

  • Soften the economic blow through targeted spending and relief: Congress is debating a $2T economic stimulus package as they rush to support American families and businesses. However, intense negotiations over a Phase 3 stimulus package broke down on Sunday, leading to a failed procedural vote meant to move the bill forward. Democrats blocked Republicans from reaching the 60 votes needed to clear the procedural hurdle.

What To Read

🌐 Macro / Why Bitcoin?

  • CB Insights published its Blockchain 2020 Annual Report, exploring the blockchain landscape, the coronavirus’ impact on crypto, and what’s in store for the rest of 2020. VC deals in crypto remained steady but the amount invested fell in 2019. While 2019 only saw 15 fewer deals than 2018 for a total of 807 deals, deal volume dropped 34%, from $4.2B to nearly $2.8B due to the lack of later-stage growth equity rounds. I expect consolidation and fewer deals in 2020.

  • Lane Rettig, formerly with the Ethereum Foundation, pens an excellent essay on Autonocrats and Anthropocrats. He explores the question of how do we prepare for a future where autonomous systems are prevalent to the point of invading every aspect of our lives, eating the world, like (mostly non-autonomous) software has already done today? Fantastic read.

🌐 Bitcoin Spot & Derivatives Trading

  • Philip Gradwell, a researcher at Chainalysis, explains how crypto exchanges experienced their largest-ever bitcoin inflows. Since March 9, exchanges received 1.1M BTC over eight days, peaking at 319,000 BTC on March 13, compared to an average of 52,000 bitcoin per day prior to March 9 since the start of the year. Transfers of between 10-1,000 BTC were responsible for 70% of BTC in and out of exchanges, suggesting professional traders were responsible for the majority of activity. Further, Nate Maddrey and the Coin Metrics team analyze data to show that the cryptoasset sell-off was driven by short-term holders.

  • According to Skew, demand for BTC options on regulated U.S. derivatives exchanges dried up even as price volatility reaches record highs. Bakkt has seen no options trading activity since February 27. CME volume has also been muted. The decline in options volume seems to have been caused by traders treating bitcoin as a source of liquidity during the stock market sell-off, which triggered a multitude of margin calls.

  • BitMEX research published an excellent report on inflation. In such an economic environment, with high inflationary expectations, gold looks set to shine. But what about BTC? BTC has crashed by almost 53% (peak to trough) in the 2020 Coronavirus crash, as investors raced to the USD. Where the BTC price may shine is in the volatile inflationary aftermath of the response to the crash.

💰 Funding, M&A, & Exits

  • Bakkt raised $300M in a Series B from investors including Intercontinental Exchange, Microsoft’s M12, PayU, Boston Consulting Group, Goldfinch Partners, CMT Digital, and Pantera Capital. Bakkt, which powers the loyalty redemption programs for 7 of the top 10 financial institutions and 4,500 loyalty and incentive programs including 2 of the largest US airlines, plans to launch the Bakkt app this summer, allowing customers to convert loyalty points into cash.

  • Tim Draper and the team at Draper Goren Holm Ventures announced they purchased a stake (financial terms undisclosed) in the DMM DAO, the governing organization of the DeFi Money Market (DMM) Protocol. DMM Protocol acts as a bridge between Ethereum digital assets and real-world assets allowing holders to earn interest completely on-chain. The stake was purchased in the form of DMG — the governance token that will run the DMM DAO.

🔓 DeFi / OpFi

  • Ibis from Santiment explores the state of Ethereum post last week’s correction. He digs into the data behind Ethereum network users, social media/crowd sentiment, holders (retail + whales), speculators, miners, and developers.

  • In response to Maker’s liquidity issue, Cyrus Younessi, Head of Risk at Maker, proposed collateral onboarding of USDC. MKR holders later accepted USDC as a new collateral asset in the Maker Protocol. USDC, a stablecoin backed by the US Dollar launched by a consortium backed by Circle and Coinbase, is the third collateral type approved by Maker Governance. Joining ETH and BAT, USDC can now be used to open Maker Vaults in order to generate Dai. Will this help to create Dai liquidity and push the Dai peg back towards $1? To be determined.

  • According to Camila Russo, founder of the Defiant, key reasons to add non-trustless assets to the Maker protocol include:

    • Dai will need more liquidity and stability to keep growing while keeping its peg than what trustless assets can offer.

    • Dai holders won’t be exposed solely to the highly-correlated risk of crypto, and as a result it will be more liquid and stable.

    • Users will be able to choose between trustless assets as collateral, or regulated assets that require KYC.

    • There’s a risk that non-trustless assets are shut down by regulators and they lose their value, but there’s also the risk that crypto exchanges get hacked or banned and crypto loses its value.

    • The Maker protocol won’t become centralized regardless of what collateral it uses.

  • Nevertheless, many in the community were against adding USDC, which is non-trustless, as a collateral type. Allison Lu, Co-founder of UMA, highlighted new risks and tweeted “I do not support the MakerDAO executive vote to add USDC as collateral in vaults.” Kain Warwick of Synthetix tweeted, “when I woke up this morning Ethereum had two permissionless stablecoins, now we have 1…”

  • One of the core structural problems is that current blockchains—both Bitcoin and Ethereum—simply do not support enough transaction throughput to facilitate global trading across many venues in volatile environments. When volatility picks up, traders need to shuttle assets between exchanges to arb price discrepancies, and they need to do this quickly (low latency). In Part 2 March 12: The Day Crypto Market Structure Broke, Kyle Samani, GP at Multicoin Capital, explores some of the potential solutions, both market structure reforms (consolidated trading venues, the establishment of clearinghouses and prime brokers, disallowing extreme leverage, the introduction of circuit breakers, RFQs for large liquidations) and tech upgrades (lightning network, sidechains, sharding, and optimistic rollups.)

  • Worth restating Matt Levine’s famous quote “cryptocurrency enthusiasts keep re-learning the lessons that regular finance learned decades ago, and that you can see a lot of financial history replaying itself, sped up, by observing cryptocurrency.”

💸 STOs / Stablecoins / Tokens / DAOs

  • Vertalo, the Austin TX-based security token platform, is partnering with DealBox to tokenize 22 securities (valued at $200M) on the Tezos blockchain.

🌉 Infrastructure

  • Following the Indian Supreme Court’s reversal of the RBI ban on crypto, Binance and WazirX announced that they have jointly set up a $50M fund to support the development and growth of blockchain startups in India.

  • Square is one of the most crypto-friendly financial institutions, having purchased more than half a $500M worth of Bitcoin over the course of 2019. The FDIC Board has voted to conditionally approve Square’s application for deposit insurance related to its Industrial Loan Company (ILC) bank charter. Square has also received charter approval from the Utah Department of Financial Institutions. The bank, Square Financial Services, is expected to launch in 2021. It will operate independently, as a direct subsidiary of Square, Inc. Its primary purpose will be to offer small business loans for Square Capital’s commercial lending business, and to offer deposit products.

🍰 Layer 1 

  • Vitalik Buterin, co-founder of Ethereum, tweeted his vision of what lies ahead for eth2 and beyond in the next 5-10 years.

🎧 Podcast of the Week

Upcoming Virtual Events / Conferences

Virtual

Conferences (Status TBU)

Postponed Conferences

🎓Highlighted Industry Jobs (non-exhaustive list for NY)

If you would like to highlight jobs or internships in future editions, please email links here.

Nothing written in RelayNode NYC is legal or investment advice and should not be taken as such. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence.

David Gogel https://www.definancier.com
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RelayNode NYC #46 - March 30 - It's the Remix to Inflation, Hot & Fresh Out the Kitchen
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RelayNode NYC #44 - March 16 - Flattening the Exponential Covid Curve, Market Failure & Liquidity Crunch, Centralized vs. Decentralized Central Bank Responses