INERTIA Advisory - Weekly Newsletter - 11/04/2022
Welcome to INERTIA Advisory’s weekly newsletter, where you will receive updates on the most remarkable things happening in the cryptocurrency space.
Enjoy!
Bitcoin 2022
Bitcoin has been trending this week, and for the first time in a while, the price variation of the digital asset has not been the cause of it.
The Bitcoin Miami Conference is an annual event that has already become the largest cryptocurrency event in the world. The 2022 conference size was more than twice compared as the one in 2021. Organizers rented out the 1.4 million-square-foot convention center in the heart of Miami Beach.
At the center of the conference was a massive expo hall, where retailers were offering from cryptocurrency 401ks to Pepe the Frog T-shirts. Cash App, the mobile payment service founded by Jack Dorsey, erected a massive volcano at the entrance that emitted regular blasts of steam. They even introduced the “Miami Bull”, an 11-foot, 3,000-pound metal statue styled to look like its Wall Street counterpart.
However, the most interesting stuff happened at the stages. A lot of announcements were made along with some very controversial statements too… Let’s take a deeper look at them.
Strike CEO, Jack Mallers, was clearly one of the winners of Bitcoin 2022. The young entrepreneur seems to be focused on taking the Bitcoin Lightning Network to mass adoption. For those of you who do not know, the Lightning Network is a second layer built on top of Bitcoin that allows instant and costless transactions, making Bitcoin payments fast, cheap, and secure.
Mallers announced that Strike will integrate with Shopify and partner with payment firm Blackhaw, and NCR, the world’s largest point-of-sale (POS) supplier. Some of the companies that use the previously mentioned payment solutions are; McDonald’s, Walmart, Home Depot, Best Buy, Starbucks, Chipotle, El Corte Inglés, Lowe’s, and Staples among many others.
Last year, Strike partnered with the government of El Salvador to issue the Chivo Wallet, which has already more active users than banked citizens in the country.
This wallet allows people to make and receive payments in the chosen currency. This is important to explain because most people do not know but, with the Chivo Wallet, if “Person A” pays “Person B” in BTC, but “Person B” does not want to get paid in BTC, “Person B” will be receiving US Dollars. I assume something similar will be made with the previously mentioned partnerships.
Cash App, one of the largest mobile payments in the world, is launching a new feature that allows users to get paid in Bitcoin. In addition, the company is also implementing the Bitcoin Roundup feature, an easy and completely free way to auto-invest people’s spare change from transactions into Bitcoin.
Robinhood’s Chief Product Officer, Aparna Cennapragada, announced at the Bitcoin Miami Conference that the company was also implementing support for the Lightning Network. Thus, Robinhood users will soon be able to transact with Bitcoin for pennies and not for dollars.
As a matter of fact, Bitcoin happens to be Robinhood’s most purchased product. Only in Q4 2021, the company generated a revenue of US $48 million from crypto. Looking to this success, they decided to launch their own cryptocurrency wallet.
Ark CEO, Cathie Woods, is more bullish than ever. Although the digital asset is suffering lately in price, the chief investment officer stated that Bitcoin serves as a “hedge strategy against inflation. She even said that Bitcoin’s price target for 2030 is greater than a million dollars per token. A bold statement that may for sure has generated some controversy on Wall Street.
The Mexican billionaire, Ricardo Salina, is the founder and chairman of Mexican conglomerate Grupo Salinas also attended Miami.
He is currently the third richest individual in Mexico, however, while being part of “The Billionaire Capital Allocators” panel, he stated that 60% of his liquid portfolio is allocated to Bitcoin and Bitcoin Equities.
Peter Thiel, co-founder of Paypal and Palantir Technologies, was arguably the superstar of Bitcoin Miami Conference 2022. The legendary investor has invested in blockchain-based firms and cryptocurrency exchanges through his VC firm Founders Fund.
Some controversial statements were made during his time in Miami. He said that Central banks are bankrupt (No surprise in there… hehe) and that we have reached the end of the fiat money as we know it today.
He even got to publicly attack Warren Buffet, Larry Flink, and Jamie Dimon by referring to them as “gerontocracy” because they are opposing a revolutionary cryptocurrency movement. Moreover, he referred to Warren Buffet as “a psychotic grandpa from Omaha” and is considered Peter’s “Enemy No.1”.
I personally have nothing but respect for both of them. However, I position with Peter when it comes to cryptocurrencies. Do not forget that Warren Buffet referred to cryptocurrencies as “Worse than Rat Poison” not a long time ago. Charlie Munger, Warren Buffet’s partner, has even a worse positioning when talking about cryptocurrencies.
Regulation
United States
Lawmakers are seeking more answers on the Treasury's work targeting crypto in Russia's sanctions evasion.
According to Nydia Velásquez, the second-most senior Democrat on the committee, they want to know more about how the Treasury Department is monitoring this “problem”. She stated that many committee members are concerned about the potential use of cryptocurrencies to avoid sanctions.
I would recommend Nydia to focus on more important issues that are happening in the country she represents right now.
Cryptocurrency exchanges, which are the main bridge between the fiat and cryptocurrency world, have already implemented restrictions for targeted oligarchs, making it extremely difficult for the use of cryptocurrencies to avoid sanctions. Moreover, there is not enough liquidity in decentralized finance platforms to launder money and get away with it. Those large volume transactions are monitored and would be pretty easy to analyze with an analytic tool like Chainalysis.
U.S. Representative for California’s 35th District, Norma Torres, is introducing the Accountability For Cryptocurrency In El Salvador Act, which requires the State Department to conduct an analysis of El Salvador’s adoption of Bitcoin as Legal Tender and create a plan to mitigate potential risks to the United States financial system.
I honestly think that these people have too much free time haha. If a country of barely 7 million citizens adopting Bitcoin as Legal Tender is putting at risk the stability of the largest financial system in the entire world, they should worry about themselves, not El Salvador!
CBDCs (Central Bank Digital Currencies)
China’s Digital Yuan
The largest social media messaging application in China, WeChat, has onboarded the Digital Yuan as a valid payment method. WeChat’s userbase surpasses one billion people, who now will be able to make digital payments with the Chinese CBDC.
The Chinese government has been playing chess while other central banks are playing checkers with the creation and implementation of their CBDCs.
China gave banking licenses to Tencent and Alibaba back in 2014 being aware that this decision could affect the country’s banking industry. However, the end goal was to introduce digital payments for the potential implementation of their CBDC. Now that goal is a reality.
Digital Euro
The European Union is facing a crucial inflection point at the time of structuring its CBDC. Regulators are wrestling with privacy issues that would be along with the introduction of the CBDC. As many of you probably know, regulators focus on AML and Terrorism Financing procedures at the time of setting certain regulations. However, with the introduction of the Digital Euro, Professor Marina Niforos says that there must be a trade-off between protecting privacy and security.
Many Central Banks will be facing the same problem. China is free of this discussion since they do not preserve data privacy at all.
Meta
Although this does not get into the CBDC category, Meta (Previously known as Facebook) is still trying to launch their own digital currency. Back in the day, the company explored this field with the Libra and Diem initiatives, however, the US government and regulators completely opposed the idea of Facebook having a digital currency that could compete with the US Dollar.
This time, the company is structuring the project with a whole different approach. The so-called “Zuck Bucks” won’t be a blockchain-based currency, but a virtual currency that will serve as a payment method in their metaverse instead.
Meta is also considering the creation of “social tokens” or “reputation tokens” which will be used to reward users for positive contributions to the network.
Venture Capital
March 2022, was the third-highest monthly VC investment inflow in crypto’s history. Over 225 crypto firms received more than US $3.5 billion worth of VC cash. In addition, several new funds were also launched, including from Electric Capital, Bain Capital, and Bessemer Venture Partners.
Pantera Capital, one of the largest cryptocurrency investment companies in the world with US $5.8 billion assets under management, announced the creation of a US $200 million fund. Unlike the company’s other funds, this one will be focused on more mature, revenue-generating companies. This Pantera Select Fund will be smaller, more targeted, and more concentrated than a typical growth fund.
Uniswap Labs LLC, the company behind the largest Decentralized Exchange Uniswap, has launched a venture wing to invest in Web3 related companies. The venture unit will be focused on investing from infrastructure to developer tools and consumer-financing applications.
Bored Ape Yacht Club
I honestly do not know why or how but week in and week out, the Bored Apes appear to be in this newsletter.
As many of you probably know, Bored Ape holders own the IP rights to commercialize their NFTs within different industries. Thus, some companies and NFT holders are taking this opportunity to launch products related to the most famous NFT collection in the world.
Coinbase is launching a Bored Apes-themed film trilogy. The exchange announced on Monday the upcoming production, which will be divided into a three-part series called "The Dengen Trilogy”.
The selection process will consist of a casting made by the producers. The license will be recorded on-chain and will continue with the ape into the secondary market. For those apes that get chosen, US $10,000 are rewarded as a licensing fee that will be paid either in $APE or BTC.
Bored & Hungry, the world’s first restaurant based on the Bored Ape Yacht Club NFT collection has been already opened. Andy Nguyen, an owner of three bored apes, has decided to use the IP rights of his bored apes to open a restaurant. The interesting thing is that he only accepts Ethereum and $APE as payment methods.
NFT communities are becoming a reality. It is crazy to think how things change in one year. As a matter of fact, the Bored Ape Yacht Club collection’s mint started on April 23th 2021, which is less than a year ago.