Welcome back to Chain Reaction.
Last week we looked at a meme investment crossover episode. This week we’re talking about Musk dumping tokens while holding others.
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Dumping favor
A weekly dispatch from TheTechWarrior crypto editor’s desk Lucas Matney:
Elon Musk shared that Tesla sold some Bitcoin this week. Well, to be honest, they have sold an awful lot of Bitcoin… tens of thousands of coins.
And while Tesla’s announcement last year that they were buying Bitcoin sent prices to the moon, Wednesday’s revelation that they were selling 75% of their Bitcoin reserves in the second quarter didn’t drastically impact the crypto market, which was on a rift this week. BTC prices are pumping and Ethereum is shooting even higher (though still vastly below prices from a few months ago).
At the end of the day, Tesla was one of the biggest corporate holders of Bitcoin and Elon Musk was, at least for a while, the biggest hype-man of the currency’s billionaire. Its shares in crypto circles appear to be falling, crypto Twitter was generally upset by the announcement and some noted that crypto holders should join those who are shorting the electric car maker’s shares.
Hidden in this revelation that the company had unloaded nearly $1 billion in Bitcoin was a small confession from Musk that Tesla was holding Dogecoin and not selling any of it. What was unclear from this statement is how much Dogecoin Tesla actually owns. Musk has written on Twitter that he owns it, and Tesla has been accepting Dogecoin payments for merchandise on its site for months, but they have not disclosed any purchases of the cryptocurrency.
I’ve been trying to calculate some napkins about how much Dogecoin the company is allowed to keep this week:
The company disclosed that it currently owns $218 million in digital assets after selling $963 million in Bitcoin. Most of that $218 million is probably the remaining Bitcoin.
Tesla reportedly had about 42,000 Bitcoin heading into the second quarter, so after selling 75% of them, it should have had about 10,500 by the end of the quarter. To determine exactly how much of that total holding is Bitcoin, we need to know exactly when the snapshot was taken. It was supposedly taken sometime on the last day of June when the fiscal second quarter ended, so 1 Bitcoin would have traded between $18,750 and $20,300 all day, which at 10,500 coins would mean about $197 million to $213 million of his total “digital assets” would be in Bitcoin.
In the end, Musk’s claim that Tesla was holding onto his Dogecoin was probably more about keeping that Twitter community in good graces than anything else, especially at a time when his Twitter trades have severely tarnished its popularity among retail investors.
the latest pod
Chain Reaction has summed up a lot of negative news in the past month as token prices took a beating and web3 companies suffered as a result. The pain is far from over, but crypto prices have seen a fairly substantial recovery over the past week, with ETH rising 45% week-over-week. Lucas and Anita talked about what might have caused the surge, though they also had to discuss the much more unfortunate news of layoffs at OpenSea.
Both co-hosts had been hard at work on two separate editorials related to current crypto news over the past week, so they unwrapped the show’s one. Anita talked about her piece about intensifying the competition among crypto exchanges for the US market (and which is most likely to win), while Lucas shared his thoughts on Yuga Labs’ highly hyped Otherside metaverse video game as one of the very first players.
Subscribe to Chain Reaction on Apple, Spotify or your alternative podcast platform of choice to keep us updated every week.
Follow the money
Where seed money moves in the crypto world:
Cryptography developer tools startup Sunscreen has raised $4.65 million in seed funding led by Polychain. Optic, an AI-based NFT authenticator, has raised $11 million in a seed round led by Kleiner Perkins and Pantera. Zebedee raised $35 million in a Series B round led by Kingsway Capital to develop Bitcoin-based gaming payments. Blockchain cybersecurity startup Halborn has raised a $90 million Series A led by Summit Partners. UnCaged Studios has raised $24 million from investors including Griffin Gaming Partners and 6th Man Ventures to build crypto games. NFT brand loyalty platform Hang has invested $16 million in new Series A funding led by crypto firm Paradigm. Peer-to-peer wallet messaging app Lines has raised a $4 million starting round from investors including Elad Gil and Scalar Capital. Crypto corporate treasury firm Meow closed a $22 million Series A led by Tiger Global. Data infrastructure provider Empiric Network has raised $7 million for its seed round from investors including Variant and Alameda Research. Web3 security auditor Secure3 has raised a $5 million seed round led by Mirana Ventures.
the week in web3
A weekly look into the thoughts of web3 reporter Anita Ramaswamy:
More than a few times recently I have heard people say in crypto that a bear market will separate the good companies from the bad. Former SEC chairman Jay Clayton put it more directly at Bloomberg’s crypto summit on Tuesday, saying that regulators should make responding to the “garbage” in web3 their number one priority.
Clayton invoked the ICO boom of 2017 when describing the aforementioned clutter, a time when all sorts of rampant scams and securities fraud were unfolding within crypto. I couldn’t help but wonder… has crypto made any material progress since then in improving its reputation as a haven for miscreants?
For US lawmakers, the answer seems to be yes, perhaps because they hate suppressing what has been proven to be a substantially large industry worth millions (or billions in a strong market) of dollars. So despite their sluggishness, they are finally coming to. In particular, US Senators Cynthia Lummis and Kirsten Gillibrand proposed a two-tier crypto account last month that is on everyone’s lips. The pair appeared at the Bloomberg summit to share updates on the status of the bill since its introduction. Gillibrand said that while some provisions appear to be moving forward, full legislation is likely to be delayed until next year.
Still, there are two provisions in the bill that Gillibrand predicted could reach consensus much earlier than the rest. The first is a set of rules for banks looking to issue stablecoins – understandably this is a particular concern for lawmakers after the Terra fiasco. The second is the part of the bill that would make the CFTC the main regulatory authority overseeing crypto, which she said is currently being finalized in committee. Congress will be able to vote on that provision by the end of the year, she noted.
While both US legislators and regulators will likely always be dragging their feet into crypto cracking because they don’t want to be seen as a stifling innovation, the new law seems to be going well, faster than many expected. It’s not exactly a sudden shift from 0 to 100, but it’s very possible that the US is about to react faster and more fiercely than most in web3 could have imagined a few months ago when markets were struggling.
TC+ analysis
Here’s some of this week’s crypto analysis available on our senior reporter’s subscription service TC+ Jacquelyn Melinek:
Regulators must first tackle crypto ‘waste’, says former SEC chairman Clayton:
As the crypto industry continues to grow, regulators around the world are looking for operational and legal frameworks to guide their actions to control the industry more effectively. While there are a “huge number of responsible players in the industry,” there are also irresponsible ones, former US SEC chairman Jay Clayton said at Tuesday’s Bloomberg Crypto Summit conference. “And regulators need to respond to the waste first. That’s the job.”
NFTs have the potential to become media companies, says Rarible co-founder
While NFTs work to maintain mainstream attention, one of the founders predicts that the digital asset industry will take a new direction. “I think NFT collections will evolve as media companies [into something] like Disney,” Alex Salnikov, co-founder and head of product at NFT marketplace Rarible, told TheTechWarrior. In recent months, major “blue-chip” NFT projects like Bored Ape Yacht Club (BAYC) and Doodles have pushed their collections beyond images and into different sectors, perhaps marking the beginning of what lies ahead for NFT- expansion into the mainstream, Salnikov said.
Some venture capitalists are doubling their crypto despite an unknown recovery timeline
The crypto markets may be red everywhere, but that hasn’t stopped many venture capitalists from investing in the space. People who briefly enter the crypto market — also known as tourists — are already “going home,” Craig Burel, a partner at the crypto-focused firm Reciprocal Ventures, joked to TheTechWarrior. But a number of VC firms see the space as a huge opportunity, even if there may be no measurable traction for several years.
MetaMask co-founder sees a developer-led future for his crypto wallet
MetaMask was founded six years ago and today it is the largest non-custodial crypto wallet. But that wasn’t always the plan, co-founder Dan Finlay told TheTechWarrior. “We thought it was going to be a quick in and out thing. Aaron thought we would work on it for a few weeks; I thought it would take a few months. It soon became apparent that wasn’t the case. ” Now the team is testing a hands-off approach to being “less stubborn” and shying away from users.
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