Crypto Rallies for War Effort and Public Good
Market Movers
The majority of the largest coins by market cap all took a hit for the week, with the Ukrainian/Russian Crisis negatively affecting the global crypto markets. However, prices of some of the larger coins recovered better than others later in the week due to their involvement in Ukrainian relief efforts
Our pump-of-the-week coin is Terra (LUNA)
LUNA is the native token of Terra's blockchain, which provides stablecoins pegged to various countries’ currencies around the world
LUNA skyrocketed 44.50% for the week after a Wednesday announcement that saw $1B worth of LUNA tokens sold in a private sale to help establish a Terra/Bitcoin reserve. The reserve projects to make Terra’s stablecoins more “stable” in the long run, which would therefore raise the price of LUNA (via Decrypt)
The Motley Fool came out with an informative summary on the exact workings of Terra if you want to read more about the project and how the price of its native token LUNA relates to its various stablecoins
First Sip
If you’re already a crypto native, feel free to skip to “Table Talk.”
STABLECOINS
Last week, we talked about crypto exchanges, but now that you’re interested in converting your fiat currency to crypto, what do you buy? Sure, you can go straight from your $USD into BTC, SOL, or ETH, but let's say you just want to convert your $USD to some cryptocurrency to exchange later, save space under your mattress, or yield farm (we’ll talk about this in incoming weeks), for instance.
This 1:1 exchange ratio, minus the exchange transaction fee, is enabled by stablecoins which are pegged to the value of some fiat currency like the U.S. Dollar, British Pound, etc. Four different kinds of stablecoins exist and they vary by how they are collateralized.
For simplicity, we’ll be explaining using the U.S. Dollar, but substituting any other currency would also work—though preferably one with low volatility.
Fiat-backed stablecoins are the most common kind, where each issued coin is collateralized with some currency at a 1:1 ratio. The issuance of the stablecoin is capped by the number of U.S. Dollars held in a bank or some other traditional financial institution. For example, if the CRYPTOPONG Bank had $10M U.S. Dollars in it then, we should only issue $10M of CRYPTOPONG USD Stablecoin. An example of this type of stablecoin is USDC.
Crypto-backed stablecoins, in contrast to fiat-backed stablecoins, are collateralized by other cryptocurrencies. Typically, because of price slippage, these coins are overcollateralized and their issuance is controlled by a smart contract. You “lock” (deposit) your BTC, ETH, or some other cryptocurrency into the smart contract and are given stablecoin[s] of equal U.S. Dollar market value to the amount of crypto deposited. This “locking” of value works like a digital bank. You can then redeem your “locked” value by returning the remaining stablecoin after your transactions. The “used up” amount of the collateralized asset is then not returned. An example of this is the MakerDAO protocol which creates the DAI stablecoin.
Commodity-backed stablecoins are very similar to fiat-backed stablecoins, but instead of being collateralized with U.S. Dollars, they’re pegged to the value of some other asset—typically gold. Like fiat-currency stablecoins, there are gold bars (or whatever other asset) sitting in the vault of the issuer, and they can only issue the value of coins for which they have ounces of gold. An example of this type of stablecoin is Paxos Gold.
Algorithmic stablecoins, in sharp contrast to the other three types, are not collateralized at all. Instead, their supply increases when the coin’s value passes that of one U.S. Dollar, and their supply contracts when the value falls below that of the U.S. Dollar. An example of an algorithmic stablecoin is Fei.
If you’d like to try this yourself, we recommend beginning by purchasing some fiat-backed stablecoin on an exchange. Then, convert it to some other cryptocurrency. Then you can go over to MakerDAO and deposit that cryptocurrency (as long as it is one they support) and get some DAI in exchange. Once you’ve done this, you’ve taken the first step towards executing more complex crypto trades. Keep seeking alpha.
Table Talk
UKRAINE RECEIVES $17M IN CRYPTO DONATIONS
It would be impossible to write an entire newsletter for the week without mentioning the Russia/Ukraine crisis. Our hearts go out to all those across the world who have been affected by the war.
On a more positive note, in an effort to help the Ukrainian people fight back against Russia, it has been reported that more than $17M in crypto-based donations have been sent to the Ukrainian government to aid in their resistance.
From a macro viewpoint, the benefits of using a decentralized payment method instead of a centralized one in a scenario like this one are clear. The transactions are relatively instant (depending on the coin), do not require the use of a third-party system such as a bank to facilitate/block the transaction, and/or do not necessitate the conversion of U.S. dollars to Ukrainian dollars or hryvnias.
We have already spoken about many of the benefits of using Bitcoin instead of fiat currency. However, it is incredible to see the various decentralized cryptocurrencies and web3 applications being deployed to fight for freedom. Theoretically speaking, ATMs can be shut down, and bank accounts can be frozen, but crypto networks stay active.
DAOs have been created and NFTs have been sold to help the Ukrainians as well.
The addresses posted below are from the official Ukrainian governments’ Twitter account if you wish to help out. But, as always, be careful of scammers trying to benefit off of a tragic situation by disguising their own crypto wallets as Ukrainian relief funds.
NFT Buzz
INVISIBLE FRIENDS TAKES #1
February 23rd marked the launch of a highly anticipated NFT collection called Invisible Friends, which skyrocketed to #1 on the OpenSea secondary market rankings (via OpenSea).
At the time of this writing, the floor price was over 27x higher than the mint price. The collection was created by Markus Magnusson and a part of the Random Character Collective (RCC) brand. RCC has also created other popular collections: Slim Hoods and Mood Rollers, both of which sold out at mint and reasonably high secondary market floor prices of about 0.5 ETH on average (via Twitter, OpenSea, OpenSea). Invisible Friends is their greatest success, though, with over 10x the number of Twitter followers as any of their other collections (via Twitter). This following translated into demand that can be seen from the incredible floor price multiple in the secondary market and chart-topping transaction volume.
Another way the collection generated some buzz was through the offering of a “Golden Friend” (seen below) where “100% of the proceeds go to the RCC charity fund” (via Opensea).
The “Golden Friend,” which was bundled with 5 other Invisible Friends, was purchased for an astounding 496.69 ETH or ~$1.3M. The NFT is believed to have been bought by Twitter user ZeroSalt420. Via ZeroSalt420’s Twitter, the purchase was the first step in a fund with a focus on philanthropy that is launching soon.
The Invisible Friends collection showed us that investor interest is strong in NFT brands that have clearly demonstrated that they are not in the rug-pull businesses. Also, even more importantly, NFTs can serve as a mechanism for incredible public good. Assuming the RCC foundation donates to charities accepting and using crypto for their expenses, the ensuing ETH disbursement could then be used to pseudo-transparently see where and and how the money was spent via the currency’s public ledger. This traceability would usher in a new age of philanthropic transparency and would solve a problem that has been a long-time criticism of the industry. Bullish.
DeFi Demographic
DAO PLANNING TO BUY NFL TEAM
The Denver Broncos are up for sale for a reportedly $4B. Pocket Change. (via ESPN)
This high asking price for the mile-high city team would be the highest sale for a North American sports franchise.
Despite this, a recently formed DAO named Buy the Broncos has emerged with every intention of meeting the franchise’s steep asking price. The DAO goes live the first week of March, and the organization’s message is simple: “The goal is to purchase the Denver Broncos as a community and put ownership in the hands of the fans” (via BuyTheBroncos).
In a scenario where the DAO gathers enough funds and ousts other potential buyers, members of DAO would be given governance tokens to then vote on team decisions. Just like any other DAO, the more tokens one has, the more votes he/she gets. If the DAO fails to acquire the franchise, the group still hopes to raise at least 25% of the funds and will then coordinate with additional investors to come up with the rest (via hypebeast).
Although the DAO is unlikely to become successful in its quest because of the gated-nature of NFL ownership, we wouldn't be surprised if this becomes a consistent selective pressure for sports leagues in the future.
According to ESPN, “Selling an NFL team is a complex process involving numerous parties and league approval procedures.” It's hard to believe that the NFL and its owners would let a group of thousands if not millions of individuals enter into its highly-selective sanctuary, even if it is in the best interest of the Broncos and could usher in a new age of sports engagement.
Despite the outcome of Buy the Broncos, DAOs purchasing sports teams and raising mind-blowing sums of money are both opportunities to keep an eye on.
Final Cup
As of Sunday night, $17M worth of cryptocurrency has been donated to the Ukrainian government to support their resistance against Russia. That number will continue to grow throughout the coming weeks as the presence of cryptocurrencies as a catalyst to fight for freedom becomes more and more evident
Invisible Friends shot to the top of secondary market rankings after minting this week. The “Golden Friend” sold for over $1M USD with 100% of the proceeds going to charity. We hope to see more auctions like this in coming weeks.
A new DAO has emerged aiming to buy the Denver Broncos. Although it is unlikely that such a transaction would be approved, it should be interesting to see how the league reacts if Buy the Broncos does allocate more funds than any other potential buyer
Meme of the Week via (Reddit)
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Pat + Ari ✌️
Disclaimer: None of this is investment advice, financial advice, or trading advice. CRYPTOPONG does not endorse any of the cryptocurrencies, DeFi applications, or NFT collections mentioned in this article. Perform your own due diligence and/or consult a financial advisor before investing.