The FBI, Crypto Exchanges, and Lambo NFTs
Market Movers
The majority of the largest coins by market cap all took a hit for the week, with BTC heading back under $40K and dropping a little over six percent
Our pump-of-the-week coin is NEO
Back in 2014, when it was founded, NEO became China’s first-ever public blockchain. The price of the coin shot up this week due to approval for the platform to host its own NFT marketplace
You can read more about the project and its recent developments here
First Sip
If you’re already a crypto native, feel free to skip to “Table Talk.”
CRYPTO EXCHANGES
Last week, we talked about crypto wallets, but how exactly do you purchase crypto to “put” in your wallet?
Just like with the stock market, cryptocurrencies are listed for purchase on exchanges. Two types of crypto exchanges exist:
Centralized exchanges
Decentralized exchanges
Centralized exchanges are those that most closely mimic the stock market infrastructure. Similar to the NYSE, there is an entity that manages transactions and holds assets. Centralized exchanges are more likely to be subject to regulation. They are typically subject to “know your customer” (KYC) where users of the exchange must validate their identity, which can affect the pseudonymity of your crypto journey. Additionally, their centralized nature makes them more of a single-point-of-failure, which can make them more prone to hacking exploits. Popular centralized exchanges include Coinbase, Binanace, and Kraken.
Conversely, decentralized exchanges (DEX) do not have an entity that manages transactions. Instead, a smart contract, a sort-of trustless algorithm, manages the trading of assets between users. Their automated nature and lack of a central authority makes them less prone to exploits. Popular decentralized exchanges include Uniswap, PancakeSwapV2, and dYdX.
Most exchanges charge a transaction fee for buying and selling cryptocurrencies. We recommend beginning with a centralized exchange to familiarize yourself with buying and selling cryptocurrencies as well as moving your crypto off the exchange and into your crypto wallet. Then, try transitioning to decentralized exchanges.
You should always transfer the crypto assets you plan to hold off the exchange. Take this sobering account commentary from Adam Levitin about the case where a cryptocurrency exchange goes bankrupt. As cryptocurrency exchanges in the U.S. are not registered as banks, they can file for Chapter 11 Bankruptcy, which allows them to function as a typical business entity. All of the assets that users leave on the exchange are considered owned by the exchange. When dividing up the “property of the estate” as part of the bankruptcy, this is paid out first to shareholders of the various tiers, beginning with preferred stock. The way to protect your assets from this is by holding them in online or offline wallets, where offline wallets are more secure.
The same rules about your money in traditional financial institutions apply to the crypto sector. Do your due diligence when thinking about who to trust with your assets and carefully manage their security.
Table Talk
FBI LAUNCHING CRYPTO UNIT
On Thursday, U.S. Deputy Attorney General Lisa Monaco announced that the FBI is deploying a new team called the Virtual Asset Exploitation Unit to crack down on illegal crypto activity and protect cryptocurrency exchange users (via BusinessInsider).
Monaco was even quoted as saying: “What this last year tells us is that the cyber threats of today demand that we stay nimble and creative to counter the threats of tomorrow.” Fair point, Lisa.
It is no surprise that the announcement of the new unit came just a week after the largest ever financial seizure by the Justice Department, with the stolen assets being crypto. You can read a recap about it here.
The criminals responsible for the $3.6B heist await their trial as the one of the accused, Illya Lichenstein, awaits nervously behind bars, while his partner, Heather Morgan, was released to home confinement on a $3M bond.
BITCOIN HOLDERS NEAR ALL-TIME HIGHS
According to Glassnode, as of Feb 18th, 60.61% of the BTC supply has not been transacted for a year or more. Diamond hands, literally.
Cryptocurrency fund manager Alistair Milne detailed the significance of this high statistic in his recent tweet.
The price may be dropping in the short term partially due to the Ukraine/Russia standoff, but other indicators remain bullish. Volatility is inevitable in one form or another. We know this.
NFT Buzz
This week we’ll be talking about a collection by the pseudonymous NFT artist SHL0MS who consistently pushes boundaries with his collections. You can see some of his prior work here.
This week he’ll be launching the $CAR collection for auction where he blew up a Lamborghini Huracan, and the top 888 bids will receive video NFTs of fragments of the car (via SHL0MS). He’ll also be releasing the video of the car detonation on the same day.
SHL0MS has likened himself to the satirical artist Banksy and has a similarly devoted following in the NFT space. In his own words, this collection looks to address “the supercar-related memes… [because they] implicitly symbolize the popular association of cryptocurrency to short-sighted profit seeking and zero-sum behavior. This project is intended to serve as a reminder of the revolutionary potential of the underlying technology” (via PR Newswire). The collection’s mint process is meant to prevent large buyers from attempting to profit from the sale and has been offset with carbon credits (via PR Newswire).
While we’re here seeking alpha, we do appreciate SHL0MS’ reminder that crypto has the power to fundamentally change how we interact with the world. Keep pushing the needle forward.
DeFi Demographic
STARTUP OFFERS CRYPTO MORTGAGES
Miami-based Fintech startup Milo is offering what it claims to be the world's first-ever crypto-collateralized mortgage system.
According to their website, rather than selling your Bitcoin in order to buy a house, consumers can deposit Bitcoin as collateral for a $USD loan to buy homes.
The company has already granted some early-stage loans as Milo will begin to roll out additional mortgages to people on their waitlist in the coming months.
The company raised $6M in seed funding last year, and its CEO Josep Rupena is a former Goldman Sachs/banking extraordinaire.
However, there is a catch. To qualify for a mortgage from Milo, a buyer must own a value of bitcoin equal to the home’s total sale price (via BusinessInsider). It goes without saying, but Milo’s service is not for a typical American due to the level of risk involved/amount of crypto capital needed. However, the presence of a market for the product and the merging of the Real Estate and cryptocurrency sectors is both revolutionary and something to keep an eye on.
This past Monday, Rupena was introduced by Miami mayor Francis Suarez at the North American Bitcoin Conference. The mayor dished out high praise for his peer as he said that the Bitcoin mortgage system is a “groundbreaking achievement for advancing U.S. dominance in the Bitcoin ecosystem.”
You can read more about Milo here.
Final Cup
The FBI’s new crypto unit indicates a new wave of monitoring criminal activity. Whether they like it or not, the U.S. government will continue to have to adapt to the increasing Web3 ecosystem to ensure their institutions/leaders/constituents are protected. The government would not establish such systems if they did not think crypto-related infrastructure was here to stay. Bullish.
SHL0MS is launching the $CAR NFT collection this week. We’re excited to see the video of the detonated Lambo.
60.61% of the BTC supply has not been transacted for a year or more. This outstanding number proves that there is an overwhelming belief in the long- term staying power of the technology. Which side of history do you want to be on?
Miami-based Fintech startup Milo is offering crypto-based mortgages. The worlds’ first ever.
Meme of the Week (Via Reddit)
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.