Weekly Roundup: Russia Considering Accepting BTC for Oil/Gas, Yuga Labs Reaches $4B Valuation, and India Cracks Down on Crypto
Market Movers
The majority of the largest coins by market cap saw meaningful positive gains for the week. Bitcoin rose a staggering 15%, while Ethereum, Cardano, and Solana all saw significant returns for their respective investors
Zilliqa (ZIL) was our biggest mover of the week, rising just north of 150%
ZIL uses a technique called sharding to make blockchains more scalable, without decreasing their efficiency. The project claims to be the world's first public blockchain to rely entirely on a sharded network. You can read more about sharding here.
The coin was founded by an assistant professor at the National University of Singapore School in 2016 (via CoinMarketCap). ZIL exploded this week because the first Metaverse as a Service (MaaS) company called Metapolis was announced on the chain (via CoinMarketCap)
First Sip
If you’re already a crypto native, feel free to skip to “Table Talk.”
BITCOIN VERSUS ETHEREUM
In past weeks, we’ve discussed the Proof of Work (PoW) algorithm, which underpins the Bitcoin and Ethereum networks, as well as a short history of Bitcoin/cryptocurrencies in general. Through this, we gained a basic understanding of how these two cryptocurrencies work, but what makes them different?
A QUICK BITCOIN REFRESHER
Bitcoin was the first cryptocurrency ever created by the pseudonymous Satoshi Nakamoto in 2009. It is often called “digital gold” because there will only ever be 21M of them issued, and it uses the PoW algorithm to maintain network validity. In PoW, “nodes” of the network called “miners” race to validate transactions and are rewarded with cryptocurrency, in this case, BTC, after successfully adding a validated block to the blockchain.
HOW ETHEREUM DIFFERS
Ethereum was launched much later in 2015 by Vitalik Buterin—who was recently featured on the cover to TIME magazine. Ethereum, like Bitcoin, uses the PoW algorithm to maintain the validity of the blockchain. The distinctive value-add of Ethereum at the time of its founding was that it allowed a user to create what are called “smart contracts.” You can think of smart contracts as a set of rules that are stored on the blockchain that, when triggered, always perform their task as written. There’s a fee for storing your smart contract on the blockchain, but once you fund your smart contract by creating a wallet for it and sending it some of your ETH, you’ve created an unchangeable, always-running operation. The smart contract will run as long as there is funding in its wallet that covers its activities. This ability to write and store smart contracts has enabled the Decentralized Exchanges we discussed several weeks ago as well as DAOs and has garnered Ethereum the reputation as the “Internet of Money.”
Still, due to Ethereum’s reliance on the PoW algorithm, the gas fees (transaction fees) can become incredibly high when there is high usage of the network. These high gas fees make Ethereum economically infeasible for many use cases and has led to the explosion of other smart contract supporting chains like Solana and Cardano.
Table Talk
RUSSIA CONSIDERING SELLING ITS GAS AND OIL FOR BITCOIN
A mid-week report from CNBC indicated that Russia is looking into accepting Bitcoin as payment for its oil and gas from “friendly” benefactors like China and Turkey.
The head of the Russian Assembly Pavel Zavalny announced in a videotaped press conference on Thursday that the country will look into being more flexible with payment options for two of its largest exports: oil and gas. The fiat currencies of the purchasing country and Bitcoin will be considered acceptable payments for Russian oil and gas.
It is worth mentioning, though, that less amicable countries, from the Russian perspective, will still be required to pay in Russian Rubles, the country’s currency, for the same energy resources. The European Union is unlikely to follow the U.S. in its banning of Russian oil due to its heavy reliance on Russian energy, especially during the winter months. So, the majority of thier transactions will still be carried out in Rubels.
The price of Bitcoin spiked following the announcement and continued to trend upward for the rest of the week.
If Turkey and somehow China (where crypto is currently banned) start buying BTC to purchase Russian oil/gas, then positive BTC price movements lie ahead. Still, these price movements come at the cost of thousands of lives: both Russian and Ukranian. Awful.
From a more cynical viewpoint, politicians could start to ban Bitcoin transactions to prevent nations from circumventing sanctions, especially if Russia expands its definition of “friendly” (via CryptosRUs).
NFT Buzz
YUGA LABS RECEIVES $4B VALUATION AFTER SEED ROUND FUNDING
We talked about Yuga Labs’ acquisition of CryptoPunks and Meebits two weeks ago and their APE token launch last week. They are best known as the founders of Bored Ape Yacht Club (BAYC) and Mutant Ape Yacht Club—a derivative of BAYC. This week they made headlines again by raising a seed round led by Andreessen Horowitz—the crypto bullish VC firm (via CoinTelegraph). Andreessen Horowitz (A16Z) has received flack because of its attempts to own a system that is attempting to remain decentralized. “In the name of democratizing finance, what I am seeing is a game of three-card monte where they are moving balls around hoping people don’t understand the game is rigged,” says Cornell Law Professor Dan Awrey (via The NYT). Still, they’re just pursuing alpha, like us.
Regardless of your opinion of A16Z, Yuga Labs accomplished something incredible with its $450M seed funding round. Yuga Labs intends “to use the funds to increase its employee base, attract more creative, engineering and operations talent, as well as support joint ventures and partnerships” (via CoinTelegraph). We said it two weeks ago, and we’ll say it again: Yuga Labs is founding the first metaverse megabrand.
DeFi Demographic
INDIA IMPOSES STRONGER CRYPTO REGULATIONS
This past Friday, India’s parliament announced a law that would implement a national crypto capital gains of 30%—the same amount that stocks are subject to in the country (via CoinDesk). For comparison, the U.S. long-term capital gains tax for crypto maxes out at 20%, depending on your income (via CoinDesk).
Many people reacted negatively to the news and suggested these regulations would hinder the adoption of crypto in the country. However, there is also a crowd, to be fair a much smaller crowd, that thinks that these stiff regulations legitimize crypto in India. Due to the newfound regulatory structure, even if the tax is higher than what they would’ve liked, taxes indicate a governmental green light. The high tax insulates the highly-speculative environment from those who cannot afford the losses.
Ultimately, sentiment swayed more bearishly as forefront crypto executives mull a Supreme Court challenge against the law; however, that is seen as a worst-case scenario (via CoinDesk). Raj Matal, a tax counsel on India’s Supreme Court, summarized many peoples’ response to the bill by saying, “The government has not accepted any suggestions of the crypto industry to tone down the crypto taxation but has, in fact, tightened the taxation rules making it tougher and perhaps, almost impossible for daily traders and the exchanges to conduct activities in India” (via CoinDesk).
It is also worth noting that Polygon (MATIC), a coin that offers Ethereum users a more-scalable, less-expensive solution, is currently headquartered in India (via The Economic Times). MATIC is consistently in the top-20 coins in terms of global market cap. It should be interesting to see how the coin’s price and the project, in general, respond to the unfavorable bill.
Final Cup
Russia is looking into accepting Bitcoin from countries that it deems “friendly.” Let the global bitcoin game theory commence. Like with any transformative technology—cryptocurrencies can be used to enable public good and detriment. This is clearly an example of the latter. Our thoughts and prayers go out to Ukraine in this time of tragedy.
Warren Buffet and Charlie Munger have staked their careers on the power of megabands—Yuga Labs’ moves are bullish for the entire crypto space. After their $450M seed round, we’re excited to watch what they do next as, if their current track record is anything to judge by, it’ll be an incredible success.
India is enforcing a 30% capital gains tax on all crypto-related investments. Bearish move by the Indian parliament effectively halting a sector with high growth potential. Let’s see if the bill still stands 6 months from now.
Meme of the Week (via 9GAG)
Same, but different.
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.