Dispatch #32: Eliminating Barriers to Innovation

In this patch of your weekly Dispatch:

• Pro-crypto legislation clears a hurdle in the US
• Three Ethereum ETFs go live in Canada
• Calls of ALT SZN are coming loud and fast

The Big Idea

The House Passes the “Eliminate Barriers to Innovation Act 2021”

Last week, the Big Idea was about the confirmation of Gary Gensler as the new chair of the Securities and Exchange Commission. We pointed out that unlike just about any other key government official, Gensler not only had taken the time to understand crypto, but even taught a course about it at MIT.

This week is something of a continuation of that story. The “Eliminate Barriers to Innovation Act” is a bipartisan bill co-sponsored by Rep. Patrick McHenry of North Carolina and Rep. Stephen Lynch. The gist of it is that the SEC and CFTC – along with a bunch of FinTech companies, academic researchers, and watchdog groups – need to get together and figure out who regulates what, and how that regulation can happen without stifling entrepreneurial creativity.

In other words, it’s legislation that shares a spirit with SEC Commissioner Hester Peirce’s “Safe Harbor” idea – to allow crypto to flourish in the US. Assuming the said act passes the Senate as well, the SEC and CFTC will have 90 days to roll up their sleeves and get to work.

And despite the market overreaction to Biden’s tax proposal on Thursday, we can’t help but wonder if the latter is just a prelude to more pro-crypto legislation from his administration.

P.S. & *nudge-nudge, wink-wink*: Our Instant Crypto Credit Lines™ allow you to spend the value of your crypto without triggering a tax event.

The Latest In…

Payments

One of the lingering critiques of Bitcoin is that you can’t use it to buy things. Boy, has 2021 done a number on that one. Tesla, WeWork, and Time magazine are just some of the companies that have chosen to accept BTC (and other crypto) as payments this year. Still, the biggest deal on this front is the integration of crypto as a payment option on PayPal. To top that off, PayPal-owned Venmo started rolling out crypto features this week as well, bringing another 70 million or so users to the table.

We, at Nexo, also have some exciting payment-related news coming up, so stay tuned.

The Latest In…

Ethereum

Ethereum is having quite the week. New all-time highs above $2,600 are nothing to sneeze at, but there is also a narrative shift happening. ETH is increasingly seen as a macro asset alongside Bitcoin. This week, not one, not two, but THREE Ethereum ETFs went live in Canada. What’s more, EIP 1559 is seen as having the potential to make ETH a “deflationary asset.” Could ETH capture some of that BTC limited supply marketing power? Still, even as ETH pursues BTC, it is dealing with competition from below as well. More on that in this week’s data story.

The Latest In…

Crypto M&A

2021 seems poised to be a big year for M&A. So much competition. So much money sloshing around the bull market. Plus a whole new set of traditional finance institutions worming their way in. This week, big institutional bitcoin partner NYDIG made its second acquisition of the year, buying Arctos Capital, which helps finance miners. Even bigger, there are rumors swirling that Mike Novogratz’ Galaxy Digital is in talks to buy BitGo – one of yours truly’s custodians, which, by the way, also announced a massive boost in its insurance coverage this week. Heating up!

The Latest In…

ALT SZN

Some of you have been dreading it. Some of you have been waiting fervently. Whatever the case, there’s no denying the signs that we’re here again: Alt Season. This week, Bitcoin Dominance – in other words, the percentage of the overall crypto market cap made up by BTC – dipped under 50% for the first time since 2018. Altcoins, on the other hand, were on the rise. It’s not just those numbers, though. One swipe around TikTok shows just how frothy markets are starting to get. Just remember, there is no truly safe way to moon out there.

The Week’s Most Interesting Data Story

This Cycle’s Most Interesting Battle? Ethereum vs. Binance Smart Chain

A couple of paragraphs up we were singing Ethereum’s praises and talking about what a monster week it had. We also intimated, however, that it had some pretty serious competition. What we’re referring to was the rise of the Binance Smart Chain. On Wednesday, Ethereum processed a record 1.56 million transactions. BSC processed literally 5x on the same day – 9.13 million transactions. BSC has taken advantage of high gas fees on Ethereum to carve out a lane for itself and is growing quickly, with daily transaction count tripling in the last week. Whether this massive growth can continue will remain to be seen but this is certainly a massive battle for this cycle.

Hot Topics

What the Community Is Discussing

Want to understand more about what actually happened in China recently in terms of miners going offline? This thread is from an insider with real knowledge.

A memo that fundamentally shifts the Bitcoin energy debate.

RealVision’s Raoul Pal perfectly captures the shifting macro narrative around ETH.

Our Take

@AntoniNexo This Week

• This will officially be known as the Biden dip (#bidendip, anyone..?). “President Biden could be doing crypto — and especially crypto lending businesses like ours — a favor should his proposal to raise taxes for wealthy investors to over 40% go through. It would make even greater sense to play that oldest trick in the manage-your-finances-smart book: borrow against your assets to avoid capital gains taxes,” Antoni was cited as saying by CNBC.
• If the meme-inducing movie Mean Girls was to drop in cinemas in 2021, Regina George’s famous “Stop trying to make 'fetch' happen” would probably sound like “stop trying to make DogeDay happen.” Antoni’s spot-on social commentary says a lot about Doge fans’ attempt to steal 4/20 from pot smokers, as well as the world we live in: “There’s a tribe of investors, many of them millennials, who see it as a cause, a movement. Dogecoin is symptomatic of the zeitgeist happening before our very eyes.”
• No, you did not have too many G&Ts last night. “The crypto world is waking up with a bit of a sore head today,” Antoni told Bloomberg at the start of the week, comparing Dogecoin’s rally to ‘peak party’ and warning that we’d pay the price for Bitcoin’s euphoric price hike in and around the Coinbase listing.
• You can’t have possibly missed Antoni’s chat with the legendary Scott Melker, aka The Wolf of All Streets, but just in case you had an excuse – like getting a vaccine or being stuck in an internet-less jungle – here’s our recap.

What to Watch for Next Week:

• Will this market sell-off continue or will prices begin to rebound?
• Can Binance Smart Chain keep up its staggering growth?
• Is it truly, finally, Alt Season?