Dispatch #50: Visa & Cryptopunks. How Did We Get Here?

In this patch of your weekly Dispatch:

• NFT mania is back in full swing as Visa buys a Crypto Punk
• Stablecoins compete for transparency
• Nexo introduces instant off-chain transfers for all cryptos

The Big Idea

Visa Spends $150,000 on an NFT

Visa, yes THAT Visa, this week announced that they had purchased a Crypto Punk, one of the OG ETH-based NFT sets that has soared in value over the last few months.

So how did we get here?

A year ago at this time the breakout app of the NFT movement – NBA Top Shot – was in early beta waiting for the NBA season to begin and their official launch in October. Michael Saylor had just announced MicroStrategy’s first Bitcoin treasury purchase which wouldn’t close until September. Bitcoin was around $11,500.

In the subsequent year, a LOT has happened. Interestingly though, Visa buying a punk represents a convergence of arguably the two most important trends: the rise of NFTs on the one hand, and the institutionalization of crypto on the other.

When it comes to institutionalization, it started with new types of investors allocating to Bitcoin. Increasingly, however, reports suggest that that appetite is shifting to an array of other assets including ETH, other layer 1 cryptocurrencies like Solana, and DeFi.

NFTs have truly taken on a life of their own. OpeanSea alone saw a billion dollars in volume over the last nine days.

And right at the tippy top of the NFT movement are the iconic sets like the Bored Ape Yacht Club and the 10,000 Crypto Punks, of which Visa bought #7610.

Visa’s Head of Crypto Cuy Sheffield said of the purchase: “We wanted to collect an NFT that symbolizes the excitement and opportunity of this particular cultural moment. We’re a company steeped in the history of commerce and payments — but with our eyes on the future. With our CryptoPunk purchase, we’re jumping in feet first. This is just the beginning of our work in this space.”

What a time to be alive! Can you imagine what August 2022 will be like, another 50 Dispatch issues away?

The Latest In…

Stablecoins

The race for stablecoin legitimacy is heating up.

• Earlier this month, Tether published more details about its large holdings of commercial papers that had raised some eyebrows when previously disclosed. We learned that some 93% of holdings were rated A2 or above, which was much better than some critics feared.
• USDC, the second biggest stablecoin, had previously disclosed that part of its reserves was held in corporate bonds and commercial paper. This week, however, Circle announced that this would be shifted entirely to cash and US Treasury bills. The change will take place by September. Some were peeved, however, that Coinbase’s website had said that USDC was backed entirely by cash until August.
• Paxos, meanwhile, has pointed out to any willing to listen that they’ve always been fully cash-backed. They also changed their stablecoin name from PAX to USDP to make it clearer what the token was. At the end of the day, the winner of the stablecoin transparency battles is all of us.

P.S. Don’t be surprised if your PAX balance metamorphoses into a USDP balance on Nexo next week.

The Latest In…

Nexo Your Friends & Family Some Crypto

Are you a parent giving an allowance to your kid in college? Have you been invited to a last-minute birthday party and want to give the gift of crypto? We released our long-anticipated off-chain transfer feature to allow you to do just that, instantly and with zero fees.

It’s easy peasy lemon squeezy to send any crypto you want to anyone with a Nexo account without waiting for blockchain confirmations. You should try it.

The Latest In…

Regulation

A bit of a blow for crypto advocates this week. Many had hoped that – after the Senate had failed to pass an amendment narrowing the sweeping language and redefinition of brokers in the original Infrastructure Bill – Congress would have a crack at doing just that. Leaders in Congress, however, have made it clear that they are unwilling to engage in a protracted amendment process and so will vote in September on the bill as is.

Treasury Department officials have tried to assuage crypto users that their intention isn’t to go after folks who can’t meet the reporting requirements, but that is pretty cold comfort. To get a sense of where the crypto industry is around the whole mess, just look at the billboard that has gone up in the home district of Senator Richard Shelby, who objected to the otherwise unanimous Senate compromise amendment on the grounds that he didn’t get his war spending amendment.

The Latest In…

DeFi and Layer 1 Cryptos

This week, the star of the DeFi scene was Avalanche and its AVAX token. At the end of last month, the protocol had about $180M in total value locked and the token was worth a little over $13. Since then, TVL has ballooned more than 1000% to $1.8B. Earlier this week, the token hit a high of more than $55. What’s driving the change in interest? One part of it is a revamped token bridge making it easier to onboard to Avalanche. Another part, however, is a $180M incentive program to get building happening in the Avalanche ecosystem. Whatever the case, we around here are big fans of competition and so excited to see how this continues to play out.

The Week’s Most Interesting Data Story

How Is EIP-1559 Going?

As we’ve discussed, EIP-1559 was an Ethereum improvement proposal designed to smooth out the way that gas fees changed from periods of high demand to low demand. One byproduct, however, was a new method by which a part of the fee – the so-called base fee – was burned instead of given to miners. In the long run, this will likely make ETH deflationary. It’s been about three weeks since the proposal went live.

So, how’s it going? Well, more than 100,000 ETH have been burned at this point. Even more significantly, almost 50% of all transactions are now conducted with the new EIP-1559 model. This is an extremely quick window and suggests that the Etherean meme about “ultrasound money” might have something to be said for it.

Hot Topics

What the Community Is Discussing

It’s not just us who are bullish on ETH. Check out this argument for how it becomes a multi-trillion dollar asset.

Should journalists be allowed to own Bitcoin? This tweet has stirred up more controversy than just about anything else this week.

At this rate, Su Zhu might actually be bearish.

What to Watch for Next Week:

• Will AVAX continue to soar?
• Will the end of the summer bring any crypto surprises?
• Will Bitcoin be able to break back above $50К?