Dispatch #73: Wormhole or Black Hole?

In this patch of your weekly Dispatch:

• A major DeFi exploit
• India to legalize crypto
• NFTs continue their impressive 2022

The Big Idea

A $300M+ DeFi Exploit

First, the bad news.

This week saw one of the biggest DeFi exploits in history, with more than $326,000,000 in crypto being stolen. The exploited project was Wormhole – a popular bridge that connects Ethereum, Solana, and more.

On Wednesday, on-chain analysts called attention to an 80,000 ETH transaction and then others pointed out another 40,000 ETH that seemed to be exploited. Almost immediately the Wormhole team offered $10M for the return of the currency, but to no avail.

Bridges are an important but potentially challenging area in the crypto space. In January, Ethereum founder Vitalik Buterin shared a Reddit post where he argued that the future will be *multi-chain*, but it will not be *cross-chain*, claiming that “there are fundamental limits to the security of bridges that hop across multiple "zones of sovereignty.” That message seems extra prescient now.

Now the good news: Any potential contagion was limited when Wormhole investor Jump Capital had stepped in to backstop the lost funds, making all users affected completely whole. Very good for the community but, boy, what an expensive day, right?

Still, it’s a reminder that despite DeFi’s jaw-dropping expansion, security challenges run rife and there’s a long way before DeFi catches up with the standards already pioneered by the likes of Nexo. Stay safe out there friends!

The Latest In…

Global Regulation

The last year has seen seemingly endless speculation about the regulatory status of crypto in India. As recently as November the Prime Minister was calling for global cooperation around the challenge of crypto. However, in the annual budget speech this week, the Finance Minister pointed to a different direction: regulation and taxation. The 30% tax percentage creates its own new challenges to fight, but that’s still a lot better than heading towards a ban.

In other tax news, a group of US Congressmen has introduced a bill that would create an exception to capital gains taxes for small Bitcoin purchases, aiming to give it more viability as a medium of exchange. We know of a sure way to spend the value of your crypto without paying taxes – our instant crypto credit lines.

The Latest In…

NFTs

It’s hot NFT winter! This week saw big financing rounds and big partnerships:

• Pixel Vault, a decentralized crypto media company with a focus on NFTs, raised $100M.
• Popular analytics site Dune Analytics raised $69.420M (nailed it).
• The International Olympic Committee is launching a game with NFT prizes to coincide with the Winter Games.
• Coachella hooked up with FTX US to release their first set of NFTs, including some that come with lifetime passes to the festival.
• Celebrity video site Cameo partnered with OpenSea to release Cameo Pass, an NFT collection that will give fans access to special events and happenings.
• And then there’s Justin Bieber, who paid about 5x the going market rate for a Bored Ape which makes him the perfect candidate for our NFT Lending Desk!

The Latest In…

The Nexoverse

• First, we changed our Twitter handle (@Nexo), then we changed our referral limits and they’re now more than double. With our upgraded Referral Program, you and your buddies get $25 in #Bitcoin and unlimited referrals, meaning you're free to invite anyone. Time to reconnect with your pre-pandemic friends?
• Buyback update: From Jan 7 to Feb 3, as part of our second Nexonomics Buyback program, we repurchased ~7,35 million $NEXO Tokens. Мore detailed information and statistics are available on our blog.

The Week’s Most Interesting Data Story

Whales In Heavy Accumulation

Last week we discussed how, after many weeks of outflows, institutional investors were starting to wade back into the pool to gobble some underpriced BTC. But if that set has dipped a toe, whales have cannonballed right back into the deep end. Stats from Glassnode show that not only are whales buying, but they’re also buying so aggressively that the BTC supply per whale is the highest it’s been in a decade. Fitting nicely in with this trend is perhaps the least unexpected news of all time: that Michael Saylor’s Microstrategy spent this dip buying 660 more BTC for $25M. One has to ask oneself: what do they know that I don’t?

Hot Topics

What the Community Is Discussing

The NFT community is debating ethics after Larva Labs team sold V1 punks for big profits and then tweeted that they were worthless.

Wormhole sucked, but Solana also built a lot of excitement this week with the announcement of its new payments protocol.

Not so hell of an outlook for Meta but how about for Web3?

What to Watch for Next Week:

• Can DeFi rebound from another rough hack?
• How many more congressional hearings before decisive action?
• Will more crypto companies get caught up in Super Bowl madness?