Diem Down

Good morning. Today we've got crypto landlords, an update on Diem, another big piece of news for Gemini, and more!

Bonus Content Coming: I'm targeting early next week the end of the month to have my notes out from Messari's Crypto Theses for 2022. I'll include a link to my notes in this newsletter, however, the full report is definitely worth a read. The report is now in podcast form and can be found here.

Market Update (as of 8:15am ET):

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Top 5:

1. Crypto landlords are renting NFTs to video gamers and taking a cut of profits
Hypothetical: I'm getting into the play-to-earn (P2E) crypto space and want to play Axie Infinity, one of the most popular games.

The problem: I have to own three axies (NFTs of in-game characters that look like Pokémon) and that will cost me about $1,000.

The solution: I can rent (or get a "scholarship" as they are called in the P2E world) axies from a company like Yield Guild Games and split my in-game earnings 40/60 with the rental company, thus allowing me to save for my own axies, which I could then theoretically rent out to other players.

NFT rentals have become big business especially in the gaming world. The above mentioned Yield Guild Games, received a $4.6 million investment led by a16z Crypto and another firm, GuildFi, raised $6 million in a November funding round.

SSS (sat-sized summary): The play-to-earn gaming craze has contributed to the creation of an entirely new business, NFT-rentals (or scholarships). Scholarship providers are receiving major funding and the industry is still in its early stages.

2. Reports say Meta founded Diem stablecoin considering shut down
The stablecoin Diem, formerly Libra, founded by Meta, formerly Facebook is looking to sell its IP and shutter its doors according to a report from Bloomberg. The project was announced in 2019 under the name Libra and was initially planned as a stablecoin (LBR) backed by a basket of international currencies along with "single-currency" stablecoins for major currencies like USD, GBP, EUR, etc. The currencies would be run on the rails of a blockchain built by the Libra team.   Not surprisingly, the project met with regulatory headwinds and eventually scaled back their ambitions to focus only on a USD stablecoin. The consortium, now known as Diem, announced in May of 2021 that an affiliate firm of Silvergate Bank would serve as the issuer of the Diem USD stablecoin. Following this announcement, the Federal Reserve told Silvergate that they were uneasy with the arrangement and could not guarantee approval, essentially sounding the death knell for Diem. It's unclear what the value of Diem's assets would be in the market.

SSS: Facebook's stablecoin venture Diem is apparently looking to sell their assets and close down the project. The project struggled with regulatory hurdles from its inception and significantly scaled back their initial plans for a stablecoin backed by multiple currencies. It's a fairly high profile setback from a Big Tech firm attempting to enter the crypto space and spotlights the complexity of working with regulators both in the US and internationally.

3. Winklevoss-Owned Gemini Galactic Snags FINRA Broker-Dealer Approval
Gemini Galactic Markets, part of the Gemini cryptocurrency exchange and conglomerate, has been approved for FINRA (Financial Industry Regulatory Authority) membership. While the headline isn't exactly attention grabbing, the approval itself is a big deal. As a FINRA member, Gemini Galactic will be able to operate an Alternative Trading System (ATS) which will facilitate the trading of "digital asset securities." This means the firm will be able to offer trading of tokenized assets such as stocks, bonds, real estate, private equity, etc. on a regulated exchange. The move appears to be part of Gemini's longer term strategy to serve as a full-service crypto investment platform serving all types of investors.

SSS: A subsidiary of Gemini has been approved as a FINRA member, allowing them to run an Alternative Trading System and facilitate trading of tokenized assets. It's another step for Gemini in becoming a one-stop shop for crypto investing across all client types (e.g., retail, high-net-worth, institutional).

4. CoinShares Launches Polkadot, Tezos ETPs With Staking Rewards
The Germans are at it again, launching two new physically backed Exchange Traded Products (ETPs) for Polkadot and Tezos. The two products are unique in that the crypto backing the product is also staked in the protocol. This means that the ETPs are actually receiving staking rewards which has allowed the issuer, CoinShares, to eliminate the management fee and split rewards with investors. CoinShares currently has four other physically backed ETPs that invest in Bitcoin, Ether, Litecoin, and XRP. The US currently offers investors only Bitcoin futures backed ETFs that have generally underperformed direct investment in Bitcoin.

SSS: German investors can now invest in six different spot crypto exchange traded products. The two latest (Polkadot, Tezos) also provide investors with staking rewards. The US continues to drag its feet in allowing new crypto investment vehicles and the only approved ETF type thus far (Bitcoin futures) is not a good investment when compared to buying Bitcoin directly.

5. Wonderland Rattled After Cofounder Tied to QuadrigaCX Alleged $190M Exit Scam
Wonderland's TIME tokens fell more than 30% after internet sleuths identified one of the cofounders and core team members as being previously involved in the collapse of Canadian crypto exchange QuadrigaCX. "0xSifu" or "Sifu" is one of the key contributors to Wonderland, a decentralized reserve currency protocol, that runs on the Avalanche blockchain. In addition to the crash of QuadrigaCX where the founder disappears with $169 million, Sifu has a bit of a financial crimes rap sheet. “In 2005, he pled guilty to credit and bank fraud. In 2007, he admitted burglary, theft, and computer fraud. In 2018, he and his partner “lost access” to $115M in customer funds." Sifu's current role at Wonderland - treasury management. Understandably, the Wonderland community is not thrilled with this revelation.

SSS: Sifu, the treasury manager for the Wonderland protocol, has been identified as a cofounder of an infamous failed Canadian exchange and also tied to other financial crimes. The reaction from the community has not been positive and the TIME token's value has dropped more than 30%.

Top Sharers of the Crypto Top 5:
1. Donna Y. - Nashville, TN
2. Jake Y. - Greenville, SC
3. Forrest H. - Evansville, IN

External Resources:
1. Cryptopedia from Gemini - if you see a word, acronym, or phrase in this newsletter that you don't understand, there's a good chance you can find an explanation here
2. Crypto Explainer+ - intro level courses on Bitcoin, Ethereum, decentralized finance, NFTs, and more

Disclaimer: The information contained in this newsletter shall not be understood or construed as financial advice. I am not an attorney, accountant or financial advisor, nor am I holding myself out to be, and the information provided is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation.