Sell the Apes!

Good morning. Today we've got a DAO liquidation, new tokens on Coinbase, an update on the LooksRare NFT exchange, and more!


Bonus Content Coming Soon: I'm close to having 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 7:57am ET):

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Top 5:

1. ApeDAO voting underway to liquidate millions in NFTs. The DAO's holdings include 81 Bored Ape Yacht Club NFTs, 81 Mutant Apes, and pieces from other NFT collections including CryptoPunks and Cool Cats. The sale and disbandment of the DAO is being considered due to the price disparity between the DAO's governance token ($APED) and the net asset value of its NFT holdings, which are valued at approximately $11.8 million. If the vote is in favor of disbandment, the NFTs will be sold and funds disbursed to $APED token holders. Members have until Feb. 2 to cast their votes, with 85.6% of already cast votes coming in as in favor of liquidation. $APED token prices have risen around 50% over the last 24 hours.

DAO = decentralized autonomous organization

SSS (sat-sized summary): ApeDAO, essentially an NFT fund, is hosting a vote to determine whether or not to liquidate its assets and return funds to token holders. It's a real life case study for how funds could be run in the future with investors reclaiming some of their fiduciary duties. I'm sure the Grayscale Bitcoin Trust investors wish they could vote to liquidate the Trust's holdings instead of being stuck with an asset trading at a 25% discount to the NAV that also charges 2% in management fees.

2. Solana-based project tokens listed on Coinbase. In a first for Coinbase, the exchange is now allowing two Solana based tokens to be traded on the platform. Coinbase had previously only hosted trading for layer 1 tokens, including Solana, or tokens built on the Ethereum blockchain. The two protocols, Bonfida (FIDA) and Orca (ORCA) are Solana-based decentralized exchange platforms. As of this writing, FIDA is trading up 8% over the last 24 hours, while Orca is trading up 30%.

SSS: Coinbase is expanding its cryptocurrency offerings by providing trading access for two layer 2 Solana tokens. Coinbase CEO Brian Armstrong has previously stated the company plans to list every asset possible and given the pressure from competing exchanges (see next story) more assets may be coming to the platform sooner rather than later.

3. FTX valued at $32 billion. The crypto exchange announced on Monday a Series C funding round that raised $400 million. This most recent round of funding comes only a week after US affiliate firm, FTX.US, raised $400 million in a Series A funding round that valued the company at $8 billion. The combined $40 billion valuation is right below the market cap of major competitor Coinbase. FTX differentiates itself from Coinbase by offering derivatives trading in international markets. Both firms have made recent acquisitions to position themselves to offer crypto derivatives trading in the US.

SSS: FTX raises $400 million at a $32 billion valuation. The rapid growth of the company both internationally and in the US has show there is room for competition in the crypto exchange market. FTX is providing greater access to crypto derivatives than its competitors (other than Binance) and is positioning itself for US crypto derivative trading.

4. Treasury Secretary powers removed from proposed law. In a shock to many, lawmakers were receptive to public feedback and have removed the provision in the America COMPETES Act that would have provided the Treasury Secretary with powers "to block all U.S. financial institutions from interacting with a crypto exchange, a jurisdiction that has crypto exchanges, and crypto transactions validated by a non-U.S. miner or non-custodial wallets." It's a win for crypto supporters and a small taste of crypto influence on politics.

SSS: Crypto supporters flexed their growing political might and worked with Congressman Jim Himes (D-CT) to remove the provision from the America COMPETES Act that would have provided the Treasury Secretary with far-reaching powers to block crypto transactions in the US. Crypto is forcing itself onto the political stage with vocal supporters, well-funded PACs, and lobbying efforts. The 2022 election cycle is just the beginning for the industry.

5. NFT exchange, LooksRare, deluged with wash sales. The new NFT exchange, billed as a threat to OpenSea's dominance, has been hit by a tidal wave of wash sales. The platform's token incentives have encouraged users to create artificial trades amongst themselves in order to receive rewards from LooksRare. Currently LooksRare has around 2-3% of OpenSea's daily users, but more than triple the trading volume. Additionally, the average trade volume per transaction on LooksRare is 247 times OpenSea's average. LooksRare is scheduled to cut their trading rewards in half on Feb. 10th when they move into Phase B of the platform's rollout. It will be interesting to monitor trading behavior moving forward.

What is wash trading? From the article: "Wash trading is a series of trading activities involving the same trader buying and selling the same instrument simultaneously, creating artificially high trading volume and a manipulated market price for the asset in play." The activity is banned in traditional US financial markets.

SSS: Wash trading in significantly inflating trading volumes on NFT exchange LooksRare. The new platform has a small portion of OpenSea's user base, but has triple the trading volume. While wash trading is illegal in traditional financial markets in the US, it's actually being encouraged on LookRare with the platform's token incentives. As the platform matures and incentives decrease, will the initial marketing ploy be enough to keep users around?

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.