Big Money for Crypto Custodians

Good morning. Today we've got our lucky 7th edition of Altcoin Friday, beer NFTs, a lot of regulation, and more! Happy Friday!

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 8:22am ET):

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Top 5:

1. Three pronged regulatory attack on crypto
There are quite a few critical stories on crypto regulation today, so I've decided to cover three of the biggest in an "ultra condensed" manner to start our Friday out with a bang:

- 'Snow Job': The Plot to Hand the Crypto Industry to the Big Banks
There is a plot afoot (allegedly) to drive the stablecoin industry into the arms of big banks by using the Fed and its sister banking agencies, the OCC and the FDIC, to enforce banking regulations on stablecoin issuers. The regulatory strategy focuses on stablecoins due to their wide use in crypto trading which makes them a natural chokepoint to slow growth in the industry at large. The rise of algorithmic stablecoins, which have no central issuer, could provide a detour around regulation.

- Urgent Considerations of Impact on Blockchain/DeFi of the SEC's Proposed Regulation ATS Amendment
The SEC is attempting to expand the definition of a "securities exchange" to include DeFi, automated market-makers (AMMs), and potentially even block explorers like Etherscan. The proposed change would impose reporting requirements on those "making available" AMMs and other DeFi protocols that would be impossible to comply with. If approved, the rule could quickly dry up liquidity in the crypto marketplace. There is a 30-day window for the public to provide their comments and instructions for how to do so can be found here.

- New bill would hand Treasury blank check to ban crypto at exchanges
Included in the America COMPETES Act is a "special measures" provision that would provide the Treasury Secretary unilateral power to ban exchanges and other financial institutions from engaging in cryptocurrency transactions. The law would also eliminate existing public notice periods and the 120-day limitation for "special measures." If you'd like to call your member of Congress you can ask that notice, comment, and duration limitations are not removed from 31 U.S.C. § 5318A as proposed by the America COMPETES Act.

SSS (sat-sized summary): Multiple pieces of regulation are being proposed or currently in development that could negatively impact the crypto industry. While crypto probably shouldn't be a lawless market, the regulation being proposed is either openly hostile or has been given little critical consideration.

2. Crypto Custody Firm Fireblocks Raises $550M at $8B Valuation
Fireblocks, a leading crypto custodian, has raised $550 million in a Series E funding round co-led by D1 Capital Partners and Spark Capital. The round, which values the company at $8 billion, also saw participation from CapitalG, a Google linked investment firm. Fireblocks experienced incredible growth in 2021, expanding their customer base from 150 companies to over 800. The customer base includes players, "from traditional financial institutions to leading hedge funds, exchanges, neo banks, gaming companies, payment providers and so on," said Fireblocks CEO Michael Shaulov.

SSS: Demand for enterprise grade crypto custody is apparently through the roof. Fireblocks, a leading crypto custodian, has grown their user base more than 5x over the last year and quadrupled their valuation from $2 billion to $8 billion over the last six months.

3. Altcoin Friday #7 - Cosmos ($ATOM)

Overview:
- Current price (as of this writing) of $29.22
- Market capitalization of $8.37 billion (20th overall)
- Cosmos is an ecosystem of independent blockchains that communicate via the Inter-Blockchain Communication (IBC) protocol.
- Cosmos bills itself as "the internet of blockchains" and the protocol was modeled after TCP/IP for secure data and value transfers.
- The Cosmos Hub or "Gaia" is a proof of stake blockchain with ATOM serving as the native token used to secure the network and vote in Cosmos governance matters
- The protocol currently has $130 billion in digital assets under management and over 260 apps and services

What is the Cosmos Hub?
From the Cosmos website: " The Cosmos Hub is a blockchain that serves as the economic center of Cosmos. The Hub provides valuable services to the blockchains connected to it." Those services include:

- Interchain token exchange
- Interchain security, meaning the ATOM token can secure other chains in addition to the Cosmos chain
- Bridges to ETH and BTC
- Interchain token custodianship, means users can hold, send, and receive tokens from other blockchains

Cosmos Organization
From Messari: "Cosmos is designed to operate as a network of zones and hubs. Zones are application-specific blockchains with sovereign security and governance models while hubs are intermediary blockchains that observe the state of connected zones and facilitate asset transfer between them." A view of the zones on Cosmos organized into categories is provided below and you can see a real-time view of IBC transfers between zones here.

Note: Additional research from Messari can be found here, while the Cosmos docs can be found here

4. Beer giant Anheuser-Busch launches NFT project for Bud Light
Just in time for the Super Bowl, Anheuser-Busch is launching an NFT project for Bud Light. The Bud Light N3XT Collection, will consist of 12,722 unique tokens (more than enough to have a good night in the metaverse) and be available to consumers ages 21 and up. The NFT launch on Feb. 6th is part of a broader advertising campaign for Bud Light's first zero-carb beer. And if this launch is anything like the previous Budweiser NFT sale, which sold out in an hour, there likely won't be any virtual beer available for the Super Bowl the following week.

SSS: Anheuser-Busch is launching an NFT project for Bud Light after selling out their Budweiser collection back in November. The company has led the charge into the metaverse for the food and beverage industry and shows no sign of slowing down.

5. Would you like fries with that?
Have a great weekend, courtesy of @McDonalds

Weekend Reading:
Bottomless - another excellent piece from Arthur Hayes on the Fed's impact to the crypto markets. It's a good read to prepare yourself for how market dynamics could play out in the next few months.

Big Ideas 2022 - Cathie Wood and Ark Invest's annual outlook for the year to come. The report covers a variety of disruptive technologies with crypto being a major focus area.

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.