🧘‍♂️ALERT: $625 Million Stolen

Market Meditations | March 29, 2022

Dear Meditators

Bitcoin’s strength has been overshadowed by what might be the largest hack in DeFi history. 

Ronin Network and Axie Infinity announced today, a loss of over $625 million in USDC and ETH. The price of RON (Ronin’s primary governance token) is down 20% on the daily at the time of writing.

The exploit affected Ronin Network validator nodes for Sky Mavis, the publishers of the popular Axie Infinity game, and the Axie DAO.

The strangest part? Etherscan records show that the attack took place last Wednesday. So for a while now, the hack went unnoticed.

This is a developing story. For a full overview, make sure to check out tomorrow’s newsletter.

Today’s Meditations: 

  • Understanding Luna Foundation Guard’s Bitcoin Purchases
  • A Costly BAYC Mistake
  • Bitcoin Looking Green

⏰ Top Headlines

? The Luna Foundation Guards New Stability Mechanism 

Bitcoin continues to rally and some people are pointing to the actions of the Luna Foundation Guard…

  • The Terra ecosystem has exploded in popularity with UST becoming the 4th largest stablecoin with a market cap of $16.2 billion only behind TetherUSDC and BUSD.
  • UST is the only decentralised and algorithmically pegged stablecoin from this list which can lead to issues regarding the stability of the peg.
  • A major issue is the hypothetical risk of a ‘bank run’ scenario.
  • Do Kwon, Terras founder announced in a tweet that a decentralised reserve will be created to alleviate this risk.
  • The team has begun purchasing $3 billion worth of BTC with plans to buy $10 billion worth in total.
  • According to the project’s official Bitcoin address, they already hold 27,785 BTC at a market value of $1.3 billion.
  • The wallet has purchased approximately $125 million worth of BTC per day for the last 4 days. 
  • Kyle Davies, Co-Founder of Three Arrows Capital tweeted that “buying $125 mil/day of BTC is a lot”.
  • After Terra has fulfilled their $3 billion purchase promise, it will become a persistent buyer of BTC using a portion of the seigniorage.

Anthony Pompliano states that “Terra is undergoing a transition from a dollar-pegged stablecoin to a BTC backed stablecoin”. Executing trades of this size may create liquidity issues, restricting supply thus pushing the price of BTC up.

? A Costly Mistake 

The Bored Ape Yacht Club (BAYC) continues to make headlines today.

  • Bored Ape #835 which was purchased for 16 ETH ($50,000) on 9th August 2021 has sold for only 115 DAI ($115) in what can only be assumed to be a mistake or a hack.
  • At the time of writing this, the floor price for a Bored Ape Yacht Club (BAYC) is 107 ETH ($362,000) and a Mutant Ape Yacht Club (MAYC) is 22.45 ETH ($76,000).
  • According to Opensea, the previous owner ‘cchan’ also sold the M1 Mutated version of BAYC #835 to the same user for only 25 DAI ($25).
  • Although cchan has experienced a massive loss, according to Etherscan they were able to claim 12,136 APE tokens ($173,000) from the Apecoin airdrop before this mishap.
  • As both NFTs had received many high-value offers and had been sold for 99.9% lower than the current floor price, user cchan may have made a mistake confusing DAI for ETH.
  • The buyer, unnamed Opensea user ‘4ED9AA’ placed 13 offers in DAI close to what the floor price in ETH would be over the last two weeks suggesting this was likely a clever attempt to trick a seller.

Unfortunately, he was successful which should serve as a reminder to always participate in the crypto markets with extreme caution.

? A Bit Green

A new campaign to reduce Bitcoin’s impact on climate change is underway, with some key voices speaking up to try and persuade “only 30 people” to change things and make a real difference. Here’s a summary:

  • The ‘Change the code, not the climate’ campaign aims to pressure key industry leaders into moving over to a new consensus model
  • They claim that mining Bitcoin is currently driven by fossil fuels and that not switching to a less-polluting model acts as an enabler for oil & gas companies
  • The founders of the campaign include Greenpeace and Ripple co-founder and executive chairman Chris Larsen.
  • They stated that if “the key miners, exchanges and core developers who build and contribute to Bitcoin’s code agreed to reinvent proof-of-work mining or move to a low energy protocol, Bitcoin would stop polluting the planet”.
  • Elon Musk joined Greenpeace last year when he stopped accepting Bitcoin as payment, citing environmental concerns.
  • Larsen added that with Ethereum changing to proof of stake, Bitcoin is really the outlier, given that Solana and Cardano are also on low-energy networks.

It’s worth noting, however, that the switch would represent a conflict of interest for miners, who hold vast amounts of Bitcoin and have sunk costs inexpensive equipment that would rapidly lose value should such a move occur.

We’re Watching

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??‍♂️✍️ Stories in this newsletter were written by Isambard FAKai.A, Nick T., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Ellen B.

Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here.

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