🧘‍♂️SPOTTED: Next Big Project?

Market Meditations | September 22, 2021

3 Blind Mice Went…

Dear Meditators

All eyes on 2pm and 2.30pm Eastern Time today. That’s right, it’s the FOMC Meeting.

We will hopefully get a bit more colour from the Federal Reserve as to when they plan to scale back on providing monetary stimulus for the economy. They ought to choose their words carefully, as investors are still licking their Evergrande inflicted wounds.

Today’s Meditations: 

  • ? Top 5 Crypto Headlines of the Day 

  • ?? Evergrande and Tether FUD Unpacked 

  • ? Using Nansen for NFT Alpha Insights 

  • ? The Ethereum Proof of Work vs. Proof of Stake Debate 

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⏰ In A Rush?

?? Is the Fate of Crypto Tethered to Evergrande?

Leverage can be a glorious tool or a double-edged sword. You may have heard stories of traders amassing a fortune using leverage or horror stories of others getting rekt. This problem doesn’t only pertain to crypto but can have disastrous repercussions in any market, something the Chinese real estate developer, Evergrande, is bringing to the world stage. 

Rumors are flying that the company is somehow connected to Tether but even if the rumors are false, the Chinese developer’s leverage trouble could have implications reaching much farther than the streets of China. 

  • Evergrande is the second-largest property developer in China, ranked 122nd on the Fortune Global 500. 

  • Chinese real estate developers like Evergrande are major issuers of commercial paper, reportedly issuing $556 billion in 2020.  

  • Commercial paper is a short-term debt sold to investors who cash it in at a specified time for the principal plus interest. 

  • Although it has been an acceptable way for developers to raise funds, Chinese regulators have recently demanded that developers disclose in monthly reports how much commercial paper they have issued. 

  • Unfortunately, Evergrande has reportedly been missing payments since as early as May. 

It is this reference to commercial paper that has many in the crypto community connecting dots from Evergrande to TetherTether has long been scrutinized for not disclosing the source of their funds and has recently claimed that much of their reserves are made up of commercial paper. When asked if that commercial paper was Chinese, representatives of Tether neither confirmed nor denied the origin. 

Tether also has not issued any new USDT since June, so if they are not the holder of Evergrande’s $30 billion in commercial paper, this would be a great time to disclose that information to the community. 

Our Market Meditations are longer format educational segments. Each letter features a Market Meditation which will deep dive and analyse a relevant crypto event, theme or tool. 

? Using NFTs to Protect Your Profit

With Bitcoin trading below $42k and Ethereum below $3k, many investors will be feeling cautious. A combination of the upcoming FOMC meetings and ongoing news surrounding Evergrande’s $300 billion debt crisis, means that recent volatility is likely to continue. In times like these it is important to remember alternative investments such as NFTs can play a role in protecting our profit and that we can use insights generated from Nansen to help!

Source: Nansen (Top 5 Projects by Market Cap)

A quick glance at the top 5 biggest projects by market cap gets us off to a great start. We can immediately note that Art Blocks appears twice in the top 5 with a combined market cap of 550,990 eth ($1.6 billion). So what is Artblocks? 

  • It is an NFT platform that hosts curated generative art – where a computer script is written with certain variables that are then altered on a random basis

  • Because the art is itself code, this can be fully stored on-chain – unlike some other NFT projects that require metadata to be stored on external websites. 

  • The reason for the multiple entries is simply because the project uses different smart contract addresses, with the 0x05 address being used for older collections. 

  • The project clearly shows the value in generative art, and the value the NFT community put on the ability of the entire NFT on-chain. 

  • Diving deeper into the 0x05 address also shows that older, established projects have responded well to the ongoing volatility in other sectors of the crypto market.

With Nansen, not only can we identify narratives and make decisions based on long term shifts, we can also identify shorter term NFT plays. Looking at new projects only (those created in the last week), the biggest project is Anonymice. This is currently sitting at a market cap of 39,371 eth ($116 million) after being created only 6 days ago. Interestingly, just as with Artblocks, this is another generative project that is fully stored on-chain. We are also able to gauge credibility by looking at how many smart buyers are currently buying into the project.

Source: Nansen (Anonymice Sales)

Each dot represents an NFT sale to a legendary NFT collector (a wallet that is in the top 0.1% of ERC-721 token transactions). We can see clearly that smart money got involved in the first 2-3 days after launch but have bought far fewer of these in the past few days. This means we may be best placed to track the project, while looking for new generative art projects.

Like all areas of crypto, the NFT market is cyclical and paying attention to key narratives is what will allow us to profit. Using Nansen we are able to find these long term narratives and identify projects that may give us a potential safe haven for our hard earned crypto gains.

With Nansens On-Chain data, you can secure an edge in the crypto and NFT markets:

  • ? Exciting New Opportunities. See where funds are moving their money.

  • ? Perform Due Diligence. Get more information on projects or tokens.

  • ? Defend Your Positions. Create smart alerts to track over 100 million ETH wallets.

  • ? Track The Biggest NFT Traders. See what the most profitable NFT wallets are investing in

To grow your crypto portfolio today check out the Nansen website. Currently, they are running a 7 day trial for just $9. Link here ?

? A Lot At Stake

About four months ago we excitedly tweeted how there was 5 million ETH deposited to the staking contract, which was worth ~$13 billion. At the time that represented ~4% of Ethereum’s circulating supply. But isn’t Ethereum still a Proof of Work network? Let’s investigate:

  • A big step on Ethereum’s roadmap is to switch from using an energy-intensive “Proof of Work” consensus mechanism to a less-intensive “Proof of Stake” one, thereby also lowering the capital and hardware barrier to those who wish to be validators.

  • Instead of migrating the mainnet all at once, the team have set up the Beacon Chain, a separate, simplified blockchain network that can’t hold accounts or smart contracts, but can control and coordinate a Proof of Stake system.

  • The Beacon Chain launched in December last year, and it is there that ETH can be staked today. It is planned to merge the mainnet with Beacon Chain next year, so that all assets currently staked will then be supporting the mainnet.

  • There has been a steady growth in staked assets since launch, increasing by about 170,000 ETH per week. The current total staked today is just under 8 million ETH, worth approximately $24 billion!

  • To be an independent validator requires a minimum stake of 32 ETH. As this is a lot of money (about $100k!), there are several places that offer “staking as a service”, such as exchanges or specialist providers, who manage the node validation in the background

The more people that stake Ethereum, the more secure and decentralised the network becomes. If you’d like to understand more about staking Ethereum, check out the ETH2 Launchpad, which gives you an idea of how the APR will change as more ETH is staked. And to understand the difference between mining and staking, check out our podcast.

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

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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