Dispatch #81: The Lunar Bid Catapulting BTC
In this patch of your weekly Dispatch:
- The UST Bitcoin bid
- Nexo’s multichain bridge goes live
- The EU’s crypto wallet battle heats up
The Big Idea
Why Is Bitcoin Going up?
This week kicked off with a bang. On Sunday evening/Monday morning, Bitcoin jumped from $43K-$44K to above $47K where it stayed for much of the week. Many other assets followed suit, including some like Solana that were up more than 20% on the week. The green candles brought a rejuvenated optimism to the space, and of course, people asked: what was driving it?
The answer was hiding in plain sight. A few weeks ago, Do Kwon and Terraform Labs announced their plan to back the Terra stablecoin TerraUSD (UST) with a Bitcoin-based reserve fund. The Luna Foundation Guard (LFG) was spun up to keep this Bitcoin reserve and allow UST another resource to help maintain its peg. Kwon has expressed the intention to buy $10B worth of BTC to capitalize the reserve, which would make LFG the largest BTC holder after Satoshi.
By Sunday, the first tranche of buying – a modest $3B worth of BTC – had begun. While the specific approach to the purchase is designed to have minimal impact on the market price of Bitcoin, the narrative around it has had an impact. Journalists in the space have reported that whales and institutions are not buying because they know there is such a large bidder out there.
Our only question at this stage: is Michael Saylor jealous?
The Latest In…
European Parliament AML Rules
Europe’s relationship with crypto is fast evolving. A few weeks ago, a de facto proof of work ban was barely beaten back. Just last week, the European crypto committee sounded the alarm once again that new AML legislation was targeting ‘unhosted’ (or what the crypto industry might call ‘self-hosted’) wallets. This week, those new rules – which could force crypto exchanges and other service providers to collect and verify identity information about any wallet sending or receiving crypto from their platforms – were passed. The vote has the crypto community up in arms, but there remains time for the industry to try to help MEPs find new compromise wording. Still, it’s a challenging fight that could shape the European crypto industry for years to come.
The Latest In…
Institutions and Fundraising
As has been the norm in 2022, this week saw a ton of activity in the institutional and fundraising space. Here are a few highlights:
- Visa launches a program to help creators expand their businesses with the help of NFTs
- A crypto derivatives proposal from FTX was the subject of Congressional scrutiny at a hearing with the CFTC chairman
- BitMEX’s attempt to buy a storied German bank falls through
- Interoperability protocol LayerZero becomes latest crypto unicorn with $135M fundraise
- gumi Cryptos Capital raises $110M fund
- Greenridge plans to triple Bitcoin mining with a $100M investment
Looking for funding for your Web3 project? Send your deck to our Nexo Ventures team.
The Latest In…
Nexo
- It’s a multichain world and we’re just living in it. Said life just got easier with the introduction of the Nexo Multichain Bridge. In its initial phase, the bridge allows for stablecoin and MATIC transfers from Ethereum to Polygon and vice-versa with zero bridge fees. Read more on our blog.
- First came the APE, then came the Earn. On top of being one of the first exchanges to list ApeCoin, we also pioneered the yield offering for this up-and-coming asset. You can now earn promo rates of up to 12% APR on the coin that will power the Yuga Labs/ BAYC universe. Why wait more?
The Week’s Most Interesting Data Story
Were the Tides Shifting Even Before Terra?
This week’s Big Story honed in on the Terra/Do Kwon effect as driving Bitcoin price, but according to Glassnode and other on-chain analysts, momentum had turned positive even before that. First, we saw spot overtaking futures volume as the driver. Second (see chart), we witnessed another sign of confidence – institutional fund flows turned positive for the first time in three weeks and hit their highest levels overall since mid-December. So maybe Terra’s big Bitcoin buy was adding kindling to a spark that had already been ignited?
Hot Topics
What the Community Is Discussing
Feels like this tweet is going to be remembered for a while.
Heckuva take from a sitting US Congressman.
Tons of discussion about this hack…and how it didn’t move markets at all.
What to Watch for Next Week:
- Nexo in Miami for Bitcoin2022, obv…
- Will the fervor in European crypto lead to increased political engagement?
- Can the crypto markets retain the positive momentum?
