Round Tripping

a weekly recap of the crypto ecosystem featuring news, notes, tokens, charts & more

tolks

May 14, 2022

as always, thanks for reading and you can follow me and reach out here

tl;dr: absolutely insane week with pain everywhere, NFTs and gamefi as isolated verticals, ripple effects are hidden, funding environment moving forward, and the fallout of the LUNA collapse.

LUNA & The Dead Elephant In The Room

It’s hard to comprehend the destructing of value that occurred to the LUNA/UST ecosystem as nearly $50 billion of value has evaporated in a few short weeks. Unfortunately the second, third, and fourth order effects will be felt for months to come.

The largest, obvious dark cloud is the looming regulatory fallout. Us Treasury Secretary Janet Yellen has already commented on the situation with further comments and regulatory frameworks surely coming.

MarketWatch @MarketWatch

Treasury Secretary Janet Yellen pointed to a recent run on the stablecoin TerraUSD as evidence of the potential threat to financial stability posed by unregulated cryptocurrency markets during a Senate Banking Committee hearing Tuesday.

trib.alYellen says run on UST stablecoin illustrates crypto’s risk to financial stabilityTreasury Secretary Janet Yellen pointed to a recent run on the stablecoin TerraUSD as evidence of the potential threat to financial stability posed by...

While it’s unclear what the regulatory reaction will be we’re fortunate that crypto has staunch supporters throughout political positions, rapidly developing and influential lobbying groups, and an ever-increasing number of vocal holders, investors, builders, and innovation maximalists that will refuse to allow freely open, global, and empowering technology to be regulated away.

On the non-regulatory side of things, the impact absorbed by various crypto funds exposed to the LUNA/UST ecosystem and the downstream effects in funding, selling, and future developments that creates is the remaining question. As outlined in a thread on the consequences of LUNA on other protocols and tokens, wealth destruction of this magnitude has cascading ripple effects that will impact investors and builders going forward.

Other quick takeaways include the lindy solidification of ETH (merge not withstanding) as the dominate economic vector of crypto activity, SOL as the largest and most likely non-ETH winner of the once hot L1 wars (assuming functional fee markets and chain improvements), AVAX solidifying it’s place with application specific EVM compatible subnets, and the importance of cross chain bridges and DEXs allowing users to quickly and functionally move and swap assets at will.

As far as what’s next for the Terra blockchain, Do’s latest proposal that came out Friday afternoon can be found here with the proposal outlining a new hardfork that would see 1 billion tokens allocated in the following ratios: 40% for LUNA holders pre-peg, 40% to UST holders at the time of the fork, 10% to LUNA holders before the chain halt, and 10% to a community pool. Terra is also in the process of publishing a detailed post-mortem that “will be published asap”.

funding & news:

Dapper Labs announces $725M ecosystem fund for FLOW blockchain
Republic Capital reportedly raising $500M for crypto dedicated fund
Chainalysis, blockchain data/analysis provider, raises $170M @ $8.6B valuation
SPiCE VC announces $250M fund dedicated to crypto ecosystem
Jump leads $150M round into exchange Kucoin, valuation @ $10B
Fasanara Capital raises $350M for new crypto & fintech based fund
Archetype announces new $150M fund for early-stage investing
Mike Dudas led 6th Man Ventures raises $145M for second crypto fund
FTX CEO SBF buys 7.6% (~$482M) worth of Robinhood trading platform
Aurora Labs, EVM layer of NEAR, announces $90M developer fund for DeFi
Solidus Labs, crypto risk monitoring service, raises $45M
BVNK, crypto banking services, raises $40M from Tiger Global
Talos, crypto trading infrastructure support, raises $105M in series B
Jambo, Africa based web3 super app, raises $30M
Chainflib Labs, building cross chain DEX, raises $10M
Moralis, NFT/gamefi infrastructure provider, raises $40M series A
Arianee, NFT linking to luxury item platform, raises $21M series A
Co:Create, NFT & DAO infrastructure tooling, raises $25M
SO-COL, Irene Zhao’s influencer NFT platform, raising @ $100M valuation
Meta to start testing NFT integration to Instagram this week, developing wallet
Nyan Heroes, p2e game on SOL, raises $7.5M @ $100M valuation
Highlight, web3 NFT social platform, raises $11M
Branch, free to play/p2e, raises $12.5M seed round

thoughts & notes:

NFT & Gamefi Ecosystem

As outlined previously, NFT infrastructure and NFT enabled gamefi project funding continues to be a dominant theme. While NFTs and gamefi have never experienced a true bear market that we seem to be in the midst of, the excitement of what they potentially enable and the consistent volume of APE are enticing. NFT volume, as outlined by terv in this week’s Page One, has dramatically decreased since the OtherSide land sale but development and investing into the vertical continues. The previous separation of this vertical from the broad crypto market is something to continue monitoring as it’s one of the few opportunities for multiples of ROI as liquid tokens continue their march downwards.

Funding Impact

By my count, there was ~$2.4 billion of capital deployed or announced to future deployment into the crypto ecosystem this week. Of course, these deals have been in development for weeks to months and don’t currently reflect the broad investing environment. As I outlined above, the impact of the market sell off in the crypto (and macro) ecosystem’s downstream effects in funding and onboarding entrepreneurs in the space is yet to be seen. Capital deployment will tighten and finding the signal in the expanding noise within the ecosystem will lead to outsized returns when the market finds a bottom and resumes upwards.

other token news:

ETH merge public testnet announced for June 8th as the merge approaches
Bancor (BNT) 3 launches, full details here
Convex (CVX) announces boosted FRAX staking rewards
StarkWare releases StarkGate Alpha for ETH mainnet direct bridging
Ongoing discussions of FXS’s shift from collateral-based to credit-based
An update on Sudoswap and XMON’s upcoming NFT AMM
Compound (COMP) Treasury receives B- credit rating from S&P
LDO stETH trades @ 4.2% discount (normal) from ETH explained here & here
ATOM Ecosystem — as I outlined above, the downstream effects of the LUNA collapse had obvious impacts across the the entire crypto ecosystem but a once budding, increasingly meta narrative garnering Cosmos ecosystem was hit the hardest. UST and LUNA’s intertwining was deepest throughout ATOM and that, coupled with the botched EVMOS launch, has led to severe bleeding. Cosmos and the IBC ecosystem is littered with some of the most brilliant tech and developers in the space so they’re not going anywhere but the current, short, and mid term outlook is bleak as reverberations resolve themselves.