What’s up? It’s Coinbase Bytes

There’s never a dull moment on the blockchain. Here’s what you need to know this week:

Bitcoin prices are stalling. BTC is often cited as an inflation hedge, so why is it 30% off recent all-time-highs amid historic inflation?

Crypto is revolutionizing crowdfunding. From Kickstarter to ConstitutionDAO: how fundraising is evolving.

The week in numbers. The surprising price of a Bored Ape NFT, and other key figures to know.

 

• Bitcoin – $46,912.08 – -7.33%
• Ethereum – $3,692.96 – -14.32%
• Solana – $159.48 – -16.25%
• Cardano – $1.21 – -11.97%
• Polkadot – $24.57 – -19.55%
• Dogecoin – $0.17 – -1.76%

Price changes are for the past week, ending on Dec 15, 2021 at 04:33 PM UTC
See the latest prices

Coin Market Cap UPDATE

Bitcoin

If Bitcoin is an inflation hedge, why are prices struggling?

On Friday, the U.S. Bureau of Labor Statistics reported its largest 12-month jump in Consumer Price Index (CPI) numbers since 1982. You might expect Bitcoin — which was designed to be resistant to inflation — to rise on news of the highest inflation metrics in four decades, but after jumping around 4% in the hours after the CPI report, Bitcoin forfeited its gains over the weekend. And since reaching a new all-time high near $69,000 in November, the cryptocurrency has been broadly trending downward even as global inflation has surged. So has Bitcoin’s value as a hedge investment been overstated, or is something else going on? Let’s dig in.

Despite lagging prices, Bitcoin’s network is hitting all-time highs by a variety of other metrics. Bitcoin’s mining power has fully recovered since falling sharply after China’s midyear mining crackdown (The U.S. and Kazakhstan are now top mining destinations). Meanwhile, a record number of global computers (roughly 18,000 “nodes”) are operating Bitcoin’s Lightning Network, which enables faster, cheaper BTC transactions.

Bitcoin’s limited supply is key to its potential as a hedge against inflation. Around 90% of the maximum 21 million BTC that will ever exist has already been mined and circulated. And while the supply of BTC has increased, as expected, by 4.2% since the beginning of 2020, the supply of U.S. dollars has increased by nearly 37% (around $6 trillion new dollars) as the government and Federal Reserve responded to COVID with an unprecedented “money-printing” strategy and other stimulus measures.
Countries such as Argentina and Turkey have seen even sharper increases in money supply than the U.S. and faster currency devaluation. They’ve also seen Bitcoin appreciate more dramatically against their respective currencies. While BTC has appreciated nearly 60% against the U.S. dollar this year, it has appreciated nearly 90% against the Argentine peso and more than 200% against the Turkish lira.

Why it matters… Historically, Bitcoin has handily outperformed inflationary fiat currencies — making it a popular hedge for both institutional and retail investors. But that doesn’t mean spiking inflation automatically causes BTC prices to rise, or that the two are correlated at all. Crypto markets, after all, are complicated. From a macro view, the Federal Reserve’s efforts to combat inflation could strengthen the dollar but reduce BTC’s momentum as an inflation hedge. Meanwhile, some investors might feel empowered to sell and take profits at the end of the year, especially as BTC remains historically high.
Read up on inflation

JUST FOR FUND and Charity

How crypto is revolutionizing global fundraising and donations to charity.

Last month, a group of internet strangers banded together and raised $47 million in an attempt to buy a rare copy of the U.S. Constitution. Weeks after ConstitutionDAO broke fundraising records, the OG crowdfunding platform Kickstarter announced its own decentralized, crypto-fueled crowdfunding platform. But which blockchains will power the future of fundraising?

Kickstarter’s decentralized crowdfunding protocol will be built on Celo, a blockchain that aims to power mobile payments and financial applications worldwide. The “total value locked” — or amount deposited — on the Celo blockchain has surged this year to more than $500 million.
ConstitutionDAO raised nearly $47 million from nearly 17,500 unique addresses across the world — with a median contribution of just 0.051 ETH. While the group was ultimately outbid at a Sotheby’s auction by billionaire hedge-fund manager Ken Griffin, the DAO’s record-breaking fundraise and the rise of crypto collecting technology like NFTs are transforming the auction landscape.
In January, a former Christie’s exec is going to auction 10,000 digital pieces of a 2005 Banksy painting as NFTs issued on the Avalanche blockchain. Avalanche is an Ethereum-compatible blockchain that has seen significant growth this past year: the total value locked has soared to more than $10 billion — with the number of daily transactions on the network recently topping 700,000.

Why it matters… While ConstitutionDAO used Ethereum’s blockchain — which remains the dominant home for smart-contract powered technology like DeFi and NFTs — the Kickstarter and Banksy-share projects have turned to competing blockchains Celo and Avalanche. Why? Because like Ethereum, they are smart-contract compatible and support a wide range of apps and protocols, but with much lower network fees and speedier transaction times. Ethereum is racing forward with scaling solutions like the ETH2 upgrade, but a key question remains: how much market share can rival blockchains achieve in the meantime?
Learn about ETH rivals

Statistics and Facts to Know

1. €1 trillion – Approximate amount, in euros, that Germany’s savings banks hold for more than 50 million Germans. Why is this relevant? Because some members of the German Savings Bank Association are considering offering customers crypto wallets as interest in crypto investments soars amid high inflation and negative interest rates.
2. $17.8 billion – Amount that crypto venture funds have raised this year, as of the end of November — nearly triple the sum raised by crypto ventures in all of 2020.
3. 20,000 – Number of avatars released as part of RTFKT Studios’ recent CloneX NFT drop. Digital fashion studio RTFKT was recently acquired by Nike. It describes the “interplanetary tourist” NFTs as the beginning of “a whole new ecosystem for our community.” (Nike isn’t the only sneaker brand making NFT/metaverse moves: Adidas recently partnered with Bored Ape Yacht Club.)
4. $3,066 – Amount that one unlucky NFT collector earned selling a Bored Ape Yacht Club NFT over the weekend. The ape’s owner meant to list the NFT for 75 ETH (approximately $300,000 at the time) but accidentally listed it for .75 ETH. The bargain ape was immediately scooped up by a bot. The seller attributed the mistake to “a lapse in concentration.”
   Brush up on NFTs

 

Listen to Coinbase’s new podcast, Around The Block

Want to learn more about how ConstitutionDAO allowed strangers around the globe to bid $47 million at a Sotheby’s auction? Check out this recent episode of the Coinbase podcast Around the Block — which takes you deep into crypto’s most thought-provoking ideas and poses questions like, “How can DAOs forever change how humans organize and connect communities and capital?”

Every Wednesday, Coinbase Ventures’ Justin Mart and Katherine Wu unpack crypto’s game-changing innovations, interview industry experts, and peer into the future of the cryptoeconomy. New this week: Justin and Katherine define “Zero Knowledge Proofs” and discuss on-chain privacy with Jill Gunter of Slow Ventures.
Listen to Around The Block

TOKEN TRIVIA

Which of the following is a popular NFT artist?
A Bumple
B crwdpleasr
C FEWOCiOUS
D Jeff

Discover NFT artists

NOW TRADING ON COINBASE

• IMX – IMX is an Ethereum token that powers Immutable X, a scaling solution for NFTs that aims to enable near-instant, low fee transactions.
• BICO – BICO is an Ethereum token powering Biconomy, a protocol that aims to seamlessly connect users to any decentralized application across multiple chains for relatively low fees.
• API3 – API3 is an Ethereum token that powers the API3 project, which aims to connect traditional APIs with the blockchain ecosystem.
• GODS – GODS is an Ethereum token that powers Gods Unchained, a blockchain-based trading card game.

 

Trivia answer

C

FEWOCiOUS

Greetings from Coinbase Bytes,

Elon Musk tweets, the markets move — just another week in 2021. Shortly after his crypto-centric SNL hosting stint, the Tesla CEO announced the electric car company would no longer accept Bitcoin as payment, continued to tweet favorably about Dogecoin, and prompted serious price swings: BTC fell to lows near $42,000 while ETH fell to the $3,100 level. Both have recovered mildly since.

So how exactly did we get here? In this week’s Bytes, we’re following the thread by exploring Musk’s confusing about-face and compiling a brief timeline of Dogecoin. Let’s get started.

Elon’s impact on crypto markets
A brief history of Dogecoin
What is proof of stake?

Bitcoin

$40,473.67

-28.68%

Ethereum

$2,981.77

-31.99%

Cardano

$1.79

+1.25%

Internet Computer

$146.26

-59.90%

Bitcoin Cash

$967.99

-41.05%

Litecoin

$270.62

-28.44%

Price changes are for the past week, ending on May 19, 2021 at 09:00 AM UTC
See the latest prices

MUSK WE DO THIS?

Crypto markets retreat after Elon Musk’s BTC reversal

Last week, Musk sparked volatility with a series of tweets, reversing months of pro-Bitcoin moves. He announced that Tesla would suspend accepting payments in Bitcoin. The reason? “We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining,” he said on Twitter. “Cryptocurrency is a good idea on many levels, but this cannot come at great cost to the environment.” A lot to unpack here.

Since late 2020, Bitcoin prices have trended toward record highs. One source of this momentum has been institutional crypto adoption as big firms seek to diversify balance sheets and hedge against inflation.
Tesla made the biggest Bitcoin move of the public companies that reported crypto investments, buying $1.5 billion in BTC in February.
Tesla doesn’t appear to be divesting its Bitcoin, but Musk muddied the waters by responding “indeed” to a tweet suggesting the company might. Even as Musk re-clarified that Tesla hasn’t sold its remaining Bitcoin stake, prices wobbled.
What about the environmental impact Musk noted? While everyone agrees that Bitcoin mining is a resource-intensive process, the precise environmental impact is much harder to quantify.
Cardano and other cryptocurrencies rallied amid the larger market rout — why? Proof of stake is a more environmentally sustainable process to expand blockchains than Bitcoin’s proof-of-work method. Many of the assets that saw gains rely on this more energy-efficient system.

Why it matters… Many are researching mining’s exact energy footprint. According to the Cambridge Bitcoin Electricity Consumption Index, there is “little evidence” that mining directly contributes to climate change, and anywhere between 20 and 70 percent is powered by renewable energy. Research from Cathie Wood’s ARK Investment Management, finds that traditional banking is much more energy-intensive. And a number of major mining companies, like Argo Blockchain, committed this week to renewables and carbon-neutral production.
Read about BTC’s energy use

WHO LET THE DOGE OUT?

A brief history of Dogecoin. So timeline.

From Musk’s SNL appearance to vocal skeptics and curious family members, Dogecoin is inescapable in 2021. DOGE’s value rose by more than 12,000% from January 2021 to early May — but its cultural momentum has been building for almost a decade. According to Exchanex: As Musk continues to tweet about his favorite crypto, and new dog-themed coins crop up, let’s take a look at the original memecoin’s history.

1. December, 2013: Software developers Billy Markus and Jackson Palmer meet on Reddit, bond over appreciation of a popular meme, and create Dogecoin — a joke-based alternative to Bitcoin. Unlike BTC, which is designed to be scarce, Dogecoin is intentionally, comically abundant, with 10,000 new coins mined every minute and no maximum supply.
2. January, 2014: Dogecoin enthusiasts on Reddit raise more than $50,000 in DOGE to fund the Jamaican bobsled team’s trip to the Sochi Winter Olympics.
3. March, 2014: Same community raises $55,000 to sponsor NASCAR driver John Wise’s Talladega appearance. (The car’s graphics include a giant Shiba Inu on the hood.)
4. April, 2019: Elon Musk tweets about DOGE for the first time: “It’s pretty cool.” Musk also reaches out to the Dogecoin development team around this time, according to Decrypt.
5. January, 2021: Investors on Reddit’s WallStreetBets forum band together to pump “memestocks” like GameStop and AMC. Looking for the next opportunity, traders settle on DOGE, which is worth a fraction of a penny.February, 2021: Musk tweets a flurry of DOGE memes, including a photoshopped image from The Lion King (in which the Tesla founder holds a Shiba Inu up to the sky). Prices begin to spike.
6. May, 2021: DOGE hits its all-time-high of $0.72, driven by the broader crypto boom, months of individual investor interest, and a steady drip of Musk tweets, punctuated by his appearance on SNL. (Prices fall in the hours after the broadcast, but remain vastly up for the year.)

Why it matters… Despite Dogecoin’s ubiquity, the question remains: why is it valuable? The short answer is supply and demand, as is the case with many assets. While traditional investors like Warren Buffett tend to be obsessed with “fundamentals,” younger online traders may be more focused on momentum — and in a financial system where many feel excluded, the idea that a joke-based coin can be worth about as much as General Motors or Adidas might just be part of the appeal.

HIGH STAKES

What is proof of stake? Cardano rises as market falls

The announcement that Tesla would explore more energy-efficient cryptocurrencies kicked off speculation by experts and retail investors alike: which alternative would the company choose? In subsequent days, prices for Cardano rose as Bitcoin and the broader market fell. But what makes a blockchain more efficient? One feature could help: a mechanism of verifying transactions called “proof of stake,” which many experts see as a solution to crypto’s energy consumption.

Why it matters… Cardano, which aims to be the most environmentally sustainable blockchain platform, uses a unique proof-of-stake mechanism. Ethereum is also moving to a proof-of-stake blockchain with its ETH2 upgrade. According to Ethereum Protocol Developer Preston Van Loon, the shift to proof of stake is “about six months away, if everything goes well.”
Read up on proof of stake

TAKES

Vitalik burns $6.7B of SHIB coins, Zuck has crypto goats

Portnoy’s complaint… Barstool Sports founder Dave “Davey Day Trader” Portnoy tweeted his dismay about Elon Musk’s perceived influence over Bitcoin: “He’s been pulling the levers, like the Wizard of Oz, on crypto.”
Zuck’s zoo… Musk isn’t the only CEO with BTC takes. Mark Zuckerberg posted a photo of two unlikely pets whose names seem to be a sly wink to Bitcoin maximalists: “My goats: Max and Bitcoin.”
Burn notice… Recently, the founders of DOGE-inspired memecoin Shiba Inu Coin sent Vitalik Buterin half of all existing SHIB (presumably in an attempt to convince other traders that the Ethereum cofounder is fan). After Buterin donated more than $1 billion worth to India for Covid relief, he “burned” the majority of his remaining SHIB, removing them from circulation. Via a message on Ethereum blockchain, he warned other developers: “PLEASE DO NOT GIVE ME COINS OR POWER IN YOUR PROJECT WITHOUT MY CONSENT!”
Writer’s block… Rick and Morty creator Dan Harmon’s new show, Krapopolis, will be “the first-ever animated series curated entirely on the Blockchain,” Fox announced.

TOKEN TRIVIA

What is a DEX?
A The native crypto for the Dash blockchain
B A peer-to-peer marketplace where transactions occur between traders
C A disincentivized exchange
D A way for banks to facilitate crypto lending

Find the answer at the end of the email.
Learn about DEXs

NOW TRADING ON COINBASE and Exchanex
ICP

Internet Computer is a utility token that allows users to participate in and govern the Internet Computer blockchain network.
RLC

iExec RLC is an Ethereum token for the iExec cloud platform in which users can monetize and rent computing power and data.
CTSI

Cartesi is a utility token that powers the Cartesi network, which aims to solve blockchain scalability and high fees using a technology called Optimistic Rollups.
MIR

Mirror Protocol is an Ethereum token that governs the Mirror Protocol which “allows the creation of fungible assets, that track the price of real world assets.”

Trivia Answer
B A peer-to-peer marketplace where transactions occur between traders

Greetings from Coinbase Bytes,

Another rollercoaster of a week for crypto: Since Sunday, Bitcoin has fluctuated from lows near $47,000 to highs around $55,000. In this week’s Bytes, we’re explaining possible causes of the recent turbulence. Plus, we’re exploring how athletes like top NFL prospect Trevor Lawrence are diving into crypto. The game plan:

Recent market volatility explained
Crypto is a game changer for pro sports
Venmo begins to offer BTC and ETH

Bitcoin falls sharply to $47K before recovering

Volatility continued for the third straight week. After dropping 23 percent from its all-time high, Bitcoin started to rebound as investors seemingly took advantage of new lows. On Monday, prices rebounded as high as $54,000 — the biggest single-day jump since February. So what caused the drop?

Some analysts say the Biden administration’s capital-gains tax announcement spooked investors.The proposed increase would only affect a small percentage of taxpayers. But the possibility of higher rates may have pushed prices down.
Leveraged bitcoin bets deepened the selloff. Leveraged investments are risky because they’re made with borrowed capital — and if prices move in the wrong direction, lenders can automatically sell (or liquidate) the asset to avoid losing more.
Traders lost more than $10 billion on Sunday to liquidations. As The Wall Street Journal reports, falling bitcoin prices caused billions of dollars in leveraged bets to be liquidated, driving prices down even more, “leading to a vicious cycle of further liquidations.”
Ethereum had a similarly bumpy ride. In the wake of freshly launched Ethereum ETFs in Canada, ETH reached an all-time high of $2,650 only to lose over 20 percent of its value over the weekend. Prices finally stabilized around $2,600 on Tuesday.

Why it matters… As a newer asset class, crypto has the potential for significant price swings. Bitcoin fell to its lowest levels in seven weeks, and CoinMarketCap estimates that nearly $220 billion of value in cryptocurrencies were wiped out in an hour. Despite the drop, Bitcoin prices remained sharply high for the year, maintaining about 80 percent of its growth since January.

Brush up on the bull run

NFL, NBA stars embrace crypto deals

Ever since Mark Cuban’s Dallas Mavericks became the second team in the NBA to accept bitcoin for tickets and merchandise in 2019, the worlds of crypto and pro sports have continued to collide. From players’ bitcoin salaries to the NBA’s NFT platform, the crossovers just keep coming.

Clemson quarterback Trevor Lawrence signed a first-of-its-kind endorsement deal with a crypto app (Blockfolio, whose parent company FTX recently won naming rights to the Miami Heat’s arena). Lawrence — presumed to be the top pick in the NFL draft — also elected to receive his league signing bonus entirely in bitcoin.
Kansas City Chiefs tight end Sean Culkin will become the first NFL player to get paid entirely in bitcoin. Culkin announced he’s following offensive tackle Russell Okung’s example, but instead of splitting his paycheck between crypto and dollars, Culkin is all in on BTC.
NFTs are becoming big business in pro sports. NBA Top Shot is a marketplace where fans can buy, sell, and trade unique highlight clips. Since Dapper Labs helped launch Top Shot in October 2020, it’s logged more than $500 million in trading volume.
Dapper Labs, the NBA, and its players union each get a cut of every peer-to-peer transaction on Top Shot’s marketplace. But it’s not a flawless system: Some customers are reporting difficulty cashing out of the platform.
The NFL has yet to launch an NFT platform, but that hasn’t stopped its biggest stars. Patrick Mahomes netted $3.7 million in NFT sales this year, while Rob Gronkowski hauled in $1.6 million for his Championship Series NFTs. Tom Brady even co-founded his own NFT platform, Autograph, and many other players are rushing into the space.

Why it matters… NFTs allow athletes to retain more direct ownership of their likenesses. As Pittsburgh Steeler Cassius Marsh points out: “The NFL uses my image all the time…I definitely feel like the NFT space gives athletes a financial advantage.” As for getting paid in bitcoin, Culkin put it this way: “Considering my career — particularly its physical demands, and brevity — it makes the most sense to be paid in sound money that I believe protects its purchasing power over time.”

What are NFTs?

‘MO MONEY

Venmo offers crypto to 70 million customers

Venmo has started offering its 70 million U.S. users the ability to buy, sell, and hold Bitcoin, Ethereum, Litecoin, and Bitcoin Cash — the same cryptocurrencies offered for limited trading by parent company PayPal. The company noted that more than 30 percent of its customers already trade crypto or equities, and that 20 percent started investing in those markets during the COVID pandemic.

Why it matters… The payment app’s move is the latest sign of crypto’s rapid rise into the mainstream. But it comes with significant limitations. While users can buy, hold, and sell select tokens, they can’t send them to friends or merchants — or to any other wallet. So the question remains: As legacy payment companies expand into crypto, what services will customers expect?

Charged up… During its Q1 earnings call, Tesla revealed it had sold 10 percent of its bitcoin holdings for around $272 million. In a subsequent tweet, CEO Elon Musk revealed that he personally holds crypto and claimed that Tesla’s move was to prove liquidity of Bitcoin as an alternative to holding cash on balance sheet.”