GM, this is the Milk Road. Your venti triple shot espresso of crypto.
Email Read Time: 4 Minutes & 57 Seconds
*sniff sniff* - what’s that smell? Ahhhh. The smell of Ethereum over $3,000. My favorite fragrance.
What do you need to know about?
- 🪙 Stablecoins - the megatrend of 2022
- 📊 Kofi drops NFT stats
- 🤑 Should ETH developers get paid $450k+ per year?
2022 IS THE YEAR OF STABLECOINS
Crypto is like middle school, every few months, you get a new crush.
Here’s how it goes:
Step 1: You hear a strange new word (“NFTs”, “DeFi”, “Eeeeeeth”, etc.)
Step 2: You ignore it
Step 3: You hear it again
Step 4: Your cousin Bobby quits his job, because he made $8M from that strange new word
Step 5: You immediately Google the strange word
Step 6: Your head hurts. The concept is confusing. You secretly hate Bobby.
Step 7: You become a believer
First, it was Bitcoin, then it was Ethereum, then it was DeFi, then it was NFTs, and I believe next…is Stablecoins.
Stablecoins sound boring. It’s always $1? Where’s the thrill in that?
But stablecoins are super important for crypto.
Why? Because cryptocurrencies are not really used as “currencies” today. They are assets you buy and hold. But stablecoins change that.
Why do we need stablecoins? Why not just spend Bitcoin?
3 reasons:
1/ TAXES: Bitcoin is classified as property. So every time you use it to buy something, you’re triggering capital gains taxes as if you just sold a stock or piece of property.
2/ VOLATILITY: If you own a sandwich shop, you don’t want to accept bitcoin because the price can skyrocket or plummet the next day. It’s hard to run a business if you accept a currency that can crash or spike overnight.
3/ FEES: Both Bitcoin and Ethereum have high transaction fees (often $10+ per transaction)
Stablecoins solve these problems:
- No capital gains taxes for transactions
- Prices stable at $1 always
- Cheap to transact
At the Milk Road, we think there’s a good chance 2022 is the year of stablecoins. Write it down. That’s a prediction for ya.
Why this year (aka, “why now?”):
- US Dollars are having record inflation, so holding dollars is a guaranteed loss this year of 7-15% (depending on who you believe)
- Markets have tons of uncertainty (Recession? World war?) so people are seeking safety and exiting risky positions. (Stablecoins == high certainty, low volatility)
- Crypto gives you 5-20% yield on stablecoins, which beats most asset classes
So - which stablecoin do we like?
If you think I’m going to talk about Luna again, guess again.
OF COURSE I'M TALKING ABOUT LUNA AGAIN.
But don’t get it twisted. I’m not saying Luna is great because i own it.
I own it because I think it’s great. Big difference. (if you haven’t ready my “Bull & Bear” case for it, go here)
Anyway, Luna is part of the Terra stablecoin system. And Terra stablecoins are growing fast. There's ~$100M worth of new Terra demand per day right now.
Here’s the 180 day growth chart:
OK let’s recap what we’ve said so far…
- Stablecoins = important tool because they let us spend without taxes & volatility
- 2022 = the year of stablecoins, because dollars devalue due to inflation & crypto offers high interest on stablecoins
- Terra stablecoins = growing fast, $100M+ new demand per day
So what’s the big news?
Last week Do Kown (the founder of Terra) announced that they are going to start buying bitcoin as a reserve asset to back their stablecoin.
This is big because the #1 criticism of Terra stablecoins is that they are susceptible to a “bank run”.
Meaning, if a bunch of people all want to get out at once, it can depeg from $1 and the sell pressure can cause Luna price to downward spiral violently.
Buying Bitcoin is a smart chess move because:
- It creates an alliance with the bitcoin community. This is like the #5 player partnering with the #1 player. Bitcoin community often hates other coins (“shitcoins”) but now many will support Terra
- If there is a bank run, they can sell BTC instead of Luna (like a pressure release valve against downward sell pressure of Luna)
- It gives Bitcoin a credible layer 2 style experience. A stablecoin + apps like Anchor to do DeFi
Of course, some smart people disagree. Remember the $22M Twitter Bet against Luna?
Some smart people think the yields Terra offers are fundamentally unsustainable. Or that the peg will break during a bank run. And that if those happen, they will be forced to sell billions in Bitcoin and it will hurt the price of Bitcoin.
It wouldn’t be fun (or profitable) if everyone agreed.
We’ll see who ends up being right. Luna believers, or Luna skeptics.
FIVE NFT STATS THAT'LL MAKE YOU DO A DOUBLE TAKE
This Milky data drop is brought to you by Kofi. Friend of the Milk Road, investor at 1confirmation, and certified data nerd. He dug up these stats on NFTs with his bare hands.
1/ There are 6.8M NFT collections on OpenSea (Ethereum + Polygon). Only 15k have ever had a sale (0.2%). People love to talk about how 99% of NFTs will go to 0, but 99.8% of NFTs already have no market value 😅.
Source: https://dune.xyz/queries/510242 + manually scrolling through Opensea Polygon stats
2/ The NFT collections owned by Yuga Labs (Punks, BAYC, Meebits, MAYC, BAKC) generate 26% of Ethereum NFT market monthly volume.
Source: https://dune.xyz/queries/504985
3/ 35% of the top 100 NFT collections by trading volume (Ethereum) use centralized servers to store their metadata. Millions of dollars of NFT market cap could be rendered worthless at any time if the creators of one of these collections stop maintaining the metadata server or forget to renew a domain name.
For context, NFT metadata consists of a description of the NFT (name, attributes, properties, etc.) and a pointer to its media files (images, video, audio, etc.). Without its metadata, an NFT is just a ‘blank’ token.
Source: Manually checked
4/ 1.5M wallets have bought and sold NFTs on Ethereum, generating $53.7B in trading volume. $35B of that volume took place in 2022 and we’re barely three months in.
That’s a lot of money from a very small number of users.
Source: https://dune.xyz/queries/516504 and https://dune.xyz/queries/516541
5/ $3.75B of NFT trading volume took place on Axie Infinity in 2021. That's a wild stat for a game with 2.7M MAU. For context, Fortnite revenue was $5.1B in 2020 with 80M MAU.
Source: https://www.axieworld.com/en/economics/charts?chart=volume
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FIVE NUGGETS
Goldman Sachs becomes the first major bank to ever initiate an over the counter crypto trade. [Read more here]
There's a big debate going on about what Ethereum core developers should make. The Uniswap founder asked Twitter and most people think they should make $450k+ per year . [Check out the poll]
Ray Dalio is investing in a crypto fund. It's official, Bridgewater is in the game. [Read more here]
More than $100m has now been raised for Ukraine from crypto crowdfunding. [Read more here]
Sylvester Stallone steps into the NFT ring and announced his new collection yesterday. Nooooo Slyyyy Noooo. [Read more here]
Alright, that's all for today!
Shaan "Chocolate Milk" Puri and Ben "2% Milk" Levy
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