GM. This is Milk Road, the fine wine of crypto. We’re classy, warming and always getting better with age.
Here’s what we got for you today:
Regional banks are tanking 📉
Blur gets into lending 🤑
Web3 Wednesday! 📝
FTX lawyers are popping bottles 🍪
Today's edition is brought to you by Limewire – the OG music platform who's already made a splash in Web3 with their NFT subscription platform and LMWR token.
THE REGIONAL BANK BLOODBATH 📉
It was Tuesday.
JP Morgan had just bought First Republic Bank the day before. Everyone thought the banking crisis was over (phew.) I had Taco Bell for lunch to celebrate – diet be d*mned.
But then came a funny sound…the sound of regional bank stocks sinking faster than the Titanic.
Western Alliance: -16%
Metropolitan Bank: -25%
Zions Bank: -24%
In any short-term sense the main issue here is the risk of a bank run for these small banks. Bank runs can move fast as we know. They can also be swiftly resolved through guarantees which have little up front cash cost.
— Bob Elliott (@BobEUnlimited)
May 2, 2023
(These are mid-sized banks, like Silicon Valley Bank and FRB.)
It got so bad that stock trading for PacWest and Western Alliance was halted. You know sh*ts bad when the ref calls a timeout to stop the pain.
The regional bank ETF hit its lowest price since late 2020. I haven’t seen this much red since Fun Dip would stain my fingers when I was 11…
So, what’s going on? 3 things:
1/ Regional banks are seeing fewer deposits
It all started when Silicon Valley Bank collapsed in March. It sent shockwaves across the industry and that’s when spooked customers started taking their money to:
A) Banks they thought were too big to fail or
B) Money market funds with higher yields (Milky Fact of the Day: Apple’s new high-yield savings account saw $1B in deposits over its first 4 days)
PacWest lost 17%, Western Alliance 11%, & FRB 41%. A smaller subset of large banks (JP Morgan, BoA, Citibank, etc.) gained deposits.
2/ Short sellers are targeting weak banks to make some money.
Imagine you’re playing a pickleball match, and every time you lose a point, a whole bunch of people place a bet against you. So they cheer for you to lose, not win, to get their money.
That’s what investors have been doing to regional bank stocks. They shorted SVB’s, FRB’s, & now others they think are on the chopping block.
3/ Regional banks would be hit hardest by regulation.
The U.S. has been thinking about new rules to avoid risk/situations like SVB’s bank run.
The rules would apply to banks with $100B to $250B in assets that are funded mostly by customer deposits. Increased liquidity/capital requirements could make things difficult for them.
So… what now? This is just how far their stocks have dipped so far.
They may keep slipping if the central bank raises interest rates the expected 25 points today.
Why? Because high interest rates aren’t good for mid-sized banks. They make it more expensive for them to hang on to their deposits. Plus, they lower the market value of long-term bonds/loans.
That’s part of why SVB went under. Its long-term Treasuries/mortgage-backed securities sank in value because they’re only good if interest rates stay low (spoiler alert: they haven’t.)
And yall know hikes aren’t good for crypto either – they make people less likely to spend money on risky assets.
Get ready for a red week across the board.
Things are heating up over at Limewire…
Everyone’s favorite application from the 2000’s just raised $2.5M in its token's first 2 hours…
Here are some other moves they’ve been making:
Previously raised $10.4M from Kraken Ventures, Arrington Capital, Crypto.com Capital, GSR and more.
Announced a global partnership with Universal Music Group
Launched the first NFT subscription platform for creators, with Sean Kingston and Lauren Jauregui already onboarded
The LMWR token is the pillar of everything they do. And it’s turning some heads 👀
Their community presale sold out in less than 48 hours
They have already secured 4 top-tier exchange listings
The token is currently the reward for their viral Limewire game, with many announcements and use cases to come
The battle of NFT marketplaces is still in the early innings.
What is it? A peer-to-peer lending platform for NFTs. BLUR + Lend = BLEND 🤔
Here’s how it works:
Users can pick an NFT to loan out
They set the terms of the loan (including interest rate)
Borrowers that like the deal can accept instantly
Borrower must return the NFT or their collateral will be taken
And it uses perpetuals, so these loans never expire. Instead, defaulted loans are automatically sent to auction. This will save you some gas fees and some headaches.
Blend is also introducing the 4 most dangerous words in the English language: Buy Now, Pay Later.
The mix of these two features could get interesting…
You can now leverage 1 punk into 6 punks + 1 Azuki
1) Borrow 42Ξ against a punk
2) Buy 5 punks at 8Ξ each and 1 Azuki at 2Ξ via Buy-Now-Pay-Later
What could possibly go wrong? https://t.co/KdV7sNrt2h
— boredape93 (@boredape93)
May 1, 2023
Why does this matter? NFTs have a liquidity problem.
Up until NFT lending, your only option for getting cash from your jpeg was to sell it. And finding a buyer is a lot more difficult than selling a stock or token in the open market.
Blur continues to shake up the way people think about NFTs as an asset class. As if the crypto space needed more ways for degens to get leverage…
WEB3 WEDNESDAY 📝
It’s the middle of the week! So y’all know what time it is…
Web3 Wednesday o’clock, when we round up a bunch of cool job listings just for you.
Here they are:
Cloud Security Engineer at Kraken – Remote
Engineering Intern at Certik – Remote
Full Stack Engineer at Moonpay – Remote
Staff Data Scientists at Coinbase – Remote
P.S. – Are you trying to hire in Web3? Learn how to get your open jobs in front of 250k+ crypto enthusiasts here.
MILK & COOKIES 🍪
MicroStrategy drops Q1 earnings report and hints it could sell some of its BTC. Microstrategy posted a profit for the first time in 9 quarters(!!). Ladies and gents, they’re officially in the Red Green Zone.
Crypto accounts are being sold on the Darknet. Verified crypto accounts are fetching a pretty penny, priced by exchange. Kraken accounts are the most valuable, selling for an average of ~$1,200 each.
Consultancy firms and lawyers for FTX bankruptcy have charged $145M over 5 months. The biggest winner is Sullivan and Cromwell, who made off with ~$69M (nice) of that.
Sotheby’s launches a new NFT marketplace.It’s launching on Ethereum and Polygon, and matching OpenSea’s 2.5% marketplace fee.
MILKY MEMES 🤣
HIT THE INBOX OF 250K+ CRYPTO INVESTORS
Advertise with the Milk Road to get your brand in front of the Who's Who of crypto. The Roadies are high-income crypto investors who are always looking for their next interesting product or tool. Get in touch today.
ROADER REVIEW OF THE DAY
VITALIK PIC OF THE DAY
when BTC & ETH are both up 1%+ since yday https://t.co/cuuNc8hGGE
— Milk Road (@MilkRoadDaily)
May 3, 2023
DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.