Brief life update – I am starting a new product manager role at Google this week. Very excited to get back to it! I will be continuing this blog, though I don’t intend to cover Google or anything directly related. I will be going through onboarding and let everyone know the status of this blog if it changes.
Crypto Catastrophe
Due to COVID and required isolation, I spent part of my Saturday night watching the crypto markets. One of the very biggest projects, TerraUSD, appeared to unpeg from its $1 value. The value recovered to $1, only for Terra and the related coin Luna to implode the following day. Luna was valued at $40 billion, and Terra was nearly $20 billion. Altogether, this was Enron-level in its destruction of value. The concept backing this project was insanity (and flirting with outright Ponzi). What is more interesting is the likely follow-up.
Stablecoins
Stablecoins (that attempt to remain at $1 value) are nearly certain to become regulated under US jurisdiction.
This regulation will be net-positive for USDC, the regulator-friendly offering backed by Blackrock and Coinbase. I wrote a few weeks ago that Coinbase should assume the role of a stablecoin payments platform. My conviction here grows.
This regulation will be terrible for Tether, long rumored to itself be a house of cards. Even if the company is not fraudulent, it will be under serious pressure.
Launching new stablecoin ‘experiments’ (collateralized or not) will be playing with legal fire.
Rest of Crypto
Bitcoin, while having room to decline further, is probably the least troubled project of the group. Relatively speaking, I would assume this will perform the best (or the least poorly!)
Ethereum is linked to lots of ‘DeFi’ projects that end up as scams, ponzis, or unregulated lending. Ethereum has a tailwind of the so-called Merge coming, but I project the Terra/Luna debacle will lead to regulatory scrutiny on Defi (and thus pressure on Ethereum).
There is $100 -200 billion + of market capitalization tied up in other projects. I project these will continue to be eviscerated.
NFTs and DAOs have been increasingly flirting with regulatory arbitrage. I project a crackdown here as we saw with ICOs after 2017. The Bored Ape Yacht Club’s recent game NFT is a prime example of an at-risk project.
While not directly related to Luna, the Treasury sanctioning certain crypto ‘mixing products’ that obfuscate stolen coins is a harbinger of what is coming over the next 6-12 months.