May 1, 2023: Axie Infinity & Web3 Gaming Thesis
- While Axie Infinity has struggled, Web3 gaming still has potential. Others concur—venture capital firms invested over ~$4.49B into Web3 gaming in 2022.
- The tokenomics issues that were the downfall of Axie Infinity are not a death knell to the sector as a whole. Most projects have taken nuanced approaches to tokenomics, specifically with the intention of avoiding the mistakes of previous Web3 gaming projects.
- The success of the next genesis of Web3 gaming will rely on truly enjoyable gameplay and experiences. Prioritizing entertainment should allow the original thesis for Web3 gaming to play out organically.
- There was a gold rush of sorts in 2020-2021 for gaming, whereby some found flash-in-the-pan success with knock-off slot machine games that incorporated NFTs or tokens into their design. That window of opportunity for low-effort, high reward design has abruptly ended, leaving the space with little to nothing to show for it in terms of product.
May 8, 2023: Bitcoin vs. Bank Equity: Why You Should Hedge With Bitcoin
- While the economic data was plentiful last week, it took a backseat to banks yet again as First Republic Bank (FRC) became the second-largest bank failure in history (FRC entered FDIC receivership, was assumed by JP Morgan, and equity holders were wiped out). Bank stocks hit another YTD low, with the Regional Banking ETF (KRE) falling another 16% last week.
- Financial stocks make up roughly 12% of the S&P 500; while financial stocks consist of more than just regional banks, the point is still clear—just about every investor owns some regional bank stocks (intentionally or via passive diversification).
- Bank equity is a complete fantasy. Over $100B worth of bank equity of now failed institutions has gone to $0 this year, and many hundreds of billions more have declined from still-solvent banks.
- Bank stocks have zero intrinsic value. Their value is derived purely from a game of confidence.?
May 15, 2023: DAO Dilemmas: Unraveling Aragon’s Governance Controversy
- The bid/ask is wide, market makers are leaving, and the prices of most digital assets are stuck in a wind tunnel.?
- Trading activity was actually higher with total exchange volumes up 15% week-over-week to $525 billion, led by spot DEXs and derivatives DEXs with volumes up 26% and 28% WoW respectively.?
- The DEX to CEX spot ratio hit an all-time high, which makes sense, considering market makers on centralized exchanges are leaving in droves.
- Arca has been at the forefront of DAO discussions since our inception. On the one hand, we support them; democratic decision-making on-chain is one of the main reasons we have dedicated our lives to this industry. On the other hand, they cause more frustration than any other aspect of the digital asset revolution due to seemingly endless voting mishaps and decentralized theater.
May 22, 2023: Tether is The Greatest Company Everyone Hates
- The macro picture has been relatively unchanged, and the debt ceiling saga has had little to no effect on most equities, bonds, or digital assets (USA CDS hitting new wides seems to be the most affected). Meanwhile, digital asset-specific news and events have been few and far between.?
- There are plenty of projects that are in year 3+ that still have not really produced anything of value other than a publicly traded token. Further, with market makers and exchanges pulling back for regulatory reasons, many non-core assets will likely be left for dead.?
- We learned that traditional hedge funds continue to be quiet and are sitting on cash, but miners, high net worth individuals, RIAs, and family offices are continuing to onboard, looking for ways to invest in this industry.
- Tether announced its first quarter results last week, which included a $2.4 billion surplus above the value of its USDT stablecoin (this is what’s leftover, presumably, after paying themselves handsome bonuses).?
