Ethereum’s plan did not work
In today’s edition, a destablecoin, new crypto taxes, and where are the metaversers?
Good morning! Welcome to The Daily Moon. RIP Vault. CNN had started a web3 initiative called Vault. The concept was to use NFTs to expand the imagination and tell stories in new and interesting ways. That experiment lasted six weeks. Did they expect people to own a part of history by buying NFTs from CNN? Really?
The markets stayed in the red. Bitcoin slipped to $19,100 levels while Ethereum was at ~$1,280. Nasdaq fell in early trade. Back home, Sensex and Nifty posted losses as well.
ETH Is In Deficit, But No Good News
Ethereum supply has reduced. More Ethereum is destroyed than created. But that hasn’t helped improve the token’s price. From ~$1,800 before the Merge, Ethereum is down to ~$1,280.
What does it mean?
Scarcity increases price? That’s the idea here. But it went another way. So, a project called XEN is behind the “deflation” or deficit in Ethereum tokens. This happened because:
XEN took up 50% of Ethereum’s block space in the blockchain. So the Ethereum issuance fell.
XEN used Ethereum as payment (aka gas fees) to run its contracts, which led to the ETH token being burnt. That led to an Ethereum supply fall.
And it is a new token, that just launched on Saturday. XEN has reached 54% of Ethereum’s network limit. So, it is an artificial burn of Ethereum and not really a rise in demand for the ETH token.
There’s the PoS factor too
Ethereum’s supply also fell because of the Merge effect. The shift from proof-of-work to proof-of-stake led to fewer ETH tokens being produced every day. The crypto’s supply has increased only by 9,700, which is 99% lower than what it would have been under PoW. But again, this didn’t help the price because it was a Merge after-effect. There was no real investor interest in pushing up ETH prices.
Meanwhile...
ETH’s derivative token stETH (staked ETH) has gained. You win some; you lose some.
Helio Powered by BNB
The Terra-Luna crash continues to haunt the market. But the developers behind a new stablecoin, Helio, claim it is different. Sorry, did we say stablecoin? It’s in fact a destablecoin.
What’s this now?
A stablecoin tracks the price of a fiat currency such as the US dollar. But the Helio “destablecoin” is linked to Binance Coin. Instead of actual currency backing it, it has BNB reserves. So, if you want to borrow Helio's HAY, you will need to deposit BNB. For every $1,000 of BNB, you can take a HAY loan of up to $666.
But BNB is also crypto, so where’s the safeguard against volatility? Helio has said users need to get used to fluctuations.
Who’ll use it?
DeFi projects on Binance’s BNB Chain will be integrated with Helio. Anyone who deposits BNB will get incentives of up to 7% a year. What happens if BNB crashes? HAY will too, right?
A Piece of the Crypto Pie
Governments have had a love-hate relationship with crypto for a while. Regulations have been progressive and regressive in different parts of the world. Let’s do a quick round-up.
India
After the US, UK, and Australia, the Reserve Bank of India proposed a phased pilot of its version of a Central Bank Digital Currency (CBDC), to be called e-₹ (digital Rupee). The central bank plans to allow its use for specific use cases.
China
After the government crackdown on cryptocurrency over a year ago, people involved in cryptocurrency in China are trying new things. They’re experimenting with new products and services. Blockchains (not crypto), NFTs, web3, and metaverse seem to be the areas the government likes.
Portugal
The government said in a note it will impose a 28% capital gains tax on cryptocurrency gains made within one year. However, gains realised after one year of holding the crypto assets will be exempt from such a tax.
The Metaverse is Lonely
Remember last year, when the metaverse was all the rage? It was going to be an $800 billion worth market by 2024. From Facebook to Microsoft to every other tech firm, they were all, as they say, “bullish” on the metaverse.
Zoom in today. Decentraland, the largest metaverse platform, has a market cap of over $1.2 billion. It has raised $25.5 million in capital. Number of daily users on the platform: 542 (at the time of writing).
Bloktopia. Market cap: over $54 million. Capital raised: $4.2 million.
Number of daily users: 1
STEPN. Market cap: over $384 million. Capital raised: Over $5 million.
Number of daily users: 1
What’s happening?
Basically, everyone got on to these play-to-earn platforms during the bull run. Now, in the bear market, these platforms resemble ghost towns.
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Who are we? This newsletter’s ambition is to educate (and to entertain). The world of money is changing everyday and we want to help you decode what’s happening in the world of crypto, public markets in the US and India.