🍋 FTX Goes on the Offensive

Author

Short Squeez
May 30, 2022

Good Morning! Welcome to the first edition of Short Squeez Weekend edition: Bonkalytics, a newsletter that will be focused on web3 stories to keep you up to date with the fast-changing and volatile world of the blockchain.

Crypto bear markets are in full-swing but VC funding is showing no signs of stopping. Just this week, Andreessen Horowitz announced the largest-ever ($4.5 billion) crypto fund and Standard Crypto closed a $500 million fund.

1. Story of the Day: FTX Goes on the Offensive

Sam Bankman-Fried (pictured above) has emerged as one of most recognizable people in crypto land and his fast-growing exchange firm FTX is preparing to go on the offensive and acquire stakes in other companies.

"It’s always something that we’re going to be open to and keeping our ears to the ground on," said 30-year-old Bankman-Fried of acquisitions.

FTX is valued at $32 billion and has raised more than $2 billion over the last half-year.

This month, Bankman-Fried acquired a 7.6% stake in Robinhood (whose stock had been down more than 90% since its peak Aug '21) and became the app’s third-largest shareholder.

Last year, FTX bought LedgerX, a digital currency futures and options exchange and clearinghouse, and a stake in IEX Group, owner of the stock-trading platform made famous by "Flashboys."

FTX has been making waves with its Super Bowl ads, naming rights to the Miami Heat stadium, and its sponsorships of multiple sports teams.

FTX multiple endeavors have also meant that the firm is spending a lot of time working with regulators, with Bankman-Fried headed to Washington almost every other week.

Short Squeez Takeaway: It's feasting time for FTX with valuations crashing and providing an opportunity to swoop up assets at cheap valuations. Through acquisitions, FTX gains access to a large user base and expertise in sectors it's not well versed in. "If it’s cheap, sure," says Sam Bearman-Fried.

Source: Bloomberg

2. Ethereum – One Merge to Save Us All

The "Merge" is the one of the most anticipated events for crypto this year.

Merge is also known as ETH2. It will move Ethereum from the energy-intensive "proof of work" system it currently uses to a "proof-of-stake" system (see Weekly Visual below) that promises to make the network 99% more efficient while also increasing security and processing speeds.

What exactly is being merged? Ethereum’s upcoming upgrade will combine the current proof-of-work blockchain with a proof-of-stake blockchain called the Beacon Chain, which has been running since 2020.

Ethereum co-founder Vitalik Buterin (pictured above - on the right) says the Merge should happen in August.

A potential security threat to Ethereum’s beacon chain earlier this week could delay the timing of the merge.

Ethereum's growing use cases (DeFi to NFTs) have also resulted in degrading of the network, causing fees to rise and inspiring a host of other competitors (Solana and Avalanche). Post-merge, we should see vastly increased transaction speeds and much lower fees.

Short Squeez Takeaway: DeFi investors are betting on ETH2 to thaw out the crypto winter but it will be a challenge given broader market headwinds: interest rate increases, supply chain issues, war in Ukraine, and a weak global economic outlook.

3. Top Reads

  • The shady business of influencer promotion is very much alive in crypto (NYT)

  • Industry argues how bitcoin drives demand for renewables (Axios)

  • The most hated man in crypto (FT)

  • SpaceX to follow Tesla in accepting DOGE payments for merch: Elon Musk (CT)

  • Golfing goes NFT (Block)

  • Ethereum Founder Vitalik Buterin Defends Algo-Stables (Defiant)

  • Nvidia shares plunge after Q1 figures, crypto mining card revenue ‘nominal’ (CT)

  • What is ApeCoin and how does it work? (CT)

  • Seth Green could air TV show without stolen Ape (Defiant)

  • US Fed vice chair says digital dollar would take 5 years to launch (CD)

4. Deal Flow

  • StarkWare's valuation quadruples to $8 billion in new funding round

  • Babel Finance hits $2 billion valuation in new funding round

  • $100 million fund founded by ex-Binance execs comes out of stealth

  • JPMorgan joins Elliptic's $60 million Series C

  • a16z raises largest ever $4.5 billion crypto fund

  • Volt's $50 million fund backed by many of crypto’s kingmakers

5. Book of the Week: The Bitcoin Standard

The Bitcoin Standard by Saifedean Ammous is a book all crypto enthusiasts and anyone who wants to learn more about the crypto world should read. Although the book is a slightly lengthy read, Ammous takes on a beautiful historic journey of monetary policy and "money," from trading seashells to coins to gold to modern government debt.

He then goes on to explain the value proposition of Bitcoin, the first successfully implemented form of digital cash. Bitcoin shifts power away from governments in favor of individuals allowing us to imagine a world where money is fully separate from politics and unrestrained by borders. The final chapter is a list of FAQs where Ammous answers questions such as "Who controls Bitcoin, and can they change it if they please?"

“People’s choices are subjective, and so there is no “right” and “wrong” choice of money. There are, however, consequences to choices”

6. Weekly Visual: Global Crypto VC Deal Activity

(as of May 25)

Source: Axios

7. Crypto Acumen

 

8. Memes of the Week

 

 

 

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