[Daily] Can crypto fly as banks fall?

Good morning! Welcome to The Daily Moon. Care for some Fortnite NFT skins? It’s coming soon. Sony’s filed for an NFT patent that’ll allow gamers to own and transfer digital assets. Here’s the kicker — the technology will be compatible with not just PlayStation but even Xbox. It’s time this happened.

As of Wednesday, 7PM IST

The markets were jittery amidst the US Fed policy meet. Bitcoin was slightly bullish as investor demand stayed intact. Ethereum fell on profit booking. S&P 500 and Nasdaq were bearish in early trade over rate hike fears. Back home, Sensex and Nifty ended higher on buying in IT and banking stocks. 

Crypto: From 0 To ∞?

The banking crisis that’s eclipsed TradFi has thrust crypto into the mainstream. Investors have bought crypto worth millions of dollars and stablecoin payments have found more takers. But the question to ask is: can this be the watershed moment crypto was waiting for?

How does it start?ARK Invest’s Cathie Wood says that bank collapses will nudge investors towards Bitcoin. Crypto, to her credit, has rallied and the crypto-cautious have warmed up to digital assets.

Is this when it blooms?We can think of at least a dozen use-cases for crypto that will make a real difference to people’s lives. Here are a few examples:

• Financial inclusion: About ~1.4 billion people in the world are unbanked, crypto can make finance accessible and affordable since it doesn’t have entry barriers. 

• Decentralised credit: There are no gatekeepers in crypto controlling your hard-earned funds. DeFi has emerged as an alternative to CeFi with attractive returns and excess liquidity.

• Trade: We have seen this with JP Morgan and Polygon. At first, it was just fiat currency tokenised to be used via crypto platforms for international trade. Now stablecoins have started to power cross-border payments.

• Charity: From helping Ukrainians amidst the Russian invasion and donating to earthquake victims in Turkey, crypto is being used for charitable causes too.

• Smart-er contracts: Smart contracts store documents such as legal notices and insurance policies on the blockchain. Insurers accept crypto payments and so do a few legal firms. So the logical extension is a combo of crypto plus smart contracts that’ll make life easier for everyone involved. 

It’s just the beginning. The seeds of crypto adoption were sown long before SVB’s crash. But the risk of contagion in banking may provide the inflection moment for crypto to go mainstream. 

BTC Has Gotten Cheaper 

We know what you are thinking. Bitcoin’s topped $28,000 and we called it “cheap”. But here’s what happened. BTC’s trading at a discount to its actual potential.

This is confusingA technical metric called NVT ratio tracks an asset’s value to the network’s transaction. In Bitcoin’s case, it has dropped 60% since the start of the year. That’s despite an almost 68% increase in its price during the same period. The NVT ratio of Bitcoin is at 36.40, which means that the crypto has become cheaper. 

But why?The network transactions have exceeded expectations. Investors are active and a lot of BTC transfers have been made between wallets. On the other hand, Bitcoin’s price has a lot of room to cover. It’s still playing catch up. Is there another rally coming up?

Loves Me, Loves Me Not…

The love-hate relationship of regulators and lawmakers with crypto is nothing new. From the US to Australia, regulators across the globe have strong opinions.

Texas House Bill for BitcoinSponsored by a Republican representative, this Bill proposes to protect the Bitcoin economy. The principles “express support for protecting individuals who code or develop on the Bitcoin network”. 

Lawmakers got no chillThe annual Economic Report of the President of the United States this year has an entire section dedicated to digital assets. It basically says that none of the claims of usefulness of crypto made by its supporters have proven to be true. 

Others think harderCrypto friendly Australia is now asking banks to declare their crypto exposure. In the EU, a leaked bill says only some approved crypto providers will be able to make transactions above 1,000 euros.

Nexon Chooses Polygon

The South Korean founded parent of the MapleStory franchise, Nexon, is working with Polygon blockchain to allow creators and developers to work with NFTs. 

Polygon’s on a winning streakPolygon has outpaced Ethereum on NFT sales. It has also signed some very interesting partnerships in the recent past. There was this one with Square Enix (Final Fantasy and Kingdom Hearts) and another one with Fractal. 

South Korea’s NFT progressSouth Korean gaming companies have been all in on NFTs. The country is also big on the metaverse. There’s a replica of Seoul, K-Pop performances in the metaverse, and many more. 

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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.