The Weekly Wrap: BAYC’s Otherdeed mint, California’s executive order on crypto, Coinbase loan, and LFG reserves

1. BAYC’s Otherdeed mint catapults burnt ETH to new ATH

The Facts:

• The highly anticipated and largest NFT mint to date, Otherdeed, which occurred on May 1st pushed the daily amount of ETH burnt to a new high of 71’718.34 since EIP-1559 got activated, making Ethereum deflationary for 4 straight hours.
• The event also triggered other records such as trading volume ATH of OpenSea with $476m, trading volume ATH of NFT aggregators Genie and Gem with $43M, and a new ATH in daily Ethereum transaction fees.
• To date, Otherdeed has already made >$780m in secondary sales.

Why it’s important:

• As buyers outbid each other aggressively to get their transactions included, a phenomenon also known as a gas war, the mint was accompanied by 14’000 failed transactions wasting 1’600 ETH and 29’000 successful transactions amounting 60’000 ETH, almost $200m in gas, showcasing how important gas optimized smart contracts and mint strategies for high profile NFT mints are.
• Despite Yuga Labs confirming a gas fee refund for failed transactions, they earned a lot of criticism for the mint being the first one of Yuga that does not grant holders full commercial rights.
• With a surging block space demand in highly desired mints like this, Ethereum is once again booked to its limits, exposing the importance of the planned sharding upgrade and scaling solutions in its rollup-centric roadmap.

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2. California pushes crypto regulation with new executive order

The Facts:

• California Gov. Gavin Newsom has unveiled an executive order on cryptocurrencies to create transparent regulation around digital assets and to leverage the technology for the public good.
• The content of the executive order is furthermore aligned with the Biden’s administration proposal from March, matching upcoming federal policy.
• The order asks lawmakers to evaluate how blockchain technology could be used to address public and policy needs as well as California officials with soliciting feedback from industry and public.

Why it’s important:

• Aiming at consumer protection and fostering innovation, California becomes one of the pioneering states crafting a comprehensive regulatory framework for digital assets and their underlying technology.
• With the new executive order, the most important U.S. technology hub with the largest economy in the U.S. and fifth largest globally is warming up toward blockchain technology, joining their already crypto exposed residents and businesses.
• The state’s executive order comes on a wave of regulatory news as competition for U.S. crypto capital is increasing its pace with 37 states having pending legislation on digital assets.

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3. Further Bitcoin utilization as reserve and collateral asset

The Facts:

• Luna Foundation Guard (LFG) acquired an additional 37’863 BTC worth $1.5b to supplement stablecoin reserves now holding >80’000 BTC worth $3b inching closer to their target of $10b before the end of the third quarter.
• OTC swaps were realized by a $1 billion swap of UST, the 10th-largest cryptocurrency with an $18.7b market cap, to BTC via Genesis Global Trading and an additional $500m via hedge fund 3AC pushing the LFG into the top 10 holders of BTC.
• Meanwhile, in a Wall Street first, the largest U.S. crypto exchange Coinbase collateralized its BTC for a cash loan (no amount disclosed) with Goldman Sachs, the bank’s first bitcoin-backed loan.
• According to Matthew Ballensweig, managing director and co-head of trading and lending at cryptocurrency-exchange Genesis, a common loan-to-value ratio lies between 40% and 60%.

Why it’s important:

• With LFG underpinning their reserves steadily and new entities such as Coinbase utilizing BTC as collateral, Bitcoin increasingly positions itself as a pristine reserve and collateral asset.
• CEO of Terraform Labs, Do Kwon, who is betting on digital native currency reserves, states: “For the first time, you’re starting to see a pegged currency that is attempting to observe the Bitcoin standard.”
• The increased utilization of Bitcoin as a bankable product furthermore paves the way for others and bridges the gap between digital assets and traditional banking.

In other news

• Kraken announces NFT marketplace (via Kraken)
• Fed hikes rates by 50 bps (via CNBC)
• ETH 2.0 deposit contract reaches 10% of circulating supply (via Crypto Briefing)
• Turkey’s inflation hits 70% (via Reuters)
• Rari and Fei protocol loose $80m in yet another DeFi exploit (via CoinDesk)
• SEC doubles the size of crypto enforcement unit (via CNBC)