《Messari:2023年加密投资理论年度报告(英文版)(168页).pdf》由会员分享,可在线阅读,更多相关《Messari:2023年加密投资理论年度报告(英文版)(168页).pdf(168页珍藏版)》请在三个皮匠报告上搜索。
1、1#theses2023CRYPTO THESESK EY TR E N DS,PEO PL E,CO M PANI E S,AN D PROJ ECTS TO WATC H AC RO SS T HE C RYPTO L A NDSCAPE,WIT H PRE DI CT I O NS FO R 202 3.2#theses20230.0WELCOMEHello frens!Its been a year.I was masochistic enough to write another annual report.It is my pleasure and pain to present
2、for the sixth year in a row,the Messari Theses for the year ahead.This report started as a tweet thread on New Years Day in 2018.Along with the rest of the crypto industry,the Theses has exploded in size and complexity ever since.I write it because it highlights the amazing work the Messari team has
3、 done throughout the year,and it helps me update my own mental models for crypto.And I write it for our customers,new and old.Whether you are a crypto novice or a multi-cycle veteran,I hope you can glean some interesting tidbits from this 201-level crypto crash course.As usual,a couple of disclaimer
4、s before diving in:1.This report is free,but nothing herein is investment advice(for all the legal yada yada my lawyers made me include,see the disclaimers section of the Bonus chapter).2.I stand on the shoulders of giants.I borrow liberally from other authors when they write something more insightf
5、ul than I can deliver.I link and cite others frequently,but any accidental plagiarism is unintentional and will be corrected promptly.The price of speed is a looser edit,but I work hard to link to primary sources and get this polished.3.Transparency matters.I have made angel investments in some priv
6、ate projects discussed in this report.Any personal investments in public tokens that are referenced are marked with a star.My core public holdings have been confined to BTC and ETH this year(and lots of USDC).Youll notice a couple of important differences between this report and last years.For start
7、ers,this one is(slightly)shorter.The crypto markets have consolidated,and I have concentrat-ed on the themes of greatest and at times,existential importance.Theres still plenty of content on the new,exciting toys,but I will assume some prior knowledge and link frequently to last years report or our
8、analysts excellent research when it comes to explainers.3#theses2023The macro and political backdrops are much different today than they were twelve months ago.I wrapped up the 2022 report when interest rates were near zero,and crypto markets and the S&P sat at all-time highs.We didnt have a single
9、proxy war with a nuclear-armed adversary!And we had Dem-ocratic leadership in both chambers of Congress.Portfolios are down 80%since then.Crypto startups are(sometimes)required to have business models before VCs cut checks,and nine figure checks might(maybe)begin to include board oversight.The separ
10、ation of money and state feels inevitable as countries are getting canceled.Real policy is taking shape in DC,and the outlook for regulatory progress is somewhat rosier.Is this the dark before the dawn,or the beginning of a long Arctic winter?I believe in crypto.Bitcoin and Ethereum seem to be on lo
11、ng-term stable ground.DeFi will take major strides forward next year.Privacy tech will be promoted as an integral part of the future of public blockchains(or get de facto banned on dystopian and vague“national security”grounds).Infrastructure investments around code security,decentralized hardware,v
12、irtual worlds,custody,protocol governance,and block-chain scalability are all in vogue.There will be less NFT speculation.Fewer moon fumes.I will probably spend more time in this report deconstructing crypto policy than you would like,but Ill make fun of important people along the way to keep it zip
13、py.Once again,this beast took me 200 hours to write.Thats a lot,but its also down about 20%from last year.I thank the Messari analyst team for those cost savings.They write good stuff daily for Messari Pro subscribers,and you should sign up.If youre an institution or crypto startup,stop missing key
14、insights:our Enterprise-level offering give your company the research and data tools you need to save more time,energy,and long-term compliance costs on day-to-day crypto work.In 2022,Messari tripled our team size and revenue in a down market.We closed a Series B,launched several new products(Asset
15、Intelligence,Protocol Metrics,Data Apps),and doubled the size of Main-net 2022 in NYC.Were still hiring.Come with me if you want to live.Every year,people ask me how I write all this stuff in such a short amount of time.Mostly,its a labor of love.I am grateful to have the opportunity to build in thi
16、s industry,and we appreciate the builders who have supported us through thick and thin.This report is a token of appreciation.But if Im being honest,theres also a certain amount of rage that fueled this report.The bad actors have gotten all of the oxygen this year,and set back the good actors and ye
17、ars of progress that they had made.I hope The Theses shifts the focus away from the frauds and the tourists,and back to the pioneers.I wrote this in the pioneers defense.Cheers,Ryan(aka TBI)4#theses2023P.S.Heres a good thread that synopsizes how I feel about crypto today.For your friends that dont h
18、ave the attention span for this book.Or if you prefer a single screenshot:0.1 War Time(This was written in five minutes one summer night in 2021.It remains my North Star.)TOP 10 NARRATIVES&8 INVESTMENT THEMES1.0 Intro 91.1 Winter is Here:Its Time to Build 101.2 Crypto is(Still)Inevitable 121.3 Survi
19、ving Winter,Redux 131.4 How Low Can We Go 141.5 Bear Market Building 171.6 Decoupling of Cryptos:19 Back to the Basics1.7 VC:Theres(Still)20 Money in the Banana Stand1.8 The Macro Rebound vs.21 The Dumpening1.9 Buyouts vs.Bankruptcies 221.10 Copy-Paste Investing 23 (Disclosures)TOP 10 PEOPLE TO WATC
20、H 262.0 Intro 272.1 Changpeng Zhao&28 Brian Armstrong2.2 Rep.Patrick McHenry 282.3 Sheila Warren 292.4 Citizen Journalists:From 30 Molly White to Autism Capital2.5 Anatoly Yakovenko 312.6 Barry Silbert&The Winklevii 312.7 Stani Kulechov 322.8 Alexey Pertsev&32 Tornado Cash Devs2.9 DAO Members 332.10
21、 IRS Agent Smith 34TOP 10 TRENDS IN CEFI 363.0 Intro 373.1 The Exchanges 383.2 The Institutions are Coming 393.3 Anatomy of a Crypto 39 Credit Crisis3.4 DCG&Genesis Contagion Risk 423.5 Grayscale:Reflexivity up.44 Reflexivity down.3.6 Custody,Security,Stability 463.7 Cloud Infrastructure 46 and Deve
22、loper Tools3.8 On Chain Forensics 473.9 Tax&Compliance 493.10 Research&Data Upgrades 49TOP 10 TRENDS IN 51 CRYPTO POLICY4.0 Intro 524.1 How a Bill Almost 53 Became a Law4.2 How a Bill Becomes a Law 594.3 The SEC vs.CFTC Proxy War 644.4 MiCA Pros&Cons 664.5 Everybody Hates Gary 684.6 Ooki vs.CFTC 69
23、(DAO Governance)4.7 Tornado Cash vs.OFAC 70 (Personal Wallets)4.8 Protecting Crypto Banking 714.9 State vs.Federal(Stablecoins)734.10 The Ground Game 73TABLE OF CONTENTSBOOK ONE6#theses2023TOP 10 CRYPTO-77 CURRENCY TRENDS5.0 Intro 785.1 Bitcoin is“Outside Money”795.2 Global Regulatory Challenges 805
24、.3 Bitcoin Mining 825.4 Bitcoin Yield 845.5 Memes&Ripples 865.6 Privacy Coins&86 Private Transactions5.7 Stablecoins Should Be 87 Our Leading Export5.8 The Stablecoin Trinity 885.9 Algo-Stables:Cryptos WMDs 905.10 CBDCs&Dystopia 92TOP 10 ETHEREUM&94 L1 TRENDS6.0 Intro 956.1 The New Ethereum Roadmap
25、966.2 Merge Economics 976.3 MEV&Censorship 996.4 What Vitaliks Excited About 1026.5 Exploding Bridges 1026.6 Rollups and Modularity 1046.7 Too Close to the Solana 1066.8 Cosmos&Appchains 1096.9 Other L1s 1106.10 Other,Other L1s 112TOP 10 TRENDS 114 IN DEFI7.0 Intro 1157.1 Revenge of the dApps 1167.2
26、 Uniswap,the Final DeFi Unicorn 1177.3 Real-World Collateralized DeFi 1187.4 Undercollateralized DeFi Lending 1207.5 Superfluid Collateral&122 Synthetic Stakes7.6 The Perp Walk:dYdX as an Appchain 1237.7 On-Chain Asset Managers 1247.8 New Novel Markets:Two 125 Truths&A Lie7.9 DeFi Censorship 1277.10
27、 Bullish Unlocks Down Bad 128TOP 10 TRENDS IN 129 NFTS&DESOC8.0 Intro 1308.1 “Blue Chip”Pixelated Art 1318.2 Generative Art 1328.3 The Institutions Are Here,133 Just Not the Ones We Expected8.4 GameFi 1358.5 The Cryptoverse 1388.6 Decentralized Social(DeSo)1398.7 ENS&Identity 1408.8 Creator Royaltie
28、s vs.142 Monopolist Taxes8.9 OpenSeas Down Bad Yarrrr.1428.10 OpenAI&ChatGPT 145TOP 10 TRENDS IN 147 DAOS&WEB39.0 Intro 1489.1 Wallets&Browsers 1499.2 DePIN 1509.3 Data Integrity 1539.4 Actually Useful DAOs 1549.5 DAO Management 1569.6 The DAO Legal Liabilities 158 are SpOoki9.7 DAO“Corporate Action
29、s”1599.8 DAO Treasury Management 1619.9 Crypto Talent Marketplaces 1629.10 Media DAOs 163BONUS:YO DRE,I GOT 165 SOMETHIN TO SAY10.0 Intro 16610.1 Why You Must Write 16610.2 No Idols 16610.3 Must Read 16610.4 Tips&Productivity Tricks 16710.5 Life Advice 16710.6 Disclaimers 168TABLE OF CONTENTSBOOK TW
30、O7#theses2023C RYPTO T H E S E S 202 3BOOK ONEWHAT H-A-P-P-E-N-E-DIN 20228#theses20231.0TOP 10 NARRATIVES&INVESTMENT THEMES1.0 Intro 91.1 Winter is Here:Its Time to Build 101.2 Crypto is(Still)Inevitable 121.3 Surviving Winter,Redux 131.4 How Low Can We Go 141.5 Bear Market Building 171.6 Decoupling
31、 of Cryptos:Back to the Basics 191.7 VC:Theres(Still)Money in the Banana Stand 201.8 The Macro Rebound vs.The Dumpening 211.9 Buyouts vs.Bankruptcies 221.10 Copy-Paste Investing(Disclosures)239#theses20231.0 IntroLast year,I thought“Web3”was a good all-encompassing term that captured cryptocurrencie
32、s(bitcoin and stablecoins),smart contract computing(Ethereum and other“Layer-1s”),decentralized infrastructure networks(video,storage,sensors),non-fungible tokens(digital identity and property rights),decentralized finance(financial services to swap and collateralize crypto assets),the metaverse(the
33、 digital commons built in game-like environments),and community governance constructs(decen-tralized autonomous organizations).Were down 80%since then.Ever since we pivoted to the Web3 moniker,theres been industry-wide carnage.So I recommend we retire the term.We need to get“Back to Crypto”in 2023.M
34、ore personal wallets(from my cold dead hands)than exchange margin accounts(bad)More privacy(none of your business what I do)than institutional adoption(slowww down)Permissionless financial&social applications(live and let live)vs.ponzinomics(fraud)If youre new to crypto,I also recommend you check ou
35、t Bloomberg Reporter Matt Levines recent Crypto 101 masterpiece(that was recently published as an entire BusinessWeek issue).Building off of Matt and the prior Messari works has freed up my headspace for more new,original content,without leaving newcomers in the dust.It makes sense to start with a r
36、ecap of last years introductory“Narratives&Investment Themes”chapter and see what held up.How did last years report do under the stress test of an 80%decline in prices and an absolute bloodbath for crypto startups?Pretty,pretty good,actually.Heres what happened in 2022,and whats in store for 2023.10
37、#theses20231.1 Winter is Here:Its Time to BuildLast year,I started out with a bang:“My first prediction for 2022:things will get worse before they get better in the“real”world.Inflation will remain above 5%throughout 2022(70%confidence),while late year interest rate hikes stall the stock markets mom
38、entum and hurt growth stocks(60%con-fidence the S&P dips next year).Though I waffle on where we are in this particular cycle,the tail winds remain strong and the capital markets flush.So my probabilities are split among three scenarios:1)most likely,we experience a blow off top before the end of Q1
39、2022,followed by a shallower,but still painful multi-year bear marketIronically,the most bearish case here(Q1 blow-off top)may be the most bullish long-term.”Thats more or less what happened.And the speculative mania is now behind us.A lot of people lost money in 2022.Some poorly managed companies w
40、ent under(normal in capital-ism,pre-2008).But many of the survivors are well capitalized and shipping product.The core theses generally remain unchanged,and now were left with true believers and long-term builders fewer gamblers,scammers,and tourists.I live for the build years.We can focus on buildi
41、ng life rafts for those worried about inflation and currency debasement;“exit”technology that helps people vote against two party systems and authoritarian rule alike;and decen-tralizing solutions that check the incumbent powers in tech,finance,and government.The core substance of crypto hasnt chang
42、ed:in a world where few,if any,of these institutions are viewed as both competent and ethical(a16z:How to Win the Future,slide 8),crypto offers a third path that seems increasingly credible,despite its volatility.Need a globally accepted asset that you can store in your head“just in case”you need to
43、 emigrate from a failing country?Theres Bitcoin.How about a platform that routes your app around Big Tech censors?Theres Ethereum and a multitude of emerging Layer-1(“L1”)protocols.Cant access cred-it?Theres DeFi.Hate 30-50%take rates for artists?NFTs.Trying to fund research for your own rare diseas
44、e cure?DAOs.This isnt boosterism.Even Bloombergs Matt Levine,a crypto skeptic,sees the potential:“Perhaps this is all a self-referential sinkhole for smart finance people,but honestly it would be weird if thats all it ever turned out to be.If so many smart finance people have moved into the crypto f
45、inancial system,if they find it so much more enjoyable and func-tional and productive than the traditional financial system,surely theyll eventually figure out how to make it useful.”The debate doesnt really center around whether crypto could be good these days.#theses202311Like most other areas of
46、tech,crypto can be great or it can be abused.It all depends on the specific product,the ethos of the builders,and the rollout strategy.If tokens help solve the“cold start”problem of network effects-reliant businesses in their battle to disrupt incumbents,thats a good thing.Good token designs will lo
47、ok more like growth capital than seed funding.(My litmus test has always been:does this token create an early user base and improve the product,or does it primarily reward the founders and VCs?)Tokens only work in markets where network effects could exist.Otherwise,youre transparently partaking in a
48、 multi-level marketing scheme.Do the knives get better when Cutco sells more of them?No.Most people lose time and money get-ting sucked into the machine,and its annoying to friends.Does a crypto product get better when more people are added,in terms of liquidity,user interactions,and/or application
49、interoperability?Yes.If a token can accelerate a products time to usability,and reward its beta testers,its a powerful tool.Lets build more powerful and sustainable tools this winter.12#theses20231.2 Crypto is(Still)InevitableIts easy to be bullish in times of euphoria.But you only see whos got stay
50、ing power when the tide goes out.Its been a bad year in many respects,especially for the greedy,the levered,and the uneth-ical.The long-term builders may have been temporarily hurt by association,but they havent been the ones who perpetuated frauds or fleeced investors.These innovators(open-source s
51、oftware and infrastruc-ture developers)will be here long after the trash(opaque lenders,trading bucket shops,ponzinomic promoters,“genius VCs,”and paid hype men)from this cycle are long gone.And good riddance!(Well talk all about the crypto credit bust in Chapter 3 on CeFi.)Beneath the wreckage is a
52、 stronger foundation than weve ever had before:$10s of billions in capital,an influx of world-class talent,four years worth of demographic change towards digital natives,and dozens of“zero-to-one”innovations in crypto scalability and application primitives.Crypto remains inevitable because weve made
53、 significant progress in the build-out of bitcoin,stable-coins,distributed computing,blockchain scalability,decentralized financial primitives(DEX,lending,asset issuance),and governance structures.These innovations will not be uninvented.Bitcoin has entered its“historic buy”range by several measures
54、.Stablecoins now represent four of the top ten crypto assets.Their volumes rival global card networks and banks,and they can actually generate*sustainable*yield now that the true risk-free rate of return(U.S.Treasuries)is above zero.The Merge,the software equivalent of the Moon Landing,went through
55、without incident,and other Layer-1s like Cosmos,Solana,and various rollup chains made significant breakthroughs as well.Fees are way down as a result!Were two years into a secular bear market for DeFi,which still faces technical headwinds(hacks)and 13#theses2023regulatory challenges,but the core pri
56、mitives(Automated Market Makers,Flash Loans,Protocol Con-trolled Value,etc.)are all here to stay.NFTs are data wrappers that open the door for secure sharing or transactions of any intellectual property,synthetic asset,consumer digital good,or identity token on-chain.They may look like toys to start
57、,but they are almost unfathomably important as a technical primitive.We now have true DAOs,with on-chain voting,delegation,and community treasury man-agement.These entities cross borders and allow for the rapid formation and wind down of online communities and collectively-managed property.We may be
58、 in cryptos 3rd inning,but DeFi,NFTs,and DAOs have barely stepped into the batters box.Dont get discouraged.The dream lives on.1.3 Surviving Winter,ReduxYou heeded my advice last year,right anon?At the absolute height of the bull market,I wrote about what exactly would happen in a crypto winter,and
59、warned that the medium-term concern for me was“From what height do we crash?”even if I was neutral in the short-term and mega-bullish in the long-term.Ive lived through multiple crypto winters and warned that many would lose faith amidst a multi-year grind lower in asset prices,stark political and r
60、egulatory headwinds,and stagnating user enthusiasm and product demand.I take no pleasure in saying I told you so,but.“In addition to eating big paper(or real)losses,youll see people have breakdowns,go bankrupt due to over-leverage(or poor tax planning),quit otherwise promising projects,turn nasty,de
61、pressed,or apathetic,and generally lose sight of the longer-term potential of crypto.To make matters worse,the next bear market will be a regulatory nightmare,and we wont have the bull market vibes to help defend ourselves against all of the con-sumer protection,fraud and abuse,systemic risk,ESG,and
62、 illicit activity FUD that our enemies will throw at us.At the same time,the“grassroots”crypto herd will thin because its tougher to wage war when youve lost 90%of your savings and need to go find a real job again.”Do you still believe?If youre reading this report theres a good chance that you do,bu
63、t are now wondering how best to navigate a prolonged winter.The answer is as simple as it is challenging and unglamorous:Build!In many respects,its easier to build in bear markets than bull markets.There are fewer distractions,real product-market fit becomes easier to identify without the noise of a
64、 token,and the weak and flaky contributors wash out of the market.Theres also a big difference between this crypto winter and previous cycles:dry powder.In 2015,cash was hard to come by,and even some of todays industry leaders struggled to raise capital at the time 14#theses2023(Kraken and Chainalys
65、is are two unicorns that come to mind).In 2018,there were a few crypto curious investors,but many of the projects who raised money via ICOs had squandered their balance sheets by holding ETH through a 90%+decline.There are bridges to build,standards to set,primitives to develop,users to onboard,infr
66、astructure to stress test,and product stories to tell.Theres no rest for the weary,and if you played your cards right,you unwound levered bets,paid your taxes,didnt get greedy day trading,and parked some assets in cash for a rainy day.Youre probably feeling ok right now,despite the market backdrop.W
67、ell survive and advance and look back on this year with pride,because we survived.What else would you do,anyway?Go work in a bank?1.4 How Low Can We GoLast year I asked,“doesnt it just feel a little toppy?”and tried to show people just how far ahead of our skis we were getting when it came to crypto
68、 asset prices,and how close market caps were getting to what looked more like 10 year TAMs.The drivers of asset prices were blinking“sell”but many of us just couldnt help ourselves.Lets flip the script this year,and ask,“how much lower can we go?”1.Bitcoin:My favorite metric for BTC from cycle-to-cy
69、cle has been Market Value to Realized Value(MVRV).It has been nearly infallible as an indicator for how hot or cold the market has gotten.This simple ratio looks at current price times supply(market cap)versus the cumulative“realized”value of“free float”coins(those that have moved in token cash flow
70、,continued ETH dom-inance,the flippening in late 2023,institutional/nation state adoption of crypto in Q3/Q4,and undercollateralized lending.AllyBiggest winner:Biggest loser:ETHHolds:ETH,MATIC,DOT,SOLLikes:Ethereums rollup ecosystem,zk tech,NFT tech applications outside of PFPs DustinBiggest winner:
71、USDC+0.00%Biggest loser:RGT(-99%)Holds:USDC,ETH,Aave,Matic,Pendle Likes:Social(familiar consumer use cases with crypto complexities abstracted away),Eth-centric rollup ecosystems,Decentralized rendering and compute,Fuel for the winter(cash and lots of it)ChaseBiggest winner:Not being in Terra&FTX(+%
72、)Biggest loser:TOKE(-95%)Holds:USDC,BTC,ETH,MATIC,SOL,PCN,RPLLikes:ETH&BTC as bases for future network states,Ethereum core devs doing the Lords work,Protocols as public goods/utilities(i.e.,no rent extraction),Decentralized social combined with DeFi,TIPIN experiments(humble Pollen garden-er),SNARKs
73、 and oracles for cross-chain communi-cations,the friends weve made along the way.your compliance and regulatory cloak position you well to clean up a technically sound,but operation-ally inferior“crypto institution,”you might want to shoot your shot in 2023.Fidelity or Blackrock might like DCG in a
74、distressed buyout situation.JPMorgan might jump at the chance to lob in a hostile takeover bid for Coinbase at just 5%dilution.If the institutions were,indeed,coming last year,then you have to wonder whether the barbarians are at the gates and Wall Street is ready to execute a slow takeover of crypt
75、o.Im not saying that I particularly like that future.Im just saying it could happen,and its looking more plausible by the day that this downturn could end up proving to be the bridge that institutions on Wall Street and in Big Tech needed to inte-grate crypto products at scale.Through M&A.1.10 Copy-
76、Paste Investing(Disclosures)24#theses2023KunalBiggest winner:Knowledge,experience,convic-tionBiggest loser:FTT(-100%)Holds:RPL,LDO,ETH,MINA,BTCLikes:Liquid staking protocols.Expect them to outperform ETH,which in turn outperforms BTC.Post the Merge,real yields for stakers are up to 6%from 0%;as soon
77、 as users return,they go up even more.With the right tokenomics,L2-coins could also have some potential.SamiBiggest winner:USDC(+0.00%)Biggest loser:HNT(-94%)Holds:BTC,XMR,ETH,RNDR,AKT,AR,HNTLikes:Physical infrastructure protocols(also known as TIPIN,PoPW,EdgeFi)that provide real-world value and tap
78、 into existing,non-specu-lative demand.This includes DeWi,compute/storage,energy,and sensor networks.Web2 adopting crypto infrastructure will bring on the next wave of crypto adoption.KelBiggest winner:Surviving my first cycle above where I started it.Biggest loser:ETH(-70%)Holds:ETH,JitoSOL,RNDR,AK
79、T,RPL,SHDW,AURY,POLISLikes:Solana:best tech without introducing cross-chain risks,TIPIN&decentralized comput-ing networks,Gaming:The model worked with worse games,what happens when you use it with better games?Liquid staking derivatives:muh free yield.MihaiBiggest winner:CHFBiggest loser:ETH Holds:B
80、TC,ETHLikes:Zero-knowledge proof applications,Infra-structure as the backbone of the next wave of crypto social applications,Dry powder ChrisBiggest winner:Kayne Anderson Energy Infra-structure Fund KYN(+154.55%)Biggest loser:GLMR(-80.62%)Holds:BTC,ETH,DOT,LINK,FIL,ZEC,GLMRLikes:Overweight LINK and
81、FIL since 2023 will be the year of infrastructure protocols.DOT.Equities,crypto-adjacent equities,and real estate buys will be highly selective throughout 2023.EshitaBiggest winner:USDC Biggest loser:ETHHolds:BTC,ETH,SOLLikes:Boolish Ethereum ecosystem,ZK infra:namely for scaling+identity applicatio
82、ns,Ex-perimentation with emerging DAO governance frameworks,Lending w/RWAs crucial in DeFi adoptionJohnny_TVLBiggest winner:MessariBiggest loser:STEPN NFTsHolds:BTC,ETH,SNX,AAVE,ATOM,MATICLikes:SNX staking is my favorite position(must be managed).A rare utility token in DeFi.Sleep-er pick is BNT,hop
83、ing they make a practical decision around tail risks even if the models dont call for it.AAVE adding GHO.dYdX punt for V4 success.ILV punt for gaming.MicahBiggest winner:XMR(42.4%YTD)Biggest loser:AKT(89.5%YTD)Holds:AKT,AR,ALGO,ATOM,BTC,XMR,ETH,DOT,FLOW,MANA,SOL,UNI,ZRX,LYXeLikes:Utility-based Block
84、space,Financialization of Blockspace(e.g.,Consensus Capital Markets),Perps,5-year(minimum)investment time horizons(YTD,crypto down;since buying firstfifteenth crypto,portfolio is up)25#theses2023SeanBiggest winner:BTCBiggest loser:SOLHolds:BTC,ETH,MATIC,MPLLikes:Undercollateralized lending/RWA,ZKP,a
85、nd cash moneyNickBiggest winner:USDCBiggest loser:MOVR(-98%)Holds:Aave,AKT,ETH,SYNLikes:Cash in the near-term because of the FTX contagion;DeFi because of the FTX collapse;crypto infrastructure because of real utility;cross-chain infrastructure;ETH BTC.JerryBiggest winner:USDC Biggest loser:ETHHolds
86、:BTC,ETH,MATICLikes:zkEVM rollups(airdrops+L2 staking opportunities),On-chain credentialing,Decentral-ized computing and storage,Holding cashRedBiggest winner:XMRBiggest loser:Endogenous collateral(Terra Luna,FTX)Holds:ETH,XMRLikes:Privacy(L1 fungibility,zk-zk rollups,mix-nets),Middleware/Interopera
87、bility(ZK light clients,ZK bridges,oracles),TIPIN(storage,wire-less,compute),Modularity(Data Availability,L3s,zkEVMs),Ethereum Staking Ecosystem(Restaking,DVT,liquid staking)Ryan C.Biggest winner:GMX,UNIDXBiggest loser:CRV,ETHHolds:stETH,GMX,CRV,AAVE,SNX Likes:Perp protocols/Revenue generating proto
88、-cols,All things Arbitrum DeFi,ETH and its L2s PeterBiggest winner:USDC,MfersBiggest loser:ETHE(-80%,thx for the protection gary)Holds:ETH,ETHE,RPL,MINALikes:Contrarian L1 plays(will be accumulating SOL),zk everything,liquid staking,and,most importantly,staying solventAshuBiggest winner:US Dollar(+0
89、%)Biggest loser:BTC(-64.5%)Holds:BTC,ETH,LDO,RNDR,SYN,VEGALikes:Liquid staking,Cosmos DeFi and for the time being,US DollarsKentrellBiggest winner:US Dollar(+0%)Biggest loser:ETH(-70%)Holds:ETH,USDCLikes:Infra-LINK,2023 is the year Sergey and Ari take off the training wheels,DeFi-FXS,Uniswap,AAVE al
90、l expanding product offering and poten-tial to eat market share from competitorsHelenBiggest winner:US Dollar(+0%)Biggest loser:Everyone with inflated valuations and egos Holds:USDC,ETHLikes:Crypto infrastructure with real applications SethBiggest winner:USDC+0.00%Biggest loser:ALCX-94.6%YTDHolds:US
91、DC,ETH,BTC,AAVE,ALCXLikes:Boolish wallets as applications/superapps,USDC,Crypto Infra26#theses20232.0TOP 10 PEOPLE TO WATCH2.0 Intro 272.1 Changpeng Zhao&Brian Armstrong 282.2 Rep.Patrick McHenry 282.3 Sheila Warren 292.4 Citizen Journalists:30 From Molly White to Autism Capital 2.5 Anatoly Yakovenk
92、o 312.6 Barry Silbert&The Winklevii 312.7 Stani Kulechov 322.8 Alexey Pertsev&Tornado Cash Devs 322.9 DAO Members 332.10 IRS Agent Smith 3427#theses20232.0 IntroIm sure people would pay good money to not end up on this list after some of last years“People to Watch”struggled mightily in 2022.Last yea
93、rs number one on the list was“everyone”as in“Were All Going to Make It.”WAGMI,as we used to cry with glee back at the pico-top of 2021,did not really pan out as hoped.And it didnt get much better at#2(Three Arrows Capitals Su Zhu)or#10(Terras Do Kwon),both of whom went bankrupt.Coinbase slid 80%(Emi
94、lie Choi),NFTs are down even further(Devin Finzer),and Axie experienced a catastrophic hack and fell 90%(The Jiho).On the other hand,a16z lost a high-profile partner,but Katie Haun did just fine with a fresh fund of her own.Twitter was bought out by Elon Musk,who might just fix it at the expense of
95、other crypto social platforms,though its unclear whether last years Twitter peeps to watch are still gainfully employed at Elon Twitter.Watchee beware,and Im sorry28#theses20232.1 Changpeng Zhao&Brian ArmstrongFTXs failure last month was damaging financially,politically,and reputationally.But its fa
96、ilure wasnt a systemic threat to the entire industry.That designation is shared by only two entities in crypto today:Binance and Coinbase,who are#1 and#2 in global spot trading volumes and crypto assets under custody.In November,Binance accounted for nearly 75%of all global spot volumes.The liquidit
97、y engine for the global crypto market operates in a jurisdictionally-fluid gray area of epic proportions.It would be a mischaracterization to call Binance“unregulated,”but the legal and regulatory risks around its op-erations are hard to handicap.CZ has been subject to personal attacks by the media(
98、who blame him for sparking a“bank run”on FTX),competitors(ill-advised),and other regulators,who would prefer Binance fit more cleanly under their collective thumbs.Likewise,at the end of Q3,Coinbase counted$101 billion in assets on its platform,comprised of$40 billion in bitcoin(11%of the total supp
99、ly),$25 billion in ether(16%),and$30 billion of other non-sta-blecoin tokens (11%of the remaining crypto market cap).Coinbase assets include all of the Grayscale Trusts assets(the largest publicly traded crypto securities).Like CZ,Brian Armstrong has attracted personal scrutiny from the media(who ha
100、te him for his“no politics at work”policy),competitors(again,ill-advised),and major U.S.regulators,who dont appreciate when their“sketchy”behavior gets thrown under a public microscope.Try as we may to convince the masses to embrace personal wallets and decentralized finance and other applications,w
101、e will probably always have centralized financial services that offer account-based services for investors and users looking to access crypto without the hassle of shepherding their own private keys.Binance and Coinbase,and their respective founders,will be integral to any industry rebuild.As their
102、fortunes go,so goes crypto in 2023.(No pressure,fellas.)2.2 Rep.Patrick McHenryWith the Republicans taking the House in the midterm elections,theres a stanche crypto proponent whos readying to helm the House Financial Services committee.North Carolina Rep.Patrick McHenry will have an outsized influe
103、nce over crypto policy in the coming years regardless of whether the Dig-ital Commodities Consumer Protection Act(“DCCPA”)is passed into law in the next couple of weeks before a new Congress is sworn in(incredibly unlikely).Even in a scenario in which DCCPA passes in 2023 without much Republican inp
104、ut,its primary impact will be on sending primary oversight of the major crypto exchanges and trading facilities to the CFTC.But it will still leave significant room for the interpretation of how the underlying regulated crypto assets are defined.What exactly constitutes a“Digital Commodity”vs.a“Digi
105、tal Security”?McHenry himself has acknowledged that“a missing puzzle piece is the necessary role House Financial Services and Senate Banking Committees must play to provide the much-needed clarity these proposals seek 29#theses2023to accomplish,”i.e.,defining crypto assets.McHenry has been an early
106、leader on this front.1.He promoted SEC Commissioner Hester Peirces“Safe Harbor”proposal for token disclosures and sponsored a bill that would codify its approach to regulation.2.He co-sponsored a bipartisan“ugly baby”bill that would clearly regulate stablecoins and establish ground rules for their i
107、ntegration into the broader financial system.3.He and his close ally on House Financial Services,Rep.Tom Emmer,who is now the House Majori-ty Whip(#3 in House leadership),are likely to provide a check on SEC Chair Gary Gensler and haul him in for questioning over his approach to regulation via enfor
108、cement and a cozy relationship with FTX.If DCCPA does*not*pass,McHenrys role will likely become even more expansive.The Agriculture Committees(which govern the CFTC and would see a boost in its authority and responsibilities under the DCCPA)will soon be consumed by the once-in-five years renewal of
109、the expansive Farm Bill,and McHenry will likely want a version of the Houses comprehensive DCEA Act back on the table.Confused?Go on to Chapter 4.For now,know that McHenry is one of the most important politicians to watch in the new year.We have a lot of informed leaders in the next Congress.Thats f
110、ortunate as the stakes are very high.2.3 Sheila WarrenOne of the reasons for optimism with this new Congress has to do with the fact that their familiari-ty with crypto has spiked due to the industrys education investments in D.C.Last year,we had the Blockchain Associations Kristin Smith and a16zs K
111、atie Haun in our top 10 list because we knew this was a year when real legislative proposals would pick up steam.Their firms were at the forefront of public policy efforts in D.C.at the end of 2021.Though she remains influential,Katies departure from a16z to start her own firm,Haun Ventures,split th
112、e policy team between two firms.Meanwhile,the Blockchain Association(BA)performed admirably but had to grapple with a larger number of restless members even as several larger firms(Coinbase,Binance.US)defected.Fortunately,a complementary trade organization emerged as another leader in D.C.The Crypto
113、 Council for Innovation(CCI),which counts a smaller,but higher maintenance group of member com-panies(Coinbase,a16z,Paradigm,Fidelity,Block).Sheila Warren,a former World Economic Forum ex-ecutive,has assembled a killer staff and positioned CCI at the center of the critical DCCPA discussions.BAs Kris
114、tin manages a larger and noisier 100+company membership,but Sheilas group has more firepower.The stakes couldnt be much higher for CCI going into 2023 given the potential rifts that ex-ist between the major exchanges and investors among its member organizations.If CCI can maintain a united front on
115、behalf of its members,and continue to thread the needle to get good crypto legisla-tion passed,it could lead to an industry boom.30#theses2023Tighter regulation is coming.New laws are likely in 2023.And as the US goes,many other countries will follow.The success of CCI(and BA)will influence the next
116、 decade of industry development.Now that FTX is out of the picture,I am optimistic about the results.2.4 Citizen Journalists:From Molly White to Autism Capital“Web3 is Going Just Great.and is definitely not an enormous grift thats pouring lighter fluid on our already smoldering planet.”So reads rese
117、archer Molly Whites blog header.“What if all this is about who gets Gisele now that they took out Tom Brady?”So read an early shitpost from the most unlikely authoritative source of information through the FTX bankruptcy,Autism Capital.Molly is an informed and savvy crypto skeptic.Autism Capital was
118、 literally a self-proclaimed“simp account”for FTXs founder before pivoting to investigative journalism.Both have outperformed the legacy media by a country mile in reporting on important stories within the crypto sphere this year.And both point to continued outperformance of citizen journalists in a
119、n information landscape thats heavy on narrative and light on truth.Web3 Is Going Just Great tracks the daily dumpster fires that have plagued crypto this year,and there might not be a more savage reality checker on crypto.Its effective because its simple,highlighting myriad startup failures,hacks,a
120、nd frauds day to day.Its easy to dismiss“FUD”from industry critics who ignore the benefits and potential of crypto,but the reality is that critics get more oxygen and attention when the markets are down than when things are up.Its not fun to get dragged on the internet,but a discerning entrepreneur
121、might parse feeds like Mollys and create solutions to the most pernicious problems and embarrassing weaknesses in crypto infrastructure.Thats been the path to unicorn status for a decade now:solve hard problems.On the other hand,I did not have Autism Capital on my draft list of people to watch in 20
122、23(I know that may surprise you).It turns out that consistency,audience,and information flow are a helluva drug,though.Pseudonymous crypto Twitter troll accounts have,at times in the past,gone from breaking big bankruptcy stories to running leading media and data businesses.Im with Mike Solana:give
123、Autism Capital the Pulitzer.Many of the most meaningful parts of the FTX saga,including CZs move-ment of funds to dump FTXs FTT token,were broken by Autism Capital and similar accounts.Mean-while,the legacy media kissed the ass of a benefactor that just happened to defraud millions of his users.31#t
124、heses20232.5 Anatoly YakovenkoThe Merge was a watershed moment for developers and investors in the Ethereum ecosystem.The Ethereum Virtual Machine(EVM)is likely entrenched as a foundational piece of industry infrastructure,the only L1 that seems certain to be a long-term fixture in the industry.When
125、 it comes to blockchain scalability beyond the EVM,you can basically narrow down four com-plements to Ethereum:EVM-compatible blockchains(including rollups like Arbitrum,Optimism,and zkSync),Cosmos-style“app chains,”Aptos/Sui“Move”chains,and Solana.All four groups will be covered in detail later,but
126、 the person to watch most closely in the“battle for second”to the EVM,is Anatoly Yakovenko,Solanas co-founder.Anatolys famous quip about the culture at Solana(“we eat glass”)will be useful going into a vi-cious down-trending market.Solana may yet face more significant headwinds from the unwinding of
127、 FTX-Alamedas sizable SOL position.It will have to work harder to retain its momentum with develop-ers.A lot is riding on the Solana phone,too.Solana is making a big bet that a proprietary hardware solution will help siphon off crypto users who wish to break from the Android and iOS devices that hol
128、d them hostage and prevent them from accessing crypto services that violate their parent compa-nies sweeping terms of service.I saw firsthand how hard it was to kill Anatoly and his team in the last bear market.In my eyes,thats the leading predictor of long-term success in crypto.As such,Id expect t
129、he Solana core team and ecosystem to persevere once again.But can they ascend to new heights?2.6 Barry Silbert&The WinkleviiEverything seems to come full circle in crypto.In a throwback to 2013,Digital Currency Group Found-er&CEO,Barry Silbert,and Gemini founders,Cameron and Tyler Winklevoss,will be
130、 three of the people to watch closest in the new year.Back in 2013,it was all sunshine and rainbows.A mere month after Fred Wilson led Coinbases Series A,the Winklevii announced their plans to create the first bitcoin ETF.Months later Barrys Second-Market followed up with the launch of its Bitcoin I
131、nvestment Trust.(SecondMarket became DCG,the SecondMarket broker-dealer became Genesis Trading,and the parent and sponsor of the Bitcoin Investment Trust became Grayscale Investments in 2015.)This year,things are decidedly different.Barrys Genesis Capital reportedly owes$900 million to Gem-inis Earn
132、 customers,and the twins are leading the largest Genesis creditor group thats looking to re-coup their funds.A sizable percentage of Genesis Capitals outstanding loans(assets)are with Gene-siss parent company DCG,so absent a recapitalization of DCG and/or speedy out-of-court settlement with creditor
133、s,these industry OGs may very well become embroiled in enormous,high-stakes litiga-tion.The fate of DCG and Gemini,not to mention ongoing industry contagion,hang in the balance.32#theses20232.7 Stani KulechovStani Kulechev is one of cryptos top innovators,having founded the top crypto lending protoc
134、ol,Aave,and one of the most promising early decentralized social protocols,Lens.Despite its price decline this year(in line with the broader crypto markets),Aave remains a pioneer and stalwart in DeFi.It is second by market cap(to Uniswap),second in TVL(to MakerDAO),and ubiq-uitous across EVM-compat
135、ible chains.Among other things,Aave pioneered the flash loan,which allows users to borrow large amounts of crypto for specific transactions without providing upfront collateral.These have generally been useful financial primitives for improving efficiencies in DeFi markets,as arbitrage opportunities
136、 have been made available to any developer who can afford to pay network gas fees,not just institutional-sized market makers.Aave performed exceptionally well during moments of peak fear in the centralized crypto markets this year.In July,distressed lender Celsius paid down its Aave loans to avoid p
137、rogrammatic liquidation during its bankruptcy preparations.In November,Aave users were able to earn 73%on their Gemini USD deposits amidst the fear surrounding Geminis delayed Earn withdrawals,a risk-adjusted return that acted as an open prediction market when a centralized service was offline.Lens
138、Protocol might be even more exciting.Its one of cryptos first decentralized social graph pro-tocols and has seen strong growth(and hackathon interest)since its launch in May.Well talk more about them later,but composable social protocols like Lens present a vast array of new high-potential creator b
139、enefits,and their intersection with identity and DeFi will be profound.If I had to bet on a“last man standing”in DeFi,it would be Stani.(Stani also happens to count one of the top in-house DeFi policy people in Europe or D.C.,Rebecca Rettig,on his team.If crypto protocols avoid a regulatory crackdow
140、n and are successfully carved out of centralized exchange legislation(as they should be),it will be in no small part thanks to Rebecca and the Aave team she represents.)2.8 Alexey Pertsev&Tornado Cash DevsTornado Cash,the DeFi mixing service that uses zero-knowledge proofs to help users execute full
141、y private transactions on Ethereum,may have been too successful for its own good.Although it count-ed just 12,000 unique protocol users,investigators believe it may have been used to help launder over$1 billion worth of crypto,some of which supported hacking groups in rogue states such as North Kore
142、a.Indeed,an analysis by Nansen showed that usage of the Tornado Cash contracts spiked this spring following the$600 million hack of Axie Infinitys Ronin bridge.Not great!But bigger questions surround whether Tornado Cashs usefulness to criminals makes it a de facto accessory for illicit activity or
143、whether the developers that prop up the protocol bear any responsibility for its misuse.33#theses2023That brings us to Alexey Pertsev,the Dutch co-founder(and Russian expat)who has been jailed since August and will remain jailed until February without official charges on suspicion of money launderin
144、g.It is unclear whether Dutch prosecutors plan to argue that the mere act of writing Tornado Cash code to process private transactions will be punished as an act of money laundering under European law around transaction surveillance,or if private chats that have allegedly been obtained between the T
145、ornado Cash founders demonstrate that there was knowledge or explicit assistance of specific illicit schemes.I would usually say this is a tough case to weigh in on without all the relevant facts.I believe software is protected speech,and individuals have the right to transaction privacy,but I also
146、dont want my stolen crypto seamlessly funding North Korean nuclear programs.That said,its maddening that authorities have failed to outline formal charges,and the impression you are left with is that this detention is designed to deter similar development efforts,not punish specific illegality.The l
147、ine is blurry,and after the prosecution and plea bargain of Virgil Griffith last year,I am not optimistic this will end well for Alexey in the short term.I hope I am wrong!2.9 DAO MembersOne of the best parts of running a company is dealing with all of the legal stuff(said no one ever).Em-ployment c
148、ontracts,customer terms of service,incorporation filings,taxes,IP registration,and corpo-rate governance negotiations are some of the glorious upshots of starting a company that no one ever tells you about.Sounds exciting?Well,what if I told you it was possible to take on all of the headache and exp
149、ense of a startup with none of the upside or limitations of liability?Welcome to DAO governance!It is admirable that various protocol communities have been experimenting with new models of gover-nance,delegation,and financial management.We certainly support that innovation(at least indirectly)throug
150、h our Governor platform,and we engage frequently with various DAOs during procurement for various projects under our Protocol Reporting segment.But the waters out there are murky and uncharted.Whenever a DAO gets into murky legal waters,voting members would do well to keep in mind their“joint and se
151、veral”liability under what are legally considered unincorporated associations.Serving as a DAO delegate or voting with your tokens is often a thankless job.And now some reg-ulatory agencies are starting to test the boundaries of their authorities and are more aggressively targeting DAOs as entities
152、subject to potential enforcement actions or other legal liabilities related to problems within their communities.(See the“Ooki DAO”section later on in this report.)If DAOs are going to have a fighting chance at innovating safely,well need better safeguards for their contribu-tors.Quickly.My guess is
153、 that will happen most readily at various state levels in 2023,but rules remain ambiguous beyond that for some time.34#theses20232.10 IRS Agent SmithPolicymakers worldwide are looking at crypto and licking their chops.Never mind this years market collapse,the boom of 2021 minted millionaires by the
154、thousands,and odds are good that some of the retail day traders and NFT flippers had“difficulty”accurately reporting their tax liabilities.A negative consequence of last years infamous infrastructure bill was its inclusion of crypto as a“pay-for”the U.S.government claimed that better tax collections
155、 from crypto investors would yield a$28 billion increase in receipts or 5%of the total bills expenditures.Now there are 87,000 new IRS agents on the prowl.(Thousands of them are armed.)And under civil asset forfeiture law,which is essentially state-sanctioned theft,it may become easier for authoriti
156、es to seize crypto assets without any conviction or filing of criminal charges.The IRS Criminal Investigation unit has already seized$3.8 billion in crypto between 2018 and 2021.Id expect that number to rise considerably.In truth,tax reporting for crypto is pure nightmare fuel.Tracking cost basis ac
157、curately is nearly impossible.Accounting for fees,trading slippage,and multiple wallets and exchange accounts is hard enough.Throw in NFTs,hacks,token farms,and more exotica,and the authorities will come for their pound of flesh in some way,shape,or form in the U.S.,Europe,and everywhere else that c
158、rypto is traded.35#theses2023In-depth research and analysis on whats trending&hotDaily crypto news&insights in your inboxDownloadable CSV dataTrack on-chain data,compare across and deep dive into protocols,and access pool-level dataBuild custom personalized alert rules for precision alerting with em
159、ail and Slack integrationsCustomized asset watchlists and trackersLong-form deep-dive research into ecosystems,sectors,and major eventsDedicated onboarding serviceAdvanced charting,screener,features&metricsTeam accounts and user managementQuarterly ReportsBasic watchlist,screener,charting features&m
160、etricsAccess to DAO Metrics Dashboards with real-time voting and governance analyticsFundraising data for crypto funding rounds,mergers,and acquisitionsCrypto&bank transfer paymentsReview,discover and participate in governance all in one platformReal-time updates on releases,hacks,token listings,and
161、 moreAccess to customer success team and product managersCurated news feed utilizing machine learning to track the top hourly articles from the crypto spaceBespoke API access optionsPROFree&Pro ResearchUnlimited WatchlistsBasic Quarterly ReportsAccess to Embedded Airtable with no exporting/downloadi
162、ngENT ERPR I S EFree,Pro&Enterprise ResearchUnlimited WatchlistsBasic&Enterprise Quarterly ReportsFull access to Expanded Airtable with CSV exporting/downloadingWhich plan is right for you?Messari offers a variety of Market Intelligence products that can quickly integrate into your existing workflow
163、s.Whether you are looking for enterprise-grade research,market intel alerts,fundraising data,or charts and screeners,we have something for everyone.Learn more about Enterprise and schedule a free demo by visiting messari.io/enterprise.Visit messari.io/pro to start a free trial or get 10%off a new Pr
164、o account with code THESES10.36#theses20233.0TOP 10 TRENDS IN CEFI3.0 Intro 373.1 The Exchanges 383.2 The Institutions are Coming 393.3 Anatomy of a Crypto Credit Crisis 393.4 DCG&Genesis Contagion Risk 423.5 Grayscale:Reflexivity up.Reflexivity down.443.6 Custody,Security,Stability 463.7 Cloud Infr
165、astructure and Developer Tools 473.8 On-Chain Forensics 463.9 Tax&Compliance 493.10 Research&Data Upgrades 4937#theses20233.0 IntroThis year was a sh*tshow for centralized crypto financial services,aka CeFi.FTX self-immolated spectacularly.Coinbase,the largest public crypto company,saw its stock dec
166、line 80%as crypto trading volumes evaporated and U.S.regulators remained hostile towards token mar-kets.Western crypto infrastructure giants laid off hundreds of employees.And the crypto lenders born in 2018-2020 are pretty much all dead,or mostly dead.Heres a partial list of“unicorn”lenders and pro
167、p desks,who ate nine-figure losses this year and/or went bankrupt:Alameda,Babel Finance,B,BlockFi,Celsius,FTX,Genesis Capital,Jump Capital,Three Arrows Capital,and Voyager.Im sure there are others;I just got tired of looking them up.Its been a classic credit boom and bust,with a crypto twist.Many of
168、 our problems this year stemmed from an over-reliance on unsustainable DeFi yields and synthetic trades.A daisy chain,if you will,of poor risk management and compounding bad bets.Amidst the wreckage,what remains?How can we build more sustainable infrastructure?Who will lead us back from the brink?38
169、#theses20233.1 The ExchangesWe covered Binances and Coinbases dominance in the crypto exchange market in the“People to Watch”chapter.These giants are hardly the only important exchanges worth keeping an eye on in 2023,though.In fact,its the mid-market services that well be tracking most closely for
170、signs of stress.Here are the biggest risks were monitoring in the wake of the FTX fallout.Binance:Global regulatory risk?They operate internationally in a“jurisdiction-light”manner that ultimately may get them into hot water with various policymakers around the globe.Whether theyre deemed to be oper
171、ating outside of the boundaries of different countries existing financial laws or simply make for good political targets,theres reason for concern.With a 75%share in global crypto trading volumes,the industry desperately needs a Binance rival to emerge.And I could make the argument that Binance itse
172、lf would be healthier with a stronger trading rival.Coinbase:Hostile public markets?Coinbase avoided the crypto lending markets,and it sits atop the leaderboard as the top global custodian of crypto assets(about 10%of the crypto market cap sits at Coinbase),the top USD exchange,and the first major c
173、rypto IPO.Still,the markets have punished the companys stock:Coinbases$3.5 billion debt yields 15%,and its market cap has fallen below$10 bil-lion.A clean bill of regulatory health and U.S.market leadership could raise eyebrows at PE shops and strategic suitors alike,but Coinbase has dual class shar
174、es,and Brian Armstrong retains voting control,so hostile takeover attempts seem unlikely to succeed.Bitstamp,Kraken:Regional(European)regulatory risk?I dont know enough about the various reg-ulatory constructs facing the big EU-dominant exchanges.Well cover MiCA in the next chapter on crypto policy,
175、but Id expect Bitstamp and Kraken to be disproportionate winners(not losers)with better regulatory clarity in Europe.OKX,Huobi,KuCoin,Upbit:Regional(Asian)regulatory risk?Same thing with the largest Asia-based exchanges.I dont know enough about the various regulatory constructs in Asia,and the regio
176、n doesnt benefit from a common legal and financial regulatory standard like we see in the EU.In gener-al,Korea and Japan are good places for business,China and Hong Kong are iffy,and India is a bit of a wild card(but trending negative).Bitfinex:Tether risk?Bitfinexs close historical affiliation with
177、 the stablecoin giant Tether opens the company up to multiple regulatory risks.Bitfinex reached a joint settlement with Tether in 2021 in which the CFTC asserted(among other things)that Tether had“commingled reserve funds with Bit-finexs operational and customer funds,and held reserves in non-fiat f
178、inancial products.”Bitfinex and Tether share several core team members,including CTO Paolo Ardoino,and its hard to imagine that issues at one entity would be completely isolated from the other.Gemini:Contagion risk?(Read the sections below.)All of these major exchanges carry operational risks as wel
179、l market declines can lead to financial stress,and hacks and customer deposit losses have been a pervasive component of crypto for a de-cade.39#theses2023But at least one silver lining to the FTX crisis was its catalyzing effect on the“proof-of-reserves”move-ment.For years,many have clamored for on-
180、chain evidence of major exchange reserve assets in order to ensure top platforms were solvent and willing to prove they werent going fractional or otherwise misappropriating user assets.FTX proved too late that those concerns were absolutely warranted,even for the“smartest guys in the room.”There is
181、 still work to be done on the“proof-of-liabilities”side of the ledger,but we now at least have unprecedented transparency around exchange assets.The days and weeks following FTXs collapse were record-setting in terms of asset withdrawals from the top crypto exchanges.“Bank runs”were everywhere for t
182、hose running lending books,but for those who werent breaking their own rules,and gambling with customer deposits,things were fine.Nansen killed it in quickly assembling a public repository of exchange reserve data.Kraken and others publish proofs-of-reserves without publicly divulging info,and Coinb
183、ase is audited quarterly as a public company.Some$200 billion in crypto assets held on exchanges are now fully accounted for and trackable quarter to quarter.3.2 The Institutions are ComingDespite the market slowdown,there was surprising and meaningful crypto adoption by a number of legacy instituti
184、ons.This is the part of the report where I pretend to care for a minute about institutional crypto efforts.Insert something about awesome legacy Wall Street firms and Big Tech pioneers,and how this time they really will continue to invest in crypto during a lengthy bear market.Or leave this in brack
185、ets and“forget”that you didnt update this section,blame a late night editing oversight,and say“Oh damn,I had a whole spiel about how awesome your insert recent press re-lease from the crypto team at the institution was.Im kicking myself for that process error!”then make up for it next year with no c
186、onsequence via another vague update about how,for the 11th year in a row,the“institutions are coming”after one of the banks or asset managers buys one of the exchanges listed above.In case this accidentally doesnt get cut via a process error,write that you love the companies listed above and this is
187、 just a very funny draft joke and misunderstanding,so the sales team can honestly tell them“Selkis said he loves you guys”and then some of them may forgive you for writing 140 pages for free,but not spending an incremental day gouging your eyes out reading up on corporate blockchain initiatives.Mayb
188、e one of the esteemed institutions that I really love quite a lot will have a sense of humor and respond by commissioning a report on corporate blockchains because“they REALLY DO care about crypto”and“this deserves a look.”3.3 Anatomy of a Crypto Credit CrisisThe Grayscale Trade,aka cryptos“Widowmak
189、er,”was integral in helping create much of the crypto contagion we saw this year.It was a root cause of the Three Arrows Capital(3AC)and BlockFi bankruptcies,and its potential rip-40#theses2023ple effects on its distressed sister company Genesis Capital and Genesis counterparties like Gemini remain
190、unresolved and could cause further damage still.The Grayscale products themselves continue to deteriorate for their investors as the discount to their fair value(the underlying assets held in the trusts)have widened to 40%,with no fee reductions or ETF conversion on the horizon.This springs Terra/Lu
191、na failure was simply a haymaker that followed years of body shots from the slow-bleeding bad bet on GBTC.Yield-hungry investors,forced further out onto the risk curve as Ethereum-based DeFi remained mired in a multi-year recession,gobbled up 20%teaser yields on an emerging algorithmic stablecoin(US
192、T)and its rising star lending protocol(Anchor),not realizing it was laced with arsenic.It was a good reminder to use common sense in investing.If you dont understand the yield,you are the yield.Lets set the stage for this section on CeFi with a speed run through cryptos first credit crisis.CMS wrote
193、 up the cliff notes in just five tweets that explain how this all went down,but I will also attempt to summarize here:1.It started with the Grayscale Trusts.These vehicles allowed investors to buy GBTC in their 401ks through OTC traded securities.But they werent ETFs,so they didnt have typical creat
194、ion and redemption mechanisms.Instead,accredited investors could create Trust shares with bitcoin,hold the shares for a six-month“seasoning”period,then flip them for what was a hefty GBTC Premium for quite a while pre-2021.2.Flipping and rolling the GBTC Premium ballooned in popularity and The Grays
195、cale Trade got crowded in 2020 hitting$40 billion in AUM at its peak due to stimulus,bitcoin halving,and zero interest rate COVID policies of 2020.3AC and BlockFi accumulated 10%of the Trusts shares with$4 billion in exposure at the peak in February 2021.But then 3AC started offloading some of its e
196、xposure during the great GBTC Premium Crash.3.Now a good chunk of the seasoning-GBTC is trapped and underwater with 3AC and BlockFi still subject to six months holding restrictions.They eat the unrealized losses and instead lean on lend-41#theses2023ing desks to allow them to borrow against the GBTC
197、 collateral.Genesis Capital,a sister company to Grayscale,is one of the only lenders incentivized to treat the GBTC at good money,given its affiliate technically controls the shares redemption mechanism(that would make whole the princi-pal of the collateral),and Genesis can milk the big borrowers fo
198、r interest in the interim.4.Exposed lending desks(BlockFi)and funds(3AC)let GBTC ride,but now they have to push further out the risk curve.This isnt a big deal in 2021 because everyone is making money hand over fist.The markets have come down from their tops in November,so the tide begins to go out.
199、But Luna is still growing massively and raises a$1 billion round in Feb 2022 to diversify their treasury.3AC is a big Luna investor.5.The Luna Foundation buys$1.5 billion of BTC with UST(their collateralized stablecoin)from Gen-esis,who proceeds to sell off UST and knock off the peg.Other funds and
200、trading desks see the peg break,and a bank run ensues on UST.Luna experiences a death spiral(great explainer piece from King Arthur).3AC is now underwater on two mega trades(King Arthur part two)in size(UST/LUNA and GBTC)and becomes insolvent.Their GBTC gets liquidated,and Genesis takes posses-sion
201、of 35 million GBTC shares.6.The contagion hits full swing,as multiple funds and trading desks with ties to 3AC go under(Defi-ance)or get bailed out temporarily by FTX,who is also a lending counterparty(?)(BlockFi,Voy-ager).All duration bets in the crypto lending markets sour and die,and Genesis acti
202、ve loans drop from$14.6 billion at the end of March to$2.8 billion at the end of September.As active deposits shrink,lending desks also call collateral and yank borrow from funds wherever they can.Credit seizes as everyone accelerates their derisking.This includes Alameda in August,who has external
203、borrow called after Genesis realizes they dont care much for FTT as collateral anymore.7.Coindesk gets the scoop of the year and publishes details on Alamedas financials and token reserves.They are loaded with illiquid crap like FTXs own trading token FTT and several low-float DeFi tokens like Serum
204、 that FTX had backed and hyped in 2021.An analyst notices that Binance moves$2 billion worth of FTT on-chain,and speculates that CZ is preparing to dump the position.CZ confirms that he plans to sell FTT and fully sever ties with FTX days later.Uh oh.Thats$2 bil-lion of an illiquid token.FTT crashes
205、,as do other major FTX/Alameda positions despite their best efforts at damage control.The entities go massively underwater as their collateral is now worthless and have no liquid accounts or access to other credit(all of their counterparties are already dead or distressed).Even CZ says yuck,Im not b
206、uying this.8.No liquidity at FTX/Alameda and commingled customer funds(thanks to mislabeled accounts or some nonsense)causes customer funds to be at risk,theres a“bank run”on FTX that isnt really a bank run because FTX was not authorized to lend against customer deposits according to its terms of se
207、rvice.FTX dies and,as CMS sums up,“Margaritaville at risk.”Thats the synopsis so far(as of December 21,2022),and the lessons are fairly straightforward:dont commingle customer assets,cut losses early on bad trades vs.lever them up and pray,maintain inter-nal controls and a fortress balance sheet,spl
208、it assets across different custodians and counterparties,and of course,only keep on exchange what you can afford to lose.But theres potentially more to work out still 42#theses20233.4 DCG&Genesis Contagion RiskThe most important trend to keep an eye on in early 2023 will be the evolving situation ov
209、er at invest-ment giant,Digital Currency Group(“DCG”)and its lending arm Genesis Capital,which was a large counterparty to 3AC,FTX,and most other large lending and trading desks.DCG is now one of the most systemically important companies in the crypto ecosystem,as the liquid-ity crisis at its subsid
210、iary and$1 billion capital infusion requirement present further contagion risks for the industry.Gemini,and at least one other large European exchange,and dozens of high net worth creditors apparently have more than$2 billion in frozen deposits stuck at Genesis,whose primary borrower is its DCG pare
211、nt.The options look pretty bleak.Creditors could strike an out-of-court settlement with Genesis and agree to a haircut on their withdrawable deposits in exchange for other DCG debt or equity in-struments.Genesis could file for bankruptcy protection,and potentially drag their parent and their deep-po
212、cketed external creditors through a lengthy and expensive reorganization process.Or DCG could identify recapitalization options at the holding company level,in order to make whole Genesis Creditors and limit their liability,but leveraging its other“good”assets.I wrote a full-length Enterprise resear
213、ch report on why a DCG recapitalization is a good idea and likely necessary to restore some stability to the crypto markets.(Laura Shin also hosted a good podcast on the subject.)But much of the viability of that plan ties back to the details regarding whats in the black box of lending agreements be
214、tween DCG and Genesis.Here are the five open questions Id be diligencing if I were looking at the deal,and determining whether there can be a resolution,or this is now an untouchable business.1.Wheres the Beef:Does DCG or Genesis hold the majority of the combined companies$700 million worth of GBTC
215、and ETHE shares?If DCG,thats a big slug of assets to borrow against.If 43#theses2023already spoken for at Genesis,and Genesis still has a billion dollar hole to fill in its balance sheet,we might yet see a further rippling out of contagion.2.The Promissory Note:On a recent episode of Unchaineds“The
216、Chopping Block”podcast,Dragonfly partner Haseeb Qureshi said that the$1.1 billion“promissory note”that DCG extended to Genesis following the 3AC bankruptcy may have been structured as“callable”in the event of a Genesis liquidation.If true,Genesis could have treated the promissory note as a“current a
217、sset”(less than one year duration)even though it was nominally a ten year note,something that would have been a material part of current assets Genesis showed subsequent creditors.Again,if true,that might reduce DCGs ability to limit liability from a Genesis bankruptcy.A callable note would mean tha
218、t a Genesis liquidation process would put DCG on the hook to repay the full$1.1 billion immediately.DCG doesnt have that cash yet,so Genesis might not feel the urgency to rush into bankruptcy as they“have the assets”from DCG,if DCG can refinance.3.Alameda Lending:Given the fact that Alameda and Gene
219、sis were two of the worlds largest bor-rower-lender counterparties,its likely they had loans together.From Genesiss quarterly reports,it appears that they were responsibly winding down many of their positions and yanking borrow.From the FTX bankruptcy filings,it also doesnt appear that FTX or Alamed
220、a are Genesis Capi-tal creditors today.If thats true,then the two giants either had no relationship(unlikely)or they closed their positions.The precise dates of any closed positions with Alameda might end up being critical to the resolution for DCG-Genesis due to the 90 day clawback period that most
221、 bankruptcy cases contain.If Alameda had loans with Genesis that were repaid after August 13,they might*potentially*be subject to the clawbacks.If there was a big number that changed hands after August 13,Im not sure how someone new to DCG assesses the risk of a clawback,which would be a*long-term l
222、iability*that hinges on the results of a multi-year,incredibly complex FTX bankruptcy process.4.The Grayscale-GBTC Tie Up:Some of the details in Fir Tree Capital Managements lawsuit vs.Grayscale look pretty alarming.They point to the related party levered transactions with 3AC,the repeated tightenin
223、g of Grayscales control over the Trusts redemption mechanisms(at the expense of shareholders),and Grayscales ability,but“self-interested”refusal to pursue Reg M re-demptions outside of an ETF conversion.That will take a long time to play out,but the one thing you should have your eye on as a GBTC sh
224、areholder is whether DCGs GBTC shares and Grayscale stay under common control for the foreseeable future.The alternative would not be good.Grayscale throws off$200 million+in annualized cash flow even at todays distressed prices.Those assets under management are permanent capital given the trusts st
225、ructure(see below).So the question for a new DCG investor or creditor regarding what Grayscale is worth as a business re-volves around your forward outlook for bitcoin.Grayscale may do$400 million in EBITDA this year,but only half of that on a run rate based on current prices.If DCG explores a sale
226、of Grayscale,theyll NEED to put the 67 million GBTC shares they own into the deal,too.A buyer without a large GBTC bag would have every incentive to shut down ETF conversion discussions and run the business as an annuity thats openly hostile to GBTC shareholders.DCGs$550 million of GBTC acts as an“E
227、TF approval hedge”since they are financially incentivized to push for an ETF.Even though an ETF would open the door for redemptions and lower fees,DCG would notch a one time gain of$450 million from the closure of the GBTC discount to NAV.The 44#theses2023incentives of the trust sponsor get ugly wit
228、hout that share hedge.A new buyer could be exploit-ative.5.The Eldridge Revolver:The irony in all of this is that the smallest creditor could hypothetically be-come the most troublesome.Connecticut-based lender Eldridge had a$350 million revolving line of credit with DCG that they could have conside
229、red to be in cross default the moment that Gen-esis halted withdrawals in November.Since they are senior creditors at DCG and Genesis,their incentives are materially different from the Genesis credit holders,who seem much more inclined to strike a deal.In my mind,nothing else really matters in the m
230、arkets right now.Until we see a bit more color around the DCG-Genesis resolution,its tough to say the credit crisis has fully resolved.Its 50-50,at best.3.5 Grayscale:Reflexivity up.Reflexivity down.Theres a good case to be made that Grayscale was the entity most responsible for Bitcoins ascent in l
231、ate 2020.GBTC and ETHE assets under management exploded thanks to the Grayscale trade,and now the asset manager generates$300 million/year in high-margin,sticky annualized revenue,even at todays crypto prices.Grayscales large AUM base and its Hotel California structure make it an attractive target f
232、or DCGs suitors.But its DCGs ownership of underlying GBTC and ETHE that Im watching most closely in February.Thats when Grayscales 10-K drops,which includes notes on affiliate ownership of shares in its Trust.DCG and Genesis(Grayscale affiliates)spent the better part of the past two years absorbing
233、all of the sell pressure from the top GBTC trust shareholders.#theses202345But that$700 million in collateral(including ETHE,too)could be subject to forced selling in the event DCG and Genesis need it in the short-term to make their creditors whole.I personally think the GBTC is better held as colla
234、teral that can be used to help refinance DCGs current debt load.(See the“ETF Approval Hedge”above.)It comes down to who holds the GBTC.The maximum amount that DCG and Genesis would be allowed to sell per quarter in the markets(under Rule 144 restrictions)would be 6.9 million shares,or about$80 milli
235、on if they had sold during the first six weeks of the quarter when GBTCs discount to net asset value widened from 35%to 45%.(It would take the combined companies 2.5 years to unload the full position if that was their ultimate wish,as I explain here.)The nuclear scenario(which I think is unlikely)wo
236、uld be for Grayscale to dissolve the trusts.Thats something that would likely only happen if 1)Genesis went bankrupt,2)DCG was pulled into Gen-esiss bankruptcy and also went bankrupt,3)DCG was unable to spin off Grayscale to a buyer and exhausted all other financing options,and 4)the Trusts themselv
237、es were unable to find another finan-cially stable sponsor.Like I said,unlikely.This whole thing is a bad look for crypto,but its also a worse look for the SEC.GBTC was allowed to become toxic collateral because of the SECs obstinance and dereliction of its duty to the American investing public.In a
238、 parallel universe in which the SEC prioritized investor protection,fair and efficient markets,and capital formation(its mandates),we might have escaped a great deal of the crypto credit carnage.GBTC investors wouldnt be billions of dollars underwater,institutions could begin to treat digital gold a
239、s a complement to their physical gold hedges via titled securities,and we wouldnt be staring down the barrel of a dozen crypto lending bankruptcies.Instead,the SEC is taking a victory lap over the carnage that they created after being played for fools and inviting the fox into the henhouse.Its utter
240、ly despicable.46#theses20233.6 Custody,Security,StabilityThe problems with crypto lending turn out to be pretty obvious:crypto assets are volatile,and many are illiquid,which makes them bad collateral.There are no free lunches when it comes to interest rates(you pay for returns through higher risks)
241、,and there are no lenders of last resort or deposit insurance.For now,there are three things to note about the crypto lending industry moving forward:1.Centralized lending is now mostly dead,and will be for a while.It will likely take years,and likely comprehensive legislation and regulation before
242、the crypto lending markets reopen and look any-thing like they did at their peak in late 2021 and early 2022.Thats arguably a good thing.2.Centralized crypto lenders will behave more like Anchorage and stodgy old banks in the future,taking full custody of secured collateral,setting market rate terms
243、,and at least pretending to take risk management seriously.All of the lending cowboys are now dead.3.A credit collapse isnt necessarily a bad thing for the long-term health of the crypto markets.One concern of mine that has grown with the prevalence of lending and margin within crypto is that re-hyp
244、othecation would eventually create systemic risks in the market(and suppress prices)by allow-ing entities to go fractional with their crypto reserves.Thats less likely to happen any time soon.I probably wont touch centralized crypto lending with a ten-foot pole ever again.(I used BlockFi to help wit
245、h my home purchase a few years ago because no banks would underwrite my mortgage at the time,lol.)Give me DeFi and its transparent collateral pools and mathematical liquidation functions from now on,or nothing.(More on that in the DeFi chapter.)On the other hand,we could start to see more stablecoin
246、 lending services emerge,now that Treasury rates are above zero,and fully-reserved custodians are incentivized to make a vig on those customer deposits if they can.Long BitGo,Anchorage,Coinbase,and FireBlocks.Short lenders who dont also own the underlying custody solution.3.7 Cloud Infrastructure an
247、d Developer ToolsDecentralized Physical Infrastructure Networks are still immature(more on DePIN in Chapter 9).In the meantime,were building on the same centralized cloud as everyone else in tech.Technical complexity and economic barriers prevent the average crypto user from solo staking or min-ing;
248、instead,they usually delegate to a professional validator or mining service.Over half of all staked Ether is controlled by three entities:including exchange giants Kraken and Coinbase.Over half of Bitcoins hashrate is supplied by three mining pools:Foundry USA,AntPool,and F2Pool.Centralized RPC prov
249、iders are currently the lowest cost and easiest to use solution for reading block-chain data Infura and Alchemy are the default solution for popular tools like MetaMask and Open-Zeppelin.Worse,cloud providers AWS,Hetzner,and OVH represent nearly 70%of hosted nodes on both ETH and SOL as of Sept.2022
250、.In fact,Hetzners terms of service dont even allow PoW mining or 47#theses2023PoS validating-related activities.Users are at perpetual risk of being deplatformed.Geographic concentration of validators could expose networks to geopolitical risks,regulations,or acts of nature.As of Sept.2022,50%of Sol
251、ana validators and 60%of Ethereum validators were lo-cated in either Germany or the U.S.,even if the broader networks were distributed more widely across 25 and 60 countries,respectively.We also expect to see redoubled efforts to alleviate some of todays pressing software-driven central-ization pain
252、 points.Expect meaningful upgrades to account abstraction(streamlines user management of accounts and assets),Proposer Builder Separation(delegates computationally intensive work to specialized block proposers,lowering node requirements for solo validators),and“Light Clients”(allows users on laptops
253、 and phones to connect directly to networks rather than through third-party hosted nodes or centralized RPC providers thanks to improved data compression).3.8 On-Chain ForensicsOn-Chain forensics has been big business for a while.Chainalysis was the first crypto data unicorn,and its counterparts Ell
254、iptic and TRM Labs dont appear to be far behind.The primary thrust of these businesses has been transaction monitoring for compliance teams and forensic tools for regulators and investigators.Demand for these tools follows market cap on the way up(more firms need the tools,more fraud gets committed,
255、and more taxes are evaded),and stays somewhat sticky on the way down(investigations take years,compliance needs are permanent,and taxes due from a bull run are still due in full even if your bags get slashed the next year.On the other hand,I would argue that on-chain analytics as a standalone market
256、 intelligence product only really became viable in the past year.Glassnode is bootstrapped,but Dune,Nansen,AmberData,Flipside,and Coin Metrics all provided a glimpse of investor expectations for the segment as all raised 48#theses2023big rounds on sky-high revenue multiples within the past year.On-c
257、hain fundamentals are getting sexier and more integral to professional traders risk scoring(and copy-trading).Nansen seems to be one of two analytics companies that have figured out how to combine a mar-ket intelligence product and a compliance product.(Ill give you a wild guess as to who the other
258、under-the-radar company is.)It was a brilliant and non-intuitive bootstrapping strategy:tag public wallets,analyze them on a best-efforts basis,and leverage Cunninghams law into iteratively better aggregated data sets(“if our data is wrong,then give us the right data”).That allowed them to hide a ro
259、bust forensics tool under an NFT flippers front end.Then low and behold they came fastest out the door with a proof-of-reserves dashboard post-FTX failure and deconstructed multiple high profile protocol and fund failures using their own dogfood in Q2.Credit where its due.Killer year.And then theres
260、 Messari.The company that many people are calling the“greatest on earth”only really entered the on-chain data game in the past year.But weve been building open APIs and data standards for 100+protocols,and are getting iteratively closer to developing the equivalent of GAAP or IFRS reporting standard
261、s for crypto protocols.Who needs the SEC and a quarterly lag.These metrics are available in quarterly reports,or real-time.Dealers choice:49#theses20233.9 Tax&ComplianceMy base case for 2023 is that the IRS is going to create hell for crypto investors.What happens when a)the IRS is directed through
262、legislation to extract higher taxes from crypto investors,b)we have a record year(2021)followed by a deep correction(2022),and c)compliance and tax monitoring tools have to take down rounds and scramble for new customers as winter arrives?Pain.Compliance solutions are fairly sticky,and theyll sell w
263、herever they are most welcome.It would not surprise me to see some crypto accounting and forensics companies go full Big Brother in the new year,and proactively search for and report suspicious accounts for tax non-compliance.I am in favor of tax compliance,and using every tool at our disposal to ca
264、tch hackers,rogue states,and criminals who leverage crypto and use it for money laundering or tax fraud.But I am very much against dragnet surveillance and taxpayer harassment.And unfortunately,I think crypto investors will make appealing political scapegoats.After all,the IRS has to give those 25,0
265、00 new agents something to do!I stand by my comment last year that crypto tax reporting violates Eighth Amendment protections against cruel and unusual punishment.But at least this year we all lost so much money that well all get refunds.Youve got a week to harvest those losses,baby.Get going!3.10 R
266、esearch&Data UpgradesWhile Im sure there are other good research and data companies out there,I dont make a habit of giving my competitors air-time in down-trending markets.I write to win(this report),and firmly believe that there is no second best when it comes to crypto research.You want market da
267、ta,protocol metrics,curated news&analysis,corporate actions&governance analysis,protocol specific diligence reports,quarterly reporting and thematic research,venture capital data,charts or screeners,and weve got you covered.If you have questions,were missing something you want,or you have product fe
268、edback,you can reach out to us to schedule a demo and product walkthrough.If youre an engineer,analyst or data scientist,were also keeping a close eye out for products that parse smart contracts and flag network or token economic risks,provide better developer tracking methodologies,and provide pred
269、ictive pricing models for NFTs.50#theses202351#theses20234.0TOP 10 TRENDS IN CRYPTO POLICY4.0 Intro 524.1 How a Bill Almost Became a Law 534.2 How a Bill Becomes a Law 594.3 The SEC vs.CFTC Proxy War 644.4 MiCA Pros&Cons 664.5 Everybody Hates Gary 684.6 Ooki vs.CFTC(DAO Governance)694.7 Tornado Cash
270、 vs.OFAC(Personal Wallets)704.8 Protecting Crypto Banking 714.9 State vs.Federal(Stablecoins)734.10 The Ground Game 7352#theses20234.0 IntroIn last years report,I covered a lot of ground regarding the state of crypto policy in the West(pp 51-73).This year,Ill recap some of the players and major issu
271、es that made headlines,and focus on the new legislative updates and regulatory challenges.Many of last years issues are still relevant and ongoing,so if you think Ive missed something,go back and re-read the old stuff(law moves slower than crypto).This year,Congress and the regulatory state have bee
272、n busy in both the U.S.and Europe.I continue to believe that the U.S.is the most important battleground for crypto policy in the world(thank you First,Fourth,Fifth,and Tenth Amendments!),so while well take a short detour into Europe in one section of this chapter,most of the focus will stay right he
273、re at my homebase.I believe 2023 could very well end up being transformational for crypto in terms of permanent law.We should get exchange oversight clarity and stablecoin regulation by law,not regulatory turf wars.And we should make progress on setting standards for disclosures and consumer protect
274、ions in an ecosys-tem that desperately needs to fix its trust deficit with the general public.The OGs of the exchange and stablecoin sectors want common sense regulation.Even some DeFi cowboys see the merits of good policy these days.We cant stand by idly and watch people get hurt by these invention
275、s.Otherwise,crypto will deserve to whither.If you dont want to read 25 pages of my political thriller,heres a thread I wrote that covers the basics.Its going to be a big year.Lets go.53#theses20234.1 How a Bill Almost Became a LawMy experience digging into the most front and center bill,the Digital
276、Commodities and Consumer Protection Act(DCCPA),these past few months may provide some helpful perspective on where cryp-to policy is heading next year.Before we talk about where DCCPA(and other crypto legislation)is heading,we have to talk about where weve been and what happened this fall.Given the
277、high-stakes moment crypto now faces and the significant policy and regulatory headwinds,Ill avoid divulging nitty-gritty details shared with me in confidence(and good faith)and will try not to over-editorialize.With one caveat:Ill break my“no SBF”rule in this section.His actions provide critical(and
278、 lasting)context to any analysis,so Ill share details about my interactions with him and the FTX team to give you a full readout.Just the facts.Then we can talk about my impression of whats coming next for crypto policy.I also want to set the record straight with respect to my brief,limited relation
279、ship with Sam.I want to highlight how cunning I suspected him to be,lest anyone be tempted to fall prey to his media-fueled,carefully crafted,and totally bogus post-bankruptcy redemption narrative.What I saw in my interactions with Sam was not someone who missed nuance or critical details.Or delegat
280、ed control to his subordinates.Or chose his words without caution and precision.Hes brilliant and I think manipulative.He is not“negligent”or“incompetent,”as his crisis PR team seems to be positioning him these days,but rather“strategic,”“calculating,”and“self-pitying.”Like most other people in cryp
281、to,I had no idea Sam might be a criminal(though that now is clear).But I had been suspicious of him and his motives for many months privately before getting more deeply involved in crypto policy conversations this fall in D.C.My misgivings deepened when I began actively working to understand just wh
282、at the hell he was thinking in slamming the DCCPA down the rest of the industrys throat.Ill acknowledge upfront that I know there will be suspicion,misdirected anger,and baseless accusa-tions thrown around towards anyone who steps foot in D.C.and engages with policymakers on mat-ters related to cryp
283、to regulation.You can choose whether to believe anything I claim in this section(though I did keep the receipts),and I wont hold it against you.Criticism and skepticism are healthy antibodies for crypto.No one should(or could)pretend to speak on behalf of the entire crypto industry on issues of exis
284、ten-tial importance.But engagement in D.C.is essential,and there are experts whose full-time jobs are to pound the pavement in D.C.to help our industry.We shouldnt abdicate responsibility for crypto policy to hired guns,but we also shouldnt drown the lifeguards we have on staff.I personally chose to
285、 invest time and learn more about the levers at work in D.C.starting this fall.Heres what I saw 54#theses2023ContextI wont play the hindsight game and pretend I knew the extent of what was going on with FTX and Alameda financially and operationally.But for a while,I was getting increasingly negative
286、 impressions of both.1.By early 2022,it was clear that Alameda had made a lot of its money through a number of.du-bious.trading schemes.They invested in tokens early and farmed them as mercenaries,then appeared to offload them to unwitting buyers at warp speed.They were notorious for backing low-flo
287、at,high FDV projects,and keeping a ton of the tokens for themselves(which now seems to have been part of an allegedly fraudulent collateral shell game).A lot of people farmed tokens and played the pon(z)ies in 2020 and 2021.But running a retail-facing business(FTX)joined at the hip of a retail-fleec
288、ing investment vehicle(Alameda)reeked to me.2.Too many people may have given Sam a pass because they thought he was a savvy trading sa-vant(and he was also helping many of them get rich).Im also sure a number of skeptics believed it would be dangerous professionally to rock the boat in calling him o
289、ut.Both were reasonable thoughts.Ive never seen anyone in crypto develop such a powerful network of friends at such a breakneck pace.Across politics,legacy finance,and crypto,Sam seemed to be operating at a different level from mere mortals.He was a formidable mercenary.And he even said the quiet pa
290、rt out loud:his ends justified his means.3.Sam had explicitly stated in the past that he didnt care about crypto,but for the fact that it was a market to be exploited.The shoelaces,the hair,the cargo shorts,etc.reminded me of Boris Johnsons act:he was go-ing for the weird but lovable wunderkind of c
291、rypto.The billboards were the“jump the shark”moment when I was personally 99%sure something wasnt right with FTX.FTXs seemingly limitless resources just didnt add up,and whenever I met an investor after 3ACs collapse in Q2 and Sams multiple bailout bids for 3AC counterparties like BlockFi and Voyage
292、r and pitch to invest billions of dollars into Twitter I asked the same question:how is it mathematically possible for Sam to have made this much money this quickly and gotten liquidity on so much of it?I began to quip in recent months(including on stage at Mainnet)that I was an effective altru-ist.
293、After all,I also wanted to accumulate enough money and power to bend the world to my iron will.FTX was expanding at a torrid pace,and Sam had a lot of smart backers and mutual friends who were betting on him and putting their reputations behind the company.Given Messaris mission to drive data standa
294、rds and transparency in crypto,it was important to work with market leaders like FTX.In fact,I believe we are the only company in crypto to count every single major U.S.exchange and custodian as investors.Thats intentional,and I actively worked to get closer to Sam and FTX these past two years to en
295、sure they werent a glaring omission from our investor network.55#theses2023That didnt mean my spidey senses werent tingling.But worst case scenario,I thought it would be a“keep your enemies closer”type of situation.We took on Alameda for a 1%stake in Messaris 2021 Series A and FTX Ventures for a 1%s
296、take in our Series B(We intend to buy back both investments).I didnt re-engage Alameda over the summer for our Series B,but I did want to work with an investor that FTX Ventures had recently brought on from another major venture capital firm.I viewed her hiring as a sign that the FTX investing appar
297、atus was maturing,and we signed them up.As they say,“Yikes,dumb f*cking take.”We announced our Series B and the new syndicate of investors(including FTX)the morning of Sep-tember 21 at our Mainnet summit in New York.That evening Messari hosted a dinner with many of the policy leaders who were in tow
298、n speaking at the event and fighting the good fight for us all in D.C.We didnt even get to the damn monkfish before the Blockchain Associations Executive Director dropped a bomb.“Can we talk about the elephant in the room?”she said.“Sam is selling out the industry to get a monopoly for FTX.”The rest
299、 of the dinner was pretty buzzy.I had invited a room full of seasoned pros,and it was the first time that many of them became aware of just how far along the DCCPA had gotten in D.C.,in large part because of FTXs aggressive lobbying.Behind closed doors,the legislation was moving at Mach 1.“Im concer
300、ned.”After digesting the monkfish and wrapping up Mainnet,I emailed Sam and his policy team on the train ride home that Friday.Two days after we had announced their participation in our round I wrote:“Im concerned with what Ive heard about the bills FTX is supporting,and would love to understand-if
301、not align-on strategy.A lack of communication and coordination in D.C.will kill us as an industry,and I want to be sure Messaris customers/users arent collateral damage of bad policy.”I spoke with his team that Monday.I can only surmise that Sams initial reaction to my email was,“Why is this guy ema
302、iling me,and what does he have to do with policy in D.C.?”(By the way,its a fair question as to what I have to do with policy in D.C.The dinner during Mainnet made me realize that every single Messari customer would be impacted by the rules being written by those in Washington,and I needed to gain a
303、 clear line of sight.Quickly.)But after my discussion with his policy team,Sam had clearly gathered that a number of people,in-cluding me,had issues with the DCCPAs DeFi language,and were planning to either fix or fight the bill.He knew I was one of the louder business voices in crypto who was now i
304、n the know,so we sched-uled a follow up a few days later that Sam could join.56#theses2023We debated DCCPA for almost two hours.I did not mince words:“FTX is viewed by other crypto lobbyists as a rogue actor looking to create a regulatory monopoly for itself to the detriment of the rest of the indus
305、try.”We spent a good percent-age of the call walking through Sams view on the political chessboard,and he made his case that the most viable path forward for the broader industry was the one that FTX was spending considerable political and financial capital on advancing.It was clear he wasnt going t
306、o stop pushing the bill.I think it was also clear to him that I was going to help resist it unless its problematic DeFi language was fixed.I thought the language being used would be horrible for the industry and our customers,the vast majority of which didnt have any idea how far along DCCPA was pro
307、gressing.Towards the end of that conversation,Sam was getting visibly frustrated that he hadnt converted me.In a shocking moment that felt very much like I was being bribed,he said,“I probably shouldnt say this,but just as a hypothetical.I dont think this bill is bad for DeFi.I dont think Im wrong o
308、n this.But if I am wrong,and anyone in DeFi that supports DCCPA gets hurt,Im willing to spend a significant sum of money making things right with them.”This wasnt a 1:1 either.His team was on the call.I was floored.I told him I wouldnt engage in hypotheticals and instead wanted FTX to help fix the c
309、rippling and 57#theses2023unworkable DeFi language.I wrapped up the call and gave Sam and his colleagues several names of DeFi policy leaders to sync with who would share their specific concerns.I wanted Sam to help ad-vance their concerns in FTXs follow-ups with Senate staff.I did not feel great af
310、ter this call.But the fact remained that Sam had spent tens of millions of dollars on a D.C.charm offensive and would have to be handled carefully,so as not to blow up relationships with the policymakers in his orbit who we believed were working in good faith on important,and ad-mittedly high-potent
311、ial,legislation.Better to leverage FTXs progress and tweak legislation with good momentum,than to air concerns in public,make the industry look like amateurs,and lose critical staffer relationships.The calculation was simple:co-opt FTXs influence in order to fix the bad DeFi language.As I tweeted nu
312、merous times,it would essentially boil down to“no DeFi,no deal.”I hadnt had any direct conversations with policymakers or their staffs at this point.Messari doesnt retain any lobbyists,aside from being a member of the Blockchain Association with 100+other com-panies.And frankly,DCCPA wouldnt even im
313、pact us directly,so there wouldnt have been much for us to offer in the DCCPA negotiations.That said,I thought DCCPA needed to be improved for the long-term health of crypto,and tried to play a small role in helping keep people talking.If we could get the right lawyers in the room to en-gage on pote
314、ntial redlines that would protect emerging parts of the industry,we could see how the final drafts were trending,and*then*make a decision on whether a coordinated and loud rejec-tion of DCCPA was warranted.Messari counts big exchanges and DeFi projects alike as customers(frankly,in todays world they
315、 cant exist without each other),and wed already convened a couple of previous policy meetups.Thats how we ended up curating a small group of people for a follow-up meeting in D.C.to discuss the DCCPAs working drafts,weigh the pros and cons it presented to various industry groups,and most impor-tantl
316、y,loop in the FTX team,so they werent viewed as working in direct opposition to other crypto companies and trade groups.The D.C.meeting itself was private,the discussion was private,and it would have stayed that way had someone not leaked details to the press.Since its now part of the public record,
317、Ill share that Sam pled his case to the broader group at this meeting and(predictably)extolled the merits of the DCCPA,echoing many of the points his team had shared with me previously.His message and particularly his exit was not well received.After Sam made his case,he excused himself from a table
318、 of twenty public policy experts with de-cades of experience in crafting financial regulations,gathered his entourage,and said over his shoul-der,“I just want to say I really appreciate your efforts here.Thank you for being super f*cking con-structive.”Nothing like a good ole pat on the head from th
319、e boy genius whos actively trying to sell you out.58#theses2023The Leak,the Voorhees Debate,and the Alameda Balance SheetBy the time the meeting in D.C.wrapped up,Id spent the better part of a month with near full-time focus on policy efforts and the DCCPA.I wanted to get back to,ya know,real work,b
320、ut more than one trade association predicted that the DeFi-crippling language and full legislation could get slammed through Congress during the lame duck(between Election Day in November and the new Congress taking office in January),and that probability was rising.A number of investors were starti
321、ng to grumble more publicly about Sams lobbying efforts.(Credit to Richard Chen and Vance Spencer for being early.)I tweeted about my redline issues for DCCPA and wrote to a friend,“Im not going to pile on or come to Sams defense,but its good to have a little public pressure on him.FTX could end up
322、being hugely positive in this saga or the villain.And the line is thin.”Still,it was premature for Twitter dunks,since it appeared that the DCCPA was salvageable,and the jury was out on whether FTX would help push for changes to the problematic DeFi language.I also worried that a public Crypto Twitt
323、er-led free-for-all would torpedo relationships that many of the trade groups and policy advisors had worked so hard to build in the year since.(As a card-carrying OG member of Crypto Twitter in all its degenerate glory,I can still acknowledge that crafting,building buy-in for,and passing bipartisan
324、 legislation through both houses of Congress is a high-wire act in which the bird app generally Does.Not.Help.)The DCCPA redlines appeared to be getting worse,not better,though.One curious change to the early drafts included“clarifying”language around DeFis decentralized ex-changes that would have d
325、e facto illegalized automated market maker DEXs like Uniswap,but explic-itly blessed central-limit order book DEXs like Serum.(Youd never guess who had$2 billion of SRM tokens on their balance sheet!Ok,ok,its FTX.)It didnt take much longer for all hell to break loose when a leaked version of the DCC
326、PA redline got posted on October 19.Thats when it seemed like Sam started to crack.After that,Sam.Simply.Could.Not.Stop.Talking about policy.While Congress was in recess.Two weeks before an election when staffers would find out whether or not they still had jobs.When pen-cils were down for a moment
327、to regroup.From then on,Sam watched his one-time adoring Twitter following begin to turn on him.During periods of high stress,one of his former colleagues told me Sam would turn to Twitter for reassurance that his messaging and decision-making were still on point.But he was starting to flounder and
328、those dopamine hits dropped off a cliff.Sam put out a public thread on his proposed policy framework panned.He debated Erik Voorhees lost.He also threatened to work to get some of his biggest DCCPA opponents fired.Then he and his team mocked Binance CEO Changpeng Zhao.As Omar says,“you come at the k
329、ing,you best not miss.”59#theses2023Sam missed.Bigly.Mere days later,CoinDesk broke the news that Alamedas solvency rested on the value of its own illiq-uid token balance sheet,CZ announced he would dump his substantial FTT stake and part ways with Sam,in large part for lobbying against Binance and
330、other crypto firms.Within 48 hours,the game was up for FTX,Alameda,and Sam himself.You can read about the ensuing drama literally anywhere else right now,so Ill save the space.But I will end with two things:First,the DCCPA is now considered a tainted bill,fairly or unfairly.FTXs influence on the leg
331、islation is hard to deny,and it begs the question whether DCCPA would have caught or simply exacerbated the damage of FTXs apparent fraud.Some kernels of the bill may yet survive and make it into an evolved bill in the new Congress,but I doubt the current name or contents live on without material ch
332、anges.Second,there needs to be justice for Sams crimes.Its not about retribution.As the indictments roll out,they look so damning that my hunch is Sam has simply been positioning himself to cop a negli-gence case and minimize the damage.But that would be a failure of justice.My first-hand experience
333、,and that of dozens of other smart people who were snookered by Sam,was with a hyper-competent Machiavellian.His full,forthcoming prosecution in the U.S.is a sign of the integrity of our justice system and a de-terrent to similarly egregious future financial crime.Most importantly,it will prevent Sam from doing something like this again.This saga has been terrible for crypto.But its been even wors