AROUND THE BLOCK - MAY 24, 2022

Oh Snap, Time to buy Jordan’s, Art, and Maybe NFTs?

• In a surprise announcement on Monday, Snapchat said that revenue and adjusted EBITDA for Q2 ‘22 would come in below the range the company projected a month ago. Snap closed down over 40% for the day. This dire warning further stoked recession fears, with stocks whose cash flows are tied to ad revenue such as Google Meta suffering declines of 6% and 9% respectively. Snap’s announcement also caused panic in broad market indices with the Dow closing flat, and S&P 500 and Nasdaq 100 down 0.8% and 2.1% respectively.
• In another recession alarm, new residential sales last month declined 16.6% compared to an expected 1.7% decline. The month-over-month slide was the biggest since 2013 and the rate of sales was the lowest in two years, according to data. Robert Dietz, the chief economist for the National Association of Home Builders called the plunge “a clear recession warning for the overall economy for the quarters ahead.”
• In crypto markets, BTC gained 0.40% but stayed below $30,000. Although BTC has traded in a narrow range, BTC denominated open interest has grown by 41,000 BTC since May 15th, leading BTC denominated OI to reach a new all-time high of 290,000 BTC. The growing open interest has mostly been accompanied by funding rates below neutral, and the most pronounced growth over the last week has been seen on Bybit (+18%) and Binance (+12%). This could point in the direction of shorts being most the aggressive contributor to the recent growth.
• BTC option skews tell a story of a remarkably high demand to hedge in the options market, with both short-dated and longer-dated options seeing recent all-time highs. The 1mth 25D skew reached a 24-hour average all-time high on May 12th of 24%, surpassing the May peaks from 2020 and 2021. The 6mth 25D skew also shows a strong demand for puts, currently sitting at 12.57% after peaking at 14% on May 22nd. A positive skew signals a higher demand for put options than call options. The longer-dated maturities have never been anywhere near the current high levels. On June 1st, 2021, the 6mth skew peaked at 4.75%, while the 6mth skew peaked at 4.15% on April 28th, 2020.
• ETH meanwhile lost over 1.73% and is trading at around $1,950. Most other top altcoins lost between 2.5%-3% on the day, with smaller declines for BNB and XRP. All in all, this was a rather tame day for the crypto markets which often decline well over 10% on days the Nasdaq falls by more than 200 basis points. This may portend a decoupling from the broad equity markets for crypto.
• Meanwhile, Tron, which recently launched an algorithmic stablecoin (USDD), is up over 7%. Tron, the 13th largest coin by market cap, has been buoyed by the launch of a $10 million incentive fund to migrate Terra developers to Tron’s EVM-compatible cross-chain solution BitTorrent Chain (BTTC), which allows the seamless transfer of assets across Ethereum and BNB amongst others. Tron has recently announced partnerships with Alameda, Amber Group, Poloniex, ANKR, Mirana, and Multichain who will be allowed to mint USDD. As of yesterday, Fireblocks - a leading digital asset custodian - added support for Tron’s native coin TRX and other TRC20 based tokens.
• In the alternative assets market, a 1998 Michael Jordan game-worn and photo-matched jersey continued a recent trend of strong results for photo-matched pieces in general and Jordan memorabilia in particular when it sold for $360,000. Similarly, Diego Maradona’s Worldcup Match Worn Shirt, in which he scored both the “Hand of God” and the “Goal of the Century,” sold for £7.1 million, well above the quoted high-end estimate of £6 million. Meanwhile, the Andy Warhol x Basquiat’s GE/Skull did very well, selling for $4,620,000 above the estimated $2,000,000-3,000,000 price range.
• Art and collectibles tend to remain flat during bear markets, such as in 2000-02 when equities lost over 50%. With the recent boom in fractional collectible ownership platforms such as Collectable, Dibbs, and Rally, interest in this form of ownership has grown substantially over the last few years. The question remains whether a lack of historical correlation between Art/Collectibles and Equity markets will extend to NFTs. Though many have recently pointed to drying transaction volumes on the ETH-based OpenSea platform, we noted last week that this may have been a function of migration to Solana’s Magin Eden.
• Similarly, Luisa Cho, an analyst at blockchain analysis firm Nansen, argued that NFT markets are changing and maturing rather than dying. Nansen’s research suggests that dropping prices for new mints is a function of increased user demand, which is forcing projects to decrease initial mint prices to compensate for higher gas fees. Nansen’s data also show shows that the top end of the NFT market is outperforming the general cryptocurrency market year-on-year. Nansen’s blue-chip 10 index, while down in dollar terms, is still up 14% year over year in ETH terms after May’s crypto crash.

Crypto News Bites 🚨

• eBay, an online marketplace popular for secondary sales, announced Monday that it will sell non-fungible tokens (NFTs) through a partnership with the OneOf, an NFT platform specializing in selling music, sports, and lifestyle digital assets. eBay’s NFT collection will involve digital collectibles of popular athletes such as Wayne Gretzky, a Canadian ice hockey player. Each athlete will have four tiers of NFTs — green, gold, platinum, and diamond — with the green tier including the cheapest NFTs starting at $10.
• The Goblintown.wtf NFT collection clocked 3,800 ETH (around $7 million) in sales volume over the weekend, the most of any project during that time. The “Goblin Town” theme is a crypto colloquialism for the bear market, with both the NFT sector and crypto market at large being hit hard in recent weeks. Some NFT sleuths have even floated the idea of Yuga Labs being involved, though moderators of the Bored Ape Yacht Club NFT Discord have denied the connection.
• The OriginTrail Parachain has won the Polkadot auction slot #17. OriginTrail is a neutral Web3 protocol enabling trusted data sharing between companies, organizations, and blockchains. End-to-end information is shared and secured in a fully decentralized knowledge graph network, monitored with AI and oracles. The TRAC token is the glue between all entities and is used as both a collateral (to keep data holders/creators honest and data immutable) and a payment (to compensate data holders for their time and resources). OriginTrail/TRAC is used by Home Depot, Walmart, Target, & the US Department of Homeland Security for factory audit verification.
• The first in-person World Economic Forum event since the COVID-19 pandemic started continues to bridge traditional finance with the future of money on its third day. Check out the latest updates for May 24 from Cointelegraph’s play-by-play coverage.

Deals and Investments 💸

• Flowcarbon, a startup co-founded by former WeWork CEO Adam Neumann, has raised $70 million to develop its blockchain-based carbon trading tools.
• Pebble, a crypto savings app, raised $6.2 million in a seed round joined by Y Combinator. Pebble offers a savings account that provides a 5% interest rate on USD which it converts to USDC and lends to institutional clients for various trading strategies. Borrowers are required to put 150% collateral according to Pebble’s CTO.