For a while, we’ve lived in the territory of bad-news-are-good-news, where increasing job losses or decreasing liquidity would mean the Fed would finally release the grip on interest rates. Crypto prices have grown since the year started, but it’s hard to figure out whether this is good or bad in the mid-term. Quoting Noelle Acheson, author of Crypto is Macro.

Growth is holding up better than expected, which means that earnings may not need to be downgraded quite as much as some feared. Or, growth is holding up better than expected, which means that the Fed could continue to raise rates without fear of tipping the economy into a recession

We wrote a self-aware thread about some of the bullish signs ahead.

Carbono @carbono_com

If you’re feeling bullish today, here are some observations that will fuel your confirmation bias. OFC, this is NFA; remember to DYOR and beware of BS.

And we’ve come across some more reasons to believe overtime

Matrixport @realMatrixport

3) #Bitcoin is up +40% year-to-date with +35% of those returns occurring during US #tradinghours. That's an 85% contribution of the #rally associated with US based #investors. Hence, we interpret this as a clear signal that US institutions are buyers of #Bitcoin right now.

We asked Dall-E for a bull and a bear through the hands of Joan Miró, and we got what we wanted: some abstract figure that could be one, the other, or neither. Bulls and bear that lay in the eye of the beholder.

We have some strong beliefs about potential trends, though. They permeate the topics we write about.

The perspective of Real World Assets (RWAs) entering the crypto-sphere is very exciting.
Aptos rose to stardom with +90% in the week, but there were no proper fundamentals behind it. There’s a tale about lessons learned here.
The fat protocol VS appchain thesis is one of the most exciting ways to frame what lies ahead from the infrastructure perspective.
The Shanghai upgrade is coming, and we learn new details weekly.
Pudgy Penguins and Doodles give real use cases to Etehreum’s scalability alternatives.
Asset managers have spoken through two surveys.

⬡ Six Angles

We select six topics to illustrate the different angles from which we can approach crypto. We could choose dozens, but six is the atomic number of carbon… and otherwise, we’d be writing for ages.

1. RWA | The year of Real World Assets

A trend is emerging around the incorporation of Real World Assets into DeFi.

Two weeks ago, we covered Ondo Finance’s tokenization of short-term treasury bonds. Last week, Societé Générale activated their MakerDAO vault and borrowed $7M in DAI from a vault with $40M collateral in French housing bonds. This week it was Maple Finance’s turn to announce a $100M liquidity pool by tax receivables.

There’s no canonical definition of what Real World Assets are, so we could also say that when Paxos asks MakerDAO to hold $1.5B USDP, we’re also talking about RWA since USDP is a dollar-pegged stablecoin one backed by cash and cash-equivalent U.S. government debt instruments.

While some say a trend is emerging, others say RWA is crypto’s final goal. Without a solid connection to “the offline world,” crypto would be a game played with tokens and jpegs. If this technology holds any transformative power, it must be because it can onboard the traditional financial and economic mechanisms.

ChainLinkGod.eth @ChainLinkGod

The point of crypto is to improve society, which means providing products/services that people actually want in a superior format In regards to finance, this means RWAs (traditional commodities, currencies, and securities) Without RWAs, what exactly do we aim to achieve here?

Here’s chatGPT with a definition

Real-world assets are tangible or intangible assets with value in the physical world. In cryptocurrency, real-world assets can refer to assets represented by a digital token on a blockchain, allowing them to be traded and managed in a decentralized manner. For example, a token representing ownership in a piece of real estate could be created and traded on a blockchain. These assets are also known as tokenized assets.

The ground is fertile for RWA assets these days. TradFi investors flew to crypto for a while, attracted by DeFi’s high yields. Today, in the context of high-interest rates and after the Ponzi purge of 2022, yields have returned to traditional banks. And now investors are looking at DeFi with different eyes: they’re looking at the liquidity available in DAO treasuries and decentralized protocols. The bridges that were being built to overcome the regulatory and operational gaps are more useful than ever. Only the direction of liquidity has reversed. When MakerDAO, Ondo, or Maple Finance onboard Real World Assets, they expose their protocols to Real World Yields.

2. L1s | Aptos grows for all the wrong reasons

Aptos has been the winning token of the week with a +90% (and a +400% in 30 days). Aptos is a Layer 1 founded by former Facebook employees, backed by some of the biggest fish in the VC space, like Andreessen Horowitz, that had 3AC and FTX as investors. These credentials couldn’t look sketchier to crypto-natives: Facebook and big VCs have a history of extractive practices, and we all know that sustainable technological improvements never moved 3AC and FTX.

Aptos has been one of the best-performing tokens of the week for the reasons we wished we had left behind. Currently, Binance is promising a 92.42% yield on APT/USDT and a 99.49% yield on APT/BTC liquidity pool deposits, and there’s a premium for arbitrageurs who trade in South Korean exchanges. In the meantime, developer and community activity on the chain is almost nonexistent.

Once again, we’re witnessing price hikes that have nothing to do with the quality or use of the product and too much to do with artificial rewards and financial engineering.

Emperor Osmo🧪 @Flowslikeosmo

$APT is the only chain with significant growth in its marketcap over the last 90 days (+178.6%). With significantly weaker fundamentals. • DAUs -66.9% • Daily Txs -55.6% Does this look sustainable?

3. Narratives | Appchains VS Fat Protocols

One of crypto's most exciting and vital conceptual conversations is the appchain vs. fat protocol thesis debate.

The fat protocol thesis claims that the future of blockchain technology moves towards a context where single, massive, multipurpose blockchains (like Ethereum) will monopolize the space: they’ll be the center of all activity, liquidity, and development, and they’ll have the biggest and most active community and user base, thanks to the power of economies of scale and network effects.

The appchain thesis claims that applications will be the core of all crypto. They point out that, as the development of new blockchains becomes faster and more reliable, the most outstanding applications will be heavily incentivized to build their own homes on tailor-made blockchains, where they have control over relevant variables like throughput, transaction costs, or composability.

The infrastructure space in crypto is much more complicated (unfortunately, for those of us who spend our days trying to understand and explain). There are scalability improvements, bridges, and other interoperability solutions, Layer 2s, modular blockchains, etc. As a result, the infrastructure conversation is less of a peaceful dialogue around tea and more like ten thousand people reading out loud in a bar.

If you want a more detailed intro, tune in to Blockworks’ Bell Curve podcast with guest Sunny Aggarwal around 4 minutes in.

4.Ethereum | Latest news from Shanghai

Figuring out the details of the Shanghai upgrade should be considered an aerobic sport.

Staking in Ethereum’s Proof of Work mechanism was first allowed in December 2020, but whoever locked their assets on the Ethereum Beacon Chain knew that they had to say goodbye to their investments indefinitely. Two years later, Liquid Staking providers' flourishing industry has poured massive amounts of ETH into the Beacon Chain (16M ETH). However, there’s still no way to retrieve these assets or their associated rewards.

Today we have a date for the release of the rewards: the Shanghai upgrade is expected in March / April 2023. And the details of how withdrawals will happen are starting to be written. Ethereum core devs have revealed what type of transactions withdrawals will go through (gasless, without tx fee) and how fast (variable depending mainly on whether there’s slashing involved).

We took a dive into the available information and wrote an explainer on the details provided by devs. You can check out how the Beacon Chain will process withdrawals in this Medium post and how Lido plans to process them in this Twitter thread.

5. NFTs | Pudgy Penguins and Doodles walk the scalability talk

Pudgy Penguins and Doodles, two Tier 1 NFT collections, recently announced that their next steps would move them away from Ethereum. Pudgy Penguins has launched a bridge to Arbitrum, Polygon, and BNB Chain, while Doodles is moving to the Flow blockchain (created by Dapper Labs, the company that clogged Ethereum with Cryptokitties)

These NFT projects give meaning to the endless marketing pitches, boring tweets, and stats from alternative L1s and L2s that keep speaking about trilemmas, security, and throughput. Until something big happens on the Ethereum chain, the threat of obstructive transaction fees is too scary.

6. TradFi | Asset Managers speak

Two separate surveys emerged last week, containing the opinions of traditional asset managers and financial advisors toward crypto. Coinshares and Bitwise have published their respective surveys, with many nuances and takeaways (so make sure not to take our word for them and check them out).

But if you want the irresponsibly fast conclusion, we like this quote from Matt Hougan, Chief Investment Officer for Bitwise Asset Management.

"The survey is a reminder that crypto is one of the best business development opportunities in the financial advisor market.”

It’s a matter of gaps: many investors want to invest but don’t take the final step because of volatility and regulatory concerns. Once these issues are solved, many will take the leap. And there’s another big gap in the number of investors still not interested in crypto; once/if they ever end up taking the red pill, the amount of capital entering the space would be massive.

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#48 Crypto is up: good news or bad news?