CryptoAM: NYT & Blockchain, Colorado & Blockchain, Cosmos & Crypto

Good morning CryptoAMers, Zac here writing from a sunny NYC. Avi’s laptop broke last night and had to type half this up on his phone so you know it’s going to be a good day (karma for moving out West).

3 things you need to know:

One: The New York Times Looks for a Blockchain Lead 

The NYT surprised everyone yesterday with a job posting for a Blockchain Lead to help it explore using blockchain in publishing - only to promptly take down the posting shortly afterwards. The role was advertised only as a temporary 12 month position. According to the listing the individual will be:

"...a forward looking leader who will help envision and design a blockchain-based proof of concept for news publishers." 

Haven't we heard something like this before? Companies attempting to leverage blockchain in news publishing isn't exactly new. Civil most famously partnered with Forbes last year in an effort to bring their content onto the Civil network and compensate journalists using their native token, CVL.  A week after the partnership with Forbes was announced, Civil announced that it was issuing a full refund to token holders after failing to attract enough interest in its token sale.  

In Civil’s case readers were meant to be able to use CVL and Civil’s platform to tip journalists for stories and subjects that they enjoyed. In theory, this was meant to better align incentives towards good journalism. If more and more people joined the Civil network the utility of CVL would increase - benefiting journalists and readers who were holding the token.

Don't be quick to dismiss the Times. Much of the criticism around Civil centered around their difficulties explaining their token model and how difficult it was to purchase the token. Utility tokens are tough to structure in a way that help raise money for a company (legally dubious also) while aligning stakeholders' incentives. The Times likely won't be using this as a way for them to raise money - making any token structuring cleaner. Also, as a traditional news organization, the Times isn’t so bad at explaining things…

Check out the full job description 

Two: Colorado passes its “Digital Tokens Act”

Last week Governor Jared Polis signed a bill to exempt some digital tokens from the state’s securities laws assuming they comply with certain conditions. Companies can raise via tokens assuming that they have a “primarily consumptive purpose.” In other words, assuming people actually have a real need to use them on a platform. The money quote:

“…creating a Colorado Digital Token Act, with limitations to protect consumers, will enable Colorado businesses that use cryptoeconomic systems to obtain growth capital to help grow and expand their businesses.”

Why that’s cool: Regulatory uncertainty and concern is the first thing that comes to mind when thinking about raising via token sales in the US. This is basically saying that you can legally raise money via utility tokens in the state of Colorado.

BUT: How does the SEC react to this? With crypto friendly regulations coming from states like Colorado and Wyoming, we might find ourselves in a similar situation to the cannabis industry, where the federal government maintains strict laws while individual states innovate. Colorado again finds itself at the blunt of another new industry.

Pro tip: Governor Polis was leader of the Congressional Blockchain Caucus before his gubernatorial win. I wouldn’t be surprised to see further regulatory support in Colorado for blockchain and crypto companies while he’s in charge. I want to note that growing interest from regulators and government agencies is a double edged sword. As more attention is given to cryptocurrencies, the more risk that the grey area’s we have all come to appreciate will evaporate.

Three: Cosmos Main-Net is Finally Live

Note: The founder of Cosmos, the TV show. No affiliation with Cosmos the Blockchain.

One of the most highly anticipated projects of the last year has finally launched. Cosmos is a blockchain designed to allow for interoperability between other blockchains, and the first of it’s kind to launch, marking a big day. As some background, Cosmos was built by Tendermint, inc. a for-profit enterprise that develops tools for blockchains and developers based on the Tendermint protocol. Cosmos even before launch proved itself to be a valuable tool, as the Binance DEX is partly based on Cosmos technology. 

Staking: Cosmos have a native token, called ATOM which is used to secure the network through a proof-of-stake system. Estimated yearly returns on staking at 9-16%, which is relatively high. If you’re thinking of getting some exposure, it would be a good idea to route through one of the more developed validators (like Staked) as there are strict penalties for those who fail to upkeep their nodes in a reasonable fashion.

Why this is important: Over the next year, we’re going to see launches of tens if not hundreds of protocols all meant to capture the market from Ethereum & EOS. Inevitably, there will be bubbles that form and as the world gets more fractured, it will become increasingly important to have ways to connect. The ability to choose is an important and needed thing in the markets, and having platforms like Cosmos reduce the downside of choosing as your choice leaves you less restricted. Today, if you build a Dapp it’s difficult to port it over to other chains. Moving forward, this won’t be the case. 

Go deeper: read the Cosmos Whitepaper & explore the Github

Also in the news:

Market Outlook:

Quick Take

Direction: We’re still trading within range. I’m still expecting more upside momentum and I’m definitely expecting volatilities to pick up. Vol ticked up slightly in the last 2 days but is still cheap. The $8000 BTC Sept Call on Deribit looks like the most interesting instrument right now. I have nothing else to say, not my fault the market is capital B Boring.

Key Support:  3850

Key Resistance: 3910

Overall Market: Notice that while select alts are popping off, the overall market-cap is remaining relatively flat, indicating that this is just a sloshing around of capital, and net inflows are staying flat. This tells me that we’re going to see alts die much harder than usual if BTC tanks, so would set shorter than usual stop losses if you’re playing the alt market, as a break in trend for an alt right now probably means it’s broken the trend for a while and won’t see a large bump again until new capital inflows start. BNB is the exception to this, as usual.

Fear & Greed

Rockets. F&G sees rockets.

Here’s a reminder of what these criteria mean

What I’m thinking today:

Chasing Fake Volume: A Plague

This is an oldie but a goodie. In this article, the epidemic of faked volume on cryptocurrency exchanges is explored. This article uses the concept of “slippage” to test whether or not exchange volume is faked or not.

“I expected that slippage should generally be a decreasing function of volume, but that some differences might show from one currency to another. After all, if you have a gargantuan volume on a given pair, there has to be a very high competition between market makers to satisfy the avid buyers and sellers. And that kind of competition is bound to densify orderbooks and reduce spreads.”

As it turns out, for the majority of Chinese exchanges — this doesn’t hold true. Volume has no impact on slippage, indicating there is large amount of fake volume.

Here, in chart form:

It’s a representation of the average slippage and volume of all pairs among a selection of a score of cryptocurrencies with a daily volume over $100k over four major exchanges: OKex, Kraken, Bitfinex and GDAX, over the course of 24 hours.

You may for example read that the blue dot at the bottom right represents a GDAX pair, with a volume close to $200m, and a slippage of less than 0.1%

The chart is striking. It shows how, although all first three exchanges seem to behave rather similarly, OKex pairs, in red, all have a massively higher slippage with regards to their volume. Like I explained before, this can only mean that most of the volume OKex claims is completely fabricated.

As always, be skeptical of things in crypto. Nothing is ever as it seems, especially volumes. Consider this a warning for those trying to value exchange coins based on the reported transaction volumes. A better (but harder to get) metric would be to evaluate based on order book depth.

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