Welcome to The New Digital World, where (as I write) the major cryptos look to end the week on a high note. Behind the scenes, we’re learning what’s going on in Washington, D.C., Cardano (ADA-USD), Helium (HNT-USD), and more. Here are the details.
Regulators, Politicians Getting Loud About Crypto
Not only does SEC Chair Gary Gensler have a Twitter account… He posts lots of videos there. Watching his latest one, I suspect he’ll continue to annoy people in the crypto industry with them.
In Thursday’s video, Gensler said he’s urged staff to “get [platforms] registered and regulated, to ensure that those crypto tokens come in as well and register where appropriate as securities.” Otherwise, we might “risk undermining 90 years of securities law.”
Gensler also criticized crypto exchanges for operating differently than stock exchanges. Namely, for “act[ing] as market makers,” as “that creates inherent conflicts of interest. I’ve asked staff to consider whether it would be appropriate to segregate out the market-making functions on these crypto platforms.”
For what it’s worth: There are decentralized market makers available for crypto trades. In other words, there’s no (human) middleman. The decentralized exchange (DEX) itself uses a protocol that defines prices and provides “liquidity pools” – automatically.
Many of the most popular DeFis are in this business. There’s Uniswap (UNI-USD), a mainstay of our Crypto Investor Network portfolio for nearly two years. Other automated market makers include Curve (CRV-USD), PancakeSwap (CAKE-USD), Raydium (RAY-USD) and Kyber (KNC-USD), to name a few.
If crypto exchanges feel compelled to operate more like the NYSE or Nasdaq, I’d expect them to benefit – and proliferate. For example, there are over 500 market-maker firms for the Nasdaq alone.
Also looking to oversee crypto: the Commodities and Futures Trading Commission (CFTC). They’re the preferred regulator in the new crypto bill from Republican Sen. Cynthia Lummis and Democratic Sen. Kirsten Gillibrand (likely to come into play in 2023). To prepare, CFTC Chair Rostin Behnam is creating an “Office of Technology Innovation.”
We also heard from three Democratic senators that it “seems ill-advised” for Fidelity Investments CEO Abby Johnson to be allowing Bitcoin (BTC-USD) in 401(k)s…
While the Federal Deposit Insurance Commission also entered the chat!
On Thursday: The FDIC (along with the Federal Reserve) sent a cease-and-desist to troubled “crypto bank” Voyager Digital.
According to them, Voyager’s marketing implied that it is FDIC insured, therefore customers would be insured if Voyager collapsed. “In reality, the company simply had a deposit account at Metropolitan Commercial Bank, and customers investing via the company’s platform had no FDIC insurance, the regulators said,” per Reuters.
How to check: Look up the legal policies on your crypto app’s website. Oftentimes, it’s just like Voyager: They’re not FDIC insured directly – but send deposits to someone who is. If you go on the FDIC’s BankFind site, you can confirm the Voyager partner (Metropolitan Commercial Bank), and Coinbase (NASDAQ:COIN) partners like Silvergate (NYSE:SI), for example.
Cardano Upgrade Pushed Back “A Few More Weeks”
Cardano (ADA-USD) developers were expected to make a “hard fork” of the blockchain this Sunday, July 31, to roll out some major upgrades for an all-new version of Cardano…
But yesterday, in the July Cardano360 video, we learned that the team needs more time.
“When we make a roll-out plan, we give dates to help the community plan their own rollout… [But] from where we are, there could be a few more weeks before we go to the actual Vasil hard fork,” explained Kevin Hammond, technical manager on the project.
“All the use [cases] have to be ready to progress to the hard fork, to make sure there’s a smooth process. Both for them, but also very important, for the end users of the Cardano blockchain.” Hammond came off very sensibly in the video…
And ADA prices haven’t reacted badly to the news. Like many other major cryptos, Cardano is up about +6% since then (as I write).
Context: This upgrade nicknamed “Vasil” is about scalability. The goal is “increasing throughput and reducing latency in block transmission, to “allow for the network to process a larger number of transactions…without affecting network performance,” as I’ve written before.
Cardano hasn’t made a hard fork like this since last September, when “Alonzo” introduced smart contracts (so developers could build apps and NFTs). ADA has a history of rallying sharply ahead of each major upgrade.
Controversy Over Helium Hotspot Revenues
Liron Shapira, who created a dating-coach site called Relationship Hero and shares the wisdom he learned in this blog, “Bloated MVP,” has been trolling Helium (HNT-USD) all week on Twitter.
First he wrote this: “Helium, often cited as one of the best examples of a Web3 use case, has received $365M of investment led by @a16z. Regular folks have also been convinced to spend $250M buying hotspot nodes, in hopes of earning passive income.
“The result? Helium’s total revenue is $6.5k/month,” Shapira ends his tweet, citing this report from The Generalist. It went viral and landed Shapira an interview with popular crypto YouTuber Tactical Investing, who’s posted excited videos about Helium Hotspots in the past.
Helium founder Amir Haleem responded with some corrections in his own Twitter thread and provided context.
“So, why is there only $6,500 worth of data being paid for? Unlike cellular networks, there aren’t millions of existing devices that can switch to @Helium. The best applications haven’t been built yet, and it takes months or years to build them,” is how Haleem addressed the main criticism.
“Expand your time horizons and focus on projects that do real work and keep their heads down during the hard times. Everything else is just noise,” Haleem advises us in his final tweet.
For what it’s worth: The Generalist’s conclusion on Helium was way different than the guy citing them on Twitter. And I generally find their content valuable, although you should note that their sources tend to work at venture-capital firms.
“It’s clear Helium’s network has room to grow. Indeed, it needs to. While it has done an exceptional job scaling the supply side of the project, nearing 1 million hotspots, more demand is necessary. Embracing 5G could send that side of the market through the roof… Indeed, winning the 5G war could set it on the path to becoming one of the world’s most valuable entities,” concludes The Generalist’s report.
Crypto Wallet Maker Gets Into NFTs – And They’re Very Popular
If you go to OpenSea to check out the top NFTs of the past 7 days, you’ll see a surprising face among the apes, “Potatoz,” and Otherside metaverse plots…
Ledger just launched its own NFT marketplace that you can access directly in its hardware crypto wallets. “Ledger Market will simply be the only safe place to mint and buy NFTs,” claims the company… And to celebrate, Ledger dropped its own NFT collection. It was a huge success:
10,000 [ Ledger ] Market Passes – Genesis Edition sold out in less than 24 hours.
THANK YOU. pic.twitter.com/l2kT4vC3jY
— Ledger (@Ledger) July 26, 2022
Ledger’s NFT was basically a VIP ticket. It gets you “privileged access to new Ledger hardware” and your own “limited edition black-on-black Nano X” wallet, as well as exclusive NFT collaborations.
Ledger is targeting luxury brands in the fashion world and is a French company…so perhaps when it comes up in conversation, we should pronounce it “Ledgé.”
Speaking of which: “Redeem-and-retain NFTs are the future of luxury goods,” according to this thoughtful essay by Nic Carter.
The deep-dive and enthusiasm for NFTs is notable because Carter was better known as a poster-boy for Bitcoin (BTC-USD) in financial TV and media… Until he was “excommunicated” after investing in a Web3 startup that’s multi-chain – not just Bitcoin/Lighting Network. Gasp! Now, his essay is a great read to see why a hardware company (or any consumer business) would find NFTs well worth their while.
On the date of publication, Ashley Cassell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. To have more news from The New Digital World sent to your inbox, click here to sign up for the newsletter.