 | 03.16.22 |
Welcome to the club. Yuga Labs, the developers of Bored Ape Yacht Club, purchased intellectual property rights of the pioneering CryptoPunks collection in a major NFT merger. [Image via Yuga Labs]
What's up? It's Coinbase Bytes
There's never a dull moment on the blockchain. Here's what you need to know this week:
- The crypto market faces tests on three fronts. How inflation, regulation, and the war in Ukraine are factoring in right now.
- Two massively popular NFT collections joined forces. Bored Ape Yacht Club's parent company bought creative rights to CryptoPunks in a blockbuster deal.
- The week in numbers. The number of Solana NFTs that Mila Kunis is launching for her new show, and other key figures to know this week.
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Price changes are for the past week, ending on Mar 16, 2022 at 11:43 AM UTC
 | MARKET UPDATE |
Inflation, Ukraine invasion rile markets, but positive signs for crypto continue to emerge
In this week's report, we've got some optimistic news against a backdrop of continued volatility — as markets of all kinds react to historically high inflation, Russia's invasion of Ukraine, and the Federal Reserve's likely decision to finally begin raising interest rates this week. So what's the good news? It ranges from signs of increasing regulatory clarity via President Biden's recent executive order and crypto's ongoing role in supporting Ukraine to the EU parliament voting against a Bitcoin mining ban and beyond. Let's take a closer look.
- Bitcoin was designed to be resistant to inflation, hence its "digital gold" nickname — so why aren't prices rising as U.S. inflation keeps climbing? Last week, the U.S. Consumer Price Index reported a spike of 7.9% for the month of February — the highest number in 40 years. But Bitcoin, counter to the digital gold narrative, has been trading more like a tech stock than a precious metal as the Federal Reserve prepares to raise interest rates and wind down pandemic-era stimulus. As that pool of easy money dries up, speculative assets of all kinds (no matter how limited their supply) are losing a major boost.
- Russia's invasion is further pressuring markets, but crypto's role in aiding Ukraine is a use-case that may be attracting users to the broader crypto industry as nearly $100 million has been fundraised so far to supply Ukraine with fuel, food, and bulletproof vests. At the same time, investors have been flocking to crypto funds and companies — with around $4.4 billion in investment over the last four weeks. As Reuters reports, "Global investors … seek exposure to a sector many believe could withstand the fallout from the Russia-Ukraine conflict."
- Crypto prices briefly rose following President Biden's much-anticipated executive order around crypto, which highlighted the need to "reinforce United States leadership in the global financial system and in technological and economic competitiveness" while encouraging agencies to consider the best ways to protect consumers. The order also urges the study and development of a U.S. "digital dollar" (around 100 countries are exploring or piloting similar technology).
- A number of states — including Arizona, Colorado, and Wyoming — are pursuing their own laws to promote crypto use. Further abroad, the European parliament rejected a proposal that could have banned Bitcoin, South Koreans elected a pro-crypto president who plans to overhaul "unreasonable" regulations, and Dubai passed its first crypto law with the goal of creating the "best business environment in the world."
Why it matters… As we all grapple with historically high inflation, there's no shortage of advice, including from the world's richest human. Elon Musk's take? "[It] is generally better to own physical things like a home or stock in companies you think make good products, than dollars when inflation is high. I still own & won't sell my Bitcoin, Ethereum or Doge fwiw." Meanwhile, the crypto constituency continues to grow: approximately 40 million Americans have invested in, traded, or used cryptocurrencies. The president's executive order recognized that reality — and the key role crypto may play in America's financial future.
| MERGERS & ACQUISITIONS |
Why Yuga Labs' purchase of CryptoPunks is such a big deal
In a blockbuster move last week, Yuga Labs, developers of Bored Ape Yacht Club, purchased the intellectual property of the pioneering NFT collectible series CryptoPunks from its creators, Larva Labs. The merging of two of the biggest collections in the NFT space is a watershed moment that could foreshadow future NFT project acquisitions. It also highlights the vastly different approaches major projects have taken in regards to digital ownership. Let's dive into what the acquisition might mean for the future of NFTs.
- The deal gives Yuga Labs ownership of the branding and logos for CryptoPunks and Meebits, the two biggest projects to come out of Larva Labs. While financial details of the deal weren't disclosed, the two collections are massively popular — with more than $2.5 billion in combined secondary market sales. Unlike many major collectible projects, neither CryptoPunks nor Meebits earned Larva Labs royalties on secondary market sales, but Yuga Labs says it has no plans to introduce royalties or the "membership club" model that has defined BAYC.
- In a major shift, CryptoPunk holders, which include stars like Serena Williams and Jay-Z, now own their Punks' IP — a perk long offered to BAYC collectors (Meebits holders get the same rights). What might that look like? BAYC members have cashed in on their IP rights in a wide variety of ways. While Yuga Labs owns the commercial rights to the overall BAYC branding, individual owners have put their NFTs to work as the faces of a wide-range of projects. The band Kingship, for example, which signed to Universal Music Group's "metaverse label," is made up of four BAYC avatars, a concept that has been compared to the virtual band, Gorillaz. Other holders have used their avatars to help market products ranging from IPAs and cannabis to comic strips.
- Despite having signed a deal with top Hollywood agency UTA, CryptoPunks has largely been dormant, especially when compared to BAYC — which is famous for throwing exclusive parties, scoring major magazine covers, and even working on a play-to-earn game. In a statement, the founders of Larva Labs admitted that their hands-off approach might not have been ideal — and that CryptoPunks and Meebits "now need a steward with a different skill set in order to continue growing." The differing approaches could be reflected in the prices of the projects – on Tuesday evening, BAYC had a floor price of 89 ETH, while the cheapest CryptoPunk was going for 67 ETH.
- While prices for A-list projects like BAYC and CryptoPunks remain high, the acquisition comes at a time when many fear the NFT market is cooling. In recent weeks, the average selling price of NFTs has fallen 48% from November highs. On OpenSea, the largest NFT marketplace, trading volumes for March — around $50 million so far — look to be far off the track of last month's $248 million peak. The number of accounts buying and selling NFTs weekly has also dropped, from 380,000 in November to 194,000.
Why it matters… The positive reaction Yuga Labs has received for granting CryptoPunk owners the right to earn from their avatars is a sign of how highly customers of Web3 brands value real ownership of their virtual property. The NFT brands that grant ownership rights, like BAYC, Nouns, and CryptoToadz, will likely see deeper engagement from their communities in the long-term than those that don't, as commercial rights incentivizes NFT communities to innovate with and add value to the IP they own.
| NUMBERS TO KNOW |
$27 million
Capital that Magic Eden — the largest Solana-based NFT marketplace — raised in a Series A funding round this week. Industry leader OpenSea, which is still working on Solana support, raised $300 million in January. (Solana is a popular alternative to ETH, thanks largely to speedy transactions and low fees.)
10,000
Number of free Solana-based NFTs that are being released on Friday as part of the rollout of a new wrestling-themed animated web series, The Gimmicks — which is being co-produced by Mila Kunis' Sixth Wall production company. Similar to the Kunis-produced Stoner Cats (which stars Chris Rock, Vitalik Buterin, and Kunis' husband Ashton Kutcher, among others), NFT holders will get to vote on plotlines.
20%
Percent of Shark Tank investor Kevin O'Leary's portfolio devoted to crypto and blockchain tech. O'Leary told CNBC about a few of his positions: "The whole point is, you don't know who is going to win. Is Ethereum going to win? Is Solana going to win? Is it Helium, or is it Avalanche? I own them all."
| TUNE IN |
How can we measure crypto's impact in Ukraine?
Since Russia's invasion of Ukraine began nearly three weeks ago, crypto has emerged as a crucial tool for funding the Ukrainian resistance and providing humanitarian aid. In the latest episode of Around the Block, host Justin Mart sits down with Dr. Tom Robinson, co-founder and chief scientist at analytics firm Elliptic, to discuss crypto's ongoing role during the crisis, and how his company has been able to provide detailed updates about the impact crypto is having in Ukraine.
| TOKEN TRIVIA |
Which NFT artist created the Fidenza collection?
| A | Beeple |
| B | Tyler Hobbs |
| C | pplpleasr |
| D | FEWOCiOUS |
Find the answer at the end of the email.
| NOW TRADING ON COINBASE |
| GLM |  |  |
GLM is an Ethereum token that allows users to pay or receive payment for resources via the Golem protocol.
| SNT |  | |
SNT is an Ethereum token that powers Status Network, a secure messaging app, crypto wallet, and web3 browser.
| AIOZ |  | |
AIOZ is an Ethereum token that powers Aioz Network, a Layer 1 blockchain enabling Ethereum and Cosmos interoperability.
| AERGO |  | |
AERGO is an Ethereum token for the Aergo protocol, which aims to allow enterprises and developers to design, build, and deploy blockchain applications on public or private networks.
Trivia answer
| B | Tyler Hobbs |
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