Hello, Investors,

New month, new crypto. This time we are in a month of halving.

And airdrops.

In this edition:

1. Airdrops

2. Market situation

3. Best narrative in Q1’24

4. The BIS joining tokenization

5. The DOJ moving $131m in BTC

6. VCs going for money; memecoins again

Enjoy.

April - the month of halving airdrops

The halving is coming, but we can’t focus with all the airdrops around.

To those unfamiliar with airdrops, it’s a process where projects reward early adopters with free tokens.

The criteria differ but in general, the more people engage with the projects in the early stage, the more they can receive from the airdrop.

Plus referrals and helping the project grow in terms of users.

An overview of some:

• Ethena ($ENA) claim is live, token listed on Binance and +50% since TGE

• Wormhole ($W) claim is live and listed on Binance.

• Tensor, Parcl, Kamino, MetaMask (FOXY) snapshots are done, dropping in April

• Frax ($FXS) second snapshot is coming on April 17, revenue share for veFXS holders begins this week

• Swell confirmed drop in April

• Speculation around LayerZero, ZkSync, and Scroll

Wormhole airdropped over $1b in tokens, Ethena around $700m, but with the extra 50% kick.

Airdrops - Crypto Money Printing?

You might remember from high school something called the Money Multiplier (Effect).

The multiplier effect is an economic term, referring to the proportional amount of increase (or decrease), in final income from an injection (or withdrawal), of capital.

When talking about money (or monetary) multiplier, this is the amount of money that “appears” in the economy after central banks inject capital into it.

Super simple example:

1. Initial Injection: The central bank injects $100,000 into the economy by depositing it into Bank A (I know…).

2. First Loan: Bank A keeps 10% ($10,000) of this amount as a reserve and lends the remaining $90,000 to Person X.

3. Person X Buys a Car: Person X uses the $90,000 to buy a car from a car dealer.

4. Car Dealer Deposits Money: The car dealer deposits the $90,000 received from Person X into Bank B.

5. Bank B Lends Out: Bank B keeps 10% of the deposit ($9,000) as a reserve and lends out the rest, which is $81,000, to another customer, say Person Y.

6. Person Y Renovate House: Person Y spends the $81,000 on home renovations. The business that provides the renovation services then deposits this money into Bank C.

7. You got the picture, right?

This is how an injection of $100,000 can create a $1,000,000 new money in the economy.

Now imagine how it works in crypto when projects airdrop $2b of tokens to investors.

These investors take those tokens and either stake them right away (Celestia, Manta) or use them as collateral to get different tokens (ETH, USDC, …) and continue on their DeFi voyage - of course, possibly ending with meme coins leverage trading.

This is just a thought train that keeps me wondering - how much of the current market cap is artificially created by airdrops and other derivates?

My Take

Let’s get back to earth and worry about the big airdrop bubble later.

• Airdrops increase volume.

• Volume directly benefits CEXes and DEXes.

• But it’s not just exchanges that profit, it’s the infrastructure as well.

• Most of April airdrops are on Solana, so we can expect an increased volatility.

This presents short-term speculation on Solana and major projects - Jupiter, Pyth, Raydium, but even meme coins that will benefit from this extra cash injection.

Wormhole: I’m selling half of my Wormhole airdrop right away - an opening at a ~$3b valuation feels too much.

Plus I got a pretty good allocation here, so it was unnecessarily high position in the interoperability bucket.

Rest I plan to hold long-term.

Ethena: I’m keeping it for a little longer, but I plan to exit completely since I don’t believe in similar government tokens in the long run.

Is it worth farming airdrops?

Yes, selectively.

There are 3 ways:

1. Free (testnet) airdrops - cost a lot of time but no money.

2. Regular airdrops - cost both time and money.

3. Staking - almost no time, just money

Since I don’t have much time, I’m skipping 1st option completely.

2nd I do only for big projects, because there are too many airdrop farmers right now and it’s difficult to get a decent reward for the time on Twitter.

3rd I farm, that was Ethena and the upcoming favorite EigenLayer.

An extra fun way to add is running a node for an upcoming project. That’s something I’m exploring right now, but it usually takes months to pay off.

Roses are red, markets as well

It’s getting boring out there.

We see a dip, we buy the dip, and we speculate why it happened.

TL;DR - no one knows.

The longer version:

1. Something gets worse, like a stronger USD (DXY), lower expectations of rate cuts (CME Fed Watch; Bloomberg), or simply the DOJ sending $131m in BTC to Coinbase (Arkham, CoinDesk).

2. That triggers liquidations (data)

3. And our overheated market gets a cold shower

But these are rookie numbers, we are yet to see the crash and yet to see the full bull acceleration.

What matters is that inflows are back and BlackRock is still buying.

Memecoins dominate narratives with a +1,313% gain in Q1 (s).

• 3 out of the 10 biggest tokens launched only in March

• Second are RWAs with +286%, third AI with +222%

My take

There is little to be said here. If there’s one thing to be bullish on, that’s people’s greed and love for gambling.

I surrendered to this, traded a few, made some gains, but it’s not my type of game.

Moving to other narratives, my top picks are:

• RWA has a strong institutional driver, very bullish, looking into infra and projects beyond P2P lending;

• AI is hard to understand. I avoid chatbots, focus on an intersection with DePIN and sharing of resources (mainly GPU);

• Gaming - Infra, as always, big studios and cross-game ecosystems. Not so much individual games, often high inflation and low utility tokens - a better way is through NFTs.

But the thing with narratives is, that we need to be careful as they tend to overprice something very quickly and then dump it as fast as it rallied.

AI and RWA both were very pricey in the last weeks, now there are buying opportunities. Gaming is lagging behind, I see many good opportunities there.

The Bank for International Settlements (BIS) is joining the tokenization race (s, s)

• Project mBridge experiments with a multiple-central bank digital currency (multi-CBDC) common platform for wholesale cross-border payments.

• Founding central banks - Hong Kong, UAE, China, Thailand.

• Observing members include: ECB, IMF, FED, France, Israel, Italy, Korea, …

• Now they are looking into tokenization with project Agora, bringing commercial bank deposits together with wholesale central bank money.

• What does it mean? Wholesale money is the type of money banks and central banks use between them. Making a bridge to commercial money could mark a huge step forward in the tokenization process, bringing us closer to buying stocks on blockchain.

My take

This is inevitable. Banks and governments are exploring the use of blockchain for transactions, settlement, and tokenization. It is one of the most valid use cases for blockchain and for sure will be deployed at some point. But what does it mean for us, investors?

The BIS project seems to be completely off the private infrastructure but, this is something to keep an eye on. If they decide to use a public blockchain, such as Ethereum or Avalanche (as the private banks are), that would be a strong market signal.

Similarly, if they start using other parts of the infrastructure, like oracles (Chainlink, Pyth) or bridges.

DOJ moves $131m in BTC Silk Road funds to Coinbase (s).

• Wallets associated with the DOJ moved 30,175 bitcoins connected to the defunct Silk Road marketplace to Coinbase Prime on Tuesday.

• You move funds to exchange when you plan to exit.

• Wallets can be tracked here.

My take:

This $131m is not an amount we should be scared of. If they would dump the whole $2b on the market, we are in trouble. But luckily that’s not the case nor plan in the near future. Plus this sale seems to be already old news from January (s).

VCs are raising funds for Web3 - Paradigm leading the way (s, s)

• One of the leading web3 VCs Paradigm is looking to raise up to $850m for a new crypto venture fund.

• They previously raised a $2.5b fund in 2021 making it the leading crypto VC.

• Other VCs raising money are Hivemind Capital ($50m for NFTs), Hack VC ($150m in Feb, now looking for an extra $100), or Galaxy Digital ($100)

My take:

Startups are raising funds when the market is up as are the valuations. Unfortunately, the bull market is better for VCs as well since that’s when it’s easier to show the numbers and talk to investors fueled by FOMO.

Early-stage projects won’t probably hit this bull market, portfolio companies could benefit even now.

Memcoins going wrong

• BNB surpasses Ethereum and Solana in trading volume.

• Reason? People trading fake Ethena ($ENA) and Wormhole ($W) tokens

That’s it for this week.

All the best,

Matt.