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Episode 52 of Season 4 of The Scoop was recorded remotely with The Block’s Frank Chaparro and Jim Greco, general partner and CEO at F9 Research.

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As persistent inflation strikes fear in the market ahead of Wednesday’s FOMC meeting, the total crypto market cap has plunged below $1 trillion dollars for the first time since January 2021, as data from The Block shows:

In this special episode of The Scoop, financial veteran Jim Greco — a general partner at crypto high-frequency trading firm F9 Research — examines some of the causes of the recent market meltdown, and explains why only the strongest crypto companies will survive.

According to Greco, this sell off was driven primarily by macro concerns regarding persistent inflation:

“On the actual market structure component of what the sell off has been about, I think it’s largely a macroeconomic story — and really ever since the end of last year, we’ve been dealing with a huge inflation story.”

Last Friday, the US Labor Department reported May’s consumer price index to be up 8.6% compared to May of 2021, signaling the highest levels of inflation since the 1980s. 

In addition to cratering crypto prices, Greco also believes the bear market will help bring last year’s inflated crypto valuations back to reality:

“Were these companies ever worth $10 billion or whatever the valuation was? Probably not. I think this was just investors looking at the direction of volumes and volatility last year, projecting out as if that wouldn’t stop into 2025, but now we’ve had a huge correction and it’s pretty clear what those projections into 2025 look like now, and they’re not anywhere close.”

Indeed, crypto financial services firm BlockFi, which reportedly raised funds at over a $5 billion valuation just last year,  announced recently that it was in the process of finalizing a down round that would bring BlockFi’s valuation to just $1 billion. 

During this episode, Chaparro and Greco also discuss:

• Crypto’s impending regulatory overhaul
• Why trading firms and banks view crypto differently
• The changing narrative regarding altcoins

This episode is brought to you by our sponsors Fireblocks, Coinbase Prime & Cross River
Fireblocks is an enterprise-grade platform delivering a secure infrastructure for moving, storing, and issuing digital assets. Fireblocks enables exchanges, lending desks, custodians, banks, trading desks, and hedge funds to securely scale digital asset operations through the Fireblocks Network and MPC-based Wallet Infrastructure. Fireblocks serves over 725 financial institutions, has secured the transfer of over $1.5 trillion in digital assets, and has a unique insurance policy that covers assets in storage & transit. For more information, please visit www.fireblocks.com.

About Coinbase Prime
Coinbase Prime is an integrated solution that provides institutional investors with an advanced trading platform, secure custody, and prime services to manage all their crypto assets in one place. Coinbase Prime fully integrates crypto trading and custody on a single platform, and gives clients the best all-in pricing in their network using their proprietary Smart Order Router and algorithmic execution. For more information, visit www.coinbase.com/prime.

About Cross River
Cross River is powering today’s most innovative crypto companies, with banking and payments solutions you can rely on, including fiat on/off ramp solutions. Whether you are a crypto exchange, NFT marketplace, or wallet, Cross River’s API-based, all-in-one platform enables banking as a service, ACH & wire transfers, push-to-card disbursements, real-time payments, and virtual accounts and subledgers. Request your fiat on/off ramp solution now at crossriver.com/crypto.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The Wildcard Alliance, a new gaming studio focused on interactive entertainment, has raised $46 million in Series A funding round.

The deal was led by Paradigm, with support from Griffin Gaming Partners, Polygon, and Sabrina Hahn.  

 The project’s new game is the brainchild of Paul Bettner, veteran video game developer renowned for producing games including Age of Empires, early VR hit Lucky’s Tale and mobile-based app game Words with Friends, together with his brother David. The fundraise marks Bettner’s debut in the world of web3 gaming.

Wildcard is set to launch on Polygon as a “hybrid multiplayer online battle arena” game including a collectible card game where players compete live in front of spectators who can interact with play.

“Despite this opportunity, the current focus of web3 game development tends to be on finance over fun, economy over engagement, currency over community,” said Bettner. “With Wildcard, we’re focused on fun first, building a next-generation ‘spectator sport’ to welcome the entire community of competitors, collectors, sponsors, and fans to play together.”

Wildcard Alliance is a subsidiary of independent game studio Playful Studios based in Texas.

Paradigm, which has made investments in influential web3 companies like Coinbase, FTX, and OpenSea, believes that “interactive entertainment will be a primary driver of growth in web3,” according to a statement.

The venture is the latest example of veterans of the traditional gaming sector pushing into web3. Last year, Justin Kan, the co-founder of the video game livestreaming service Twitch, and other gaming industry entrepreneurs launched a Solana-based marketplace designed for gaming non-fungible tokens (NFTs) called Fractal.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto lending firm BlockFi has received another consent order from a state agency for offering and selling securities without registering as a broker-dealer.

Iowa’s Insurance Division has ordered the firm pay a $943,396.22 fine as part of a broader settlement with securities regulators across the US announced in February.

BlockFi’s offerings have drawn scrutiny from securities regulators, both on the federal level and from state agencies. The firm’s interest account product acts a savings account with higher rates of return than traditional high-yield savings accounts. It provides that return by lending out funds deposited on its platform, similar to banks.

BlockFi contends the product does not constitute a security and is hoping the settlements will provide a path to registration for its products. Securities and Exchange Commission (SEC) chair Gary Gensler has taken a closer look at crypto lenders and pointed to the area as one of interest for the agency.

The SEC has already sought to take the firm to task and regulators in New Jersey, Alabama, Texas, Kentucky and Vermont have also taken action against the firm.

Iowa’s consent order is part of a multi-state investigation with the SEC and state securities regulators from 53 jurisdictions that make up the North American Securities Administrators Association (NASAA), according to the release. That investigation confirms that BlockFi will pay $50 million to the 53 jurisdictions and $50 million to the SEC in fines in a $100 million settlement with the SEC.

The Iowa consent order alleges BlockFi misrepresented the level of risk in its loan portfolio in addition to selling unregistered securities.

“Specifically, BlockFi stated in multiple website posts that its institutional loans were ‘typically’ over-collateralized when in fact most loans were not over-collateralized,” said the order. 

According to the order, less than a quarter of the loans were over-collateralized in 2019, and less than 20% in 2020 and 2021. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto exchange Coinbase (COIN) was down as much as 5% on Tuesday following the announcement that 18% of staff would be laid off.

CEO Brian Armstrong revealed in a blog post on Tuesday that COIN would be laying off 18%, or about 1100 staff, with immediate effect.

Shares in the company were trading at $49.34 at the time of writing, after closing at $51.01 on Monday. Early trade in the exchange stock was highly volatile, swinging above and below $50 throughout the morning. 

COIN closed down 11.41% at the top of the week following a choppy day of trading in the US that has spurred bear market fears. 

The exchange estimates that it will incur between $40 and $45 million in total restructuring expenses related to employee severance and other termination benefits. 

The news followed Coinbase’s announcement on June 2 that it would be freezing its hiring plans and rescinding some of the offers it extended.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• BitDAO is an investment DAO launched by Bybit in June 2021 to provide funding for promising projects across the blockchain ecosystem through community-driven investment proposals
• It has become one of the largest DAOs in the crypto space with an estimated treasury of $2.8 billion in assets and has invested in four key verticals since inception
• A consistent growth in community and sustained influx of treasury assets will build a steady runway for BitDAO’s success in the future

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The Lido staked ether (stETH) token discount has deepened further following a large selloff of the token by a major holder.

On-chain data from Etherscan show wallet addresses, labeled as Three Arrows Capital in a tweet from PeckShield, selling over 56,000 stETH for ether (ETH). One transaction involved a 17,780 stETH swap for 16,625 ETH which was converted to the dai (DAI) stablecoin for $20 million.

Another batch of selling involved 38,900 stETH swapped for 36,718.64 ETH. This trade happened from another wallet labeled as 3AC. The wallet in question still holds over 19,600 stETH as of the time of publishing.

Today’s stETH is the latest in a string of high-value swaps of the liquid staking derivative token that has seen staked ether become more decoupled from the price of ETH. One wallet sold close to 50,000 tokens on Thursday, as reported by The Block at the time.

Lido, a liquid staking platform, gives users stETH in exchange for ETH staked on its platform. Thus, each stETH is backed 1:1 by ether staked on the Ethereum Beacon chain.

This, however, does not mean that stETH will always trade at the same price as ETH. Secondary market forces can create a slight disparity in the price of staked ether relative to ETH.

The disparity can be attributed to the uncertainty that comes from holding a derivative token rather than the underlying asset. ETH staked on the beacon chain cannot be withdrawn until Ethereum transitions to a proof-of-stake and the two parallel chains are merged.

Today’s selloff has also caused the stETH liquidity pool on Curve to become even more unbalanced. Curve is a major DeFi liquidity pool and serves as the primary source of liquidity for staked ether swaps.

Data from the stETH Curve pool now shows a ratio of 20% ETH to 80% stETH. This means that liquidity for staked ether is shrinking and it will become increasingly difficult for swaps to proceed.

Shrinking liquidity and increasing price discounts could spell trouble for people with loans collateralized with stETH on DeFi lending pools like Aave. Further price declines would potentially impact these positions.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Coinbase announced on Tuesday that it would move to cut the size of its workforce by “about 18%.” 

In a blog addressed to staff, CEO Brian Armstrong wrote that the decision had been made to “ensure we stay healthy during this economic downturn.” He also said that Coinbase had grown too quickly and had “over-hired”.

Affected employees will be notified via their personal emails, Armstrong added, as the company has decided to cut their access to the Coinbase system. They will receive a minimum of 14 weeks of severance.

This is a breaking story and will be updated.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Tron’s algorithmic stablecoin, called Decentralized USD and known by its ticker USDD, slipped further from its peg to the dollar on Tuesday in a sign of ongoing stress in crypto markets. 

USDD dipped as low as $0.974 this morning before recovering to $0.979 at the time of writing, according to CoinGecko data.

USDD is trading under a dollar even after TronDAO, which oversees the stablecoin, injected another $700 million worth of USD Coin (USDC), a centralized stablecoin issued by Circle, to defend its peg.

TronDAO claims there is a 300% collateral ratio backing USDD’s value. This means the DAO would need to hold about $2.1 billion worth of assets in bitcoin and tron — as well as stablecoins like USDC and tether (USDT).

Still, the de-peg has sparked worries that USDD, which has a market capitalization of just over $700 million, may suffer from the same fate as TerraUSD (UST), an algorithmic stablecoin that inspired USDD. UST collapsed in May, wiping more than $40 billion from investors’ pockets and sending shockwaves through the crypto market. 

Crypto markets have had a tough start to the week, as bitcoin fell below $21,000 and lending platform Celsius was forced to stop clients redeeming funds from their accounts. 

USDD shares the same algorithmic model of mint and burn as UST. Whenever the price of USDD is below a dollar, the system allows you to burn one UST to get $1 worth of tron, the native cryptocurrency of the Tron blockchain. Conversely, if USDD’s price is above $1, one can burn tron to get USDD and help bring the price back to its dollar mark.

Furthermore, to attract more users, USDD pays about 18% to stake the stablecoin on a lending platform called JustLend, a similar amount of interest to that offered by UST via Anchor. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

French fashion brand Lacoste has launched a collection of non-fungible tokens (NFTs), in a move it says aims to build an online community and engage with customers in a new way.

The drop comes just a week after the brand launched a Discord server, which saw 30,000 subscribers in the first two days, the company said in a statement.

The number of NFTs i the release, 11,212, refers to a signature polo shirt by the brand called L1212. These will be sold for 0.08 ETH (roughly $97).

The project, called UNDW3 (pronounced “underwater”), will give collectors of the NFTs access to a “long-term collaborative community” Lacoste said in a press release.

“Collectors will be able to access a pioneering ecosystem and digital, physical, and experiential benefits in the world of the crocodile, such as co-created products exclusively for them,” the release states.

Fashion brands have continued to experiment in crypto and web3 projects despite the recent fall of floor prices of the most popular NFT collections and the volatility in the crypto market in general. 

Last week, fashion company Farfetch announced that it has started to accept crypto payments, following moves by other companies like Gucci, Tag Heuer, and Off White. Balenciaga will begin to accept crypto at both brick-and-mortar stores as well as through its US website. 

Alongside this, Kering chief client and digital officer Grégory Boutté said last week at a press conference that he thinks “web3 and NFTs are a real breakthrough.” Boutté also revealed at the conference that Kering has invested in web3 venture capital firm Haun Ventures, founded by former Andreessen Horowitz partner Katie Haun.  

It’s unclear if the drop in crypto prices and general instability in the markets will have any impact on the fashion industry’s enthusiasm for this space. 

UNDW3 is not Lacoste’s first move into the interactive virtual world. Previously, the company collaborated with popular game Minecraft.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

ScienceMagic.Studios, a firm that advises brands and talent on implementing web3 technologies, has raised $10 million in pre-seed funding. 

Investors in the round included Coinbase Ventures, Digital Currency Group, and billionaire hedge fund manager Alan Howard. 

The company, which is spearheaded by former Guardian Media Group CEO David Pemsel, will advise brands on how to utilize web3 technologies such as NFTs and social tokens to increase interaction with fans and communities. 

“Digital assets offer huge potential for brands to engage with their communities in a new way, and for talent to realize the true value from their work for the first time. But many brands are just starting to understand this,” said Pemsel. The company says it will primarily use the funds to scale up with the expectation of increased interest as brands continue to dive into the web3 hype. 

The raise comes as big-name brands, particularly in the fashion sector, continue to look at the web3 space. Earlier this month, The Block reported that Kanye West’s Yeezus brand has filed 17 trademark applications indicating a possible move into the NFT space.

Previously, Prada also became the latest fashion brand to launch NFTs as part of its ongoing Timecapsule initiative. 

Beauty brand Lancôme recently announced the launch of customized gift boxes with exclusive NFTs for China’s 520 holiday, according to data compiled by Vogue Business.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.