Here We Go Again...

After last week's roaring upward price action, yesterday we saw the markets bleed across the board. In roughly 24 hours, BTC dropped ~13%, ETH fell ~22%, and the combined value of the crypto market dropped from $2.4 trillion to $2 trillion.

Crazy times, huh?! Eh, not so much. Yesterday's flash crash marks the near hundredth time we've seen this happen. But before you read any more knee-jerk reactions, let's take a stab at what may have caused it.

The Rumor:
Right before the crash, El Salvador officially accepted BTC as legal tender, a much-anticipated event that was months in the making. Some traders may have been buying the rumor and selling the news, cashing out amidst the anticipated media attention.

What Probably Happened:
The sudden crash was likely mostly due to a series of liquidations of leveraged futures. There was over $2.3B worth of liquidations on Tuesday, the most since May 19th (around the same time the crypto market experienced another large crash amplified by a liquidation cascade).

The team from CoinMetrics said it best in their latest State of The Network report:

"Although painful in the short-term, leverage flushes are typically healthy over the long-term. If the system gets overleveraged flash crashes can help flush out some of the riskier contracts and reset to healthier levels. This creates a more solid foundation for building towards the next leg up."

El Salvador Officially Enters The Arena

Yesterday, bitcoin officially became the legal tender in El Salvador... and it was a rocky start, to say the least. While a massive nosedive in prices (see story above) isn't anything abnormal for bitcoin, it's not the kind of thing most citizens want from their currencies...

Neither is having a payments mechanism that can be unplugged by the government at will. Chivo, the app that El Salvador developed for its citizens to transact in bitcoin, was unavailable for much of the day; President Nayib Bukele said the government had "temporarily unplugged it" in order to deal with demand.

The day ended, however, with the El Salvadorian government doing what the smart money does best – they bought the dip and added 150 new coins. The government now boasts a balance sheet of 550 BTC.

Related: A great boots on the ground thread from Alex Gladstein

Story Time With Brain Armstrong

Less than a week after news broke that the SEC was investigating Uniswap, Coinbase said it is expecting to be sued by the agency in connection with its forthcoming offering, Coinbase Lend.

Why? Well, this is where it gets interesting.

Coinbase has been actively engaging the SEC for nearly 6 months regarding its 'Lend' product in which customers could earn interest on assets, starting with 4% APY on USDC.

That was until the SEC informed Coinbase that lending is a security, all while refusing to explain why. The SEC then issued a Wells notice saying the agency will bring an enforcement action if the company goes ahead with the product. (Get the full story here through the lens Coinbase CEO, Brian Armstrong)

Now, is Coinbase Lend a security? Maybe... there are a lot of people arguing it is. But while the SEC is threatening to sue a publicly-traded crypto company after their attempts to engage and stay on the right side of the law, plenty of other companies are currently running unfettered offering lending services.

SPONSORED

Yeah, we know…

By now, some of you are aware that we are helping (once again) promote another Teeka Tiwari webinar that is set to go live on September, 15th at 8PM EST.

We say “once again” because, as many of our long-time readers know, we have been promoting his events for quite a while…

While we understand that these emails might be somewhat of a headache… it’s worth noting that Teeka’s team always seems to have immaculate timing. As in, whenever we feel that something is in the air, when positive narratives are colliding, or if a new market cycle is approaching… we know another Teeka webinar is on the way.

To RSVP to the event, click here.

DEEP DIVES

A New Viral Social Network That Looks Like Nothing You've Ever Seen

We know, we know. You, like us, are probably sick of hearing about another NFT project and would maybe rather be doing mocks to prepare for your fantasy draft tonight, but just bear with us.

This week, Dom Hofmann, the co-creator of Vine, launched LOOT – an on-chain NFT that contains no images, just text. Yes, "just a TXT file on a black background."

An uncharitable way of describing all this is to say that Hofmann created a way to let people pay the Ethereum network for a list of utterly useless TXT files. But Hofmann’s fans saw it very differently and quickly turned LOOT into a phenomenon.

The 7,777 bags that Hofmann offered up for minting were all snapped up instantly. Over the next week, some LOOT bags sold for as much as $1 million. (Hofmann, realizing that prices were getting ridiculous, has since dropped 1.3 million more)

So far, this seems like any other NFT story: weird "artwork" is released, the price goes up quickly. What makes LOOT different, however, is the diverse amount of projects that have spun up so quickly around it.

So... what is this? Well, we aren't sure. But it's something new... we guess.

Bitcoin Miners And Oil & Gas Execs Mingled At A Secretive Meetup In Houston

What do you get when you bring together 200 oil & gas execs and bitcoin miners together? An environmentally friendly, money-making operation.

Houston was always destined to be the bitcoin mining capital of the world but it was clear from last week’s "secrative" meetup that the energy industry is engaged in a serious way.

So what's the point?
In the U.S., at least 1.5 billion cubic feet of natural gas is wasted through flaring (burning gas while drilling for oil) every day, resulting in significant environmental impacts. But now, instead of flaring it, the gas is being used to power onsite Bitcoin mining operations.

The bottom line:
The financial incentives brought to the table by bitcoin miners can completely change the oil & gas industry, while making a positive impact on the environment. Sounds like they need to start selling some carbon credits too.

REGULATION FRONT

Crypto’s Rapid Move Into Banking Elicits Alarm in Washington

The New York Times wrote a piece on the boom in companies offering crypto loans and high-yield deposit accounts, and how it's disrupting the banking industry.

While it's a good overview of what's currently causing regulators to scratch their heads, perhaps what's more interesting is Caitlin Long's 24-thread response. As she puts it, you shouldn't paint everything in crypto with the same negative, broad brush.

TWEET OF THE WEEK

SEC To Sue Coinbase, Yesterday's Flash Crash, and a Secretive Meeting in Houston

Here We Go Again...

El Salvador Officially Enters The Arena

Story Time With Brain Armstrong

Yeah, we know…

A New Viral Social Network That Looks Like Nothing You've Ever Seen

Bitcoin Miners And Oil & Gas Execs Mingled At A Secretive Meetup In Houston

Crypto’s Rapid Move Into Banking Elicits Alarm in Washington

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