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🤯Crypto drops >50%, is more to come?

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🤯Crypto drops >50%, is more to come?

Luna collapses as Azuki's founder comes out as a rugger

Andrew Steinwold
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Trevor Grant
May 17, 2022
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🤯Crypto drops >50%, is more to come?

andrewsteinwold.substack.com

Zima Red gives readers the weekly pulse on the biggest news around NFTs. Join our community and take the journey with us by subscribing here:

“Trevor, I think a bearish newsletter is in order”

- Andrew Steinwold


📉 Andrew’s Market Update

Public markets have been getting demolished, inflation is still high, and the Fed continues to raise rates - things are not looking peachy. Many venture investors are telling founders to get burn rates under control, raise whatever you can, and get to “ramen” profitable ASAP. Despite the carnage in the markets and the bearish macro view that many hold, it is looking like the market is near capitulation according to the Net Unrealized Profit/Loss chart.

https://www.lookintobitcoin.com/charts/relative-unrealized-profit--loss/

Obviously, one chart cannot tell you the future but it can give you a historical look into other periods of max pain. In my opinion (not financial advice) the Fed decides which direction the market will head. Raise rates = market down. Cut rates = market up. Keep close tabs on what they decide.

$LUNA death spiral

Unless you’ve been living under a rock you’ve almost certainly heard that $LUNA has hit basically 0.

So what happened?

The Terra Ecosystem has two tokens: UST and LUNA

LUNA is a Layer 1 blockchain (like Ethereum) but is unique due to its stablecoin, $UST.

  • Stablecoins are ideally backed in a manner that is 1 stablecoin = $1USD

  • USDC is the best example of this. 1 USDC will theoretically always be backed by 1 greenback.

  • The problem with these 1-1 stablecoins is that they are centralized and can be censored by governments/companies.

Enter Luna, a decentralized stablecoin.

1 LUNA always* equals 1 UST

LUNA developers, community, and investors believed that this mechanism would keep UST pegged to $1 USD. The majority of UST’s users came from Anchor Protocol which allowed liquid UST staking at 20%. UST/LUNA critics argued that a significant UST outflow from Anchor would lead to a LUNA death spiral.

Twitter avatar for @0xHamz
0xHamZ @0xHamz
Terra employs a new trick with an old name --- capital controls It’s impossible to swap more than $30mm of UST for LUNA at reasonable spreads on-chain In fact --- UST pegs completely fails with an exit of 6% of Anchors deposits A plumbing update 👇
5:37 PM ∙ Jan 26, 2022
940Likes237Retweets

A large amount of capital exits UST —> They sell more and more LUNA —> The 1 UST - $1 USD peg breaks —> a bank run triggers a UST and LUNA death spiral.

LUNA attempted to protect against a bank run by buying BTC.

On May 7th-8th, $UST depegged to 98 cents after several $100M was pulled out. The BTC backstop came out and trading firms backing LUNA injected capital to defend the peg.

  • This brought the peg back up a bit but didn’t hold

  • More and more funds were pulled out

  • More LUNA was sold

The death spiral that LUNA backers said couldn’t happen…happened. The end.

Jack Niewold wrote a great thread on this with some more context about Terra’s founder Do Kwon's attempt to save it, as well as attempting to answer the question of…Now what?

Also, the death spiral’s effects weren’t only felt by the Terra holders. Check out this thread to learn some of the second-order consequences.

👤 Social & Collectibles

Zagabond’s “learning experience”

This past week, the Azuki project has been embroiled in drama after one of its four founders, Zagabond, released an article that masqueraded past rug pulls as “learning experiences.”

What went down:

Zagabond dropped an article where he discussed his founding of three projects prior to Azuki:

  1. Phunks

  2. Tendies 

  3. Zunks

He described the learning experiences gathered from each project and how they ultimately strengthened Chiru Labs and Azuki.

To most, these “learning experiences” were considered to be rug pulls - i.e. he abandoned the projects.

Twitter avatar for @zachxbt
ZachXBT @zachxbt
Remember this?
Image
Twitter avatar for @chopper__dad
Chopper @chopper__dad
There was NO handoff when the Phunk devs left Tendies rugged mid reveal Zunks larped as women and were dishonest about the connection to Phunks (blocking us for asking questions) If you don't think @ZAGABOND is a scam artist, you either hold Azuki or you're a scammer yourself.
12:14 AM ∙ May 10, 2022
354Likes43Retweets

The backlash incited Zagabond to go on a Twitter Space with Andrew Wang to hopefully explain the situation and clear the air….

…that did not happen

Twitter avatar for @ZAGABOND
ZAGABOND.ETH @ZAGABOND
I fucked up. After the spaces today, I realized my shortcomings in how I handled the prior projects which I started. To the communities I walked away from, to Azuki holders, and to those who believed in me — I’m truly sorry. 1/x
12:46 AM ∙ May 11, 2022
5,323Likes1,329Retweets

Azuki’s floor started to spiral almost immediately after the Space.

Twitter avatar for @AndrewSteinwold
Andrew Steinwold @AndrewSteinwold
Brutal Azuki selloff in a matter of days Chart from @SfermionR
Image
12:50 AM ∙ May 12, 2022
28Likes2Retweets

Despite all this… Azuki is back to 13ETH+

Bored Ape #8585 sold for a 500+ ETH loss

You can check the transaction history here

  • This was probably a self-trade to claim a tax loss but not positive!

Doodles Dooplicator airdrop

Claim here

  • May 12: Claiming started

  • June 21st: Claiming ends

  • June 22nd: Trailer premiering @ NFT NYC featuring the Dooplicator

  • June 23rd: Traits & rarities revealed

  • Summer 2022: Dooplication begins


🎮 Gaming

Potential Roblox NFTs

On a call, Roblox's CEO reportedly spoke about the ability to wrap Roblox digital items in an NFT and take them off-platform.

Axie Origin goes live on Android mobile + unveils land staking

Jiho and the Axie team released an overview of land staking:

  • 337,500 AXS per month is dedicated to this initiative

  • Proof of engagement and gameplay ic required to claim tokens


🌎 Virtual Worlds

Otherside releases a new demo

Twitter avatar for @OthersideMeta
OthersideMeta @OthersideMeta
And here’s a sneak peak of the First Trip, the tech demo from @Improbableio. Can’t wait to share the experience with you.
12:40 AM ∙ May 12, 2022
16,085Likes5,143Retweets

Illuvium land sale

  • Taking place June 2nd

  • Dutch auction

  • Price starts 2ETH

  • Total supply of 20,000 plots across seven unique regions

  • ~5% of all in-game revenues go to landholders


🎶 Music

Web3 Artist journey

Twitter avatar for @ReoCragun
Reocragun @ReoCragun
I wrote an article on @viamirror detailing my journey as an artist in Web3. This is just the beginning. You can give it a read here:
mirror.xyzMy Journey In Web3 Thus FarFor the last 6 years I’ve been operating on a fairly loose schedule. As an artist I let my creativity take the driver’s seat, and I’ve lived my life on a play it by ear mentality. Today that’s not so much the case, and after getting heavily involved within the web3 community my organization skills…
9:56 PM ∙ May 4, 2022
48Likes6Retweets

📰 Mainstream

NFTs are coming to Instagram

Instagram tweeted that they are testing ways for creators and collectors to share NFTs on the platform.

Some details:

  • They have begun testing the product with select creators

  • Rainbow wallet will be supported

  • The platform will support Ethereum and Polygon NFTs initially before adding support for Solana and Flow

Sorare signs deal with Major League Baseball

The MLB has reached an agreement with the NFT-based fantasy sports company, Sorare. Similar to Sorare’s agreements with European soccer, this deal will allow users to collect tokens representing players.

  • The deal includes an upfront payment guaranteed against future royalties from the sale of tokens

  • The MLB also has a deal in place with Candy Digital to produce MLB NFT trading cards


💸 Funding

MechaFightClub ($40M) | Combat sports in the metaverse with artificially intelligent NFT fighters. The round included participation from Andreessen Horowitz, Michael Ovitz, Sonam Kapoor, Solana Ventures, The Chainsmokers, Mantis VC, Advancit Capital, KeenCrypto, Capitoria, Unlock Venture Partners, and Infinity Ventures Crypto.

Co:Create ($25M) | A new protocol that provides foundational infrastructure for decentralized brands. The round’s participants include Andreessen Horowitz, VaynerFund, Not Boring Capital, and Amy Wu.

Highlight ($11M) - Platform to build blockchain-based membership communities. The round included participation from Haun Ventures, 1kx, SciFi VC, Floodgate, Coinbase Ventures, Thirty-Five Ventures, Offline Ventures, DAO Jones, Mischief, Polygon Studios, WME, Chris Zarou, Scott Belsky, Tarun Chitra, Mark Gillespie, Robert Leshner, Lenny Rachitsky, Gokul Rajaram, Linda Xie, Lucy Guo, Magdalena Kala, Method Music, A.capital, & 2PunksCapital.

Cometh ($10M) | A DeFi-powered videogame featuring yield generating NFT. White Star Capital, Stake Capital, Serena Ventures, Shima Capital, IDEO Colab Ventures, and Ubisoft all participated in the round.

InfiniGods ($9M) | A blockchain gaming studio. Participation from Pantera Capital, Framework Ventures, Animoca Brands, Jefferson Capital, and Double Peak.


📚 What we’re reading

New Arthur Hayes article

(Listen) The full Aku story with Micah Johnson

Scarcity in NFTs


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🤯Crypto drops >50%, is more to come?

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