ETH as a Safe Haven

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Good Morning,

Uncertainty continues as the Binance case continues, including a potential deal regarding Binance US asset freeze. Many also speculates that Binance will be pushed to sell BTC to defend BNB price. Stay alert.

In Today's Email:

• What Matters: Gensler’s crypto hypocrisy 👨‍⚖️

• Case Study: ETH as a safe haven 🔐

• Governance & Features: Polygon 2.0 upgrade ⬆️

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WHAT MATTERS

Republican for Crypto & Gensler’s Hypocrisy

State of play: Republican representatives Tom Emmer and Warren Davidson introduced the 'SEC Stabilization Act' to restructure the SEC and remove Chairman Gary Gensler from his position.

• Rep. Warren Davidson stated "US capital markets must be protected from a tyrannical Chairman, including the current one”.

• The Act will add a sixth commissioner to the SEC, and create an executive director position to oversee day-to-day operations.

• The SEC Stabilization Act would prevent any political party from controlling more than three seats on the SEC.

A 2018 video of Gensler expressing sentiments that appear to contradict his more recent suggestions that all cryptocurrencies other than Bitcoin are securities has surfaced online.

• The video is from a crypto-themed institutional investor event hosted by Bloomberg and Fidelity.

• Gensler stated in the video: “Over 70% of the crypto market is Bitcoin, Ether, Litecoin, Bitcoin Cash …. They’re not securities”.

• In the other video at the same event, Gensler appears to endorse crypto lending.

• Other videos have surfaced from Gensler’s time as senior lecturer at MIT, in which he declared that Ethereum is not a security.

• Recently, Gensler has declined to affirm that Ethereum is not a security.

Why it matters: Crypto has been a part of political debate in the past but not as intense as in today’s situation. It is likely that crypto will be on spotlight in the 2024 US presidential election.

• Several presidential candidates have endorsed crypto (e.g. Ron DeSantis & Robert FKJ) while the two more prominent candidates in the election, Donald Trump and Joe Biden, are not supporters of crypto.

For builders and investors: Pay close attention to the following for the next few days.

CASE STUDY

Ethereum: The New Safe Haven

Credits to Ann for the original analysis.

State of play: Despite the bear market, ETH price remains resilient. It has been stagnating on the $1,800 level, despite a broader market selling pressure on other altcoins.

Despite the stagnant demand for ETH, holders are reluctant to sell. There is a greater inclination to engage in staking rather than unstaking.

• ETH has long queues of new validators eager to participate.

• The Merge and coin burn have made Ethereum a truly deflationary asset.

In today's landscape, Ethereum holds competitive edges over Bitcoin:

• ETH is the most decentralized L1 blockchain out there.

• ETH serves as the primary currency for purchasing other assets and covering gas fees.

• ETH lacks the black swan risk found in traditional finance (TradFi) stablecoins.

• ETH gives staking yield.

• ETH does not entail counterparty risks similar to bridged assets.

Our take: ETH remains the strongest and the “flagship” asset of the crypto industry. However, it is important to note that unlike BTC, ETH is in the ‘line of fire’ of SEC and CFTC crackdown on crypto.

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INSIGHTS

Binance Market Movements

Binance market movements have sparked suspicion from the public that the exchange is selling Bitcoin to defend BNB price at $220 — preventing a liquidation waterfall.

• The action is reminiscence of FTX defending FTT Token $22 level.

• There are significantly more selling pressure of BTC on Binance that’s not present on other exchanges.

FEATURES & GOVERNANCE UPDATE

Polygon 2.0: The Value Layer of the Internet

Polygon 2.0 is the blueprint for the Value Layer construction. The proposed upgrades are focusing on unlimited scalability and unified liquidity.

• The Value Layer is the fundamental protocol that allows anyone to create, exchange and program value.

• Polygon 2.0 is a network of ZK-powered L2 chains, unified via a novel cross-chain coordination protocol.

• It will unify protocols, providing seamless usage across zkEVM, PoS, and others — while establishing long-term decentralized governance.

Why it matters: ETH and the crypto ecosystem currently are not unified and infinitely scalabe.

• Polygon 2.0 aims to be able to add capacity by creating new chains, without fragmenting liquidity, reducing security and capital efficiency.

Other notable feature updates:

• Silo launches three new isolated Curve LP lending markets.

• 21Shares introduces Lido ETP.

• SudoSwap V2 goes live.

• Raft Finance goes live.

• Cryptex V2 launches on Arbitrum.

• Enjin Blockchain goes live.

• Metronome goes live on Optimsim.

• Astroport goes live on Neutron.

• Polygon zkEVM completed mainnet update.

QUICK BITES

• Binance US working on a deal to avoid full asset freeze.

• Prime Trust’s Banq files for bankruptcy.

• Lazarus Group reemerges with $100M hack.

• Uniswap releases draft code for v4.

• Apple might remove Damus App unless it drops BTC tipping feature.

• a16z crypto expands to the UK.

• Tether mints $1B of USDT on Ethereum to support chain swaps.

• Republicans take shot at SEC Gensler, proposing to oust him.

• Cardano IOG restructures to venture studio model.

• Ava Labs CEO advocates for sensible blockchain regulations.

• eToro halts Polygon, Alogrand, Decentraland, and Dash Purchases.

MEME & NOTEWORTHY READS

• Digital Asset Research’s read on May 2023 RWA Tokenization report.

• DLNews’ read on what’s at stake in Curve founder lawsuit.

• An Ape’s Prologue’s read on bridges in the multi-chain of madness.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.