🐌 Jump & Jane St Slows US Crypto Trading

Web3 Social Media Growth | Maker Launches Spark

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Good Morning,

The big boys have submitted a letter criticizing the US SEC's proposed qualified custodian rule that would limit innovation in the crypto space.

The firms include JPMorgan, Coinbase, Bain Capital Crypto, Dragonfly Capital, Haun Ventures, Electric Capital, Ribbit Capital; and even the CFTC.

In Today's Email:

  • What Matters: Jane St., Jump slows US crypto trading 🐌

  • Case Study: Lens and web3 social media 📱

  • Governance & Features: Maker launches Spark 💰

Narratives: Bitcoin BRC-20 ecosystem tokens are heating up, tread carefully.

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WHAT MATTERS

Jane St. & Jump Pulls Back on Crypto Market Making

State of play: Jane Street and Jump Trading are slowing down their crypto market-making activities in the US amidst the ongoing regulatory crackdown.

  • Jane Street will scale back its crypto ambitions globally, stating that "regulatory uncertainty has made it difficult for the firm to operate the business in a way that meets internal standards"

  • Jump Crypto is pulling back from the US market, but will expand internationally.

Both trading firms were caught up in the Terra failed stablecoin project. They were named among the trading firms questioned by US prosecutors.

Jane Street was also one of the three quant-trading firms cited anonymously by the CFTC in its lawsuit against Binance.

Why it matters: Overnight, the effects can be seen on Binance. Alex from Scimitar Capital wrote a thread explaining the situation.

  • The drop in liquidity in the 1% range is less noticeable.

  • The drop in the first few bps of the order book is much more dramatic.

For builders: There's an opportunity to help scale and distribute global crypto liquidity from a predominantly US market to an international-based one.

  • The approach can combine DeFi primitives and a centralized middle layer, but it's a topic for another time that deserves an entire essay.

For investors: Altcoins pricing dynamics in OTC and secondary markets might be impacted as the top market makers readjust their strategies and approach. Lookout for opportunities.

CASE STUDY

Lens Protocol Growth

State of play: In the past year, Lens Protocol's growth experienced a significant increase in daily active users (DAUs), from below 5,000 to over 20,000.

  • Lens is an open-source social layer for web3. "Open" means that users can migrate between dApps since all their data is tied to their crypto wallets.

  • Ally Zach wrote a report that highlights Lenster dominance in users net migration.

  • Social media-based dApps such as Lenster and Phaver saw higher user retention rates.

That said, we're seeing Lens' monthly user growth slow down while existing users' engagement increases.

  • Lens' competitor, a decentralized version of Twitter called Bluesky, recently passed 375,000 iOS downloads globally.

Our take: The crypto space hasn't truly solved whether the same closed-source network effect on web2 social media such as Facebook is replicable in web3, in a sustainable way.

  • Since everything is open-source, how do we prevent competitors from hard-forking existing protocols and undercutting the business model by reducing fees to zero?

Take a peek at our new referral reward at the bottom of this issue. Share this newsletter and receive our list of 100 smart crypto investors' wallet addresses 👇

INSIGHTS

PEPE Profits Cycle

Many traders made millions thanks to PEPE.

Where are they cycling their money now?

Here are the top 15 PEPE holders. Collectively, they hold 9.05% of the total supply with a total profit of $92.6M. Track their wallets to know where the capital will flow next.

Credits to @lookonchain

FEATURES & GOVERNANCE UPDATE

Maker Launches Spark Protocol

Meet Spark, Maker's new DeFi lending solution. The new protocol focuses on providing lending solutions for DAI users. Users will be able to borrow DAI at a 1.11% annual rate.

  • Spark is linked to Maker's D3M, a system that enables interaction between the Maker ecosystem and third-party lending protocols.

  • Spark will initially support borrow features for ETH, stETH, DAI, and sDAI.

  • Spark was built as a soft fork of Aave v3. Profit generated from Spark will be given to AaveDAO for the first two years.

Why it matters: Spark is part of Maker's endgame plan to expand the MakerDAO ecosystem. It will slowly increase the usability of DAI other than becoming the go-to-stablecoin for on-chain traders to gain leverage.

Other notable feature updates:

QUICK BITES

  • US House to hold joint committee hearing for digital assets.

  • PayPal states its customers’ crypto holdings near $1 billion.

  • Ex-Coinbase Manager gets 2 years for insider trading.

  • Goldman & Moody’s join Digital Asset’s blockchain network.

  • Grayscale files for three new ETFs.

  • Bittrex files for bankruptcy in the US.

  • Worldcoin launches a self-custodial mobile app.

  • SBF moves to dismiss most criminal charges against him.

  • Coinbase cuddles up to UAE policymakers.

MEME & NOTEWORTHY READS

  • Arthur Hayes’ read on why the US banking system will be nationalized.

  • Bain Capital Crypto’s (and friends) comment letter in response to the SEC’s proposed qualified custodian rule.

  • Molly White’s read on why a16z crypto report is narrative over numbers.

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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.