💭 What Happens if USDT goes *poof*

$2.4B ETH Selling Pressure | $ARB DAO Drama

Good Morning,

Musk is pumping Doge again, Tether used Signature Bank, and the SEC nears deal with ex-Coinbase employee accused of insider trading. ETH also broke $1,900. Is this the exit pump before the post Shapella dump? 🗿

Let's dive in.

In Today's Email:

  • What Matters: Tether used Signature bank 🤌

  • Case Study: Arbitrum DAO drama 🎭

  • Governance & Features: $2.4B ETH sell pressure post upgrade 💻

We plan to start a weekend issue breaking down crypto businesses. Check out our last issue covering Etherscan, here.

Reply to this email to let us know what protocols/companies you want us to cover!

Narratives: The top dApps on zkSync Era chain.

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WHAT MATTERS

Tether Used Signature Bank

State of play: The world’s largest stablecoin issuer had been using Signature Bank to access US financial systems. By using a Bahamian entity that Tether controls, they’ve been moving USD from the US to the Bahamas.

  • Tether told its US clients to pay for USDT minting by sending money to its Bahamas-based banking partner, called Capital Union Bank, via Signature Bank’s SigNet blockchain platform.

  • This is not illegal as Tether isn’t sanctioned. However, it shows that Signature has a high risk appetite for business.

  • Tether responded with a generic answer saying that its banking partners always “had access to several banking channels and counterparties”.

To read more about Tether’s inflow funnels to access the US banking system, here’s a great thread.

Why it matters: The Tether situation is definitely the last canary in the coal mine. Any damage done towards Tether will significantly shift the dynamics of primary crypto markets.

  • It is unlikely for US regulators to not take strong action, and continue letting unregulated flows of offshore US dollars.

For builders: Diversify the method in which you’re holding your treasury. It should be a mixture of traditional bank accounts and multiple stablecoins.

For investors: We still need innovation in the stablecoin space. The current solution means that there’s a centralized point of failure for DeFi (USDC), and a centralized point of failure for CEXs (USDT). It’s a hard problem, but also with a ludicrous upside.

CASE STUDY

Arbitrum DAO Governance Drama

State of play: L2 chain Arbitrum is undergoing a governance drama. The community of ARB token holders voted against the first governance proposal (AIP-1), citing that it is an ‘omnibus’ proposal that formalizes multiple items, potentially confusing votes.

  • The most controversial item in the AIP-1 is allowing the Arbitrum Foundation to bypass future community votes and distribute 750M+ in ARB tokens from the treasury.

  • On-chain investigators identified that the 750M ARB tokens had already been moved several weeks earlier, implying that the Arbitrum Foundation took action prior to getting ARB token holders’ consent.

  • AIP-1 drew 78% opposition from ARB token holders, with only 3 delegates voted in favor of the proposal.

Arbitrum has since responded to the situation.

Our take: This is a classic DAO governance problem. When there are too many cooks in the kitchen, decentralization can lead to inefficiency instead of progress.

  • Until crypto can bake governance decisions into smart contracts effectively, your vote is not vote. Degen Spartan was right all along about governance tokens 🤷

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FEATURES & GOVERNANCE UPDATE

Staked ETH Withdrawals in 2 Weeks

Staked ETH upcoming withdrawals. The long-awaited Shanghai upgrade (now called Shapella = Shanghai + Capella), will go live on April 12. This will allow staked ETH to get withdrawn for the first time, marking a successful transition to Proof-of-Stake.

  • 15.5% of Ethereum circulating supply, or $34B, is currently staked.

  • 2,200 staked ETH withdrawals will be processed per day.

  • It will approximately take 35-40 days for the entirety of staked ETH to be unstaked.

Why it matters: The upgrade means that ETH there will be massive selling pressure. Although not the entire staked ETH can be withdrawn immediately, roughly 1.1 million ETH (or $2.4B), will potentially hit the market.

Other notable feature updates:

QUICK BITES

  • S&P Global seeks DeFi Director.

  • Binance denies interpol rumor.

  • Twitter changes logo to Dogecoin.

  • Tether used Signature Bank to access US financial system.

  • OPNX launches bankruptcy claims trading.

  • SEC nears deal with ex-Coinbase employee in the insider trading case.

  • OpenSea launches OpenSea Pro.

  • Tokenized gold hits $1B in market cap.

  • zkSync Era experienced a downtime.

MEME & NOTEWORTHY READS

  • Kyle Downey’s read on reimagining Howey for DeFi.

  • Li Jin’s read on building psychological attachment into web3.

  • @karsenthil’s thread on the crypto middleware thesis.

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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.