Compilation of the original text: Deep Tide TechFlow
Compilation of the original text: Deep Tide TechFlow
In this episode of Empire Weekly Roundup, Nic Carter (Castle Island Ventures Founding Partner) joins hosts Jason and Santi to discuss whether Genesis and DCG can solve their liquidity problems and avoid bankruptcy, and what to expect next. Nic then walks us through his framework for institutional adoption, Bitcoin's long-term prospects, Proof of Reserves, and more.
Below are notes taken for this episode of the podcast.
Genesis and DCG
The fact that Digital Currency Group (Genesis' parent company) owes Genesis Trading's cryptocurrency lending arm $575 million is a scandal.
Genesis has definitely taken a bit of a beating, starting with UST.
At the end of the day, does Barry's have enough money to keep the empire afloat, or do they have to sell Grayscale's franchise to other asset managers.
Genesis has short-term debt, but it appears their liquid capital is being redeployed into illiquid long-term assets and trying to raise capital from a variety of sources.
One way to address the GBTC discount is to commit to winding up the trust within a year or two.
Barry is one of the best entrepreneurs in the space and has the credibility to raise capital.
Grayscale has custody of their BTC through Coinbase, and Coinbase refuses to do proof of reserve because it reveals too much privacy. Coinbase doesn't keep all BTC in cold wallets, and it would be much more complicated.
Coinbase is an audited public company, as good as a proof of reserve.
Bitcoin miner bloodbath and the outlook for BTC
One of the toughest areas of crypto to be overlooked will be that of Bitcoin mining.
Due to rising interest rates, rising electricity prices, and a sharp increase in hash rate, Bitcoin mining has been unprofitable for the past few months and operated only to pay interest.
Already, small finance businesses have begun to recover ASICs (application-specific integrated circuits used to mine BTC) that have been loaned out.
The hash rate (computing power in the Bitcoin network) is arbitrary, don't assume there is a linear relationship between the Bitcoin hash rate and the security of Bitcoin.
Bitcoin fees are at their lowest level in a decade, the trend is not positive, and without utilization, there is not enough way to support security.
When many people become more and more aware of the fiat currency problem, it will be easier to inspire political support for BTC.
The current top priorities are:
1) Reform the exchange, because there is a problem with the reserve;
2) Find a way to make $BTC a collateral asset that can be used elsewhere, as we've seen some sort of wrapping BTC fail on the FTX issue.
PoS
Concern regarding the impact of MEV (Maximum Extractable Value) on OFAC (Office of Foreign Assets Control) filtering transactions and the potential for over-compliance.
The main problem with PoS is that a lot of power is in the hands of exchanges/custodians and larger institutions, which end up being intermediaries in the system.
What's the focus now?
Nic's firm progressively invests in start-ups with good valuations.
Very concerned about DeFi as it is currently struggling, and like new kinds of lending projects that are trying to rebuild crypto credit from the ground up in a more credible and responsible way.
A hosted solution that provides a Web2-like authentication scheme is important.
This year has been generally positive on the institutional front, with Fidelity launching their retail cryptocurrency offering and Blackrock already starting to invest in the space.
How has institutional adoption been affected?
Institutions prefer Ethereum spot exposure over Bitcoin.
Judging from the performance of Terra and Solana, I don't think institutions will have confidence in L1.
There will be a greater focus on security, liquidity, and durability.
The future of Solana
Due to the enthusiasm for the Solana Developer ecosystem and applications, positions have been allocated to the Solana ecosystem and plans to remain in Solana.
As an investor, we are happy when we see something that the market doesn't value.
It will be a challenge for the Solana ecosystem to leverage the influence and momentum it has and turn it into value.
About Offshore Exchange
I believe that offshore exchanges will be more important than onshore exchanges, but after the failure of FTX, there will be an essential difference between offshore and onshore exchanges.
Proof of reserves
A Proof of Reserves is not complete without a Proof of Liabilities.
Exchanges that start doing Proof of Reserves should include Proof of Responsibility with auditors.
Original link
