Hey Snackers,
From markets to memes, crypto's rarely static. But now, perhaps more than ever, both crypto's underlying tech and its role in a regulated society are in flux. Today, we're peeling back the layers of this moment with a crypto-takeover edition.
As of Friday afternoon, bitcoin and ether (the two largest cryptos) were both down over 55% year to date as crypto winter sends chills through summer.
Equities aren't doing so hot either: the Nasdaq plunged 4% on Friday after Powell said the Fed would keep hiking rates till inflation is under control — suggesting rates could stay elevated for a while.
The future of finance… aims to leave its past in the dust. The ethereum Merge — a years-in-the-making reimagining of the world's second-largest crypto — is set for mid-September, and crypto fans are HODLing their breath. The Merge is meant to move the chain's consensus mechanism (think: verification process) from “proof of work” (PoW: old, power-hungry) to “proof of stake” (PoS: new, efficient). It's a critical moment for the seven-year-old crypto, with real — ahem — stakes:
Growing up = growing pains… Dragging a chain worth $202B into the future isn't like flipping a switch. Plenty could go wrong, from bugs to industry consolidation (aka: dreaded centralization). Merge fans argue that if ethereum sticks with the old PoW, it risks getting left behind by new chains on the block (like: solana), but not all of cryptoland's on board:
The Merge is full steam ahead… and crypto's future is along for the ride. Picture a bunch of railroad engineers trying to swap out parts on a moving train — but the train's packed with priceless cargo and can't slow down. That's kind of like the Merge. Getting it wrong risks derailing the ethereum train and everything built on top of it (DeFi, Ape NFTs). If the upgrade succeeds, the train’ll run cleaner and could inspire the broader crypto industry to follow suit. If it fails? Hold on.
The good, the bad, and the cryptic… Crypto’s so-called “Wild West” could be in for a reckoning. For over a year SEC Chair Gary Gensler has said that many crypto products should be considered securities and regulated as such. Think: the same controls and protections as stocks and bonds. The SEC's doing more than talking: as part of an insider-trading case last month, it classified nine cryptos as securities.
Scrutiny is brewing… This year, high-profile instances of crypto fraud have cranked up the heat from regulators and lawmakers. Recent meltdowns of some high-yield crypto lenders have added fuel to the fire. In many crypto-fraud cases, there isn’t much investors can do. People who had their funds locked by crypto lender Celsius, for example, are begging bankruptcy judges for help. Now:
Scrutiny may be reaching a boiling point… So far, the SEC’s strategy has been case-by-case enforcement actions and lawsuits. But if it can bring crypto under its purview, it could change the industry’s biz model. Listing securities carries rigorous disclosure and registration requirements meant to protect investors. While some crypto enthusiasts want it to stay unregulated, others believe that clear guardrails could boost the whole industry.
Authors of this Snacks own: bitcoin, ethereum, and solana and shares of Starbucks and AT&T
ID: 2399696