TLDR Crypto 2022-05-13

Ex-Meta crypto chief David Marcus is launching a company that will be building on Bitcoin's Lightning network. Lightspark aims to explore, build, and extend the capabilities and utility of Bitcoin. Its first round of funding will be co-led by a16z, Paradigm, and several other firms.

stETH is a claim on one staked ETH on the Ethereum Beacon chain. These tokens can be redeemed after withdrawals on the Beacon chain are enabled around the end of 2022. stETH trading at 0.98 ETH affects only those who want to sell their tokens before the primary market opens and anyone who uses the token as collateral to get leverage. The falling stETH price can put traders at risk of liquidation. Anyone can buy stETH at 0.98 ETH and redeem it for 1 ETH once withdrawals are open.

This Twitter thread discusses risk management in crypto and advises on how to prevent losses in the next cycle. Cults of personalities can result in narcissism and egomania making it tough to have a healthy discussion about projects. Going 'all in' on any asset is bad risk management. Following strict investment rules can prevent losses and protect investors from emotions and biases. The only Blue Chip assets are the ones that have survived at least two cycles and are on an uptrend. Catching a falling knife is a bad strategy, as is using leverage. Stablecoins all have their own risks, so it is best to diversify and spread the risk.

The current crypto market is starting to feel similar to crypto back in 2014 and 2017. At every crash, people criticized crypto, but the projects that survived were able to build and became better equipped for the next bull run. Protocols that survived were able to absorb the users, demand, market, talent, and growth as they came back. The bear markets also resulted in more regulation that reshaped the market. This cycle will likely happen again. With crypto, it is best to think long-term.

The current crypto market is starting to feel similar to crypto back in 2014 and 2017. At every crash, people criticized crypto, but the projects that survived were able to build and became better equipped for the next bull run. Protocols that survived were able to absorb the users, demand, market, talent, and growth as they came back. The bear markets also resulted in more regulation that reshaped the market. This cycle will likely happen again. With crypto, it is best to think long-term.

This Twitter thread covers stablecoin designs and their risk levels. It talks about the different types of stablecoins, how they are funded, how they maintain their pegs, the major risks of each type of stablecoin, and more. Links to resources for further reading are available.

Terra's validators halted the blockchain temporarily to install an update that would prevent governance attacks. It was only down for around an hour and a half. Staking on the network is now disabled. Terraform Labs has announced a plan to salvage the Terra ecosystem. It involves burning the remaining UST in the community pool and Ethereum and staking $240 million worth of LUNA to avoid potential governance attacks.

Tether (USDT) briefly dropped 5% before bouncing back to $0.98 on Thursday. The Tether peg was greater than $1 on Bitfinex, but lower than $1 on Kraken, resulting in arbitrage opportunities for traders. Tether's CTO said that the volatility was caused by pure market dynamics and that it had nothing to do with the value of Tether, which continues to hold its peg. USDT is backed by reserves, so users can swap 1 USDT for $1 from the reserves at any time. Tether was able to redeem $300 million of USDT in 24 hours without any issues.

Terraform Labs has outlined three emergency measures aimed at saving LUNA and UST from collapse. It plans to burn the remaining UST in the community pool, burn any UST that still exists on Ethereum, and stake $240 million LUNA to protect the project from a governance attack. There is currently not enough liquidity in LUNA to support Terra's mint-and-burn mechanism to bring UST's market cap of $7.2 billion back to parity or below. The burned tokens would reduce UST's circulating supply by just over 11%.

FTX CEO Sam Bankman-Fried purchased 56 million shares in Robinhood on May 2, according to an SEC filing. The position represents a 7.6% stake in the trading app worth nearly $482 million. Robinhood shares rose 28% in after-market trading.