Ember Nuggets #14

What are Ember Nuggets?

Ember Nuggets are a weekly update with commentary from the investment team on what’s happening within the crypto market - news, developments, market trends, and more.

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Nugget 1: ConstitutionDAO

A rare copy of the US constitution hit the auction floor at Sotheby’s last week. As is custom in crypto, the community rallied together, formed a DAO, and in one of many firsts raised $48M. However, the story did not have a rosy end, as they ultimately lost the auction to Citadel founder and CEO Ken Griffith.

ConstitutionDAO had a lot of media attention over the past few weeks and showed the potential of Web 3.0 after a group of friends were able rally the community behind the cause in such a short period of time. We think this is just the beginning of what DAOs could do in the future.

For those that may not know, DAO stands for decentralized autonomous organization. In crypto, it is basically a group of people with a common purpose (social club, dev community for a project, crowdfunding for investments etc). Typically, a majority vote by members of the DAO are needed to make decisions.

Nugget 2:  Crypto and Regulation

2021 saw explosive growth in crypto and also brought regulators to its doorstep across the globe. We saw various levels of crackdowns. From China to the US, it has become clear that government organizations are trying to better understand the space and reel it in.

Some notable events:

As is customary, China banned crypto a few times this year, but this time it was larger in scope and swiftly carried out such that Bitcoin mining shifted to the US

The Biden administration passed the infrastructure bill that had a crypto tax provision that saw backlash from the crypto community due to its poor language. Senators Wyden and Loomis are working on an amendment which aims to pass later this year. It is clear from party standpoints that Republicans have seemingly embraced crypto, while leadership within the Democrats are likely against it

India introduced a crypto bull in parliament that will likely be decided before the session ends before Christmas. Per comments made by the Modi administration, it is unlikely crypto will be banned in the country, but they are against it as a form of payment. The uncertainty around the bill has led bitcoin to trade at a discount when compared to other markets

The SEC, Fed, CFTC and others in the US continue to push back and evaluate the crypto space. Gary Gensler has taken an aggressive stance towards the crypto space. Various fines, penalties and lawsuits have popped up throughout the year. Although there has been a lot of chatter and aggressive statements by various leaders, it remains unclear on what actions, if any, will be taken in the US

Nugget 3:  Fun Fact - NFT, Metaverse, and Crypto top 3 words of the year

Collins, a dictionary publisher established in 1824, named NFT (non-fungible token) as the word of the year followed by Metaverse and Crypto. The usage of these words skyrocketed in 2021 and directly correlated with the price action and demand in the space. The data is clear across most analytic platforms like Google Search, the general public is interested in the space, trying to learn and invest, and having active conversations about the development. Looking at active wallet addresses and crypto penetration in the US, this is just the beginning.

Thank you for reading!

Harsharn Singh
Investment Associate | Ember Fund