How Could Crypto Perform in a Currency Crisis?
Crypto Adoption in Argentina | State of Crypto 2023 | Sports + Blockchain?
GM, this is your Daily Bolt briefing.
In today’s edition we’ve brought you extended reports, breaking down a16z findings on the current state of crypto in 2023, as well as the unique advantages Web3 and blockchain bring to the table when it comes to operating sports leagues.
And if you’re concerned about inflation in the Western world; read our featured note of the day, to see how crypto is viewed in Argentina, a country currently facing a currency crisis, with exchange rates constantly changing due to consistently elevated inflation.⬇️
Stay alert in the markets.
1/ Coin Bureau - State of Crypto in 2023
Preview: In this episode of Coin Bureau, Guy summarized the report published earlier this month by the crypto VC firm, Andreessen Horowitz, or known as a16z, that reveals which issues are holding crypto back and which cryptos are about to explode. Read our notes below to learn more. Click here to listen to the full episode (20 mins).
Read our Note (6 mins) and save 14 mins.
Here are some key takeaways:
This a16z report begins with an overview of what’s been going on in crypto.
There’s been progress in research and development.
Setbacks from crypto companies collapsing.
Prices have been following the crypto cycle.
Bad regulation is creating uncertainty.
Decentralization is becoming an opportunity.
The authors showcase the contrast between Web2 and Web3 platforms with this infographic which Guy thinks is a bit concerning because it makes it look like tokens, such as $UNI, are analogous to stocks in a company.
According to the authors of the report, crypto market cycles are caused by a positive feedback loop.
Prices go up which causes interest to go up which causes new ideas to emerge which causes new projects to emerge which causes prices to go up.
The a16z authors highlight new L1 cryptos, like Solana and Aptos, application-specific cryptos, like Cosmos and Polkadot, L2s, like Optimism and Polygon, and data storage cryptos, like Celestia, as areas of interest.
After reviewing the rising popularity of zero-knowledge proofs and NFTs, the authors then examined the rapid growth of Web3 gaming, which hasn’t been nearly as impacted by the crypto bear market.
Regarding developer activity, the authors point out that the U.S. is falling behind.
The percentage of crypto developers in the country has been declining for years.
The authors then say to be on the lookout for 3 proposed crypto regulations including the Bipartisan crypto bill by Senator Cynthia Lummis and Kirsten Gillibrand, 7 pending crypto cases including the SEC’s case against Ripple and 3 proposed crypto rules including the SEC’s crypto custody rule
2/ The Delphi Podcast - Karate Combat & Advantages of Web3 for Sports Leagues
Preview: In the episode of The Delphi Podcast, Host and Delphi Co-Founder Tommy Shaughnessy is joined by onlylarping who is a co-founder of Karate Combat to discuss the fight league, tailoring the sport for engaging experiences for the new generation, the league bucking the trend by not signing exclusive distribution agreements, and much more. Click here to watch the full episode (50 mins).
Read our Note (8 mins) and save 42 mins.
Here are some key takeaways:
Tommy talks about his experience attending a Karate Combat event and praises the energy and excitement of the league. Delphi Ventures are investors in Karate Combat.
Karate Combat has 4.5 million followers on social media and distribution with top television partners around the world. Karate Combat hits 10 million views per event, and 100-200 million organic views on the internet.
onlylarping highlights the success of Web3 projects in the sports industry, such as Top Shots, Sorare, and Socios but mentions the difficulty in raising funds for sports Web3 projects.
onlylarping mentions that the $KARATE token, which will launch in a few weeks, has two primary utilities: governing the league and allowing token holders to vote on winning fighters and earn more tokens from token issuance.
Tommy asks about the comparison to UFC and how they would distribute equity in their league without a token.
Traditional sports organizations would struggle to replicate this model. onlylarping explains that controlling the league and using tokens as a source of governance is crucial for this type of structure to work effectively. He also mention that there is a fixed price pool for each event happening every 4-6 weeks and the distribution of $KARATE tokens depends on the votes of token holders, with the fights receiving the most votes getting the biggest portion of the prize pool.
onlylarping argues that traditional leagues like NFL lack operational flexibility and cannot easily create changes that fans may want as they are bound by collective bargaining agreements and player salaries.
There is an upcoming launch of the Karate Combat app, web app, and token launching on May 10th followed by the airdrop of tokens to allow users participate in Up Only Gaming, along with an event and launch party on May 20th in Miami.
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In this episode of The Scoop, Frank Chaparro is joined by Christiana Sciaudone and Nathan Crooks to discuss Argentina’s currency Crisis, crypto adoption in Argentina, and more! Read our notes below to learn more.
Background
Frank Chaparro - Host of The Scoop podcast
Christiana Sciaudone and Nathan Crooks (Guests) - Writers at The Block
The Block - Leading information services brand in the digital asset space
Nathan’s Perspective on Argentina’s Currency Crisis
Nathan wrote an article on Argentina’s currency nightmare.
He has extensive experience in Latin America, especially Chile and Venezuela.
Argentina's complex currency situation and multiple exchange rates resembled Venezuela in 2013-2014.
Nathan investigated the use of crypto as an alternative in Argentina.
The currency situation in Argentina proved more complex than anticipated, with unclear pricing.
Exchanging money was difficult, even through Western Union, due to cash shortages.
Foreign tourists were also found waiting at Western Union offices, seeking alternative locations for cash.
Crypto usage in Argentina is growing but not yet widespread on the streets.
Cash remains essential in Argentina, leading to a bizarre situation where people search for devaluing cash despite the potential advantages of crypto.
Companies Operating in Argentina
Uber operates in Argentina, but drivers prefer cash payments to avoid delays in receiving devalued currency.
Major companies face significant struggles in Argentina, such as Anheuser-Busch encountering difficulties importing aluminum for Budweiser cans.
Winemakers are affected by the economic situation, struggling to acquire bottles and labels due to insufficient funds and the central bank's unwillingness to provide dollars for imports.
Argentine Business Owners Turn to Crypto
Nathan interviewed an Argentine travel agency owner and [a] winery owner, who were both interested in cryptocurrencies.
They [both] traded Bitcoin, Ethereum, and stablecoins, and wanted to accept crypto payments to save on fees.
[According to them], neither suppliers nor customers demanded crypto. but the interviewees used it for personal savings.
The interviewees criticized crypto's image, mentioning Ponzi schemes and market manipulation like Elon Musk's Dogecoin tweets.
They sought stable money due to Argentina's history of financial instability.
US dollars, once a popular savings option in Argentina, are now seen as less stable due to rising inflation.
Both interviewees acknowledged crypto's potential for preserving savings but were put off by the surrounding noise and volatility.
Christiana’s Currency Challenges in Latin America
Christiana faced difficulties using crypto exchange services for writing due to KYC issues with her Argentine ID.
Western Union is her preferred choice for transactions because of its convenience and direct transfers to her local bank account, despite the fees.
In Argentina and Venezuela, Bitcoin and stablecoins are commonly used for foreign exchange due to their lower costs.
Crypto in Brazil is viewed more as an alternative investment option rather than a tool for transferring money.
Christiana provides an example of buying a cell phone in Argentina, demonstrating the impact of fluctuating exchange rates on the cost of goods.
She bought a Samsung phone for $535 in Argentina at an exchange rate of 380 Argentine Peso per 1 USD, while the same phone costs $400 in the United States.
The exchange rate later fluctuated, reaching 500 Argentine Peso per 1 USD.
Christiana chose a six-month payment plan, and due to the changing exchange rate, she ended up paying less for the phone than if she had purchased it in the U.S.
Argentina's Shift Towards Stablecoins
Nathan observed that people quickly grasp money concepts when multiple exchange rates affect daily life.
Bitso, a Latin American exchange, has seen a massive surge in stablecoin demand.
Bitcoin trading volume is declining, while USD stablecoin to Pesos trading is increasing.
In Argentina, wallet-connected stablecoins facilitate retail purchases.
QR codes are prevalent in Argentina, making Pesos and stablecoin transactions more accessible.
In Argentina, the "crypto dollar rate" is comparable to the "blue rate."
Binance is a popular topic in Argentina, with a Binance-themed cafe appearing in a shopping mall.
MasterCard and Binance launched a prepaid debit card, allowing users to spend stablecoin balances.
Binance enabled on and off ramps for pesos, but increased volume is not yet highly noticeable.
Christiana thinks the 87,000 pesos minimum wage ($213) is favorable for foreigners with US dollars.
The exchange rate fluctuates significantly, such as a recent drop to $165 in three weeks.
The situation is devastating for locals earning in Pesos due to decreasing purchasing power.
The unstable economy may drive increased crypto adoption.
Nathan’s Observations on Crypto Adoption in Argentina
Nathan asserts that cash is essential in specific locations [countries], such as Venezuela, where he personally experienced a black market exchange.
He struggled to exchange money in these circumstances, leading him to wonder why cryptocurrency was not more commonly used.
He recognizes the deteriorating economic conditions in countries like Venezuela, where people are becoming increasingly impoverished due to escalating inflation.
Nathan identifies obstacles to cryptocurrency adoption in Venezuela, including [such as] safety concerns and inconsistent internet access.
Conversely, he observes that in cities like Buenos Aires, these barriers are less significant, creating a more favorable environment for cryptocurrency adoption.
During hyperinflation, Nathan thinks that people will seek methods to safeguard their savings, and traditional currencies like dollars may not be the best solution.
Crypto firms like Bitso emphasize the importance of education in expanding their operations and promoting [crypto] adoption in volatile regions.
Nathan agrees that increased education is crucial for people to understand various cryptocurrencies and their applications.
As for future developments, he advises monitoring the progress of cryptocurrency adoption in these areas and the impact of education in facilitating that growth.
Potential Collapse of Pesos
According to Christiana, a complete devaluation of the currency is a possibility, but the uncertainty surrounding the upcoming election taking place October 2023, makes it difficult to predict.
In Argentina, people are required to use Pesos instead rather than of U.S. dollars for their daily transactions.
Argentina’s Ideal Conditions for Crypto Adoption
Argentina has the ideal conditions for crypto adoption, given the inconvenience of carrying large amounts of cash.
Nathan questions why crypto isn't more widespread and suggests that there could be valuable lessons to learn and apply in [apply to] other situations.
Reputational hurdles and user experience challenges might be the reason behind the limited adoption of crypto.
Nathan points out that in Venezuela, people eventually preferred [US dollars] cash over boulevards and wonders if a similar shift might [eventually] occur in Argentina.
If Argentinians no longer desire pesos, Nathan speculates that they might explore alternative options like US dollars or cryptocurrencies, potentially paving the way for greater crypto adoption.