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| What you need to know today in crypto and beyond May 20, 2021 Sponsored By: Welcome to The Node.
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Today's must-reads Top Shelf BOUNCE BACK: Bitcoin is more or less back where it was on Tuesday, trading above $40,000 after its biggest single-day decline since March 2020. Most other cryptocurrencies joined in the rebound. A record $131.1 billion in bitcoin changed hands in Wednesday’s spot markets. The cryptocurrency’s “market dominance” also fell below 40% for the first time since June 2018. DEUX DILIGENCE: The chairman of the Senate Banking Committee, Sherrod Brown, is “concerned” about conditional national trust charters the Office of the Comptroller of the Currency granted to Paxos, Protego and Anchorage. Brown is concerned these charters, which essentially allow these crypto-natives to act as banks, were granted without “appropriate due diligence.” Separately, the OCC is warning of scam letters impersonating the agency fishing for crypto. BIT SIGNAL: Bitcoin mining pools that represent 94% of the network’s hashrate are signaling support for the Taproot upgrade, though we may not know if the upgrade will be scheduled for November activation until the next difficulty period in nine days. Taproot is a small upgrade of two lines of code that will allow Schnorr signatures and smart contracts on Bitcoin. BUNNY CHOP: Yet another flash loan attack. This time an attacker found a way to manipulate yield farming aggregator PancakeBunny’s BNB pools and dump a significant amount of Bunny tokens (the protocol’s native governance token) on the market, making off with an estimated $45 million. The price dropped to 9 cents from $146. Just days ago, bEarn.Fi, a cross-chain farming protocol, suffered a similar $11 million exploit.
–D.K.
Correction: Yesterday's newsletter incorrectly identified Coinbase's chief executive. He is Brian Armstrong, not former OCC lead Brian Brooks.
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First COVID-19. Then GameStop. Then Coinbase. The events of the last year have destined bitcoin to play an integral role in our world.
Next week at Consensus by CoinDesk, our virtual big-tent conference, we explore the place of bitcoin as an asset, as a worldview and as a response to the extraordinary policies coming out of our financial, technological and societal institutions.
Join our Explorations track "Bitcoin as a Worldview" with Cynthia Lummis, Lyn Alden, Dan Held, Meltem Demirors and more at Consensus by CoinDesk, May 24-27. Register today.
Overheard on CoinDesk TV Sound Bite "Bitcoin miners that are operating in North America ... actually bring stability to the grid. We are there as a stable user of a significant amount of power during the 80%-90% time when otherwise it would be sitting there waiting for peak demand."
–Hut 8 CEO Jaime Leverton, on CoinDesk TV's "First Mover."
What others are writing... Off-Chain Signals $ASS Coin Billionaire: Tales From the Fringe of the Crypto Craze (Bloomberg)Jack Dorsey Says Bitcoin Can Make the World Greener. Could He Be Right? (New York magazine) Bitcoin hashrate drops as Sichuan miners face short-term power cap (The Block) Instagram is moving to NFTs (Decrypt)
–D.K.
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A message from CoinDesk Introducing Unlocked 101 at Consensus by CoinDesk 2021 New to crypto? Here's a crash course. Unlocked 101 is a free educational series of sessions designed to give you the tools to navigate crypto. Sessions will be hosted May 4–20 to prepare you for Consensus by CoinDesk 2021, our virtual big-tent event.
Register for Unlocked 101 this May.
Putting the news in perspective The Takeaway What Coinbase’s Media Play Means for Crypto In case crypto media wasn’t fraught enough, Coinbase is now apparently launching a media arm.
The U.S.-based exchange is looking for a top editor, who would report to the company’s marketing department, Axios reported Tuesday. Coinbase said in an email it has nothing to share at this time, but a job posting for a content director suggests the exchange is branching out into media.
This may just be the beginning. Exchanges like Kraken already have content operations, and the top-tier VC firm Andreessen Horowitz (a Coinbase investor) is also getting into the media game. As more new investors rush into the market, there will be greater demand for crypto content. Exchanges can use media arms to raise brand awareness, attract users and just spark wider interest in crypto, which could ultimately be good for business.
But at what cost to the crypto industry? Okay, let’s get a few things out of the way. Yes, I am a managing director at CoinDesk, which in theory would be competing with Coinbase’s new media arm. And yes, CoinDesk is owned by Digital Currency Group, or DCG, a for-profit company with deep-pocket investments throughout the industry. CoinDesk maintains a policy of editorial independence. Still, the perception of interference creates its fair share of drama, such as when DCG’s Barry Silbert announced DCG was shorting dogecoin and people wondered if that would shape CoinDesk’s dogecoin coverage. For what it’s worth, Coinbase is also a DCG portfolio company, and this piece isn’t exactly advancing either company's interests. But see what I mean about crypto media being fraught?
Ultimately, you’ll just have to believe me when I say that I have no agenda other than to express my personal opinion, based on experience and observation. Exchanges getting into media isn’t necessarily bad for the industry, but there will be big challenges in striking the right balance. Here are just a few.
Newcomers need objective information. Crypto has entered the mainstream. It’s on "Saturday Night Live." It’s on "Ellen." It’s on Elon Musk’s Twitter feed, basically all of the time. Paris Hilton makes NFTs, and Tom Brady is launching an NFT company. Slim Jim, social media’s favorite meat stick, has a dogecoin strategy.
What this means is we are seeing an influx of new investors into the market, and these new investors need reliable information, or even warning labels. Buying your first crypto? Here’s what to watch out for. This is not to insult the intelligence of newer investors, it’s simply to say that some knowledge comes with time. More seasoned crypto hands may have a better sense of who’s who or how to distinguish promising projects from duds. They have seen previous boom-and-bust cycles, and they may have even been burned by scams.
Take dogecoin, a wildly popular coin with no shortage of risks. Will exchanges’ media operations be incentivized to highlight the flaws of specific tokens, particularly when the platforms may be listing those tokens themselves?
Crypto Twitter doesn’t like bad news. The crypto world generally does not like “negative” stories, at least in my observation. If you publish a story about a problem with a specific project, a government crackdown or bitcoin being used for illicit purposes, you’re likely to be accused of “FUD,” or of being on a secret mission to destroy a particular token.
And it’s not just crypto Twitter. More sober stories sometimes just don’t perform as well overall as “bitcoin to the moon” articles. It makes sense: Crypto is strikingly sentiment driven. No one knows for sure what moves the market, but there is the perception that a single article, or even a tweet, could have a significant impact on price.
But there is also something deeper at play. For a long time crypto was an underdog industry, scoffed at by traditional investors and widely associated with crime. As such, some of the longer-term players in the crypto industry are quick to go on the defensive when they feel they are being maligned by journalists. Many still believe that crypto is totally misunderstood by the mainstream media and is badly reported by the industry press.
The bottom line is that less-than-effusive stories tend to attract an unpleasant mix of social media rancor and lower traffic. Often the only reason to publish these stories is simply out of a commitment to, well, journalism. And journalism means sometimes publishing things that people don’t like. Will crypto exchanges’ content creators share this commitment? Maybe. But they may find it a lot easier to just give readers what they want.
The line between content and marketing will get more blurry. So if exchanges have an agenda, what’s the big deal? People aren’t stupid. They should be able to distinguish between marketing and actual news.
The problem is that as more exchanges enter the media space, competition for eyes will get fiercer. And people won’t want to read ads; they will look for engaging content. Exchanges ultimately want to attract new users. To do that they have to get people’s attention, which will require increasingly sophisticated content that doesn’t resemble marketing at all. Imagine, for example, a piece that reads like an objective article but features examples that have been cherry-picked to create a positive impression of a particular crypto project. These incentives may not be immediately obvious to the reader, many of whom will not be that skeptical to begin with. Maybe this trend would lead readers to seek out more independent sources of information, but it could also end up eroding trust in the media as a whole.
The one possible silver lining is that these exchanges will not be driven by the same pressures as typical media outlets. To put it more bluntly, they have cash to burn, at least while this bull market lasts. They will be able to attract top talent. They won’t necessarily have to worry about advertisers or traffic numbers because their media arms could be subsidized by other parts of their business.
In theory at least, this could lead to more editorial freedom. One positive outcome would be patronage for more of the technical deep dives and investigative reporting that this community needs.
How that will play out remains to be seen. The danger is a surge of “another sunny day in crypto” stories, which are not ideal for an industry that is already rife with risk.
–CoinDesk Managing Director and Global Macro Editor Emily Parker
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