Jul 26, 2021 • 12M

Ep 29. I'm back!

BlockFi under fire, Crypto eating TradFi & more

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Some say Crypto is a scam. Others swear it's a breakthrough technology. But which is it? Join us, as we explore Crypto in real life (IRL).
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I’m back!

I took a couple weeks off to recharge. I surprised my wife with a beach getaway to the Caribbean. It was sunny, sandy and so much fun. Unfortunately, I got pretty sick on our last full day. Thankfully I’m fully vaccinated and it wasn’t COVID. My doctor urged me to go straight from the airport to urgent care. It was pretty gnarly but I’m finally feeling better now. I’ve missed y’all. What have you been up to? How has your summer been?

Crypto never sleeps.

While I was laying low, crypto kept on pumping and churning. I’m going to highlight 5 recent developments then share some resources for you to explore and read. Let’s go!


News

1. BlockFi is under fire

  • Regulators in New Jersey, Texas and a growing number of states are challenging BlockFi’s Interest Account. BlockFi provides high interest savings accounts (2-8%) for stablecoins and cryptocurrencies. The firm also provides collateral backed loans.

  • Regulators allege that these interest accounts are securities under state rules. BlockFi may need to cease operations in some states until they can obtain appropriate registration. Boohoo! I’ve been a happy customer for over a year.

  • This would be disruptive to customers like me. It could also be a big blow for BlockFi’s IPO plans. The implications could extend to other companies and FinTechs seeking to offer similar products. I’m gonna follow this closely.

2. High interest savings accounts going mainstream

  • I was really excited to see that Compound launched a Treasury business that would enable FinTechs and banks offer high interest savings stablecoins account to their customers.

  • I’m earning 0.40% APY on my cash savings at my bank. My bank brags that this is 5 times the national average. In June, the US Bureau of Labor Statistics (BLS) reported that the inflation rate was 5.4%. It sucks. My savings aren’t keeping up!

  • Meanwhile, Compound’s new offering would enable banks and FinTechs to offer their customers 4% annual interest on USDC deposits. To be clear, USDC is a stablecoin that is pegged to the value of a dollar, 1 USDC always equals $1.

  • 4% is literally 10x what I’m getting at my bank. But it doesn’t come without risk. Unlike dollar accounts that are insured by the FDIC up to $250k, I don’t think the stablecoin savings accounts will be insured. I still think it’s a good product as long as you manage your exposure based on your risk tolerance. I’m excited to see Compound Treasury help bring truly high interest rates to the masses. Let’s go!

3. Square building DeFi unit

  • Jack Dorsey, one of my favorite CEOs, announced that Square is building a new business focused on DeFi. Right now, there’s about $50B worth of value locked up in DeFi applications. Most of this value is on the Ethereum blockchain. But Square is going to focus on building its DeFi platform on Bitcoin instead.

  • If you are unfamiliar, DeFi refers to Decentralized Finance. It uses smart contracts and blockchains to provide permission-less financial services to customers. Right now, we send money, make payments and trade through a series of middle men ex banks, brokerages, payment networks…each of these have significant costs, limited hours of operation and require permission and/or documentation. DeFi changes that.

  • Square’s new business unit is yet to be named. I think it could be big deal. Square could help scale by leveraging its 36 million Cash App users and hundreds of thousands of vendors using its products. It’s easy to see how CashApp could add the ability for consumers to take loans against their bitcoin holdings. Or leverage Tidal to introduce new ways for us to purchase and earn income from music. I’m really excited about it. It’s not going to be easy but I think we will look back and realize this was a big deal.

4. Stellar eyes buying MoneyGram

  • Stellar is a crypto network focused on cross-border payments. It is reportedly considering buying 81-year old MoneyGram, one of the largest remittance companies.

  • This would be a fascinating development seeing a crypto company acquiring an established traditional financial services company. I’m guessing that Stellar wants to leverage MoneyGram’s reputation, presence in 200 countries and 350,000 agents with last-mile access to millions of consumers.

  • I have family across Europe, Africa, and North America. My family and I frequently move money across borders. Existing options are less than ideal. This is an area ripe for disruption. Consumers want cheaper, faster, and easier cross-border payments. If Stellar and MoneyGram can deliver that then I’m all for it.

5. Malaysia police STEAMROLL 1,069 bitcoin miners

  • Some folks in Malaysia acquired bitcoin miners. The problem is they got greedy and illegally tapped electricity from the local power authority for free. Eventually they were caught, arrested and prosecuted. Justice was served.

  • But then the local police takes it a step further and uses a steamroller to crush 1,069 perfectly functioning bitcoin miners valued over $10M.

  • I think the police should have auctioned off the machines to raise money for the community. Each year, the US government raises billions of dollars by conducting over 300 auctions selling seized or abandoned property. Maybe Malaysia could borrow a leaf? Here’s a video if you are curious:


EXPLORE

1. Strike: best way to buy bitcoin?

  • Strike is now charging 0.3% rates on bitcoin purchases. In contrast, Coinbase charges up to 3.99%. Lately, I’ve been using SwanBitcoin for my weekly bitcoin purchases. They charge 0.99 to 2.29%. Strike’s new rates are a big deal and could help drive down fees for all consumers.

  • Strike is still in beta mode and is only limited to Bitcoin, you can’t buy other cryptocurrencies on the platform. Sign up for the waiting list here and earn $5: https://invite.strike.me/8LBL22

2. Choice: Buy crypto with retirement funds?

  • Choice allows you to use some of your tax advantaged retirement dollars to acquire digital currencies. Bitcoin has been the best performing asset of the past decade. If you are a long-term crypto bull then this might be something you want to check out.

  • Right now, Choice has over 125,000 accounts and $18B assets under custody. They have a website where you can make your allocations and manage your portfolio. Choice recently announced that they will be launching an app. I’m excited to try it out. If you would like to join me on their waiting list you could do so here: https://www.choiceapp.io?kid=1KZEV7


Read

There are so many good reads on the internet. Here are a couple I’m digging through.

  1. Deconstructing CeFi by Kraken: If you are curious about how crypto lending platforms are able to offer high interest rates, then check this out.

  2. Compass Mining: Risk vs Reward by Lyn Alden: Earlier this year, I became a bitcoin miner. Lyn Alden is a great thinker. In this piece, she analyzes the risks vs rewards of bitcoin mining with Compass. Compass is a white glove service that makes it easy for regular non-tech folks to become miners. Check it out if you are curious.

Thank you for making it this far. I always appreciate your questions and feedback. Have a great week ahead!

Afolabi