 | 5/15/24 |
The intersection of AI and blockchain tech has emerged as a key crypto narrative in 2024.
What’s up? It’s Coinbase Bytes
There’s never a dull moment on the blockchain. Here’s what you need to know this week:
- Wisconsin is now a bitcoin whale. Plus, ETH ETF updates, how miners are faring after the halving, and more market headlines in focus.
- AI-meets-crypto companies are on the rise. A closer look at some of the startups at the intersection of these two technologies.
- This week in numbers. Jack Dorsey’s 2030 price prediction for BTC, the number of Pudgy Penguins toys retailers sold in under a year, and more stats to know.
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Price changes are for the past week, ending on May 16, 2024 at 12:05 AM UTC
 | MARKET BYTES |
BTC’s big new HODLer is … Wisconsin?!
After a week of lower volatility, crypto prices spiked on Wednesday as new U.S. consumer price index (CPI) figures showed inflation easing slightly. One key index, “core inflation,” which removes food and energy costs, hit its lowest rate since April 2021.
As markets of all kinds got a boost, BTC climbed toward $65,000 and ETH approached $3,000.
Meanwhile, the BTC ETF category saw weekly inflows return for the first time in a month and futures markets continue to suggest a bullish path for BTC, with many traders betting on a new all-time high north of $75,000 by the end of June.
Here are three more crypto stories to know this week.
1. Wisconsin reveals $160 million crypto portfolio
The spot BTC ETFs that began trading in January were created in part to make crypto a more viable option for big-money institutional investors like pension funds.
According to a new SEC filing, that promise is already coming true. The State of Wisconsin Investment Board — which manages state-employee retirement funds among other assets — disclosed that as of the end of March, it held around $160 million in spot BTC ETFs (split between BlackRock’s and Grayscale’s funds).
Those weren’t the board’s only crypto-related investments. According to the Block, “shares of other cryptocurrency firms such as Coinbase, Marathon Digital, Riot Platforms, Block, Cipher Mining, Cleanspark and MicroStrategy were also in the Board's portfolio.”
- Follow the leader... According to Bloomberg ETF analyst Eric Balchunas, other big institutional investors are likely to follow in Wisconsin’s footsteps. “Normally you don't get these big fish institutions … for a year or so (when the ETF gets more liquidity),” he noted, “but as we've seen these are no ordinary launches. Good sign, expect more, as institutions tend to move in herds.”
2. What’s happening with ETH ETFs?
Following the blockbuster success of spot BTC ETFs — two of which hit a record-breaking $10 billion in assets under management in just three weeks — major firms including BlackRock, Grayscale, and VanEck are hoping for approval from the SEC to begin trading similar products for ether.
After months of delaying decisions on several firms’ ETH ETF applications, the SEC has a final deadline to approve or deny VanEck’s application on May 23, followed by a May 24 deadline for ARK Invest and 21 Shares’s filing. The latter modified its application this week by removing a staking component.
In advance of the BTC ETF approval, there was reportedly a flurry of communication between the SEC and the firms. With little back and forth said to be taking place this time out, according to Reuters, market watchers expect the SEC to deny or delay VanEck’s application next week, and don’t anticipate clarity around other applications anytime soon.
- In the long run… Some market watchers are still optimistic that the ETFs will eventually begin trading. As J.P. Morgan analysts put it recently, “The template is likely to be similar to bitcoin: with futures-based ethereum ETFs already approved, the SEC (if it denies the approval of spot ethereum ETFs) is likely to face a legal challenge and eventually lose.”
3. Miners navigate post-halving landscape
Last month, Bitcoin’s fourth-ever halving reduced the amount of new coins generated by the network every ten-ish minutes from 6.25 BTC to 3.125 BTC. Overnight, mining firms saw their main source of revenue decline by half — an annual shortfall of around $10 billion.
Larger (often publicly traded) firms prepared by investing in faster and more efficient mining rigs, while smaller firms were expected to have to move older gear offline.
That appears to have happened. The BTC network saw a 6% decline in “mining difficulty” last week, the biggest dip since crypto winter. According to a new Bernstein report, the biggest mining companies have increased their share of the post-halving pie.
- Rune revenue… Over the last few weeks, the explosion in popularity of Bitcoin Runes — which allow users to create new tokens on top of the BTC blockchain — boosted miner’s bottom lines via transaction fees, with $135 million being generated the week Runes launched. But as the Runes craze has cooled, fees have come down dramatically.
| ARTIFICIAL COINSCIOUSNESS |
The rise of AI-meets-crypto companies
AI and crypto are among the most transformative technologies in decades, and in 2024 — as crypto prices have spiked and AI programs like ChatGPT have continued to evolve — companies operating at their intersection are emerging as one of the year’s major crypto market narratives.
In recent weeks, the AI-meets-crypto sector has outperformed the broader crypto market, with tokens like Render, Akash Network, and others rising double-digit percentages on their potential to redefine access to AI computing power, increase data transparency, and even combat deepfakes.
Here’s what you need to know about the rising sector.
Use case: Decentralized computing power
The AI development race has created a nearly insatiable demand for chips like those made by Nvidia, making computing power an increasingly valuable commodity.
Nvidia’s most powerful chips cost as much as $40,000, and renting access to similar chips from cloud providers like Amazon can cost nearly $100 an hour.
Several crypto startups are looking to use decentralized computing networks and crypto-powered incentive structures to make access more affordable.
- The Render Network allows users to contribute unused GPU power to help power AI projects. Its partners include Stability AI, the makers of generative AI graphics program Stable Diffusion. Stability AI uses Render’s computing power to help train its 3D asset creation model, which has been used by Hollywood visual effects teams and other creatives.
- The Solana-based IO Research has similar plans, and is focused on providing decentralized computing for AI and machine-learning startups. IO Research raised $30 million this year to grow its network of 25,000 GPUs, which have collectively processed over 40,000 hours of computation.
Use case: AI agents
What if an AI program could negotiate on your behalf? Or make predictions based on data analysis? Or solve complex customer service queries? So-called “AI agents” may usher in the next iteration of the AI economy, wherein software autonomously performs tasks, manages assets, and even interacts with other pieces of software on its own.
At least some of these AI agents will be built on top of blockchains. AI programs are heavily reliant on huge datasets; blockchains help ensure that data can be audited, and smart contracts can help define AI agents’ capabilities.
- Fetch.AI is creating blockchain-based AI solutions that allow anyone to create agents that can handle all of the tasks mentioned above, as well as enable the chaining of multiple AI agents together to scale new business models or ideas.
- AI crypto startup Alethea plans to create agents that its CEO says will be able to handle administrative tasks, pay bills through autonomous crypto transactions, and manage “a large part of our lives,” in the next five years.
Use case: Proof of identity
Alongside AI’s many productivity promises are some risks that the technology is misused to spread misinformation (via things like deepfake images) and power new kinds of scams.
Crypto is uniquely well suited to combat these problems, and a variety of startups are building ways to verify “proof of personhood.”
- Worldcoin, the startup founded by OpenAI founder Sam Altman, uses a combination of biometrics and blockchain to prove personhood. (Disclosure: Worldcoin is a Coinbase Ventures portfolio company).
- Modclub, which is built on top of the Internet Computer blockchain, is testing facial recognition software to verify users of a decentralized messaging app called OpenChat.
- Rarimo launched its “proof of humanity” protocol last year, which requires users to prove they’re human before they can access digital identity tools such as Gitcoin Passport.
The bottom line…
As Jeremy Allaire, the co-founder of USDC issuer Circle, put it: “AI and blockchains are made for each other.”
And the potential market for these technologies is vast. A new report from VanEck pegs the revenue from AI crypto projects by 2030 as ranging from $10.2 billion to more than $51 billion. “There is a significant chance that ... AI applications will be crypto's raison d'être,” said the fund’s managers.
| NUMBERS TO KNOW |
$45 million
Amount raised by Polymarket, a crypto-based predictions market, in a Series B funding round. Peter Thiel’s Founders Fund led the round; other investors included Ethereum co-founder Vitalk Buterin. Polymarket “utilizes the Ethereum blockchain and smart contracts to allow users to speculate on the outcomes of various real-world events,” explains the Block.
$1 million
Price BTC will hit by 2030, according to Block CEO Jack Dorsey. Earlier this month, Block announced it would use 10% of its reported bitcoin profits to buy more BTC throughout 2024.
1 million
Number of Pudgy Penguin plush toys that retailers like Target, Walmart, and Hot Topic have sold in under a year. The collectible birds are based on the identically named NFT collection that debuted in 2021 and have since become a top-20 NFT project by trade volume.
6
Number of meme tokens tracked by VanEck’s new memecoin index, which is up around 212% for the year. According to the index’s official description: “Meme coin refers to crypto assets often named after characters, individuals, animals, artworks, or other memetic elements. Initially supported by enthusiastic online traders and communities, these coins are intended for entertainment purposes.”
| TOKEN TRIVIA |
When was Dogecoin originally created?
| A | 2011 |
| B | 2013 |
| C | 2015 |
| D | 2017 |
Find the answer at the end of the email.
| NOW TRADING ON COINBASE |
| NEON |  |  |
Neon EVM, the first parallelized EVM on Solana, allows developers to seamlessly deploy Ethereum dapps to Solana.
| SAFE |  | |
Safe provides developers with an open-source and modular account abstraction stack.
| KARRAT |  | |
The KARRAT Protocol is a decentralized gaming infrastructure layer and aims to cultivate a community-driven environment that propels the next wave of gaming and entertainment innovation.
Trivia answer
| B | 2013 |
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