Why crypto prices are falling

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The top stories from the week in 10 minutes or less. Here's what we have on deck for today:

• 📉Why crypto prices are falling

• 🤔What happened to Solana this week

• 🦍Otherwise launch and the future of $APE

Pass the dip

The entire crypto market is down almost 8% since last week. Taking the year-to-date view paints an even more pessimistic picture and the contributing factors are aplenty.

Federal Reserve Chairman Jerome Powell announced rate hikes on Wednesday of 50 basis points. This is the largest such increase in over 20 years and in general, rate hikes have a negative correlation to prices on open markets. Combine that with high inflation, geopolitical conflicts, soaring energy prices, and supply chain constraints and you can see why asset prices have taken a beating this year.

However, as Powell mentioned in his post-meeting press conference on Wednesday, fundamentals are still strong, citing a strong labor market and increases in household spending and business fixed investment.

So is this just a dip or are we going into a full-blown recession?

Well, we can't say for certain. Nobody can, and if they say they can, run. But we believe that the fundamental technologies behind cryptocurrencies from immutability to decentralization are more important now than ever before. And we tend to invest in what we believe in

Although he was talking about stocks, our pal Elon put it perfectly in this tweet:

Solana crashes (again)

Over the weekend, the Solana blockchain went down for ~7 hours.

Apparently, bots were spamming Metaplex's Candy Machine program, which is a tool for minting NFTs. Since the mint was set at a fixed price and not an auction, this "created an economic incentive to send a huge number of transactions in hopes of winning the mint" according to Solana Labs.

The transaction volume reached an incredible 6 million transactions per second (tps) before crashing. That level of tps created over 100 Gbps of traffic, and since Solana is a proof-of-stake blockchain, validators ran out of memory trying to validate the blocks and their capacity was exceeded.

We like to picture it like this classic scene from I Love Lucy:

Solana's advantage over other blockchains like Ethereum is scalability. It offers faster transactions at lower prices. However, it appears it bit off more than it can chew in this instance, and this crash was only the latest in a wave of crashes over the past year.

To improve the network amid these crashes, Solana Labs put out this statement outlining the cause of the crashes and what is being done technically to improve the blockchain.

Yuga’s “Otherwise” launch sends gas through the roof

Speaking of too many transactions...

Yuga Labs launched an NFT sale for Otherdeeds this weekend. Otherdeeds is a collection deeds to pieces of land in their upcoming metaverse gaming project called Otherside.

The mint took place exclusively in ApeCoin, which is an ERC-20 token that exists on top of the Ethereum blockchain. And since Yuga Labs is known to do it big, this sale was no different.

The Otherdeeds were on sale for 305 $APE (or ~$5,800) plus gas fees. But because Yuga's releases have become so popular, the high-demand caused gas wars never before seen on the Ethereum blockchain and over $180M worth of ETH was burned over the weekend as a result.  

Some perspective on the event here:

Shortly after the event, however, Yuga Labs posted this Twitter thread stating that they will encourage the ApeCoin DAO to migrate to its own chain. ApeCoin DAO board member Yat Siu responded with a thread of his own, stating that "no discussion was had" on a potential apechain and the DAO would be receiving offers from various L1 & L2's.

On the same day as the thread from Yat Siu, ApeCoin announced that it will now be supported by Polygon.

Whether Otherside will be the next big thing or a flash in the pan is uncertain. But the fact that a major project like this is potentially moving away from Ethereum may be a signal that the future is definitely multi-chain, and projects will need to find the ecosystem that fits them best.

Glossary

We're confused too. We're here to help decrypt the crazy world of crypto.

• minting - creating or publishing on the blockchain (full guide on minting here)

• ERC-20 - ERC stands for "Ethereum Request for Comment" and ERC-20 is a standard used for creating and issuing smart contracts on the Ethereum blockchain. (Investopedia)

• gas fees - refers to the fee required to conduct a transaction successfully on the Ethereum blockchain and is the unit that measures the amount of computational effort required to execute specific operations on the Ethereum network (ethereum.org)

• gas wars - an auction for priority inclusion in an upcoming block of transactions to be validated on a blockchain. (CoinDesk)

• burn - permanently removing tokens in circulation by sending them to a dead address to create a deflationary event (CoinDesk)

• L1 & L2 - short for Layer 1 and Layer 2 - covered in previous newsletters but you can read about them here.

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