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How the Elon-Twitter saga impacts crypto

How the Elon-Twitter saga impacts crypto

Twitter drama has never had higher stakes. As the Elon Musk saga continues, the crypto industry is watching closely. [Image via Jeremy Bezanger]

There’s never a dull moment on the blockchain. Here’s what you need to know this week:

The crypto world is reacting to Elon Musk’s $43 billion bid for Twitter. Themes around Web3 and decentralization have become key to the story.

Several altcoins have been outperforming Bitcoin. Avalanche, Solana, and Terra have outpaced BTC this past year. We’re taking a closer look.

The week in numbers. The amount of ETH the Ethereum Foundation holds in its treasury, and other key figures to know this week.

MUSK SEE TV

What does Elon Musk’s Twitter takeover bid have to do with crypto?

If you’re interested in crypto, you probably pay at least a little attention to Elon Musk’s Twitter account. The memes and musings he’s shared over the years have helped spark market frenzies and sell-offs alike, which is just one reason why his latest move, a bold attempt to take over Twitter, has Crypto Twitter completely spellbound — DOGE (Musk’s favorite memecoin) even spiked 10% after Musk’s stake in Twitter was made public. But why else is the crypto industry following this story so closely? Let’s dive in.

  • The saga started on April 4, when Musk disclosed purchasing 9.2% of Twitter’s stock. Soon after, Twitter CEO Parag Agrawal announced that Musk would be joining Twitter’s board of directors. Then, a few days later, Agrawal announced that Musk wouldn’t be joining, and the Tesla CEO offered to buy the social media company outright for $43 billion and take it private. Last week, the board implemented a “poison pill” provision — designed to make it too expensive for Musk to buy Twitter by granting shareholders the right to buy more Twitter shares at a discount if Musk increased his stake past 15%. 

  • Why does Elon even want Twitter? At least according to his own statements, he wants to protect Twitter’s role as the “de facto town square” of the internet by encouraging “free speech” and limiting content moderation. Another change Musk floated was making the Twitter feed algorithm “open-source” — an idea that’s also been endorsed by Twitter founder Jack Dorsey. (Open-source code is also key to the decentralized ethos underpinning many blockchain applications.)

  • The potential for a “decentralized Twitter” inspired some prominent crypto players. FTX founder Sam Bankman-Fried mused about encrypted on-chain tweets, while Cardano founder Charles Hoskinson offered to help Musk build a decentralized alternative to Twitter. But the prospect also spurred plenty of crypto-community criticism. Dogecoin co-founder Jackson Palmer voiced discomfort with the world’s wealthiest individual launching a hostile takeover of a public company. Ethereum co-founder Vitalik Buterin, who has no issue with Musk owning Twitter, warned that similar hostile takeover bids from other wealthy individuals or groups — like those from “ethically challenged foreign governments” — could “easily go very wrong.” 

  • Twitter has already been funding a decentralized social media project called Bluesky, which is building a “decentralized protocol for public conversations” that will allow users to control their relationships with audiences and let developers innovate on top of the protocol without needing permission. Elsewhere, Web3 developers are working on related concepts. A project called Entre, for example, is focused on connecting working professionals. Each user profile is an NFT, with connections documented on the DeSo blockchain.

Why it matters... In the days after Musk’s takeover plans emerged, investors were skeptical — in part because it wasn’t clear how the Tesla CEO would finance the purchase. We know this because Twitter’s stock price initially remained stagnant. But by this week, as other potential admirers began eyeing the company, Twitter’s stock price finally spiked — in part, some analysts say, due to enthusiastic retail investors drawn to the drama. And while no one can say what’s going to happen next in this crazy saga, we all know where we'll hear the news: Twitter.

ALT CTRL

As Bitcoin struggles, altcoins aim for the crypto crown

Unless you’re a true diamond-hands HODLer, sputtering BTC prices might have inspired you to at least look at alternatives. “Smaller, lesser-known tokens are outperforming Bitcoin,” reported Bloomberg recently, describing the current moment as “altcoin season.” By building upon Bitcoin’s pioneering tech, thousands of new tokens — from buzzy dog-themed memecoins and Ethereum alternatives to a vast list of obscure challengers — have emerged within crypto’s nearly $2 trillion ecosystem. In the last year, many of the top altcoins have outperformed Bitcoin, but what’s been giving them the edge? Let’s take a look.

  • Bitcoin’s share of the total crypto market is nearing an all-time low. The biggest cryptocurrency’s “dominance,” to use one popular metric, hovers around 38% of the total crypto market — only a few percent away from its 2018 all-time low.

  • The surging popularity of DeFi, stablecoins, and NFTs have helped propel rival cryptocurrencies that offer smart-contract compatibility. Smart contracts and decentralized apps (or dapps) were first pioneered by Ethereum, which helped the cryptocurrency become the second-biggest by market cap. ETH’s market cap is currently near half of BTC’s, but by some measures it’s actually bigger than BTC: Ethereum regularly processes nearly five times as many daily transactions and saw greater trade volumes on Coinbase for half of 2021. 

  • ETH’s recent performance has likely been driven in part by anticipation over a major upcoming upgrade known as “the merge” or ETH2, which will move Ethereum’s network from a mining-based system to a proof-of-stake system that promises to be faster, cheaper, and more energy efficient. But bugs in testing and other issues have caused repeated delays for the transition, with the timeline now pushed out to this fall

  • In the meantime, a wave of smart-contract compatible ETH rivals has gained momentum — including Solana (SOL), Terra (LUNA), and Avalanche (AVAX), which have outperformed BTC by more than 300%, 700%, and 280% respectively over the last year, compared to ETH’s nearly 90% outperformance. Ethereum remains the leader in NFTs, with nearly $22 billion in sales over the last year, but fast-rising Solana tallied nearly $2 billion, according to CryptoSlam. When it comes to DeFi, the story is similar. Ethereum remains king, with $117 billion “locked” into smart contracts on the platform, but rivals are rapidly growing: Terra has ballooned to over $29 billion, Avalanche past $11 billion, and Solana past $6 billion. 

Why it matters… Bitcoin remains the king of crypto, but can it keep its crown as the universe of smart-contract powered applications continues to expand? It’s worth noting that Ethereum fans have long predicted a moment nicknamed the “flippening,” when ETH’s market cap would eclipse BTC’s — but it still hasn’t happened. In part, that’s because Ethereum’s quickly emerging rival blockchains have stolen some of its smart-contract momentum. But it’s also likely because Bitcoin’s simpler utility and history as an inflation-resistant, gold-like store of value remains a pretty strong value proposition. After all, actual gold has a market cap north of $10 trillion.

NUMBERS TO KNOW

$4 billion

Valuation of blockchain-based game The Sandbox, which is aiming to raise $400 million in a new funding round. The open-world game is a leader in the emerging metaverse economy as brands like Adidas and Warner Music Group have purchased NFT real estate in the game, and Snoop Dogg even released a music video filmed entirely inside the digital world.

$300 million

Total sales volume that new ETH-based NFT project Moonbirds has generated since launching on Saturday, making it by far the most popular NFT collection by sales in the last 30 days. Each NFT features a cute pixel-art owl and grants membership to the PROOF Collective, the club behind the project.

$41,000

Price of a pair of Bitsneaks, a “super silly” pair of sneakers that display the live price of BTC via flexible LED material. The limited-edition kicks were developed in partnership with NBA star (and crypto booster) Spencer Dinwiddie.

0.3%

Percent of Ethereum’s total supply that the Ethereum Foundation currently holds — worth about $1.3 billion. That means that the non-profit responsible for leading Ethereum R&D efforts holds 80.5% of its $1.6 billion treasury in ETH, per a new financial report.

TOKEN TRIVIA

What is ApeCoin’s maximum supply?

A

21 million

B

1 billion

C

100 billion

D

There is no max supply

Find the answer below.

Trivia Answer

B

1 billion