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Is Bitcoin coming to your 401(k)?

Is Bitcoin coming to your 401(k)?

Welcome to the monkey-verse of madness. This weekend, Bored Ape Yacht Club began its foray into the metaverse. [Image via Yuga Labs]

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

Bored Ape Yacht Club’s metaverse broke (virtual) ground. BAYC’s Otherside project auctioned NFT real estate and jammed up Ethereum’s blockchain.

Fidelity plans to add BTC to workplace 401(k)s. The finance giant would enable people to allocate up to 20% of their retirement savings in BTC.

The week in numbers. The huge sum Square Enix plans to invest in blockchain games, and other key stats to know this week.

APES UNCHAINED

How Bored Ape’s new metaverse game brought the Ethereum network to its knees

Last March, the celebrity-studded world of “blue-chip” NFTs was rocked when Yuga Labs — creators of Bored Ape Yacht Club (and various spinoffs) — acquired the IP rights to pioneering NFT project CryptoPunks. With control over three of the top five best-selling NFT collections of all time, Yuga then created ApeCoin, a native cryptocurrency to go with its expanding ecosystem. And this week, it launched the first phase of its most ambitious project to date: a public sale of NFT “deeds” to property in Yuga’s forthcoming virtual world, Otherside, which will allow holders of a wide range of NFT projects (Apes, Punks, Cool Cats, World of Women, and more) to use their NFTs as avatars. Here’s how it all went down.

  • The virtual land rush kicked off on Saturday, as users raced to mint 55,000 parcels in the form of Ethereum-based NFTs called “Otherdeeds,” which were priced at 305 ApeCoin, or around $5,800 each. Ethereum fees quickly spiked to historic highs (in a so-called “gas war”) as users frantically outbid each other in the hopes the overstressed network would process their transactions. As a result, each NFT required around $6,000 worth of ETH to mint – more than doubling the price of a deed. All 55,000 units sold out within a few hours, with Yuga Labs raising over $320 million in ApeCoin. 

  • The “gas war” resulted in many would-be purchasers paying considerable fees for transactions that ultimately failed — and made using the Ethereum network for any other purpose temporarily unfeasible. (Etherscan, the most popular way to monitor ETH transaction data, even crashed.) Ethereum co-creator Vitalik Buterin suggested ways that Yuga Labs could have designed its NFT smart contract to alleviate fees and promote “fairness.” Yuga Labs has promised to refund anyone who paid for a transaction that failed due to congestion.

  • Many successful purchasers immediately put their NFTs up for sale on OpenSea, with secondary trading of Otherdeeds helping the site notch a record-high daily trading volume of $476 million. (OpenSea now also accepts ApeCoin.) And not all of the parcels were sold to the general public. In addition to the main onsale’s 55,000 deeds, an additional 45,000 went to Bored and Mutant Ape holders and project developers including Yuga Labs. 

Why it matters… In the wake of the sale, Yuga apologized for “turning off the lights on Ethereum” and suggested that a dedicated ApeCoin blockchain might be needed to alleviate traffic. If you don’t follow ETH closely, it’s hard to understand the full scale of the Otherside sale, but one good metric to look at is “burned” ETH. Because of a complicated upgrade to the Ethereum protocol last year, the majority of gas fees are now burned (or permanently removed from circulation). The Otherside mint’s gas war “burned” more than $157 million worth of ETH in hours — which is all the more impressive when you learn transactions on the most popular Ethereum application, OpenSea, have burned $630 million worth of ETH … over nine months.

WHAT’S THE 401?

Crypto retirement funds go mainstream

It wasn’t too long ago that the idea of being able to buy bitcoin for your retirement account seemed like a pipe dream. But in 2022, workers have a rapidly increasing number of ways to access BTC, ETH, and more via an IRA or 401(k). This week, Fidelity Investments announced that holders of its 401(k) plans will be able to directly buy BTC for their retirement accounts by the middle of this year. As the firm’s head of workplace retirement offerings puts it, “We fully expect that cryptocurrency is going to shape the way future generations think about investing for the near term and long term.”

  • Fidelity is the largest retirement-plan provider in America. When the BTC product is fully rolled out later this year, more than 20 million employees will get the opportunity to become tax-advantaged, long-term HODLers via a digital assets account within 401(k) plans. Savers won’t be able to go all in – the plan limits BTC allocations to 20%, and individual companies will have the option to make that threshold even lower. Fittingly, the first company slated to be onboarded is MicroStrategy, the software firm that is also the largest corporate holder of BTC in the world. 

  • One in four millennials are already using crypto to help fund retirement goals, and options for adding crypto to portfolios keep expanding. Last year, in partnership with Coinbase, 401(k) provider ForUsAll began allowing workers to allocate up to 5% of their contributions in BTC, ETH, and LTC, among other currencies. Grayscale, a digital asset management firm, also offers crypto retirement options with a range of crypto funds that investors can access via traditional brokerages — meaning you can purchase them as part of your traditional or Roth IRA.

  • Institutions are betting on crypto, but some employers (and regulators) have doubts. In a recent survey, a trade group focused on employer-sponsored retirement plans found that just 2% of respondents would consider adding crypto options to their companies’ 401(k) plans. Vanguard, a competitor to Fidelity, has called the long-term investment case for crypto “weak” due to volatility. And in March, the Department of Labor recommended that employers exercise “extreme care” around offering crypto in retirement plans, noting that the agency “expects to conduct an investigative program aimed at plans that offer participant investments in cryptocurrencies and related products.” (Fidelity, along with other financial services firms, responded to the agency with a request to have the recommendation withdrawn.)

  • Beyond retirement savings, many of Wall Street’s biggest names are making new crypto moves. Last week, in a first for Goldman Sachs, the investment-banking giant offered a cash loan of an undisclosed amount to Coinbase that was backed by BTC. (Less than a year ago, Goldman published a report saying that Bitcoin was not “a long-term store of value or an investable asset class.”) And last month, BlackRock, the world’s largest asset management firm, joined Fidelity and others in a $400 million funding round for USDC parent company Circle. More than $50 million worth of USDC, a stablecoin pegged to the U.S. dollar, is currently in circulation across multiple blockchains. 

Why it matters… Last year, when crypto’s bull run was peaking, it wasn’t totally surprising to see Wall Street’s “smart money” finally joining the party. What’s perhaps more telling is how finance-world giants show no signs of slowing their engagement, despite 2022’s crypto down cycle (and rapidly shrinking liquidity across a wide range of markets). As Pomp Investments founder — and crypto Twitter star — Anthony Pompliano puts it: "Bitcoin has transitioned from a contrarian idea to a consensus trade on Wall Street.”

NUMBERS TO KNOW

Number of potential NFT use cases there are, according to New York-based ETF and mutual-fund manager VanEck. The firm, which oversees $65 billion in ETFs, recently announced its “Community NFT” collection, comprising 1,000 Ethereum-based NFTs. The project aims to “build an active community of crypto-focused investors” by offering holders potential perks like event invites or early access to VanEck’s digital-asset research.

$300 million

Amount that legendary Japanese video game publisher Square Enix made after selling IP — including Tomb Raider — to Swedish gaming firm Embracer. Square Enix’s president (and NFT gaming proponent) Yosuke Matsuda said the proceeds would, in part, enable the company to make “investments in fields including blockchain, AI, and the cloud.”

223.15 million

Bitcoin’s new all-time high hashrate — measured in terahashes per second — as of last Wednesday. Bitcoin’s hashrate is a measure of the network’s total computing (or mining) power and is considered a key security metric

1,550

Total square footage of Meta Platforms’ first-ever physical store, where shoppers can try on Oculus VR headsets, co-branded Ray Ban smart glasses, and other metaverse-y tech built by Facebook’s parent company. The (somewhat ironic!) physical space is intended to “demystify” Meta’s vision of the metaverse.

7

Number of hours that the Solana blockchain — popular for low fees and speedy transactions — was forced offline on Saturday after a swarm of bots overwhelmed the network by rapidly minting and reselling NFTs on secondary markets. 

TUNE IN

How does Coinbase decide which cryptocurrencies to list?

Even if you’ve never tweeted “wen [insert your favorite coin]?” at us, you’ve probably wondered how Coinbase decides which new assets to list. In the latest episode of Around the Block, host Justin Mart sits down with Coinbase’s chief product officer Surojit Chatterjee and chief legal officer Paul Grewal to discuss the legal, compliance, and security tests applied to each asset before it’s listed on the Coinbase exchange.

TOKEN TRIVIA

When was the term “metaverse” invented?

A

1985

B

1992

C

2008

D

2017

Find the answer below.

Trivia Answer

B

1992