A weekly recap of the most insightful news, analysis, and capital flows in the wild west we call crypto.

Hello and welcome back to the Web3 Rewind! Per usual in this industry, lots has happened this past week. Here's what we have in store for you:

• Wallets are having a moment

• Roaring Kitty and the attention economy

• Coinbase systemwide outage

• Tornado Cash developer found guilty

• State of Wisconsin Investment Board Bitcoin ETF investment

• Role of KOLs in Crypto

The Latest

Wallets are having a moment

Farming users dept.

Roaring Kitty and the Attention Economy

RoaringKitty or DeepFuckingValue. If you don’t know this name, you haven’t been in the trenches enough or lived through the mania that was 2021. Better known as Keith Gill, previously a financial analyst, RoaringKitty singlehandedly drove the GME mania that resulted in GME rocketing from $4 to $480 in one month. If you want a good film recapping the events, I would recommend Dumb Money.

If you recall, that saga led to multiple movements, including Occupy Wall Street 2.0, and ultimately manifested in an outlet for the average individual to vent years and years of frustration against the financial system that left them broke and without opportunity. Driving short sellers bankrupt and breaking the financial system even for one day was their way of presenting as big of a middle finger as they realistically could.

Where am I going with this? After a three year hiatus on Twitter, RoaringKitty posted a cryptic tweet, depicting a man holding what seems to be a game controller, and leaning forward in his chair. Such a motion can be seen as someone saying “game on,” What exactly is game on? No one is sure, to be honest. Since that comeback tweet, RoaringKitty has been posting cryptic video after cryptic video, with no one able to decipher the meaning behind the videos. One thing that is game on again is meme stocks, with GME being up 180% in the past few days and similarly, AMC being up more than 100%. It’s Deja Vu as GME short sellers have just lost $2B amid the meme stock rally. It feels like we’re living through 2021 all over again.

This is great news for much of CT, which given the price action in the past few weeks, thinks that the cycle is completely over. Everyone is asking when retail mania will finally hit, and maybe RoaringKitty has given the catalyst we were all waiting for.

The attention economy has been a topic of hot discussion in the past few months. Notably, one sector of crypto has outperformed while everything else has barely budged off the lows. Of course, I’m talking about memecoins. Big tech monetized attention, where most of the money made in big tech has been around capturing attention, retaining it, and then monetizing it. The real economy has reoriented itself around attention and now financial markets have woken up to the attention game. And what better arena than a globally distributed, permissionless financial system? Crypto tokenizes attention to the maximum.

If RoaringKitty managed to add more than $10B in market cap to GME’s stock, it is safe to say that the financial attention game is very much alive, and quite frankly never left. Ever since the fated days of COVID when we all sat at home, sitting behind our Robinhood accounts, and the entire world devolved into a mass of unbridled degeneracy, you can’t undo that. If anything, big tech and the human behavior it has encouraged have pushed the attention game to the absolute limit. There’s no going back now.— Joseph Cooper, Decential Media

Quick Bits

Coinbase systemwide outage

• On Monday, Coinbase experienced a system-wide outage. The outage lasted for roughly three hours and so far, there is no indication of what caused the outage.

• Surprisingly, outages are still fairly common for Coinbase, even if it is one of the most well-established CEXs within crypto. One would’ve at least expected them to upgrade their infrastructure to deal with the tremendous growth in demand when full mania hits.

Tornado Cash developer found guilty

• Tornado Cash developer Alexey Pertsev was found guilty by a Dutch court. In what is frankly a complete travesty and an insult to the values we stand for, Alexey was sentenced to 64 months in jail.

• As stated by the judge, “Tornado Cash in its nature and functioning is a tool intended for criminals.” In a note handed out to the press, it further stated that “The defendant and his co-perpetrators developed the tool in such a manner that is automatically performing the concealment acts that are needed for money laundering.” I guess privacy was never a fundamental human right.

State of Wisconsin Investment Board Bitcoin ETF investment

• The State of Wisconsin Investment Board has purchased $99M of BlackRock’s Bitcoin ETF. This likely won’t be the last investment board to purchase BTC.

• Bitcoin ETFs have significantly slowed down with the ETFs seeing net outflows in 8 of the last 12 days. Could this trend last for a bit longer? Definitely. Will we eventually get back to business as usual with hundreds of millions in inflows per day? Yes.

And last but not least

Role of KOLs in crypto

KOLs, which stands for Key Opinion Leaders, are an integral component of crypto today. Hundreds of thousands of retail users look to them for trading advice, airdrop farming guides, and generally pay attention to what they say. In the attention economy, this is a very valuable thing to command. Thus, for projects, without being able to command your own attention, sometimes you can pay these KOLs to do it for you. Said less nice, it’s shilling. Said nicely, paid advertising that isn’t always disclosed as being paid. A recent academic study showed that in the short term, KOL tweets are initially associated with positive returns. However, these tweets are followed by significant negative longer-horizon returns, suggesting that KOLs generate minimal long-term investment value.

Intuitively, this makes sense. Most individuals follow KOLs to make money, often by trading or farming protocols, the most short-term behavior one can expect from degens in the space. Understandably, this probably doesn’t lead to the best price action in the long term. A protocol wants an organic community, brought together by similar ideals and values, that sticks around because they genuinely believe in the protocol. When you get a community filled with short-term thinkers here to make a quick buck, then naturally it isn’t that surprising that the community does not stick around and hence, individuals sell their tokens. Building a community of believers takes time, and is often the result of months of community initiatives, constant interaction and nurturing. If you are a protocol looking to boost your metrics, whether that be the number of active users, activity, or community size, KOLs remain one of the best short-term way to do it. But remember, it is very much trading some short-term gain for long-term pain.

However, there’s a slightly different method to get KOLs involved. Rather than simply paying a KOL to tweet about your protocol, protocols are launching “KOL rounds” where KOLs get to invest in protocols, often at a lower valuation and a shorter vest. In return, the protocol does not need to spend any cash for promotion, and KOLs are maximally incentive-aligned to talk about the protocol, drive attention to it, and make it successful. This is likely a better model than a protocol paying thousands out of pocket for a KOL tweet, however, the impact of such KOL rounds has yet to be demonstrated, by virtue of a small sample size and many other factors in consideration. There are thousands of KOLs that exist on CT, and it would not be that surprising if they are here simply to make money (don’t we all?). And thus, the shorter vesting schedules they get as part of a strategic KOL round, often means that they can dump their tokens in the market far earlier than investors and the team.

Should a KOL’s vesting schedule be shorter than an investor’s? That depends on how much value you think they respectively add. However, given the state of the market, and with every protocol depending on KOLs as a key component of their GTM strategy, protocols are very much the beggars here. And you know what they say, beggars can’t be choosers! — JC

Have you read the definitive history of Ethereum? No? Well then get your copy of Out of the Ether while you can.