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GM. This is Milk Road, the crypto newsletter that's cooler than the other side of the pillow during a heatwave.

Here’s what we got for you today:

• The state of crypto 👀

• Coinbase acquires a stake in Circle 🍪 

THE STATE OF CRYPTO 👀

Let’s talk about the state of crypto.

But instead of sending a long, boring PDF, we’re gonna give you the rundown using 4 charts - all in under 2 minutes.

We make our industry snapshots like Cup Noodles - quick, easy, and convenient.

Alright, let’s dive in.

1/ BITCOIN IS HAVING AN INTERNAL BATTLE

Bitcoin is going through a civil war right now. It’s the Battle of 2 Investors.

• On one side: short-term BTC holders (aka they’ve held BTC for less than 155 days)

• On the other side: long-term BTC holders (aka they’ve held BTC for more than 155 days)

Both groups are facing very different situations.

Most long-term holders are in the green on their investments. As a result, they’ve been accumulating more and more BTC.

In contrast, most short-term holders are in the red on their investments. According to Glassnode, ~88.3% of short-term holders are underwater after last week’s flash crash.

As a result, short-term holders have been selling this past week.

Overall, this is a bearish sign for Bitcoin in the near term.

You see, short-term investors are a lot like teenagers going on their first date - they get nervous, sweaty and are more likely to panic when something goes wrong.

So if prices keep decreasing, we could see more short-term investors sell-off which could push the price of BTC lower.

We’ll be keeping a close eye on this trend as we head into September - which has historically been the worst-performing month for BTC. *gulp*

2/ ETHEREUM IS MIGRATING

ETH (pronounced “eeeeth”) is the second largest cryptocurrency with a $197B+ market cap. 

And there’s one big trend happening…

ETH is moving off exchanges. Over the last 5 months, the total ETH on exchanges has dropped from 29M → 22M.

This is good for a few reasons:

• Less ETH on exchanges = less likely chance of a sell-off.

• More users are staking ETH (there is currently 24M ETH staked vs. 22M ETH on exchanges)

• Users are moving off exchanges to explore the Ethereum ecosystem - like Layer 2s, lending protocols, etc

Overall, these are bullish signs for ETH in the long term.

More staked ETH + more ETH moving away from exchanges = less available supply and more buying pressure.

*static noise*

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THE STATE OF CRYPTO CONTINUED 👀

3/ THE LAYER 2 WAR IS HEATING UP

Layer 2s have been growing in popularity over the last few months. The top ones have been Arbitrum and Optimism. 

Well, there’s a new fighter: Base.

It’s Coinbase’s new Layer 2 blockchain and although it’s only been live for ~2 weeks, Base has more daily transactions than Arbitrum and Optimism.

Here are the stats from yesterday alone:

• Base: 723k transactions

• Abritrum: 643k transactions

• Optimism: 450k transactions

The majority of Base’s volume is coming from Friend.Tech (crypto’s new favorite app) so it’ll be interesting to see if the new Layer 2 can keep up the lead in the near term.

Either way, Base is making a strong case for Crypto’s Rookie of the Year. (Let the Onchain Summer celebrations continue.)

4/ NFTS ARE DOWN, BAD

There’s no sugarcoating it: NFTs are in the sh*tter.

Over the last 6 months, the market cap for major projects is down ~$2.2B. (ouch)

This includes popular projects like Bored Apes, CryptoPunks, Azuki, DeGods, and more.

(Milky Fact of the Day: There’s only one NFT project that’s up in price over the last 6 months… Milady. In fact, it’s up 3x)

In the near term, we predict the pain will continue as investors’ attention moves to up-and-coming sectors like LSD-Fi and SocialFi.

BITE-SIZED COOKIES 🍪

Kraken Pro has become the one-stop shop for Pro Traders. Packed with new trading and analytics tools, a polished UI, and a fully customizable trading interface, it’s Kraken’s most powerful trading platform—ever. *

Coinbase has acquired a minority stake in Circle - the issuer of the USDC stablecoin. The Centre Consortium (which governed USDC) is being shut down and USDC will also be integrated into 6 new blockchains.

Balancer announced a vulnerability that puts $27M worth of crypto in its pools at risk. The team added the vulnerability had not been exploited (yet) and said that 80% of the issue had been mitigated, but some funds were still at risk. Users have withdrawn $100M from the protocol since the news broke.

Former OpenSea executive gets 3 months in prison for insider trading. Nate Chastain was found guilty on charges of buying/selling NFTs he knew would later be featured on OpenSea’s website. (My researchers tell me jpeg trading doesn’t get you much street rep in prison either)

Sam Bankman-Fried pleaded “not guilty” to fraud and money laundering charges. His lawyers also argued that he’s living off bread, water, and peanut butter due to the lack of vegan options in prison. (They call it an “inadequate diet”, but back in college that was the Meal of Champions™)

*This is sponsored content.

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.