Project Updates ($DOT, $NEAR, $SAND, $XRP)

This fundamental analysis was published on July 13th, 2023, and is part of a weekly paid newsletter from the Crypto Consulting Institute that provides market insights, actionable trade signals, and monthly fundamental analyses. For more information on receiving FAs as they are released, visit: https://www.cryptoconsultinginstitute.com/newsletter

Polkadot ($DOT)

Updates since March 2022:

• Polkadot released the Rococo v0.4.22 testnet, which included a number of new features, such as the XCM cross-chain messaging protocol. XCM is a universal protocol for inter-blockchain communication, adaptable for usage within and beyond the Polkadot ecosystem. It operates in conjunction with XCMP-Lite (also known as HRMP) or any other potential transport protocols to facilitate secure, trustless communication between parachains.
• The Polkadot ecosystem utilizes XCM. The introduction of XCMv3 provides added advantages to parachains and the contracts and applications they host, such as bolstered bridging capacities that connect to external networks, enhanced fee transactions for operations, NFTs, and APIs that allow for the querying and utilization of pallets on other blockchains.
• Polkadot released the Relay Chain v0.9.23, which included a number of bug fixes and performance improvements.
• By the end of 2022, Polkadot had onboarded 74 parachain winners; notable parachains are Clover Finance, Moonbeam, Acala, Unique Network, Centrifuge, Plasm Network, Astar Network, Equilibrium, Litentry, HydraDX, Parallel Finance, and Statemine.
• In 2022, Polkadot introduced its innovative governance system, OpenGov, initially commencing its deployment in Kusama. Self-proclaimed as the most advanced and comprehensive blockchain governance system to date, OpenGov shifts away from the slightly more centralized Polkadot Council, decentralizing the entire governance process to a community-driven voting system. This change guarantees that decision-making and implementation can always proceed in an unstoppable and completely autonomous way.
• According to the annual Electric Capital developer report, Polkadot remains one of the most expansive developer ecosystems in the cryptocurrency industry. Boasting a community of more than 2,000 developers, including over 750 full-time professionals, Polkadot’s full-time developer numbers have skyrocketed by more than 16-fold since 2018.

• Revolut, the worldwide financial platform catering to over 27 million customers, has introduced a second Learn & Earn program in collaboration with Polkadot. This course enlightens users about the intricacies of staking and the advantages of multichain interoperability. Customers of Revolut in Europe can earn DOT tokens by completing the courses. Moreover, they can opt to stake these tokens directly within the app, thereby receiving equivalent rewards to other staking participants who contribute to the security of the Polkadot network.
• In February, the developers working on ink!, Polkadot’s native smart contract language, released a significant upgrade featuring an end-to-end testing framework. According to data from Dotinsights, the ecosystem witnessed the deployment of 2,577 WASM smart contracts by the end of the quarter.
• A Polkadot parathread is a type of blockchain that can connect to the Polkadot network. Parathreads are similar to parachains but do not have a dedicated slot on the Relay Chain. Instead, parathreads share slots with other parathreads and only produce blocks when needed. This makes parathreads a more cost-effective way to connect to the Polkadot network and allows more projects to participate in the ecosystem.
• The openga launch of Polkadot has granted dot holders greater opportunities, while the establishment of the core technical Fellowship has fostered on-chain governance. Additionally, the Polkadot treasury is preparing to accommodate multiple assets and sub-treasuries in the near future. Despite encountering challenges, Polkadot has experienced substantial growth in its community and developer adoption.

What is to come:

• Messari released a Q1 State of Polkadot report, noting: “Polkadot’s future looks promising, with a loaded roadmap featuring XCM V3, OpenGov, system parachains, asynchronous backing, and parathreads. Given its large and committed developer community, Polkadot is expected to deliver innovative products throughout 2023.”
• Polkadot aims to move away from the current slot auction model and adopt an agile approach where it is viewed as a collection of compute cores. This involves proposing a monthly sale of core time for immediate usage and leveraging bulk sales and fixed pricing strategies to maximize market potential. Through this transformative shift, Polkadot intends to enhance accessibility, efficiency, and market opportunities within its ecosystem.
• Polkadot looks to enhance interoperability among diverse chains by introducing “accords” as intermediaries that facilitate asset interactions without requiring an additional third chain. Simultaneously, Polkadot prioritizes the development of robust systems through decentralization, cryptography, and widespread adoption of client technologies. This dual focus aims to foster seamless connectivity and resilience within the Polkadot ecosystem.
• Dr. Gavin Wood stated that, as initially envisioned, Polkadot is functionally complete, and the release of the Polkadot 1.0 codebase is imminent.

Risk Assessment Factors:

• Even in the face of a bear market, capital limitations, and regulatory shifts, Parity Technologies’ technical groundwork remains robust, and they are now witnessing advancements in their endeavors.
• Enhancing user experience has posed a notable obstacle within the ecosystem; nevertheless, efforts have been taken to address this issue by introducing user-friendly wallets such as Nova, Talisman, and Subwallet. Furthermore, there exists untapped potential for further enhancements in this regard.
• Amidst market challenges and regulatory hurdles, Polkadot has demonstrated expansion in its community and developer adoption. Over the past year alone, there has been a notable 43% surge in monthly active developers, underscoring the platform’s robust growth.
• The existing model of Polkadot poses significant barriers that impede collaboration and potential growth. To overcome these limitations, a proposed future vision entails a shift towards an agile approach, wherein Polkadot is viewed as a collection of compute cores. This paradigm shift aims to foster greater flexibility and facilitate improved collaboration within the Polkadot ecosystem, paving the way for enhanced growth and development.
• Xcm is a language that abstracts common functionalities found in chains, enabling the transmission of expressive messages. However, its limitation lies in the absence of guarantees for faithful interpretation, which renders it less suitable for trustless environments.

Discussion

Cutting immediately to the chase, the price action of $DOT has been a point of fascination. Anyone that has paid attention to the top 20 cryptocurrencies by market capitalization would recognize that $DOT has hardly budged at a current $6.45B market cap. Yet, the price has returned to December 2020 levels that lead up to what is broadly accepted as the beginning of the bull market.

The price diminishing in the face of a resilient market cap can be partly attributed to the dynamic or unfixed emissions of $DOT’s tokenomics. The annual inflation rate, or new tokens minted into circulation, is 6.85%. During bear market conditions, as with any currency, we can expect the price to continue to be diluted over time with further emissions.

At present, the technicals tell a pretty straightforward story. At a glance, $DOT has held up well compared to sharp movements experienced more broadly across the market, yet has experienced a gradual decline. There appears to be a bullish market structure forming on the daily charts, with the price having found support on the 200D MA following a rejection of the 100D MA. In the short term, the Resistance/Support flip of $5.166 will be critical to maintaining structure leading to a retest of 50–200D MAs. $BTC and $ETH will continue to lead the market and influence the movements of altcoins.

As a benchmark of the long-term potential of $DOT, a $55.7B all-time high market cap is approximately an 8.6x gain from here. But how likely is it that $DOT retests or surpasses its all-time high?

Polkadot changing its value proposition from initially marketing itself as an interoperable protocol to a resource-based protocol that realizes value from selling available resources from the network is a positive. Polkadot plans to move away from the current slot auction model in favor of a more agile approach. Under this new model, Polkadot would be seen as a collection of compute cores that could be rented monthly. This would allow for more flexibility and efficiency, as projects could rent the computing power they need for the time needed. Bulk sales and fixed pricing would also be used to maximize market potential. Since the emergence of LayerZero, alongside similar iterations, and ongoing competition with Cosmos, interoperability as the primary narrative somewhat minimizes the positive metrics from Polkadot’s growth in developers and community. There is such a thing as taking on too big of a problem, and if a product like LayerZero or Cosmos has the optics of taking control of market share, then having a backup narrative that doesn’t leave it voiceless as a run-of-the-mill layer 1 will be essential.

Polkadot has significant developer activity on the network. With the parachain system, crowd lenders lock $DOT tokens for up to two years, encouraging longer-term token retention. Staked $DOT is currently at 43.55% of the total supply. As more high-quality DApps become available on the network, proportionally greater token retention opportunities become available. While Polkadot developer activity continues to lag behind major alt ecosystems like Solana and Polygon, having over 2000 developers working on the network in varying capacities should not be overlooked.

When picking an investment to take us into the next bull market, the ecosystems are more robust or “complete,” with a solid community, and continued deployment of DApps is a shoo-in to retest their all-time high market caps. While it is unclear whether one should expect mouthwatering gains from $DOT, regarding the likelihood of underperforming against the rest of the market and overall safety as an investment with limited downside risk, $DOT can likely retest previous all-time high market cap in favorable conditions.

How well Polkadot 2.0 will bolster investor confidence is yet to be seen, but Dr. Gavin Wood remains a highly respected figure in the space. In the mid-term, how Dr. Gavin’s Wood notion of ‘Accords’ plays out will likely challenge the existing standard of bridges. Accords are mechanisms that can be proposed and opted into on the Polkadot system. They allow for patterns of cooperation and cross-application functionality that are impossible to achieve through bridges. During our recent LayerZero fundamental analysis, we touched on the limitations of the lock and mint bridge function, which has been one of the most common attack vectors in the crypto space. Solving this problem will not go unrewarded, and Polkadot is well-positioned to take a robust product to market that cannot be shut down due to the decentralized nature of its operations.

Sandbox ($SAND)

Updates since March 2022:

• A plethora of partnerships;
• Warner Music Group to create a music-themed metaverse,
• Helium Foundation to create a decentralized network of nodes in the metaverse,
• The Atari Hotel creates a virtual hotel in the metaverse,
• The Binance NFT marketplace to launch a new collection of LAND NFTs,
• South China Morning Post to create a virtual newsroom in the metaverse,
• The Walking Dead to create a virtual world based on the popular TV series,
• Gucci to create a virtual fashion experience,
• World Wildlife Fund to create a virtual wildlife sanctuary in the metaverse,
• Adidas Metaverse team to create a virtual space for the brand,
• South Korean entertainment company CJ ENM to create a virtual K-pop concert experience,
• Music streaming service Spotify to create a virtual music festival,
• French fashion house Yves Saint Laurent to create a virtual fashion experience,
• American football league NFL to create a virtual football stadium,
• Microsoft to create a virtual world on Microsoft Mesh,
• British fashion house Burberry to create a virtual fashion experience,
• American toy company Mattel to create a virtual world based on the Barbie brand,
• Warner Bros. to create a virtual world based on the DC Comics brand,
• Sony to create a virtual world on PlayStation,
• Google to create a virtual world on Google Cloud
• Samsung to create a virtual world on Samsung TVs,
• Meta to create a virtual world on Meta’s Horizon Worlds platform,
• HTC to create a virtual world on HTC’s Vive Flow headset,
• Ubisoft to create a virtual world based on the Just Dance franchise,
• American multinational technology company Warner Music Group to create a virtual music festival,
• Sony to create a virtual world based on the PlayStation brand,
• Samsung to create a virtual world based on the Galaxy brand,
• Google to create a virtual world based on Google Earth,
• Microsoft to create a virtual world based on Minecraft,
• Atari to create a virtual world based on the Atari brand,
• Warner Bros. to create a virtual world based on the Harry Potter brand,
• Ubisoft to create a virtual world based on the Rabbids franchise,
• Binance to create a virtual world based on Binance’s NFT marketplace,
• Samsung to create a virtual world based on the Galaxy S22 series, Galaxy Z Fold 4, and Galaxy Z Flip 4,
• Atari to create a virtual world based on the Rollercoaster Tycoon franchise,
• Binance to create a virtual world based on Binance’s Launchpad platform,
• Warner Bros. to create a virtual world based on The Lord of the Rings franchise,
• Ubisoft to create a virtual world based on Tom Clancy’s Rainbow Six Siege franchise,
• Sony to create a virtual world based on the PlayStation 5 console,
• American football league NFL to create a virtual football stadium,
• Metafight to create a virtual MMA-themed experience,
• Sandbox hosted a virtual music festival featuring performances from artists such as Steve Aoki, Grimes, and deadmau5,
• Launched its Alpha Season 2, which featured new experiences from partners such as Atari, The Walking Dead, and Snoop Dogg,
• Sandbox launched its LAND 2.0 sale, which allowed users to purchase new LAND parcels in the metaverse,
• Raised $93 million in a Series B funding round led by SoftBank Vision Fund 2.
• Sandbox Landowners have been rewarded with multiple farming events (I.e., $GEM and $CATALYST), creation of estates, renting of LAND and estates, and can now redeem the $mSAND token.
• $SAND was listed on Coinbase and became the first ever metaverse token purchased in Japan through CoinCheck.
• Sandbox LAND migrated to layer-2 Polygon.
• The Sandbox Partners Program was launched with the aim of assisting over 300 agencies and studios worldwide in advancing their business through dedicated resources, teams, and support.
• Over $12 million from the Game Maker Fund was allocated to support more than 100 independent studios, pushing the boundaries of creativity and entertainment within The Sandbox.
• To enhance accessibility, the creator tools (VoxEdit, Game Maker) have been localized and are now available in 10 languages, including Mandarin, Portuguese, and Korean, making asset and experience creation more accessible.
• Seven LAND sales, including three regional neighborhoods (California Dreamin’, K-verse, Megacity), were initiated to foster diverse communities and content within The Sandbox.
• New offices were established in five countries (United Kingdom, Canada, Singapore, Thailand, and Uruguay) to strengthen The Sandbox’s global presence while ensuring local relevance.
• Sandbox Game Client installed over 1.3M times by the end of 2022.
• Sandbox’s main Twitter account has surpassed the milestone of 1 million followers, generating over 150 million impressions and 10 million engagements. Additionally, we have launched The Doggies Avatars account specifically for Snoop Dogg fans within our community.
• On Discord, The Sandbox has over 300,000 registered members who actively engage and stay updated on all things related to LAND, events, SAND, and more.
• The growth of The Sandbox community extends within the game itself, as Sandbox achieved over 2 million registered wallets in early 2022.

What is to come:

• Partners Resources HUB will provide agencies and studios with all the information they need to drive their businesses forward.
• Partners Directory is a platform that matches brands’ needs with agencies’ expertise, further facilitating collaboration.
• The release of Game Maker V0.8 will enhance the possibilities for builders, offering more fun, social, and immersive experiences.
• Making creation more accessible by localizing Sandbox tools in new languages.
• Facilitating the onboarding of new Partners into The Sandbox ecosystem through various initiatives, including the launch of a content series to inspire brands and IPs to join The Sandbox.
• Introducing new vertical and regional LAND sales, featuring flagship neighborhoods based on cultural and geographical affinities.
• Implementing a new onboarding process specifically designed for agencies and studios.
• Focus for The Sandbox has been overwhelmingly on partner developments and facilitating builds of their products.

Risk Assessment Factors:

• Competition. While there has been no shortage of partnership developments for 2023 and technical developments in 2022, there has been limited discussion of The Sandbox. Lunarcrush currently assigns an alt rank of 430/4481 and a Galaxy Score of 35/100, which is below average in proportion to its market cap.
• The Sandbox 2023 roadmap is scarce on further technical developments. Indeed, partnerships are immensely important to access followers of brands they onboard. Still, the lack of announcements on ongoing development direction is vague and makes it difficult to determine what The Sandbox will look like in the long term.
• Crypto gaming, as a category, has underperformed against emerging narratives. How relevant gaming cryptos will be heading into the next bull market is yet to be seen.

Discussion

The quality and quantity of partnerships that The Sandbox has onboarded since we published our initial FA in March is jaw-dropping.

Microsoft, Google, Ubisoft, Samsung, and Sony are about as big as it gets regarding partnerships. You’d be hard-pressed to find yourself wishing they had more well-known backers pushing their way into The Sandbox.

Yet, The Sandbox has spent much of its time in the 50s by market capitalization. A $755M market cap is not a small amount of money but is a far cry from its November all-time high of $6.8B. Being down 95% from an all-time high at this stage of the game is a bitter pill to swallow and takes a consistent dollar cost-averaging strategy to dilute one’s cost basis.

While some of the following statements mightn’t amount to more than speculation, it may be a useful exercise to think of how this could be.

First, as we’re all too aware from Scoop’s macro and technical insights from previous newsletter editions, investor confidence is low, and many indicators suggest that disposable capital is limited (typical of bear markets). I would make the point that on a categorical level by relevance and what a typical investor may deem as something they’re willing to sacrifice — that gaming would be one of the first heads on the block. Sexier niches such as Zero Knowledge, DEXs, Layer-2s, and liquid-staking tokens appear to have overtaken gaming in aggregation. That said, meme coins are a possible correlation with crypto gaming that would be interesting to look out for during a bull market. This hypothesis is not to diminish the value of gaming cryptos but is equivocated on the assumption that both these categories present a flight risk in the face of risk. I have little doubt that gaming will have a renaissance under favorable conditions, but with the state of the macro continuing to flag a possible recession, it is difficult to say what that might look like.

Secondly, gaming is a massive market that continues to grow year-on-year That is a positive metric for The Sandbox, but with recent developments in AI and advances in graphics, it wouldn’t be unfair to suggest that traditional gaming is clawing its way back. Not everyone is across gaming, but massive releases this year (Final Fantasy XVI, Diablo IV, Harry Potter, Zelda, etc.) have likely captured the attention of those who may otherwise have ventured into crypto gaming.

While the play-2-earn model is certainly alluring, it is difficult for most onlookers to conclude the likes of $AXIE and not have the thought that it was just a bubble. This isn’t entirely negative. It may indicate that there is still plenty of room for growth. If these partnerships with Sandbox amount to anything, we could see more hybrid web2/web3 integrations into more conventional gaming means, such as a Playstation 5 console.

Trade opportunities are scarce in the short term. While the market broadly has correlated with what appears to be a bullish market structure on the daily, $SAND was recently rejected from the 200D MA and can not find support between 50–200D MAs. Further, it’s struggling to maintain a basic trend, traders do not currently appear interested in $SAND, and most of its price action is likely largely determined by it sharing a collateral basis with $ETH. Given there appears to be a good deal of overhead resistance, I am inclined to favor a retest of 0.3324 in the short term.

However, veering back to a previously stated hypothesis in the hope that we may see the forest through the trees, it may be the case that for crypto gaming to really break into the mainstream — and stay there — we require further advances in Virtual Reality and Augmented Reality technology.

During this updated review of The Sandbox, it was surprising that there was little to no mention of technical developments apart from a 3D engine designed to improve graphics. While this may sound like nerd-speak to many of you, how pleasant and aesthetically pleasing a game is correlates with the level of engagement. While my view of gaming cryptos has always been ambitious beyond the core concept, crypto gaming needs AR technology, particularly to couple with P2E mechanics and have applications outside of a recreational context. StepN’s ‘move-2-earn’ concept is one such example.

All that said, It is worth removing the tinfoil hat with our neural link chip inserts to see what is in front of us. If your conviction and stomach is strong, you cannot go wrong with steadily building a position in gaming cryptos like $SAND; the upside potential is significant. However, the risk profile of such an investment is far from a sure thing in rocky macro waters, as it would only take the core narrative being disrupted for you to become exit liquidity.

Near Protocol ($NEAR)

Updates since April 2022:

• NEAR Protocol made a significant announcement in May 2022 regarding a major upgrade for validators, incorporating additional features and enhanced functionality. This upgrade aims to enhance the security and scalability of the NEAR network.
• NEAR Foundation Grants Program: The NEAR Foundation has unveiled a fresh grants program to provide funding to projects constructed on the NEAR Protocol. This grants program is carefully designed to bolster the expansion and advancement of the NEAR ecosystem.
• NEAR Protocol Ecosystem Growth: Over the past few months, the NEAR Protocol ecosystem has experienced continuous growth. The number of projects building on the NEAR Protocol has now surpassed 1,000, and the user base is expanding rapidly.
• NEAR Protocol Partnerships: In recent months, NEAR Protocol has also announced several partnerships. These partnerships encompass collaborations with organisations such as the World Economic Forum, the Chamber of Digital Commerce, and the Linux Foundation.
• NEAR Protocol Collaboration with Google Cloud: NEAR Protocol revealed a strategic alliance with Google Cloud. This collaboration empowers NEAR Protocol projects to leverage Google Cloud’s robust infrastructure and services.
• NEAR Protocol Collaboration with Alchemy: NEAR Protocol announced a partnership with Alchemy. This collaboration enables NEAR Protocol projects to utilise Alchemy’s infrastructure and services to develop and deploy decentralised applications (dApps).
• NEAR Protocol Launches Rainbow Bridge: NEAR Protocol introduced the launch of the Rainbow Bridge. This innovative bridge facilitates two-way asset transfers between Ethereum and NEAR Protocol, offering seamless platform interoperability.
• Near partnered with Alibaba Cloud to leverage the computing power of their web services network
• Near integrates with Wormhole for ZK-enabled cross-chain communication with Ethereum
• NEAR releases their Blockchain Operating System (BOS)

• Near.org boasts a collection of more than 6,800 components contributed by approximately 100 active developers and over 12,000 user accounts.
• In the recent launch of Phase 1, the network’s validator capacity was bolstered by including chunk-only producers.
• Lunarcrush assigns NEAR an altrank of 66/4486 and a Galaxy Score of 41/100.

What is to come:

• Further development of BOS.
• The NEAR Foundation is moving towards a decentralized capital allocation model by delegating decision-making authority to community DAOs. Each DAO is dedicated to a specific purpose and has a defined mandate: marketing, developer governance, and creatives.
• The NEAR Digital Collective is an evolving governing body created to democratize decision-making within the network. It consists of five key components: a Voting Body that includes all active NEAR accounts, a House of Merit that represents the community during voting and decision-making processes, a Council of Advisors that guides the House of Merit, a Transparency Commission that ensures checks and balances are in place and a Community Treasury that finances grassroots initiatives supporting the NEAR blockchain.
• NEAR Horizon is an accelerator program supporting Web3 startups. It offers a platform where founders can access resources and assistance to scale their projects. The accelerator boasts a wide network of mentors, service providers, and backers, creating a streamlined path for the growth and advancement of startup ventures.

Risk Assessment Factors:

• Centralization: The governance structure of the NEAR Protocol is relatively centralised, as developers and the NEAR Foundation hold a significant portion of the tokens. Decentralising governance is a focus on ongoing development.
• Security: Being a relatively new project, the NEAR Protocol has yet to undergo extensive testing like established blockchains. Consequently, there is a risk of potential security vulnerabilities being exploited.
• Scalability: While designed with scalability in mind, the NEAR Protocol is still developing. As the user base grows, there is a possibility of network congestion leading to performance issues.
• Regulation: The regulatory landscape continually evolves, leaving room for new regulations that could impact the NEAR Protocol’s operations and value.
• Lack of Adoption: As a relatively new project, the NEAR Protocol has not yet attained widespread adoption, which could impact its long-term sustainability.
• Competition: The NEAR Protocol faces competition from various other blockchain projects in the market, particularly Solana. To thrive, it must effectively compete with these projects.
• Developer Activity: While the NEAR protocol has continued to onboard developers steadily, it does not appear to have significantly disrupted developer activity on Solana.

Discussion

NEAR has plenty of potential, but like all projects, it could not escape the crosshairs of the bear market. Since we initially covered NEAR in April, developer activity has continued its uptrend but not in a manner significant enough to shake its largest competitor Solana.

As discussed in the previous FA, Rust is the primary language for Near and Solana, making Solana a primary target to poach developers from as a KPI to track its success. While Near’s efforts haven’t made a dent in Solana’s momentum, their pivot toward their Blockchain Operating System (BOS) is a welcomed development as the Zero Knowledge Layer-2s and similar tech steal the spotlight on the scalability narrative. Simplifying the developer onboarding experience and putting forward a common interface for all blockchains is one of the more underrated yet monumental tasks required to make blockchain technology more accessible. Whether NEAR reaps the fruits of such a major development by the next bull market mightn’t be likely, with scalability remaining the core issue with blockchains. However, they will likely be rewarded if they continue focusing on this area beyond the next bull market. Further, it is too soon to dismiss the possibility of BOS being a complimentary feature with Solana’s mobile devices they are working on.

In the mid-term, NEAR had missed their opportunity to capitulate on the FTX charade that heavily implicated Solana. For this reason, among accessibility issues, I don’t see NEAR being a top 10 crypto by the next bull market.

They have held steady in market cap, currently ranked in the 40s. As we warned in the FA, increased supply has significantly diluted token value.

Quick math; An all-time high market cap of $12B, currently at $1.2B, is a 90% loss to its collateral base. $NEAR is certainly not the only wounded project throughout the bear market; however, an all-time high token price of $20.40, down -93% currently at $1.32 per token, should demonstrate to those still reckoning with the visuals of supply squeezing the price. When covered in April, $NEAR’s supply was 679,412,414; it now sits at 930,976,358, approximately a 28% increase. As previously mentioned, the only negating factor to this price decline is network effects associated with ecosystem usage. We can boil it down to poor timing with heavily vested token releases during a bear market. Still, all hope is not lost if we’re to look toward the likes of $SOL and $MATIC, which both had heavily vested token releases yet maintained value through network effects.

There is no clear opportunity to go long on $NEAR in the short term. Like the above projects, it has managed to bounce in correlation with the rest of the market but has lost steam since BTC has surged in dominance. $NEAR failed the retest of the 200D MA and is battling in the short term to maintain a bullish daily market structure, but if we zoom out to the weekly, things could get a lot messier as the market structure appears bearish. The risk-reward is not there in the short term.

A good place to close is with Nears Q2 2023 Transparency Report, treasury holdings near $1B, suggesting a more than adequate runway to continue developments and operations. Marketing efforts have pushed more than 300 mentions in articles, and their Lunarcrush score does suggest an adequate level of engagement, which is pertinent, while most alts are drained by BTC’s dominance.

Like $SAND above, if your conviction in NEAR is strong in the longer term, and you believe BOS will be a major trump card for them going forward, then a modest dollar cost-averaging strategy to manage your cost basis is a viable option to manage that investment. But there does not appear to be much probability of a significant short-term rally without some serious partnership integrations that leverage their BOS.

Ripple ($XRP)

Updates since May 2022:

• Ripple announces a partnership with the Central Bank of the Bahamas to collaborate on developing a Central Bank Digital Currency (CBDC).
• Ripple introduces a new product called XRP Ledger Consensus Service, tailored to assist businesses and financial institutions in building applications on the XRP Ledger
• Ripple achieves a significant legal victory in its ongoing lawsuit with the SEC as a judge orders the SEC to provide more details about their decision to classify XRP as a security.
• Ripple unveils a partnership with MoneyGram to leverage XRP to facilitate cross-border payments.
• Ripple publishes an updated roadmap for the future of the XRP Ledger, outlining its strategic plans and initiatives.
• The SEC released documents revealing that William Hinman, a former SEC official, made a speech in 2018 asserting that Bitcoin and Ethereum were not securities. This disclosure may have implications for the Ripple lawsuit, potentially supporting the argument that XRP should not be considered a security.
• A hearing between the SEC and Ripple is scheduled for their ongoing legal dispute.
• The Xumm wallet has introduced version 2.5.0, which includes user experience (UX) enhancements such as NFT action previews and navigation fixes.
• Fractal, a digital identity solution, is actively working on incorporating KYC/AML compliance into the XRPL, aiming to enhance regulatory compliance.
• A proposal for XLS-40d as a standard for XRPL Proof-of-Payment (XPOP) allows offline proofs for transactions and associated metadata.
• Another proposal, XLS-42d, seeks to establish a standard for XRPL Plugins, simplifying the process for developers to modify and build sidechains without requiring knowledge of C++.
• Rippled V1.11.0 has been released, bringing updates and improvements to the Ripple protocol.
• Ripple is discussing with over 20 central banks about creating and implementing a central bank digital currency (CBDC).
• Peersyst’s proposal for an EVM sidechain presents a proof of concept to introduce smart contracts into the XRPL ecosystem. This initiative aims to provide EVM developers and functionality to the XRPL ecosystem, offering a broad range of applications. The EVM sidechain is currently active on Devnet, utilizing the Cosmos SDK, specifically Ethermint, and establishing a connection to the XRPL through the XRPL-EVM bridge. The Devnet is live and generates blocks approximately every 3.4 seconds, utilizing the Comet BFT PoS consensus mechanism, a Tendermint variant.

What is to come:

• The XRPL (XRP Ledger) is exploring sidechains. Coreum and Root Network, two recent launches, provide XRPL developers with increased programmability, allowing them to delve into security tokenization and the metaverse. This expansion opens up exciting possibilities for developers to explore and innovate within the XRPL ecosystem.
• The XRPL is expanding its decentralized exchange (DEX) capabilities beyond the existing order book system. A new automated market maker (AMM) is under development, following the specifications outlined in the XLS-30d standard. This development aims to enhance XRPL’s trading ecosystem by introducing AMM functionality to provide liquidity and improve asset pricing mechanisms.

Risk Assessment Factors:

• In the second quarter, there was a decline in average daily transactions by 11.9% and average daily active addresses by 17.6% compared to the previous quarter. Except for NFT activity, most network activity metrics experienced a decrease in Q2.

• XRPL does not yet natively support smart contracts.
• Legal risks: Ripple is currently facing a lawsuit from the SEC, which carries the potential for significant consequences for the project. A successful outcome for the SEC could lead to XRP being classified as a security, resulting in various implications for the project.
• Regulatory risks: The regulatory environment surrounding cryptocurrencies is continuously evolving, leaving room for potential new regulations that could impact XRP in the future. Such regulations could affect the project’s operational capabilities and its overall value.
• Technical risks: XRPL is a legacy layer-1 distributed ledger solution. Making changes to XRPL is of similar difficulty as Ethereum, which has been referred to as “mechanically upgrading a plane midflight.”

Discussion

If you have been paying attention to global and macro events, you’d undoubtedly notice the wheels in motion for Central Bank Digital Currencies (CBDCs). The end of 2022 saw pilot programs from Australia, Singapore, and Hong Kong, to name a few.

While our principled position on CBDCs doesn’t warrant repeating, forces are bringing it to fruition. XRP’s core value proposition to facilitate settlement for global transactions remains, and judging by the resilience of $XRP’s market cap, there is significant liquidity banking on the further proliferation of CBDCs.

The SEC has continued to diminish it’s reputation in response to the FTX debacle and the manner in which it has singled out projects without giving notice for fixes. For this reason, among many others, a significant contingent of investors do not take the proceedings against Ripple seriously.

Indeed, $XRP has rallied out of the blue, even through association, with developments in CBDCs. Given the size of the company and its convoluted origins predating $BTC, there is a strong probability that XRP will play a role in the ISO-20022 interprotocol ledger, among many others, as intended.

In our initial FA, we indicated that developing smart contracts and functionalities on XRPL that can rival smart contract ecosystems is secondary. Not because smart contracts are not a powerful tool to facilitate application functions but because $XRP has maintained a resilient market cap of $25B without the promise of smart contracts. $XRP is about cross-border settlement, a key feature of CBDCs.

While Ripple has dabbled in NFTs, we will unlikely see decentralization maxis, or even NFT apes, look for opportunities on their network.

This is not to say that there are zero network effects or opportunities, Coreum is an interesting sidechain to XRPL that brings smart token functionality to meet a use case such as real estate. Linking themselves to XRPL offers opportunities for network effects with $XRP. Similar to a recent FA on emerging features of the Bitcoin blockchain and the recent performance of $STAX, the correlation with their collateral base leaves the door open for future opportunities.

$XRP has held up incredibly well compared to other assets during a bear market, with much to do with speculation on announcements around CBDCs. Yet, it is still not immune from BTC dominance and exit liquidity from risk-off macro conditions. Those held since 2018 are still underwater, and the SEC proceedings arguably diminished its potential in the previous bull market. As it stands, the risk-reward in the short term is dubious at best.

Undoubtedly, assuming the consequences of the SEC case against Ripple closing are not existential, it will run in the next bull market. $XRP is an investment for those that understand its role in the interledger protocol. While we’re capitulating on what we’ve gone as far to call draconian outcomes — if there is a clear opportunity, then we are fools for not taking it, at the very least in the short term.

An outcome in the SEC case will give certainty for $XRP, they could get off with as little as a fine or as much of a forced closure.

We would not hazard to say how hard $XRP runs in the next bull market, but if it manages to retest the previous bull market all-time high, there is a 4x opportunity. Clarity on the SEC case would likely see $XRP enter price discovery after 3 years of regulatory scrutiny.

Regardless, while $XRP is under scrutiny in the US, it still operates globally and involves itself in the emergence of CBDCs. We should not let our principles get in the way of opportunity when it presents itself.