The Pulse: Crypto airdrops going to select communities reminds us it’s an insiders game

Quick Take

• This is the fourth edition of a weekly column by The Block’s editor-in-chief on current events in the crypto space and other musings.
• Today’s topics include airdrops, the SEC going after Uniswap, upcoming Bitcoin ETFs in Hong Kong and the Halving.

The evolution of the airdrop has reached its next stage.

In the early days, crypto airdrops were a surprise gift of tokens to early adopters, who would each receive as much as tens of thousands of dollars. Yet over time, the awareness that projects may launch tokens through airdrops gave rise to an ongoing battle between projects trying to distribute tokens to their real users and people trying to farm the airdrops.

The latest twist and turn in this saga is that projects are distributing a portion of their airdrops to popular communities, in particular ones built around NFT projects. But why? Well, there may be a couple of reasons.

A big one is engagement. NFT projects that typically make the list include Mad Lads, Milady’s and Pudgy Penguins — all communities known for being very passionate on X and boosting engagement. This type of engagement is so forceful that even Su Zhu turned to Milady’s to try to fix his reputation following the collapse of his hedge fund Three Arrows Capital.

Another one may be of enriching insiders. Having the ability to decide an airdrop for a potential billion-dollar project is a lot of power. Crypto’s most rapidly growing project Ethena — which is not without its risks — gave part of its airdrop to NFT projects SchizoPosters and Redacted Remilio Babies, communities that two of its core contributors are part of, it noted. The reason given? “Why not,” the founder Guy Young posted, before solely writing “Remilio” to end the post, a style adopted by many of its community members.

This approach of getting crypto diehards to boost a project on social media is nothing new. It’s well known in the industry that influencers, referred to as Key Opinion Leaders, get outrageously short lockups on tokens allocated to them for shilling projects. Some even receive large chunks of the token supply.

In a similar — although more legitimate — vein, Monad’s recent raise was focused on getting as many crypto influencers on board as possible. The project named 12 angel investors in its announcement post before gesturing at “others,” of which it appears there were a lot. Some went so far as to joke it would be easier to name the number of people who aren't on the list. Hell, even I was asked to join (although I respectfully declined).

“I keep seeing people tweet about what a stellar go to market strategy Monad has,” Jill Gunter, chief strategy officer at Espresso Systems, mused on X. “But as far as I can tell, the main GTM strategy mostly involves getting its backers to tweet about its great GTM strategy.”

None of this is particularly surprising either. Crypto owners love deifying influencers, following their trades and usually becoming their exit liquidity. Look at how Ansem has stepped into Cobie’s shoes for instance. But it does highlight how crypto has become a social game.

This may be great for those in the know with $30,000 NFTs that let them access private Discord groups — especially as these airdrop allocations have the potential to pump their bags, as it were. But the flip side is that it may begin to alienate the rest of crypto, especially those who are new to the space. Although, frankly, I'm not sure they'll care.

Now, onto a selection of stories that caught my attention this week.

The SEC takes its biggest shot yet at DeFi

The Securities and Exchange Commission has gone after big centralized crypto companies, like Coinbase, Ripple, Binance and others, as well as smaller DeFi projects like Ooki DAO — but this is the first time it has gone after a major established DeFi project: Uniswap.

The SEC sent Uniswap Labs, the organization that developed the eponymous decentralized finance (DeFi) protocol, a Wells Notice on Wednesday, writes my colleague Elizabeth Napolitano. A Wells Notice is a formal notice that the SEC intends to bring charges against a respondent.

The crypto industry reacted by calling it a "war on DeFi" with many proponents ready to take Uniswap's side. "This is a new area for them to be moving forward with, although it's certainly not one that surprises me or anyone that they're continuing to open up new areas of new fronts in the battle against crypto," noted Jennifer Schulp, director of financial regulation studies at the libertarian think tank Cato Institute.

However, some say this could be good for crypto. I shared the stage with Ledger CEO Pascal Gauthier at Paris Blockchain Week on Thursday and, when asked about this subject, he replied that it might finally get the industry the answers — and the clarity — it has been yearning for.

Bitcoin ETFs are coming to Hong Kong

Hong Kong regulators could approve spot ETFs based on bitcoin and ether as early as Monday, Napolitano writes, citing Bloomberg. The first batch of issuers are aiming to launch both types of spot ETFs at the end of April.

This matches comments made by Livio Weng, chief executive of HashKey Exchange, who told my colleague Timmy Shen that the fund issuers in collaboration with HashKey have finalized developing their spot Bitcoin ETFs — meaning it's go time.

While this is a notable milestone, similar crypto products have existed in Europe without coming close to the impact of their U.S. counterparts, so it's unclear whether Hong Kong will have any more of an impact.

Bitcoin halving just a week away

There are just seven days to go until the Bitcoin Halving, the fourth in its history and, as always, the question of whether it's priced in is being asked.

On one side, Coinbase analysts say it might well be priced in, as bitcoin hit a new all-time high only a few weeks before the halving is set to occur. This could mean "the effect has already been priced in by savvy traders," they said.

On the other, BitGo Head of Go Network Matt Ballensweig said that in each cycle, the halving tends not to be priced in. He pointed to the Bitcoin ETFs as an example of a similar event that, in his view, was not priced in as the price rose heavily after the products were approved.

Either way, make sure to track the halving on The Block's new Bitcoin Halving Countdown tracker.

That's all from me this week. Make sure to come back each weekend for the next editions of The Pulse.