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🪙 Stablecoins are unstable

The Hustle

Yesterday, the final member of a group of former eBay execs pleaded guilty to terrorizing the creators of a critical ecommerce newsletter with packages of live spiders, cockroaches, and a funeral wreath. Alrighty then…

In today’s email:

  • Stablecoins: What are they and why are they crashing?
  • Chart: Can ads actually be good?
  • Codie’s Corner: The 1-in-60 rule as a guide for living.
  • Around the web: How to meet your next co-founder, realistic androids, sloth and dog friendships, and more cool internet finds.

🎧 On the go? Listen to today’s quick podcast to hear Zack, Mark, and Rob talk about stablecoin struggles, a baby formula shortage, and more.

The big idea
stablecoin

What the heck is a stablecoin, and shouldn’t they be stable?

The world of crypto is no stranger to volatility.

Bitcoin, Ethereum, and other cryptocurrencies experience wild price swings that make them hard to use as a means of exchange.

Enter stablecoins — cryptocurrencies that peg their value to an existing asset, and offer crypto holders a way to enjoy the benefits of digital currency (e.g., transaction speed and low fees), without the volatility.

For stablecoins to stay stable…

… they need to be backed by something they can “peg” their value to. This is called collateral, and there are generally three types:

  • Fiat-backed: Coins backed by a national currency (e.g., USD) that match the fiat currency in reserve to the number of coins in circulation.
  • Cryptocurrency-backed: Coins backed by another cryptocurrency (e.g., BTC, ETH), that typically keep the cryptocurrency in reserve higher than the coins in circulation to account for crypto’s volatility.
  • Algorithm-backed: Coins that use an algorithm or “smart contract” to peg the stablecoin to another crypto token that helps ensure the stablecoin remains, well, stable.

As you can probably imagine, algorithmic stablecoins are a bit controversial — technically, they aren’t backed by anything.

One such stablecoin…

… is TerraUSD (UST), which is pegged to another crypto token called Luna. The smart contract between the two dictates that UST holders can always trade one UST for $1 worth of Luna tokens.

Per Bloomberg’s Matt Levine, this relationship helps keep the price of UST stable at $1 through a pair of arbitrage trades that can happen if UST moves above or below $1:

  • If UST trades above $1, people can buy $1 worth of Luna and exchange them for one UST, and instantly profit
  • If UST trades below $1, people can buy one UST for under a dollar and exchange it for $1 worth of Luna, and instantly profit

While this mechanism has traditionally kept the price of UST in place at $1, the recent panic in crypto has caused it to unravel. The value of one Luna has dropped from ~$81 to one cent in the last week. Predictably, no one wants to buy it anymore.

As a result…

… the price of UST (which, again, should always be $1), has dropped as low as 30 cents.

But it’s not just algorithmic stablecoins that are struggling. Tether, a fiat-backed stablecoin that’s pegged to the dollar, dropped below 96 cents yesterday morning.

With the broader crypto market still turbulent, the next week could determine if “we’re all going to make it” after all.

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SNIPPETS

Robinboost: Robinhood shares jumped 30%+ following news that Sam Bankman-Fried, CEO of crypto platform FTX, now owns a 7.6% stake, worth $648m.

Slow down: Meta’s metaverse machine, Reality Labs, will delay or cut projects it can no longer afford. This news comes on the heels of Facebook’s hiring freeze.

Poor timing: Twitter’s head of product, Kayvon Beykpour, interrupted his paternity leave to announce that he would be leaving the company after over seven years. Beykpour revealed he was asked to leave by CEO Parag Agrawal who he says wants to take the team in another direction.

Formula fiasco: A nationwide baby formula shortage may go on for months. In most of 2021, 2%-8% was out of stock nationwide, but as of May 8, ~43% was out of stock, per Datasembly.

Trends revealed: China’s livestreaming shopping market, a modern twist on QVC, has become a multi-billion dollar business. Savvy US startups can get in on the action — see how to tap into this space on The Hustle blog.

Preventing e-waste: Best Buy’s recycling program will come pick up your old electronics for ~$200. #ecommerce-retail

Map: Check out this map to see how much wind and solar power was generated across the world in 2021. #clean-energy

Uhh: Zuck shared a demo in which he uses Meta’s fancy new VR headset, Project Cambria — except it was blurred out. #emerging-tech

In an effort to curb scams, NFT marketplace OpenSea is adding a system that will find and delete “copymints,” AKA bogus NFTs posing as real ones. #fintech-crypto

Chart
what makes a bad ad

Selina Lee

If ads are inevitable, what makes them good?

Love it or hate it, Netflix will likely launch an ad-supported tier this year in the wake of its 200k-subscriber loss.

While CEO Reed Hastings has long resisted ads, he recently said he was “a bigger fan of consumer choice.”

And it turns out a majority of consumers would choose ads — Morning Consult found 57% of US consumers prefer a low-cost ad-supported service.

On the flip side…

… Unsupervised, an AI analytics platform, found 69% of consumers have abandoned a platform over irritating ads — which raises the question: What makes for a winning ad?

Research shows top attributes include favorite brands, and content that’s relatable, informative, or funny.

Take Coca-Cola’s personalized “Share a Coke” campaign, or Metro Trains Melbourne’s “Dumb Ways to Die” ads, which promoted rail safety through cartoons.

Perhaps predictably, ads deemed bad feature:

Alternatively, if an ad can’t be relatable, perhaps it could be so bizarre that it launches an ice cream company.

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Opinion
Codie's Corner

The pilot’s navigation tool that makes sense for your own life

Every Sunday (ahem — so, like, 60% of Sundays) I have a little ritual where I check in to make sure I’m on the right path.

I use a framework called the 1-in-60 rule. If I had to give you one guide to living a happy life, I think I’d give you this one.

The 1-in-60 rule…

… is a framework pilots use for navigation. It means that for every one degree a plane veers off its course, it misses its target destination by one mile for every 60 miles flown

The thesis is, the further you go, the further away from your goal or destination you get.

I’ve found this is true in life, too — if you don’t track your progress consistently, you’ll veer off course. So often we obsess over a number, like $1m in net worth, 1m subscribers, $10k in monthly income, that we can forget the bigger picture.

So, how do you make sure you’re on the right path?

You grab yourself a nice big glass of red. You sit down to some music (I like instrumental). You open your computer. Then you ask yourself some questions.

Here are a couple I ask myself:

  • Am I happy doing what I am doing right now?
  • Looking back at last week, how much of my day was spent doing things I actively enjoyed? How’d that compare to the week before?

Then I throw all those answers and questions in Evernote. It turns out it’s a lot harder to get lost when you’re constantly looking at the map.

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AROUND THE WEB

🎾 On this day: In 1973, tennis stars Margaret Court and Bobby Riggs faced off in a “battle of the sexes” match. Riggs, who had the court resurfaced to match his play style, won, then immediately challenged Billie Jean King to a $100k match. She beat him (though some suggest the match was rigged).

🤝 Useful: On Deck is a platform for finding your future co-founder.

🎹 Cure boredom: Turn your keyboard into a jazz keyboard.

🤖 That’s interesting: The Verge takes a trip to Engineered Arts, where very realistic robots are made for entertainment and educational purposes.

🦥 Aww: And now, a sloth and a beagle who are BFFs.

IN CASE YOU MISSED IT

(A roundup of our best reads from the last couple weeks…)

🤑 Why free stuff makes us irrational

🧼 The surprising afterlife of used hotel soap

🎨 Why 2022 could be a massive year for art

🖼️ NFTs are coming to Instagram

🔒 Are passwords over?

Shower Thoughts
  1. “Your baby teeth are out there somewhere.”  SOURCE
  2. “Spicy chicken wings are the pinnacle of human evolution. You’re eating wings a bird used to fly away from predators covered in the chemical that spicy plants use as a defense mechanism.”  SOURCE
  3. “People love listening to/watching rain fall because they’re not out in it. Some survival gene is probably really satisfied to be safe and warm and rewards us for being out of the inclement weather.”  SOURCE
  4. “If you die at the top of a water slide, the park employees will probably debate how to properly move your body.”  SOURCE
  5. “Future generations likely won’t know what it’s like to find money on the ground.”  SOURCE
 
via Reddit
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Today’s email was brought to you by Jacob Cohen, Juliet Bennett Rylah, and Rob Litterst, Codie Sanchez.
Editing by: Mark “Losing my peg” Dent.

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