In this episode of The Chopping Block, host Hasib of Dragonfly is joined by Tom, Tarun of Gauntlet, and guest Laura Shin, CEO of Unchained and author of The Cryptopians. The panel begins by analyzing the financial stability of MicroStrategy's "Stretch" preferred shares, which recently fell to $87. They debate whether Michael Saylor's debt-leveraged Bitcoin acquisition strategy presents systemic risks or represents a "Luna for suits" scenario.

Next, the group discusses the recent restructuring at the Ethereum Foundation, which includes a 20% staff layoff and the spin-out of EthLabs. Laura Shin references her historical research in The Cryptopians to contextualize Vitalik Buterin's governance preferences and organizational influence. They also examine the CME's high-stakes lawsuit against the CFTC over the approval of perpetual futures, debating the legal distinction between futures and swaps. Finally, they evaluate Meta's leaked points-based prediction market, "Arena," and its potential to capture consumer attention.

MicroStrategy's "Stretch" Shares Face Market Skepticism

MicroStrategy's preferred stock, "Stretch," designed to trade at a $100 peg, has weakened to around $85 to $87 following Michael Saylor's sale of $32 million in Bitcoin.

"Implicitly what that means is that the market believes that they need more than the 10% yield in order to hold this thing" - Hasib

MicroStrategy holds $1.4 billion in cash as of June 22nd against approximately $1.5 billion in annual dividend obligations, leaving them with roughly one year of dividend runway.

Tarun compares the preferred share structure to Terra's ecosystem, calling it "Luna for suits" due to the continuous dilution of common shareholders to maintain the preferred yield.

Unlike the algorithmic collapse of Terra, MicroStrategy holds $55 billion in Bitcoin assets and has the legal right to defer preferred dividends indefinitely if needed.

Ethereum Foundation Layoffs and the EthLabs Spin-Out

The Ethereum Foundation announced a 20% staff layoff affecting over 50 employees, alongside the departure of co-director Xiaowei Wang.

EthLabs, a new nonprofit spin-out led by seven senior foundation members, has launched with funding from Bitmine, Sharplink, SNZ, and Joe Lubin.

Drawing from her historical research in The Cryptopians, Laura Shin notes that Vitalik Buterin historically preferred having "the supermajority votes" and acting as a "secret hand" in organizational decisions.

"I think the market's kind of beyond that... there's a functional, ETH goes down, we have less runway" - Tom

The division of labor between the two entities leaves the Ethereum Foundation focused on long-term research and core values like privacy, while EthLabs targets protocol upgrades and market adoption.

CME Files Lawsuit Against CFTC Over Perpetual Futures

The Chicago Mercantile Exchange (CME), which controls 93% of exchange-traded derivatives in the US, has sued its primary regulator, the CFTC, over the approval of perpetual contracts.

The CME argues that perpetual contracts do not settle and should be legally classified and regulated as swaps rather than futures.

The CFTC has pushed back against the lawsuit, calling the legal action "frivolous" and characterizing it as "lawfare" designed to protect an incumbent monopoly.

"Coinbase had like the 10-year futures... they roll over after 5 years" - Tarun

If the CME wins, crypto exchanges may simply adapt by offering long-dated contracts, such as 100-year futures with periodic funding payments.

Meta Explores Points-Based Prediction Market with "Arena"

Leaked reports indicate Meta is developing "Arena," a points-based prediction market slated for integration across Facebook, Instagram, and WhatsApp.

Meta has previously experimented with prediction markets, launching an internal version and a public points-based app called "Forecast" in 2020 before winding it down.

"I view prediction markets as media companies that are dressed in the sheep's clothing of a trading platform" - Tarun

While prediction markets typically struggle with monetization, Meta's core business model is uniquely suited to monetize the attention and user data generated by market observers.