1.3.24
We're back, crypto's alive, a Bitcoin ETF is on the way, and Solana is coming for Ethereum
We are so back.
They threw everything at me. A banking crisis. Government-driven attacks on crypto. Scathing reviews of crypto in national economic reports. A newborn (who is, admittedly, a lovely individual). A toddler (who is, admittedly, an enthusiastically lovely individual). A bunch of Binance news. Some more SEC garbage. I think Meta ended support for NFTs on Facebook and Instagram at one point. Every major crypto company announced layoffs, sometimes twice, and many early stage startups pivoted or wound down. More smoke around Binance. Then finally some fire around Binance. CZ went c-ya. SBF was found guilty. Twitter tried to cancel Substack and stupidly and childishly changed their name. The Warriors traded for Chris Paul and kind of suck. Brock Purdy threw away his MVP on Christmas.
But what is dead may never die. Broadcast lives on.
No promises on the weekly cadence from yesteryear. I’m writing when I can, on what I can, and hope that it’s enough. This is for the three people that emailed me over the past six nine ten months asking where I went. (I started writing this post in July, then again in October, then opened it for a few minutes in December, and finally, mercilessly, hit publish here in January.)
Today’s agenda:
A very brief state of the market. Two paragraphs, tops.
Some rapid-fire stories that you may have missed from the last 10+ months. Some really weird shit happened, and if I can’t unsee it, you have to unsee it with me.
Some moderately uneducated but passionate thoughts on the upcoming Bitcoin ETF bonanza, Solana coming for Ethereum, and things I’m looking at in 2024.
Go Dawgs.
Fair warning: I needed some therapeutic long-form writing to cleanse myself of those 2023 vibes.
A Very Brief State of the Market
Crypto is still a nearly $2T industry despite constant regulatory attacks from the government and an unprecedented deleveraging cycle from its money makers that dropped 500+ basis points on the capital markets; ~every regional bank in the US was insolvent ten months ago; and all of that followed an Enron-scale fraud by one of the most recognizable figures in the industry. Yet crypto remains, standing tall amongst the rubble.
You might not know this, but crypto outperformed in 2023. Rate headwinds are now shifting to becoming rate tailwinds. Regulators seem to be pulling back their machetes, realizing they may have overplayed their hand in trying to cripple this generation’s most democratizing technological advancement while every other major country quietly educated themselves and stole mindshare. Institutions want our bitcoin. Cows in southeast Asia are being tagged and tracked using NFTs. Dog coins have hats now. This whole thing is still going to happen, and we’re all going to be driving gently used 2001 Honda Civics.
Rapid Fire Round
LinksDAO won their bid on a Scottish golf course. I am over the age of 30 with kids, therefore requiring me to become irrationally obsessed with golf, even at the expense of my family. And now a DAO owns a course? My demographic (male, 30-39, loves crypto, drives 180 yards into the rough) needs me.
Hamster racing. People created crypto assets to bet on hamsters; of course there were accusations of impropriety, eg rug pulls, pre-recorded races.
Then animal racing became a ‘thing’. Snails, rabbits, rats … I wish I could say no animals were harmed, but who can with a straight face?
Coinbase’s former CTO Balaji Srinivasan bet $1.5M that Bitcoin would reach $1M/bitcoin by June 17. It did not. (He lit a milly on fire – via charity donations – to bring awareness to hyperinflation risk in the US.)
The founders of Three Arrows Capital opened a crypto exchange, OPNX. Because bankrupting their hedge fund wasn’t enough. OPNX did … $13.64 of volume on day one. That’s like three McChickens. I honestly forgot this happened until I re-opened this document in December.
(Almost) all the bad guys were caught… Do Kwon, Su Zhu, Alex Mashinsky, SBF. But not Kyle Davies (yet) or, questionably, Sam Trabucco … ever? The Other Sam is AWOL, probably “stuck” on a luxury yacht in international waters.
…but then the DOJ dropped the campaign finance charges against SBF. Conspiracies fail to remain conspiracies if and as they become reality.
XRP ruled … not a security. XRP! Like, the most security-looking token known to mankind. The SEC is fighting the ruling but … whew. Mama, (maybe) we made it.
The NYAG sued Barry Silbert and Genesis for defrauding customers of $1.1B. Apparently the only difference between DCG (Barry Silbert’s company) and FTX was … well, not much.
Senator Elizabeth Warren tried to convince the world that Hamas was funded by crypto, then sent a letter to the White House stating this as fact. Upon being delivered the actual facts, she and everybody who signed the letter issued an apology pretended they were still in the right.
Netflix gave an unproven director $55M and “near-total budgetary and creative latitude.” The dude nuked it trading options and then made millions back buying Dogecoin. He’s one of us!
Solana’s DeFi summer is here. Seemingly every application built on Solana is launching a ‘points’ program to incentivize usage. Those points will become tokens, providing a cascade of free monies for people who use Solana applications. The first notable token launch came in November – Jito dropped a casual $10K+, minimum, to anyone that interacted with their protocol. Jupiter, “the Uniswap of Solana,” is about to drop $500M to $1B to its users this month. Dozens of other apps are planning their token generation events. Buckle up, boys and girls.
The dog has a hat. And that’s all that matters.
The Bitcoin ETF Bonanza
The biggest story in all of crypto needs no introduction. We are days away from a spot Bitcoin ETF approval decision, quite literally Bitcoin’s moment of institutionalization. Happy 15th birthday, Bitcoin.
How did we get here?
Simple: corporates, big banks, and institutions finally started seriously looking into Bitcoin a couple years ago, back when the money printer was stuck on automatic. It took some time for them to figure out how to push the market down so that they could announce their entrance on the cheap, but they did it. ‘The institutions are coming!’ has been a rallying cry for five years, but we may be on the precipice of memeing it into existence.
Our fearless guardian, Gary Gensler, could hold the wall no longer, as he is now being forced to relent to Bitcoin because *checks notes* his political puppeteers have been instructed to support the Big Dog by *checks notes again* large banks. It would be funny if it wasn’t so sad. No, it’s funny.
Oh, what’s this? A last-minute report on Bitcoin’s 15th birthday from a Twitter account with 800 followers implying that the SEC is going to deny all spot Bitcoin ETF applications, nuking the market on the morning of this newsletter’s publication? We actually fell for this?
Markus, when pressed for any evidence supporting his research and findings:
His actual response: ‘My report is not based on issuer, nor on SEC insider comments. Obviously this is massively out of consensus.’ What in the flying fish markets was it based on then, my man?
(We are choosing to ignore the argument that this shows how stupidly and easily the Bitcoin market can be manipulated, particularly when there is too much leverage in the markets.)
Never mind Markus. The decision is coming, and it’s coming within the next week. This stunt, delivered to be contrarian for contrarian’s sake, has re-energized the belief in certain people that this approval remains up in the air; that is farcical.
These are not serious people and their unseriousness should be branded upon their forehead for all to see. Want my source? BlackRock has filed for ~550 ETFs. They have been rejected one single time. You think Larry Fink is going to bend the knee to Gary fucking Gensler and limply slink back to his shareholders, accepting defeat? Do you hear yourself? Put away the inverse Doctor Strange gifs.
A big, fat ‘YES’ is coming, with consensus expectations (from the serious people) putting the approval announcement between January 8th and 10th (the deadline).
My long-shot prediction is that Gary wants control of this up to and through the announcement, and therefore may ‘surprise’ us with an approval this Friday, minutes before happy hours kick off and nocoiners and bigcoiners alike hit the weekend for some R&R. He will want to mute the impact in any way possible, forcing you to have to remember for three whole days that Bitcoin is now institutionally-approved before you can buy via Jamie Dimon’s banking cartel. Who knows if this is even on the table after we just gift-wrapped Gary a market manipulation story to hold onto tightly until the buzzer, but that’s why we call it a long-shot.
If he does try to pull this, we will respond by buying bitcoin by the metric fuckton over the weekend with our relentless, 24/7 markets, delivering a green candle direct from Valhalla. Then all of Gary’s institutional friends can buy it higher come Monday morning. (Well, they would have, but again, we just gifted them a 10% better entry. We are moronic.)
The most realistic ‘worst case’ scenario is one that few have actually talked about, which is the SEC coming out with a motion to delay the decision. That would happen if Ark or another issuer withdrew their application, and would push The Decision to March. In this case, Valhalla would have to wait.
Okay, so what is going to happen once that sweet, sweet ‘SEC APPROVES BITCOIN ETF’ ticker hits your screen?
Larry Fink, meet Bitcoin:
For months, I subscribed to the “ETF is priced in” belief. How could it not be? We all knew it was coming eventually, and surely the big boys would find a way to get their allocation to that sweet, buttery corn before letting us simpletons in on the action. I thought initial flows into Bitcoin ETFs would be muted.
I now believe this was me midcurving myself into madness.
The correct approach, as always, is to simplify. Initial flows may still be muted, but the avalanche is coming shortly thereafter. Let’s break it down.
Many of the institutions who will buy a Bitcoin ETF cannot buy bitcoin today because it is either not large enough (<$1T market cap … for now) and/or does not carry the institutional seal of approval (trust me, convincing your investment committee that oversees a multi-billion dollar portfolio to open a Coinbase account to buy bitcoin is not the move).
It’s not necessarily because they don’t want to, it’s because they structurally can’t. Slap a BlackRock sticker on Bitcoin and *poof* Bitcoin is upgraded from fake magic internet money to an energy-backed, unstoppable, censorship-resistant, hard asset that fits snugly in eleven- and twelve-digit portfolios as a hedge against money printers everywhere. It’s like gold but the price can actually go up and you don’t need a military plane to transport it to your villa in Tuscany your middle class shareholders.
You are about to drown in a tsunami of commercials telling you to buy Bitcoin. You, your mother, and your mother’s mother are going to be so overwhelmed with pro-Bitcoin propaganda that you will all feel existential irresponsibility for every day you go without buying some. And the kicker? Your asset manager and wealth advisor, who definitely care about you and not the fees you pay them, will be incentivized to high heaven to sell you Bitcoin.
There are more than a dozen firms pushing to launch a Bitcoin ETF. The SEC will feel compelled to approve all of them at once, as not to stand in the way of good old capital market competition. The result? From the minute these things launch, ETF issuers will be going on a Settlers of Catan-like land grab with the ruthlessness of Cersei Lannister for the $10Bs in future fees that are at stake. (For reference, gold ETFs bring in $700M+ annually in fees.)
Here’s the key: every marketing dollar spent in 2024 is exponentially more important than marketing dollars spent in 2025 and beyond, because once a customer chooses an ETF, they are unlikely to switch. And asset managers aren’t stupid – they recognize that bitcoin could rise in price significantly, ‘organically’ pumping their fees by multiples simply because they had their clients hodl.
Ya’ll thought a short, techie, bouncing QR code Coinbase ad at the Super Bowl was the top signal two years ago? You are about to see so much Bitcoin on your TV you’ll start Googling how to eat it, drink it, and inject it into your eyeballs. You skin will turn orange. In a year, you will beg me to find some nostalgic clips of the Allstate Mayhem Guy or the GEICO Gecko, both of whom will be out of a job due to the lack of available ad space.
But to find those ads of your youth on YouTube, you’ll have to listen to two minutes of Larry Fink shilling Orange Coin to you, even if it means taking out a second mortgage on your home and selling your left femur. And if you even think about skipping the ads, Cathie Wood will appear on your front porch, covered in the orange blood of bitcoins not purchased. Pfizer is already at work on a vaccine to protect nocoiners.
I mean, look at this ad from Bitwise. It’s beautiful. Elegant even. I might stop typing to go buy some coin right now.
Oh yeah, and while all this is happening, Bitcoin’s halving event is coming in Q2 2024 and Bitcoin miners are quietly printing Brinks trucks of money right now because the network finally found a transaction-oriented use case in Ordinal inscriptions (Bitcoin ‘NFTs’ created by attaching data such as images, videos, and more to an individual satoshi on the Bitcoin blockchain). We’re even seeing other funds that are registered as securities and trading on the public markets amend their prospectuses so that they can now expose 15%+ of their AUM to Bitcoin through spot Bitcoin ETFs.
Welcome to the Bitcoin ETF Bonanza of 2024.
This isn’t financial advice – wait for Jamie Dimon to deliver that in a few weeks on Super Bowl Sunday – but I’d say one bitcoin at $43,000 or $45,000 or $40,000 greenbacks is mispriced, on both a short- and long-term perspective, unless asset managers lose their ability to sell or Gary Gensler comes into possession of proof that Larry Fink is a serial killer.
Speaking of Jamie, no, I will not comment on the below, other than to say: never listen to what these people say, only watch what they do.
The TL;DR if you skipped this entire section: SEND IT. Please.
The Death of Ethereum, Brought to You By the Solstice of Solana (This Segment is Presented by the BlackRock Bitcoin ETF, With Support From Your Local Franklin Templeton Bitcoin ETF)
Ethereum’s not really dying. But for you to keep reading after 1,000+ words on the launch of an ETF, I had to bait some clicks.
And while Ethereum isn’t dying, I would love to hear a genuinely compelling argument for why a net new user to crypto applications would pay $20-200 per transaction rather than <$0.0001. Because that is what the Ethereum ecosystem is going up against right now with Solana (and other high-throughput blockchains).
Even the argument “moar cheaper L2s!” doesn’t excite (yet), since even transactions on Ethereum’s primary, very real scaling solution (those highly-marketable L2s) cost a few dimes to a couple bucks. The future of finance, gambling, and consumer commerce isn’t happening if every click of the button sucks even a few quarters out of your digital piggy bank.
And yes, there are technical upgrades coming (EIP 4844 for the initiated) but those simply narrow the gap, they don’t eliminate it. And the existence of the gap, let alone the size of it, is cavernous.
To be very clear, Ethereum is still generationally innovative. Smart people still build on it, and will continue to. Transaction costs and usability will improve. It is still the best choice for decentralized, permissionless smart contracts at scale. Massive investment banks are running research papers on it, and Ethereum’s DeFi products are tip-toeing into the view of institutions. The consensus view is that we’ll see an Ethereum ETF before the end of 2024. (I’ll actually take the over on that, but not because Ethereum is a walking dinosaur. More because it took five years for Bitcoin to get institutional support, and Ethereum’s pitch to institutions is far murkier.)
ETH will probably (almost certainly?) put up better performance than your daddy’s favorite boomer stock in 2024. The dollarinos are still getting inflated away with rate cuts to come, and IBM’s stock price isn’t going anywhere; you’ll still be able to afford it when you rage-quit crypto again in two years.
But December 2023 might just mark an inflection point in Ethereum’s long-term growth and the narrative that it sits as the undisputed king of smart contract platforms. Doing stuff on Solana feels as close to using the ‘web2’ internet as crypto ever has – transaction fees and speed is so fast, I rarely notice a lag and I genuinely never think about transaction costs.
Then I went back to Ethereum and spent $14 in transaction fees to send $10 … to myself. And it took at least a minute, if not two, for the transaction to complete. The future never felt so prehistoric.
I’m not going to bore you with the technicals, mostly because I have the technical capacity of a pillow, but I do feel it prudent to share how Ethereum and Solana differ, specifically as it relates to transaction throughput, at least at the highest level, since that is most critical to the end user experience.
One of the biggest limitations with Ethereum today is that it is built to provide and create self-executing smart contracts, but that those smart contracts cannot be executed in parallel; every call to a contract is executed serially.
Solana has fundamentally different programming, designed from the ground up to solve for performance and throughput. Its consensus mechanism architecture (ie how it validates transactions) includes parallel processing, which allows it to execute transactions concurrently across multiple nodes.
There is also this difference in engineering approach. Top image is from Vitalik Buterin, Ethereum’s co-founder; bottom image is from Anatoly Yakovenko, Solana’s co-founder.
Which network would you trust as an end user to deliver a fast, cheap, and easy experience? Which do you think developers will choose to build on when they want to build products that serve billions of people and deliver everyday value?
A year ago, Solana was perceived as ‘Sam’s Coin.’ Though somewhat understandable for a novice to fall into that trap considering the sheer scale at which SBF and FTX invested into the Solana ecosystem (with stolen funds, of course), this perspective was completely unfair to those building on Solana. The ecosystem was openly mocked by everyone who either wanted to see it fail or hadn’t actually talked to the people building in it. And yet, that community of builders banded together and shipped. Day in, day out.
Today, Solana has a burgeoning DeFi ecosystem, awesome consumer application potential, and innovative crypto tooling (eg compressed NFTs) that can turn previously overhyped primitives into valuable data tools. It has vastly improved the downtime issues it experienced prior to 2023 (while, ironically, Ethereum L2s struggle with outages themselves), and has its own significant performance and scalability upgrades on the horizon (eg Firedancer).
The strongest case for Solana is this:
And if you long for the days of monkey jpegs or iconic PFPs, Solana has those, too.
At the end of the day, I do, and you can, like them both. I know that’s boring, but it’s the truth.
Things for 2024
Decentralized physical infrastructure networks go mainstream-ish. Imagine earning crypto from your mobile phone and data plan? Here’s a nationwide, $20/month, no-contract phone plan with unlimited data, talk, and text. Or maybe earning tokens by sharing performance data on your car? We gotchu. DePIN is one of the few areas set to transcend the web2 <> web3 product barrier such that non-crypto natives begin using crypto-powered products without realizing it (or needing to understand it).
Real world assets bring even more institutionalization to crypto. The promise of crypto always sat beyond the experimental tokens created to govern crypto-native protocols. The path to global saturation was going to require bringing real, tangible assets – like Treasuries, energy markets, commodities, etc. – onchain, to improve efficiency, liquidity, and enable greater access. The Bitcoin ETF approval will be crypto’s shining moment of institutionalization, and may be shortly followed with the recognition that novel use cases for real assets can be explored and created using crypto primitives. Examples include commercial real estate (eg Bonfire), clean energy infrastructure projects (eg Plural Energy), and stablecoin-denominated credit markets for businesses in emerging markets like Goldfinch.
Stablecoins go nuts. This is already happening, and stablecoins are already one of crypto’s first few killer use cases. But as the world continues to go digital, and as developing economies seek out better access to mobile-first, inflationary-safe (relative to their national currencies) monies (and credit, per the above), stablecoin issuance and usage will likely go screaming higher. And this will accelerate if and when these economies build products based around our one-dollar internet coins. I can hate the US dollar as a beer-blooded American, and understand the importance of its existence on a global scale. I’m nuanced like that.
People begin to recognize the (seemingly) limitless use cases of compressed NFTs. If decentralized financial applications are programmable money legos, compressed NFTs on Solana can be viewed as programmable data legos. Imagine tagging transactions, users, or sets of actions with NFTs (like cookies) so that applications can target specific user profiles for marketing campaigns, rewards, and more?
You will start seeing Pudgy Penguins everywhere (or at least definitely in Walmart). And you’ll initially think it’s a new brand from Mattel. But no, it’s an NFT collection that is in the midst of transforming itself from an (adorable) collection of profile picture jpegs to a global toy and media brand. It may be the first NFT project that successfully makes this transition. The real winners here? Kids. Because these stuffed pudgies are heart-melting. Every kid deserves a pudgy.
Free monies from airdrops stack up for those who actually use crypto. I think the highlighted takeaway explains this. Use Solana apps, get tokens from those apps when they launch their token. Secure data availability layers like Celestia, get tokens from protocols that build on top of it. Secure settlement layers like Dymension, get tokens for applications that build on top of those. Rinse, repeat.
The convergence of AI and crypto. This is actually just here for search engine optimization. (Just kidding, we are actually in the very early stages of experimenting with how AI can benefit crypto and vice versa. It may genuinely be a match made in heaven: it is becoming increasingly difficult to trust what we see online – we don’t know if photos of people are real or deep fakes, for example – and here sit cryptographic proofs to save the day.)
A word vomit on some of the protocols I think are interesting today because of the problems they are solving, excluding the mainstream majors and others I’m less familiar on: the ring leaders of Solana DeFi (eg, Jupiter for trading, Parcl for passive real estate investing, etc.); EigenLayer (restaking on Ethereum); Celestia (data availability layer); Dymension (settlement layer); Monad (parallelized EVM); Sei (parallelized EVM specialized for value exchange); Mina (zero knowledge proofs for the win); Bittensor (decentralized OpenAI); Farcaster (decentralized Twitter, with actual signal, minimal noise).
Some of these have tokens, some of them don’t, but all of them will (hopefully) push the adoption of crypto forward.
Go Dawgs.
[Disclaimer: Any opinions expressed are solely my own and do not express the views or opinions of my employer. Because the information included in this newsletter is based on my personal opinion and experience, it should not be considered professional financial analysis or advice.]