Welcome to Hvbris, a crypto-focused newsletter.
In today’s edition, I share my thoughts about the current state of the crypto market and also some fun bits and bytes worth your time.
DISCLAIMER: This content is not financial advice and only represents my personal opinions.
Crypto is high risk. Always do your own research.
Let’s dive in!
Crypto Market Update and Beyond.
Today feels like a good day to write down some thoughts about the current state of the market.
Crypto is in shambles.
A tweet from Elon Musk just sent BTC tumbling down ~10%:
A tweet that came on the heels of this:
So there you have it.
Elon bashing Bitcoin’s mining energy consumption while simultaneously cheerleading for… another mined coin.
All of this is happening against a backdrop of Tesla gunning for a green image and a relative Bitcoin bearishness marked by the decline of Bitcoin “dominance“, extremely bullish ETH performance YtD, and record-high prices in the long tail of altcoins.
What to make of all of this?
Well, this feels like 2017 all over again… with a twist!
First Bitcoin will undoubtedly survive the Tesla news, as impactful as this drop seems short term.
Tis’ but a scratch on its long-term adoption curve.
I think it’s also worth pointing out what I think is a fundamental flaw in the Bitcoin energy debate.
The question is not:
Does BTC have a significant impact on the environment?
but
Is Bitcoin worth spending all this energy on?
Though Bitcoin’s environmental footprint is certainly a valid concern, the energy cost of the network is a byproduct of the free market pricing sound money.
I mean, what is the environmental footprint of gold mining at this point? How much energy do banks and the American army need to keep the petrodollar system afloat?
Bitcoin doesn’t exist in a vacuum so context is needed to appreciate why it’s worth generating all this energy to keep blocks coming.
Sound, incorruptible store of value.
To me at least, it’s worth it.
Second, I expect Bitcoin’s dominance to continue declining in favor of crypto “platforms“ like Ethereum that are trying to accommodate all types of assets and not only a digital form of gold. This is because it’s reasonable to expect that the importance of bitcoin in the crypto economy will roughly equate to that of gold in the legacy system.
Third, to me, this recent drop in price confirms that most people who bought BTC in the 50-60k range are worried low-conviction holders looking for external validation of their investment thesis. In this case, appeal to authority from Elon Musk, Michael Saylor, or what have you.
If your question starts with “Do YOU think I should get into Bitcoin“. The answer should be an obvious no. You’re not ready to invest if you need someone else to convince you. Convictions rule the crypto investment game.
Fourth, unlike in 2017, there is something to the “flippening“ narrative (ETH will overtake Bitcoin). I never bought into the John Pfeffer narrative that the price of ETH would drop down to the marginal cost of a transaction.
To me, utility was always ETH’s killer feature and its main value accrual mechanism.
To quote my old ETH investment thesis from April 2020:
[…] It seems inevitable that some of the [Ethereum] network growth will translate into accrued value to the native token itself. That is, as long as ETH remains the main/only way to settle transaction fees on Ethereum.I believe the transition to Proof-of-Stake will also help draw more investors in. When ETH becomes a capital asset the allure of holding some ETH to help secure a global financial network while earning passive income will prove a very attractive narrative to retail and institutional investors alike.
Suffice to say that this thesis has played extremely well.
Not only EIP-1559 is imminent and will enshrine ETH as the only way to pay fees on Ethereum (while also burning some of the supply), but institutions have indeed caught on to the potential of getting yield on their crypto through staking.
To very roughly quote Chris Burniske: the mental leap from 0 to BTC is much more difficult than the leap from BTC to ETH.
BTC is the gateway drug into the whole crypto space and it was only natural to expect institutional money to slosh from BTC to ETH once they’d get accustomed to the idea of holding BTC on their balance sheet. I expect institutional investment in ETH to continue and, barring delays in EIP-1559 and the ETH 1 >< ETH 2 merge, the price of ETH to keep appreciating against BTC over the next few years.
Last but not least, I’d like to leave you with my next area of interest.
I’ve been watching the explosion of stablecoins like a hawk:
I believe that the next x10 investment is in coins/protocols that give exposure to stablecoin trading volumes via the redistribution of trading fees.
For me, Curve/CRV is particularly well-positioned to capture a substantial chunk of that market. I wrote about it a couple of months ago. The TLDR is simple, you’re getting trading fees from a protocol that’s trying to become a crypto-equivalent to the ForEx market. What’s not to like?
Bits and Bytes.
A great conversation on economics, life, and purpose between Lex Fridman and Tyler Cowen. I would also recommend putting Tyler’s podcast “Conversations with Tyler“ on your regular rotation list.
The founder of Curve Michael Egorov was on the Epicenter Podcast to talk about… Curve. Egorov doesn’t do a lot of podcasts so this was a very interesting episode.
Lex Fridman again, a conversation with Chainlink’s founder Sergey Nazarov. I particularly enjoyed the last bit where Sergey gives life advice and shares his recipe for living a regret-free life and achieving success.
Mike Green talks about US-China relationships on the “On the Margin“ podcast. Despite Green not being nice to crypto, he’s an intelligent man with interesting takes.
Erik Voorhees explains how you can get yield on your BTC by providing liquidity to THORChain to facilitate cross-chain exchanges. I am very excited about THORChain and how it will impact DeFi.
Vitalik Buterin put out two great pieces. One on sharding and one on Uniswap. Both are worth your time.
Lyn Alden wrote another monster piece about inflation and how it’s (badly) measured. Great read but it’ll take you at least 45 minutes to get through it all.
A great read on China’s intellectual landscape and the people that populate it.
Canelo Alvarez put a very satisfying beat-up on Billy Joe Saunders last week. The fight was really competitive until it wasn’t. I wish BJS recovers well from his injuries.
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And that’s it for now,
Onward,
Hvbris.