9th July 2022 > > Larry.

tl;dr

Ruminations from resident techie Larry.

Market Snap (at time of writing)

Market Wrap

A very muted end to the trading week, though with 10-years aggressively breaching 3% again that is a state of affairs that is unlikely to last any length of time.

Curious Cryptos’ Commentary – From Larry, our resident techie

Reflecting on the current turmoil in crypto, I am - like many - trying to understand if I am a Bitcoin maxi.

I’m not by inclination – if only because the fear and greed dopamine cycle is so much better in alts.

But there are very strong arguments that if anything valuable is to happen in crypto it will and should happen on top of the only truly decentralised, censorship resistant base layer of hard, digital money.

All the altcoin innovation is inspiring and informative – a light path for the future of BTC and its ecosystem, perhaps. But all the alternative layer 1’s, the Ethereum killers and Ethereum itself, all sacrifice some of the essential value of BTC. And perhaps there is no value in crypto other than that which is Bitcoin. The Ponzi schemes, the ridiculous steroidal yields, the counterparty risk, the exposure to egos in Luna or Celsius or Voyager or Three Arrows. Or the inflation = yield pyramid. All of it is suspect now.

Bitcoin remains pure. Current market gyrations are irrelevant to it. It won’t fail or go to 0. And it is probably the only digital asset that is a commodity and not a security.

Even Ethereum is controlled and altered when the Ethereum Foundation desires to do so – witness the delayed difficulty bomb.

All the pain in the current deleveraging is a result ultimately of BTC rehypothecation extended into an environment with entrepreneurs wanting to build and choosing ALT blockchains to build on because the BTC blockchain does not yet provide that functionality. One day it will. One day BTC will be a global base layer of money and every useful financial innovation will be built on top of it. That’s the BTC maxi’s mantra.

Every alt tarnishes Bitcoin, is another maxi cry – a negative sum game where the world is better off without them. Are they right? Perhaps we’re better off fighting this fight behind a single champion.

Almost all the crypto stories of financial collapse, contagion, failed risk management are a result of what the crypto industry asked for.

Institutional adoption, when will it happen, how much will it pump the prices. How much will it drive adoption.

Well, we have institutional adoption. And what do you know, they brought along their institutional tradfi ethos – overleveraged risk bets, human frailty, illegal behaviour, inadequate disclosure, counterparty risk, insider advantage, Ponzi schemes, pump and dump on an industrial scale, and most importantly a sophisticated system of how to make money, based on starting with more than the rest and using that liquidity to manipulate markets to their advantage. Who would have thought?

Crypto welcomed them like a herd of gnu’s thinking that inviting the lions would protect them. We focus on those that failed (and ran off with our money) but we forget that the majority of the institutional investors in crypto have come, have played the crypto casino much better than those before them and - having pumped, thereby established exit liquidity from the ranks of the desperate and impressionable – and are now licking their bank accounts ready for the next round of hopes and dreams to feed on.

Perhaps a necessary lesson on the grand journey. A cautionary tale.