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"There is nothing wrong with a ‘know nothing’ investor who realizes it. The problem is when you are a ‘know nothing’ investor but you think you know something."

— Warren Buffett

Thursday TBD mailbag

Q: Is crypto still cypherpunk?

I don’t know if it can be after so thoroughly attaching itself to the Trump bandwagon.

This has been a shockingly large success so far, but I suspect it may be coming too easily — earned success builds resilience but gifted success builds fragility.

How resilient will crypto be, for example, if TRUMP is trading at $1 four years from now, MSTR is trading at 0.5x NAV, and the strategic reserve is 80% underwater on the bitcoin it bought at $1,000,000?

It was probably unrealistic to hope that crypto could be bipartisan. 

But leaning so heavily into partisan politics may prove to be a mistake because to be truly cypherpunk, crypto would have to be equally disdainful of any political party.

It would have been a much harder road to travel, but it may also have been the only road that travels toward censorship-resistance and permissionlessness.

Q: Why is bitcoin still only $100,000-ish?

I guess people are disappointed that the strategic reserve wasn’t included in Trump’s flurry of day one executive orders — he issued 26 of them, which might give the impression that crypto is barely a Top 30 issue for him.

His dedication to crypto has always been a little suspect, considering he’s a recent convert (recall that he was anti-crypto in his first term).

But recall as well that the zeal of the recent convert surpasses all others.

My guess is that, if anything, he will over deliver on his campaign promises (just like he has with the pardon of the Jan. 6 rioters) — especially now that a memecoin accounts for most of his net worth.

In the meantime, don’t forget that bitcoin still has to absorb $300 million of new tokens each week just to trade sideways (and that the higher the price goes, the more fiat it takes to absorb that supply).

Q: Is the TRUMP token good for crypto?

I think it’s too early to say. 

In the first instance, it drained billions of dollars out of the crypto ecosystem as people sold almost everything (other than Solana) to buy TRUMP this weekend — most of those billions are sure to be off-ramped into fiat as Trump realizes his paper profit over the next three years.

The question is whether the TRUMP token will cause even more than that to be on-ramped into crypto.

The early signs are encouraging: Moonshot (the payments app that many used to buy TRUMP) estimates that the TRUMP token attracted 400,000 new users into crypto in the first 24 hours of trading (I’m not sure how they calculate that, but existing crypto users probably would not have used Moonshot, so they’re probably all new). 

Similarly, Chainalysis estimates that 50% of TRUMP and MELANIA token holders had never previously bought a Solana altcoin.

Chainalysis also notes that most wallets holding TRUMP hold less than $100 worth — but also that several wallets hold upwards of $100 million worth.

That probably tells us something about Trump’s America, but I’m not sure what.

Q: Is everything a meme now?

One way to make the TRUMP token look more substantial and less like a grift is to drag everything else down to its level, which is what lots of memecoin-apologists are increasingly doing. 

In a tweet that got 4,400 likes this week, for example, the crypto influencer Anthony Pompliano called Berkshire Hathaway a "boomer memecoin" and Warren Buffett a "financial influencer."

Normally, I’d dismiss that as social media slop, but I think it represents a new level of financial nihilism that could become genuinely damaging.

It feels like crypto is increasingly full of know-nothing investors who think they know something — or, even worse, think there's nothing at all to know.

Every dollar that’s "invested" in a memecoin is a dollar that’s not being invested in a productive enterprise like Berkshire’s See’s Candy, which makes the world a better place with peanut brittle. 

Not everything needs to be as productive as peanut brittle, but if we lose sight of the distinction between entertainment and investing, the world will be a poorer place for it.

The basis of capitalism is that you get rewarded for taking risk — it’s why entrepreneurs make more money than employees and stock market investors make more money than bond market investors.

Crypto is now rewarding President Trump with billions of dollars in profit for taking no risk.

If we can’t tell the difference between that and what Warren Buffett does, we’re in trouble.

Q: Has Trump violated the emoluments clause of the Constitution?

I don’t know, but if he doesn’t make all of crypto go up for us, I believe the crypto industry already has cause to file suit against him.

In 2019, a federal appeals court ruled that Maryland and the District of Columbia had standing to sue President Trump because their economies and tax revenue were negatively affected by competition with President Trump’s hotel — every other local hotel and restaurant was losing business simply because they weren’t owned by the president of the United States.

This is not legal advice, but I think any crypto investor who lost money this past weekend could claim the same: My token went down because of unfair competition from the president of the United States!

Hit me up if you want to start a class action.

Q: Why is Ross Ulbricht such a crypto hero?

I think you have to have been in crypto longer than I have to really understand that one.

For many crypto people, their first encounter with bitcoin was through Ross Ulbricht’s Silk Road marketplace — they often have fond memories of buying illicit but generally harmless substances there.

They weren't all harmless, however; Silk Road offered much harder substances than most people would consider using.

I think it’s worth noting as well that a lot of Silk Road’s proceeds went to criminal gangs — the sellers weren't just hobbyists with a marijuana plant in their closet.

It does seem like Ulbricht’s sentence was excessive, so I imagine his pardon is well deserved.

But I’m not sure he should be a crypto hero just because he accepted bitcoin on his illegal market for drugs.

Also, from reading American Kingpin, at least, it seems like he should be re-tried on the accusations of murder-for-hire.

Nevertheless, there is logic to the idea that had there been no Silk Road, there’d have been no bitcoin-based economy and therefore no crypto industry.

And if we didn’t have a crypto industry I’d have to get a real job, so I guess I’m glad there was a Silk Road.

Q: Is buying a memecoin a good way to donate to Trump?

It might be the best way.

Part of the reason investors like share buybacks more than dividends is that $1 spent buying stock in the market is likely to move a company’s shares by more than $1 of market capitalization (whereas $1 paid as dividends can only ever be worth $1 to investors, minus taxes).

By that logic, buying the TRUMP token becomes a disproportionately large donation (or bribe) to President Trump, relative to just donating to his campaign.

It’s also an unregulated and unrestricted donation, which is the very best kind — for the recipient, at least.

How it works out for the rest of us is entirely TBD.

— Byron Gilliam

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Listen to On the Margin on Spotify, Apple Podcasts or YouTube.

This March, hear from Matt Hougan, Colleen Sullivan, and Pascal Gauthier as they share their expertise on institutional adoption, asset security, and the evolving crypto landscape. DAS NYC brings together fund managers, allocators, and industry leaders for discussions that matter and insights you can act on.

📅 March 18-20 | NYC

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