đŞ Thursday premium mailbag
Money, it turns out, can just be money
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"Optimistic people will see opportunity in suffering and pessimistic people will see suffering in opportunity."
â John D. Rockefeller
Q: Is bitcoin a special snowflake?
"Special snowflake" is redundant because the whole thing with snowflakes is that theyâre each unique, right?
But the phrase seems to be catching on nonetheless and I think thatâs instructive â in two directions: Crypto people are accepting that bitcoin really is a memecoin and non-crypto people are accepting that bitcoin really is digital gold.
These things can be true because gold itself is a meme; it just happens to be a really old one.
But people havenât always thought so.
JPMorgan famously said, "Gold is money. Everything else is credit" â and Ludwig von Misesâ "regression theorem" stated that goldâs value as money could be traced back (ie. "regressed") to its original utility value as a commodity.
I think that bitcoinâs big contribution to economics might be that itâs shown both of these ideas are incorrect: Monetary "premiums" donât have to be a premium over and above some original utility value.
Money, it turns out, can just be money.
Q: Does bitcoin even have a monetary premium? Or is it a speculative premium?
Thatâs just semantics â which is my favorite thing, so thanks for the question!
Gold has earned its "monetary premium" by holding its real-world value over 2,000 years â by some measures, its purchasing power is exactly what it was in Roman times.
Still, you canât buy anything directly with gold, so (contra JPMorgan), itâs not money. But it is "money-like" because holding it will maintain the purchasing power of your savings.
Bitcoiners, however, are more ambitious than that: They want bitcoin to increase their purchasing power â by a lot, not just maintain it â and they want it to happen in years or decades, not millennia.
So if gold has a "monetary premium" because people buy it to preserve their purchasing power, Iâd argue that bitcoin has a "speculative premium" because people buy it to increase their purchasing power.
If youâre thinking, tomayto, tomahto, I wouldnât blame you â but as long as weâre rewriting economics, we might as well be precise, right?
Q: Are my ETFs safe?
Yes â except for your crypto ones!
The FBI issued a public service announcement this week warning that "North Korean malicious cyber actors conducted research on a variety of targets connected to cryptocurrency exchange-traded funds (ETFs) over the last several months."
Thatâs noteworthy because no one ever worries about hackers stealing their stocks, for good reason: Hackers wouldnât normally bother with your brokerage account because US equities exist in a Hotel California-like ecosystem (the DTCC), from which they can never leave.
Thereâs no point stealing something you canât take with you.
Bitcoin and ether ETFs, however, are different because they are receipts for crypto that you can take with you.
It wouldnât be easy, but if a North Korean hacker could gain access to an ETF issuerâs systems (probably by posing as a developer not from North Korea) and then somehow convince the issuerâs custodian to send some crypto somewhere, thereâd be no retrieving it.
We like to mock regulators for fretting that crypto introduces new attack vectors on traditional finance, but this time it really has.
Q: What do I do if I suspect a developer is secretly North Korean?
Ask them to say something mean about Kim Jong Un â if they decline, you probably have your answer.
Q: Will cryptoâs fate be decided in November?
That is increasingly the consensus. Early hopes that Harris would adopt crypto seem to be fading at the same time Trump seems to be even more all-in on it.
On the latest episode of 1000x, Jonah van Bourg said he expects crypto to go "directly into banana zone trading" (aka, trade parabolically higher) if Trump wins and Crypto Twitter is filled daily with warnings that crypto will go parabolically lower if Harris wins.
Directionally, I agree, but Iâm not sure about the parabolic part.
Would Trump really be that good for crypto?
Getting Gensler out of the way would, of course, be incredibly helpful, but even with Trump, there will still be an SEC that thinks some cryptocurrencies are securities, and itâll be years before we know which ones.
Also, however friendly regulators might be, the industry will still have to build things people want â and itâs not obvious to me that the SEC is the primary thing thatâs been preventing the crypto industry from doing that.
If elected, Trump would make it easier for crypto builders, yes, but theyâll still have to build things and building things will still be hard.
And would President Harris really be that bad for crypto?
She might be. Her silence has been deafening, especially for beleaguered crypto democrats hoping for a kind word or two. So it increasingly feels like a Harris SEC wouldnât be much of an improvement over the current one.
Either way, though, crypto is meant to be permissionless, right?
If so, isnât saying it can only succeed with the permission of US regulators tantamount to saying it was never going to amount to very much anyway?
Iâm enough of an optimist to think that if crypto is genuinely valuable, it will find a wayâŚno matter whoâs in the White House.
So Iâd fade the current election consensus â in both directions.
Q: Could a Harris administration be good for crypto?
Maybe by accident?
Like a cactus growing in the desert, a crypto industry that develops in a hostile regulatory environment might turn out to be more resilient than one that develops in a friendly regulatory environment.
Because if creating a permissionless financial system is the goal, wouldnât developing without permission be the best way to get there?
I wouldnât expect anyone to volunteer to live in a crypto desert, but if it comes to that, there might be opportunity in the suffering.
â Byron Gilliam
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Intents Trading: Why AMMs Are Going out of Style
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Blockworks Research is conducting a survey to gain insight into the institutional staking landscape. This data will help industry leaders adopt their strategies as the industry matures.
If you're an institutional staker, we want to hear from you (and if youâre new to Blockworks Research, get 20% off of our service while youâre at it!)
The difference between the yield curve uninversion now and that at the beginning of August â and why this one is likely to stick.
A month ago, yields were volatile. Now, they seem more determined to close the gap.
â Noelle Acheson (@NoelleInMadrid)
2:55 PM ⢠Sep 5, 2024
Could bitcoin drop in case of a stock market crash? Sure, though I think such a "flush" event would be short lived. Here's my take on technical support:
â Tuur Demeester (@TuurDemeester)
4:51 PM ⢠Sep 5, 2024
my blockchain has won because a mid level PM at a large corporation said they wanna use it to solve a problem no one has
â mert | helius.dev (@0xMert_)
5:57 PM ⢠Sep 5, 2024
recent research
Research
SKALE is a network of EVM-compatible chains with pooled security. SKALE stands out by offering a gas-free blockchain experience for end-users. It is able to do this by shifting validator compensation to developers. This business model has allowed SKALE to find traction in the gaming sector, demonstrated by the activity in the Nebula and Calypso hubs. As the network matures, SKALE chain growth will be a key metric to follow as the networkâs economic sustainability depends on new chains joining the network and paying their monthly subscription fee.