"Bitcoin offers something unique: unstoppable, uncensorable, permissionless money."

— Win Ko Ko Aung

Thursday Mailbag: Sentiment, stablecoins and resistance money

Q: Should sentiment in crypto be better?

I think it should — crypto market cap is back above $3 trillion, bitcoin has become part of the zeitgeist, stablecoins are booming, the institutions are here, regulators are sympathetic, memecoins are out, utility is in.  

But I can also see why it isn’t.

Among other things (many listed here), it feels like the wealth that crypto is currently generating is unrelated to the value that it hopes to deliver.

Case in point: If you bought Bearchain’s token, BERA, when it launched in February, you’re down about 50% — which is fair enough because people don’t seem to be using the chain very much (per data from Blockworks Research, Berachain has been generating about $500 of revenue per day).

But the unofficial marketing around Berachain celebrates wealth as if investing in it will somehow allow you to live a lifestyle of the rich and famous — now, before the project has delivered any value. 

Similarly, Token2049 was reportedly a party, but from The Wall Street Journal’s reporting, it sounds like what was being celebrated was not so much crypto’s utility as its political influence.

So far, the benefits of that influence have been narrowly distributed.

The FT reported this week, for example, that a "small group of traders" made $99.6 million by buying up the MELANIA token in the two and half minutes before it was publicly announced. 

These well-informed buyers unloaded 81% of their tokens within 12 hours of the launch — at  prices at least 90% above where they are now. 

This kind of thing is dispiriting to anyone who invested in crypto because they thought people would use crypto.  

But it’s worth remembering that this is a story at least as old as stock markets.

Recounting the 1870s mania for railroad shares, Bhu Srinivasan writes that "shareholders got rich when railroad stocks went up, not when people actually used the railroad."

When "the moment of clarity set in" and "financing for speculative and incomplete projects was frozen," the investing mania ended in a financial crisis. 

But people did end up using the railroads. 

Q: What could get people to start using crypto?

Stablecoins still seem like the best bet.

At Stripe’s annual conference yesterday, the co-founding Collison brothers listed stablecoins and AI as "the two big tailwinds" they expect to drive the next evolution of "the internet economy."

Amazingly, stablecoins were listed ahead of AI:

I guess that ordering is to be expected from a payments company, but still, John Collison made a convincing case for why stablecoins, paired with AI, will lead to a "way higher rate of breakout company creation." 

Stablecoins enable "borderless financial services," he explained, which will make it possible for small businesses to be borderless, too.

Collison says it’s already happening: "People have been waiting since 2010 to see if crypto is for real and what you're seeing with stablecoins is real utility for real business at a growth rate which eclipses anything we’ve seen before at Stripe, including Stripe itself."

Stablecoins are centralized, so this is not exactly the realization of cypherpunks’ dreams.

But it’s real-world utility and the world will be a better place with a "higher rate of breakout company creation" — so I'll take it.

Q: Could SBF have turned a profit?

I think so, yes.

To take just one example, the FTX estate sold SBF’s seed round investment in Cursor for exactly what he paid for it: $200,000.

At Cursor’s latest valuation, that stake would be worth $500 million. 

That’s a 250,000% return — far more than the crypto he "borrowed" from FTX customers would have returned. 

A profitable fraud is still a fraud, of course.

Still, pretty funny to think that if he had managed to fake it just a little longer, he might actually have made it.

Q: Is bitcoin a risk-on asset or risk-off asset?

Yes.

It’s been a risk-on asset this week, as evidenced by all the headlines saying some version of "bitcoin up on talk of trade deals." 

This doesn’t entirely make sense — the asset for people who think things will be bad, is good because things are not as bad as expected?

But bitcoin’s correlation to risk comes and goes and it feels like it’s trending toward being more risk-off.

Here, for example, is the year-to-date return of bitcoin (in purple) oscillating around the return of gold (in, well, gold):

Were it to carry on like that, bitcoin might finally cement itself in investors’ minds as a risk-off asset (which should make it more valuable).

I expect it will continue to be both risk-on and -off for a while — it’s still the only liquid thing you can sell when you’re feeling nervous on nights and weekends. 

But that could change. 

It was reported this week that Robinhood is developing a blockchain platform to offer US securities trading to European investors — and people like Kyle Samani and Robert Leshner think that eventually, all assets will be available to trade onchain, all the time.

If so, we’ll be able to stop using bitcoin to amplify our short-term risks — and start using it to hedge our long-term ones. 

Q: Is bitcoin just another thing to trade?

Not for the people who really need it, no.

In a recent email, the Human Rights Foundation (HRF) highlighted the story of Win Ko Ko Aung, who fled persecution in his native Burma in 2021: "I made it to the US with almost nothing — except a small amount of bitcoin I had once bought out of curiosity. With my money trapped back home, bitcoin helped me survive."

Since then, he’s been promoting the use of bitcoin as a form of resistance money: "For people living under dictatorship, it’s a tool for financial autonomy and freedom," he writes.

Aung cites the example of the recent earthquake in his native Burma: "The military junta blocked access to the hardest-hit areas and even launched airstrikes against people trying to flee, continuing their long-standing pattern of blocking humanitarian and financial aid. But bitcoin made peer-to-peer relief possible."

"When governments fail, repress their people, and collapse currencies," he concludes, "bitcoin provides an escape hatch. In times of crisis, it makes aid and survival possible."

That, at least, is something everyone can agree to feel good about.

— Byron Gilliam

NO SLEEP TILL BROOKLYN

Permissionless IV is where you stress-test your vision. This conference is for the engineers, founders, and devs building the next cycle’s backbone. If you’re scaling infra, rewriting DeFi, or experimenting with new primitives.

Hackathon devs? Your ticket is covered.

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FreightWaves CEO Craig Fuller discusses the impact of tariffs and Trump’s trade war on shipping and supply chains. Unpack the differences between this and the Covid shock, the impact on small vs. large businesses, bonded warehouses and more. 

Listen to Forward Guidance on Spotify, Apple Podcasts or YouTube.