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MEMO W05 FEB 2024

What it is, does not mean nearly as much, as what it allows you to do. - xh3b4sd

My current understanding of ETH/BTC has changed in the sense that trend lines for ratios matter only as much as additional factors permit. Expressing my thought process in simple terms, for the past year BTC had tailwinds while ETH had headwinds. I am not sure how to express structural supply and demand between those two assets. So for now I assign equal weightings with a bias for ETH being structurally positioned better for the future, because of neutral net issuance and real usage of ETH across the vast majority of DeFi. The structural competitiveness of ETH was not strong enough to compete with BTC over the past year. We are still working through certain headwinds like supply overhang from the FTX blowup in 2022. On top of that, we had BTC ETF season, causing a relative drawdown of ETH against BTC to the extend of 30%. We can now say BTC ETF season is over, ETH ETF season is starting, and supply overhang is stopping. Note that these external dynamics are not bound to trend lines on a chart, meaning, unusual external forces can distort typical patterns, that can otherwise often be relied upon. We are now about to get structural competitiveness back into a more natural balance. The implication over time should then be to revert back to ETH/BTC levels seen 12 months ago. In a vacuum that means 45,000*0.075=3,375, which we should start to see some time in H2. Just note that nothing happens in a vaccum.

There was an interesting setup for LINK for which an entry above 17 got just confirmed. The projected upside is at least 30% in H1, but given our current ETH position and other anticipated dynamics it does make little sense to trigger taxable events at this point. We are not moving the barbell now. In any event, a prediction I am willing to make is that LINK will make it into the top ten crypto assets by market cap this year, where it rightfully belongs. Whether it stays there long term I am unable to tell at this point.

At the end of January the FOMC meeting concluded and Fed Chair Jerome Powell dampened expectations for March rate cuts. I think it does not really matter whether rate cuts happen in this or that quarter. They will happen and we will go down over time. US household deficit is too high and the future is bleak from a balance sheet standpoint. It is not likely that we go straight to ZIRP again. So slightly higher for longer is on the table and that would be ok as well.

The long anticipated Jupiter airdrop concluded. There was a bunch of drama around it but I did not follow it all and was honestly not very interested to look into it. To me it felt like a crowded trade that was heavily gamed and I am usually not to keen on playing those kind of games. The input/output ratio does never make sense for me on these things. That is, I cannot really make life changing money there. And so I spend my time elsewhere.

Brad Gerstner, CEO of Altimeter, suggested a future program for every new born child in the United States to automatically receive a bank account, seeded at birth with 1000 USD of shares in the S&P 500. Some called it the American Dream Account, allowing people to pocket a projected 1M USD when they have grown old, based on historical and expected growth data. This is such an incredible idea, because it would automatically enable every citizen to participate in the growth and success of the economy. That is an incentive structure to redirect energy back into the future, where it rightfully belongs. That is skin in the game. I mention this idea here because the mechanism design aligns incentives for every actor of the system. You force everyone to participate in the rise and fall of the empire, by design. Imagine a world in which everyone has to hold BTC or stake ETH. That is a world I would want to live in.

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