Meaning is everywhere. Only because you do not see it, does not mean it is not there. - xh3b4sd

In crypto twitter there has been this idea of financial nihilism because so many people gamble on meme coins now. The argument is that those gambling people refuse the rules of the old system, because there is no hope for them to ever "make it". The charitable interpretation of the meme coin mania would now be this. When we are gambling we are doing something entrepreneurial in search for financial freedom. This is a creative process. And I would say that creative processes cannot be nihilistic. Because, as we learned from Fathers and Sons, nihilism was finally destroyed by something that created an emotional reaction. And that is exactly what memes do. They create emotional reactions. Why does any of this matter now? The systems of our day and age are insufficient for the many, and we can therefore conclude that people will allways want to gamble in search for financial freedom. And that in turn means for us that there will always be opportunities. As we pointed out in the last Powerlaw memo, the next meme will come.

We heard less optimistic opinions about the ETH ETF approvals. For obscure reasons there is a political will to prevent further token ETFs. The ETF experts announced publicly that their projected odds are now around 35% for an ETH ETF approval until end of May. Polymarket states a 27% chance for the approval by end of May, but that market does only have 2 million USD in liquidity. I could see the market to be too small and too skewed for reliably predicting anything. What we do know to be true is this. The SEC is in a real predicament here. If the ETH ETF gets denied then the decision will be made in the court of law anyway and that decision would most likely be in favour of an ETH ETF approval. The question here is not if the ETH ETF gets approved, but when the approval will be made. This will be all fine and well in time. On the upside, I found ETH to be holding up quite well compared to BTC, given that BTC got all the massive ETF inflows, while ETH gets shunned by the crypto degens, because of muh Solana.

This week the Dencun upgrade happend in Ethereum land. Most notably we introduced a new fee market for blob space. That new fee market enables L2 rollups to post data on L1 mainnet in a more efficient way, so that economic activity on L2s can be cheaper. Blob space is separate from block space. L2 rollups opting into the new fee market do not have to compete for the highly demanded block space anymore. And so L2 transactions are not as expensive anymore. What the Ethereum developers are now starting to work on are all the prerequisites for statelessness and light clients. This will then be super exciting because validators will be able to operate without massive storage requirements, and that will make solo staking so much easier.

Towards the end of the week we experienced a market wide repricing of some 10%. Funny enough in last week's Powerlaw memo we said this time is different. So how do we reconcile the current situation with our outlook on the future? To me the repricing this week felt very forced and artificial. Price inflation of goods and services remains relatively high and seems to creep up again. Maybe the market had to price in changing rate cut expectations from the federal reserve. Maybe it was the exhaustion of an "everything pumps market" that had to calm down eventually. We don't know and we could not have known. What we do know is this. BTC is getting the infinite ETF bid. Global liquidity is still rising and it is expected to further rise massively. And we do know that this has dramatic implications for risk assets in general. We do know that this is still an election year and we do know that this cycle is only half way through. Higher for longer!

Meaning is everywhere. Only because you do not see it, does not mean it is not there. - xh3b4sd

In crypto twitter there has been this idea of financial nihilism because so many people gamble on meme coins now. The argument is that those gambling people refuse the rules of the old system, because there is no hope for them to ever "make it". The charitable interpretation of the meme coin mania would now be this. When we are gambling we are doing something entrepreneurial in search for financial freedom. This is a creative process. And I would say that creative processes cannot be nihilistic. Because, as we learned from Fathers and Sons, nihilism was finally destroyed by something that created an emotional reaction. And that is exactly what memes do. They create emotional reactions. Why does any of this matter now? The systems of our day and age are insufficient for the many, and we can therefore conclude that people will allways want to gamble in search for financial freedom. And that in turn means for us that there will always be opportunities. As we pointed out in the last Powerlaw memo, the next meme will come.

We heard less optimistic opinions about the ETH ETF approvals. For obscure reasons there is a political will to prevent further token ETFs. The ETF experts announced publicly that their projected odds are now around 35% for an ETH ETF approval until end of May. Polymarket states a 27% chance for the approval by end of May, but that market does only have 2 million USD in liquidity. I could see the market to be too small and too skewed for reliably predicting anything. What we do know to be true is this. The SEC is in a real predicament here. If the ETH ETF gets denied then the decision will be made in the court of law anyway and that decision would most likely be in favour of an ETH ETF approval. The question here is not if the ETH ETF gets approved, but when the approval will be made. This will be all fine and well in time. On the upside, I found ETH to be holding up quite well compared to BTC, given that BTC got all the massive ETF inflows, while ETH gets shunned by the crypto degens, because of muh Solana.

This week the Dencun upgrade happend in Ethereum land. Most notably we introduced a new fee market for blob space. That new fee market enables L2 rollups to post data on L1 mainnet in a more efficient way, so that economic activity on L2s can be cheaper. Blob space is separate from block space. L2 rollups opting into the new fee market do not have to compete for the highly demanded block space anymore. And so L2 transactions are not as expensive anymore. What the Ethereum developers are now starting to work on are all the prerequisites for statelessness and light clients. This will then be super exciting because validators will be able to operate without massive storage requirements, and that will make solo staking so much easier.

Towards the end of the week we experienced a market wide repricing of some 10%. Funny enough in last week's Powerlaw memo we said this time is different. So how do we reconcile the current situation with our outlook on the future? To me the repricing this week felt very forced and artificial. Price inflation of goods and services remains relatively high and seems to creep up again. Maybe the market had to price in changing rate cut expectations from the federal reserve. Maybe it was the exhaustion of an "everything pumps market" that had to calm down eventually. We don't know and we could not have known. What we do know is this. BTC is getting the infinite ETF bid. Global liquidity is still rising and it is expected to further rise massively. And we do know that this has dramatic implications for risk assets in general. We do know that this is still an election year and we do know that this cycle is only half way through. Higher for longer!