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MEMO W20 MAY 2024

When you believe in mankind and our common progress towards the future you should just keep owning the market and upper your positions gradually. - xh3b4sd

Crypto legislation attempts continue in the United States. It does somehow not make too much sense for the Democrats to be opposed to this industry and its technology. I am trying to come up with a compelling theory that steelmans this seemingly backwards positioning in an election year. In my mind we will look back at this very time in the future, realizing those were the days of really important turning points, that, in retrospect, defined the trajectory of the world economy. All of the politically motivated conflict we witness today reminds me of the old crypto wars in which the first advances in cryptography were classified as ammunition and was therefore not allowed to be used by the average person in their everyday life. We are talking here about the same cryptography that literally every single human being in the civilized world uses today, every day, all the time, simply by means of using the internet. Imagine the military industrial complex and the government would have gotten their way to keep that kind of innovation away from the free market economy. Imagine how our very lives would be different today. And just like in the old days, today there are actors in the government that try to prevent the next evolutionary stage of crypto and its effects on the world economy, once again.

It came to my attention that once again there has been drama on Crypto Twitter about Ethereum. As for the sentiment check here, the conversations and opinions I saw were pretty close to as rock bottom as it possibly can be. We do not even know at this point what qualifies as shitpost over there anymore. The situation is this dire. Everyone is hating on Ethereum, ranting about how bad it is and all the things that are wrong about it. Now, we have to take a step back and take it for what it is. A bunch of mids on the internet posting uneducated opinions, and my guess would be, without having much skin in the game. I am not talking about qualified contributors in their public discourse. I am talking about random anons with cartoon profile pictures. What I think has also become true on that matter is that many educated and hard working actors in the Ethereum community have simply logged off Crypto Twitter, causing brain drain and a decline in sentiment on the app that once had a bird on it. So my takeaway here is that whatever happens on Crypto Twitter is really just mental illness and I don't know how anyone is still gasping for relevance in that theatre. Today I am starkly reminded of Amazon's early days after the dot-com bubble burst in the 2000s. While all business metrics inside of Amazon were pointing to healthy growth and a promising future, the market was so frontloaded by earlier exuberance, effectively resulting in shorting the stock. To put things into perspective here, when the dot-com bubble burst, Amazon's stock dropped off an all time high of about 5.53 USD per share around 2000. It took roughly 10 years to break this price tag on the stock again in around 2010. And then after 10 more years, Amazon's stock made a 30x around the year 2020. I think it is reasonable to assume that the majors, like Ethereum, will follow a similar turn of events. And all of that will take time. Our plans are measured in centuries. And then, as always, as soon as price goes up again, the technology will have improved dramatically.

GME had a moment this past week again. This is the GameStop saga all over again in which the common folk gives the finger to the big man. The war going on within the markets here is between wallstreet and mainstreet. Somehow the whole backstory is complicated. What we can take away for us is that we just witnessed a pulse check on animal spirits. If anything, there is retail out there that wants to gamble. And all the people are waiting for is a compelling reason to go all in again. If anything, remember this, John Bull can stand many things but he cannot stand two per cent. That means people are not happy with low yield. The people are out there and they want to make some money. Those animal spirits run in waves, and one day the confluence of many such waves will bring a flood of liquidity back to all time highs for almost any asset that trades.

This here is a bit far deep in the trenches of MEV, but for those who are in the know, here is a story for you. Low Carb Crusader got indicted by the DOJ with charges of wire fraud and up to 20 years in prison. The case here is about an exploit in the mevboost relay software that caused an MEV bot to be robbed by another MEV bot for some 20 million USD. The crazy story that happened here about over one year ago was that bots fight bots onchain. The issue here though was that no strict onchain activity was exploited. The exploit was possible because an MEV bundle could be made visible by the attacker, which by design is not how it should be, exactly because all kinds of vulnerabilities do unfold in second order consequences when MEV bundles can be inspected before they are executed onchain. It will be interesting to see how those actions by the DOJ will effect prosecution and adjudication of various MEV related activities in the future. And their name was Low Carb Crusader.

Some interesting numbers at last. The State of Wisconsin now holds about 100 million USD worth of Bitcoin by proxy of the ETF products. This is the very first account of state owned crypto funds inside the USA, and it will not be the last. As far as retail activity is concerned, we can see retail trading volume on Coinbase sitting at 56 billion USD throughout all of Q1 2024. In comparison, we saw 256 billion USD of institutional trading volume on Coinbase within the same time period. That means of all trading volume on Coinbase, retail did only account for 18%. At the hight of the bull market in Q4 2021 this share of retail trading volume was almost twice as much with 32%. Way to go. And another interesting data point I came across this past week. Base accounted for almost 50% of all trades on Uniswap in April across all deployed chains. It's Base season after all.

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