The predictions our brain issues radiate our social reality like a shield around us. - xh3b4sd

The market is a magnificent beast. Price action allowed voices to be raised, wondering whether the glorious bull market be already over now. Complaints could be heard that this is by no means the bull market that people expected. And now others come out proclaiming how the bull market has barely started. Yes, the market is truly a magnificent beast. Enchanting its participants to the highest degree possible. As if nobody knew that daily exposure to volatility tends to have significant effects on anyone's state of mind. Maybe we have to acknowledge that the only thing that really matters is the bull market that people perceive for themselves. And that includes only the effects that every individual gets exposed to on their own. We can imagine one market participant who comes out ahead from the bull market with 20% gained over 18 months. We can imagine another market participant who comes out ahead from the bull market with 50% gained over 9 months. Both may have a severely different experience over severely different time horizons. Both have severely different returns. But both should maybe just call it quits at this point and lean back a little bit. As we can see, different experiences make for different perspectives. And so we always have to be very careful who to listen to and which word to regard higher than others. The lesson in here is once again this. Think for yourself. And stick to the plan. I saw a pinned tweet the other day saying that October 2024 will conclude the top of this cycle and that this top will be inflation induced. The argument there was that inflation picking up more severely will have adverse effects on risk assets. I do not subscribe to that view at all. For one, it does currently not look like inflation is going to pick up substantially again. The FED has yet to start cutting interest rates. The current environment is already notably restrictive. And the first rate cuts are priced in to come in September. Are surprises and re-pricings possible? Sure! Right now there are simply no indications for those on the horizon. And second, the global liquidity cycle would have to be cut in half if everything were to be over already in October 2024. That particular development would only happen if the world economy were to overheat dramatically due to speculation and progress induced deflation, which is not at all the case right now. Raoul Pal would describe it this way. We are in the middle of the banana zone. The eye of the storm. It has been calmest where we came from. And it is likely to be very loud where we are going to over the next 12 months. Our plan remains the same in absence of significant change in the world. And that plan points to a market top around the mid point of 2025. If that view changes, you will hear it here first.

We can only better the world if we are able to take pain without passing it on. And shouting into the ether only to distract random strangers is net negative for the world. I am writing these lines because people are getting shamed again on social media for making use of their right to participate in elections. There is an ever so bitter irony in that particular theater. The most moralizing proponents of diversity do now express their utmost disapproval for those that make simply use of their democratic right to vote. It is almost as if all opinions are good and well as long as some people agree with them. It is almost as if some people are better than others because their own point of view is the right one. On that matter we may simply want to highlight what a democracy is. Democracy means that anyone can vote for anything without being threatened. And it is somehow paradox, the hypocrisy of this kind of social justice warrior mindset. Some people are dying to be accepted for what they are, while they are unable to accept others who simply have a different perspective on life. Without rambling any longer. Let it be this. Every vote in an election must be protected and must be independent. Some people vote for this cause. Some people vote for that cause. It is for nobody to judge which vote is better or worse. And I think all of the key opinion leaders out there would do well to simply focus on their work, instead of gaslighting the internet for no apparent reason. Stay away from person cults. And stay away from people who think that their opinion is superior to others, while at the same time they are trying to take something away from you. Go vote, that is! Because in politics we get very rarely served the luxurious opportunity to vote for the best possible option. Because the real world looks as follows. None of the candidates that we are given to chose from is aligned with our deeply moral cypherpunk values. As so often in a democracy, we have the choice of the lesser evil. And the only thing that matters in Realpolitik, in crypto today, is the choice between somebody who's administration tried to sue the whole industry into oblivion over the past 4 years, and somebody who is very loud about being "pro crypto". Well, what then appears to be the lesser evil for any single issue voter?

Somebody I know for a long time, who I consider trustworthy, articulated a theory for value accrual across the L1/L2 landscape. And if that theory were in fact true, I would be concerned. The theory here is that every L2 will eventually be incentivized to become their own L1, because L1 blockchains command a higher monetary premium. That very theory is somehow flawed in several ways. Becoming an L1 after having been an L2 is a significant challenge that we have never seen to successfully play out as far as I am aware. The biggest problem of becoming an L1 is bootstrapping a decentralized validator set that users want to ultimately rely on. And if you start out as an L2, benefiting from the security of Ethereum mainnet, then any change you make by becoming an L1 yourself implies a severe downgrade in economic security. We can now argue that decentralization and economic security does not matter for the users of said new L1 blockchain. But if that were to be true in itself, then we have to ask why said L1 blockchain started out as L2 rollup in the first place. I think we can sense that this story does not add up somehow. And there is more to highlight regarding any app that wants to become an app chain in the form of an L2 rollup. All of the decentralized apps and protocols migrating to become their own L2 would then have to further transition to become their own L1!? Why wouldn't apps become L1 blockchains right away? None of those developments are what we are seeing today. I think monetary premia will not change the discussed dynamics to the extend that the incentives of becoming an L1 blockchain start to make sense. Because ultimately it is not necessarily the monetary premium that makes an L1 blockchain work. Monetary premium is an outcome that somebody has to be willing to bet on. And that bet may or may not work out as intended. Grifters would maybe go for such a bet. But builders by all means focus on creating something useful without focussing too much on monetary premia. Build something that people want! Because the viability of any L1 blockchain itself is crucial to exist in the first place. L1 blockchains need a very good reason to exist. And trying to get the L1 blockchain aspects right alone is a huge detractor from any business model that aims to serve its users. My prediction would be that none of the active L2 rollups today tries to become an L1 blockchain during this cycle.

L2Beat is tracking 160 projects in the L2/L3 landscape. Half of those are not yet active. RWA.XYZ is tracking over 160 billion USD in global stablecoin market cap. That is still below the 2022 all time high of 171 billion USD. Interestingly there are 106 million addresses tracked to hold any amount of stablecoins, of which 18 million addresses have been active over the past month. Those 18 million addresses generated a monthly transfer volume of almost 1 trillion USD. Somebody having better data may please correct me here. Back in 2022 the generated transfer volume on the Visa credit card network was somewhere above 10 trillion USD over a 12 month period. In ballpark terms we can say that stablecoins are already in reach of the largest credit card network in terms of value transfer. Arguably the use cases might be quite different and I could see that especially the distribution of transfer volume across addresses is night and day between stablecoins and Visa. For instance big exchange addresses may account for much of the volumes, where credit card usage might be more evenly distributed across the population. In any event. I think we will go higher for longer!

The predictions our brain issues radiate our social reality like a shield around us. - xh3b4sd

The market is a magnificent beast. Price action allowed voices to be raised, wondering whether the glorious bull market be already over now. Complaints could be heard that this is by no means the bull market that people expected. And now others come out proclaiming how the bull market has barely started. Yes, the market is truly a magnificent beast. Enchanting its participants to the highest degree possible. As if nobody knew that daily exposure to volatility tends to have significant effects on anyone's state of mind. Maybe we have to acknowledge that the only thing that really matters is the bull market that people perceive for themselves. And that includes only the effects that every individual gets exposed to on their own. We can imagine one market participant who comes out ahead from the bull market with 20% gained over 18 months. We can imagine another market participant who comes out ahead from the bull market with 50% gained over 9 months. Both may have a severely different experience over severely different time horizons. Both have severely different returns. But both should maybe just call it quits at this point and lean back a little bit. As we can see, different experiences make for different perspectives. And so we always have to be very careful who to listen to and which word to regard higher than others. The lesson in here is once again this. Think for yourself. And stick to the plan. I saw a pinned tweet the other day saying that October 2024 will conclude the top of this cycle and that this top will be inflation induced. The argument there was that inflation picking up more severely will have adverse effects on risk assets. I do not subscribe to that view at all. For one, it does currently not look like inflation is going to pick up substantially again. The FED has yet to start cutting interest rates. The current environment is already notably restrictive. And the first rate cuts are priced in to come in September. Are surprises and re-pricings possible? Sure! Right now there are simply no indications for those on the horizon. And second, the global liquidity cycle would have to be cut in half if everything were to be over already in October 2024. That particular development would only happen if the world economy were to overheat dramatically due to speculation and progress induced deflation, which is not at all the case right now. Raoul Pal would describe it this way. We are in the middle of the banana zone. The eye of the storm. It has been calmest where we came from. And it is likely to be very loud where we are going to over the next 12 months. Our plan remains the same in absence of significant change in the world. And that plan points to a market top around the mid point of 2025. If that view changes, you will hear it here first.

We can only better the world if we are able to take pain without passing it on. And shouting into the ether only to distract random strangers is net negative for the world. I am writing these lines because people are getting shamed again on social media for making use of their right to participate in elections. There is an ever so bitter irony in that particular theater. The most moralizing proponents of diversity do now express their utmost disapproval for those that make simply use of their democratic right to vote. It is almost as if all opinions are good and well as long as some people agree with them. It is almost as if some people are better than others because their own point of view is the right one. On that matter we may simply want to highlight what a democracy is. Democracy means that anyone can vote for anything without being threatened. And it is somehow paradox, the hypocrisy of this kind of social justice warrior mindset. Some people are dying to be accepted for what they are, while they are unable to accept others who simply have a different perspective on life. Without rambling any longer. Let it be this. Every vote in an election must be protected and must be independent. Some people vote for this cause. Some people vote for that cause. It is for nobody to judge which vote is better or worse. And I think all of the key opinion leaders out there would do well to simply focus on their work, instead of gaslighting the internet for no apparent reason. Stay away from person cults. And stay away from people who think that their opinion is superior to others, while at the same time they are trying to take something away from you. Go vote, that is! Because in politics we get very rarely served the luxurious opportunity to vote for the best possible option. Because the real world looks as follows. None of the candidates that we are given to chose from is aligned with our deeply moral cypherpunk values. As so often in a democracy, we have the choice of the lesser evil. And the only thing that matters in Realpolitik, in crypto today, is the choice between somebody who's administration tried to sue the whole industry into oblivion over the past 4 years, and somebody who is very loud about being "pro crypto". Well, what then appears to be the lesser evil for any single issue voter?

Somebody I know for a long time, who I consider trustworthy, articulated a theory for value accrual across the L1/L2 landscape. And if that theory were in fact true, I would be concerned. The theory here is that every L2 will eventually be incentivized to become their own L1, because L1 blockchains command a higher monetary premium. That very theory is somehow flawed in several ways. Becoming an L1 after having been an L2 is a significant challenge that we have never seen to successfully play out as far as I am aware. The biggest problem of becoming an L1 is bootstrapping a decentralized validator set that users want to ultimately rely on. And if you start out as an L2, benefiting from the security of Ethereum mainnet, then any change you make by becoming an L1 yourself implies a severe downgrade in economic security. We can now argue that decentralization and economic security does not matter for the users of said new L1 blockchain. But if that were to be true in itself, then we have to ask why said L1 blockchain started out as L2 rollup in the first place. I think we can sense that this story does not add up somehow. And there is more to highlight regarding any app that wants to become an app chain in the form of an L2 rollup. All of the decentralized apps and protocols migrating to become their own L2 would then have to further transition to become their own L1!? Why wouldn't apps become L1 blockchains right away? None of those developments are what we are seeing today. I think monetary premia will not change the discussed dynamics to the extend that the incentives of becoming an L1 blockchain start to make sense. Because ultimately it is not necessarily the monetary premium that makes an L1 blockchain work. Monetary premium is an outcome that somebody has to be willing to bet on. And that bet may or may not work out as intended. Grifters would maybe go for such a bet. But builders by all means focus on creating something useful without focussing too much on monetary premia. Build something that people want! Because the viability of any L1 blockchain itself is crucial to exist in the first place. L1 blockchains need a very good reason to exist. And trying to get the L1 blockchain aspects right alone is a huge detractor from any business model that aims to serve its users. My prediction would be that none of the active L2 rollups today tries to become an L1 blockchain during this cycle.

L2Beat is tracking 160 projects in the L2/L3 landscape. Half of those are not yet active. RWA.XYZ is tracking over 160 billion USD in global stablecoin market cap. That is still below the 2022 all time high of 171 billion USD. Interestingly there are 106 million addresses tracked to hold any amount of stablecoins, of which 18 million addresses have been active over the past month. Those 18 million addresses generated a monthly transfer volume of almost 1 trillion USD. Somebody having better data may please correct me here. Back in 2022 the generated transfer volume on the Visa credit card network was somewhere above 10 trillion USD over a 12 month period. In ballpark terms we can say that stablecoins are already in reach of the largest credit card network in terms of value transfer. Arguably the use cases might be quite different and I could see that especially the distribution of transfer volume across addresses is night and day between stablecoins and Visa. For instance big exchange addresses may account for much of the volumes, where credit card usage might be more evenly distributed across the population. In any event. I think we will go higher for longer!