Strength is what you do even though everything around you is difficult. - xh3b4sd

It has been ETH ETF week. The word Ethereum is printed on a large banner hanging outside of the so much renowned New York Stock Exchange as I am writing these words. Without paying too much attention during the week, I had the feeling there was an awful lot of cope and quiet in the air. Is this just the summer lull? Or what are we dealing with today? We look at the BTC and ETH spot ETF flows. We look at Dune dashboards. We look at Solana's relative strength and we look at said cope all around. Let's start with this then. The net flows of the spot BTC ETF have never been negative since inception over half a year ago. The spot ETH ETF only started to trade earlier this week, but we have to acknowledge that its net flows have so far never been positive, but on the first day of trading. The converted Grayscale ETHE trust gave away the most, but is still holding about 8 billion USD in ETH assets. "Rip the bandaid off!" I hear them shouting from the roof. The total net flows for BTC and ETH are 17 billion USD and negative 180 million USD respectively. I wanted to see what the Dune dashboards say about the ETFs. The Bitcoin ETF dashboard made by Hildobby is pretty interesting and informative. The similar Ethereum ETF dashboard does exist, but is practically useless in its current form. Two months ago the Grayscale trust was added, but none of the other spot ETH ETFs are shown at the time of writing. What we have then been left with is to compare the number of people who starred the dashboards. The Bitcoin ETF dashboard had over 1800 stars. The Ethereum ETF dashboard, abandoned as it is these days, has close to 150 stars. The right conclusion here would be, the ETH dash has so few stars exactly because it is abandoned. So, stars on an abandoned dashboard don't mean much. I agree. But something is in the water. And so may that be an indicator for general interest. And since these are also the days of the Mt. Gox repayments, people receive in parts a lot of Bitcoin. Arguments have been made how some of those redistributed coins may be allocated to the just released spot ETH ETFs. And judging from the price action so far it looks more like people sold their Mt. Gox BTC and Grayscale ETH to buy, not more BTC, not more ETH, but more SOL. People do always seem to find explanations for why ETH underperforms. And whatever the reasons, if anything, the SOL price has been much stronger compared to ETH, and I must say that I am surprised by that development. My theory right now is that ETH is still overallocated across the market at large, and that SOL appears to be still underallocated in comparison. Where will then be the point at which SOL cannot outperform ETH anymore so that both assets are fairly priced relative to one another? Some quantitative estimates I have seen suggest that SOL will trend towards a medium term equilibrium of 25% market capitalization of ETH. We are somewhere at 21% today. And I want to end this part with another thought, without referring to anyone in particular. Let it be thought provoking. And let it be this. The hardest pill to swallow is eventually the fact that all the idiots have been right all along.

Some more thoughts on Solana's perception and valuation. A metric often shown is the amount of DEX volume that Solana is generating compared to Ethereum. The topic is contentious because nobody can agree whether TVL or volume is the relevant metric. Either metric might be more or less meaningful depending on what kind of economic activity we are looking at. My take would be this. Metrics inform about use cases. And those are contextual. If you are in the business of transferring money, then volume is the metric that you may pay attention to. The velocity of money is then what you care about, because more of less money can be transferred, if you transfer smaller amounts more often. That is what is happening on Solana today. And the money transferred over there is still mostly meme coin related, of which almost all go straight to zero quickly. The volume metric in itself is a good one for the right use case. And Solana is now generating the same or more DEX volume than Ethereum is doing on its own. That statement in and of itself is what a lot of market participants pay attention to, but it is not too meaningful as I see it. Here are some reasons why I think that way. Some of those meme coins have a market capitalization of under 100,000 USD. At the same time, those meme coins generate volumes of several hundreds of millions in volume. And my guess would be that most of those volumes are MEV related. Solana is doing more with less. That is great. But if some shitcoin of some 70k market cap makes about 200 million USD in volume, then I am not too interested in that kind of metric. Another issue with those kind of comparisons is that the Ethereum mainnet related metrics alone are now a mere subset of what is actually happening onchain. We always have to look at the cumulative amount of anything across all of the Ethereum ecosystem, and that includes L2 rollups. Today we are still early and the tooling to understand what is happening onchain is still being build. So it takes effort and time to understand what is going on around us. In some metrics the competition that Solana faces is not even Ethereum, but Arbitrum and Base. One day we will recognize that pointing to the fact how poorly Ethereum is performing on this or that metric compared to something else is rather irrelevant, because Ethereum mainnet gave up certain areas to the L2 ecosystem. Focussing on one area versus another is a business decision. I do not know what the future brings, but we are living through times of tectonic shifts in our industry, and throughout the world at large. So, what do you think?

Following from the above, we have to take a look at the ETH/BTC ratio. It is now trading again below 0.05 ETH per BTC. Somewhere above that specific line, reasons for optimism can be found. Today we have to acknowledge that ETH/BTC has not traded above the 10 month moving average since somewhere around January 2023. And what we have learned ever since is that anything trading below its 10 month moving average for significant amounts of time should simply be sold. Since early last year ETH has given away a lot of strength in price performance compared to BTC. And yes, compared to SOL the picture looks worse. There is likely a long painful way ahead of us in order to find a strong footing on those relative valuations. And so we keep pounding the table on metrics that do in fact matter long term. We are seeing over 8 million million weekly active addresses across all L2s. That is almost all time high again! Interestingly, Base has 40% of that market share there. Another interesting data point that keeps catching my attention is in the area of ETH burn. Different categories of economic activity cause certain amounts of ETH to be burned. DeFi is such a category. NFT is such a category. And L2s are a category too! What I find interesting here is that the L2s related ETH burn is steady at 7% for months now. That suggests that there is a considerable and reliable demand for block space to burn ETH based on L2 rollups that want to pay for economic security. And that means yes, economic security does matter, on Ethereum!

At last, I would like to invite anyone of my readers to reach out, if there are any questions or ideas for collaboration. I want to write about your startup, strategic execution and elegant mental models. My brand archetypes are sage, outlaw, magician and creator. If you would like me on your cap table as an angel investor, then feel free to send your pitch my way. If you would like my feedback or engage in an interesting conversation, then I am happy to chat or have a nice dinner over some sweet red wine. If you are a writer yourself, then I would love to talk about the art of writing and maybe get your feedback on my writings here. If you think we should work on something cool together, then please reach out and let's be friends.

Strength is what you do even though everything around you is difficult. - xh3b4sd

It has been ETH ETF week. The word Ethereum is printed on a large banner hanging outside of the so much renowned New York Stock Exchange as I am writing these words. Without paying too much attention during the week, I had the feeling there was an awful lot of cope and quiet in the air. Is this just the summer lull? Or what are we dealing with today? We look at the BTC and ETH spot ETF flows. We look at Dune dashboards. We look at Solana's relative strength and we look at said cope all around. Let's start with this then. The net flows of the spot BTC ETF have never been negative since inception over half a year ago. The spot ETH ETF only started to trade earlier this week, but we have to acknowledge that its net flows have so far never been positive, but on the first day of trading. The converted Grayscale ETHE trust gave away the most, but is still holding about 8 billion USD in ETH assets. "Rip the bandaid off!" I hear them shouting from the roof. The total net flows for BTC and ETH are 17 billion USD and negative 180 million USD respectively. I wanted to see what the Dune dashboards say about the ETFs. The Bitcoin ETF dashboard made by Hildobby is pretty interesting and informative. The similar Ethereum ETF dashboard does exist, but is practically useless in its current form. Two months ago the Grayscale trust was added, but none of the other spot ETH ETFs are shown at the time of writing. What we have then been left with is to compare the number of people who starred the dashboards. The Bitcoin ETF dashboard had over 1800 stars. The Ethereum ETF dashboard, abandoned as it is these days, has close to 150 stars. The right conclusion here would be, the ETH dash has so few stars exactly because it is abandoned. So, stars on an abandoned dashboard don't mean much. I agree. But something is in the water. And so may that be an indicator for general interest. And since these are also the days of the Mt. Gox repayments, people receive in parts a lot of Bitcoin. Arguments have been made how some of those redistributed coins may be allocated to the just released spot ETH ETFs. And judging from the price action so far it looks more like people sold their Mt. Gox BTC and Grayscale ETH to buy, not more BTC, not more ETH, but more SOL. People do always seem to find explanations for why ETH underperforms. And whatever the reasons, if anything, the SOL price has been much stronger compared to ETH, and I must say that I am surprised by that development. My theory right now is that ETH is still overallocated across the market at large, and that SOL appears to be still underallocated in comparison. Where will then be the point at which SOL cannot outperform ETH anymore so that both assets are fairly priced relative to one another? Some quantitative estimates I have seen suggest that SOL will trend towards a medium term equilibrium of 25% market capitalization of ETH. We are somewhere at 21% today. And I want to end this part with another thought, without referring to anyone in particular. Let it be thought provoking. And let it be this. The hardest pill to swallow is eventually the fact that all the idiots have been right all along.

Some more thoughts on Solana's perception and valuation. A metric often shown is the amount of DEX volume that Solana is generating compared to Ethereum. The topic is contentious because nobody can agree whether TVL or volume is the relevant metric. Either metric might be more or less meaningful depending on what kind of economic activity we are looking at. My take would be this. Metrics inform about use cases. And those are contextual. If you are in the business of transferring money, then volume is the metric that you may pay attention to. The velocity of money is then what you care about, because more of less money can be transferred, if you transfer smaller amounts more often. That is what is happening on Solana today. And the money transferred over there is still mostly meme coin related, of which almost all go straight to zero quickly. The volume metric in itself is a good one for the right use case. And Solana is now generating the same or more DEX volume than Ethereum is doing on its own. That statement in and of itself is what a lot of market participants pay attention to, but it is not too meaningful as I see it. Here are some reasons why I think that way. Some of those meme coins have a market capitalization of under 100,000 USD. At the same time, those meme coins generate volumes of several hundreds of millions in volume. And my guess would be that most of those volumes are MEV related. Solana is doing more with less. That is great. But if some shitcoin of some 70k market cap makes about 200 million USD in volume, then I am not too interested in that kind of metric. Another issue with those kind of comparisons is that the Ethereum mainnet related metrics alone are now a mere subset of what is actually happening onchain. We always have to look at the cumulative amount of anything across all of the Ethereum ecosystem, and that includes L2 rollups. Today we are still early and the tooling to understand what is happening onchain is still being build. So it takes effort and time to understand what is going on around us. In some metrics the competition that Solana faces is not even Ethereum, but Arbitrum and Base. One day we will recognize that pointing to the fact how poorly Ethereum is performing on this or that metric compared to something else is rather irrelevant, because Ethereum mainnet gave up certain areas to the L2 ecosystem. Focussing on one area versus another is a business decision. I do not know what the future brings, but we are living through times of tectonic shifts in our industry, and throughout the world at large. So, what do you think?

Following from the above, we have to take a look at the ETH/BTC ratio. It is now trading again below 0.05 ETH per BTC. Somewhere above that specific line, reasons for optimism can be found. Today we have to acknowledge that ETH/BTC has not traded above the 10 month moving average since somewhere around January 2023. And what we have learned ever since is that anything trading below its 10 month moving average for significant amounts of time should simply be sold. Since early last year ETH has given away a lot of strength in price performance compared to BTC. And yes, compared to SOL the picture looks worse. There is likely a long painful way ahead of us in order to find a strong footing on those relative valuations. And so we keep pounding the table on metrics that do in fact matter long term. We are seeing over 8 million million weekly active addresses across all L2s. That is almost all time high again! Interestingly, Base has 40% of that market share there. Another interesting data point that keeps catching my attention is in the area of ETH burn. Different categories of economic activity cause certain amounts of ETH to be burned. DeFi is such a category. NFT is such a category. And L2s are a category too! What I find interesting here is that the L2s related ETH burn is steady at 7% for months now. That suggests that there is a considerable and reliable demand for block space to burn ETH based on L2 rollups that want to pay for economic security. And that means yes, economic security does matter, on Ethereum!

At last, I would like to invite anyone of my readers to reach out, if there are any questions or ideas for collaboration. I want to write about your startup, strategic execution and elegant mental models. My brand archetypes are sage, outlaw, magician and creator. If you would like me on your cap table as an angel investor, then feel free to send your pitch my way. If you would like my feedback or engage in an interesting conversation, then I am happy to chat or have a nice dinner over some sweet red wine. If you are a writer yourself, then I would love to talk about the art of writing and maybe get your feedback on my writings here. If you think we should work on something cool together, then please reach out and let's be friends.