Get a 5% deposit rebate in USDT when you sign up using my link to Bitget! Bitget
is the best crypto exchange for both spot and leverage, world’s largest crypto copy trading platform, and the official partner of Juventus Football Club. They are also offering a 15% discount on trading fees!
Was yesterday Doomsday for crypto?
The answer is no… but it was pretty damn bad.
Before I continue, I want to discuss why I write this newsletter every day. It boils down to one word - therapy.
Probably not the word you expected.
Much of what I write is spontaneous. It’s quite rare that I sit down with a conclusion in mind and neatly arrive at it without bumps in the road. Each new paragraph is genuinely a surprise to both of us. It’s what keeps me going and hopefully what keeps you reading.
This gives me the opportunity to explore my thoughts, put them on paper, review them, and then challenge and assess my conclusions. This is a test of my conviction and a thought experiment to sort my own beliefs.
By writing, I untangle the knots and jumbled information stuck in my head. In doing so, I find a sense of relief and am hopefully able to clarify some points for you in the process. I have ADHD, so this exercise is incredible for my well-being.
I have been up for hours, thinking and rethinking about the past few days in this market. Today, you get my random musings about the state of crypto.
On that note and in the spirit of therapy, let’s resume our regularly scheduled programming and discuss some crypto. To better understand where we are at in terms of crypto doomsday, let’s make a list of the good, the bad, and the ugly.
- The merge is coming
- Nation-states are turning to crypto
- Regulators are (we will see after Luna) warming up to us
- UST and LUNA blew up
- Michael Saylor could be liquidated (unlikely)
- El Salvador could be forced to give up on crypto (unlikely)
- Our over reliance on certain people, events, and things
- Our correlation to equities
- The market flushing out the garbage
This is by no means a comprehensive list, but it’s a an honest off the cuff appraisal of where we currently sit.
The Luna saga kept me awake last night. I can’t stop thinking about it. My “normie” friends can’t stop discussing it. The hedge funds that I am invested in can’t stop updating us. It’s a big problem.
First, it confirms the worst fears of every regulator, critic and hater on the planet. Janet Yellen was forced to address it yesterday, and I found myself struggling to disagree with anything she said. In this case, self-regulation was an epic failure, and nobody was there to protect the “Lunatics” that have believed and bet on this project, often with their life savings. The biggest money in crypto was backing Luna. Hell, Mike Novogratz has a Luna tattoo.
A stablecoin proved to be a systemic risk to the system, something politicians and talking heads have been screaming from the Washington mountaintop for ages. They were right.
It pains me to write that sentence, but it is the truth. And we have to be honest even when we don’t like it.
Bitcoin is supposed to be a hedge against inflation, bad behavior from governments and financial nonsense. It’s supposed to be a way to avoid systemic risk of market collapse. And it can be.
But… we piled on systemic risk within the crypto market so that it can’t function accordingly. We have largely taken the problems that we are fighting against and built them into our own system.
The worst part of the Luna saga is that we shot ourselves in the foot. There’s nobody on the outside to blame. NOTHING is worse than a self-inflicted wound, acquired on the world stage while everyone is watching. It’s like the classic scene in every horror movie - the call is coming from INSIDE THE HOUSE, GET OUT OF THERE!
We just gave the regulators all of the fuel that they will ever need to attack.
Warren Buffet is probably high on his 12th consecutive Coca Cola, celebrating our imminent demise.
Rat poison squared. Not true for Bitcoin. Maybe true for Luna.
This is a serious Catch 22 for builders who want to create a new financial system, and a clear argument for Bitcoin maximalism.
This does NOT mean that there is no value beyond Bitcoin. You know that I love the innovative side of crypto and am an avid fan of many altcoin projects. But this is a glaring example of the risks of being wrong and of blindly assuming that everyone in this space actually knows what they are doing.
Luna is currently trading at $4. It was $85 a week ago, and trading in the top 10 by market cap. This is an Enron type moment for crypto. Their stablecoin, UST, traded down to 22 cents. It is currently around 40 cents. Here are the two charts.