The Wolf Den #870 - Solana Crashed The Party
But It Ain't Over Till It's Over.
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In This Issue:
Solana Crashed The Party
Bitcoin Thoughts And Analysis
Legacy Markets
Cue The Commercials
Argentina Flirts With Bitcoin
Bye Bye Bitcoin
Solana Crashed The Party
It feels wonderful to be back; the holidays serve as a gentle reminder of how grateful I am for all of you who have stuck around and taken the time to read this letter.
During the break, I had the opportunity to reflect on some new thoughts and ideas, and I'm excited to share them with you.
While I was away, the most noteworthy development was Solana breaking through to new yearly highs, surpassing even the most optimistic predictions.
Congratulations to all Solana holders! For those, like me (I did, but… Voyager) who don't own any, rest assured that everything will be okay. As I mentioned a couple of weeks ago, 'there are plenty more pre-games to attend,' so don’t feel bummed if you missed out on this one.
Allow Solana to serve as a glimpse of what's possible in this cycle. Jealousy is the thief of gains.
Now, let's shift our focus to today's newsletter and delve into a conversation about our longtime companion, Ethereum, and its new rival Solana.
From here on out, between each thought, I am going to share Ethereum hate I have come across. For my contrarian investors who are willing to take calculated risks, view these images as ‘buy signals’ (not financial advice). For everyone else, enjoy the show.
Just over a month ago, I wrote a newsletter titled 'The Most Hated Asset,' outlining why Ethereum took the crown for being the most despised asset in the sector, largely owing to its price woes. Jump to the present, and astonishingly, Ethereum has found a way to accumulate even more disdain.
If Ethereum was the ugly stepchild just a month ago, it's now transformed into the middle child obsessed with goth - yeah, it's that bad.
I can't seem to recall a time when Ethereum faced such widespread disdain while the rest of the industry bathed in praise. Bitcoin is on the verge of winning over Wall Street, and Solana, the baby of the bunch, is now hailed as the greatest thing since sliced bread. Since this is my publication, where I can say whatever, I want, f**k the haters - I'm buying more ETH.
Examining the rationale behind this move, one may reasonably wonder: Is it risky? Of course! However, it's crucial to acknowledge that the contrarian bets are the ones that carry the potential for significant returns - a sentiment I would bet convicted Solana investors would agree with.
Throughout the entirety of the previous bear market, Solana stood out as crypto's contrarian bet, in contrast to Ethereum. While the entire crypto space is seemingly inclined towards being contrarian, Solana existed as a contrarian within our own community—contrarian squared if you will. There’s no denying that Ethereum sat on a comfy cushion the entire previous bear market next to Bitcoin, while Solana walked the tight rope.
All things considered, does it make sense to fade Ethereum and just throw the baby out with the bathwater? Hell no. Quite the opposite, in fact. I acknowledge that this newsletter might ruffle some tribal feathers, and I'm not here to argue that Ethereum or any single coin will outperform another asset in this cycle, because nobody knows. However, anyone convinced that ETH is now 'old news' or 'burnt' is in for a rude awakening.
I won't reiterate the entire ETH bull case at this moment; this isn't the time nor place. However, I'll quickly mention a few things. Do BlackRock, Fidelity, Grayscale, Ark, VanEck, and HashDex (filers of the Ethereum spot ETF) believe that Solana outgaining Ethereum signals the end of Ethereum? Would any of these institutions file for an ETF with the level of flimsy conviction we are witnessing in our echo chamber? Where is Ethereum’s credit for performing well in the bear market or being the first asset behind Bitcoin to recover while every other crypto asset still had a bear market?
I hope this is coming across as reasonable, but I'm aware that there might be a Bitcoin or Solana maximalist reading this, eager to dismiss my perspective as mere coping—that's okay. I’m not an ETH maxi, I simply see an opportunity. Solana has proven itself resilient, no doubt. But very little has fundamentally changed.
Solana investors can point to all the gizmos and gadgets they want to justify, quantify, and rationalize this run, but it's largely a technical move. Solana was a tightly coiled spring and survived its do-or-die moment this year; the investors deserve their spoils. Solana is a solid asset, and Ethereum is too.
I am dying on this hill.
I have more thoughts to share about this situation and ETH at a later point, but for now, I'll leave it at that. It feels great to be back, and I'm looking forward to celebrating the new year with all of you.
Bitcoin Thoughts And Analysis
Bitcoin appears to be consolidating in a bull pennant. I have not checked the chart in over a week as I have been on vacation, and little has changed - including the price.
A pennant has a descending resistance and ascending support. Remember, this can easily turn into a flag, a descending parallel channel. For that to happens, support breaks... people get bearish, only to see another form of bullish consolidation. So be careful.
Price is clearly interested in the $42,000 key area here, no surprises.
Legacy Markets
U.S. equity futures have risen and the dollar remained stable as markets resumed trading after the Christmas holiday. Investors anticipate earlier and deeper interest rate cuts next year. Asian stock markets were mixed in light trading, with European markets closed for holidays. Emerging Asian currencies, notably South Korea’s won and the Taiwan dollar, strengthened against a weakening dollar.
In U.S. premarket trading, Manchester United Plc's shares surged after UK billionaire Jim Ratcliffe agreed to buy a 25% stake in the club. Other deal news included Hollysys Automation Technologies Ltd. and 3D printer maker Stratasys Ltd., both experiencing stock jumps due to acquisition offers.
Stocks in mainland China fell, influenced by weak investor sentiment and recent regulatory tightening in the videogame industry. Meanwhile, the Singapore dollar remained steady following a slight decrease in core inflation, potentially allowing for a continued monetary-policy pause.
Japan’s two-year sovereign debt auction saw weak demand amid speculation of an end to negative interest rates in 2024. The Japanese labor market remained tight, pressuring employers to increase wages. The Bank of Japan indicated no rush to end its ultra-easy monetary policy, with the Topix index showing minimal change.
Chinese gaming shares outperformed after several companies announced share repurchase plans. Cathie Wood’s recent investment in LY Corp. suggested growing positive sentiment in the sector.
Iron ore futures reached a 18-month high, while oil prices slipped after a notable weekly gain, influenced by shipping disruptions in the Red Sea. Geopolitical tensions in the Middle East, particularly between Israel and Iran, continue to concern investors.
Global markets have been optimistic recently, betting on significant rate cuts by central banks, including the Fed, as inflation decreases. The S&P 500 is approaching a record high, supported by data showing U.S. economic resilience and subdued inflation, leading to expectations of more aggressive rate cuts in 2024.
Key events this week:
BOJ releases summary of opinions from December meeting, Wednesday
China industrial profits, Wednesday
Norway retail sales, Wednesday
Japan industrial production, Thursday
South Korea industrial production, Thursday
Thailand trade, Thursday
Mexico unemployment, Thursday
Bank of Portugal releases quarterly report on banking system, Thursday
South Korea CPI, Friday
Spain CPI, Friday
UK nationwide house prices, Friday
Brazil unemployment, Friday
Chile unemployment, Friday
Colombia unemployment, Friday
Some moves in major markets:
Stocks
S&P 500 futures rose 0.1% as of 9:58 a.m. London time
Nasdaq 100 futures rose 0.2%
Futures on the Dow Jones Industrial Average rose 0.1%
The Shanghai Composite fell 0.7%
The MSCI Asia Pacific Index rose 0.3%
The MSCI Emerging Markets Index rose 0.5%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.1015
The Japanese yen fell 0.1% to 142.51 per dollar
The offshore yuan was little changed at 7.1470 per dollar
Cryptocurrencies
Bitcoin slipped 2.6%, more than any closing loss since Dec. 11
Ether slipped 2.3%, more than any closing loss since Dec. 15
Bonds
The yield on 10-year Treasuries declined two basis points to 3.88%
Commodities
Brent crude was little changed
Spot gold rose 0.4% to $2,062.11 an ounce
Cue The Commercials
Why wait for the ETF approval when you can preemptively launch a commercial? Bitwise and Hashdex have proactively taken the initiative to start airing commercials promoting both crypto and ETFs simultaneously. While neither explicitly focuses on Bitcoin spot ETFs, the allure is hard to resist when ‘The Most Interesting Man in the World’ dons a gold Bitcoin pinky ring and Bitcoin cufflinks. If anyone happens to know where I can acquire such accessories, kindly reach out.
Argentina Flirts With Bitcoin
Argentina’s minister of foreign affairs, Diana Mondino, announced on X a decree that allows the use of BTC and other cryptocurrencies in the country under certain conditions. Her specific verbiage was, “We ratify and confirm that in Argentina contracts can be agreed in Bitcoin.”
Following up on this announcement, Diana articulated, “And also any other crypto and/or species such as kilos of steer or liters of milk. Art 766. - Obligation of the debtor. The debtor must deliver the corresponding amount of the designated currency, whether the currency is legal tender in the Republic or not."
Bye Bye Bitcoin
In Arthur Hayes’ most recent blog post, "Expression," there was a particular idea presented that I want to highlight here. The idea is that if TradFi asset managers are “too successful,” they will "destroy Bitcoin." This isn't the idea that BlackRock is going to steal Bitcoin or issue a fork in its place; rather, this is the notion that TradFi issuing a product fundamentally renders the asset useless. The relevant parts are quoted below.
Imagine a future where the largest Western and Chinese asset managers hold all the Bitcoin in circulation. This happens organically as people confuse a financial asset with a store of value. Because of their confusion and laziness, people purchase Bitcoin ETF derivatives rather than buying and hodling Bitcoin in self-custodied wallets. Now that a handful of firms hold all the Bitcoin, and have no actual use for the Bitcoin blockchain, the coins never move again. The end result is miners turn off their machines as they can no longer pay for the energy required to run them. Bye-bye, Bitcoin!
It is beautiful when you think about it. If Bitcoin becomes just another state-controlled financial asset, it dies because it isn’t used. The death of Bitcoin then creates space for another crypto monetary network to grow in its place. This network could just be a reboot of Bitcoin or something different that is an improved adaptation of the original Bitcoin. Either way, the people will once again have a non-state-controlled monetary asset and financial system. Hopefully, the second time around, we will learn not to hand our private keys to the baldies.
My initial reaction to this is as follows: First and foremost, institutions that find success with Bitcoin won't want to destroy it. This is a problem that could only happen decades from now, in a world that could look significantly different, allowing for steps to be taken to mitigate this outcome. Second, if Bitcoin reaches a very high level of success, there will be a real need to hold it beyond allowing an asset manager to do that for you. Third, major changes can be made to Bitcoin, and investors will strive to make positive changes when needed because of the direct incentive.
This is a neat idea, but not one worth concerning ourselves over.
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.
We’re happy to have you back.
Imma “coin” a phrase here . (possibly). . Beholden to No coin but, Beholden to Opportunity.
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