The Wolf Den #940 - What Really Matters.
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In This Issue:
What Really Matters.
The Halving Is In Less Than 2 Weeks
Coinbase Takes Home A Win
IBIT Adds New APs—All Banks Want In
Why Mega Bull Billionaire Mike Novogratz Has The Majority Of His Net Worth In Bitcoin & Crypto
What Really Matters.
Does price precede narrative, or does narrative precede price?
If you're having trouble answering the question, maybe starting here could help:
What came first, the chicken or the egg?
In the endlessly engaging debate of whether price movements drive narratives in the cryptocurrency world or vice versa, we're faced with a conundrum as age-old and unsolvable as this chicken-or-the-egg scenario. It's a question without a clear answer, as strong arguments exist on both sides, and ultimately, we may never have a definitive conclusion.
However, what we can grasp and analyze is the intricate dance between price and narrative in the crypto market. Sometimes, price shifts precede the stories we tell about them. These changes might stem from market dynamics like speculation, technical analysis, or even manipulation, where the narrative forms post hoc to rationalize the price action.
Conversely, narratives—those compelling stories we weave about a cryptocurrency's potential, technological advancements, or growing adoption—can significantly influence price. A positive story can spark demand, leading to price increases, while negative news can scare off investors, causing declines.
The challenge lies in the entanglement of these factors. While one might lead at times, they're perpetually interlinked, each influencing the other in a complex, ongoing relationship.
Shifting the lens to a more tangible debate within the DeFi ecosystem—the rivalry between Ethereum and Solana—we see this dynamic play out vividly. Ethereum enthusiasts might argue that Solana's price surge came before its narrative solidified, while Solana supporters could claim the opposite. This mirrors the chicken-and-egg dilemma, highlighting the futility of pinpointing a clear starting point.
Reflecting on Erik Voorhees' pivotal speech, ""Why are we here?"—without explicit favor towards any single technology—underscores a broader perspective. It's not about comparing the merits or popularity of Bitcoin, Ethereum, or Solana. Instead, it's a reminder of the overarching vision of crypto: to champion decentralization, freedom, and a permissionless financial system. The focus on specific technologies, prices, or narratives misses the forest for the trees.
“Crypto is our rebellion - it is a rebellion against a system that is unworthy of its authority.
Wild and romantic, these words still define the heart of crypto.
Capital flows where it is respected. Like water, it flows where it may and as the permissions of the fiat system constrain and strangle, so our open decentralized alternative stands ready to receive it. True innovation is messy, sometimes veering in unhelpful directions and back again. But capital will flow to well-ordered decentralized finance as water flows indelibly to the sea, and both will happen naturally and both will happen without permission.”
We often find ourselves overly fixated on details that, in the grand scheme, might not hold as much significance. There's a concern that such focus could deepen divisions and distractions, particularly if the landscape shifts—be it Ethereum regaining prominence while Solana lags or Solana eclipsing Ethereum over the course of this cycle.
It's important to recognize the absurdity in obsessing over these potential outcomes.
With the conclusion of my thoughts, there's much to anticipate in the upcoming week. Coinbase has achieved a notable success that hasn't quite caught the market's eye, IBIT is on the cusp of surpassing GBTC, the anticipated halving event is near, and the integration of real-world assets (RWAs) in crypto is solidifying.
Thank you sincerely for taking the time to read this.
The Halving Is In Less Than 2 Weeks
With the halving less than 2 weeks away, I wanted to point out what the price has done after each of the past three halvings. As always, past performance is not indicative of future results. Additionally, this halving is unprecedented in a number of ways discussed in previous letters. Now, let's turn to price.
Halving #1 - November 28, 2012
The block reward reduced from 50 BTC to 25 BTC
Price at time of halving: $13
Following year’s peak: $1,152
Halving #2 - July 16, 2016
The block reward to reduced from 25 BTC to 12.5 BTC
Price at time of halving: $664
Following year’s peak: $19,511
Halving #3 - November 28, 2012,
The block reward reduced from 12.5 BTC to 6.25 BTC
Price at time of halving: $9,734
Following year’s peak: $69,202
Halving #4 - June XX, 2024
The block reward will reduce from 6.25 BTC to 3.125 BTC
Price at the time of halving: $70,000 ish?
Following year’s peak: TBD?
As I've mentioned many times before, what you'll notice is that our current price at the time of halving is higher than the previous year's peak. Historically, the price has usually been about half of where it is at this point, which could indicate that the cycle is progressing faster, extending higher, or both. With Wall Street finally being here, I'm leaning more towards the possibility of ‘extending higher’ and maybe progressing faster—time will tell.
Coinbase Brings Home A Huge Win
Let’s set the stage:
Early June of last year, the SEC filed more charges against Coinbase, Inc., accusing the exchange of operating as an unregistered national securities exchange, broker, and clearing agency. At the same time, Coinbase was also charged for failing to register its crypto asset staking-as-a-service program.
And before June, back in February of 2023, a consumer lawsuit wagered against Coinbase from 2021 was revived against the exchange that argued Coinbase was engaging in the sale and offering of securities that were not registered. By the time June rolled around and the SEC brought about its lawsuit, Coinbase was playing 2-on1.
Here’s a quote from the SEC’s press release the day the SEC’s lawsuit was announced, “According to the SEC’s complaint, since at least 2019, Coinbase has made billions of dollars unlawfully facilitating the buying and selling of crypto asset securities. The SEC alleges that Coinbase intertwines the traditional services of an exchange, broker, and clearing agency without having registered any of those functions with the Commission as required by law. Through these unregistered services, Coinbase allegedly:”
Gary Gensler posted the following on x, which was actually community noted, I just couldn’t fit it all in one picture.
Fast forward to today, almost one year later, and the U.S. Court of Appeals for the Second Circuit has ruled in favor of Coinbase, confirming that the secondary sales of cryptocurrencies on its platform do not violate the Securities Exchange Act. What’s important to note about the determination of Coinbase’s victory boiled down to the court’s interpretations of Coinbase’s user agreements and contracts.
A) This was NOT a win against the SEC, it was a win against a group of consumers issuing a class action lawsuit that was revived.
B) This was NOT a declaration that assets such as Solana, Polygon, Cardano, and others named in the lawsuits are NOT securities.
C) This lawsuit was about the secondary trading and sale of securities, not the underlying assets themselves.
D) In my non-expert and non-legal opinion, this is a HUGE foreshadow of the case the SEC wagered against Coinbase, some of the SEC’s claims are near identical.
E) I am NOT a legal expert, read the summary order, and seek the opinions of professionals.
I’m looking forward to seeing how COIN reacts and the company decides to move forward with this determination.
IBIT Adds New APs - All Banks Want In
At the end of last week, BlackRock announced the addition of five new authorized participants to the iShares Bitcoin Trust, bringing the total number to nine. The new participants include Goldman Sachs, Citadel Securities, Citigroup, UBS, and clearing house ABN AMRO, joining existing participants Jane Street Capital, JP Morgan, Macquarie Capital, and Virtu Americas. As a recap, authorized participants (APs) facilitate the creation and redemption of ETF shares, contributing to a more efficient, liquid, and transparent market for ETFs.
One interesting aspects of this news is that Goldman Sachs' chief investment officer stated just this past week, “Crypto has no value, we do not think it is an investment asset class, and we're not believers in crypto.” However, we all know that in crypto especially, talk is cheap, and actions speak louder than words. While the CIO's statement may reflect her opinion, it does not necessarily indicate the actions the bank will take. Last point, if BlackRock adds 2,000 BTC to their AUM and Grayscale sees 2,000 BTC in outflows, the ETF’s flip. This could happen as soon as this week or next.
Why Mega Bull Billionaire Mike Novogratz Has The Majority Of His Net Worth In Bitcoin & Crypto
Come join us for the newest episode of the Wolf Of All Streets podcast, where we delve into the realm of cryptocurrencies with Mike Novogratz, CEO of Galaxy Digital. Known for his support of Bitcoin on Wall Street, Mike has been instrumental in making cryptocurrency more mainstream. In this episode, we tackle important topics such as the debt crisis, tokenization, ETFs, the promising future of Bitcoin, and why Mike allocated two-thirds of his portfolio to crypto. Tune in to gain valuable insights from one of the most influential and bullish experts in the field.
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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.
Great post Scott. So many excellent points from big picture and Erik's speech to Coinbase/SEC. And terrific interview with Mike N!!