The Wolf Den #996 - Facing Critics Head-On
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In This Issue:
Facing Critics Head-On
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Trump May Be At Bitcoin 2024
Could Bitcoin Be Used To Pay Federal Income Taxes
The Ethereum Foundation Was Compromised
Billions Will Flow Into Spot ETH ETFs
Crypto Crash? This $5 Trillion Institution Is Insanely Bullish On Crypto
Facing Critics Head-On
Every now and then, I actively seek out ideas that oppose my beliefs—ideas that thrive in different echo chambers, which we are either not privy to or choose to ignore.
In my search, I came across an article criticizing Bitcoin by an author I generally enjoy, who typically writes about various financial topics unrelated to crypto. The article is lengthy, and refuting each point would require a book's worth of work. However, this particular point caught my attention:
“The real test of if you should be a cryptocurrency supporter: would you be exactly as passionate and spend the same amount of time thinking about it if Bitcoin were still an obscure piece of code, worth less than one cent, and offered no chance of ever earning you any money? Because if you’re going to be an evangelist for anything, it needs to be purely based on the underlying merits, not what you hope it will do for your personal fortune.”
The question is: Would you be as passionate about Bitcoin if it was just code and worth under one cent? My honest answer is 'No,' and I'm sorry if that disappoints anyone. If you thought I would say 'Yes,' thank you for giving me the benefit of the doubt. Let me explain why this argument falls short, even when we give the answer the author wanted us to arrive at.
The argument begins with setting the context of Bitcoin being 'an obscure piece of code' and 'worth less than one cent.' The only time this ever occurred was around 2009. If I had casually heard about Bitcoin then, I probably would have kept scrolling because I am not the type of person that gravitates toward anything solely because of tech.
I use an iPhone because it is culturally relevant. I drive a Tesla because it is reliable and a cost saver. And an electric toothbrush because it cleans my teeth well. There is fascinating and groundbreaking tech behind iPhones, Teslas, and electric toothbrushes, but I don't operate on a tech-first basis. Neither does the majority of the world. How many people really know why an iPhone is technologically better than an Android or why a Tesla is superior to a Toyota Camry? Consumers are thinking more about features (which are a product of tech) and culture in their decision-making.
Point 1: The initial appeal and adoption of Bitcoin, like other technologies, are generally influenced by a combination of factors such as cultural relevance, reliability, and functionality.
Moving forward, it's important to acknowledge that there was never a time when Bitcoin didn't have the potential to generate value for its users, despite some reservations I take with the author’s wording. The white paper itself made ambitious promises that inherently suggested a significant increase in the value of Bitcoin. Moreover, those familiar with the original Bitcoin mailing list may recall that Hal Finney quickly grasped that if Bitcoin were to succeed, its value would far exceed its initial worth.
Point 2: The original question posed about Bitcoin's value proposition overlooks the inherent potential for value generation that Bitcoin has ALWAYS possessed.
Now, for the crux of the argument: Why can't an evangelist advocate for their own personal gain? I am an evangelist for my electric toothbrush, showcasing the return on investment in the form of clean teeth. I chose to upgrade from a manual system to an electric one. Bitcoin shares similarities with the toothbrush in that it offers its own set of cool features, such as fast transactions, 24/7 trading, and blockchain. However, it differs in that it is also a financial asset. This author is conflating a flaw in Bitcoin with the crowd of people who are buying solely because it’s a trend.
Bitcoin isn’t just another technology that marginally improves lives; it's an escape from a system that drains life away—an opportunity to trade fiat dollars for something else that’s better. In that sense, it’s not an investment.
Bitcoin is a black hole that will suck the inflated value out of other assets tied to a fiat world and shape a new reality where discussions about value aren’t hinged on dollar denominations. Bitcoin is better money, and better money will rise in value.
Point 3: Bitcoin can be appreciated for both its technological features and financial gain, without requiring a devotion to one over the other.
What's probably happening is that the critic doesn't like that Bitcoin has the gravitational force to attract investors who haven't yet understood what they are buying. The catch is that anyone who does the research gets it.
Truth be told, if any of us were naturally a little curious about money or cryptography and happened to be on the original mailing list when Bitcoin was just code worth under one cent, we probably would have believed in it. I can say this because Bitcoin has become a household name precisely because those original individuals were hooked enough to tell everyone they knew about it. We wouldn't be here if they hadn't.
We can debate endlessly about what constitutes the merits of Bitcoin, but the reality is that its cultural relevance and rapid adoption are powerful motivators for people to invest in it. As Bitcoin becomes a mainstream topic and experiences significant growth in adoption, individuals are naturally drawn to be a part of this movement. This doesn't diminish the importance of understanding Bitcoin's underlying technology and principles; rather, it acknowledges that adoption can be driven by broader factors.
Moreover, while I would hope that new investors take the time to learn about Bitcoin to avoid falling into the trap of investing in superficial trends or memecoins, at least they are stepping away from fiat currency. Our job at that point is to not ridicule adopters or steer them away but inform them why they came to the right place.
What a missed opportunity it would have been to criticize the greatest asset ever created on Earth when it was trading at just $15,000.
Bitcoin Thoughts And Analysis
Bitcoin managed to close yesterday back in the trading range, which is encouraging for bulls. Still, things look a bit precarious, with support having broken for a bit.
I am not particularly concerned, this remains the anticipated summer doldrums. I see nothing but tailwinds for crypto heading in the fall and next year, so I would not be looking to exit at the moment.
Altcoin Charts
A number of altcoins are sitting in support zones, pretty beat down. Buying your favorites here long term could make sense, if you are able to zoom out and be extremely patient. If you are looking for shorter term moves, hard to enter without taking on some more risk. I am hesitant to share charts at a time when I am not myself particularly interested.
Legacy Markets
US futures wavered after a Federal Reserve official downplayed hopes for interest rate cuts, impacting market sentiment. European stocks reversed gains, Treasury yields rose, and the dollar strengthened. The yen breached a critical level, raising speculation of possible intervention by Japanese authorities.
Fed Governor Michelle Bowman emphasized maintaining elevated borrowing costs, influencing S&P 500 and Nasdaq 100 futures. Nvidia's recent volatility has sparked concerns about the concentration of megacap technology stocks in equity indexes. Notable premarket movers included FedEx, which surged over 13%, Carnival Corp., which gained after a surprise profit, and Southwest Airlines, which fell 6.7% after cutting guidance. The Fed forecasts minor rate cuts by year-end, but market participants are betting on deeper reductions.
In Europe, the Stoxx 600 reversed gains due to declines in carmakers and travel stocks, despite gains in the tech sector. Japanese and Hong Kong equities rose, while Australian markets declined amid persistent inflation pressures.
In commodities, oil prices rose ahead of a US government report on crude inventories, iron ore climbed, copper fell to a two-month low, and gold remained stable.
Key events this week:
US new home sales, Wednesday
China industrial profits, Thursday
Eurozone economic confidence, consumer confidence, Thursday
US durable goods, initial jobless claims, GDP, Thursday
Nike releases earnings, Thursday
Japan Tokyo CPI, unemployment, industrial production, Friday
US PCE inflation, spending and income, University of Michigan consumer sentiment, Friday
Fed’s Thomas Barkin speaks, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 7:25 a.m. New York time
Nasdaq 100 futures rose 0.1%
Futures on the Dow Jones Industrial Average fell 0.2%
The Stoxx Europe 600 fell 0.3%
The MSCI World Index was little changed
Currencies
The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.3% to $1.0683
The British pound fell 0.3% to $1.2646
The Japanese yen fell 0.4% to 160.27 per dollar
Cryptocurrencies
Bitcoin fell 0.9% to $61,374.01
Ether fell 0.9% to $3,378.54
Bonds
The yield on 10-year Treasuries advanced three basis points to 4.28%
Germany’s 10-year yield advanced three basis points to 2.44%
Britain’s 10-year yield advanced three basis points to 4.11%
Commodities
West Texas Intermediate crude rose 0.7% to $81.36 a barrel
Spot gold fell 0.6% to $2,305.85 an ounce
Title
Trump May Be At Bitcoin 2024
I've had a suspicion for a while now that there's a good chance Trump will attend the Bitcoin 2024 conference. Recently, he met with David Bailey, the CEO of Bitcoin Magazine, and executives of mining firms to discuss policy and anti-CBDC legislation in DC. David Bailey is likely the primary decision-maker regarding Trump's potential speaking engagement at the conference this year, assuming Trump wants to attend.
Could Bitcoin Be Used To Pay Federal Income Taxes?
There is a bill in the works that would allow Bitcoiners to pay federal income tax with Bitcoin. Matt Gaetz, a Florida congressman behind the bill, said the following:
“By enabling taxpayers to use Bitcoin for federal tax payments, we can promote innovation, increase efficiency, and offer more flexibility to American citizens. This is a bold step toward a future where digital currencies play a vital role in our financial system.”
Just recently, Gaetz traveled to El Salvador, which likely inspired the decision-making.
The Ethereum Foundation Was Compromised
Phishing scams are still a HUGE problem. The Ethereum Foundation email list was compromised, and guess what happened… emails were sent out posing as the Ethereum Foundation, enticing recipients with an innovative staking platform in collaboration with Lido DAO. Tim Beiko, one of the major figures at the Foundation, sounded the alarm on Twitter, notifying everyone of what a fake email could look like and that all external access has been locked down to further protect the platform. I suggest you closely read through the image below to grasp how clever and deceptive these attacks are.
Billions Will Flow Into Spot ETH ETFs
Bitwise's CIO, Matt Hougan, predicts that $15 billion will flow into Ethereum ETFs within the first 18 months, driven largely by market cap comparisons and the success of similar products overseas. If you aren’t already subscribed to receive the free weekly memo, I highly recommend it.
“There are a lot of ways to tweak this model.
For instance, you could argue that Ethereum ETPs will underperform my estimate because they will not stake assets, which will lower demand. I don’t think this is true—staking income is a rounding error on ETH’s average annual return, and I think ETP investors will be happy simply having exposure. But it is a valid critique.
On the other hand, my estimate doesn’t take into account the multiple tailwinds behind Ethereum’s growth, including the rise of stablecoins, growing regulatory clarity, and the aftereffects of the blockchain’s recent Dencun upgrade, which dramatically lowered transaction costs on Ethereum. A strong bull market for ETH as an asset would significantly increase demand.
Still, I think $15 billion in the next 18 months is a good starting point. My gut tells me we’ll do better than that; ETH is a compelling asset powering the world’s most versatile blockchain. But even $15 billion in net new demand will have a dramatic impact on the Ethereum market.”
Crypto Crash? This $5 Trillion Institution Is Insanely Bullish On Crypto
Chris Kuiper, the Director of Research at Fidelity Digital Assets—a cryptocurrency-focused division of Fidelity Investments, which manages nearly $5 trillion in assets—joins us today to discuss the recent cryptocurrency market downturn. We'll explore why Fidelity maintains a strong belief in the potential of cryptocurrencies despite the market's challenges.
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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.
Hi Scott,
I saw an article stating the Ethereum ETFs may be approved on July 4th, when the market is closed. Maybe you can comment on this for the rest of us. Do you see price declining after launch as with Bitcoin before?
Thanks, Dave S.