The Breakdown - 14 Takes on Shiba Inu Coin

Starting point is 00:00:00 Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by Nidig and produced and distributed by CoinDesk. What's going on, guys? It is Thursday, October 28th, and yes, we are actually doing it. There is so little else to talk about, and I have done so many regulation shows in a row that here we are talking about. Sheeb or Shib or however you pronounce it. And maybe you get from my lack of knowing the pronunciation where I start with this. However, I'm going to endeavor to give lots of different perspectives on this. It would be too easy to lean all the way into one critique or one dismissal and I've even

Starting point is 00:00:56 joked about why one should dismiss it on the show before. But that's what we're going to do for today. I will take no offense if you calmly turn this off and wait for tomorrow's show. For those of you who are still with me, here's the background. Doge is obviously the meme that won't die. Dogecoin has been around so much longer than so many of its illustrious shit coin relatives, and at some point someone decided that it would be right to make a Doge coin killer. If this meme has legs enough for one coin, what about for multiple? The Shiba Inu coin was first minted in August of last year,

Starting point is 00:01:29 but where most people started paying attention was the dog coin explosion in April. and May of this year. They were all taking advantage of the Dogecoin pump that was, of course, driven by, in large part, Elon Musk talking about it incessantly on Twitter. Around that time, again, April May of this year, we had Dogecoin cash, Kisha Inu, Underdog, Rendoge, Dojette, Doge Fai, Doge Swap, Mona coin, and Kat. Sheba stood out, I guess, as seemingly more serious or at least trying to be, right? It was discussing its different philosophy. It had a white paper, although we'll talk talk about that in a second. It had this idea of building out an actual decentralized exchange. The initial mint was one quadrillion tokens. Yes, that's also a thing that we'll talk about.

Starting point is 00:02:15 And half went immediately into uniswap with the key theoretically destroyed, while half were sent to Ethereum founder of Vitalik Buterin as a way to effectively burn them or keep them away from the rest of the community. Now, there was a whole hullabaloo around that, and Vitalik donated 10% to India COVID relief and then burned the rest to a dead wallet and asked nicely, for these coins to stop using his wallet like that. Why we're talking about this obviously right now is that it has been on an unexpected and unexplainable in many ways, tear, that has it battling with Doge

Starting point is 00:02:47 for the ninth biggest cryptocurrency by market cap. As I'm recording this, its market cap is $39 billion to Doge's $40 billion. With that setup, let's now do 14 takes on Sheep, and these are not all my takes. This is a variety of different perspectives that I'm trying to represent, lines that I've seen the community taking. Some of them have a representative tweet, but either way, hopefully this gives you an actual complex picture of what's going on out there.

Starting point is 00:03:17 The first take is you could have been a billionaire if. Morning Brew tweeted, this wallet bought roughly 8,000 of Sheeb last August. It's now worth 5.7 billion. from 8,000 to 5.7 billion in roughly 400 days, we may actually be looking at the greatest individual trade of all time. There is absolutely no doubt that this particular FOMO, that if I had only invested X at this time, I would now have this much, is the reason that people are paying attention to this. And this is just classic human psychology. And frankly, it's a particular type of psychology that has always lurked around crypto. If I had only bought Bitcoin at this price,

Starting point is 00:04:02 at this time, I was around, I can remember that time, and I had the money to do so. Now, of course, this is hard to avoid. This type of thinking is extremely difficult to not get caught up into, but there are so many things that make it such a really irrelevant counterfactual. Not least of which is that it's nearly impossible to not sell these things when they have such rapid returns. This comes back to me for this argument that you'll sometimes hear that Bitcoin OGs were just lucky. They were lucky to be there. They were in the right place at the right time. And I call total BS on that. The number of life events that would have been made easier by selling the stash. The amount of times that the things seemed dead. The number of people

Starting point is 00:04:47 telling people who were early hoddlers that they were stupid for being involved in this, or even worse criminals. It's just not as easy as being. there at the right place and the right time. But still, it's an incredibly, incredibly, perniciously compelling counterfactual. And I don't expect that we will ever be fully free from this type of you could have been a millionaire or a billionaire if type of thinking in crypto. So that's number one. Number two, the idea that this is 2017 all over again. And when people say this, what they're referring to is the arch peak of the ICO era, this time when everything was going public

Starting point is 00:05:25 their initial coin offerings with a little more than a telegram community and a white paper and big promises. People feel like that here because it's so hard to tell what the substance is because it's so me-mey or at least on first glance. And they also have that sort of inclination because you're seeing sheep all over the Wall Street Journal, CNBC, mainstream outlets like Bloomberg, but you're also seeing it rocket crypto apps like Coinbase to the number one place in the app store in the U.S. In fact, Coinbase changed its description yesterday to Buy BTC, ETH, and Sheeb.

Starting point is 00:05:59 Immortal crypto tweets that Sheab is the typical top signal that triggers a two-year bear market. We'll get more into this idea of top signals and retail and the risks to retail. But I will make a couple notes about the 2017 comparison. The first is that the ICO dynamics themselves were very different. There's a phrase called the shit coin waterfall that Meltem de Mirrors coined, And basically the idea of the shitcoin waterfall was that there was a cascade of investors who were basically just handing off to other investors all the way to eventually dumping on retail. So the way that it worked is that if you were really well-known VC and people wanted to put your name

Starting point is 00:06:36 on their coins telegram page or whatever, you would be able to buy the token at a discount to the ICO price, call it a 100% discount. And then if you were a good VC but not quite as valuable as those other ones, you would be able to buy it at a 50% discount. And so if you're keeping track there, the people who bought it at 100% discount already just doubled their money. And then you go on and so on and so forth until you finally get to the ICO. Immediately there's liquidity. If those guys just want to get their 2x or whatever, their 100% return, they can just sell right into that market.

Starting point is 00:07:05 And this happened over and over and over again. There aren't exactly this type of dynamics here, and that sort of thing is happening at least a little bit less publicly than it was in 2017. I think if anything, the NFT market has more of the elements of 2017. than this does. I think the NFT market is radically less pernicious than the 2017 ICO market was. But if you're looking for that style of pump and dump dynamic, I think that's where you look. A third take on Sheab is that this plays directly into regulators' hands. And frankly, that's one that I can't really disagree with. You may be a person who believes wholeheartedly that this represents a really interesting new community governance experiment. And if that's you, God bless. I am not here to crap on that.

Starting point is 00:07:49 idea. However, I do think that it's a reasonable concern that this thing is pumping to crazy valuations, is attracting a flock of retail investors, is seeing the sort of, should I buy this, where should I buy this text that we did see with the ICO movement, it's going to be a useful cudgel for the regulators, let's just put it that way. That doesn't mean it shouldn't be allowed to exist, but we do have to recognize that this sort of meme coin is going to arouse that sort of ire. Fourth, retail is actually going to get hurt. I think this is a reasonable debate to have. Anyone who's heard me on this show knows that I am a pretty aggressive free marketer through

Starting point is 00:08:27 and through, that I think people need to be empowered to make their own financial decisions, even dumb ones, that I don't think the government's job should be regulating what we can and can't buy with our own money. However, when it comes to asset advice and recommendations, I think that pushing people to buy a thing like Sheeb is their first entrance into the crypto markets is fairly questionable, if only because that hype almost for sure means that at some point the win- comes out of the sales. There could very well be some meaningful number of first-time retail buyers to crypto who buy sheep at the exact top and just watch it decline, decline, decline. Now, hopefully

Starting point is 00:09:00 they will have taken heed of the idea of not spending more than they can afford to lose, but ultimately that is a concern. NIDIG sponsors this podcast and they are helping banks, corporate treasuries, and fintechs integrate Bitcoin into their products and balance sheets. See why Bitcoin means business at Nidig.com slash NLW. That's nydig.com slash NLW. Fifth, speaking of retail, let's talk about this idea of quadrillion and if it only goes to a dollar. If you go hang out on crypto TikTok ever, which I can't necessarily super recommend, you will see so, so many videos and not just about she, but about a million different things,

Starting point is 00:09:48 where the primary argument is some semblance of what if it only goes to a dollar? A dollar seems like such a reasonable amount of money for a discreet, knowable thing to be, right? Why wouldn't this shebe go to a dollar? Well, humans are bad at understanding very, very big numbers, and they're bad at understanding very, very small numbers. A quadrillion is an enormous number of tokens. That's why the thing is worth something like 0.000000-0-0-0-7-9 or something like that. But it's so compelling for humans, and especially these sort of fly-by-night crypto content creators, on these fast-hit dopamine channels like TikTok, who can say, if you put in X amount now and it only goes to a dollar, here's how much you'll have. I think that this is a

Starting point is 00:10:29 dangerous, dangerous game to play. I also think it's a stupid game to play. What people don't do is they don't multiply a quadrillion by a dollar and find out what the total market cap would be and why it would be more than all the other assets on Earth if that actually came to pass. A sixth take that I have seen frequently on Sheeb is the idea that it distracts from the cool, real things happening in crypto. Mikkel Jolette says it confirms in the eye of the mainstream all of the worst notions about the crypto space. Totally loses the larger point about efficient agreed upon value storage

Starting point is 00:11:01 and programmable, decentralized money, and makes it all about very disposable ideas. I am sympathetic to this in the sense that I guess on some level there is a zero sum of time and attention that people have to deploy towards anything like this, and if they're spending it all on purely kind of number-go-up games like these, or at least like these are perceived to be, it cuts away their time to explore these other things that people are really excited about,

Starting point is 00:11:24 like decentralized value storage or programmable money. At the same time, I'm sort of a little bit less harsh on this one in the sense that almost everyone has the story of how they came in, and very rarely was it a clean line to something super valuable, like understanding a new financial primitive or understanding a government untamperable store of value. There will be a fair number of people, in other words, who come in through the door of She, but who leave through the door of Bitcoin or DeFi or something that others find more valuable. Seventh take, even meme markets love a competitor.

Starting point is 00:11:57 One of the things that I think is fascinating is that everyone was like, no, of course there can't be another Doge. Doge is so randomly specific, and it's got this history. But it turns out that markets love competition. We love having a horse race between the two Shiba Inus. Now, that doesn't mean the market can support two long term or even one long term, nor does it mean that it can support more than too long term? But we do have this human competitive instinct that loves to see this jostling battle between this doggo and this dogo over here.

Starting point is 00:12:26 And I think that it's fascinating to see that play out yet again in this random context. Eighth, this one is more of a question, but it's, are institutions really coming in? Yesterday, Coin Desk published an article called Shee Flipin-Doge with $160 million in quote smart money-backing latest pump blockchain data shows. And I am just going to read the first couple paragraphs of this. Quote, since the beginning of this week, addresses labeled as smart money by blockchain data firm Nansen started buying up Sheeb, according to Daniel Koo, a research analyst at Nansen. The buying was mostly concentrated in the past seven days worth about 160 million. Addresses labeled as smart money include traders who made more than $100,000 in profit by providing

Starting point is 00:13:06 liquidity and mining liquidity in decentralized finance protocols and public entities that invest in crypto. Listen, that may be completely accurate that $160 million from people who made more than $100,000 providing liquidity in defy have come into the Sheeb markets. But I do not think that that means that there's some new institutional shift to Sheab. I think, if anything, that means that people are reading rightly the incredible media attention around this, which, by the way, was my biggest concern in even doing this, that it feeds into that frenzy.

Starting point is 00:13:35 And I don't want to be a part of that necessarily. But here we are. Anyways, I think that it's more of a bet that that sort of attention is going to drive more people in to buy it, and so it's going to be a good short-term bet. 9. For the love of everything holy, let us not keep forgetting liquidity. Dad invest tweets, are these crypto people ever going to learn their lesson about a thin, one-sided market? Or am I just the dickhead who's never going to earn any money in the ISOEM manufacturer at 3x EVEBDA? Because I'm starting to not feel so good about myself with this new

Starting point is 00:14:05 Shibu stuff. Another person, Shiba swapping tweets, Shiba Inu is now more valuable than Deutsche Bank and Credit Suisse. So again, this gets to kind of a market structure or just a market interpretation thing. As I said before, I quoted the number $39 billion of market value. We heard that someone held $5.7 billion worth of Sheab in their wallet. Well, the question is, is it really worth that if you can't sell it for that much? And what I mean and what I think Dat Invest means by this idea of thin liquidity is what happens if that person wanted to actually sell $5.7 billion worth of Sheep?

Starting point is 00:14:39 What would happen if they even wanted to sell $1 billion worth of Sheeb? Is there that much buying attention? Would it immediately crater Sheab? Would that just create a run on the market that was a self-fulfilling prophecy down? These markets aren't big and robust. And in fact, frankly, this is one of the things that regulators worry about that when people want to get out, they can't necessarily because of this thin liquidity. I just think it's an important consideration whenever you're talking about some new asset

Starting point is 00:15:04 that seems super hyped and has a big fat market cap number associated with it. Take 10. At what point do we take these memes seriously? We've been talking for a couple years now around meme coins and meme stocks and we've been doing it dismissively, but how many people have to buy into these things before we actually just accept the power of memes and start to look out for them and start to have a better or different understanding and appreciation of them. An article about this pointed out that the primary Twitter account of Sheab has over 1.3 million followers. The Reddit has over 300,000 followers, the telegram has 50,000 members, and there's 129,000 on Discord. Now, I think it's reasonable to ask what those people are in that community for, but there are a lot of people who are into

Starting point is 00:15:46 this sheep thing, and I don't want to be so dismissive as to assume that they are all bots, although it certainly seems like some are, or that they all don't really believe that there's something here. But I don't know, it just feels to me like even if we don't take memes seriously in terms of their longevity, we have to take them seriously in terms of their market power. 11, and this is one of my favorite takes. Everyone becomes a maximalist eventually. Lee Drogan from Star Killer Capital wrote, My favorite thing in crypto this month is that the Doge people hate the Sheep people for stealing their meme and their money. Joe Wisenthal from Bloomberg wrote an entire piece that basically said the same thing.

Starting point is 00:16:23 He wrote this whole piece and he concluded with, So Sheep has advanced smart contracting NFTs, a decentralized exchange and its orders of magnitude, quote, cheaper to buy. You might still say it's a total joke and that there are more serious crypto projects, that should be getting attention, and maybe that's true. But as the longtime holder who goes by Shib Barbie on Twitter told me, people are always going to hate things that aren't what they view as serious. Take the Marvel Cinematic Universe, for example.

Starting point is 00:16:45 There are still people who don't consider them serious films, despite making obscene profits and getting rape reviews. Can't argue with that. She also engages in Sheabstaking and other activities on Shiba Swap, and is a general fan of the project's roadmap. Get your popcorn. It is times like these that really help people decide where their lines are in this industry.

Starting point is 00:17:02 More than a few Bitcoin maximalists have been printed at this time, and I wouldn't be surprised if a few more ETH maximalists and Doge maximalists come out of this one as well. 12. I have to give the inverse take or the reverse take on the when we take memes seriously, and this is, let's call it, the Dmitri Kofinas take. Dmitri is obviously the host of Hidden Forces, one of the best podcasts out there, and he has talked frequently about this idea of market nihilism, that even though this seems totally disconnected, this sort of meme activity, this dog coin competition is, in fact, reflective of an environment, a macro environment that has gone so off the rails, that people are nihilistic about what markets are supposed to mean. They don't have the

Starting point is 00:17:41 sense of value that people used to have. And that's not just sort of some boomer shakes his fist at the sky. It's a fundamental and concerning thing for him. I think this idea of market nihilism and the role that it plays in this sort of memeification of markets is worth discussing. Like I said, I don't think it has to be the Abe Simpson, old man shakes hand at fist kind of meme approach to really understand that there's something to that point. However, let's flip it again and go over to Suu from Three Arrow's Capital, who basically is arguing that all exposure is good exposure. He writes, dog coins are net great for crypto. Contrary to popular belief, there's actually no need to be mad at assets going up, which you don't own. And I think his point more or less

Starting point is 00:18:20 comes down to what I was saying before, that everyone's journey starts somewhere, and there will be some number of people who likely come out of this Sheeb community and do really interesting things. Finally, let's bring it to the 14th take, which is probably the most close to mine, which is that this is simply a part of truly free markets. Udi Wertheimer tweets jokingly, I will support the free market vehemently unless someone tries to compete with me, in which case they're a scammer. Now, it's a great joke, but, and here's the big but. There are two sides to this truly free market thing. The first is that coins and projects and ideas that we don't like or that someone doesn't like, have the chance to thrive. The second is that

Starting point is 00:19:05 there are no rules about having to like those things as part of the markets, and so people are allowed to be loud and vocal about their opposition to them. I think part of what makes crypto so compelling for me is the fact of these boisterous arguments and disagreements about fundamental meaning of value of the future of money. We are living inside a cauldron of debate that is fierce and painful and violent and often very distasteful, frankly, on Twitter. But it's so unique relative to the rest of the world and relative to other markets. So listen, I don't know, man, I don't know about this sheep thing. I know that my wallet does not have a sheep balance and will not have a sheep balance. But it is part of what you signed up for when you got into this space,

Starting point is 00:19:49 Bitcoin or Ethereum or otherwise. So welcome to the Thunderdome. Have fun. Stay safe. Do your own research, cliche, cliched, cliched phrase. And until tomorrow, be safe and take care of each other. Mark.

The Breakdown - 14 Takes on Shiba Inu Coin

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.