The Breakdown - The Great BTC-Alt Divergence / Epic Rap Battles Of Adoption / Derivative Games

Episode Date: September 5, 2019

BTC dominance is over 70%, and the gap between its performance and everything else may be accounting for the strange dissonance between 3x BTC price growth in 2019 and the serious gloomy pallor on display on crypto Twitter. We look at that divergence in the context of Fred Wilson's state of crypto post yesterday, as well as the continued growth of bitcoin-focused derivative products and comments from Twitter/Square CEO Jack Dorsey and the Apple Pay head on BTC and crypto. And don't miss the epic rap battle of history between Hamilton and Satoshi.  Watch: https://www.youtube.com/nathanielwhittemorecrypto

Yeah, dude, super funny. As if banks these days still help people make money. The rich get richer and we follow like we're all cheap. The banks serve Wall Street. Crypto serves all streets. The interest in crypto's on rapid ascent. What's your current interest? Like half a percent.

I'm sorry. The bank's gone past its peak. But I want info encrypted, not hack them. If this crypto system will be our salvation, it needs to be centralized. Neatting 3. All right. Number one, we're going to talk about mass adoption and a couple interesting comments from leaders of major tech companies. Two, we are going to talk about this interesting contrast

between how things seem to be going kind of from a market perspective with how people seem to be reacting to it. And three, we're going to talk about why derivatives seem to be leading everything. So first, on this idea of mass adoption, right? So I woke up this morning to Reed Hoffman, CEO and or the former CEO, founder of LinkedIn, had financed and produced a, or presumably had financed, uh, something on the spirit of epic rap battles of history around, uh, pitting Hamilton against Satoshi Nakamoto. So Hamilton, the kind of originator of the central banks, uh, the central bank in the U.S. Uh, and obviously Satoshi of Bitcoin fame. Um, and I think it's like, it's so it's, it's fun to me. Uh, I'm a huge fan of epic rap

Battles of History. I'm glad he brought at least half of the duo that does that in to do this. And I think it's just more interesting than anything else. There's a lot of fun cameos and worth checking out. You know, I don't know. It's an interesting question about how much stuff like this actually matters when it comes to popularizing Bitcoin, popularizing cryptocurrency in general. My feeling is usually that mass adoption of cryptocurrency and Bitcoin is going to come largely on the basis of what it does and what it offers financially and from a value proposition standpoint in people's lives that you can't just educate your way into it or meme your way into adoption. That said, I think that it's important for it to be accessible and for people to have intellectual, ramps to it. And I think that things like this provide a very different narrative and a very different story than the idea of it as a terrorist money or just, you know, black market money

or whatever. So I'm all for things like this, especially from folks like Reid Hoffman, who have the resources. And this is a great way to do that. So pretty cool. But I think it is more notable in the fact that it was one of a number of interesting comments that people were talking about, kind of from big tech leaders around cryptocurrency yesterday. Another one came from the head of Apple Pay Jennifer Bailey. So in an interview, basically, or a private CNN event, rather, she mentioned that she thought that cryptocurrency had longer. Apple thought that cryptocurrency has long-term potential. This is interesting in the context of Apple being pretty anti-Bitcoin, you know, earlier in its life. Now, Niraj from Coin Center points out that he says,

before you get excited, remember that this is the safest possible comment, which I think is true. But at the same time, it's notable that it's coming up, that it's on their radar. I think in some ways it would be unthinkable that it wasn't, but still, it's kind of an interesting little footnote in maybe where things are that, you know, we don't really know, other than Apple Pay and Apple's credit card exactly how they're going to put their, you know, what foot forward they're going to have as it relates to this global game of digital currency and digital money that we're seeing with Facebook's Libra, with, you know, Binance Venus, with central bank digital currencies, where Apple sees its role and all that. But you have to believe that they're thinking about it.

It's got one of the biggest platforms in the world, and it would be almost inconceivable for it not to. What we do know is where Twitter and Jack Dorsey stand on this. In an interview earlier this week, he reaffirmed that Twitter will not release Twitcoin or anything like that. And the quote that, again, Niraj points out is, I think open internet standards serve every person better than ones controlled by controlled or started by companies. So this is a, you know, we've talked about this before in 3.3. I've talked about it before in LRS. I think that it is remarkable and notable to what extent Jack Dorsey provides a counterpoint to the kind of the Zuckerbergian take on cryptocurrency in his investment in belief

in Bitcoin and an open standard like Bitcoin as the right way to do a global internet money. It provides a really strong poll. It'll be interesting to see to the extent that the market likes Libra, whether that actually hurts him, whether he's putting some risk as it relates to public markets for himself because people see it, investors see it as a, as kind of an interesting money opportunity and they want the companies that they're invested in to take advantage of it. But I don't see him changing that anytime soon. So really interesting stuff, continued affirmations, continued reasons to be super kind of pro-jack and pro-Twitter as a medium and as just a countervailing intellectual force.

With that, let's move on to number two, which is, in fact, also based on a comment from someone in technology. So yesterday, Fred Wilson, who's a very prominent venture capitalist, Union Square Ventures, has been investing in crypto for a long time, wrote a post called Some Thoughts on Crypto. He's talking about Bitcoin, how it's making up almost 70% of the aggregated market cap. And he says, and this is the quote that a lot of people pulled out, in some ways Bitcoin is the one protocol that has found lasting product market fit. In terms of a citizen, in terms of a censorship-proof digital store of wealth,

there is nothing that comes close to Bitcoin. There are some protocols like the privacy-focused ones that offer similar, and in some cases better use cases, but for the most part, Bitcoin is our digital gold. He then goes on to say that Ethereum, as many of you know, confounds me. It has shown the way in so many important things, smart contracts, programmable, trust-free, computing, potentially proof of stake and a lot more, but it remains hard to build on scaling issues about and many developers are looking elsewhere. Stable coins, he says, and this is kind of his third point, including Facebook's plans for Libra are a bright spot, much innovation in the

sector, yada, yada, yada, yada. And then he goes to point on, though, there's plenty of disappointment to be had in crypto right now. He talks about some of the best performing projects have been delayed in going to market, how regulation has held things back and a lot of the innovation is moving to Asia, how DAPs haven't gone mainstream. And there was a huge amount of sentiment from all sides on this. And, you know, it's not new necessarily as a position for Fred Wilson, even in this thread that Tertes, Tertemuster started. There's a back and forth between him and James and Lopp, where in 2017, Fred Wilson said that he thought the market cap of Ethereum would bypass Bitcoin by the end of next year.

And then in 2018, at the Multi-Coin Summit, he talked about his frustration with how Ethereum was being managed. And Jameson, a lot made the point. Sounds like Fred was learning the hard way that crypto networks are not companies. There are some that operate like companies, and I'd pose that for them, the crypto network itself is running with the tradeoff of greatly diminished robustness. So I think that the interesting thing for me is that this is something I've been noticing as well, that there's a real interesting divide or kind of contrast between.

The fact that on the one hand, Bitcoin is up, you know, three, three and a half per, or three times, basically, cycle lows of $3,500 that we experienced in December, January of this year. It's up from there, and it's been holding consistently at this 10K level. But then everyone is acting so goddamn gloomy, as I put it. And it was really interesting to see the comments. There was some was, some focus was just around the idea of time preference. So people were, people were basically thinking too short term in terms of how they evaluate the success of the market. Some folks said that it has to do just with the psychology of prices, right? So Miguel, Canita says, because we haven't surpassed all-time highs yet, this is like Bitcoin at 600 in 2016.

Many still didn't believe we were out of the woods yet even after a year at 200. Full-on irrational euphoria only kicked in, really, in late 2017, which led from 5K to 20K in just a couple of months. Some people said battered bull syndrome. Some polls I've seen, say about 40% of market participants didn't buy their first Bitcoin until the bull run of 2017. And 2018 was traumatic. Dave Levine, I thought this was a great comment.

We were in a transition from BTC as a globally day-traded video game to BTC as an institutional asset class. This part is more boring, but a hell of a lot more. bullish in the long run. So for him, the argument is just basically that this part is necessarily boring. What's building is boring. Then there was a piece or kind of a comment that I thought was really interesting from Yang, Yang Ventures over here that says, the global recession will force, quote, a lot of strong hands to sell to pay the bills, make rent. Many people on Bitcoin Twitter don't have enough non-BTC assets or skills to be immune from a deep recession. He was kind of the only

one who commented that, but I think there's more truth maybe in that that there is a sense of general market nervousness of if not gloom than wariness about what comes next and that that might be creeping into the space. But overall, the vast majority of comments had something to do with the fact that the much Ballyhooed, much anticipated alt season had not come and didn't give any signs of coming. And that people had been for months as soon as Bitcoin surged in April or whatever it was of this year. You know, it started moving up again, and it got all the way up to nearly 14,000,

that the alts never followed, and that so many people that have been hanging on are underwater on their alt-coin bags, and that without that, it's basically just that it's, this rally, basically, the bull market that we shifted into is really a Bitcoin-only phenomenon, and that that is sinking in,

and that's causing this contrast and this frustration, between the folks who are kind of bitcoiners and everyone else. In particular, Ethereum, which continues to kind of index lower as a percentage of value as compared to Bitcoin continuously. I think it's a really interesting and important thing to track just from kind of a narrative perspective because it is, there is this dissonance between that Bitcoin price and just the feeling and the sentiment. This is just my sample size. It could be off and people could be bullish everywhere.

But it does feel like there's this interesting kind of holding pattern in terms of the emotions of people in the space that doesn't seem to be particularly affected right now by Bitcoin price. I thought Ariana Simpson had a great visual representation of this. She says both of these have logos, the Bitcoin logo, for those of you who are listening, not watching. If you can't love me at my 6,000, you don't deserve me at my 50,000. Ariana, meanwhile, for those of you who want to dig in a little bit further to this question of alt season, had a great threat a couple of weeks ago that ended with. So in some, I believe claims that, quote, alt are dead and Bitcoin alone will make it are nonsensical. I am most definitely long Bitcoin, but call me after you've tried deploying an app on Bitcoin versus Ethereum. Alternative chains might not seem so useless after all. Again, there's, so what she's talking about is that folks who have lived through cycles know that at some point things besides Bitcoin, arise. It remains to be seen, but I think that there's part of the separation that's happening now is around use case as well and what these are for. And I think part of the tension that everyone's experiencing is just that in some ways what the aims of these different types of

cryptocurrencies are is so wildly divergent that it's hard to kind of even pin them down into the same industry. But with that, I want to turn just very briefly to the third and final topic for today, which is derivatives. So I recently asked, for those of you guys who watched or listened yesterday, I asked a number of different crypto Twitter, personalities, entrepreneurs, VCs, content creators, what have you, a bunch of questions about what they thought about the summer and then what their predictions were going into the fall. And one of them, one of the folks who I asked was the crypto dog.

And he said, looking at the fall, basically that derivative. will continue to drive everything. And so this is something that I've been watching for a while. I think if you look at kind of 2017 and early 2018, it was all about trading your kind of long-tail alt coins on Binance, whereas for a lot of 2018 as the bear market settled in, people were, you know, playing the Bitcoin game with Bitmex, right? And you've seen just over the last, you know, number of months, such a huge amount of attention and focus on building Bitcoin-specific derivatives and these derivative products for the crypto markets. And that just used multiple pieces of news where that was really heating up this week. So Binance in particular had acquired crypto exchange

GEX to boost derivatives offerings. So this news broke earlier this week. Binance has announced the acquisition of crypto exchange Jex or JX, I'm not sure which, in a bid to boost. its crypto derivatives offering for pro traders and then this is super interesting they actually decided to launch two crypto futures platforms for user testing simultaneously so dubbed futures A and futures B the new test nets are now open for users to play with using dummy assets with new competitions to encourage traders to get involved so that again this is showing just kind of how much focus in some ways even for you know some of the

leading all coin exchanges to shift their attention over to these kind of derivative products that are much more focused on, you know, Bitcoin and just a few other assets. There's one other piece of news and other derivatives exchange that just launched. And so, again, it's kind of you're seeing this trend over and over again. And I think that you are, you know, it feels to me likely that we'll see some amount of bifurcation and decoupling that continues, right? If you look at the last year, year and a half, the people who are out of evangelizing crypto to institutional investors were not talking about Ethereum and DAPs and smart contracts. They were talking about Bitcoin. They were talking about non-savre money. And in particular in the

context of a macro economy where you've got negative yielding bonds that continue to kind of increase as a percentage of the overall bonds available in the world, where you have just kind of the insurgency of modern monetary theory. It's basically doing the job. of highlighting the difference with Bitcoin, with an actually digitally scarce asset that can't be debased through extra printing. So this is not to say that there's no value in other things that cryptocurrencies will do. I think that there's, we're going to continue to see innovation around smart contracts and capital coordination.

There's so much activity and energy around Dow's. So it's not to be dismissive about those things necessarily to recognize that, relative to the world right now as it exists and the larger chaos that seems to be threatening to engulf the markets and just we feel kind of in our bones, it's clear to me why there is such a divergence in terms of the narratives of Bitcoin and everything else right now. And it'll be interesting to see how that changes and increases over time. All right guys, that's it for today's Crypto Daily 3 at 3. Thanks as always for watching.

Thanks for listening. Let me know what you think about this idea. Like, are you actually feeling the same kind of gloominess despite the pretty decent prices? And what do you think it is? Hit me up and let me know, and I will talk to you guys tomorrow. Peace.