Welcome to Wonderings & Wanderings by Will Reynoir. If you want to get these wonderings from this struggling blogger straight to your inbox, subscribe for free and join the 40 other people following along!
Hey everyone! I hope you all had an incredible weekend! I’m not sure where in the world you are reading this, but if you happened to be in NYC on Sunday and proceeded to stay indoors on Sunday, shame on you. It was the best day of weather so far this year. So much so, that I was strutting down to East Village sporting a T-shirt and shorts (I didn’t think this would be possible, but here we are).
Also, I finally have a roommate (hi Spencer) living in my two beds, which means I’ll finally have someone to share a meal with instead of pulling up my laptop and proceeding to go on the most random YouTube binges known to man (can range to everything from blind auditions on the voice to highlights of WWE’s Attitude Era). We both had our first NYC pizza since moving up here from a place next door to us, and both agreed that we may be in for a whole lot of trouble in the weight department as a result.
Enough NYC chatter though (as I know many of y’all aren’t reading this from there), let’s start getting into today’s blog. Unless you’ve been living under a rock, you’ve probably seen the recent news about crypto (namely Bitcoin) surging in prices in response to some of the BTC ETFs. I believe that the setup we’re looking at right now may just be the “Perfect Storm” that crypto has been waiting for to finally go mainstream. Why do you ask? Well, that’s what I’m here to explain.
Laughing Stock No More
While I’ve been an advocate for the crypto/blockchain industry since I randomly first bought ETH as a Robinhood trader in 2020, I will admit that there have been times that I kinda wish I had taken a more “traditional” career path. The space has been infamously filled with scammers, fraudsters, and hackers who have given the technology a bad rap. These bad actors (most notably Sam Bankman-Fried, Do Kwon, Su Zhu & Kyle Davies, and a bunch more) have created a narrative that this industry shouldn’t be trusted at all, even though at its core, blockchain is meant to be considered a trustless system.
My continuing belief in this industry has come with some ridicule over the years from even my closest confidants. Friends of mine have straight up told me that what I am working on is a straight-up scam (in a polite way since they’re instilled with Southern hospitality), my mom has insinuated that I should try and find a “real job” at some point (hi mom), and my aunt even believes that I must work for the CIA and that this crypto thing I do is my cover up (there are definitely people in NOLA that think I’m actually in the CIA now because of this).
Side note: To any of those mentioned, I’m not trying to “put you on blast” as Eminem would say it, so don’t take it the wrong way. Objectively one of the funniest music videos of all time.
However, only two months into the year, the entire narrative has shifted. The former crooks that plagued the industry are all in jail (like SBF, Su Zhu, and Do Kwon) or being sued, the SEC (the government financial overlord, not the football conference), approved Bitcoin spot ETFs, thus providing regulated legitimacy to the space, and more. I’ve even been receiving texts from close friends of mine who are asking me why I didn’t tell them to invest, or asking why the market is rising a bunch recently.
While I’m no sage or oracle, it’s becoming clearer and clearer that this current crypto rally is carrying some weight behind it. I know that with every previous bull run and price increase, people have previously said that this is the moment crypto, but this one feels different. Crypto/blockchain is in a better position than ever before to turn its tides from being the joker people laughed at to having a seat at the table, and I believe it will earn this seat for three main reasons.
1) BTC (& eventually ETH) ETFs
To put it lightly, the Bitcoin ETFs have been the talk of the street. And when I say the street, I don’t mean crypto, I mean Wall Street. Since their inception in January of this year, the Bitcoin ETFs backed by major institutional players like BlackRock, Fidelity, and more have been the hot commodity (pun intended) to trade, breaking all types of volume records for trading activity. While these ETFs did have the backing of trusted financial players as mentioned, I’m still shocked at how much demand there has been for this product from traditional finance (or TradFi). As you can see from the graphic below, this demand has been quite astounding.
To put how successful this ETF launch has been into possibly a better perspective, let’s compare it to another asset that saw much broader adoption due to the launch of an ETF: Gold. Before the Gold ETFs, gaining exposure to the market was notoriously hard as you’d have to buy physical gold bars/coins and then have to incur further costs of safely storing them. Thus, with the creation of an ETF, you had a product that tracked the value that anyone on the stock market could buy or sell straight from their brokerage. Gold provides an especially good comparison to the current BTC ETF trends given that Bitcoin has widely been touted as “digital gold” given its inherent scarcity (there can only be 21 million Bitcoins ever in existence). Let’s look at a quick inflation-adjusted comparison between dollar flows into both the BTC & gold ETFs:
These inflows to this product have been the main catalyst that has driven the recent price increases, which is generally what attracts people to this industry. However, that’s not what’s important here. Financial services institutions are inherently one of the most trusted groups of organizations in the entire world (they are the ones we leave responsible with all our money after all). Having finance behemoths like BlackRock, Fidelity, Invesco, etc. offering these Bitcoin ETFs, with others like Wells Fargo, Citi Group, & Merrill Lynch offering these products to their customers gives the entire space a baseline level of trust that was otherwise missing. Now, all the people who previously touted crypto as a scam would be implying that all of these firms are complicit in this scam, which at face value sounds like a losing argument.
Furthermore, there are rumors and expectations that there may be another crypto ETF later this year in the form of an Ether ETF. I’ve written about my thoughts on the ETH ETFs previously (shameless plug as always), and how I think institutional investors will love them even more than the BTC ones, but it goes to show that the institutional adoption of this space will only continue from here on out, which will help legitimize the industry and provide it with staying power.
2) Distrust in Fiat Currency
Now…this second may sound very ironic given that I talked about financial institutions in the last section, but bear with me. Since the turn of the century, Americans (and also Western Nations more broadly), have grown to distrust their government overlords more and more. I’m sure those reading this empirically feel this trend after the last two presidential administrations we’ve had, but if you wanted some cold hard data, you could see from recent polling that only 1% of the country saying they trust the government to do what is right “just about always”.
While this lack of trust spans many political issues (ex: border security), none might be more pressing and alarming than the national debt, which we have seen grow from less than $6 trillion to over $34 trillion in this century alone. With the debt being exacerbated by the COVID-19 pandemic, thus causing the interest rates to rise faster than at any time over the past 35 years, the US national debt is now projected to rise by $1 trillion about every 100 days. Although people in the government/the FED want you to believe that only they can understand what is happening, it doesn’t take a rocket scientist to figure out that being in a $1 trillion deficit every 100 days is not sustainable.
Outside of the debt, there are other alarming trends. While the US dollar has been the world reserve currency since WWII (and will most likely continue to be for the foreseeable future), other countries are starting to look to become less reliant on the US dollar. Additionally, Congress is starting to raise eyebrows from Americans as they’ve raised the debt ceiling 78 times since 1960, and have also said some pretty hypocritical, diabolical, & hubristic statements such as this:
Crypto is a complete juxtaposition to this fiat structure. Due to the blockchain being decentralized by nature, no one person or entity can change the amount of issuance at will and for their own benefit. For example, Bitcoin is famous for having a capped supply of 21 million Bitcoins as well as a standardized, automatic supply structure that decreases the amount of issuance over time. Ethereum has a different model where the Ether token issuance remains constant, but tokens are burned (i.e. taken out of circulation) depending on how much the Ethereum network is used (shameless plug, but wrote a blog talking about it over a year ago). There’s even an awesome website (ultrasound.money) that shows exactly how much ETH is in circulation, and what the burn rate looks like. Generally speaking though, crypto solves a lot of the issues that government-backed currencies have.
A few of the people on Capitol Hill (mainly Elizabeth Warren) constantly spout that crypto is bad claiming that its primary use is to fund terrorist organizations and be used as a currency in illicit activity since it is not government-issued. However, these stories have been debunked, the biggest one being that Hamas only had $450k of funds from cryptocurrencies after WSJ claimed they had raised over $93 million. At the same time, these organizations have raised hundreds of millions in fiat currencies and, generally speaking, fiat remains the top option for criminals to use. And I’m not just talking about who you think of when you hear bad guys; I’m also talking about the people in Congress who are trying to ban crypto!
3) Simplicity is finally here
Simplicity is something for products that can be hard to find. Steve Jobs once said:
That's been one of my mantras - focus and simplicity. Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it's worth it in the end because once you get there, you can move mountains.
Apple is well known for the simplicity of its products. Crypto is not. The industry is notoriously known for having a terrible UI/UX experience compared to its Web2 counterparts. Trust me…I know…I had to go through it myself too. Having to download some random Chrome extension you never heard of, writing down 12 random words on a piece of paper, and needing to click at least five different buttons just to perform one transaction, it’s quite clear to see why blockchain & crypto haven’t gone mainstream to date.
However, the builders built during the bear market of the last two years. Now, it’s simple and easy for anyone, even novices, to onboard to blockchain networks. Additionally, compared to a few years ago, there are more mainstream applications than ever where the blockchain aspect is completely confiscated in the backend of the product, and users can’t even tell they’re using blockchain and crypto; it just looks and feels like any other online application. For some examples, I’ll highlight the work of my current and former employer in this regard.
Coinbase has always been the go-to place for anyone looking to buy crypto due to its incredible centralized exchange. However, the main gripe with the crypto natives is that this exchange doesn’t get users on the blockchain. Now, with Coinbase Wallet, users can instantly and cheaply transfer the tokens and coins they purchase on the exchange to this wallet to start interacting with decentralized applications (dApps). If that wasn’t easy enough, Coinbase created its own Ethereum L2 Chain with its ecosystem of dApps called Base. Similar to the wallet, Base works incredibly smoothly with the Coinbase Wallet & the centralized exchange, making interactions effortless on both desktop and mobile. Furthermore, the Coinbase team is building and improving products every day to make it easier for builders to launch applications on their L2 Base, which will thus drive user growth of the entire blockchain ecosystem. Take a look at this clip from ETH Denver last week; you can just see how excited the team is for this moment.
Alongside these developments, blockchain apps are starting to remove blockchain elements from the front end. One of my favorites that I’ve been interacting with more and more frequently is Farcaster, which is a decentralized protocol designed for creating and integrating social media applications. Its flagship product, Warpcast, is similar to Twitter except that each cast (the equivalent of a tweet) can have much more functionality than simply a string of words. Anyone can create and build interactive elements such as games, quizzes, and more within the cast, thus creating a much more engaging experience. The most popular example I’ve seen to date is one where users could purchase Girl Scout Cookies directly from the cast. I highly recommend you give it a try, you can use my link to sign up on mobile.
Other applications that are getting tons of usage include ones built on NEAR (hey any NEARians reading this…hope y’all are doing well). Apps like KaiKai, Sweat Economy (or Sweatcoin as famously known), and Hot are getting multi-million numbers of monthly active users, which…for blockchain applications traditionally…is bonkers. They achieve these stats by being mobile-first (which is also abnormal for most blockchain applications), and by almost entirely removing anything blockchain-related from the user’s screen so they can focus on using the app because it’s a good app to use. I think this trend will likely grow from here, which will spawn more and more useful applications for not just crypto natives, but newcomers as well.
Conclusion
As we navigate through the currents of technological evolution, it's becoming increasingly clear that we're on the cusp of a new era where cryptocurrency might just find its long-awaited anchor in mainstream acceptance. The convergence of Bitcoin ETFs offering a bridge to traditional finance, coupled with a growing skepticism towards conventional monetary policies, has set the stage for a paradigm shift. Add to that the improved simplicity and user-friendliness of crypto applications, and we're witnessing what could be the perfect storm for digital currencies to sail into uncharted, yet promising territories. Just as pivotal innovations of the past have reshaped our societal landscape, the burgeoning crypto revolution, fueled by these key developments, stands poised to redefine our economic future, making this an exciting moment for both veterans and newcomers to the blockchain world.
Thanks for reading! As we’ve seen with Bitcoin’s price reaching an all-time high this week, it looks like we’re on the cusp of a crypto breakout. Hope you’re hopping on board and enjoying the ride. Not sure what I’ll write about for next week yet, but should be a fun one. Stay tuned until then!
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Email: wreynoir@gmail.com