Your ETH Merge Predictions Might be Very Wrong
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Jordi Alexander is an investor, speculator, and writer in the Crypto space. He has a background in fixed income trading and is currently CIO at Selini Capital.
He joins Luke Martin as guest on the Stacks podcast to share his thoughts regarding macro, the upcoming ETH merge, and the Crypto market in general.
Why the Economy is Fucked
Assets have been allowed to inflate for far too long
Asset appreciation directly hurts low to middle class via inflation because they don’t own any of the assets that are inflating while their cost of living increases at the same time.
Will take 1 to 2 years for the Fed to correct this mistake
“Squeaky wheel gets the grease”, average people will demand more help from Fed with rising energy, living costs
Economy could be a lot worse in other countries besides the USA
Those expecting a pivot may be disappointed
Has Inflation Peaked?
Perhaps, but it will take a while for incomes to catch up to inflation even if it has peaked
Consumers are tapping into their savings, which will run out
Companies are tapping into their balance sheets, which will run out
4 - 5% inflation might be an improvement, but Fed ultimately needs to get it back down to 2% inflation
Market narrative that inflation has peaked was not sustainable, bull market rally ended
How can average investors prepare?
Market favours active investors and relative value trades, not a great time to just buy and HODL
USD will remain strong at least for several more months. People in other countries should try to denominate in strong currency
Control expenses
Thoughts on Crypto Market
Good long term buying opportunity, although it is unclear what the best way to allocate into Crypto currently is
Bitcoin has temporarily lost its bullish narrative
Unclear if alt L1s are good buys, saturated trade with new L1s also being developed
Thoughts on ETH & the Merge
ETH allocation is probably good long term
Merge is generally bullish for ETH price
People have conflated expectations of price appreciation and network growth
E.g. Bitcoin ETF & Coinbase ICOs underwhelmed expectations > long correction period following unsatisfied expectations
No straight ascent upwards for ETH especially with current macro
Thoughts on Reflexivity
ETH bulls believe cycle of expectations leads to increased prices, which also leads to increased expectations
Short term: if everyone is positioned according to high expectations then there is huge downside without many new actors left to buy
Long Term Thoughts on Reflexivity
Income from gas fees is supposed to increase, but there isn’t reason to believe price increase will also increase gas expenditure
Applications on main chain increase gas fees, but there's no reason to assume main chain app usage increases notably
ETH value accrual via fees thesis vs ETH value accrual via hard money thesis oppose each other (if value accrual via fees thesis plays out, this high gas environment harms the user experience)
Can ETH price appreciation can be sustainable in current macro?
Market needs an upcoming event to speculate on and justify bids
Need to create good UX to attract new users
Or rely on ETH community acting more like a cult
Thoughts on Triple Halving Thesis
Emission reduction narrative is long term bullish, emissions will be significantly reduced
ETH burn narrative (the idea that high amounts of gas will be burned, delivering more fees to ETH stakers) is somewhat flawed as there is no reason gwei will stay extremely high as it has in the past due to alt L1s and L2s being used instead of main net
L2s and their Dapps will want to stop paying rent to ETH e.g. Optimism and DYDX are already exploring other options and incentives
Supply shock narrative flawed, people can sell ETH via derivatives if their ETH is locked or staked
Prediction for ETH Yield
ETH production will be reduced 0.50 - 0.8%, 2000 ETH a day at first, can cap out at 5,000 to 6,000 ETH a day
~5 to 6% yield if staked pre merge
Post merge people will have to wait several months in queue to stake, ~3 to 4% yield
Long term ~1 to 2% yield
Likely over 50% of ETH will eventually be staked post merge
Divide Within ETH Community
Regulated “solarpunk” DeFi vs underground “lunarpunk” DeFi
ETH holders may prefer a regulated, KYC ETH chain so corporations can use it and spur mass adoption
Idealist devs and innovators may prioritise privacy, decentralisation over adoption and don’t want to comply
Do you prioritise the user or the token holder? High gas is bad for user, good for token holder. Low gas is good for user, bad for token holder.
Merge will enhance the rift between these groups in the ETH community
Thoughts on ETH’s role in Web3 adoption
Adoption will come via DeFi, games & lifestyle apps such as STEPN
Many Web3 use cases don’t need the security that ETH provides, doesn’t make sense to pay rent to ETH
Leaving ETH could allow for more independence
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Something not quite right with the style of writing. I get the bare bones straight to the point concept. That’s great. But it’s dry & boring to read & more importantly when I finish reading I don’t really feel like I’ve learned anything. The way each post is written doesn’t engage my brain to learn. I guess that probably why it’s so hard to get a great book published & bought.