2023 in crypto: Predictions episode
In this episode of Empire, Mike and Mark from On The Margin join Santiago and Jason to discuss their 2023 crypto thesis. They debate predictions on the Wallet Wars, ETH vs Bitcoin, the rise of insurance, app-specific vertical integration, the adoption of CBDCs, Coinbase vs DEXs, MEV as a business model, and more!
Read our notes below to learn more.
2022 in preview
Mike
We are sitting down to a banquet of consequences from the last two years.
FED overly corrected to an enormous amount of liquidity that they injected into the system.
FTX and Alameda were extremely exposed.
We found out that a lot of crypto systemic institutions are extremely leveraged hedge funds.
2022 is not a great year for crypto but I am very optimistic for the upcoming year
Santiago
We started to see real use cases when crypto has been migrating from infrastructure deployment into more tangible use cases like NFTs.
A lot of bad problems have been exposed to crypto.
We’re in a state where a lot of people have turned sour negative are leaving the industry.
Jason
This is the fourth bear market in crypto history.
People are leaving and asking themselves “Is crypto here to stay”?
I have a very strangely optimistic view going into next year.
Mark
The Mt. Gox thing that happened in 2014 is much worse than the FTX debacle.
It is not unusual to have centralized institutions fail.
The positivity of technology has been acknowledged.
The flight of talent into the industry is here to stay.
Bitcoin has a reason for being created in the middle of the global financial crisis.
Bottom is in for Crypto, not for Equities
Mike
Crypto has been moving off the back of the interest rates.
Everything is happening in a broader market.
Crypto is being driven by fundamental dynamics in our space more than liquidity.
Macro holder base of crypto which was enforcing this relationship between liquidity and interest rates in crypto have mostly exited.
TODAY'S EDITION IS BROUGHT TO YOU BY BITTICKER
BitTicker is the real-time cryptocurrency ticker featuring up to 12 tokens.
Easily connect from PC or mobile to choose your tokens & fine-tune your features. BitTicker updates pricing through CoinGecko every minute, keeping you current.
Act now, click the link below to order your BitTicker today.
MVRV (Market Value vs. Realized value)
Market value is the market cap, current price times the circulating supply.
Realized value is looking at the on-chain price that bitcoin last changed hands at times the circulating supply.
The assumption here is that the changes in Bitcoin price action are driven by speculators.
If there is a high MVRV, that means that speculators are in control marking a top, but when the MVRV is low that means that the holders are controlling the market and typically marking a bottom.
There can be price fluctuations that can happen in the next 12 months for Bitcoin.
Q1 is going to be horrendous for stocks.
Mark
We need an adoption mechanism to drive adoption in the early bull market.
The absence of the adoption mechanism makes it hard to get the fulfillment of the cycles.
The angle of ascent in crypto summer has to do with the ability of the masses to have adoption.
2023 Predictions
Jason
Big bear market runs will end up happening.
We see the kings of both trading and NFTs lose market share.
There will be wallet wars.
Uniswap will end up passing the biggest U.S. exchange.
Uniswap will launch NFTs.
Vertical-specific exchanges in NFTS, like for music, gaming, and fashion.
Opensea will continue to face these really difficult challenges on the royalty side of things, a direct trade-off between attracting trading volume and then protecting artists and creators.
2023 predictions in Stablecoins, DeFi’s resurgence, and permission protocols
Santiago
Defi has been in the bear market long before rates and inflations started to kick in.
Stablecoins continue to be the biggest acquisition and onramps in crypto.
Dollars will continue to be the preferred currency.
U.S. demographically will continue to be the strongest country.
Stable coins adoption basically nothing in 2020 to ~ 5 billion in 2021.
Stable coins didn’t hit a trillion in 2022 because recursive leverage dried up.
In 2023, stablecoins will continue to be a primary driver for growth in the industry and usability.
Defi is set for resurgence.
Next year will be largely guided by the regulation.
Regulators are coming in
Mark
From 2009 to 2015 they ignored crypto, from 2016 to 2021 they laughed about it, and from 2022 to 2027 they will fight you.
Regulators are trying to cancel this incredible technology that replaces trusts with truths.
Central Bank Digital currency debate
Mark
Central Bank Digital currencies are not positive for anything.
Santiago
Even Libra (discontinued digital currency that was being developed by Facebook) would have been positive for the space.
China has a surveillance state, if the state doesn’t agree with you, they can freeze your account or money. They can do that to the USCC.
Crypto is like when people start using digital money, unfortunately, they will have a central bank digital currency.
MEV as the dominant business model for DeFi and Exchange
Mike
Three dominant business models that have been emerging on the internet, there was advertising, SAS, and platforms.
Something similar is going to happen in crypto.
App chains ultimately end up winning, ETH and cosmos may fall on the DYDX route.
The Logical next step for Coinbase or Kraken or some other exchanges is to get in the game.
Uniswap has 60 million customers.
Jason
MEV extraction starts to flow towards the users and the broadcasters through Uniswap.
MEV will increase transactions that happen on private chains.
More transactions will happen privately rather than in mem pool.
Santiago
The biggest criticism in Defi is about monetization and governance.
Maybe there is a pathway where things can be hybrid.
MEV will be the number 1 source of profit for these viable Defi.
DeFi creates a lot of value but it is leaking via MEV.
Mark
We are moving from TradFi to DeFi.
There can’t be zero. There has to be money either equity, or the debt of claim on cash flow for them to be valued.
If the token itself doesn’t give me a share of the cash flow generated by the DEX then it doesn’t have the right function.
No industry Takes off without Insurance
Mark
There has to be some lender of last resort.
None of them would function without a viable and robust insurance market.
Assets without the promise of insurance don’t make sense.
Santiago
Ronin network was hacked with 600 million.
This year, DeFi yields are lower than treasuries which are irrational.
DeFi yields should be higher than ETH staking yields.
Mark
When you’re young, the potential is higher than your actual efficiency or effectiveness.
If we are 14 today (14 years of crypto existence) the actual potential versus the capability is very low. And I think that is okay.
A company that has one pool has an advantage over a company that has a lot of pools.
Market Bottomed and the Value of Memes
Santiago
Tend to look and rest my case on fundamentals.
In the next 5-10 years, you’ll start seeing great entry points.
Luna still trades at a billion, FTX trades at 280 million, Celsius trades at 360 million and Voyager at 90 million market cap that should be all zero.
Mark Rebut
The bear market can’t end, crypto winter can’t end, until Doge and Shiba are zero.
Tesla shares are simply a speculative vehicle.
Santiago Rebut
I largely disagree, because there is value in memes.
There is a lot of entertainment value; just like Netflix and Las Vegas where people want to be entertained.
Humans always want to speculate.
In 2008, the market has not traded rationally.
You cannot justify in your right mind from a fundamental standpoint how things trade.
ETH vs. BTC
Santiago
ETH has been considerably stronger and resilient, there are criticisms around censorship of the proof of stake model but it was successfully delivered on the merge and is very powerful.
Alt L1s are not dead but struggling.
Ethereum is going to get much more love.
Why would you need BTC when ETH is the settlement layer like BTC?.
The challenge for ETH is how to remove centralization and censorship.
Mike
Bitcoin has decided to compete on a monetary angle and ETH has decided to compete on a technological angle.
Bitcoin is basically in a league of its own, it’s the original store value money app chain and only one that does proof of work.
Bitcoin is the only one doing proof of work, but everyone is doing proof of stake.
Bitcoin is going to win the hard money use case.
Mark
Gold is the only money exist in the world; money is an asset that exists in the absence of a liability. Gold is the only thing to this point that has survived 5k years.
Gold has been held by Central banks, Central banks print currency out of thin air.
Bitcoin came along and solved the two shortcomings of gold, portability and divisibility.
Bitcoin replaces gold as the base layer of money.
Ethereum can be all of the things on top of all the transactional things that we use as currencies or payment rails.
Renminbi (Chinese Yuan) is going to be the next reserve currency, it won’t be Bitcoin. The Chinese want that to be the case.
Miner Capitulation, Wallet wars & Gaming
Jason
Bitcoin miners are selling 150% of their coin every day.
Every four years we see wars in crypto, in 2017 we had exchange wars.
2020 we saw L1 wars, like Solana, Avax and Luna.
We’re going to see wallet war that will emerge in 2023.
Mark
It is the end of hot wallets; we’re moving to browser moment.
The hard wallet is going to be the big trend that we’re all going to carry around.
Santiago
You’re going to have HSM (Hard security module) on your phone.
Next cycle, there’s going to be a war in games.
Probably 2/3 of the start ups are going to die.
Mike
Bottom is in for miners already, don’t think it will get worse.
Miners still have assets in their balance sheet.
Aggregation theory, the farther you are away to your customer the more your business is going to get monetized.
Big wallet provider makes some acquisitions further downstream.
Vertical Integration, Privacy and payments
Santiago
There’s really not much when you just fork and own the user experience.
Slightly higher skew and incentive for a consumer-facing projects that are going to be the ones who’s going to be dominate.
Jason
Wallets in the past were only about holding crypto assets.
We’re moving to a world where the wallet experience is going to feel like digital home.
Mark
Digital wallet is your digital identity.
NFTs is not a monkey jpeg, is simply a line-item ledger and it is a way to own everything. A digital property.
By putting your wallet to that NFT, you opened up all of your transactions and history and ownership.
Professional Guilds
Mike
I think we’re going to see the rise of professional guilds.
The problem with labor is it’s not fungible.
There will be a balance between the labor and capital that exists in more traditional markets between unions and people who own and manage companies and equity.
Santiago
Web3 open sources that enable people who don’t want to go back to traditional work.
Mark
Your skill set has value, your accomplishments have value, and your expertise has value.
There’s a quality to a like, there’s a quality to a participant.
There’s a quality to guild membership.
Check Out These Important Links
TODAY'S EDITION IS BROUGHT TO YOU BY BITTICKER
BitTicker is the real-time cryptocurrency ticker featuring up to 12 tokens.
Easily connect from PC or mobile to choose your tokens & fine-tune your features. BitTicker updates pricing through CoinGecko every minute, keeping you current.
Act now, click the link below to order your BitTicker today.