How Will Crypto Adoption Among Investors Play Out?
Congress Thoughts on Crypto | MUX Protocol | Avalanche Evergreen Subnets
GM, this is your Daily Bolt briefing.
This Monday we have the most current info from the Capital on the war that the US is waging against crypto. Considering the hostile domestic stance on digital assets, we’ve summarized Raoul Pal and Dan Tapiero’s thoughts on alternative locations to invest in, the long-term future of blockchain, and more.
We’ve also included the latest alpha on MUX, a multichain perps trading platform which also aggregates trades through GMX and Gains. ⬇️
Over and out.
1/ Unchained Ep. 478 - Recent Enforcement Actions With Rep. Tom Emmer
Preview: In this episode of Unchained Podcast, Laura Shin is joined by Representative Tom Emmer to talk about recent enforcement actions, the classification of cryptocurrencies as securities or commodities, and more! Click here to listen to the full episode.
Length: 37 mins | OUR NOTE: 4 mins
Rep. Tom had people telling him that they've been running into problems trying to bank crypto.
The three largest crypto banks in the country, Silvergate, Silicon Valley, and Signature all went down within a short period of time.
In August of 2021, the infrastructure bill really put the jets on people's interest in getting up to speed and a whole bunch of Republicans on the committee now were very open to understanding what the digital asset space is all about, what crypto is all about, how it works, why it's important, what are the pros and what are the cons.
Senator Ted Cruz worked hard to get up to speed the crypto.
Rep. Tom believes that the Federal Government has weaponized market chaos to kill crypto.
Rep. Tom thinks that the whole purpose of crypto is to put people back in charge of their own decisions without regard to what their government may want them to do or to give.
People don't need the central authority because they have a blockchain that is open, permissionless, and transparent, and everyone can see what's happening on it.
2/ blocmates - Introduction of MUX Protocol
Preview: In this episode, Grant from blocmates invites Dumbird and Jean from MUX Protocol to introduce the project and discuss the features and developments. Click here to listen to the full episode.
Length: 52 mins | OUR NOTE: 5 mins
Here are some key takeaways:
MUX is short for Multiplexing, a telecommunications term for sending multiple signals of info.
MUX Protocol is a decentralized perpetual swap trading platform that enables users to trade crypto derivatives with other traders directly on-chain.
It was created as a decentralized alternative to centralized derivatives exchanges, which are subject to hacking, manipulation, and central authority control.
MUX offers perpetual swaps, which are a type of derivative contract that allows traders to speculate on the future price of an underlying asset without actually owning it.
MUX Protocol has integrated with Gains to allow traders to trade perpetual swaps with up to 100x leverage, with 0% spread on $ETH and $BTC.
GMX is also included in the aggregator; traders will have the best trade option picked from GMX, Gains, or the MUX protocol itself.
3/ Blockbytes - Across The Chains Ep. 28
Preview: In this episode, Clay Kilgo is joined by Nick Drakon and Mark Jeffrey to discuss the current state of the market, Avalanche’s Evergreen subnets, fractional reserve banking and more. Click here to listen to the full episode.
Length: 108 mins | OUR NOTE: 7 mins
Here are some key takeaways:
There’s no way to come into compliance is what is heard from multiple parties which have tried to come into compliance and really tried hard to be good actors.
Nick wouldn’t live in the U.S. if he wanted to start building a DeFi protocol.
People don’t want to move out of the U.S. because they’ve got families or they like where they live.
The SEC doesn’t do a very good job of protecting investors in all the other markets that they are regulating.
The big issue with the Avalanche Evergreen subnets is that liquidity is fragmented and you’d have to still move it across bridges.
The market is digesting these kinds of things in a more rational way than it used to.
It seems like the Avalanche team is taking an approach of building some tooling that could potentially be useful to companies and private institutions.
On the Revelo Intel platform, we’ve summarized these 3 episodes and in total, would have saved you: 3 hours and 1 minute!
Real Vision - The Macro & Crypto Nexus With Dan Tapiero
In this episode of Real Vision featuring Raoul Pal and Dan Tapiero, CEO and Managing Partner at 10T Fund, talk about the Macro environment, crypto adoption, investment opportunities, and more!
Read or listen to our notes below to learn more.
The Macro Backdrop
Dan
The Federal Reserve is using the two most lagging indicators, Consumer Price Index (CPI) and the unemployment rate, to make policy, ignoring all of the leading indicators that showed a decline in growth and inflation.
The Fed needs to show that they have conquered inflation and that they had to raise rates to get them down if there were any remnants of sticky inflation.
The government's cleaning debt is 100% of the Gross Domestic Product(GDP) in the private sector, and the government has lost trust in its capacity to foresee inflation.
The banking systems blew up due to amateur local banks not knowing how to manage, leading to the worst year for bombs and the 60-40 portfolio since 1867.
If the Fed does not reduce interest rates to 2% by the end of the year, there will be a larger difficulty with doing what they intend.
The Fed's rapid rise in interest rates is a sign of overt distress.
Raoul
An Arbiter is a group of academics who are not market practitioners.
Fed has lost credibility and it is difficult to manage an interest rate portfolio when it goes crazy.
Bitcoin has experienced upheaval due to a lack of government intervention, taxpayer money, and rights, leading to people questioning its effectiveness.
The yield curve was too negative and short-end rates were too high, causing the millennial group to get shafted again, while the digital-asset ecosystem is developing and settling.
The boomers dread the 1970s, while the millennials fear technology entering their workforce and competing with them on a large scale.
Crypto vs Macro
Dan
2% CPI is the holy grail, but there is no market experience to make policy without deep experience in the markets.
The Bitcoin rally has caused a credibility loss due to the lack of a big blowup at the Fed.
The digital asset ecosystem has a value of $1.7 trillion after a 70-80% decline in the price of its leading assets, Bitcoin and Ethereum. This is due to its unreliable and disadvantageous nature.
Bitcoin has made a new low and inflation is expected to be similar to the European Banking crisis without the sovereign side.
Banks were forced to consolidate via acquisition, due to their difficulty to generate money when interest rates were high.
The digital asset ecosystem is shifting to Asia, and banks are losing money, therefore the Fed is pumping money into them.
Many people invest in real estate as a store of value, and there is an overhang of commercial real estate and noncapitalist banks.
The concept of a store of value is shifting to the digital world, where the finite supply of real estate is inferior and digital collateral is an easier place to add supply.
Digital assets are becoming an increasingly popular alternative financial system, and the value of the digital asset ecosystem has increased from $300 billion to $1.7 trillion.
There is a lack of regulation in the US, which has led to a decline in the value of the leading assets.
Spanish and Italian banks have seen a shrinkage due to investors no longer seeing banks as money-making enterprises and assets going into digital asset ecosystems.
The overhang of commercial real estate is linked to the amount of debt in the West.
Crypto Adoption
Cryptocurrency is an asset, as it is a future deferred consumption, so it is an obvious place for people who can't afford a house to accumulate assets.
Homeownership is not going away, and there is a component of real estate that is a store of value holder for investors.
Some of the gold money has migrated into bitcoin, and people don't sell their commercial real estate property to go into Bitcoin.
The value of the digital city will increase 10x if the value of all debt stays constant and all assets in the Old World go up 100% over the next 10 years.
The Satoshi White Paper is an important invention that supports the Bitcoin network and is being discussed by investors.
The number of choirs in the NFT space has been increasing exponentially since 18 months ago, with the top five or six having the most usage.
Institutional people are also recognizing that this is a once-in-a-generation type of technology, and application layers are being built big time.
Consumerization and the integration of blockchain technology are also becoming increasingly important, and it is not through the expected channels.
The California Department of Motor Vehicles (DMV) is incorporating blockchain into their business models, and the Argentinian airline with ticket suit has also been talking about something similar.
The interest in Blockchain has been broadening, and digital wallets can be used to store different things, such as licenses.
Embracing Crypto Outside the U.S
The Middle East is embracing technology and financial innovation, with Abu Dhabi encouraging businesses to set up there and Dubai offering a regulatory framework.
The US is not leading in technological and financial innovation, for the first time in 50 years, as they invented the mortgage back security market in the 80s.
Australians understand currency, and they have already tokenized an asset and put it on a blockchain.
JP Morgan has the largest number of blockchain patents in the world, and Jamie Dimon is saying whatever he's saying, but under the hood, they're doing stuff.
Luxury brands in Paris are looking to issue NFTs to reach out to their community and extract more from the digital acid ecosystem. This is a way for them to get closer to their community.
The Foreign Exchange (FX) market in London has become the largest market in the world due to the US leaving the gold standard and restricting their currency, leading to 85% of world crypto trading outside the US.
The U.K. also made strategic mistakes, such as not allowing banks access to Over the Counter (OTC) derivatives and changing the capital reserve ratios for banks, which led to Brexit and other issues.
The youth is making more progress compared to adults on the regulatory framework for blockchain, crypto, and arbitrage.
The U.K. market is developing, but it is not as liquid as it would be on Nasdaq, and there is less liquidity now in the ftse that used to be liquid.
Crypto and the Rise of A.I
Dan is looking for companies that are integrating blockchain with Chatzy.
Artificial Intelligence (AI) participating in the crypto ecosystem is going to replace humans in various ways.
Technology is a renaissance for humanity because it enhances daily functioning and can be a revolution for humanity if properly leveraged.
What Dan’s seeing in terms of investment opportunities
Dan is one of the few private equity guys that actually like the cycle, and he invested over 100 million into 7 different businesses from October to December.
Dan is raising money now for another fund, and the first close is going to be at the end of June due to the dramatic discounts.
Companies like Open Sea have stock in the market now at a 90% discount, and companies like Alchemy have raised at 50 to 100 times revenue.
Quick Node invested 40 million in a 720 million pre-money valuation, and Alchemy raised it by 100 times revenue.
With Dan and his teams’ funds, the target is to make a five or 10 x on the portfolio over 10 years, and it is the only growth equity fund that exclusively focuses on crypto and blockchain businesses in the world.
There is a growing demand for exposure in the technology space, with over 100 businesses having a valuation of over a billion dollars at the peak.
FTX had one board member and it was SBFs father, which was a red flag.
Traditional private equity is not terribly comfortable with macro and currency, and even tech-oriented companies like Thoma Bravo are not finding companies of the quality they need or expect.
Institutional investors are not allowed to invest in the underlying cryptocurrency due to legal restrictions.
Dan believes that their team has built a fun structure and a way to tap into that value accretion without the panic and fear and other stuff that a company is holding.
Both Bitcoin and Ethereum are about to go up by 500 points.
Dan has a strategy called the "sleep well at night strategy" investing big chunks of money in businesses such as Twentieth Century Fox.
Dan believes that the crypto space is going to be bigger than 10 trillion soon and that the value in the ecosystem is going to be digitalized.