There exists too much noise on impending doom with respect to Quantum Computing. Yet, I fail to understand the severity. So below I slowly try to piece together the various aspects. Will update this over coming weeks as I verify / learn more.

How about Bitcoin

In the name of Satoshi the most hidden. The most beloved & the most despised.

Presented, herein, are nuggets of past few weeks of tribalism (with few historical facts peppered in), and peak bitcoin & generic crypto hatred

Paul Krugman, tweeted on Nov 23 2022:

Everything about crypto-currencies is fraudulent. They are not real currencies, the industry is one big Ponzi scheme. The selective outrage over TX's collapse is misplaced. BF took money from fraudsters and donated it to good causes. There's nothing wrong with that.

Pendulum of BTC prices over the years around Thanksgiving:

• 2010: $0.28
• 2011: $2.49
• 2012: $12.51
• 2013: $813
• 2014: $376
• 2015: $328
• 2016: $739
• 2017: $8,771
• 2018: $4,015
• 2019: $7,150
• 2020: $18,764
• 2021: $58,927
• 2022: $16,592

November 8 - birthday of Aaron Swartz:

A hacktivist who was involved in development of web feed format known as RSS and news aggregation website Reddit. He was arrested by MIT police and charged for downloading & making available for free, academic journals from JSTOR (a digital library - jstor.org). Charged with 13 felonies, sentenced to 35 years & fined $1.0m. Committed suicide Jan 11, 2013 (aged 26).

Alexey Pertsev:

A developer of Tornado Cash (an open source app) - detained in jail still without any charges until Feb 20, 2023. He was arrested in August 2022 but no charges filed & no bail allowed and has his assets seized by Dutch authorities. OFAC has blacklisted Tornado Cash because North Korea used it to launder their ill gotten crypto proceeds.

It feels sort of like blacklisting Microsoft Windows or Linux operating system because North Korean hackers used them to attack their targets. Maybe, indeed Alexey did something wrong - but its better when your charges are known - something apparently democracies are supposed to share!

ECB declares bitcoin dead:

The apparent stabilisation of bitcoin's value is likely to be an artificially induced last gasp before the crypto-asset embarks on a road to irrelevance. #TheECBblog looks at where bitcoin stands amid widespread volatility in the crypto markets.

Bitcoin’s last stand

The European Central Bank (ECB) is the central bank of the European Union countries which have adopted the euro. Our main task is to maintain price stability in the euro area and so preserve the purchasing power of the single currency.

European Central BankEuropean Central Bank

A longish read on 3AC and DCG:

3AC, DCG & Amazing Coincidences

This is a long-form version of two twitter threads. This is not an ELI5 — this relies on primary sources and analysis thereof. Sorry if…

ChainArgosDataFinnovation - ChainArgos - 4AC

New York banned proof-of-work mining:

New York is the first state to ban certain types of crypto mining—here’s what to know

New York’s law temporarily bans cryptocurrency mining companies that use fossil fuels from receiving or renewing operating permits.

CNBCCheyenne DeVon

The above should provide enough of a picture to realise that slowly gloves are coming off. The political guardrails upon which we attempt to glide towards our destined future will need to be cognisant of the disparity between narratives & generational divides. Indeed, criminality wherever found must be rooted out however it must be done in an evenhanded manner. The case of FTX will be the baseline upon which the younger generations will be guided. It could not be that hacktivists, open source developers, computer algorithms be punished irreparably in order to teach everyone a lesson whilst any alleged white collar crime of not just FTX but also 3AC as well as few other players who have their paws in certain listed companies (e.g. Silvergate) get swept away quietly. Justice will have to be seen to be done.

How do I personally feel about FTX?

Used it to build an alt-coin index that would hint to me when market was turning - will have to find an alternative exchange now. It had one of the better interfaces as far as exchanges are concerned (however not from speed of execution perspective or complex order types like ladder). Given, general shyness of KYC-ing everywhere it was nice to see you could easily send a request-for-quote to their OTC desk even if you were not KYC-ed. Also, used it to lend out a few alt-coins I cared to hold long term - was great feeling getting paid by short sellers but ofcourse nothing is risk free! So, all-in-all, was easy to use, but had deviated from initial innovation like MOVE/BULL/BEAR contracts to spot/futures on illiquid alt-coins that literally forever trended to zero (essentially a dumping ground for VCs).

In other news:

Its much quieter now that FTX has cleaned house - I no longer need to keep myself updated on hourly basis. Even in post-2017 crypto winter it did not feel so quiet. Am 60% done allocating for BTC & ETH which I am prepared to keep for long term (minimum 10 years).

Uniswap (decentralised cryptocurrency exchange) seems to be lobbying to get ETH core developers to rollout EIP 1153 that if implemented will help Uniswap's next iteration, v4, decrease its gas fees substantially; something that might give Uniswap an additional advantage just due to its sheer size & marketshare. Certainly, ETH foundation will need to ensure there are proper rules to control such lobbying and that there is no way to favour one protocol over another.

Moreover, Infura, the leading infrastructure provider for Metamask will officially be collecting user's IP addresses & wallet addresses. Incidentally, or tin-foil amusingly both are ConsenSys projects!

Now, for my thinking on MtGox's 160k BTC is as follows (in BTC terms only - ignoring any fiat & BCH). There are 2 payment schedule choices

• early payment (EP) - get between 15% and 21% of claim - i regard this as 17% for simplicity's sake
• final payment (FP) - get 6% of claim as intermediate payment (IP) + approx. 17% of claim when all court cases are disposed off (F)

Below are 4 buckets of claims; at today's approx. price of $17k/BTC

Going through 1600+ pages of trustee's documents a few things stand out.

• 70% of claims are for 0 to 50 BTC (there are those who just have fiat claim)
• max. 2% are for 1000+ BTC claims
• biggest hurdle for those wishing to go for FP schedule (as opposed to EP) is estate & inheritance planning given the strictness & vagueness that still existing in the court cases
• therefore, i suspect 80% of claimants will go for EP
• however, even till today after all the drama in the markets, majority I know of are apparently not planning to sell; incidentally or ironically some cannot sell in order to avoid being reclassified as a short term gain thus taxed heavily in their relevant jurisdictions
• finally, Fortress is probably going to make 6% on each claim that choose EP in return for Fortress assisting the trustee with getting Coinlab to not block this). My estimate is that this is about 7k BTC (so $119m at today's price) additional gain for them.

Lastly, Grayscale rejected providing proof-of-reserves of the BTC its supposed to hold in the GBTC trust. So, chain forensic analysts have been attempting to build out their own view of what Coinbase Custody might be holding on-behalf of Grayscale. They have found what looks to be about 317k BTC (approx. 50% of what GBTC should hold). Additionally, Fir Tree Capital Management has filed a lawsuit against Grayscale in order to gain access to its books & records.

It would be ironic to have GBTC sell all BTC; crater price that may threaten Saylor's liquidation. Joke is that oldies (in terms of crypto years) were the buyers during covid crash when $3.5k/BTC was defended. So what if we had to do it again but this time how many will be willing to save Saylor? Especially, after FTX debacle it all depends on how many actually have dry powder & patience left to handhold the mistakes & greed of "smart money"

Listens:

Ep. 140: Fred Thiel on FTX Fallout, Bitcoin Energy Myths, and Future of Crypto - Macro Hive

Fred Thiel is the CEO of Marathon Digital Holdings – one of the largest bitcoin mining companies in North America. Prior to this, Fred co-founded Sprocket…

Macro HiveBilal Hafeez

So many titles I could give to this note today

• reflexive up & reflexive down....reflexive in jail...
• super cycle to zero...
• novogrets.... Novogratz goes to CNBC and quotes a tweet (from a parody account) about El Salvador asking for Sam to be extradited as a fact!!
• brick or treat...bit late for Halloween
• clown town...
• spills galore - gary's aisle 3....
• front run customers; make 7+ figures daily profit; somehow still go bankrupt...
• crypto don't kill people; custodians do...
• 10 billion down the drain...
• ok, I give up...

Just after the turn of the century, early 1900s, families in surrounding areas of my ancestral lands reached out to my great-grandfather. They asked him to be the custodian of their valuables. There was an increase in robberies and folks wanted to store their heirlooms or expensive wedding gifts for bride/groom. The thought was that no one will dare to rob an educated landlord. Surprise-surprise some years later 7 politically well-connected armed robbers not just robbed but also left my great-grandfather for dead. The repercussions of this event can still be noticed in my immediate families way of life.

Firstly, the enforcement of justice required greasing of many palms of higher echelons of the police. The price was 7 gallons of ghee (https://en.wikipedia.org/wiki/Ghee) per commanding police officer up the chain of command. This led to each of robbers being arrested and jailed. Henceforth, we as a family became insular to an extent with aim to never displaying our hand so-to-speak in general public; weirdly we also don't pass down surnames to next generation - a tradition my generation is now trying to change.

This mentality of untrustworthiness I also had until I managed to 200x my net worth due to bitcoin in 2012-2013 period. Paid off all my debts and then forgot the one true lesson of Lord Satoshi; don't trust; verify. That put me back into the rightful place when my net worth got completely wiped out due to MtGox. I was too complacent, too pompous & aloof.

Thankfully, I was still single. Only one person knew that I only had $20 worth of money to live off for 3 weeks before salary would come; didn't have the guts to share with my parents the news. The shock of that is the reason I only started speaking about digital assets openly since 2020; even the 2017 period I acknowledged to few folks in passing / vague terms.

Some of you reached out to check on me over past few days - thanks for that. I wasn't impacted in any consequential manner however dust has not settled. The biggest takeaway will be that from now on there will be resounding crackdown on anything crypto / DeFi related as well as these centralised exchanges. Even if DeFi world is transparent with fully auditable holdings / collateral / leverage etc statistics; the visible impact politically speaking is much bigger than MtGox thus legislations will smite it all. Furthermore, there is going to be additional noise about taboo topics like cronyism of those in echelons of power. It can already be seen in some 3rd world countries that are slowly creeping towards what one can only describe as an impending French Revolution. Yes, mentally the level of dejection seems very much close to MtGox days but if we survived in past and we are honest to each other then there is hope.

Coming back to crypto; one notable aspect that is hard to explain is the cultural dynamics. Similar to the Divine Brotherhood of Pythagoras; its indeed a cult of sorts whose collective dreams, nightmares & struggles are shifting like a pendulum. It nurtures all manners of personas because it doesn't point to one ground truth. This continuous shape shifting of collective crypto hive mind is the reason we forget the tenants of Lord Satoshi. I recall being subscribed to some mailing lists around 2001 that spammed me many interesting technical info from cyber security to cryptography or history yet within those groups there were folks who were probably full of nefarious aims. I could recommend some crypto twitter accounts to follow but problem is that you require a very thick skin to not get annoyed with them. There are characters who on regular basis aim to reduce their follower count by spewing what I can only describe as moronic statements. Then once the count is low they start to discuss actual topics of interest like hunting down some of the FTX's shenanigans even prior to this public downfall.

Everyone I know was fully aware that FTX had been front-running us (e.g. trade matching hiccups even on market orders); it was accepted as a fact of life because Sam had become the face of our world. Regulators loved him; legislators listened to him; even ex-Presidents and Prime Ministers were turning up to his events (he probably paid 'speaking fees' I guess to the ex-Ps for some face time at his conferences but that's beside the point). It's only now being realised that from the FTX founders' perspective this has just been a logarithmic wealth accumulation game that turned into an all out war against older generation of crypto exchanges/leaders who had been there since nearly a decade.

Divisions in Sam Bankman-Fried’s Crypto Empire Blur on His Trading Titan Alameda’s Balance Sheet

Alameda had $14.6 billion of assets as of June 30, according to a private document CoinDesk reviewed. Much of it is the FTT token issued by FTX, another Bankman-Fried company.

CoinDeskIan Allison

The train of destruction was started by Coindesk's article questioning the leaked FTX balance sheet. On the face of it there seemed to be interlinked companies borrowing & collateralising coins that Sam / FTX were the sole major investor of (e.g. FTT; and SOL to some extent etc). Industry folks started to put the jigsaw puzzle together whilst around same time Binance's CEO Changpeng Zhao (CZ) got a tweet response from Sam that sounded rude (could say borderline xenophobic). Binance being one of major holders of FTT publicly let it known that they will begin to exit it as part of their risk management protocol given the Coindesk leaks. This $500m position (at that time) triggered panic once Sam's other entity, the "hedge fund", Alameda Research's CEO Caroline publicly tweeted they will buy it all at $22. Binance never agreed to OTC. The seed for all this mess seems to be large transactions that were made between FTX & Alameda on 28th September; probably to shuffle the FTT coins in lieu of cash injection from FTX to Alameda.

FTX/Alameda seem to have defended this $22 price point with what little cash they had left until it fell through to single digits. Binance competitors were publicly voicing that CZ should leverage his balance sheet to backstop FTX. Especially, funny was to see OKX's Star giving advice to CZ when OKX themselves had been running fractional reserve as well as volumizer algo years ago. But I guess bygones-be-bygones.

Finally, what made matters worse from public perception perspective was the moment Sam went to CZ to get a letter of intent of buyout of FTX International. This was first public (as opposed to 24 hours of rumours) proof that no one wished to touch FTX and only the biggest player in this whole space could maybe do it. Eventually, Binance also walked away; whomever buys FTX will have to struggle through litigation and fines over the rest of the decade at minimum.

Furthermore, Solana ecosystem has postponed the tranche unlocking of SOL that would have flooded the market with additional supply of SOL - I guess we forgot decentralisation again to save a central counterparty. Lastly, there were ideas being floated that FTX wished to give all clients FTX-DEBT token as an IOU so the exchange doesn't go into bankruptcy. At the end they gave up & finally went to Chapter 11.

Frankly, this whole <pick any very bad word>  storm had been a major ethical / moral test for me; which am glad I passed irrespective of temptations. I was in chat groups where folks were desperately looking to sell their accounts for anything between 0.1 to 0.25 cents on $. Furthermore, there were loop holes allowing one to buy up a Bahamian (resident) account and utilise it to withdraw assets. FTX International is based in the Bahamas and had to apparently by default prioritise withdrawals for residents there. The money transfer between accounts could be done by buying & reselling NFTs on FTX's marketplace (at least finally after these years we found a use case for NFTs!!!!). Literally, one could make 7 figure profit by just doing this for desperate souls within couple of hours! I fail to understand how FTX's management allowed this to continue when all they had to do was to switch off their website. Its was no longer incompetence but rather wilful negligence after-the-fact. Hopefully, these intermediaries will get tracked down for AML/KYC fraud as online sleuths have shared ample info on these transactions.

In other news:

• BlockFi is probably done - too much evidence on-chain of their addresses sending ETH / USDC to FTX/Alameda.
• I am not subscribed to Real Vision so cannot review what allegedly Thomas Braziel of 507 Capital shared there; however I have interacted with him in past (anonymously). He's helpful & has some links (that's his job after all) but only noticed him appear after Fortress became a major public player in crypto distressed assets space. Usually found 507 Capital offers to be lower than Fortress. Their only selling point is that they attempt to close out the deal faster than Fortress.
• US DOJ finally released info that confirmed that indeed Loaded (pseudonym) got caught last year. They also got 50k BTC from him. He was one of few sleepy BTC whales who only rarely woke up when some drastic drama is occurring that requires a whale to put their foot down to ensure parties behave. Looks like majority of his BTC came from hack of dark web portal - Silk Road.

Silk Road hacker was Bitcoin OG who once tried to bet with ‘Bitcoin Jesus’ Roger Ver

At least one wallet associated with the Silk Road hacker was signed by a Bitcoin OG known as “Loaded.”

The BlockTim Copeland

U.S. Attorney Announces Historic $3.36 Billion Cryptocurrency Seizure And Conviction In Connection With Silk Road Dark Web Fraud

DOJ USAO Southern District of New York logo

• All exchanges are slowly accepting they will have to produce proof of reserves; Binance have already shared their's; whilst Kraken has already been doing this since earlier in the year.
• Lastly, JP Morgan's Onyx team revealed they were working on a modified version of AAVE to perform a proof-of-concept for borrow/lend mechanism between fully KYC'ed parties (similar in concept to dark pools in tradFi). They intend to build further into this space by incorporating zero knowledge proofs; essentially you don't have to know all details but the mathematical mechanism will prove that what I say is indeed correct & can be verified in some manner.

Key takeaways for me:

• many folks I know got hit
• many big players are probably 50% down; if not wiped out
• some will attempt to revenge trade this
• personally, I feel next bull run is delayed by 2 more years - maybe summer of 2024 we see it commencing
• my last bingo card says - Saylor

Stay safe & I hope none of you or your loved ones were impacted.

Somethings are pure coincidence and somethings are daydreams coming true. First crypto bear market I met my partner. Second bear market we had our first child. Now third bear market second child arrived. In reality there is no pattern to this except bear markets are time to go spend more time with family and friends. Detox and rest for as humans we will see opportunities again - yet we don't feel that when sitting in depths of market or political turmoil. So to entice my brain away from the doom loop on the screens and in news I am imagining up-front the next year or two.As someone who apparently studied stochastic processes, machine learning & easily sleep walked through A-level maths; I am a disaster at making sense of greeks, skew & volatility curves for capturing those left/right tails that the twitterati & podcast pundits keep shelving out.

So herein I split my non-mathematical thoughts into 2 scenario:

• Bear-me-up till 2028....
  • If crypto history is anything to go by; I would expect all the "hopioum" of traditional markets buy-the-dip participants to have their resolve tested. For now everyone seems to be either full bear or averaging down for a rally up. However, market deserves respect and for far too long it's been too easy so why not a gruelling and cruel whipsaw of momentum ignition sort of moves up and down until it just looks like a flat line for a year. Ideally this "crab" market would continue until folks exit due to boredom or having been chopped up.
  • During same time let crypto (especially Bitcoin and ETH) bleed another double digit percentages (but continue to show signs of volatility to entice participants from traditional markets over). Make them suffer with a fake bull run and eventually through another 6 months of boring flat lining price. This would bring us around Q1 2024 however in order to be truly evil why not repeat the pattern of first crypto bear market and keep the prices subdued little while longer into Q3 2024 (way past the next Bitcoin halving event to put to question any crypto analysts looking for a post-halving bull run) and not gain any public attention / imagination until 2026.
• Happy Valentines???
  • Much has occurred over past months that still needs digestion. On top of big players being liquidated, many "experts" & industry financiers are looking like degenerate gamblers. Additionally, we are now discovering the long arm of sleepy regulators reaching out and conducting arrests of even the open source coders such as Alexey Pertsev (https://finance.yahoo.com/news/alleged-tornado-cash-developer-alexey-093657198.html) of Tornado Cash.
  • Therefore, as far as crypto is concerned only overhangs remaining are now
    • Traditional markets
    • MtGox distribution of 160k BTC - this will have at minimum 2 distributions
      • early payment - given litigation can continue for another decade there is a discounted option of early payment
      • final payment - remaining creditors who didn't take early payment will wait out for all litigations to close out. Fortress LLC is one of those creditors who will wait till the end
  • Traditional markets definitely need a deep wash equivalent of what Bitcoin suffered. Cannot have a gamblers den wiped but not the source of that impulse of wealth. Moreover, as we saw this week; its rather eye opening how similar the crypto strategies are to UK pension funds leveraging up on Gilts in a rather circular fashion. This shows we are not that different and must await our collective humbling - I just hope its orderly.
  • Currently, the next Bitcoin halving is estimated to be in 502 days which as of today weirdly falls around February 16 2024. What if?
    • Traditional markets become boring
    • Fiat (including USD) decides to stop its volatile run and becomes boring again. Many crypto traders are ex-FX traders; and for sure some have already flipped back to FX
    • Crypto on other hand attempts a bull run pre-halving around late Q1 2023; fails and wobbles back down due to MtGox distribution news. Depending on statistics that will start to get leaked with regards to distribution size, the wobble in prices will dictate whether we must await Q1 2024 for a sustained bull run. Volatility in this space will entice larger participation if traditional markets and fiat are subdued for the rest of the decade.

Both are similar in terms of bearishness for a long while but one hopes crypto recycles upwards and provides the impulse needed to kickstart upwards momentum. Now all this of course will change if Fed pivots or some major
geopolitical events trigger some additional turmoil. Nevertheless, this 2 year timeline at-the-very-least provides me mental framework in terms of how and when I may wish to completely allocate into BTC / ETH spot. I have already 30% allocated whatever I am willing to keep for the next decade.

In other news:

• Bitcoin miners seem to be copying the playbook from OPEC by increasing their mining hash rates into a down market. Seems like a game of chicken where already some are filing for bankruptcy (e.g. Compute North, the second largest bitcoin mining hosting provider in the US.

Bitcoin Mining’s First Major Bankruptcy Creates Uncertainty For Key Partners, Opportunity For Others

Compute North, the second largest bitcoin mining hosting provider in the US, filed for Chapter 11 bankruptcy last week. More are likely to follow.

ForbesColin Harper

• ETH has started to have many OFAC compliant blocks - i.e. where any sanctioned ETH address is not having its transactions completed. State captured or entering the realm of traditional finance?
• Solana died again for couple of hours! One misconfigured node led to whole network needing to be restarted!
• Market pundits, tiweratti & podcaster fights:  ETH & BTC proponents have fallen silent after publicly fighting each other up until the merge. Instead they are now fighting within their own space which at least will lead to some convergence eventually (e.g. ETH's dilemma of acting like its decentralised but abiding by censorship such as OFAC compliance needs). Now, I see similar sort of fights occurring between traditional markets' players regarding their long /
  short thesis. Only constant is the disdain each side has of the other (crypto folks feel traditional markets will be wiped clean and out of its ashes BTC/ETH shall appear). Whilst, traditional markets folks are betting on crypto trending to zero since its all a ponzi scheme.
• Lots of enhancements being proposed in the Bitcoin space that I must one day attempt to gather my thoughts around as the strands of privacy, state capture & trust become central discussion items over the rest of the bear market; e.g. Fedimint - custody solutions - https://bitcoinmagazine.com/technical/fedimint-adds-new-bitcoin-custody-solutions

I leave you with Lord Satoshi's bitcoin genesis block one liner; The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.

Its funny in ways that my time wasting antics of youth are now leverage-able in the saga that is ETH merge. I used to spend nights playing StarCraft ladder games against mostly Korean players; me getting beaten nearly every single time. Yet those story lines are a welcome noise in the maelstrom that is the ETH merge - largely in-part to efforts of Kevin Zhou (Galois Capital). If you wish to get a run-down of the current thought (albeit by today some things have progressed further) - I would suggest you listen to Episode 381 of Unchained by Laura Shin.

Why Kevin Zhou Believes Ethereum Will Have 3 Forks After the Merge

Kevin Zhou, co-founder of Galois Capital, comes to talk about the possibility of a Proof of Work chain on Ethereum after the Merge, the LUNA death spiral, how he plans to play the Merge, and much more… Show highlights: how Kevin got started in crypto what Galois Capital is and…

Unchained CryptoLaura Shin

I have no favourites in the game of merge; yet financially if one could profit from it then why not explore. The ETH merge is supposed to move the ETH chain to proof-of-stake. This is a hard fork; and therefore there will be a split. Similar to previous split that ETH went through years ago; that led to ETC; now you are bound to have at least 1 more proof-of-work chain that splits at the merge time.

To make things easier to understand lets declare some "tickers":

• ETH - is current pre-merge chain
• ETH2 - is proof-of-stake chain (some are already referring to it as ETHS; S for Staked)
• ETHW or ETHPOW - is proof-of-work chain post-merge
• ETC - is proof-of-work chain that actually is unaltered original Ethereum chain (inclusive of the DAO hack). Current ETH has an altered chain from this original one - alteration was the reversal of the hack.

When ETC/ETH split occurred in July of 2016; Vitalik & co learnt a valuable lesson (or so I hope). They were of blind belief that everyone (especially miners, exchanges, market makers, large holders of ETH aka whales) will obey the geek overlords and simply move over to the new chain. Yet, whenever money is at stake there will always be someone willing to bend the rules to make some profit. This same drama was seen during the block wars of BTC which led to BCH's birth.

Upon fork; there exists distinct & separate universes of ledger. If I held coins pre-fork; now post-fork I will hold coins in both ledgers. Yes; free money - yet in order to profit you need an off-ramp where you can sell whichever chain you are not interested in holding. Game theory plays a big role in how major players build narratives and which exchange they could convince into listing the coin. For instance, in 2017 I was too impatient and sold all my BCH upon the fork; however, if I had waited another week or so; then Coinbase's listing would have 4x-ed this free money. Indeed, as always future is unknown.

Now let's return to ETH drama. How to play this theoretically?

• buy spot ETH
• hedge this spot - probably long dated futures - (or wait till August 10/11 when September 19 date could be firmed up)
• ensure spot ETH is in a self-custody wallet - this is crucial because exchanges will play their own games (fork coins are not guaranteed like a share dividend to be distributed to you - so be careful)
• keep track of players & their flip-flopping antics.
  • Chandler Guo (@ChandlerGuo)
  • Justin Sun (@justinsuntron)
    • he is apparently contemplating donating some of his rumoured 1.0m+ ETH coins to one of the proof-of-work forks
    • he also owns Poloniex exchange that has just activated trading on future fork trading pairs
  • Vitalik (@VitalikButerin)
• create google alerts on ETH, ETH2, ETHW, ETHPOW, ETC
• monitor twitter for same tags as google alerts
• upon merge news; decide which fork to dump & which to keep

After all, I am not the only one who is thinking in similar manner - so I am 60% of opinion that best outcome might well be to dump all forks (including the proof-of-stake) and just closely watch the narratives post-merge before deciding which to buy up for long term hold. Ideally, given that the group think & tribal wars within crypto-sphere are already very heated; I would say merge might well be peak Bitcoin hate period - hopefully some more cheap bitcoin will come to market than.

Lastly, there is too much noise again about MtGox coins being distributed to creditors after August. The most I can say on this topic is that I will be very surprised if something comes by December (even Fortress with its rumoured BlackRock backing was too optimistic of the distribution timings). Only slightly off-tangent change is the extradition of Alexander Vinnik to the US (from Greece) - again I highly doubt it will have material impact on MtGox trustee's estate. Yet, I hope it gives US a closure on Russian involvement & supposed funding of actions in Crimea.

Having the extended family in farming across me & my partner's side is great for having opportunities for hands-on nature adventures for a non-green-fingered moi. However, those farmers within this family sphere who are monetarily less fortunate also then become our struggle. In some ways the below is a thought experiment that allows me to understand what a central bank must be feeling.

• main source of income
  • salary
• main buckets of expenses
  • living costs of immediate family
  • taxes
• non-compulsory assistance expense for less fortunate folks in extended family
  • medical bills
  • farming expenditures

The above needs to balance out (i.e. at least net to zero). If it goes into negative then we are eating into our savings or about to lead myself to ruin. Extrapolating further if we stop non-compulsory assistance then we are leading someone else to ruin. We must strive to keep us in this delicate equilibrium whilst ensuring we keep at least the non-compulsory assistance receivers abreast of the fact that money doesn't grow on trees and they must attempt to secure other avenues of funding.

The pickle above, without any pure knowledge of inner workings of central banking or monetary policy is the only way I can understand what must keep some folks awake at night. We as the general population perceive our governments to be forever resilient with pocket full of monies. Someone must be giving that money to our governments, and even those sources of funding must have some constraints. In this wonderful perpetual money feast we have forgotten the lesson of frugality. The respect that money deserves has slowly eroded away. The reasons for this could be many; yet I wonder if one of them are the level of debts that we as students attained from the get-go. When I leave university with debt that runs in multiples of my earnings then maybe I will be willing to attempt any lottery ticket in order to extricate myself from it. I wonder if the whole crypto world didn't get so expansionary just when we as students started to get charged exorbitant amounts from universities. Maybe this was the outlet that allowed us to see an exit. However, now that the genie of disrespect for money is out-of-the-bag any sort of debt forgiveness schemes will just make matters worse. What if, all along we been running around as central bankers playing with our personal balance sheets hoping to one day enter Valhalla with chariots of gold (or bitcoin in my case)!!!

This leads me to my 2nd thought. Why do I listen to Morris Sachs' podcast and others like Market Huddle even when majority of time they are anti-crypto or continue with same old anti-Tether etc tirades. Largely, because its become fashionable within folks of my age or younger to dismiss the older generation as bunch of loonies. We want to make a better world and be true to Lord Satoshi whilst paying homage to Hal Finney but we fail to do basic maths. Satoshi, Hal and even Zooko Wilcox, co-founder of Z-Cash (privacy coin) who recently gave a talk to Swiss National Bank are all older generation.

Schweizerische Nationalbank (SNB) - Forschungs-TV

www.snb.ch

The path ahead will be futile if we don't realise that we are standing on the shoulders of giants and sometimes its better to listen (even if we disagree) as opposed to simply being ignorant of dissenting talking points. One can only hope the current implosion of firms like Voyager, BlockFi, 3ACs will help to wash away the gambling characters riding on the coat tails of hardworking Satoshi acolytes and with it the maxi-mania (aka crypto fundamentalists) we have gathered both within the BTC & ETH worlds.

During this weekend's MacroVoice (ep. 333) Harley Bassman says; "in the grand scheme of things your life is transitory". This made me realise how I spent last 2 years talking about Metaverse and new Defi platforms but have missed the plot.
Crypto as it stands is still largely trying to make 1^st world better whilst there is still vast developing & under-developed world which has a long way to catchup. For instance, I sent $600 to my grandmother in 3^rd world country. After a month I get $540 refunded. I find out that thanks to some FATF rules (or their interpretation) apparently my grandmother must have a mobile number otherwise they simply reject my transfer whilst eating $60 in fees.

Moreover, I don't need 10 different DeFi platforms to do partial things just like I don't wish to buy NFTs in games only to have to start to list these as immovable assets like a house. There must be greater interoperability, integration & transmissibility of my Metaverse assets. I am happy to wait in this transitory life to at least see these things appear instead of demanding them for tomorrow but false promises & scope-creep needs to avoided.

For example: Vitalik is already selling the day dreams of bigger & better ETH but the merge is still only "tentatively" scheduled for September 19. He says he wants to do following post merge:

• split up the network into smaller pieces
• shrink node size (reduce storage demand)
• reduce network congestion through removal of historical data

If you notice, merge is being sold as environmentally friendly, yet all the 3 items above are not going to be part of merge. They will occur over a span of rest of decade. So indeed over time ETH could become easier to manage, more decentralised & ESG-compliant however by than I feel G of ESG might well be very centralised. After all, how many of you own 32 ETH and run a ETH node or validator?

Talking of Governance, we are already seeing interesting votes being conducted on various DeFi platforms (e.g. Lido) where VCs (e.g. Dragonfly) wish to buy tokens but without any lock-up period because apparently they aren't allowed to buy illiquid assets!!!! They were about to win the vote until some crypto anons made noise on twitter that led to other anon whales to step in and block it.

Lastly, regarding crypto anons; it is very amusing to see Coinbase come out with insider trading of its own employees & subsequent SEC fight. One aspect of this whole drama that shouldn't be forgotten is that Coinbase's own mobile application was leaking data for quite a while (e.g. they have a token popularity metrics widget; and couple of hours or days prior to Coinbase listing a new token; this widget would start to show the token)! Additionally, its amazing to see twitter posts being shown as evidence in legal documents; especially when it is the anons pointing out to Coinbase that its insiders are up to no good.

Interesting Reads:

Superhistory, Not Superintelligence

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Ribbonfarm StudioVenkatesh Rao

A Samurai, a Knight, and a Yankee

(Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor…

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Excalibur

(Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor…

Entrepreneur's HandbookArthur Hayes

Wakey wakey, William Albert Ackman - shill me more hell on CNBC please. The doors to the heavens have been closed shut and crypto whales are publicly admitting their own losses. Someone I have known since 2014 just now (18 Jun) puked a huge chunk of their BTC holdings in the breach of $19k. I, as someone, who was bearish at the stupidity of prices being seen in altcoins is now feeling the glimmer of bottoming hopes; especially if ancient whales are puking all over. The bids side has finally thickened with certain whales like AngeloBTC coming back (at-least) to twitter after their hibernation. The bear memes of the 300 Sparta are slowly making their appearance again and of course we all know what happened to the 300! The slaughter will continue while there are whale wallets with public liquidation prices. The fear of last weekend has abated and instead it's turned into hunger games. Yet - biggest unknowns are the private deals executed off-chain.

If you wish to get a better journalistic look at the mess we created - go here: https://www.axios.com/2022/06/18/ether-bet-gone-wrong-underscores-crypto-winter-drama

As I write there is a Solana "user" in danger of being liquidated - yet sol-degens are trying to defend the price. Liquidation price is $22.27 and current price (at time of writing) is $29.85. The fear is if the $170m SOL gets liquidated then there is a chance of a cascade causing others to be liquidated. Would I bid it? Not a chance - but give me $10 SOL then why not - just for the culture.

Now the talk of the hour: 3 Arrows Capital. From what I gather their debts are in excess of $2 billion and assets are probably $0.5 billion. However, Su & Kyle of 3AC surely must only be limited partners so there is limited recourse for folks to go after their personal assets which are supposed to be in 100s of millions. Nevertheless, if there was appetite by big bucks out there then am sure SAFTs (https://www.investopedia.com/terms/s/simple-agreement-future-tokens-saft.asp) could be found at distressed prices. Below is someone else's (ICODrops on twitter) hard work on collating all assets 3AC were involved in and which are bound to have distressed valuations as we continue with this drama. For those impacted and wanting to go after Su & Kyle; there are some avenues such as proving misrepresentation or breach of trust or fiduciary etc. To this end, slowly people are coming out of woodworks with information that could help in this area.

Moreover, the target to get Celsius liquidated is now $13k / BTC and some big players on AAVE is $900 / ETH. This long weekend and low liquidity will be best opportunity for anyone who wishes to go for that. At this time I see ETH is $922.

side note:

Celsius attempted to top-up their balance to bring down their liquidation price but instead of paying a higher fee to speedup their transaction they decided to be cheap and the transaction hung around for what I believe was 2 hours before it got picked up!!!! Literally all they had to do was pay a few cents more for the millions they were transferring!! Shows unpreparedness and/or incompetence or both.

Lastly, as with oil rigs vis-a-vis oil prices; soon we probably will start to hear crypto miners defaulting and closing shops. Once the dust has settled I would like to look at cost of joining a mining syndicate - should be much cheaper & affordable finally.

musings:

Folks have forgotten about MTGox distribution - that would be an interesting time with 160k additional supply of BTC hitting markets some time over next couple of years (maybe just before the next bull run?).

ETH merge apparently is coming in September but I fail to verify this in deluge of all the mania. People had staked ETH back when it was $600 for 20% yield and soon we might breach $900!!! What a round trip.

At least I can say its not crypto that failed but central parties like Celsius & degenerate funds following in the footsteps of Bill Hwang and Long Term Capital Management that levered themselves too much and slaughtered everyone & themselves.

As I send this out; ETH just wicked to $883 and BTC $17650...SOL $27.2. Don't worry the whales are not yet liquidated on ETH - battle continues into the night!

Is my Mac learning from the randomness of my written musings? The original title of this note was going to be "Silence of the bids" but then i noticed the touch bar on the Mac was proposing me 3 random words. I decided to pick Cycles as the first choice amongst the 3 and repeated same approach for a while - end result being the above title in quotes!

Leaning into this artificial title; I wonder if you have noticed the spaghetti of narratives over past months and how each have been tested if not shattered. The most spectacular fall from heaven has been of Terra Luna & UST - the very system I previously mentioned (10 April) might be leading us down the path of 2008 style crypto's very own contagion. Within matter of hours it wiped out $60+ billion of paper wealth!

The downfall was not surprising yet the speed indeed has been. In terms of impact there is much yet to be revealed vis-a-vis Terra Luna's financial dealings, how did it actually survive the covid crash of March 2020, what were the secret deals between the founders and VCs, how bitcoin treasury that Luna Foundation Guard held was managed and how more than $2.0 billion of said treasury in bitcoin was effectively market sold.

Moreover, over the past 48 hours there has been continued pain especially in non-BTC crypto markets where even ETH lost another 8+%*. This clearly is a sign that margin calls that started being made around May 13 have used up all the grace period they could likely muster prior to end of month. Moreover, mining hardware prices, ASICs specifically, are now suddenly under $6k!

Moreover, over the past 48 hours there has been continued pain especially in non-BTC crypto markets where even ETH lost another 8+%^[1]. This clearly is a sign that margin calls that started being made around May 13 have used up all the grace period they could likely muster prior to end of month. Moreover, mining hardware prices, ASICs specifically, are now suddenly under $6k!

So, as the Mac generated title seems to be ending in a "question", is the wobble of prices and pain too much now?

All-in-all, my psychological pain level is still around 4 out of 10. I fail to deduce if this is due to having spent a decade in this valley of boom & doom or pure complacency. One thing is clear; just as how I was feeling not too glorious in October last year; similarly I now won't be surprised if this is the end of bitcoin's bear market. My personal alt-coin wallet that always only holds the most useless tokens bled 80% by January 2022 and has been idling there since; even the Terra fiasco didn't make it go to 0; yet!

Looking back at bitcoin price the best outcome would be for the price to bleed slowly down and then wiggle around for next 9 months (similar to what occurred between Jan 2015 till Sept. 2015). The bear won't hibernate if boredom doesn't devour its appetite.

Side note:

• till today $10+ billion have been redeemed from Tether (USDT) since Terra Luna collapsed about 2 weeks ago; leaving it with $72 billion of assets
• ETH merge podcasts have started to pop-up. Following two parts from Uncommon Core podcast are a great listen. They show the marketing campaign advocating for superiority of Proof-of-Stake over Proof-of-Work is slowly being rolled out by ETH foundation

‎Uncommon Core: The Merge (Part 1) - with Danny Ryan, Tim Beiko, and Hasu on Apple Podcasts

‎Show Uncommon Core, Ep The Merge (Part 1) - with Danny Ryan, Tim Beiko, and Hasu - 12 May 2022

Apple Podcasts

‎Uncommon Core: The Merge (Part 2) - with Stephane Gosselin, Danny Ryan, Tim Beiko, and Hasu on Apple Podcasts

‎Show Uncommon Core, Ep The Merge (Part 2) - with Stephane Gosselin, Danny Ryan, Tim Beiko, and Hasu - 25 May 2022

Apple Podcasts

Nothing is as seasonal as the work-life balance in crypto-sphere. Beauty of the bear market is plethora of opportunity to concentrate on life; enjoy time with family, recoup the lost sleep and research. This time is definitely not different. The crypto community continues to quietly be pacing forwards and number of substack articles keep being rolled out (at a greater speed than they were during the bull market). However, podcast world indeed have decreased or stopped their VC speak! Long term players are still seen to be working away; and drama continues to build in ETH world (e.g. Yuga Labs; whose projects include Bored Ape amongst other NFTs just did an airdrop last night that cost folks 2 to 3 ETH to claim it. They then proceeded to blame ETH network for high fees with a threat indicating they are thinking to move ApeCoin to a different blockchain!!!).

If one is looking for long only trades they can still find them in tokens such as GMT and APE; similarly short only is full of many other alt coins. Nevertheless, I for one will simply nibble all the way down to $10k or whatever comes for BTC (and similarly grotesque price levels for ETH). Timeline to exit these would be incrementally over 2026 till 2031.

Why 2026 and 2031 dear crypto fanatic you may rightly ask? As a follower of Satoshi I sense there is a method to his madness that are the halving cycles. Moreover, with my very basic understanding of rates & economic activity cycles its becoming evident we all must wade through the mud of pain before we get anywhere close to glories of a bull market. I am no expert on macro or even micro but i do keep very granular personal spending data over many years as part of my own personal accounting. I personally don't feel comfortable with the levels of costs and I fear for those much poorer than me. The pendulum of pain has already swung through the lower income groups and is probably half way through middle income before it arrives at the doors of higher income.

Duality of a nomad: A weird aspect of my past is that through the sheer luck of birth I happen to belong to "influential" clan of a third world country. Moreover, as a descendant of immigrants to West of 1960s I am middle class; no wealth, except ~£50, was moved from origin country to West - because majority of family stayed back there and to this day still does. Practically speaking I am part of 99% in West - i.e. I work, I get paid and I live on that only - no extra cushion of wealth. Therefore I see and feel the pain of this inflation. On the flip side, in my ancestors' origin country, simply by standing on shoulders of 4+ centuries of ancestors I get to live and experience the machinations of the upper class. Last time this band of "big wigs" felt pain was between 1940s & 1950s. Ever since there had been some ups & downs but nothing too dramatic. This year I notice a shift in their habits after a very long time - for instance during the year we give away food to hundreds if not thousands of families. This year when I enquired about the plans I was met with radio silence. Silence not due to lack of money (yet) but lack of trust in those who will do the hard work of distribution. Yes, the "big wigs" don't do any work - they simply order underlings to do so. Yet - trust in underlings is waning due to the pain those in middle / low income are facing. Now "big wigs" must decide whether to increase the income of underlings or squeeze through the pain. This prism of sorts is a comical journey since it allows me to see the world from two different perspectives.

Long story short; something seems off and only time will tell. In my mind this phase seems to be in years and not months. Thus, my belief in Lord Satoshi's 4 year cycles anchors my outlook and timeline. Of course, it doesn't hurt when Arthur thinks similarly

The Doom Loop

(Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor…

Entrepreneur's HandbookArthur Hayes

Correlation 1 - reborn: Now going back to thoughts of 27 March. I see SPY has breached the 200-2day moving average. How long will it stay below and how will crypto market react? A capitulation event would be beneficial in seeing how serious some of the traditional players are about crypto especially bitcoin; e.g. Goldman's bitcoin backed lending facility - https://www.bloomberg.com/news/articles/2022-04-28/goldman-offers-its-first-bitcoin-backed-loan-in-crypto-push

Indeed, in certain places preparation for doom can already be seen; e.g. announcements by crypto.com with regards to their Visa card cashback rewards programme - https://crypto.com/product-news/crypto-com-visa-cards-update

Cycles of narratives within the crypto world are not so different than those within the physical world. Its especially obvious if we are to compare crypto narratives to political campaigns. As I write the world's 5th populous country, Pakistan, has just had its Prime Minister dethroned. His position became untenable as soon as he was unable to control inflation. The opposition had been clamouring to oust him since the day he took office nearly 4 years ago and repeatedly failed until now.

Why now? The general population doesn't have the will to take up protests or conduct any campaigns because the narrative has changed from anti-corruption to price controls. This is indeed weirdly opposite to what's occurring in Sri Lanka where population is willing to expend further energy to demand a change. This passive/aggressive ways of fighting for the narrative is very much visible in crypto land albeit virtually.

Bitcoin (BTC) came to the world as an answer for trust-less electronic cash (in 2008) with a concrete supply limit; and then led its adherents through

• peer-to-peer payment settlement system
• censorship resistance
• anonymous uses
• reserve currency for crypto ecosystem
• programmable layer
• uncorrelated asset with a concrete finite supply limit

Whilst, Ethereum (ETH) entered as Bitcoin 2.0 (with a parameterised supply mechanism; theoretically infinite supply), yet it also evolved

• programmable world computer
• decentralised autonomous organisations
• crowd funding platform
• tokenisation
• open finance

This year, as mentioned in previous note of 10 December 2021, we are slowly and repeatedly being introduced to the politically charged subject of ESG with a hint to ETH becoming the poster child of traditional finance. Currently, blocking its transition to the world of ESG-ticked (or tickled...) funds is the merge event that moves it from proof-of-work system to proof-of-stake. Of course, in true ETH fashion, we are now being hinted to potential of the merge being delayed from 02 to Q3. Given the complexity involved & murmurs of ETH researchers & developers having differences of opinion on path being followed it does logically makes sense to put some brakes on to ensure stability. Moreover, the narrative adjustment requires there to be a sign of rekindling of the crypto bull market; for ETH on its own cannot continue upwards without BTC stabilising. Albeit, indeed multiples gained during last month does show a bigger push on ETH (+4% BTC vs +21% in last 30 days).

Now, coming back to narrative thoughts. The ESG narrative is indeed a strong one however it simply shifts the burden of environmental costs away from mining rigs to validators who will essentially be building out real estate on cloud computing platforms like Amazon's AWS or buying up ultra-expensive mission critical hardware since they will need to be up 24/7 to avoid having their 32-ETH stakes being eaten by various slashing events (for not servicing their clients etc).

food for thought: was buying DVDs from shops more energy efficient or subscribing to Netflix, HBO & Disney today is?

Gist of today's thoughts are simply to state that cults that we create whether within political, social or virtual worlds all run on narratives and our perceived biases push us into one corner or another. Of course at the end of day I just wish to accumulate more wealth however I rather do it with eyes wide open to narrative violations.

• Bitcoin's proof-of-work is bad for environment - skewed comparisons like below lead to bad policies (who knows how many legislators in Europe read such stats thus there is a push to ban proof-of-work mining)

Bitcoin energy consumption 2023 | Statista

The average energy consumption for one single Bitcoin transaction in 2023 could equal several hundreds of thousands of VISA card transactions.

StatistaRaynor de Best

• Ethereum's proof-of-stake will be greener for environment - aka no more like Bitcoin + supposedly controllable as legislation can target DeFi teams. Yet. I wonder what did Vitalik mean with this article on 1^st of April - https://vitalik.ca/general/2022/04/01/maximalist.html

In other news:

• After Luna's UST now other algorithmic stable coins are planning to mimic the same strategy of buying "exogenous" crypto assets into their treasuries in order to help them stay stable. I feel crypto world is looking for its own 2008
• Secretary Yellen seemed to have made some crypto lobbying groups happy with her remarks and "nuanced understanding" - https://home.treasury.gov/news/press-releases/jy0706
• USD Coin & Tether apparently were worst performing cryptocurrencies according to researchers at Citil!!! Given they are pegged to the $, I do hope that's a good thing.

Arthur, my sometimes ambivalent and other times pompous guru wrote recently about the correlation 1 moment that he feels is probably coming. He has hinted towards it a number of times previously however for once I wonder if he is waiting for an Armageddon that may not arrive; or if it does it will leave most participants breathless and unable to blink in time. Psychologically speaking, it seems very similar to the test that Mark Douglas refers to in his book, Trading in the zone, where someone was giving out free money with no strings attached on a street and 99% of passers-by thought of this as a potential scam

Energy Cancelled | BitMEX Blog

The last major hydrocarbon energy shock occurred because Arab suppliers rug pulled the West. The Gulf States “lived their values”…

BitMEX BlogArthur Hayes

To judge the likelihood of such a scenario still occurring I thought to look back over the history of bitcoin, number of times it breached the 200-2day moving average (yes it's a 2day's moving average as opposed to 1day's + just eye-balled metrics instead of being super scientific on my part). Moreover, compared it to SPY's & NDX's similar breaches (again ignored anything that lasted a day or 2).

Looking at above and knowing the past decade of bitcoin it seems to me the only true correlation 1 moment was March 2020 when all assets seemingly trended to zero, Additionally, March 2020 felt (I was awake & monitoring a number of crypto spot and futures exchanges including BitMex) like a gravitational singularity (I presume would feel), where the sheer speed & collapse of prices was enough to question the future of the whole crypto space & my sanity! I feel this singularity has had a paradigm shift - due to which we didn't get any blow-off top & probably won't get an extreme capitulation event.

Now fast forward to today; BTC has just poked its head over the breach for the 4^th time since Jan 2022; and yet I am in two minds over the future direction. I feel some of following are needed if we are truly to see $20k BTC (and $1.2k ETH)

• SPY breaching
• new BTC narratives begin to face blockers - e.g. Luna having an hiccup in its plans to put $3 to $10 billion BTC as a reserve/collateral asset behind UST; its algorithmic stable coin

Do Kwon reveals plan to increase UST’s bitcoin reserve to $3 billion

Luna Foundation Guard (LFG) may increase its bitcoin reserve to $3 billion in the near term, according to Terraform Labs CEO Do Kwon.

The BlockVishal Chawla

• bad news to actually depress prices - e.g. El Salvador's bitcoin bond delay failed to make a dent

El Salvador postpones bitcoin bond issue, expects better conditions

El Salvador postponed an unprecedented issue of a bitcoin-backed bond planned for last week, as the government decided to wait for favorable conditions in the financial market, Finance Minister Alejandro Zelaya said on Tuesday.

ReutersNelson Renteria

• Biden's executive order leads to policy decisions that enforce draconian measures. However, quite a few long term government advisors seem to be putting forward views that seem to be positive for bitcoin (https://uploads-ssl.webflow.com/627aa615676bdd1d47ec97d4/629ed6fc7948cb7951197365_Bitcoin and U.S. National Security.pdf). Even Yellen seemed a bit positive recently.

Treasury Secretary Janet Yellen: Crypto Innovation ‘Can Be a Healthy Thing’ - Decrypt

Treasury Secretary Janet Yellen said in 2018 that she was “not a fan” of Bitcoin. Her recent comments about crypto are less negative.

DecryptJeff Benson

• Russia to utilise bitcoin as payment for its oil/gas leading to greater scrutiny / blockers on crypto-sphere. Canada is going that way already after the trucker strike...
• Some draconian crypto AML FATF travel-rule implementation. EU Parliament is about to (on Thursday) vote on crypto AML regulation where they propose to revise Transfer of Funds Regulation (TFR). Herein, they are not setting a minimum floor that must be breached prior to any PI info sharing - seems to be any & all crypto transfer must require additional PI data sharing; essentially a divergence when compared to fiat. Personally; I have had to go through an implementation of such a process with an exchange. Literally had to send dust amount to an exchange's wallet to prove ownership. They just deposited it under my name and I could transfer it back out if I so wished.

When feeling the FOMO (fear of missing out) I look at the transaction fees chart of Bitcoin; we are still higher than pre-COVID crash and Jun 2018 - Apr 2019 period. Lastly, Bitfinex whales have now stacked visible orders on both bid & offer...wondering in this cat & mouse game who will pull their orders first?

musings:

Sberbank seems to be building out a smart contract...wondering how many blackhat hackers will officially come out to target it?

Craig Wright lawsuit against Bitcoin developers got rejected by UK judge. Craig had wished to make the developers liable as fiduciaries and force Bitcoin to be rolled back so he can claim his "Satoshi" coins.

ETH merge is still on - yet there are differences & noise regarding the complexity of its implementation. I will be biting my nails around late May - prior to that a capitulation to $1.2k / ETH would be a dream scenario for mass accumulation

Kraken Bank (Wyoming subsidiary of Kraken crypto exchange has secured an American Bankers Association routing number - now fun starts to get the Fed master account

Dinosaur coins (like ZRX) that I forgot about have been randomly having price spikes this weekend - is that the omen for the coming of correlation 1 moment....

Must start with acknowledging the sad fact of us living through yet another war while many in the 2^nd & 3^rd world have not yet ended. I hope & pray this one ends soon.

Over past two weeks there have been many mentions of sanctions evading capability that crypto provides; even Senator Elizabeth Warren brought this up this week at House Financial Services Committee. There are few facts media, pundits & politicians are stepping around.

• all major crypto exchanges with deep enough book to move multiples of tens of millions (if not billions) are bound by AML & KYC. Moreover, they keep bothering their clients with proof of wealth/funds to the extant that I sometimes wonder if their job is to annoy clients so they go away! e.g. I am KYC'ed on at-least 4 exchanges; yet I have had to provide more documents for proof than I heard my sibling get requested for Interactive Brokers.
• another example from personal experience - I have had to on number of times find proof of my original purchase of 2011/2012 which involves hunting down bank transaction going back a decade now. Compare that with how I got a mortgage from a globally top 10 bank couple of years ago and all they cared about was latest salary slips and a tax statement.
• recent arrests of Bitfinex related hack is a concrete proof of how advanced blockchain analysis software has become that even tech-savvy tools available to obfuscate origins of coins (e.g Tornado Cash for ETH, Samourai for BTC) are largely breakable.

Two Arrested for Alleged Conspiracy to Launder $4.5 Billion in Stolen Cryptocurrency

Two individuals were arrested this morning in Manhattan for an alleged conspiracy to launder cryptocurrency that was stolen during the 2016 hack of Bitfinex, a virtual currency exchange, presently valued at approximately $4.5 billion. Thus far, law enforcement has seized over $3.6 billion in cryptoc…

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• same arrest proves billions are impossible to launder - I doubt an oligarch used to private jets & super yachts will be able to have same lifestyle with gift card scams.
• finally, the whole blockchain ledger is auditable - anyone using it to move any ill-gotten or sanctioned money is hunt-able to the extent that even US treasury themselves admit albeit in a very subdued manner (showing its more of a political ploy than a technical limitation)

Russia’s hidden tool to undermine sanctions

Rapidly evolving digital markets have created new ways to subvert heavy-duty penalties that were designed to cut off wealthy Russians and state-backed institutions from the U.S. financial system in the aftermath of the invasion of Ukraine.

POLITICOSam Sutton

Now coming full circle to questioning the use case of crypto if all is traceable - why even bother? Answer to this is hopefully becoming obvious to the 1^st world populations:

• Canadian donators to Canadian trucker protest
• population of sanctioned countries (e.g. Russia)
• population of a country defending an invasion (e.g. Ukraine)

All 3 above categories have largely lost/degraded access to banking services due to their government's decisions / events outside of their control. However, populations still need to feed themselves, negotiate transport to exit war zones, attempt to settle their dependents; aka populations need to have an asset they can utilise when Bank stop services or run out of money. This is the very reason within hours of war starting, one of biggest Ukrainian crypto exchange, Kuna, was trading Tether at $1.10. Flight to pseudo-dollar had begun. Same sort of demand for Tether was seen on nearly all International crypto exchanges - even fiat pairs against Tether were impacted (e.g. USD/EUR on Coinbase was up nearly 1%).

Furthermore, as populations forcibly migrate, there is only so much they can physically carry so one avenue to transfer assets is to move them off exchanges into personal custody wallet. Why? Personal custody wallets, e.g. of BTC allow you to create a wallet with a seed phrase. All you need to do is remember that seed phrase (yes hard thing to do when you are under huge stress). Nevertheless, if you can remember the 24 word seed phrase (or somehow store it across safe places - e.g. X different email addresses or data stores) then you can recover access to your assets anywhere in the world without a need to carry any gadget.

Of course, the nail in the coffin of above x-border asset transfer is how to KYC + AML if you are a refugee running away from a war zone; e.g. if I had to urgently exit say CountryA, I am not carrying my CountryA tax returns with me across hostile borders - conclusion: its not so easy to launder crypto nor easy to use your own assets if you are unable to prove origin of funds. There is still lots of work to do if crypto truly wishes to on-board the masses.

That leads me to couple of shenanigans that only happen in bear markets:

• folks complaining about companies that are changing the interest levels for crypto assets - e.g. crypto.com from 14.5% to lower range between 7% and 12%, with a max ceiling for clients with assets in excess of $30k! entitled much?
• many high conviction crypto platform developers are slowly leaving (e.g. just today more info has come that Andre Cronie & Anton Nell have quit the space). This is what happens when eyeballs start to drift away, boredom after making too much money creeps in, burnout after thinking crypto is a race to be won within a year or two instead of a marathon over decades. It'll be interesting to watch how some projects that Andre worked on progress (e.g. Fantom -
  FTM, Solidly of Jump Crypto)

Lastly, it's been interesting to see $50.0m+ donated directly to the crypto wallets of Ukraine and then for details to emerge that 40% of the suppliers are willing to accept crypto as payment. Of course, not every donor thought that the money will be used to buy weapons, nevertheless, this proves there is abundance of crypto capital willing to fund countries & exit liquidity exists for such quick turnarounds.

Ukraine Buys Military Gear With Donated Cryptocurrencies

The Ukrainian government anticipates doubling the $50 million of crypto donated so far in the next two or three days,

TimeOlga Kharif / Bloomberg

How does a country KYC/AML itself?

This weeks Market Huddle episode with Kris Sidial reminded me about Decentralized Option Vaults (DOV) that a few market making firms (e.g. QCP Capital) are having a very fond time taking the other side off.

The crypto world seems to have given the volatility bug to tradFi markets (e.g. those double digit percentage drops on various big name stocks over past weeks) and in return has begun to take up big chunks of playbook of structured products that in my layman eyes reminiscent of tradFi's short vol times. As with anything experimental in crypto world that promises to provide some sort of yield; DOVs have seen a massive uptake. Of course, no market maker will take the other side unless they are going to be able to make something from it - and this we can clearly see in OCP's pleasant market updates as well as how well every Friday european morning crypto volatility seems pinned.

Some interesting reading regarding DOVs:

Crypto Options Analytics, Jan 16th, 2022

Visit gvol.io Disclaimer: Nothing here is trading advice or solicitation. This is for educational purposes only. Math minded people here, pardon any typos. Feel free to contact us at https://t.me/tradeparadigm & follow us at @tradeparadigm on Twitter to access the best pricing and liquidity for larg…

AD Derivatives Newsletterg_vol

Optimized Options Auction Execution

Welcome to Sparks, Friktion’s DAO contributor driven Quantitative Research insights on market structure, trading, and Volt design written…

Friktion Researchgalileo

I am all for having more avenues to earn some yield for my magical internet money however if the past decade in this world has taught me something from abundance of my losses; other than patience for right price, its to keep an eye on market narratives & watch the lop-sided positioning from perspective of yield hunters (and thus market makers who are also out to make money thus have tendency to eventually go blind with greed).

They all got saved very recently by someone (@Tree_of_Alpha on twitter) who was kind enough to reach out to Coinbase to report a bug^[1] that truly would have had an eye-watering impact on crypto markets if any other shadowy characters were the discoverers.

Nevertheless, if statistics on crypto exchanges (e.g. Binance) are to be believed and are of any indication then there is indeed a weird continuous build up of open interest on stable-coin margined BTC contracts that are now reaching 160k coins. Lastly, biggest crypto derivatives exchange, Deribit, is slowly inching (with an initial upgrade this week) its way to providing stable-coin based wallet with my hope to finally provide futures / options contracts against it soon. That should shine a reliable light on this dynamic and allow one to monitor for that lop-sided positioning within DeFi world's DOVs.

Coinbase rewards researcher $250,000 for discovering “market-nuking” bug

The bug, which was discovered by anonymous account Tree of Alpha, allowed the person to sell 0.0243 BTC on Coinbase’s exchange with 0.0243 Ether.

The BlockFrank Chaparro

Desperation or luck can lead to similar feelings of attachment to an idea - former, I knew of due to my formative years growing up in 3rd world; latter, I feel I have only understood over past few weeks. Admittedly, I grew up in rich family so its not a personal experience; but saw first-hand how ordinary folks went through life to feed their families to the extent that court judges had to be secretly bought off to ensure land mafia would not take over the area where poor families lived.

Recently, I went through a life experience that opened my eyes to my current position in life, which, in one weird way builds upon my thoughts of previous note. Gist of it is that I had to list out assets I hold so that my partner is able to cash them out if in an unforeseen event I am not around. Going through it and thinking through how I got here I realised how luck can make you feel sentimentally close to certain ideas.

Once we are attached to an idea; we always look for excuses to justify it. This usually leads us to a group think (since largely we prefer to listen to those who agree with us or promise to protect us). In order to stop myself from becoming a crypto-purist I have been mentally classifying any crypto wins as luck (although sometimes my notes sound too sure of themselves).

Nevertheless, as the current crypto cycle progresses I am questioning & agreeing more & more with critics - e.g. an anonymous treasurer (known as Sifu) of DeFi protocol Wonderland was doxed and we discovered he is co-founder of the defunct QuadrigaCX that lost $100m+

Crypto Co-Founder Revealed to Be Infamous Fraudster, Investors Shaken

The co-founder of DeFi protocol Wonderland was revealed to be a convicted fraudster who previously co-founded the notorious QuadrigaCX exchange.

VICELorenzo Franceschi-Bicchierai

To make matters worse the lead of Wonderland who is running a number of other such projects knew about this. Plot twist: Wonderland was called out by Senator Warren in one of the congressional hearings on stable-coins months ago; so one wonders if Senator Warren had access to something that regulators have been sharing with her. Additionally, I for one wouldn't be surprised if there is an attempt to confiscate Sifu's $200m in DeFi assets.

On the other hand, the crypto community has never been stronger - e.g. Trezor (a hardware wallet provider) had to backtrack and remove Address Ownership Proof Protocol (OPP) after facing backlash from crypto enthusiasts & its customers. AOPP is a Swiss travel rule protocol that allows to verify ownership of withdrawal address.

A decision on AOPP

Trezor will remove AOPP from Sign & Verify and provide a guide to manually verify addresses.

Trezor BlogSatoshiLabs

Nor there is a shortage of $ even with impending rate hikes. A "bridge" that allows folks to transfer assets between one blockchain to another; known as Wormhole got exploited for approx. $300m+. Within hours Jump Trading put up from their own pocket the assets required to make the protocol whole.

Wormhole replenishes its blockchain bridge after $325 million exploit

Wormhole, a cross-chain protocol that suffered a $325 million exploit on Wednesday, has replenished its reserves.

The BlockYogita Khatri

This brings me to my last point; crypto Super PACs are coming and I really hope we take up the crypto discussions under the guide of Robert K Merton's CUDOS norms to allow to build a constructive future & limit our inherent biases; i.e.

• communism - aka open source our thoughts
• universalism - aka enforce uniform standards in discussions
• disinterestedness - aka be vigilant to personal agendas
• organised scepticism - aka encourage engagement and dissent to allow for better scrutiny

Crypto super PAC backed by Anthony Scaramucci’s firm targets midterms

The crypto super PAC’s backers include SkyBridge Capital, the hedge fund led by former Trump communications director Anthony Scaramucci.

POLITICOSam Sutton

Nearly a decade ago I joined in this Bitcoin adventure (with many ups & downs) however ever-since everyone I started off with (myself included) have been attempting to optimise our wealth generation avenues. Circa mid-2021 a realisation seems to dawn that now it's time to pivot away from generation to wealth preservation.

Within the timeline & evolution of universe (ignoring all religious inputs); humans seem to be nothing but a rounding error. So sometimes we might be right and others we may well be hurtling towards solutions that are detrimental to our own aims over a long enough time horizon. It's a vague way of saying our individual lifespans might well be immaterial to the trajectory we are evolving into & we may not know the true consequences until it's too late.

So, for this first reading of the year, all I ask that you don't try to bucket any of my statements into truths, falsehoods or facts until the very end when you are try to self-actualize where you may stand and/or how this could be helpful to your or client's strategies.

Who do we see as biggest winners of each vertical below?

• web 1.0
• web 2.0
• web 3.0

Web 3 2 1... where did we come from?

• Web 1.0 - came out of military & scientific community's work (e.g. CERN).
• Web 2.0 - was a consequence of entrepreneurial minds trying to leverage greater interactivity on user's part

Where we are (perceived to be) from?

• Web 1.0's origins are a huge mix bag of civilian / military collaboration - e.g. many aspects of "semantic web" as some refer to under the umbrella of Web 3.0 have been debated, codified, experimented over decades ago. Much of origins of the design of the network has its foothold in the work of US DoD either through active work or funding
• Nevertheless, US DoD didn't stifle any entrepreneurial spirits and instead has been a benefactor of technological advances
• Web 2.0's intentions may well have been noble yet biggest winners have been the entrepreneurs & their financial backers; not the user's whose data is leveraged

Where are we now?

Looking back over past 2 years; if not the last decade; it should be stark clear by now that what counts is the perception not whether it's true or not. As globally the middle income class continues to shrink & merge into low or high; slowly we are decoupling by not income but across a new set of buckets that I can only refer to as ideologies of:

• Ponzinomics - not in grotesque Madoff style fraud; but rather cryptosphere where tokens are leveraged to generate yield through multiple avenues (e.g. revenue sharing, inducing governance of decentralised organisation and enforcing product visions, finding avenues to leverage control over other productive assets within the ecosystem) - of course not all avenues end up with an ROl upon execution.
• Monetarists - those who seem to push for continuing the status-quo albeit with some adaptations

Ponzi-what?

We can split this population into sub-demographics:

• Cypherpunks - believers of true decentralisation; privacy & least state oversight
• ponzi-monetarists - moulders of crypto ecosystem in the image of traditional finance and staying instep with true monetarists with eye to full government oversight & control

Essentially, the gambit of folks within the crypto ecosystem live on a spectrum between these 2 sub-demographics.

What's next?

There will be continued push into the concept of Web 3.0; yet each of the above ideologies have their own views on what it means. Some would already argue that Bitcoin was the true Web 3.0 with its public/fair genesis & bootstrapping of its ecosystem without any venture capital at its origins. Others will state that we already live in a metaverse given as humans our intrinsic value assignment only makes sense to food & shelter needs; rest being just wants & desires. In essence, this argument could be extrapolated to mean that we anyway are living in an optimistic thought experiment with a goal to reach some destination.

So Web 3.0 is an amalgamation of all above threads leading to this decade being a race between

• monetarists' attempts to assimilate the fringes into a controllable existing ecosystem,
• ponzi-monetarists' battles to gather value & greater control over the future ecosystem while keeping links with the existing one,
• cypherpunks' generation of new ways to spawn off a new ecosystem in bid to escape the gravitational pull of existing one.

Coming full-circle; the low/middle/high income class will decouple into above threads and take avenues that best fit their narratives & beliefs; e.g. my Nov 25^th 2021 note wondered aloud whether retail is exit liquidity for Raoul Pal, Su Zhu & co. Indeed, there is greater noise in cryptosphere to lower the dependency on VCs and not give away rights to our own data like we did back in Web 2.0. I sense Facebook (aka META) might well be posterchild of this battle.

In the end I leave you with a quote that I am told is of Alan Greenspan because it always makes me wonder whether I am listening to my thoughts or my feelings...

I know you think you understand what you thought I said but I'm not sure you realise that what you heard is not what I meant