May 19, 2021 | Issue #169

MUST READS

It was Inevitable.

Well, as we're sure all our readers out there are quite aware, we have a bit of a market crash going on. To put it simply, pretty much every single crypto asset in the top 100 is flashing red.

For all our new readers (we now have more than 40,000), this isn't our first rodeo, as we've been through quite a few "crashes" in our 4 years of writing this newsletter.

Since 2017, Bitcoin has fallen by more than 25% over a seven day stretch on four different occasions:

12/24/17: When the price fell from $20k, at the peak of the 2017 bull run
2/5/18: When the price fell below $10k as the bull run ended;
11/25/18: When the price went to $4k as crypto winter set in
Mid-March 2020: When the price touched as low as $4k as financial markets reacted to Covid

And in every one of these situations, we got a deluge of emails wondering: What caused it? When will it end?, and What comes next?

Now, before we try to answer these questions, let us be upfront and say "we don't know."

We are in this for the long game (we hope you are too) and daily price movements, can cause as much pain as they can greed. But if you look at each of those four "crashes" above and look at where we are today you'll realize they are mere blips in the ultimate long-term value that crypto assets will offer.

Now let's get to it...

What Caused It?
As always, nobody has a great answer.

Now of course we could point to Musk tweeting that Tesla had suspended vehicle purchases using BTC due to EnViRoNmEnTal CoNceRns (read this please), but that's probably too simplistic.

Or we could note that ransomware FUD from the DarkSide hack hit an ATH. As always, there are some good conspiracy theories as well.

But what we do know is that we've had three months of sideways BTC price action, with Coinbase (COIN) and MicroStrategy (MSTR) weakening, and GBTC premium falling off a cliff.

The most likely answer is that Bitcoin just lost momentum and the market needed a correction.

When will it end?
It might already have. BTC hit a low of $30k this morning and is hovering back around $39k as we write this. ETH, which fell to $2,200 this AM, is back up to $2,800.

Does that mean the carnage is done? Of course not. It could move lower.

What Comes Next?
In the short run? Probably more volatility...

In the long run? You guessed it – nobody knows. But for what it's worth, despite this week's correction, long-term fundamentals haven't changed in the slightest. Overall, Glassnode's latest on-chain analysis suggests that newer investors are "panic-selling" while big investors are "largely unshaken."

As Pete Seeger famously said: "Which side are you on?"

On the Bright Side...

To help calm any nerves out there, we wanted to quickly lay out some things to look forward to.

It has nothing to do with celebrity tweets, Shiba-Doge sh*tcoins, Bitcoin pizzas, NFTs – no, we've seen enough of that crap anyway. These are things that actually matter:

NYDIG announced that BTC will be coming to hundreds of US banks later this year. Bank customers are expected to be able to buy, sell, and hold BTC through their existing accounts, potentially bringing in many new investors.
In another sign of growth, Square recently shared that BTC accounted for 15% of Cash App’s gross profit in Q1, up from 8% a year ago.
Jack Mallers and his team at Strike are quietly revolutionizing the remittances industry in countries like El Salvador, giving millions of people access to developed financial services they never had before.
Bitcoin technology is also in line for a major upgrade. Activation for Taproot has officially begun, as miners have begun to signal their support.

TLDR: With so much happening in crypto, it can be easy to forget that the Bitcoin ecosystem is still growing at a rapid rate.

Burn Notice 🔥

Recently, the founders of the DOGE-inspired memecoin Shiba Inu Coin sent Vitalik Buterin half of all existing SHIB (presumably in an attempt to convince other traders that the Ethereum cofounder is a fan).

After Buterin used the coin to donate more than $60 million to India for Covid relief, he “burned” the majority of his remaining SHIB, removing them from circulation. 😎

Via a message on the Ethereum blockchain, he warned other developers: “PLEASE DO NOT GIVE ME COINS OR POWER IN YOUR PROJECT WITHOUT MY CONSENT!”

Coinbase to Raise $1.25 Billion in Bond Sale... Announces Q1 Earnings

As Coinbase (COIN) stock skids to below $225, just days prior it announced an offering to sell $1.25 billion of convertible debt. In the announcement the company stated:

“This capital raise represents an opportunity to bolster Coinbase’s already strong balance sheet with low-cost capital that maintains operating freedom and minimizes dilution for Coinbase’s stockholders.”

Why? Not sure. Move to DeFi? Acquisition target on the horizon? Time will tell.

This comes after its first earnings report showed $1.8 billion of revenue and announced it will soon support DOGE trading.

DEEP DIVE

Why ETH Will Win Store of Value

In Michael McGuiness' latest long read he explores his reasoning behind why he believes ETH may be a superior store of value to BTC for four main reasons:

More Scarce
More Secure
Organic Demand
Real Yield

Ethereum Announces First Quarter 2021 Results

Ethereum isn't just a crypto currency. It's a software platform with users, revenue, and applications.

If we cover software like AMZN, MSFT, SNOW, or TWLO we should cover Ethereum (ETH). To get started, check out its Q1 "earnings' results."

Financial Freedom and Privacy in the Post‐Cash World

Even in liberal democracies where citizens can — in theory — protect themselves, corruption thrives and financial privacy is on the verge of extinction.

Alex Gladstein continues to knock it out of the park. Here's his latest essay, published in the Cato Institute Journal, exploring two ways of securing digital liberties. (TLDR here)

REGULATORY FRONT

DarkSide Ransomware has Netted Over $90 million in Bitcoin

After being the first company to find the wallet that DarkSide used, Elliptic is now reporting that the ransomware group has been paid just over $90 million in Bitcoin ransom payments from 47 distinct wallets.

U.S. City in North Dakota Now Accepts Cryptocurrencies for Bill Payments

The city’s finance director, Hercules Cummings, explained that the city of Williston has partnered with Bitpay to accept cryptocurrencies, elaborating:

"We are the first municipality in the state of North Dakota, and the third in the nation, to offer this service."

Recently, two other cities in the U.S. have been working on some Bitcoin initiatives. Miami has passed a resolution that would allow employees to get paid in BTC, residents to pay for fees in BTC, and for the city to have BTC on its balance sheet. Meanwhile, Jackson, Tennessee, is exploring payroll conversions for employees in BTC as well as bitcoin mining to add to its balance sheet.

China Bans Financial, Payment Institutions from Cryptocurrency Business

Under the ban, such institutions, including banks and online payments channels, must not offer clients any service involving cryptocurrency, such as registration, trading, clearing and settlement.

📌 The ETH Bull Case, China Bans Crypto, and Let’s Talk About this Crash…

MUST READS

It was Inevitable.

On the Bright Side...

Burn Notice 🔥

Coinbase to Raise $1.25 Billion in Bond Sale... Announces Q1 Earnings

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DEEP DIVE

Why ETH Will Win Store of Value

Ethereum Announces First Quarter 2021 Results

Financial Freedom and Privacy in the Post‐Cash World

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The Only Escape Route Left For Your Money

REGULATORY FRONT

DarkSide Ransomware has Netted Over $90 million in Bitcoin

U.S. City in North Dakota Now Accepts Cryptocurrencies for Bill Payments

China Bans Financial, Payment Institutions from Cryptocurrency Business

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