Backstage pass: The only black swan at the liquidity maelstrom superposition meetup
Clarity looks murky // 24-7 NYC // Iran and Venezuela USD // CT toasted // PM smacked // Quantum threat // Saylor promise
11 years ago this week, bitcoin was $210.
The 11th biggest coin was peercoin.
The 111th was digital note.
Byzantine Whose-Fault-Is-This? Tolerant
Consensus has been one of the primary achievements of blockchains. The technology we’ve all convened around swiftly enables disparate humans to come to agreement, again and again, about the state of networks that hold billions of dollars worth of assets. The whole thing would feel pretty “Kumbaya” if so many entrepreneurs in the space didn’t also love to talk about stocking up on guns.
So, one could be forgiven for forgetting that consensus is the specialty of the blockchain industry amid this week, as different key opinion leaders and also actual leaders split over whether or not to move forward with the Clarity Act, the legislation for regulating the making and trading of tokens.
And it’s also for know-your-customer rules in DeFi.
And the rights of open-source software developers.
And bank monopoly on yield for stablecoins.
And releasing more of the JFK files, probably.
Coinbase blinked first. That sank Banking Chair Tim Scott’s 487th deadline for voting the legislation through this committee. Other crypto industry leaders said Armstrong was wrong, it’s better to just move.
But Charles Hoskinson came out swinging against the White House, blaming Pennsylvania Ave. for screwing up the Clarity Act so far. OK, Charles, cool, cool. That’s what you’re mad about. It’s not that you were publicly not-invited from the Digital Asset Summit at the White House.
Like, the White House said: “That dude in Wyoming can’t sit with us.”
Speaking of the White House, the guy who is running crypto there called out Coinbase for backing out of Clarity. The big news for me? That there is a guy running crypto there.
Honestly, since Bo Hines left for Tether, I thought the White House had just pivoted to Greenland.
But I guess they hired this guy Patrick Witt, and he got snarky like the bully’s sidekick in an 80s after-school special. Everyone’s talking about the first part of his post, but I like the part at the end where he writes:
So, do we take advantage of the opportunity to pass a bill now, with a pro-crypto President, control of Congress, excellent regulators at the SEC and CFTC to write the rules, and a healthy industry? Or do we fumble the ball and allow Dems to write punitive legislation in the wake of a future financial crisis à la Dodd-Frank?
Translation: “Listen, you jokers, you know that you’re going to blow up again. Get legislation now before that happens!”
You don’t get it, Mr. Witt: This time is different. We’ve changed. We’ve grown. We’re on Chinese peptides now.
The fact that the big guns are not aligned at the moment probably looks messy to most people, but surprise! This actually is crypto’s consensus style when it counts. The ledger is one thing, but policy? We like a knife fight of passive aggression, thanks.
You think passing legislation is hard? Please. Try getting a change through Bitcoin Core.
Congress is mildly arcane. The Bitcoin mailing list is industrial-grade attrition.
NYSE goes all night
The New York Stock Exchange announced that it is going to tokenize a bunch of stocks, but for as much as has been revealed so far, mainly all I see is enabling 24/7 trading. This, in fact, seems like the whole announcement, honestly.
One time I worked for a paper and the editor in chief came to me one day, because I was one of the tech reporters, and showed me their app and said, “People are saying this isn’t working. It works right?”
I did not know there was an app for our paper at all. But he showed it to me on his phone and when I looked it was just... the whole actual paper scanned and loaded onto a mobile screen. You could zoom in and move it around to see different parts, but you’d never be able to make out the whole thing.
I made a face like I’d just smelled something bad.
He snatched the phone away from me and said, “Oh whatever, it works.”
As far as we know, NYSE tokenization will be much like that. It could take us back to the days when luxury brands were shilling phygital.
TL;dr: private blockchains.
Private blockchains are the pleated khaki pants (with cuffs) of the future of finance. If you’re on a date with a girl and she says “Hi!” to a guy she knows who’s wearing pleated khaki pants (with cuffs), are you worried?
Crypto Twitter spanked
The timeline is depressed and not just because number go down. It is also because it seems like the audience just isn’t there any longer.
The consolation for every crypto influencer has long been that even if they weren’t getting richer that week they could still pop off the odd banger for thrills and lolz. Not so much these days, though. Everyone on Crypto Twitter is saying the eyeballs are gone.
Moonshots feel much more rare. Meanwhile, retail got tired of sharps picking their pockets, and now investors and normies alike need to bet with conviction and wait anyway.
Where’s the fun in that?
So at least, in the meantime, give us our dopamine rushes back!
Nikita Bier, the head of product at X, said that a ton of crypto users were just reply-guying in the bajillions. So the company had to put the smackdown on. But Nic Carter has pointed out that X’s determination to get the most engagement possible has wrecked the ability of small communities to form on the site.
You know: Bitcoin Talk is still right there, everybody. What do you think about bitcoin pensions? Get in there. Sometimes you gotta go back to move forward.
Shadycoins
After Delta Force yanked Maduro out of Venezuela, we learned that Tether had frozen almost $200 million worth of stablecoins controlled by the state. Meanwhile, blockchain spies at Elliptic revealed on X that a half-billion dollars worth of USDT passed through Iran. Seems pretty clear that they got in and out as fast as they could because they knew that a freeze could be a real risk for them.
Seems like it’s just a matter of time before some of the rogue states like this switch to something genuinely censorship-resistant, like bitcoin. Zcash and Monero, two cryptocurrencies explicitly designed to stymie blockchain surveillance have been popping off over the last year too. Could that be why?
Let’s be real: There are two wolves inside every crypto denizen. One of them says, “Actually blockchain networks make it easier to trace bad actors” and the other one is saying, “If the rogue nations take the orange-pill that would be pretty bullish...”
Which one are you feeding?
We’re going to get called out for this eventually. I’m ready for it though, personally. Ever since Nikita nerfed the timeline I’m like: It’s gonna be nice to feel something again.
Rules roller coaster
A few years ago everyone in crypto was moving to Portugal, but this week it went very unchill, ordering Polymarket to GTFO.
Betting on elections is forbidden in the coastal nation, but $100 million in liquidity changed hands anyway in its most recent election, and officials there don’t want to see that much fun on chain again.
Meanwhile, here in the U.S., the new head of the CFTC just announced: “I’m pretty sure that a bunch of the rules at my agency are dumb probably so we’re going to chuck ‘em.”
(I mean that’s not a quote, but think of me as Google Translate for Washington press releases. I don’t even need the gigawatts Grok does. Just some Pepsi Zero.)
CFTC chair Mike Selig is calling it “Future Proof.”
Herding honey badgers
I got in trouble all the time in elementary and middle school, but I got in the kind of trouble good kids get into. Dork trouble. I would get too excited, make scenes, yap a lot. Teachers called me disruptive, but they knew I did it for love of the game.
Teachers never said it, of course, but the implication seemed to be that kids like me (and, to a certain extent, all kids) were immature, and adults knew how to behave themselves in groups. We needed to act more grown up, they said. Don’t slide under the table when math is hard, they told us.
But then the first job I had out of college was basically organizing events for affable older people where they would hang out and talk about political change, and boy was I surprised. It turns out that adults are very poorly behaved!
Grown-ups never shut up. They never get in line. And you can’t make them stand against the wall during recess if they refuse to do what they’re told!
I’d been lied to!
The truth is that it is extremely hard to get people to behave in an orderly way en masse, even when it’s in their own best interest.
Well, the quantum threat to Bitcoin and its proximity to the present has been a hot topic in recent weeks. During a long car ride on Tuesday, I listened to an episode of the Zero Knowledge podcast in which the host spoke with Project Eleven, a startup built around readying the crypto industry to make that pivot to probably-quantum-resistant cryptography.
On the episode they point out that it won’t be enough for blockchains to upgrade their cryptography.
Not your keys, not your coins, etc. etc. etc. Ergo, if you don’t move your assets to a quantum-secure address, it won’t matter if the chain upgrades. Unca Vitalik and Unca Anatoly cannot protect you. You gotta protect yo’self.
So once you actually think about this, you realize:
A. It’s going to take forever.
B. Mother fuckers gonna put it off.
C. This is never going to get done in time.
☝️ That’s like Bertrand Russell level logic there. Call it “The Dale Proof of We’re Totally Screwed.”
Anyway, the company has raised $20 million to build tools to facilitate the post-quantum pivot. God bless them. I don’t think a billion jillion would be enough, though, now that I’ve thought this through.
Is there still time to buy GameStop?
Dancing the conga into the cryptocalypse
Whales are accumulating while the numbers fall.
The giga-whales are really accumulating. Michael Saylor’s Strategy, Inc just bought another $2 billion worth of BTC and Tom Lee’s Bitmine just bought another $100 million of ETH.
It didn’t occur to me to put this together until these two items are side-by-side, but how about this. Q-Day hits and loads of wallets that never got updated started getting liquidated. All the supposedly “lost Bitcoin” goes back on the market.
On Ethereum, too. On Solana, too. On Dogecoin, even, if anyone cares that week.
The market gets flooded with way, way more inventory for sale than anyone wants to buy and it drives down the prices of blue chips hard enough that cracks finally form in the supposedly diamond-boned and titanium-coated hands of the two remaining mega-whales, Strategy and Bitmine. So they start selling into the bloodbath.
That would be a fun year in the crypto space. That wouldn’t leave anyone completely second-guessing their every life decision.
I hope you’ve got conviction, dear reader. The rest of us are gonna need exit liquidity.