How Low Can We Go

MVRV-Zscore - Reliable BTC metric for testing flow. Use as an indicator to buy/sell. (3 MVRV = SELL / < 1 MVRV = BUY)
ETH: “Apple’s P/E is 23 and growing. Microsoft’s P/E is 24 and growing. Google’s P/E is 16 and growing. Ethereum’s “P/E” is 195, and its revenues are shrinking”
What to look forward to: Decentralized physical infrastructure networks, aka storage solutions (Filecoin, Arweave, Helium).

What were the biggest problems in 2022?

Systematic risk (disclosures standards, proof-of-reserves and on-chain monitoring infrastructure, and crypto’s GAAP accounting moment to discern fundamentals vs. greater fool investing.)
Hacking (Solving security issues at scale (with AI monitoring, algorithmic circuit breakers, etc.) will be huge)


We can now track quarterly financial statements directly from the blockchain for 40 top protocols.
Predict a confidence interval for Coinbase trading volumes by adding 40-60% to Uniswap.
See top Dapps in revenue - TokenTerminal

ZK and Gaming

The opportunity is massive for startups that succeed to integrate privacy features in a high-throughput on-chain game engine.

Top 10 people to watch

Changpeng Zhao & Brian Armstrong - Binance
Rep. Patrick McHenry - Defining crypto assets for regulation
Sheila Warren - The Crypto Council for Innovation (CCI)
Citizen Journalists: From Molly White to Autism Capital
Anatoly Yakovenko - Solana
Barry Silbert & The Winklevii - Gemini, Digital Currency Group
Stani Kulechov - Aave, Lens
Alexey Pertsev & Tornado Cash Devs
DAO Members

CeFi Risks to look out for

Binance: Has a 75% share in global crypto trading volumes, which could lead to global regulatory risk.
FTX’s collapse shows the importance of Proof-of-reserves
$200 billion in crypto assets held on exchanges are now fully accounted for and trackable quarter to quarter. Track on Nansen.

The Crypto Credit Crisis - Grayscale, 3AC, Luna

  1. GBTC (Grayscale Trusts) launches Trusts for BTC that can be flipped for large amounts of GBTC AFTER 6 months staking.
  1. Grayscale hits 40B AUM. 3AC and BlockFi has 10% (4B in exposure). GTBC starts dipping - 3AC starts offloading.
  1. 3AC and Blocfi trapped in staking so they work with lending desks to use their GTBC as collateral. Genesis Capital accepts thinking they can get good returns on interest.
  1. Luna raises $1B, 3AC is a main investor.
  1. Luna buys $1.5B BTC with UST from Genesis, who sells that UST to knock off the peg. Cue bank run. Luna death spirals. 3AC down bad on both investments (GBTC and Luna/UST) and becomes insolvent. 3AC’s GBTC is liquidated.
  1. Lenders pull back as they attempt to derisk drastically, including Alameda (Genesis has decided they don’t want FTT).
  1. Coindesk publishes Alameda holdings which consists of illiquid tokens including their own (FTT, Serum). Binance moves $2B FTT on chain appearing to dump. CZ confirms plans to sell. Cue bankrun. FTT crashes, FTX crashes, Alameda crashes.
  1. FTX has been illegally using customer funds as collateral and other investments - all funds frozen.
Don’t co-mingle customer assets Cut losses early on bad trades vs. lever them up and pray Maintain internal controls and a fortress balance sheet Split assets across different custodians and counterparties, Only keep on exchange what you can afford to lose.

Digital Currency Group

Subsidiaries: CoinDesk, Foundry, Genesis (looking for $1b), Grayscale Investments, and Luno.
DD questions for Digital Currency Group
  • Does DCG or Genesis hold the $700m of GBTC and ETHE? If DCG, they can borrow against it, if Genesis will they sell causing a ripple effect?
  • More on the promissory note on DCG bailing out Genesis at $1.1B over 10 years.
  • Alameda Lending - what was the relationship, chances for clawbacks?

Crypto Lending

Centralized lending is dead
Future centralized lending will look like banks and Anchorage. (How Anchorage works: Originate loans to the borrowers with the best risk profile instead of focusing on the highest interest rate available, lends directly to creditworthy institutions - no defi)

DEPin (Physical Infrastructure Networks)

50%+ of all staked Ether is controlled by three entities: incl. Kraken and Coinbase.
50%+ of Bitcoin’s hashrate is supplied by three mining pools: Foundry USA, AntPool, and F2Pool. Centralized RPC providers are currently the lowest cost and easiest to use solution for reading blockchain data – Infura and Alchemy 70% of nodes are on cloud providers (AWS, OVH, Hetzner - which recently banned blockchain hosting)
Whats Next?
  • Meaningful upgrades to account abstraction (streamlines user management of accounts and assets)
  • Proposer Builder Separation (delegates computationally intensive work to specialized block proposers, lowering node requirements for solo validators)
  • “Light Clients” (allows users on laptops and phones to connect directly to networks rather than through third-party hosted nodes or centralized RPC providers thanks to improved data compression).

On-Chain Data Forensics

Players: Chainalysis, Elliptic, TRM Labs
Transaction monitoring for compliance teams and forensic tools for regulators and investigators.
Market intelligence product (b2c) Players: Nansen, Dune, AmberData
Combines market intelligence product + compliance product.
Nansen Methodology: Tag public wallets, analyze them on a best-efforts basis, and leverage Cunningham’s law into iteratively better aggregated data sets (“if our data is wrong, then give us the right data”). They became a robust forensics tool under an NFT flipper’s front end.
Tax and Compliance
With the bear, compliance solutions may start working for/with the IRS proactively searching for tax non-compliance accounts.

Crypto Policy

DCCPA Digital Commodities Consumer Protection Act CFTC Commodity Futures Trading Commission
Current DCCPA hurts DeFi and the state of crypto. What it should do:
  • Regulate crypto intermediaries & custodians
  • Regulate stablecoins
  • Create safe harbors, disclosure norms, and fit-for-purpose rules that allow innovation to flourish while safeguarding users.
DCCPA was pushed by Sam which would protect FTX. It woudl have illegalized automated market maker DEX’s like Uniswap, but explicitly blessed central-limit order book DEX’s like Serum.

Bitcoin Mining

It has not been a good year for mining. Profit is down to almost cost level.
  • In environments with acute energy shortages and high costs, bitcoin mining can be seen as driving up marginal energy costs for the average consumer.
  • 39% of bitcoin mining was renewable. CoinShares estimated that nearly 60% of bitcoin mining power comes from coal and gas
  • HOWEVER the energy spent is 1/3 of Gold Mining and less intensive that the global banking system
    • notion image
  • Bitcoin mining has been trending towards using capture flared methane, stranded geothermal energy, coal refuse, and even recycled waste tires. (Wasted energy that other industries won’t use - BMining uses 70% of wasted flared gas!)
The next demand for Bitcoin will likely come from Gov not large companies.

Why we need privacy [From Privacy Wars]

  • Fungibility is tied to privacy. If we associate one fungible BTC as non-fungible because it had been owned in a certain wallet, the value could decrease - breaking the system.
  • Tornada Cash can be used to send crypto to people living in oppressed circumstances. Eg Ukraine without it being intercepted by Russia, Women’s Annex project for Afghanistan girls without their fathers/brothers/male family members intercepting.
  • Funds don’t want their trades to be publicly known
  • Demand for privacy has grown with NFTs as PFPs and online identites.


2 major USD-reserve stablecoins:
CIRCLE: $45 billion in USDC. Blackrock and BNY Mellon are custodians. Pushing for federal stablecoin legislation.
PAXOS: $20 billion in circulation (90% BUSD, rest Paxos). Is a NY state Trust company. Mastercard and Paypal are it’s whitelabel customers.
Crypto Collaterized Stablecoins:
Algorithmic Stablecoins
= $1
< $1
> $1
Fiat Centralized, off-chain partners (banks) Implicit sponsor firms (Circle)
Exogenous Collateral Overcollaterized
Endogenous + Exogenous Redemptions + mints assumes value in projects governance token Ranges in collateral levels
Single point of failure (centralized) Can blacklist addresses (central company has contral)
Requires more money deposited than withdrawn (inefficient use of capital)
Stability dependent on governance token

Algorithmic Stable Coins

Rebase: Mints and burns token supply from users wallets to maintain peg.
Seigniorage: Multi-coin system, one is stable, the other is used to maintain the stablecoins peg. Uses a mix of protocol-based mint-and-burn mechanisms and free market mechanisms that incentive market participants to buy or sell the non-stable to maintain the stable-peg.
Fractional-algorithmic stablecoins: Part seigniorage, part collateralized
Uses FRAX (stable), and FXS (Frax share, governance token).
FRAX is fractionally collaterized, can be minted using both FXS and USDC. It is partially collaterized by USDC and the collaterization ratio depends on market price of FRAX.
The protocol also collects minting/redemption fees (.2 to .45% in FRAX).
The Collateral Ratio is managed by Algorithmic Market Operations.
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