Market Overview December 2023
Highlights
- CZ pleads guilty, Binance charged with 4.3B
- Bitcoin hits 40k (although without natural demand)
Positions
60% Cash, 40% Crypto
Topic 1: Bitcoin Risks
- Satoshi selling (he didn’t sell for 15 years, but this doesn’t mean he won’t sell in years 16, 17, and 18, making Bitcoin the largest rug pull in history - the reasons could be ideological, such as better tech, security risks, disagreement with the community, the possibility that CIA/Mossad is Satoshi and decides to conclude the experiment, who knows)
- Quantum computing risks (not a question of if but when - 256-bit ECDSA will be broken at one point in the next few years, causing dev chaos in making BTC quantum-proof, stolen coins, an inevitable hard fork with <21M supply, and many other problems)
- Cyber attack (an inside job by intelligence agencies? At least they can use this new crisis to implement digital IDs, tighter controls on the Internet, and so on)
- No economic incentives for miners, Bitcoin becoming a large regulated bank
- https://twitter.com/TheDesertLynx/status/1728113528991559728
- https://twitter.com/TheDesertLynx/status/1716513247241654415
Topic 2: Market Maker Cycles
- Cryptos are very cyclical, and the reason is not natural demand/supply, but futures manipulated by printed Tether
- Market makers can artificially create a bearish narrative to make people panic sell while they buy cheap, then pump the price higher, create a new narrative (or have people create it, which they always do), and sell into buy-volume
- Two main questions. What is the current narrative (answer: halving and ETF), and what will be the next narrative
- For the next bearish narrative, we can imagine:
- It is unprofitable for miners to mine after the halving
- Quantum computer hacking coins (how easy is it to orchestrate a fake quantum hack by some known entity in the crypto space… much easier than the fake ETF news post on Cointelegraph)
- Risk assets are sold first in recessions
- BTC is too slow; Ordinals killed it
- Regulation anti-Bitcoin
- Institutions are not interested in buying BTC (failed ETF narrative)
- Governments (US, EU) coordinating to suppress prices to prevent retail interest and competition with their CBDCs
- Tether and Binance regulatory problems and attacks by governments
- What could be bullish narratives?
- BTC as the best inflation hedge (alongside Gold)
- BTC as an uncorrelated asset to Stocks/Bonds
- Massive inflows into the ETF
- Last cycle of Tether minting and pumping all markets (for example, due to legal pressures and knowing they won’t survive for too long)
- Lightning Network gaining adoption and trust versus CBDCs
- Rate cuts and US elections
Topic 3: Options
- There is no liquidation risk, no risk of wicks
- Limited and known downside
- Especially for Bitcoin, beneficial to express longer-term hypotheses (X price will happen by Y date)
- We are starting to incorporate options and are looking forward to buying puts on BTC (detail TBA, but according to our hypothesis that 2024/2025 will be bearish)
- Puts are a great way to hedge (limited downside, in case the market turns bullish - this downside can be recovered on alts and other opportunities because liquidity enters the markets again)