The macro and crypto economic thesis for 2021, building out the linkages between “Risk-On” assets, flows into and valuation of Bitcoin and Ethereum, and the interplay between value locked, the growth of decentralized application revenue, and the volumes around digital objects. We bring it all together.
This week, we look at:
The 10% collapse in GDP across the US & Eurozone, and how it compares with China's second quarter
The geopolitical battle over TikTok, its alleged spying, and understanding the winners and losers of the Microsoft deal
A framework for how to win in open source competition, explaining both Shenzhen manufacturing success and decentralized finance growth to $4 billion
If you are in finance and only looking at banks, you are missing out on the real change agents. Here's some cross-industry action that we will unpack this week.
Amazon selected Goldman Sachs to be the lender of choice for small business loans. TikTok maker ByteDance is working with a Singaporean business family to get a financial license. And small business bank Starling is integrating Slack, energy switching service Bionic, and health insurance provider Equipsme into their marketplace. And we might as well talk about the Plaid Exchange launch, and end on the computational economy of Ethereum.
This week, we cover these ideas:
Crypto prices show increasing correlation in market swings, which hides the large substantive differences between projects
The core narrative of Bitcoin, and its fundamental indicators
The core narrative of Ethereum and Web3, and its fundamental indicators
A sanity check on potential market caps relative to gold, equities, and other assets
I hope that you and yours are OK, socially distanced and stocked on essentials. Whether you feel it yet or not in daily life, the world is bracing for coronovirus impact. In this week's analysis, I look at the difficult trade-offs between health and economy, and try to quantify the impact of the likely slow-down. We look at some grim but useful concepts, like (1) the value of a statistical life, (2) what happened to the Soviet economy and life expectancy after perestroika, and (3) how our financial machines (NYSE, Robinhood, Maker DAO) are cracking at the edges. If you can do one thing -- be kind and gracious with each other as some things inevitably break.
This week, we look at:
The spectacular price increase in crypto assets, hitting new records for Bitcoin, as well as the comparable statistical situation around Covid cases
An explanation of the $1.5 trilion income effect in 2020, and how it has led to both capital acumulation and inequity (thanks NY Times!)
A discussion of all-time-highs and all-time-lows, why we need them, and their connections to the macro-economy, computer code, music, and the universe itself
One wonderful takeaway from Watts, which of course is not his, but beautifully plagiarized into the English language, is the duality of experience. The need for polar opposites, in a clock-like cycle. To have black, you must have white. To have the top of the wave, you need the bottom of the wave. To have a melody, you need equally the presence of the notes, and their absence in silence. To breathe in, you need to breath out. It is meaningless to have a data point without the context in which it exists.
This week, we look at cash -- blockchain cash. The war for money is just starting to ramp up, as Facebook Libra explains its new regulated plan, the Chinese national Blockchain Service network goes live, Ethereum stablecoins reach historic market caps in the billions, and the Financial Stability Board recommends to go heavy on global stablecoin arrangements. In 2008, Bitcoin threw a rock through the window of the financial skyscraper, and today we are starting to see the cracks. As the US government runs out of $350 billion in small business bail-out money and gets ready to print more, where do you stand?
This week, we look at:
Chime, eToro, and Wise targeting the public markets through IPO and SPACs, and their operating performance
The overall growth in fintech mobile apps, their install rates and market penetration (from 2.5 to 3.5 per person), and whether that growth is sustainable
The implications for incumbents from this competition, and in particular the impact on money in motion vs. money at rest
Broader financial product penetration and an anchoring in how the technology industry was able to get more attention that we had to give
In this conversation, we talk with Rune Christensen of Maker Foundation about how he became one of the most influential builders in the DeFi ecosystem. Additionally, we explore the creation, experiences, and evolution of Decentralized Autonomous Organizations (DAOs), the nuances of stablecoins, the interaction between Maker and DeFi with traditional finance and traditional economies, and Maker’s approach to leveraging layer 2 solutions to aiding scalability and transaction throughput.
We anchor our writing around the World Economic Forum 223 page report on CBDCs and stablecoins. The analysis highlights the key conclusions across several white papers in the report. We then add a layer of meta analysis around the language in the report, and question what it is trying to accomplish, and whether that will work with the Web3 revolution. This leads us to think about the tension between populism, as represented by crypto, and institutionalism, as represented by banking structures. We discuss theories of cultural and national DNA, and the rise of populism, as difficult problems to solve for any global alignment.
