Carbono Insights #96 | Of bulls and frogs
Is it ok if we start getting used to this? The year so far is being generous with crypto. ETF inflows are pushing bitcoin up, and we are still not feeling the halving coming. Ethereum is again undergoing a massive technical upgrade that might expand the scope of use cases for L2s. And ETFs, halvings, and forks are not usually the kind of news that make it to the mainstream media, so it’s likely that Main Street investors are still not feeling all the FOMO waiting for them.
While retail investors ask their bankers about ETFs and mainstream media starts picking up on the All-Time Highs, crypto insiders are enjoying the time to play with memecoins.
We tried not to be defeatist during the bear and will try not to be triumphant now. We’re still building, but this time under a warm sun. Shameless plug: remember, we’re Carbono, and if anyone wants to know more about where opportunities might be for them, know that we get crypto.
Bitcoin’s price action simple explanation
It is not very often that crypto follows an elementary logic, and this seems like one of those rare occasions. Bitcoin price continues to go up following a fundamental rule of economics: the demand for BTC created by the approval of spot bitcoin ETFs exceeds the pace at which new bitcoin is minted in the mining process. After the year 2023, when anyone willing to abandon the ship had already abandoned, there is not enough sale momentum to tie purchase appetite.
In his article, The Bitcoin Demand Shock, Coinshares’s James Butterfill brings the data to the table
So far, the launch of the ETFs on the 11th of January has led to an average daily demand of 4500 bitcoins (trading days only), while only an average of 921 new bitcoin were minted per day.
If you’re feeling bullish and want to feed your confirmation bias, we also have numbers for you. Famous crypto investor Andrew Kang puts bitcoin demand in context, making an estimation of potential global crypto ownership in relation to global income.
One of the most common cardinal sins of crypto investors/traders is underappreciating the amount of wealth/income/liquidity in the world and its spillover into crypto.
Dencun: bullish news for Ethereum
Depending on when you read this, the latest upgrade to the Ethereum network will have just gone live or will have been running for a while. Dencun is one of those technical milestones that hopefully nobody will really care about in the future when blockchain technology is the invisible infrastructure and not headline material.
Dencun will drastically reduce the costs for L2 to settle transactions on mainnet Ethereum. As soon as possible, this should translate to improved or even new use cases for crypto that were dormant while transaction costs were too high and transaction speed too low.
This is definitely great news for Ethereum.
Clouds over Ethereum ETFs
Some not-so-great news is the current sentiment around approving a spot Ethereum ETF. Bloomberg analysts, the people whose light guided our way before the approval of the bitcoin spot ETFs, are now estimating the likelihood of a spot ETF approval down to only 30%. The reason is mainly the lack of progress. The road to bitcoin spot ETFs was filled with news: issuers were anticipating their strategy, filing modifications to their submissions, the SEC was expressing their position…
Ethereum ETFs are quiet.
The deadline is still far: May 2024 is when decisions must be made. Things might change in the meantime.
Wyoming takes DAOs seriously
DAOs are a new breed of corporation, born from the primordial soup of fully digital relationships (some could even call it the Metaverse) and crypto infrastructure, which provides the means to engage in financial activity.
DAOs are challenging because they can behave like companies without being anything like them.
The state of Wyoming recently passed a breakthrough bill supporting this new company vision.
The new bill, which was approved on March 7, will provide a legal framework for DAOs to enter into legal contracts with third parties, allow them to pay taxes, and provide the organizations with limited liability–a term that offers protection for shareholders and stakeholders.
https://thedefiant.io/wyoming-s-new-dao-act-gets-two-thumbs-up
This provides many DAOs with a clearer compliance framework. Believe it or not, it’s something the crypto community eagerly seeks
And the winner is…memes
There’s something strange about this bull run, though. We mentioned earlier that there is a clear culprit: ETF inflows. This means that, deep inside, things have not really changed that much in crypto from other perspectives. Technology still progresses at the same pace it used to before the bull. Changes have more to do with sentiment and culture.
Memecoins are the kings of sentiment. They feel like a rollercoaster in so many ways. One, because their charts are full of ups and downs (if we ever witness a loop in a price token’s chart, it’s likely to be that of a memecoin). Two, because they are strongly rooted in amusement.
Crypto is euphoric and solvent today. There are two ways of making real money: staying close to BTC and playing with memes.
Second mover advantage
TradFi has never been the most innovative sector. Banks and other financial institutions are generally burdened by a very large structure of physical and human resources and live under the heavy scrutiny of legislation. In their case, the smartest way to innovate is probably by being the best second. Let others break the ice.
Luckily for them and for us, the number of pioneering initiatives to look into keeps growing. In the last weeks, we have seen some interesting adventures popping up.
Van Eck, issuer of one of the 11 approved ETFs, recently launched Segmint, “a self-custodial NFT marketplace and digital assets platform.” SegMint allows KYCd users to store and fractionalize their NFTs — pretty degen, if you ask me.
Apart from Van Eck, we’re seeing many firms dipping their toes (sometimes even their ankles) in crypto:
