September 26, 2024 | Read Online

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"In order to be irreplaceable, one must always be different."

— Coco Chanel

Thursday differentiated mailbag

Q: Are memecoins back?

There are signs!

Iggy Azalea's MOTHER token has shot higher after being the talk of Singapore last week, Ethereum blocks are filling up again, and Telegram trading bots are booming.

It's hard for me to imagine this will have staying power, though.

The memecoin renaissance at the start of the year was unceremoniously buried in an avalanche of supply and it will be difficult for new tokens to meme their way out of that morass well enough to get people's attention.

Murad Mahmudov, however, thinks memecoins aren't just memes. Instead, they are "tokenized communities," the best of which will become "neo-religions," as he explained on The Bell Curve podcast this week.

Murad, who seems to think about these things longer and harder than anyone else, foresees a new wave of relevance for memecoins as they stage a "counter-revolution" against VC-funded crypto (ie, any protocol that attempts to be a productive business).

As a next step in that revolution, he expects a transition from joke memecoins to more serious ones, and from animal coins to non-animal coins.

I have no opinion on the relative merits of animal vs. non-animal memecoins, but I love that crypto is a place where a thesis like that can exist.

"We're going to see the tokenization of ideas," he predicts, "the tokenization of philosophies, the tokenization of ideologies."

If that sounds too intangible for you, he has a quantifiable metric to ground things with: "It ultimately boils down to the average inspiration per capita."

OK, fine, "quantifiable" might be a stretch — but I'm glad crypto now has a metric (average inspiration per capita) that's wackier than anything TradFi could ever come up with (WeWork's "community-adjusted EBITDA" was the previous peak of multiple wackiness).

Murad thinks many memecoins will be bigger than WeWork at its peak: "Some of these mission coins or movement coins are going to go to $100 billion market caps or more."

If so, it will be because they're powered by "free-cult labor" that "collapses the cost-of-acquisition to zero."

We've seen many examples of that already, but Murad thinks the biggest winners are yet to come: "I'm on the lookout for the next religion."

I will not be on the lookout because none of that sounds investable to a TradFi refugee like myself.

But I love that Murad thinks it's possible because if crypto is going to make a difference, it has to be different.

Q: Is bitcoin a memecoin?

Murad calls Bitcoin a "cult" (he means it as a compliment) and a "neo-religous movement" (he means that as the highest compliment).

I'm not sure what the distinction is there, so, yes, I will continue to think that bitcoin is a memecoin.

If you disagree, have a look at Michael Saylor's X feed. Bitcoin's chief evangelist has gone all-in on memes, posting a steady stream of AI-generated silliness that I guess is intended to keep everyone enthused while BTC's price is flatlining.

Saylor has long argued that bitcoin is not digital gold, and I'm starting to see why.

Digital gold has been a great meme, but it's perhaps limiting — the market for analog gold is only worth $24 trillion and that is only 18x bitcoin's market cap.

The upside of becoming one of Murad's neo-religions is much greater.

Q: Is bitcoin increasingly unique?

That is how BlackRock describes it in a recent note promoting the investment merits of bitcoin. But it's wrong, because unique is binary.

You either are or are not unique — you can't be increasingly, somewhat or (the worst offender) very unique.

Still, though, BlackRock has got the right idea — bitcoin has value because it's different, so emphasizing its otherness is a good way to make it more valuable.

Q: Is that why it's been stalled lately?

Maybe!

Increasing institutional adoption may be making bitcoin seem less special and therefore possibly less valuable.

If so, Saylor might have the right idea with his AI-generated memes — making bitcoin weird again might be just what it needs.

Q: Why is the TIA token worth billions?

It's a good question because Celestia offers a seemingly commodified service (a place to keep data) that is not in high demand (currently). And yet its native token, TIA, has a fully diluted value of $6.8 billion.

Last week I would have attributed that valuation to retail crypto being irrational.

This week, however, we learned that Celestia has raised $100 million from professional investors and professional investors generally have at least some reasonable-sounding reason for the investments they make.

I haven't heard the reason here, but since Celestia's service is debatably a commodity (see here for both sides of that debate), I can only assume that Celestia's new investors are highly confident that crypto will achieve the kind of mainstream adoption implied by TIA's $6 billion valuation.

Like betting on memecoins, betting on crypto going fully mainstream has gone thoroughly out-of-fashion, so it's nice to see that some well-informed people are still doing it.

Q: Are they just in it to flip for a quick profit?

That's possible, because the raise was reportedly done a few months ago at just $3 (when the token was probably trading around $6) and with a lock-up only until October.

Contrary to a lot of caustic commentary on X, the short lock-up period doesn't bother me. Stock market capital raises like this don't typically have any lock-ups at all.

But they don't typically trade at 50% discounts, either.

With stocks, institutional investors often "flip" these kinds of deals, but when they do, they typically make a 2 or 3% profit, not a 50% one.

I take the rumored discount on the TIA deal as further evidence that crypto is still weird — and weird is good, but 50%???

Crypto really needs some investment bankers to tighten these things up.

Q: What's so good about weird investments?

Investors want variance — or they should, at least.

Here's how Cliff Asness makes the case for investments that have an expected return of -100%:

"Imagine you had an investment that each year would either double with a 2/3 probability or go to zero with a 1/3 probability. Further imagine that the outcome is independent from anything else in the portfolio ("uncorrelated"). I don't think many investors would want this as their whole portfolio, as the expected compound returns are clearly -100%. But, hopefully everyone would say 'I want some of this in my portfolio.' Putting [a] modest amount in this hypothetical investment should be a no-brainer."

I agree: Investors need more investments with an expected return of -100%.

Fortunately, crypto is providing them.

— Byron Gilliam

Your all-time favorite newsletter author will be IRL at Permissionless chatting with the top liquid token fund managers on how they seek and find alpha in the digital asset space. Don't miss it!

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Joey Politano 🏳️‍🌈 @JosephPolitano

To understand how GOATed the US economy has been, consider that today's revisions have increased real GDP per capita growth by 1.2%, from 8.2% to 9.4%

That 1.2% increase alone is more growth than the UK, Germany, and Canada have seen, and is almost on par with France (1.5%)

tw profile: Joey Politano 🏳️‍🌈 Joey Politano 🏳️‍🌈 @JosephPolitano

Here's each G7 country's cumulative increase in real GDP per capita, since just before the pandemic:

🇺🇸 +8.2%
🇮🇹 +5.1% (thru Q1)
🇯🇵 +2.4%
🇫🇷 +1.5% (thru Q1)
🇬🇧 -0.9%
🇩🇪 -1.8%
🇨🇦 -3.0%

6:57 PM • Sep 26, 2024

433 Likes 99 Retweets

18 Replies

Dan Smith @smyyguy

If native asset issuance is occurring on L2s, does it dilute the value proposition of the L1 as a settlement layer?

tw profile: Coinbase Assets 🛡️ Coinbase Assets 🛡️ @CoinbaseAssets

cbBTC on Arbitrum. Coming soon x.com/99174516227446…

7:26 PM • Sep 26, 2024

30 Likes 1 Retweet

9 Replies

Faryar Shirzad 🛡️ @faryarshirzad

Great to see @RepMaxineWaters recognize (1) that crypto is inevitable, (2) that the political environment is changing, and (3) that we need to take action as the US falls further behind.

Looking forward to keeping the conversation going on a bipartisan basis, and hopefully… x.com/i/web/status/1…

tw profile: Brendan Pedersen Brendan Pedersen @BrendanPedersen