#91 Naked swimmers

The bull market is here. If we had just one piece of advice it would be "beware of naked swimmers". Also,TradFi, regulation and investment narratives in your weekly dose of crypto context.

If you thought you had crypto figured out, think twice because things have changed a lot, very quickly, once more.

Once we start settling down in the bullish mindset, we will discover two things: one, that many of the lessons learned in the bear times do not apply now, and two, that the references and mental models that we learnt in previous bull seasons have changed too.

In the last months of struggle, attention, and liquidity were laser-focused. There was little to do besides chasing the next best thing, and people and capital moved as a flock. One day it was Telegram bots, the next, it was Friend.tech…but whatever it was, the flavor of the week, we all moved there as a unit. Crypto was peer-to-peer and cannibalistic. There were a few winners and a lot of losers, but we were all trying to find some solace in the depressive atmosphere.

These days, you just can’t chase the shiniest new thing because there are too many.

We’re bringing the wagmi vibes back. There are so many opportunities; everyone speaks like a winner, and it’s hard to tell who is really winning and who is just floating effortlessly on the rising tide. There are so many apparent opportunities to get rich that you can almost cut the FOMO with a knife. And the lessons from previous bull markets don’t really apply because many of the waves we’re riding today didn’t exist two years back. Ask our comatose friend from last week what a yield-bearing L2 like Blast or an RWA-backed stablecoin is, and he’ll probably go back to sleep.

If there is ONE lesson to carry with you at all times, it comes from this quote attributed to Warren Buffett: “Only when the tide goes out do you learn who has been swimming naked.” The bear mauled naked swimmers aplenty. Beware because the rising tide is covering swimsuit lines again.

1. Institutions | TradFi gets warmer and warmer

This week, we learned that BlackRock is already seeding its ETF. Seeding is the process by which a firm creates and trades the initial shares of a product. This process has no legal implications, but it proves Blackrock’s confidence in their ETF. 

SGForge, the crypto arm of French bank Société Générale, has launched two more crypto-based products: a green bond and a euro-backed stablecoin. SGForge, which in the past has partnered with MakerDAO in RWA experiments, has led some of the most crypto-friendly institutional initiatives. However, their pilot programs show what institutional participation in crypto will probably look like. SGForge is leveraging blockchain technology's transparency, interoperability, and accountability to improve current financial products, but they will never go full permissionless.

2. WAGMI | Airdrop season

Airdrop season is back, and it’s already tearing off the roof. It seems like protocols were waiting for a more appropriate time to launch their tokens, and that time has come. Not a week goes by without a massive airdrop putting smiles on people’s wallets. This week, we saw Jito distribute their token. Jito is a liquid staking protocol on Solana (Solana’s Lido). Jito has given one more reason for euphoria to the Solana ecosystem and has created a new wave of attention and liquidity.

On top of that, two of the most-wanted airdrops have been confirmed for the upcoming months: Starknet and LayerZero have announced that they will finally launch their tokens, bringing joy to airdrop farmers around the world. During the bear run, it felt like one of the most profitable things you could do with your crypto was to play the airdrop game and try to score some points in the expected token launches of the biggest, tokenless products.

3. Bitcoin | Bragging Rights

This is also a time to brag. If you've built a brand around buying bitcoin, it's your time to shine. Nayib Bukele knows this: El Salvador holds 3,144 BTC (source) that has finally turned green after months of bearing losses. And Michael Saylor’s bitcoin strategy for Microstrategy is also paying moral dividends these days, with its 174,540 bitcoins acquired at an average price of $30,252 each (source). 

Holding is cool again.

4. Regulation | Jamie Dimon would close crypto down

During a recent panel between bankers and regulators, Elizabeth Warren asked a bunch of banking CEOs whether "crypto companies facilitating financial transactions should have to follow the same anti-money-laundering rules that your bank has to follow?" On top of the generalized positive reply, JP Morgan’s Jamie Dimon added, "I’ve always been deeply opposed to bitcoin, crypto, etc.… If I were the government, I would close it down."

There is an astoundingly high density of misunderstandings and contradictions in those few words. “Crypto companies” already follow the rules applied to them, or they get fined. FTX was an exception due to a gross error in oversight by financial regulators, but they seem to be getting their act together, as the Binance case proves. Crypto protocols are a different story, but the fact that Elizabeth Warren fails to acknowledge the distinction is quite concerning.

But Jamie Dimon’s death wish on crypto is also blatantly wrong. How exactly would the US government close down bitcoin? The closest thing we’ve seen was China unsuccessfully banning crypto a few years back. Would Dimon rather the US was more like China?

These people are still representative of the mainstream opinion on crypto. We ask Santa Claus to bring them knowledge and nuance this Christmas.

5. Investment | Narratives are coming

Now that bitcoin is leading the way with an impressive hike, we are seeing how many narratives that were hidden or hibernating during the bear times gain momentum. The path is usually the following:

• Bitcoin takes the lead and attracts institutions and retail.

• Some more engaged investors look for the second-best thing and end up checking out the next cohort of massive projects: OG chains like Ethereum or Solana, “blue-chip” DeFi protocols like MakerDAO or Aave…

• If things continue to look good, then the eyes will move to altcoins and more minority projects with shallower track records but beautiful storytelling. Nerds will gravitate towards infrastructure trends (there’s a lot to look at, with L2s booming and modularity taking off), and VCs will look for newcomers, like the last DeFi protocol, or futuristic plays like AI tokens. 

This will be the time for narratives. And narratives are warming up these days to be ready for retail. 

6. Adoption | Send crypto through TikTok with Coinbase

Coinbase says you can now send fund transfers via “WhatsApp, iMessage, and Telegram, social media platforms like Facebook, Snapchat, TikTok, and Instagram, or even via email.” What they actually mean is that you’ll be able to send fund transfers through a link. Not a small feat. 

The only thing users will need is a Coinbase Wallet. But this move by Coinbase is more than just a growth hack to increase the number of downloads of their wallet. Coinbase Wallet is Coinbase’s decentralized wallet—one more proof of the company’s commitment to crypto’s true value proposition. No identification (KYC, AML) is involved in using a Coinbase Wallet. It’s a purely Web 3 piece of technology provided by one of the most prominent players.