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Doge Has Crashed
In what is possibly the least subtle metaphor in the history of crypto, a Dogecoin-sponsored racecar crashed yesterday at the NASCAR Tennessee Lottery 250 in spectacular fashion. (The Dogecoin community has sponsored NASCAR vehicles since 2014.) The $DOGE cryptocurrency itself has been in a slow-motion car crash since early May, losing control at $0.70, careening to $0.46, skidding to $0.33, and now drifting at $0.28. (Hey, I know car words!)
$DOGE isn’t the only crypto in a slow-motion crash, unfortunately. $ETH has really struggled over the last 6 weeks, and is down nearly 50% from its ATH of $4200. The metric that I like to watch isn’t the dollar price of $ETH though, but its price expressed in Bitcoin terms. Currently that’s 0.06. Said another way, the price ratio of ETH:BTC is 16:1. The best it’s ever been for Vitalik’s project was 10:1 back in early 2018. In order for $ETH to take the #1 spot away from $BTC in terms of market cap, it has to be at a ratio of 6:1. Although my heart is with Bitcoin, I think there’s a non-zero chance that this will actually happen in the next 12 months.
The Bitcoin car hasn't crashed, but it made a 10% pitstop over the weekend. Now in the $30,000 to $35,000 range, the potential for the dreaded “death cross” continues to loom on the charts. If you want to look at a completely contrarian perspective on the death cross, check out this interesting Twitter thread about how it may actually be a counter-signal.
We’re seeing extremely high price correlation across ALL the coins in the top 10 — everyone from $ETH to $UNI — which implies a broader loss of faith amongst the investor community these past few weeks. That said, we’re also seeing sell-offs in other areas: Gold is down over 12% from the beginning of June.
Speaking of gold, here’s a great visualization comparing Bitcoin, gold, and fiat. Now, the important thing to remember about this chart is that it’s an opinion; these are NOT facts. But it’s a great starting point for conversations and probably bears some explanation. For instance: why is Bitcoin only graded “B” for fungibility? Well, because the traceability of the blockchain actually means that everyone knows the whole history of every satoshi they’ve ever owned. It’s because of this that not all the bitcoins out there are technically the same; some of them may have touched the wallets of dangerous people, and you don’t want to be inadvertently linked to them. If you somehow received satoshis from the various addresses that the US DOJ have sanctioned, for instance, then they’d be close to worthless because no centralized exchange will accept them.
Fiat has roughly the same fungibility problem, although mostly just for primary currencies like USD. If you’ve ever wondered why Philippine banks have to write down the serial numbers of every dollar bill that you exchange with them, it’s to allow the US government to trace where their bills are going. And of course, the reason why gold is graded “A” here is because you could melt it down and re-cast it, assuming you had metallurgical inclinations, thus destroying its provenance in the process.
Speaking of traceability, Switzerland will be requiring licensing from DeFi companies beginning August 1st, 2021. This comes right on the heels of Mark Cuban’s call for regulations following his $TITAN losses, so it seemed as if he triggered it, although I’m quite sure it’s completely coincidental. On Friday I wrote about how regulations like these are antithetical to DeFi, but I guess that doesn’t mean they won’t try anyway. Of course, Switzerland can only enforce this new law within their own borders. Unlicensed DeFi companies (read “all of them”) will likely have to block access to Swiss users at the IP-address level, similar to what happened in New York back when the Bitlicense came into effect in 2015. https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-84035.html
Over in China, the mining shutdowns appear to have reached its ultimate conclusion. Sichuan was the last remaining province without any clear guidance, and on Friday the order was given to shut down the region’s 26 mining pools before June 20th. The Bitcoin mining hashrate has dropped by about 40% since its April high, as Chinese miners are all either shelving their equipment or relocating to Kazahkstan or Russia. To put this entire debacle into perspective: as recently as April 2021, the Chinese miners were making as much as $50M a day in profits … something like $10B a year. The Chinese government shut them all down in under 2 months.
Have a great week, cryptofam! On tomorrow’s Cryptoday, I’ll be talking about NFTart, as well as my upcoming drop on Binance NFT marketplace on Thursday!