The Crypto Comms #42; Decentralisation Theatre

4 min readFeb 21, 2023

Twitter is awash with takes on the state of the market — up, down, sideways — nobody really knows. Barring a few cryptos, most accounts are providing reasons for market participants to buy their illiquid bags. Often enough, the ‘reasons’ boil down to a refined distillate of verbal diarrhoea. But despite the deluge of narrative-based flavour of the week schemes, Bitcoin looks formidable.

In this issue

Bitcoin analysis
Musical chairs
Decentralisation Theatre
Latest happenings
Listening material

Bitcoin exchanges hands at $24,700 at the time of writing, 2% above its weekly close. Price is effectively hugging the 200-weekly moving average. The last time this happened was in March 19, 2019 (Tradingview BTC INDEX not Coinbase chart).

The November 2022 crash (-25%) to $15,500 was the final nail in the coffin following the drawn-out liquidation saga of 2022, which started with the Luna foundation crash, and ended with FTX’s spectacular market implosion. Litigation and repercussions will drag out, but toxic debt has been flushed out.

In other words, Bitcoin exchanges hands at historically discounted prices (below the 200 w-ema).

Modest retracements are desirable, but deep pullbacks are not guaranteed.

The reason being that stablecoins account for a high proportion of the total cryptocurrency market cap. ($125 billion, over 10%). The high ratio can be seen in the SSR chart above, which indicates the ratio of BTC’s market cap. relative to the aggregated market cap of all stablecoins. Low values means a high stablecoin supply, indicating side-lined buyers are ready to deploy capital.

That said, there is a scenario where price deviates above the 200-weekly ema ($25,000) and forms a local top. In fact, there are various pathways to high-time-frame targets, per the H12 chart below.

Generally, it’s thought that ‘pullbacks are healthy’. This is largely due to liquidity conditions and funding rates relative to asset valuations. Admittedly, rates are positive — but could be offset if a robust spot bid materialises.

Zooming into H4, BTC/USD has formed an ascending triangle continuation structure. If broken, a sweep of Mon. low ($23.8k) is probable. On the flipside, the breakout target is $26,400. In the latter case, it’s unwise to blindly short given the high-time-frame breakout confluence that would ensue.

Musical chairs

That being said, I see no compelling reason why Bitcoin should reverse its medium-term to long-term rally, even if price consolidates below $23,000. Systemic risk events are over, contagion consequences (bankruptcies, fraud) are now in litigation proceedings, and Bitcoin is undervalued relative to historical performance and global liquidity conditions (PBOC & BoJ easing, for e.g.).

I’d go further and argue that Bitcoin and Litecoin are undervalued in terms of capital flows too. The market insists on playing musical chairs with the latest illiquid tokens after a small pump on majors. First came the AI craze, then the NFT craze, and round and round we go — shuffling funds into schemes, pumping them, cycling out and into the next ‘revolutionary tech.’

If you’re not a 24/7 trader (who’s part of the successful 10% of traders), you are the exit liquidity.

Regulators are no longer taking it sitting down after the FTX scandal, however. But they’re already overplaying their hand by conflating stablecoins with securities — a nonsensical idea by definition since there isn’t any expectation of profit on a 1:1 redemption token.

If given a free pass, they will set a precedent to go after functioning stablecoins like USDT and USDC. It’s arguably a deliberate move to squeeze stablecoin issuers and set a path for a 1984-esque CBDC rollout. This is operation choke point 2.0.

My current view is that Tether supports the Bitcoin mission, and should therefore be defended insofar as it sticks to this decentralisation ethos (as opposed to decentralisation theatre, as is the case with Ethereum).

Decentralisation theatre

Speaking of decentralisation, you can now find me on Nostr.

Nostr is an open protocol that enables censorship-resistant and global social networks. It also has a tipping function, which means you can finally show your appreciation for good content!

The dichotomy between Bitcoin and Ethereum is so incredibly apparent. One steam-rolls ahead into a world where individuals give up everything for the sake of efficiency, and the other is one which sticks to decentralising tech; creating real public utility, and reducing the scope of governments world-wide. One is decentralisation, the other is decentralisation theatre.

Both will exist and that’s fine, but the irreconcilable differences are palpable.

Cheers.

Latest happenings

Listening material

The Inflation Debate Rages on with Mark Yusko.

Dear readers,

The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is released every Tuesday. I am not perfect and this is not a science — nor is this newsletter analysis a signals service or financial advice. While I cannot promise perfection I do my best to be honest and transparent.

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