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Crypto's immediate future

Few random thoughts driving my perspective on crypto and Cardano in particular the next few years. Not writing this to generate some sort of narrative, just using this to write down my rough personal expectations on things.

  • Economically, we’re seeing some of the tightest monetary policy in over a decade. Debasement has gone far post Covid, but with both rate hikes and QT, the delta is now working against us like a sledgehammer. Traditionally you would expect the economy to start balking at this, something to break and quantitative easing to return but so far eg employment and growth seems to be holding up. A catalyst to change this could of course show up any time. A new pandemic, a geopolitical event.. but it is not a given and there’a a chance we just muddle on like this for years which in some ways would be max pain. A lost decade?
  • Inflation and CPI might remain elevated ceteris paribus, but history tells us that QT does eventually break stuff (taper tantrum 2013, US repo mkt 2019, SVB 2023). I see no reason this won’t happen again. Policy will then turn and crypto get a boost. Only question is when it happens.
  • We are in slow boil the frog mode when it comes to regulatory efforts against crypto. On-ramps being throttled and divide and conquer tactics with winners being picked. It feels like this struggle which was always going to come has now properly begun, and I wouldn’t be surprised if in a depression like economic scenario we at some point move to full illegality.
  • Cardano is not a winner here but also not really a loser in my opinion. It caught stray bullets in the Coinbase vs SEC case and will not be on any shortlists of approved cryptocurrencies in most developed markets (which will be Bitcoin and Ethereum, at best, until the above depression like event and we might go fully underground for a while), but most its trading is on Binance and a plethora of shady smaller exchanges anyway. They can’t really be stopped, though getting fiat in may be increasingly difficult. Regulators have decided that two truly mainstream cryptos is enough and they will throttle the rest. It is what it is.
  • My view is that things like Wanchain, Mehen, wrapped BTC, Milkomeda, Mynth, the ABHS Ethereum bridge and any other bridges in the works offset a lot of the idiosyncratic risk to Cardano here. At worst everything except Bitcoin and Ethereum becomes like Monero and liquidity has to flow through these two to reach us. Maybe Ethereum and Bitcoin benefit for a bit, and while I find this government meddling and picking of winners extremely distasteful, our immediate concerns aren’t competing with the crypto behemoths anyway, so let’s just try to stay afloat.
  • Protocols like Cardano are in this weird state where they are simultaneously building resistance against all of the above, while also creating fun stuff on top of it - socials, games, DeFi, NFTs - to attract people. It seems to me that the combination of monetary policy turning and the throttling of inflows probably has us in a state where the focus in any near term bull market will be 80% the serious stuff (resistance, decentralisation) and 20% fun stuff. The 2020-21 bull market was 80% fun stuff and 20% serious stuff.
  • Fun stuff protocols with no resistance will really struggle as there won’t be a point in owning them anymore. Imagine the value of Google in the People’s Republic of China: completely blocked and no way to get around it, so worthless. Solunavax and Aptosui.. we hardly knew ye. There’s also zero incentive for VCs to try and create new chains. Who will pay for Solana security? So for Cardano regulation is a double edged sword. Less competition on the fun stuff, and a chance for Cardano to shine on the serious side.
  • As I tweeted out earlier, Cardano’s inflation has gone from 5.1% to 3.6% in the last 1-2y. We are now seeing serious contraction in emissions and scarcity will play up. This only underlines Cardano’s serious side, as will things like full P2P, dynamic availability with Ouroboros Genesis etc. and in this way we are well placed for the next few years. When the Fed’s free flow liquidity starts again, Cardano will be one of the serious protocols people should try and get their money into and we need to get that message out.
  • Eventually (>5y from now) I think we pass the cloudy crypto weather and regulators ease up, probably aided by regulatory arbitrage. They’re creating a massive black economy and if they see other countries benefit from that by bringing it on shore and levying some taxes, they will want to get their share. The fun stuff being built in crypto right now is in many ways infrastructure for then. In the meantime I think we as a community that is already in Cardano needs to try extra hard to support builders and keep them going.
  • TLDR: 1) Cloudy skies for now though a bull market will still play out within that. 2) The bull market will have very different characteristics than 2020-21 and will focus more on crypto’s serious properties like resistance against fiat debasement, censorship resistance, decentralisation. Back to crypto’s roots. 3) We need to advertise these serious properties of Cardano more than ever, and as regulators start picking winners, we need to work hard to advertise especially bridges. 4) Within the community we should try to have fun and enjoy the things that have been built, for our own benefit but also to support builders, because it might take some years before the great “Web3” influx is allowed to happen. The battle is on.