"CRYPTO THESES 2024" on Crypto Monies

Part shared before:

Today is the fourth part of the report, Crypto Monies.

1. Bitcoin: Godzilla of the Financial World

The main factors why the author is bullish on BTC include:

Finally approved the spot Bitcoin ETF.
Concerns about currency devaluation are increasing.
Accountants are on our side.
The "protest vote" for Bitcoin is real.
Last year, we canceled one country (Russia).
The trend towards digital cash is obvious and unstoppable.
Bitcoin's upcoming halving further reinforces its scarcity and the concept of 21 million coins.
The negative impact from "whale sellers" has diminished.

2. Bitcoin Security Model and Assumptions

The "soft cap" of Bitcoin's 21 million will eventually be adjusted to ensure a minimum seigniorage per block for Bitcoin miners; or Bitcoin mining will ultimately transition to Proof of Stake (PoS).

Application-generated fees: Bitcoin saw a few fleeting applications in 2023, hinting at the potential for future native Bitcoin applications.
Soft cap, continued proof of work: All Bitcoin really needs to do is maintain its low inflation rate relative to fiat currency and store-of-value competitors.
Hard cap, shift to proof of stake: The "economic majority within the Bitcoin network" tends to support PoS.
Irrelevant: This was one of the main reasons Ethereum took off at the same time, and we've seen relatively less innovation on Bitcoin since then.

3. Bitcoin mining is more important than ever

Bitcoin mining (at least domestically) helps reduce methane emissions, balance the grid, and incentivizes the buildout of new renewable capacity before it connects to local grids.

4. Private transactions: Protocol, coin, or pool?

We have a long way to go in achieving private crypto payments in the future. The industry has three (potential) legitimate paths toward pursuing truly private transactions.

Tornado Cash without tokens
Privacy chain
Privacy pool

5. New TINA trades: Stablecoins

Zoltan is about to realize that the ideal portfolio isn't 20-40-20-20 (cash, stocks, commodities, bonds), but rather 40-40-20 (interest-bearing stablecoins, stocks, and crypto).

Stablecoins are the fastest-growing area in the crypto space. Our first true killer app, stablecoins, settled $11 trillion on-chain in 2022 and continue to grow this year. Their payment volume is nearly ten times that of PayPal (no wonder the company launched a stablecoin this year), and they are catching up with Visa's payment volume. Nearly five million blockchain addresses conduct stablecoin transactions every week.

6. USDT

Tether is the oldest, largest, and most critical digital euro, a key part of global liquidity and market infrastructure for cryptocurrencies. At the time of writing, Tether has reached a new all-time high market cap of $89 billion, while its main competitor USDC has only half of its previous peak market cap. (If only U.S. stablecoin issuers could be better insulated from these banks' systemic risks to the crypto market!)

7. USDC

Ironically, our most heavily regulated crypto dollar remains, by far, the primary quote currency for most DeFi markets. USDC still dominates DEX trading volumes, CDP collateral, and money market lending. The ETH-USDC pool on Uniswap is essentially the linchpin of DeFi.

8. Paxos, Binance, and PayPal Dollar

Paxos struck a potentially game-changing partnership with PayPal and its suite of apps, including Venmo, for the pyUSD stablecoin used within them—a big win for the original New York trust company in what was otherwise a mixed year for the crypto space.

PayPal has been a driving force in the development of cryptocurrencies for years and has even had the fortune to be one of the few crypto payment companies that can fully guard against potentially destructive attacks from the CFPB. The launch of pyUSD was a surprise, but not shocking.

The market capitalization of Binance USD (BUSD) plummeted from $16 billion to $1.6 billion by the end of November. Following the announcement of a settlement with the U.S. Department of Justice and other financial regulators, Binance announced it would cease support for its BUSD stablecoin on December 15, 2023, effectively ending the product.

9. Crypto-backed Stablecoins

crvUSD, Lybra, and Prisma are two of the most promising new Collateralized Debt Position (CDP) protocols. Algorithmic stablecoins aren't popular right now, but I'm still excited about their potential in 2024.

10. CBDCs vs Other Meme Coins

The Project Tourbillon project of the Bank for International Settlements (BIS) claims that its "eCash 1.0" and "eCash 2.0" prototypes can provide KYC and payer anonymity. The relevant paper was released on November 29th.
The Bank of Korea is piloting a CBDC project with 100,000 citizens, scheduled for 2024.
Russia is piloting a basic retail CBDC payment program with 13 banks and a limited number of users in 2024.
Digital Currency (e-CNY) is a notable exception: since 2020, it has processed transactions exceeding $250 billion and created 120 million wallets, now including Standard Chartered, Hang Seng Bank, and HSBC as pilot project partners.

But my view on retail-focused CBDC projects is roughly the same as my view on DOGE and PEPE. They're fun, good for playing around and discussing, and their short-term impact on the world is roughly similar. This is also a good thing because the way global bankers talk about these tools of surveillance and financial control is a bit too enthusiastic for my taste.

Conclusion:

Binance and Tether are global cowboys, decisive when working with regulators, but at other times leveraging their massive balance sheets, top-tier law firms, and regulatory arbitrage to expand outside the reach of U.S. regulation.
Coinbase and Circle are steady, old-school American companies that will benefit greatly from federal legislation but still have real crypto values embedded in their DNA.
Paxos and Kraken play by all the rules but choose to emphasize state versus federal strategies (ironically, Kraken by avoiding New York, Paxos by diving headfirst into it) and, after domestic setbacks, have ultimately begun accelerating internationally.
Maker and Uniswap created the categories for decentralized stablecoin issuance and decentralized exchange, but now face the harsh reality of how to engage with global authorities as their projects have scaled.
JPMorgan and Nasdaq are quietly ready, eagerly awaiting the opening of the compliant crypto gate — whether it's 2024 or 2034. They have the financial resources to wait patiently, and their size, reputation, and regulatory standing will help them catch up with (part of) the crypto emerging companies.