The Good, the Bad and the Ugly - 2022

Friday December 30, 2022 - Issue # 33

Hoping you all are enjoying the holidays and got to spend a bunch of time with family and friends. Also hoping that you didn’t have to spend as much time as I did with said family and friends asking if I’m “okay” because you know…what happened with crypto. Thankfully, I never really preach crypto to family and friends because dealing with the repercussions when things go bad — bear markets, rug pulls, frauds, hacks — is not really worth it — “everyone gets bitcoin at the price they deserve”. Of course, I’m there to answer any questions and over the years I’ve certainly recommended that they take a close look and provided material for them to read/watch but man do I feel sorry for whoever got their family/friends into crypto near the highs last Christmas and had to face them last week…Yikes.

Unfortunately, I still have a bit of rust on me post Christmas so I lazily listed the GBU in point form below. However, I did dig into most of the above in pieces throughout the year so we’ll just call this being short and sweet…a brief overview. I will include links to podcasts and write ups on some of the points below which you can peruse.

The Good

• Tick tock, next block — Bitcoin is very much alive and well

  • Biggest developments in Bitcoin 2022

  • Michael Saylor on Twitter Spaces discussing Lightning Network

• The Merge was a success - Vitalik hopped on Bankless to discuss 2022 and what’s next for Ethereum and crypto in 2023

• DeFi outperformed CeFi

  • DeFi protocols like Aave, Compound, Uniswap, Curve all functioned flawlessly during the toughest conditions of 2022.

    • Pantera Capital does a great job digging into the need for trustless systems in their latest blockchain letter

    • Stablecoins have grown substantially

• Leverage in the system has been wiped out

• Bad actors gone — on the run, in jail, or on undercollateralized bail

The Bad and The Ugly

• Regime change — The Fed and other large Central Banks hiked interest rates at a record pace to combat inflation creating extreme macro headwinds felt across all markets.

• The War in Ukraine — The most important geopolitical event of the year which has caused massive inflationary pressures felt across the globe.

  • An eye-opening interview with political scientist John Mearsheimer on what happened and where the war might be headed

• 3AC — $10 billion hedge fund wiped out leaving their lenders (BlockFi, Celsius, Voyager, Genesis, etc.) holding the bag.

  • How 3AC went bust and dragged many investors down with it

  • Former Hedge Fund Manager Hugh Hendry sat down with Kyle Davies, Co-Founder at 3AC for a very interesting 2 part interview

    • pt.1

    • pt.2

• FTX — customers and investors lost billions.

  • Interesting news from today citing Bahamas regulator seized $3.5 bn of FTX crypto assets

• CeFi lenders failed — Celsius, BlockFi, Voyager, Gemini Earn, Babel Finance, Genesis (to name a few)

• Tokenomics

  • “Financial engineering” for crypto. The projects glorified for their “tokenomics” were mostly destroyed in 2022 due to their ponzi’esque design. In 2021/2022, token design came first, product came last.

    • Example: Terra LUNA/UST — ~$60 billion wiped out of crypto space

• “Web3” — it might be time to shelf this term and get back to crypto.

***I only covered the most material items of 2022 above and hardly dove in. If you would like to discuss in greater detail or ask about points that were not listed, please send me an email and we can find a time to chat***

If 2021 was the year of the 🚀; 2022 has been the year of the 💣

So, what’s in store for 2023? I wish I had a crystal ball but I’m hedging my lack of seeing into the future by dollar-cost-averaging into BTC and ETH. I started buying on December 14th and I’ve kept it up every other day as planned. My averages on each:

BTC: $16,990 USD
ETH: $1,227 USD

I believe that risk assets don’t do too much to the upside until we see a proper Fed pivot. I don’t think a pivot means smaller hikes or a temporary pause — I mean, I think we get a pop off of anything dovish but I don’t think we see a proper cyclical reversal until something breaks and the Fed needs to interject.

Things like this ^ are a pretty good precedent where California-style governance gets exported to other States.

Please, take my thoughts on macro with a grain of salt. Here’s a interview with renowned macro investor Felix Zulauf where he breaks down his market outlook for 2023 and beyond:

I listened to this more than once as it has helped me shape my “rough around the edges” view on global macro.

If you really want to get a great handle on 2023, I suggest reading Messari’s CEO, Ryan Selkis Crypto Theses 2023 report — it is worth the hours if you want to be up to speed on everything crypto 2023. Here ya go:

Messari Report Crypto Theses For 2023

70.9MB ∙ PDF file

Download

Download

My goal next year is to write more — please hold me to it.

Happy New Year!

(Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)