You need to understand that it’s degen season.
The central bank talk just does not matter anymore. The only potential Black Swan (for us) would be if Powell decides more rate hikes are on the books for 2024. But as we discussed in November, that’s done. They’ve set the high water mark for interest rates. Central Banks around the western world are more or less finished. They’re going to try and hold out for as long as they can, since they are currently conducting as much QT as they can before the next cycle starts, but they’re done.
We’re in what Peter Schiff has often referred to as the economic roach motel (where the US Dollar is concerned).
So now what? It’s time for pure degen activities.
Turn on your VPN’s and grab your Digital Palau ID’s, because where we’re going, Americans aren’t allowed.
Song of the Week - NLE Choppe “First Day Out” (It’s not that great, but this video is our energy for 2024)
Lol, they really did crash that car.
Table of Contents
American Citizenship is a Liability
Degen Season
Degen Activities
Scams and How to Avoid Them
DeFiLlama Usage
OmniBTC, SUI, Optimism, and BEVM
AVAX
STX
Arb Opportunity on STX
Conclusion
Internal References
1. American Citizenship is a Liability
Apologies for starting this off with a bit of pessimism, but this is one of the sections for free subscribers, so we’re going to get this out of the way now.
If you’re an American, you probably feel it. A deep sense of malaise with the country, the way it’s run and the people that benefit from it being run in that way. One has only to look at the FTX bankruptcy settlement and trial against SBF to see it.
Originally there were several charges against SBF. These charges were split into two separate trials. The first trial (in which he was found guilty) was for fraud and money laundering, crimes that he obviously did commit. The second trial was for 6 charges including campaign finance violations, conspiracy to commit bribery, and conspiracy to operate an unlicensed money-transmitting business. Now that he has been found guilty in the first trial the judge has decided that it is “no longer in the public interest” to continue proceedings in the second trial. As a result of this first trial, users who had funds on FTX and withdrew them within 90 days before the exchange went bankrupt may be federally obligated to return the funds to be then split amongst creditors/depositors. If this second trial had occurred, politicians who had received bribes and donations would have also been obligated to return the funds.
If you were a victim who figured out what was going on and managed to withdraw funds in time, fuck you. If you were a politician being bribed, we got your back and it’s not in the public interest for you to return the funds to the people it was stolen from. It’s not in the public interest for political bribes and donations to be subject to discovery in a public court where officials might have to disclose where the money actually went after it was received.
The public interest simply means the interest of public officials. The public trust was sold long ago. Elected officials often sell their regulating authority for little more than a couple thousand dollars. At least Nancy Pelosi seems to merely be insider trading (illegal). The corruption of other political officials is far worse.
One day I will write at length about my experience in the courts, but it mirrors this precisely. I had 2 separate judges make rulings on what would occur with my money. Every single one of them was a coward who was unconcerned with looking at the evidence presented. Our elected officials possess no redeeming values or altruistic human qualities. I gave up on the system. Being an American citizen and paying taxes to the American government offers you no benefits. Here I am jumping through VPN hoops, and paying some tiny island nation in the Pacific for a digital ID so I can participate in global finance.
I can’t even pay for a day in court and actually get it if I’ve been aggrieved by an entity above my social class. The border is wide open, anyone can walk in and get free health insurance by just showing up. They’ll print out boarding passes and fly you anywhere you want without an ID. Buses to Chicago and NYC, it doesn’t matter. When secession is on the ballot, I will vote yes. If Texas ever moves to secede, I will support that in any way, shape, or form that I can. I no longer wish to contribute or to facilitate the operation of this country in any form. I used to post out of a sense of hope that things could be fixed or redeemed in some fashion. I no longer believe that.
I think many people have come to appreciate my perspective because there was a certain optimism behind it. And there was. I often used to say “You’ve already won, you just don’t know it yet.” I believed that, I did. Honestly, I still think it’s true. I just believe myself to be one of the casualties in our battle for ideological freedom. That’s new, I’ve never seen myself as a victim before. I will work to eventually remove the victim mentality, and language from myself, but that will take time. Hopefully, you can bear with me while I do it.
But now… let’s get to the positive side of the times.
2. Degen Season
So, I say it’s Degen season, but how do I know? Historically, there is one very strong tell that it is Degen season, and it’s always the same tell. Look at stablecoin yields on popular lending markets. When we’re in Degen season, people will borrow stablecoins to buy risk assets, pushing interest rates up. Let’s see where rates are sitting on Aave (ETH) right now.
Yes, people are willing to borrow stablecoins for anywhere from 13-93% APY to speculate on crypto prices. We’re back baby!
I’m writing this early at 1 am on Saturday 12/30/23. The degens aren’t taking a single day off. If you have a traditional broker or account manager and you’ve sent them an email you are probably getting an automated OOO reply saying they left the office on 12/21 and won’t be back until 1/2. It’s a rare soul that is seriously working right now. But Degens never sleep.
You might ask yourself, is it worth borrowing stablecoins at 18% just to speculate? Simple math, if you borrow $10,000 at 18% APY, that’s $1,800 a year or $150 a month in interest owed. Expensive, sure.
If you then buy 4 ETH at (let’s round) $2,500 each. You need the price of ETH to go up by (150/4) $37.50 in a month to break even. Let’s call it $45 including gas fees, swaps, and platform fees. That’s less than the daily volatility of ETH price, so of course, degens will take that loan during times of high volatility. When stablecoin yields pick up, it’s simply a sign that the degens are back at the trough. These yields might sound attractive to you, I mean who wouldn’t want to earn 54% APY on stablecoins? But in a risk-on environment, even triple-digit yields on USD can be comparatively unattractive. Never mind treasuries.
In November, we discussed outlooks for the long end of the US Treasury yield curve. Rates were kissing 5% on the 20 and 30-year notes. At that point, it was fairly certain that the Fed had just made their last rate hike. At the time I mused that long-dated treasuries still had some upside risk from Japan but that speculators entering the market could make a tidy sum by longing treasuries at that price. We have since gotten answers about that trade and whether long-dated treasuries would still go up. It doesn’t seem that they will. Even if Japan were to go full black swan it seems as if most institutions no longer care and are happy to load up on treasuries with the expectation that they can re-sell them into the market when rates drop to 0% again.
The only risk on the horizon to current market sentiment will be how the FOMC decides to handle the end of the BTFP swap desk. As you remember, back in March, the Federal Reserve opened up a swap desk. Banks could swap their treasuries, Mortgage-backed securities, and other qualifying assets for a 0.25% loan. These assets would be treated at their par value rather than their market value. This allowed any distressed financial institution to receive full value for any of their assets with bad duration risk at the cost of 0.25%. Essentially, you took virtually no losses if you made a bad loan and were in a position where you had to sell assets to round up cash so long as the desk is open.
That swap desk had a 1-year duration. The swap desk will close down on March 13th, 2024 unless it is extended in some form or fashion. That means a few things'; either interest rates will need to be brought down low enough that the desk can be closed without creating the same problem the desk was made to solve, or the desk needs to be extended far enough into the future that the regime can presume rates will come down low enough. This has many speculating that the first rate cut of next year will occur before March. Do I think that? I genuinely don’t know or care. It doesn’t matter anymore now that degen season is back (I told you my tone would change soon). But if I had to guess I’d say that we won’t see a rate cut before the question of the BTFP swap desk is answered. Mainly because there is only one FOMC meeting before March 13th (It’s on February 1st).
The FOMC is forecasting 2-3 rate cuts in 2024 according to their dot plots. We already discussed this. When they occur is mostly meaningless to us since crypto is going to be riding several waves next year (you did DCA for the last 1.5 years right?). However you are positioned is mostly how you will be in this entire bull market. Our goal is to participate in the degeneracy (safely) and increase our underlying BTC, ETH, and other L1 tokens. Near the end of the bull run, we’ll want to be peeling profits off the random shitcoins we’ve accumulated and piling them back into stablecoins to plop them in lending protocols for the 3-4%, while everything else stays in BTC and ETH. Can you toss cash into crypto still? Sure, nothing is stopping you and we still have a ways to go in this run as it’s only barely started. But that isn’t the focus going forward. The goal now is to take what you’ve accumulated and be a good and faithful steward of those funds.
The thing to remember is what seems like nothing this cycle is a lot next cycle. There was a time when having 20 BTC meant you were poor. There was a time when having 100 ETH was barely anything. With each cycle, the threshold for what feels like a lot comes down. So your mindset, regardless of how much you have now, should be all about preserving as much as you can first, and taking healthy risks to grow beyond that.
It’s basically the opposite of inflation.
$10,000 in 1970 was the equivalent of $81,230.42 in today’s money using official government inflation statistics. More in real terms. 10,000 ETH in 2016 might have only been ~$20,000 back then, but it’s a fortune in today’s money.
Be patient and preserve your position in the winning horse. Your emotional urge to pursue a “catch-up” trade is what will ultimately screw you out of a winning hand.
Now that the disclaimer is out of the way, let’s discuss the degeneracy.
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