1/ a thread on cross chain liquidity - my talk from last monday at @MessariCrypto's #MainNet2021 but without the leather pants and on-stage tequila shot
what is liquidity and how does it work? liquidity is a measure of market depth - how quickly you can sell and at what price
2/ illiquid assets have poor price discovery and wide spreads, they're difficult to trade in size or trade quickly without having to pay a premium
liquid assets, on the other hand, have tighter spreads and are easier to trade in size at a moment's notice
3/ the workflow of a trade in traditional markets requires the constant moving of data between databases - creating entries and deleting entries forever
tradfi markets are ngmi - execution speed will *always* suffer due to the double spend problem and lack of settlement finality
4/ bitcoin's core innovation is enabling settlement finality for digital money ie data with robust security guarantees
basically, bitcoin was the first to turn computation into money
5/ the bitcoin network prices demand for secure financial transactions in the form of tsxn fees
ethereum prices demand for secure financial computation in the form of gas fees
blockchain networks make financial computation a fungible, priced asset
6/ as such, block space itself is a financial primitive
the demand for block space ie financial computation will persistently exceed supply on all networks
this has been the case since as early as 2017
so we make trade-offs to enable more financial computation on blockchains
7/ for commodities to be tradable, you have to be able to move it around in a cost effective manner - hence the creation of synthetic / paper contracts representing physical commodities
how do we make financial compute liquid and fungible?
8/ ENTER THE L2's
9/ the first experiment started in 2013, when Tether put dollars on the bitcoin blockchain via the Omni Relay protocol, effectively bridging USD liquidity into bitcoin
but not all stablecoins are created equal - tether still makes up 90% of daily crypto dollar velocity
10/ the next experiment was bridging Bitcoin onto Ethereum to be utilized as collateral in various DeFi protocols
nearly 1.5% of bitcoin is now used on Ethereum, but nearly all of this is fully custodial - again, trade-offs!
11/ the current experiment, given the demand for Ethereum block space exceeds its supply, is bridging Ethereum from L1 into L2
in the last two weeks, the TVL of ETH on L2 has grown explonentially
12/ to date, nearly $8 of TVL has been bridged from Ethereum into not only L2's, but also other L1's
in the quest for available and affordable financial compute, all assets are becoming fungible liquidity across all chains
13/ today, 8% of blockchain-based assets are used on other networks
over the next 12 months, i expect this will be over 50%
if you want to bet on this, lmk
14/ what's exciting about this is now anyone, not just boomers in blazers, can be a market maker and supply liquidity
it makes markets absolutely massive. it makes liquidity possible in ways that we've never imagined before. it blows the doors open on the fungibility of assets.
15/ we can put the FUN back in FINANCIAL COMPUTATION
assets are now interoperable across L1 and L2, and can be made liquid and fungible. liquidity itself is becoming a fungible asset.
mind. blown.
15/ and crypto markets are just the beginning.
at @CoinSharesCo, we believe blockchain-based financial computation will eat all markets.
every market will be on-chain, global, and trading 24/7/365
if you wanna chat or are building liquidity focused primitives, DM me. our team at CoinShares would love to talk and see how we can bring liquidity to your network.
17/ i apologize in advance for any typos or conceptual leaps, i made this presentation on a red-eye flight and i'm still wrapping my brain around things
i'm always happy to trade notes, so feel free to DM me if u disagree or if u wanna help me get the framing tighter
/fin
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1/ @CrucibleCap Q1 VC report, sharing for those curious about the process of investing. we use @attio.
sourcing - we get a LOT of inbound, mostly on this site and LinkedIn. we only track investable deals in our mandate and valuation range. this is why we write / post!
2/ the number of deals through our pipeline has stayed pretty consistent quarter over quarter - we generally will do 1-2 meetings and then decide quickly if we want to dig in or not
3/ deal momentum is important - a lack of momentum can kill deals. i look at how efficient we are.
notably diligence and execution time was cut down 50% - this is due to better internal alignment and process handoffs between @itsanhonour_ @kellyjgreer and i
the sell off was driven by short term holders selling at a loss. let's see what comes out in the Q1 13F filings - our mercenaries may have been top buyers after all. love that for us!
2/ we're in a rough spot
stocks below 200 dmas, indeces selling off, Bessent and Trump both fixated on forcing rates lower even if it costs the market
this is a relief bounce driven by retail buyers (they're a contrarian indicator) and algorithmic CTAs
1/ quick slide rip from my @Blockworks_ DAS talk - Believe in Something
this is where it all began. everything we talked about ten years ago when we started building the world's first bitcoin investment firm has come to pass.
so why isn't bitcoin a million dollars?
2/ if we take out bitcoin and ethereum, this is the last five years of crypto markets
the names may have changed but the numbers haven't
this is a big problem. there's no growth.
3/ 2024 was propped up by two persistent bids - Microstrategy and Blackrock
but the buyers aren't missionaries, they're mercenaries
MSTR buyers are farming the convert arb
IBIT buyers are farming basis
1/ just wrapped my quarterly report for @CrucibleVC
our playbook is simple
as a GP, every quarter i quantify and qualify our ability to run this playbook. we double down on what works, experiment / re-visit with what isn't working.
let's dig into the data and tools👇
2/ we use @attio to manage our pipeline
step one is analyzing the funnel - both raw #s and relative %s
with a small team, quality > quantity. low conversion % signals top of funnel is too broad. high conversion may signal you're not seeing enough deal flow.
@attio 3/ "customer experience" in the context of venture is largely based on responsiveness, so tracking time spent processing deal flow is an important metric
i'm pretty happy with our pacing. good to spend more time in later stages ensuring everything is ticked and tied.
1/ gave a talk last week on "energy, compute, crypto" - the three pillars of the modern economy and the converge of three trillion dollar investment themes
sharing the slides and full deck - let's rip 👇
2/ compute rules capital markets
Nvidia was the big story in 2024, but Broadcom cracked the top 10 too and TSMC cemented its place alongside the rest of the Mag 7
expect 2025 to continue this trend as energy and compute carry capital markets
3/ while everyone was loading up on semiconductor names, energy had its own quiet rally
Vistra, an independent power producer, outperformed Nvidia and Bitcoin
this year, we'll see more focus on the US grid which is by far the greater bottleneck than GPUs