ETH is Capped // Short-Selling BMNR

I will initiate this thread with that I am short ETH from ~$3800 as well as short BMNR. I am first targeting $3500 and then ideally lower b/w $3000-3300. This is not a recommendation or financial advice advising you, the reader, to pursue any activity listed in this thread

The reason this opportunity exists is because I believe that the amount of capital that has pushed us here to-date is non-replenishing and showing signs of exhaustion. This is occurring at a point where distribution has been poignant thus far on a HTF basis ($4000). I will caveat this note that this is a strictly LTF view. I do not necessarily think the TCo meta is a "flash in the pan" that is going to end today; and for that reason amongst others - this post may not concern you

I will illustrate specific examples of why this exhaustion exists - where it comes from - and use key numbers from visible sources/sinks of demand to illustrate the rate of demand that is implicitly priced at today's prices. I will then contrast what may be available moving fwd in showing why today's prices are unsustainable

First - as a starter - I have been long ETH the last 2 weeks (to varying success). Between July 11th and July 14th, I believed that the vehicles creating the most torque (not just on ETH, but especially on ETH) were not being acknowledged sufficiently by the market. Hence, the rational thing to do was to: get long. At the time, price was b/w $3150-3300. I put together an aim for $4000 ETH and significant OTHERS expansion beyond $300+.

I believe therefore that I am well positioned to address the reasons why ETH can achieve these downward price targets because I understood, on the other end, the prongs that made ETH attractive as a LTF LONG - namely:
- vibrant marketing in the form of positively-inclining legislation re: Crypto Week & the 3 stable bills
- echo/reflexivity conjured by the 10-20x multiples being observed in ETH TCo vehicles post PIPE-announcement
- robust ETF volumes/flows seeing generational ATHs
- staking (ETHA) acceptance that was being lost in translation from news fatigue elsewhere

However I believe that these points of strength are behind us for now, and moving into August - there are a unique set of challenges/obstacles (re: August reminder) that can create friction Dimensioning How We Got Here

This month has been truly month for volumes/flows. This was the first true "win" for the ETH ETF bucket since the disappointing start (we covered this) around inception. What made this strength so exceptional is not just the quantum - a ~10x rise in daily volume during the 3rd and 4th of July @ $2B+ vs the $200M days you would see in parts of Q1 (see below) - this flow was clearly substituted as well - stealing market share from BTC.

Note that since the first week of July (adjusting for BlackRock products on a T+1 basis) BTC and ETH net flow effectively swapped places -

BTC and ETH was respectively $3B and $1B in Wk.1

By Wk. 2 and Wk. 3 BTC's $2B and $200M (!) were supplanted by ETH's eye-popping $2.1B and $1.9B numbers. Therefore, not only did ETH create parity in the 2nd week despite already out-performing from a MC-adjusted standpoint - it actually exceeded BTC flow on a nominal basis as well by the 3rd week.

You wanted to be long these weeks

However - these were not the only sources of demand - an interesting vehicle which we refer to as "Treasury Companies" or "TCos" formed on the horizon - with unique structure unlike of which we had observed in the past with MSTR or what I refer to as "gen1s" (RE: MetaPlanet). A new adaption of TCo (glossary provided in the end) - a primarily crypto-native funded one using the deSPAC process to quickly get online into the public equity fundraising space. Thru fast financing (PIPEs) and ongoing financing (ATMs, when available) they were able to acheive dense amount of capital formation.

SBET's PIPE was back in May - but with Tom Lee captaining BMNR on 6/30 - front-running ensued - and in aggregate $800M and $1.5B was deployed (per disclosures) thru Wk. 2 and Wk. 3.

That means - thru Wk. 2 and Wk. 3 - a total of $6.5B of visible flow went into Ethereum. During that period of time, ETH rose from ~$3000 to $3950 - a return of ~25%

The first question: well if there was so much buying - and in such significant fashion relative to the past - say in December - does it not seem bizarre that price remains stagnant in the high 3-s? After all, $6.5B is roughly 3-4x as great as the same amount of ETF powder that was created thru Nov-Dec when price similar ascended in fast fashion at the same price thresholds

This question forms the foundation of my thesis - which, there is a significant amount of distribution happening at these levels - and therefore if $500-600M/D of flow was unable achieve a break thru $4K during "peak hours" - how will price respond if flow slows down? Say - during a period of "off-peak" seasonality?

MSTR is Capped

Today, MSTR announced guidance that they will no longer issue common equity to fund BTC purchases unless the company trades at >=2.5x NAV. For reference, their NAV currently is 1.8x. For MSTR to hit this 2.5x threshold: MSTR would need to go to $500-600/sh.

This is obviously a big deal - they are a prominent buyer of BTC and was the original gen0 TCo.

For reference: MSTR's average weekly purchase quantum YTD has roughly been $850M

And since the beginning of November to today, Saylor has bought roughly $36B of BTC. Of that $36B, ~$8B of that was in preferred instruments and $5B was in CBs. Therefore, 2/3 of purchases were fueled by common equity

And so: using our YTD run-rate: that is 600M/wk or so that needs to be substituted thru other means (such as his other products) or elsewhere "Common ATM doesnt matter"

Is ETH Overextended

Am short from higher and will discuss why. Have been building a posn since 6/9

Despite this, I am actually fairly neutral on ETH even though I am short perps-wise. Own a synthetic straddle w wingy calls

Am going to use charts here since that resonates with CT Addressing May quickly - it was actually incredibly asymmetric to be long and I didn't see it. I got ran over and I am going to address this in a separate thread

The TLDR though is that in hindsight no one really owned the right tail and I didn't see the policy shift from Trump/Washington to retreat & "spend their way out" until it was too late; namely, their desire to get the tax bill thru

That being said, my bias today is constructed different than my bias last month and is selective toward ETH.

Simply put, IMO the climate for risk has shifted from an inefficiency (borne from adverse selection and info that was hard to see, but was there RE: Containership) to taking a risk premium now that people feel comfortable digesting risk (SPX 6K+, BTC 100/105K+). And ETH has been the reception of being risk-on (+20% OI from 6/9, which is equivalent to the amount of OI that got added in the same duration of time when the ETH ETF got re-priced to 75%, which subsequently lifted price from $3050 to $3850)

Back in longs Reasoning is pretty simple and in line w everything I have shared in past regarding tariffs

Mkt having the same indecision it's had in the past where it feels skeptical around legitimacy of putting on tariffs, until day b4 or 2 days b4, goes "OH NO" and then risk-off. Push down was aided by the fact that there seemed to be softer rhetoric earlier in the wk + last Friday, and that move has reversed

Except this time there is even more defensiveness positioned for 4/2 than any event prior and I suspect it will resemble more of a clearing event

The risk is that expectations are unanchored (still very little out there wrt what is on the table)

A framework of 4 eras - there is no evidence to suggest that BTC is having an idiosyncratic fall cross-asset, contrary to analysts' positions that SBR is some equation of sell the news + that Trump's "doze-off" posture is effecting LTF PA

The reverse is actually possibly true, creating convexity around a BTC long if/when momentum stalls around selling on the equities front - Creating a case for BTC strength on the latter tilt of tariffs (thread last week) using the 2018-19 US-CN trade war as a comparison:

https://x.com/lazyvillager1/status/1897023205640167891

I will initiate this thread with the punch line that I am long, and have been long from higher so I am likely to be biased (although we added a lot in at the lows)

We commented yesterday that last night was a really interesting spot @ 82, and it is still interesting, but of course the spectrum of risk changes as we rise or fall. Herein I will express some thoughts on why this spot has a degree of asymmetry that is not typically available

We believe this spot is a pretty complex one (again, unique) where there's been a mish-mash of unique drivers that has softened pricing. Therefore to speak to what can possibly happen moving fwd, we must also reconcile how we has arrived at this point

Since my tweet on 1/23 around "SBR-Lite-Lite" I think we were earlier than anyone else wrt adopting a short bias (and TBD on that) carried by the notion that attrition alone - and nothing else - would carry us downward

Of course, there were many promising variables at the time - FASB 121 lift, emerging interest in stable coin tender, etc - but I felt that actual impact was largely inadequate to carry weight relative to the flows that had supported 100K+ (Saylor's appetite + ETF flows) The incoming tariff situation early February only added to this view. We actually underpriced just how much noise this could create, and digital assets crystallized this materially with a significant drop of 10% (more on ETH). This is an important range which we will revert to later. It is notable that equities do not drop much over this time frame and that the first day out the wknd, there was significant cushioning via ETF flows.

The saga continues w a hot CPI print, which we believed w the push of gamma + vanna&charm in equities would be unlikely to deteriorate pricing until OPEX. We believed that OPEX would be the lynchpin for attrition to start driving fwd the momentum we felt was pent-up artificially

The following week (2/25), we see an unravelling of CME basis, which we identified as poignant. I believe many authors incorrectly assumed this would be a net zero vacuum. The exhibit below summarizes a few of my thoughts but the theory behind this is -

"When we were ranging last year (but failed to break 50-60K meaningfully), basis for CME products remained fairly elevated (double-digits) and it was natives that were net-net more bearish than Trad (can see latter wrt how sticky basis was by quantum or by rate)

Now, seems to be the reverse, in that Trad is pulling capital out while funding remains 10%+ on perps end

The disconnect I think is quite notable in the sense that demand propping prices up have, in my estimate, been largely led by Trad within the back half of 2024

Following that same logic, if that same interest is waning (due to various other factors), that is capital that a) may not be returning and b) may be indicative of a price reset to prior-seen before levels. In other words, Trad *may have been* happy collecting yield w muted directional view in 1H 2024, saw some directional skew upward when basis saw itself elevated in Q4'24, and now it is reversing the other way

...This may signal that demand for BTC is waning faster than imagined & perhaps we should place more consideration into incl BTC in the short basket"

Notably, that trad offramping signaled a drying up of flows and a broader lack of appetite, which has culminated at what we believe is a LTF floor just under 80K, which is where we opted into covering

I genuinely think this is one of the most interesting, unique spots I've seen since August Please no "that's so fire bro" pasta I am trying to figure it out still

I’m long. Breaking the rules a bit on this 1. Think v logical to be scared w such big CME gap. Marginal spot but have fresh eyes & think RR not bad Have never seen anyone in my chats or CT do research on how SBR <> Congress actually gets thru until this wknd where BTC went from 96 to 78 (and from 105-110 where there was some optionality embedded from Lummis bill being considered)

You guys understand that just because a team decides to do coin buybacks doesn’t suddenly improve the “fundamentals” right? Keep seeing the Artemis screenshot thrown around

All it does is provide a floor and more often than not, said floor ends up becoming a magnet If an NFT project uses its treasury to buy back the floor does that improve anything related to the underlying project from an intrinsic POV

SOL has rallied significantly hard in the last 2 weeks (at least partially due to a TRUMP sink) and believe there is at least a quorum of thought around the fact that the SOL ETF approval may be today after the initial 19b4 filings by Canary / 21Shares / VanEck that happened on Nov 11st, 2024

This is due to the fact that the "1st deadline" is quoted as Jan 25th, 2025. IMO this is almost 90%+ likely to be extended for further review & there is a mismatch b/w how it appears (on Polymarket w/ 80%+ odds of getting approved) vs the highly unlikely chance we see an approval today/tmr specifically

The timeline in b/w official approval for IBIT and ETHA for filing their 19b4s & official approvals all took at minimum around the 3rd deadline (~180 days) and for the latter, 225 (effectively the latest possible)

The market was able to get leaks respectively (GBTC discount closing in Sep'23 and media leak in Oct; BBG bros leaking in May'24) so we should look at the half-life which is probably closer to 90-100 days for when ETF outcomes starts being priced in

SOL is much more of an edge case to me and leans toward a lengthier timeline, not shorter (so more similar to ETH) for 2 reasons:

1. There is no futures data for SOL like there was for BTC/ETH, which no doubt helped support the approval case

2. BlackRock has not filed their 19b4 yet and I would be quite surprised if they did not to garner in the fees @EricBalchunas @JSeyff @NateGeraci

Please comment your thoughts and whether you agree or disagree w the above

I am once again long After this weekend’s events I believe that the chance of a positive EO is quite under priced

Think mostly everyone I know is interpreting the Melania spin off as a sign that the cycle is over

These are conditions I like finding longs in

Am initiating a starter short on TRUMP at ~$35 with room to add at ~$43 (if we get there)

I do not view DOGE and SHIB as good comparables during a very different time of recovering and much more concentrated liquidity (fewer selection and breadth of assets vs what is more fragmented today)

In general we have not seen crypto assets out price their Trad counterparts and believe DJT at 8.5B MC acts as a soft selling / comparable to where the TRUMP memecoin lands (at 7B circ now)

From a FDV perspective TRUMP’s current valuation also outweighs effectively every other meme on SOL combined; figuratively a quick proxy around harvested / cannabalized liquidity that is immediately available in the aggregate

I view the culmination of all these listings (OKX, CB, NANCE) this evening as actually the most bearish scenario. These pools of liquidity available are not spaced out in a way to retrofit, shape and accommodate marginal demand. To me it is analogous to giving an avid swimmer an ocean to swim in after a single day of practicing in the public swimming pool. He/she will likely not be able to utilize this effectively to what would have been 100% otherwise (if more spaced out)

Put another way the gyration of all these listings prevent holders from looking ahead to upcoming “catalysts” as clear changes of ownership

Such a dislocative effects (which this certainly is) / “white swan” should draw a mix of fanfare / exposure in the coming days from contemporary media & allow the public to draw two possible conclusions:

- the possible enrichment of the hyperbolic time chamber that is the memecoin casino

- that the President has effectively drawn a line around the “what is a security” debate in solving toward memecoins being the answer while instruments that are “yield-based” or “utility-driven” remain challenged / under pressure from the SEC / CFTC

To me this does not raise and elevate attention to TRUMP but instead rather “the next best thing” of coins that are much smaller and seemingly available to replicate the multiplier effect - which could be bullish for every other listed meme on public platforms like Robinhood, CB, etc

TLDR in the interim:
++ retail interests
- - insto interests Probably should add that I would not recommend this and am just sharing my view

Many lack understanding of who/what is really driving these markets and have not capitulated, assuming that PA today is just an over-reaction to yday's comments by Powell

This includes those on CT, but importantly, almost everyone on other platforms - ETF buyers, Reddit, Tiktok Those who say “Powell doesn’t matter” are likely the same ppl who weaponized 50 bps of rate cuts in September as the lever to be long

If you pay attention, the final conclusion of their argument never changes, no matter the circumstances

Happy to be wrong but an observation

Any Sailors left in December?

I am expressing a LTF short around BTC off the following factors:
1) Saylor is possibly done bidding this month & next
2) As a continuation of 1), low seasonality diminishes the required re-allocation to BTC that would otherwise be needed for a Saylor-less order book
3) Contemporary markets were not expecting Powell's hawkishness, and will need to time to re-price this in

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1) Although it is not possible to say for certain, I believe Saylor may have already started his blackout

I think Saylor may have attempted to structure a convert (which if successful would have been bullish for LTF demand), but was not able to get there on terms. His last convert was done at $3B face / $672 strike, the latter of which was a ~55% premium over the US VWAP on 11/19. He would have normally priced one in by now (15th/16th) around FQE; I am assuming he was not able to do so with current MSTR price (~$350) too low, representing what would be a dilutive tranche relative to November's. This is purely hypothetical; from my experience in structuring similar notes, I could see that being an issue directly as a covenant per the original loan package, or simply a bogey that prospective investors couldn't get excited around

If this is true, the market will require an entity / group of entities to substitute for the ~$17B of BTC purchases that Saylor made on behalf of MSTR from the Oct. 31st onward. This represents ~$3B/wk on average in gross demand

Naturally, an argument arises that demand for MSTR could have been substituted away in different vehicles, if MSTR did not exist. This is apt but I believe it is not a perfect 1:1 sleeve which I have covered previously. For every $1 that enters MSTR, my guess is that ~$0.30-40 would enter an ETF product. This is especially relevant for something like the convert: a unique instrument that opens up the palate for non-traditional / credit investors. Therefore possibly ~$10B of demand would still need to effectively be made up via ETFs or a sterling idiosyncratic spot bid elsewhere

Some exceptions to this exist, which I list out in the subsequent note below

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2) The impasse for the remainder of the month is that low seasonality may start kicking in

We have seen the impact firsthand of low seasonality back in August - when managers/allocators go on vacation. There is an add'l bogey here as well that many participants found themselves offside today, expecting a Santa rally built off the back of a dovish Powell. @FedGuy12 does a nice job opining around his surprise in the latest @fejau_inc video. Noted inflation hawks such as @DannyDayan5 were even shocked at Powell's sudden shift in demeanor and move away from the "restrictive policy" conditioning he layered in September. The dots were especially hawkish, with 4 people even advocating for no cut today, and only 5 committee members voting for 3+ in 2025

Seasonality should not be understated; the last Fed move that generated a reversal was 12/21 (per @AviFelman), in contrast to the infamous 12/23 "pivot" presser where 9 rate cuts were priced in after Jerome's surprise dovishness.

From Dec. 13th to Dec. 31st last year, BTC flattened around $42K despite the bullish undertones underpinning markets elsewhere (SPX rallied +300 bps) and the catalyst of an upcoming BTC ETF

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3) The managers best suited to provide step in for a missing Saylor may have their hands full with fire drills elsewhere (eg. interpreting what this means for longer dated bonds, growth equities, value equities, etc)

Digesting today's presser likely takes a few days. Is it possible that BTC finds a bid as *the* solution? Yes, of course. However, one must acquit that an add'l layer of complexity has been observed that was not present going into FOMC

There is also the added wrinkle that is BOJ's minutes for 2025 (which we will know about shortly). I view the LTF bounce this evening as coinciding with the news around the December rate pause. However, with the USDJPY rising against Japan, I believe Ueda may be inclined to set expectations for more hawkish guidance, hiking (or towing the line around one) as soon as possibly next month (Jan) More thoughts on MSTR here

https://x.com/lazyvillager1/status/1869183095049441376?s=46&t=EZUQzxqzI0jyJhwDoB76gQ

I believe that given refreshed demand/supply dynamics and recourse around changed sentiment these last few days there is fuel for a push for 100K+, possibly 105-110K in the next 2 weeks

I am positioning for this with very long pos'n; this is the most long I have been since adding ETH @ $2700 following Trump's win

I will initiate this first by reflecting on the glass ceiling concept I wrote about pre-Trump, and the 100K selling line piece from last week

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I think the former is in need of a revision - namely, I under-estimated the extent to which Saylor has been able to drum up demand in November via his sleeve of equity offerings / converts. He has been able to sub in as the manufacturer of QE / easing-LIKE liquidity - namely, providing a floor of buoyancy and stability with his relentless bidding. I do not believe that it was possible in hindsight to forecast ~$13-14B of consummated flows stemming from just Saylor himself in November. And although to SOME extent substitutable (but not 1 to 1), I believe his unique sleeve represented +9-10B locally that would otherwise not have appeared so quickly

The 100K line per last week's thread is very weakened now post-sell off (reports of ~2B in liquidations; our friends CL207 and Zaheer believes this number could be closer to 8 digits - regardless the largest quantum since 2021). My perspective is that we have mechanically arrived *here* (here being 95-98) with increased short OI forcing down funding. With funding at sub-10% this is reflective to me of significant dislocation. This is not a sustainable level of funding in a trending regime, similar to how 100%+ APR was not sustainable either (as was the case last week on the BTC-specific liquidation where price quickly reversed)

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I believe there is raw edge here in being long; most participants have now been conditioned into thinking December will be seasonally weak / choppy, with Q1 meriting strength. I believe it may be the reverse. This could be exploited shortly: I estimate Saylor to raise a convertible bond that will be over-subscribed in the ball-park of $3-5B, and TWAP this in

It appeared last week that spot flows had possibly been growing more disinterested (larger negative outflows on GBTC and weak FBTC) but with a sterling FBTC # back-to-back this week, I believe we will be led higher via the following:

1) Saylor has been locked out of his ATM equity sales due to marketing for his convert - he begins buying a week out which I anticipate to start shortly. In other words, I do not believe he's bought this previous Monday/Tuesday at all

2) With alt structure broken and few remaining obvious rotations & narratives of strength, I believe the market is now over-indexing on macro-related events; as an example, I believe one motive for the spot seller this week was to de-risk ahead FOMC and the CPI/BOJ rate decision next week

3) I believe most participants are greatly disoriented around direction and are now greedily looking to buy lower, expecting consolidation and is now very offside to right-tail risk - possibly stoically remaining in alts or even opportunistically short

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There are 3 instances of news this week that form my view around point 3 above - namely, that news is not being digested correctly:

1) The lack of reaction underpinning Korea announcing the postponement of 20% digital asset tax from being implemented in 2025 to 2027. This is extremely bullish and is under-represented in discourse, with Upbit and OKX doing a significant amount of volume (10B and 8B in the last 24H)

2) The nonsensical selling off around the MSFT rejection yday around BTC not getting added to the B/S. This is deeply unsophisticated as this virtually had 0% chance of passing

3) The lack of market shift from the after-market news yesterday around 4PM for MSTR being added to the NDX-100

Has the latter been priced in? To me - no

There is an insufficient caucus of people that actually understand MSTR well enough to price in the flywheel effect of passive flows. From the index having to physically rebalance if/when MSTR gaps up in price, to the newly opened base of tech-investors that are conditioned to buy growth - I find that there is far too much chatter today around unrealistic permutations around MSTR's demise & subsequently too little around how the premium may continue to persist in unlocking MSTR's bid even further Am long BTC around 98-98.5K, ETH at 3700-3750 and SOL at 225

Going to say this again and again

Team does all the little things well. Things that most teams think don’t “move the needle.” And they wouldn’t in isolation but it adds up. Airdrop vs competing gas to claim. $0 cost basis to control LTCG and FY of selling vs income in 2024.

Personally am very very excited to see what NFT is going to be. Imagine it COULD be soul bound and purely aesthetic but think there’s a bit more around it.

My bull case is that it gives fee discounts while staked or something Will also be an NFT with significant provenance (first) and so could have that same level of appeal as a SOL Gecko or ETH Punk a few years from now

A brief SOLiloquy (short thread)

Herein are some brief thoughts on what I believe should be relative (and believe this has already started, but should continue) downside for Solana in December against other assets

I am short from ~$235-240 and believe this is the last great asymmetric set-up of the year. Caveat that I am short other assets as well (BTC because the gap between Saylor buying and the ETF is only continuing to grow; tend to think ETH will carry well to the downside if/when it falls)

The punchline is that Solana has been mostly untested this year and is showing signs of exhaustion wrt major tailwinds having unwound (or are in the process of unwinding).

In my view, what has truly elevated Solana this year to be the best performing liquid asset of scale YTD are the following drivers:

i) a much more vibrant and diverse ecosystem than its competitors boasting fast transaction speeds,

ii) the most robust casino where memecoin participants are happy to denominate in SOL,

iii) mid-year inflows where I believe many fund managers and large liquid participants found themselves displaced by the lack of ETH ETF appetite, undergoing an existential crisis around future allocation

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Today, I believe all 3 drivers are weakened, and highly vulnerable with significant fat available to be trimmed. Below I reason why -

1. As the dominant L1 boasting both speed and diversity, I believe HYPE and ETH/BASE have emerged as highly viable threats in ways that were unexpected and are unsolved for.

See below a chart of Artemis flows and you can go back and zoom out on 1W and 1M time frames as well.

This is the most significant siphoning away from SOL this year toward EVM - and can also be observed in different ways other than just flows as well. We can observe case studies of the "hottest" sector in AI memecoins (previous stalwarts in GOAT, FARTCOIN, ZEREBRO and AI16Z all having their valuations halved) whereas the VIRTUAL & agent ecosystem flourish in the same time frame.

I would also argue that Solana has not had a real competitor in the L1 space for quite some time and though it is early - the appetite for HYPE that we have seen is undeniable to be filled in the short term wrt its democratic ownership & team prowess

2. Solana has not had a real supply cliff event yet in 2024 - and has not been tested in a significant way

Whereas majors have been tested in major ways (BTC with MTGOX & Germany and ETH with the ETH ETF) SOL has been mostly left alone outside of 1 week where Jump sold in the summer (and was quickly looked over given ETH capitulated much more soon after).

SOL has had its best months performing as BTC beta eating the lion's share of flows away from ETH (already dissipating) and very lackluster alts that did not command any attention

The supply event would be the below:

In the liquid fund world - there should only 2 options to realize a cash distribution event for the GPs in FY2024: as a % of realized gains or as a % of unrealized gains (but have a clawback against a high water mark the previous year). In either scenario, given Solana's outperformance last year as well, I believe liquid managers will be induced to sell SOL as a) the best performing asset YoY and/or b) the belief that formerly lagging parts of their portfolio have untapped upside that would be better captured via holding & observing alts that have now seemingly found H1/H4/1 trending strength

This is further activated by the popularity of the Galaxy auction (SOL cost basis at $80-100) where managers who participated can capture spread on notional SOL (eg. sell the 1/3 of locked supply that was bought near ATHs and then "get that back" via the first March unlock cliff)

3. Exit liquidity for the SOL ETF is now dulled by the rising of dino coins and a possible XRP ETF

XRP's performance has likely been informed by 2 main reasons: a) its proximity to Bitwise as being next-in-line for an ETF product after ETH, and b) the rumor around 0% capital gains tax for US-based crypto-currencies. Given the provenance in the asset (one of the oldest) and the resignation of SEC chair Gary Gensler - even if the odds of an XRP ETF are even or lower to that of SOL's - one cannot take away from the idea that it is taking away from the pie that was formerly all SOL's to eat

4. Complacency

The sentiment is difficult to precisely quantify but intuitively I believe we have reached an impasse around the hubris around SOL that matches the inverse when it occurred on the other foot a few years ago: when ETH let SOL catch-up mirrored by a seemingly impenetrable moat

The following examples come to mind:

i) "Network extensions vs L2"; DRIFT vs HL; a display of the "can do no wrong" attitude

ii) very popular mentions that "no one would ever want to bridge over to BASE" away from SOL despite clear evidence to the contrary

iii) Former ETH stalwarts completely capitulating weeks ahead of a 35% gap up in ETH where some have aggressively called for much lower ETHSOL targets (eg. 0.027 ETHSOL) out of seemingly nowhere

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In short, over the next 30 days, I believe the argument for the marginal buyer around Solana is the weakest it's been this year (ETF flow parity with ETH as a clear driver of spot, which SOL lacks; attention amongst alts is much more spread out wrt dispersion than before) and the case for the seller is simultaneously the strongest (profit-taking; users who have made life-changing money via memecoins & holding in SOL selling to secure wealth)

Funding here continues to be elevated as longs continue to try to push for upside, spurred by the recent (but brief) ATH break that was fully catalyzed by leverage
Incentivized by my opponents advocating for a pro SOL position instead, please see below more information around the quality of net flows using @artemis__xyz

The first takeaway is that ETH MN has indeed been a net negative outflow to other ecosystems each month. There is not one month where it hasn't been negative. YTD, ~7B of outflows have occurred from ETH. This is indisputable

However what is more interesting to me is the vacuum of flows and SOL's ownership of such flows in productive months (productive defined as when on-chain conditions are hot) vs other L1s and EVM L2s

My opinion of course being that SOL's price action on a LTF basis is at minimum a partial by-product around flows in/out.

The cornerstone of my thesis is that flows to SOL will cease to be programmatic in the sense they have been, severely impacting PA on a LTF basis

Let's start with cum'l net flows YTD -

Solana has been linearly growing month over month representing consistent additions MoM. We can similarly observe that BASE, the original line, made a much bigger jump in November against any other ecosystem on a % basis

Shower thoughts on Hyperliquid ($HYPE)

> Literally in the shower typing this on my phone

Generally stray from chipping in on single names directly and everyone has thrown in their hats already so this may not be too novel. Also I’m not the strongest when it comes to alt selection

That being said -

I see 3 simple tailwinds for HYPE. My punchline is of that today’s estimates that I have reviewed (2-4B FDV), I believe they are too conservative and that the run/rate should be closer to 8B+ FDV based on existing comps

1. I believe the Community has largely forgotten on what a good linear executed airdrop looks like where the express purpose of participation is not simply to farm an allocation. That playbook has not been recreated once yet truly in 2024. Furthermore given the “success” of HLP, most traders are simply down money and likely to exchange for fiat wealth upfront. This is sufficient incentive to test the lower bound valuation right away. Although it may appear consensus that HL will do well, I believe that in reality most people intend to sell their allocation

2. Given the ease in comparing readily available metrics (volume, TVL) I believe we have over emphasized Hyperliquid’s similarity to trading and LP protocols. Over time the ecosystem should experience a re-rating effect (that we have seen on APE, DEGEN, etc) that comes from future sinks that are HYPE-specific

3. What underscores this launch uniquely and what I have not seen being discussed elsewhere is the cannibalization of flows from competing EVM adjacent L1s. In the last several months there have been OTC deals allowing liquid funds and participants reduced entries into what are now very bloated valuations relative to TVL and vibrancy of ecosystem.

Most of these were designed around forming a laggard bet around “the next SOL killer.” This showcases 2 things: a) appetite to recycle the 0 to 100 playbook and b) a lack of fluency around what truly forms sustained capital

The emergence of HyperLiquid is a shift that everyone must decide at the same time - instead of on a staggered, private timeline - where they want to position. Therefore “new money” may not not needed to buoy resilience as the flow of funds may come from existing faucets today

At the end of the day there will be beta to majors so all numbers used here assume the current market environment of ~100K BTC et al. This can be adjusted based on health elsewhere Disclosure: I have points and therefore am biased toward HL doing well.

However my personal positioning elsewhere is informed by the view I share above

The last supper (short, simple thread)

Below I will discuss why ~100K was a highly asymmetric short set-up from my perspective. The punchline is that the market is highly (still) offside wrt being long

Since Trump's win, I have been carefully observing & monitoring flows with the belief that there would be an irrational rally of craving exposure. It was clear the day after Trump's win to me that getting long was the best risk-reward:

a) irrationality would likely last for some time (although I did not suspect we could try for 100K so soon) and ,
b) if this was truly a regime shift than current levels (75K BTC / 2.7K ETH) would be highly constructive entries

Over the last few days, I surmised that that these flows showed early signs of exhaustion and we would tilted toward seeing a correction (independent of whether this was truly a regime shift or not), with whether or not we had surpassed 100K BTC being irrelevant.

The main drivers of this are as following:

1. Very few people understand MSTR's financial structure and there was enough people that (wrongly) assumed his Convertible was not spent yet, and still, that his ATM offering was some boundless fountain of youth. Having done more work on MSTR than anyone else, I knew that every time he announces the 2nd closing of a convert - the buying finishes within a day or 2 of that usually. Saylor having done 4.6B between 11/11-11/17 with half of that this last week is showing clear signs of a slowdown. Most people do not comprehend that MSTR and ETF products are competing products - and the velocity of one also informs the other

2. Fidelity is actually the better vehicle to visualize retail demand ebbs & flows as IBIT is always lagging. During this last month and also in the original heated rally between February and March, Fidelity (being the 2nd largest month) has shown visibility around correcting pre-Trump and where there is a chop. Friday was the first non-starter day for Fidelity at a measly ~$20M with cum'l inflows excl. IBIT actually being negative. I suspect today's flows and tomorrow will show this

3. Leverage creeping up insidiously (on-chain) but also across multiple assets - with 60%+ on memes and ETH/SOL being at 40% respectively (having creeped up in short, impulsive gaps in the evenings). During the Friday session, mostly everything had slowed with the absence of BTC (propelled entirely by Saylor)

4. Lack of short positioning - from watching books and rhetoric of people I watch, I surmised that people were very hesitant to short such a seemingly scary point (100K) and that this has largely invalidated shorts for most people who had stubbornly kept this positioning post-Trump. I felt that this was anchoring bias that would prevent new short OI from forming

5. Algo-led rallies with no spot follow-thru. Had noticed that a basket of 2021 alts (UNI, AVAX, COMP) had chosen to put in - all at the same time - 15% candles in the span of an hour after-hours on Friday. I do not view this move on OTHERS being sustainable especially now that we are back at March resistance of 325B+. I believed this would likely induce FOMO and leverage over the weekend, further creating the pinata to burst over this week as participants find themselves offside by lack of BTC strength

6. Utter complacency - over time, I noticed that first cyclers had gone from trying to call local tops in the first week to being silent, and then a growing union with very respected figureheads from previous cycles calling for higher, where the conversation had evolved from "is the top here" to "I know what a top looks like and this is not it"

I believe the majority of these aspects are still in-play, with panic & indecision having not seeded itself yet.

In my view this is still an area where people are in "dip-buying" mode, viewing this as an opportunity to gross up size in likely having missed the first part of this move starting at 75K+. The market has formed a dependance on 3B from ETFs + 5B from Saylor a week

Certainly at least some people will doubt whether or not I actually thought about the below in constructing a short or even being long - and so for for that reason I am making all recordings done over the last 2 weeks free (over the next 48H) - where I shared these ideas live.

If you have the patience to audit then I am happy for these to be consumed: lazyvillager1.substack.com/publish/posts

See also below for a thread around exhibits for some of the points above in more detail 11/7 - ETH Long (pt 1)

https://x.com/lazyvillager1/status/1854649640479866888

My BASE Case for where the puck is going next

Since Trump's win on 11/5, COIN and BTC have led the way forward (+70% and +16%, respectively). My bias remains in ETH and adjacent to a thread I wrote back in October around memecoins (following tweet), I believe that multiple points of strength are aligning for the BASE L2 ecosystem to:

- "win" the battle against competing L2s and even ETH MN itself as the de facto ecosystem of choice to house memes, consumers dApps and attention

- compete as the premier EVM-aligned ecosystem in parallel to SOL's "all-in-one" robust casino

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My core belief is simple; ETH is still an integral center of the digital asset ecosystem, with all & any spin-offs to-date reliant on two key principles to drive positive network effects:

a) the "underlying" coin must see relative strength to its competitors, and
b) the "underlying" coin must have "scarcity" (more on this later)

Therefore - in this race for attention - in most cases you are mostly betting on one coin (even if just a simplifying measure) to visualize strength. In the following weeks (and this has already started), you will see an argument made from the CT populace on why a given individual coin MAY win (SOL killer, meme) or why an app supported by a coin MAY win (utility-token, DEFI governance, etc).

I am here to present an argument for why a strong risk-adjusted option from today is to bet on the ecosystem WITHOUT a coin.

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In my view, the way BASE has organized itself creates the strongest potential for sustained adoption, with the double-edged sword being that it is likely reliant on an ETH resurgence.

However, given that I believe ETH is currently under-utilized - if/when relative value between BTC <> ETH <> SOL lifts over the coming weeks, there must & will be a sink to house this newly created & recycled wealth.

BASE should win this as:

1) The interconnection of "faucets" on BASE has greatly evolved this year - and is underappreciated,

2) BASE is of key strategic value to COIN, with an actual balance sheet to create support,

3) BASE has been battle-tested this year - and the response has been sterling

I have positioned myself accordingly and will discuss in the following thread what my rationale is, and the risks/mitigants involved in re-directing on-chain flows toward what I believe is the most vibrant playground: BASE. Thread below discussing memecoins and the environment they typically succeed in

The punchline is that low-cap memecoins typically offer uncorrelated returns, and that on-chain activity typically heats up pre- and post- periods of significant uncertainty

https://x.com/lazyvillager1/status/1846844712260350281

Why I think ETH is a highly asymmetric long here
(1 post, very simple, no thread)

I discussed the below on my stream yesterday (around $2700) but I believe very few people have thought about ETH (from a price perspective, not technical) more than I have from both sides (short & long). This is the first time I have bought a meaningful amount of spot ETH since 2021, and herein are the reasons:

1. Coinbase's +30% move on 11/6
Pent-up demand was clearly demonstrated yesterday with Trump winning: this logically follows given that coins (which have universal penetration) are better liquid proxies and +EV that can participate in price discovery going into, and around, Trump's election odds vs. the more binary bet that CB was.

CB is a US-domiciled Company where the unlocking of regulation is highly relevant. This pertains to not only developing novel revenue streams (perps in the US) and facilitating seigniorage <> BASE chain but also the primitive "easy" stuff - having consistent access to bank accounts, highly visible vendor OpEx, reliable cash collection methods - stuff that most companies take for granted otherwise.

Coinbase and its derivatives (staking, DeFi) are fundamentally most tied to Ethereum as a primitive - both in terms of price (more highly correlated than other assets) and ethos. This "lag" in price between CB <> ETH is the gap that I am targeting being lifted.

2. ETHA volumes and ETF expectations
With record ETHA volumes yesterday and today (with noticeable flows on both CB and Kraken), I believe ETF flows will be constructive. The flows do not have to be eye-popping as the reference benchmark is effectively zero. Over the last 2 weeks, cum'l flows have been ($75)M - and that is leading into the election with ETHBTC and ETHSOL eroding vastly over October. I believe that even modest flows - as long as they are continuous - will be enough to lift & generate back-end demand. ETH remains the only vehicle with an ETF product other than BTC where a) flows are visible and b) available for immediate injection.

3. Valuation gap
If we are to believe that Trump unlocks "new capital" coming in: we must ask whether or not this new capital verges more highly on the side of retail or institutional. Put in other words - why has "[this participant]" not participated yet?

I believe that ETH is the superior intersection for institutional entry - which is in some ways proven by its lack of appetite in the summer. New capital did not show up - which is more linked to the low seasonality and unwillingness to evaluate "digital silver" where fund managers were either taking vacations or rolling-off new decisions.

Today, Bitcoin is at its MC all-time high.
Solana breached a new MC all-time high today.

ETH is ~30% down from its 2024 high and ~45% down from its prior all-time high.

Trad evaluates opportunities in a different way than retail does. They search for two things: a) precedents and b) implied discounts. There will be individuals who look at price history amongst managers and relate: why has Ethereum slowed behind and does it deserve to be the only laggard here? In the air where everything else re-rates, I believe dry powder will be less comfortable bidding assets where value seems stretched vs the discount that ETH appears to be at.

4. Clearance of supply
The fulcrum of why I was short the ETH ETF in August was two reasons:

1) supply and cost basis from previous cycles did not have an organic opportunity to participate in 2024 given the rehashing of multiple LST/LRT farms (where ETH was staked) and,
2) most alt managers were heavily overweight ETH as beta to their benchmark (BTC).

When other assets (memes, SOL, etc) received a bid post-liquidation wick on 8/5, crypto-native funds were displaced and had to reorganize their emerging re-allocation strategy (which I believe now is heavily overweight SOL).

Today, I believe that most individuals/participants who remain in ETH are anchored to a vastly different price anchor than where BTC/SOL strategists are. It is by far the most challenged asset to-date, and where supply for other assets may form at reasonable junctures (at ATH, +5% from ATH, etc), existing ETH stewards are likely targeting terminal prices set much higher than today.

5. What the market has shown
Excitement about upcoming catalysts are splashy: - a surge in DeFi coins (all ETH-adjacent) looking for the cash flow switch - rumor-milling (underdiscussed in the midst of BTC ATH excitement) of "staking" enabled for the ETH ETF (which creates yield and aligned to the thread below which I wrote earlier this year)

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In summary, the reasons which I believe have led to ETH lagging this year - a poor showing on the ETH ETF from low seasonality, existing over-weight supply and in the midst of this unreasonable price expectations - are likely now reversed and can enable material price discovery.

ETH has been the most over-used short leg to hedge majors and alts after August, and this complacent positioning lays the groundwork to me for a violent repricing. I am hedging this with shorts elsewhere (persistent with my view on BTC's glass ceiling)
How Ethereum fits into a classical portfolio

https://x.com/lazyvillager1/status/1800647269345116288