I can’t believe it – we’re back. For real.
BTC is close to touching $44k. ETH also touched $2300. And there were a ton of announcements and sneak peeks from different projects.
Salute to everyone that grinded during the bear market. Don’t ever let someone tell you that you got lucky. Stay focused – the next two years is our biggest opportunity to make it.
Here’s what we got today:
- $SOL vs $ETH. The old battle is back.
- How to be a better investor? Three underrated ways to master DeFi.
- BTC Dominance chart. And an intro to money flow in the crypto ecosystem.
- Around the web. Celestia introduced the Ethereum fallback option, Arbirum approved a $23.54 million backfund, and more.
Here’s your Edge 🗡️!
Game of Chains: $SOL vs $ETH
When there’s liquidity entering the system, there’s going to be tribalism. Everyone wants to convince others that their bags are the best.
And every cycle, there’s always Ethereum vs. alternate layer 1s – it looks like next cycle will be similar. While Ethereum has improved its scaling with Layer 2s, there are still some issues.
The liquidity is fragmented across various L2s, and bridging across L2s isn’t so simple for newbies. We’ve seen Solana roughly 3x in the past few months and outperforming ETH price week.
Let us try to understand the position of each tribe.
The Solana Take
The argument is that Solana has the better technology and is easier to use.
It is the cheapest and fastest L1 because of features including parallel execution and local fee markets. Its average cost per transaction is $0.00025. In contrast, a $30 gas fee is the standard on the Ethereum chain.
“Firedancer,” an upcoming Solana client, will make Solana even faster and cheaper. Devs need cheap and fast blockchains to build applications. So, devs are very likely to come to Solana.
Many applications will be “Only Possible On Solana.” This is also known as the “OPOS narrative.” Decentralized Physical Infrastructure Networks and micro-payments are examples of this.
Helium, Hivemapper, and Solana Pay are also built on Solana. And, more importantly, according to SOL maxis, they are “Only Possible On Solana.”
One major con of Solana before was its outages. The network went down 11 times in 2022. However, it has only gone down once in 2023.
The Ethereum Take
ETH is the best credibly neutral decentralized blockchain.
According to the Ethereum camp, other chains are sacrificing decentralization to be faster and cheaper. Now, according to Solana, they are decentralized enough. That is an ongoing debate between the two sides.
Ethereum also has the highest network effects in terms of liquidity and developers. EVM has an extensive infrastructure available for devs. And while the TVL of ETH is $70.498b, SOL only has $2.536b in TVL.
Ethereum has the best tokenomics, whereas Solana has horrible tokenomics.
Right now, Ethereum is deflationary. The number of new Ether is much lower than that of burned Ether. In the last week alone, 44k+ Ether have been burnt. You can see these ETH tokenomics stats at Ultrasound.money.
In contrast, SOL has around a ~5.6% inflation rate. Since users only require a negligible amount of SOL for transactions, there isn’t much demand for it. And any token with increasing supply and comparatively little demand is bound to go down.
The problem of high transaction fees will be solved through Layer2s. And the current problems of L2s, including centralization and fragmentation, will also likely be solved in the coming years.
I hold ETH. I don’t hold SOL.
I have nothing against Solana – it does have room to grow and should break $100 this cycle at least. While the price action for ETH sucks, more attention should pivot towards it if the ETH ETF gets approved.
Personally, I think tribalism is a waste of time and energy.
Three Underrated Ways to Master DeFi
The bull market has already started. If you’re reading the same things as everyone else, then you don’t have an edge.
Here are three underrated ways to master DeFi investing.
#1: Reading Governance Forums
Protocols and DAOs often have governance forums which are goldmines of information. Here’s how they can help you:
Alpha on Upcoming Catalysts: These forums are actual hotspots for inside scoops. For instance, MakerDAO, a leader in the RWA narrative, discussed onboarding US T-bills months before it eventually became a hot topic. By just tuning into these forums, you could have caught this alpha early, for example.
Learning Operational Details: Governance forums are not just about alpha. They also teach the nuts and bolts of protocol operations. Take the Arbitrum STIP as an example. By following various proposals, you learn about the different mechanisms that drive on-chain activity and also obtain insights into potential outperformers.
These days, I’m paying attention to Frax Finance’s Telegram chat and governance forum. They have a lot of stuff coming up, including BAMM, FraxBonds, and FraxChain.
Bottom line? Spend some more time in these forums. Plus, it’s funny watching giganerds be passive-aggressive with each other trying to pass proposals.
#2: Reading Old Trading Books
Old trading books are timeless guides for great trading strategies. Here are two recommendations from me:
Market Wizards: This classic provides real insights from legendary traders. It’s a window into the minds of those who’ve already mastered the market.
Trading in the Zone: Trading is about more than just strategies; it’s about developing the right trading mindset. This book is my bible when it comes to trading psychology. In fact, I’ve previously shared my thoughts on this book. Check out the thread here.
#3: Using Burner Wallets to Experiment with dApps
Finally, the best way to learn is to do. Whenever I see an interesting protocol, I’ll start interacting with it and playing around.
Earlier this year I spotted Maestro rapidly increasing in revenue generated. But I couldn’t really understand the value of telegram bots until I rolled up my sleeves. The thing is…make sure you’re using a burner wallet. Think of it as a temporary wallet to protect yourself in case the protocol is a bad actor.
Step #1: Set Up a Burner Wallet. Different wallet providers have different mechanisms for this. In Metamask, you can do this by clicking on your account name and heading to “Add account or hardware wallet.” You can do the same in your Rabby wallet by clicking on the wallet icon in the top right corner.
Step #2: Allocate Funds. Enter an amount that you’re comfortable potentially losing. Consider it your tuition fee for hands-on learning. I usually have around $100 in each of my wallets.
Step #3: Explore dApps. Dive into new decentralized applications. Try everything from swapping to staking to yield farming.
Step #4: Learn from experience. Using these protocols in real life should teach you a lot. Which UI/UXs are better? How do people try to phish you? Etc.
DeFi investing is a multifaceted puzzle. Each piece you do – from the insights gained in governance forums, the timeless wisdom of trading books, and the hands-on experience with dApps – adds to your overall skill level.
When Will Your Favorite Token Pump?
I’ve been saying that the bull market is here.
But apart from $BTC and a few other tokens like $SOL and $TIA, others aren’t going parabolic.
So I’m going to cover how cycles have played out before. History doesn’t always repeat itself, but it often rhymes.
The above chart is called the Bitcoin Dominance chart. It measures Bitcoin’s market capitalization as a percentage of the total cryptocurrency market cap.
And it has been in a consistent uptrend this year. This means that the price of BTC has been performing much better than other tokens throughout this last year.
The bull market usually starts with big BTC pumps. Similar to the one we saw when the ETF rumors started going around. It is the first stage of the money flow. It also applies to speculations about BC having. Since BTC is the most well-known crypto asset, everyone will try to enter the market, pushing up BTC’s price and dominance. We’re in this stage now.
After BTC pumps, people will start to feel that there isn’t much return potential left in BTC. Others may want to use some of their BTC on projects with higher potential returns. So, money will flow into Ethereum. In this transitional phase, it’ll go ETH/BTC and will go back and forth between the two. But, in this second phase, ETH will outperform BTC. This is when you’ll hear people talking about ETH flipping BTC.
As time passes, people will want to take on greater risks for greater returns. They have more profits because of BTC / ETH. So, the money will move into large caps. In this third phase, ETH will outperform BTC. But, large caps tokens will go parabolic.
Eventually, all of these large caps will reach insane valuations. And it will stop making sense to expect huge returns from them. So, money will flow into midcaps, lowcaps, and other shitcoins. This is the final and fourth stage.
At the beginning of this phase, mostly solid and innovative projects will be pumping. But by the end of this phase, every coin will be pumping left, right, and center.
This is the signal that the crypto market is overvalued. Eventually, some people will recognize this and take their profits into fiat.
This marks the start of a downward spiral. As people take money out, coins start losing value. Seeing this, other token holders take their money out to cut losses. This pushes down the price further. And so on and so on.
This is a good model for understanding money flows in crypto. But don’t take it too rigidly. Different stages can overlap and also temporarily reverse before continuing. The key to using this model is to always be one step ahead of the overall money flow and direction.
This image from @SecretsOfCrypto is a good summary of the whole phenomenon.
🚀 DeFi Catalysts
Celestia introduced Ethereum fallback for OP Chains. Now L2s can fall back to posting their block data to Ethereum in case data cannot be posted to Celestia.
Arbitrum DAO has approved a $23.54 million one-time “backfund” to support 26 projects that missed out on its initial STIP round.
Synthetix’s founder is proposing to end $SNX inflation. If approved, the inflation will be reduced to zero in the claim week following the vote.
Osmosis, the largest DEX on Cosmos, and lending protocol UX Chain are proposing a merger. There’s another proposal to make Osmosis the home of Mars Protocol as well
Aevo announced the aeUSD. It will allow users to earn 4.75% APY on their exchange margin whilst trading with 20x leverage.
Balancer announced V3. It is said to introduce brand-new features, pool types, and tooling for the DeFi market.
Hashflow 2.0 is live. New and improved UX, Smart Order Routing, and Solana expansion are said to be the three main features of the upgrade.
Jupiter, a DEX aggregator on Solana, revealed the airdrop allocation for different wallets. It seems like Solana airdrop season is here.
Evmos is discussing burning mechanisms for their token. In general, burning mechanisms are good for price because they’ll reduce the token supply.
RARI Foundation announced the RARI Chain. It is a new L3 chain built on Arbitrum. It’ll focus on catering to the creators.
📰 Industry News
French Court set the Platypus Hackers free. The court didn’t find their use of publicly accessible smart contracts a criminal activity.
Kyber Hacker demanded full control over the off-chain Kyber company. And has set December 10th as the deadline. This is wild even by crypto standards.
FTX and Alameda Research wallets moved crypto worth ~$10.8 million to different CEXes. Around 8 different tokens were transferred.
SEC was warned by a Federal Judge for trying to freeze a crypto firm’s assets under “false and misleading” pretenses.
Mantle started Mantle Moonshot. It is a 4-week long series of missions 19k CoM NFT add-on traits & protocol revenues can be won.
🧠 Twitter Alpha
- More Info on ETF Approval dates.
- Market expectations for Fed Funds Rate.
- AI Agents running USDC transactions.
- New Arthur Hayes article.
- “Trading In The Zone” Book recap by Taiki Maeda.