Plodding Mediocrity (Part VIII)

These series are from April 2018

Goat Marathon

I had to provide too much information because we are not living in a sterile vacuum. You must get overwhelmed by all the interconnections, regulations, ambiguity and questions that are left open. The mess in the head becomes unbearable. Up until this section things were more combed. Here and afterwords I want to include things that didn’t make the cut for specific topics but which are current and interesting issues. In Goat Marathon I’d cover scattered things that are indicative of market players and situations that we should take a note of.

Inspiration: “Method is much, technique is much, but inspiration is even more.” - another quote by Justice Cardozo that I think describes and fits state of crypto community and regulators. Both sides are strongly focused on method and technique, but by following the herd we start to lack inspiration, and it is not ungrounded, looking at regulatory agenda weighting over the technological promises, it takes its toll on diminishing inspiration, while few regulators are inspired by bringing inspiration to technology as well.

I’d bring up Coinbase example for this. During all the turmoil that Coinbase recently faced: class action lawsuit, insider trading probe, Robinhood competition, IRS taxation handling, VISA technical issue, Ripple trade rumors and CFPB with 2200 complaints, it still is the largest industry player providing easy access to cryptocurrencies, it produced great talents for the industry and it is not afraid to move slowly by working with regulators, further legitimizing cryptocurrencies and pushing new products all along.

Market and Regulations: With so many news from regulators the market will continue to bleed hard, until technological issues overtake, or regulatory signals are interpreted differently, the longer market is vulnerable to regulatory news, the bigger and stronger the technological breakthrough should be. Large wave of investors already seems to be bought into crypto, low daily volumes are no indication to buying the dip, because dip subdued to the bear cycle and in bear cycle the only instrument that you can get ahold of institutionally is the futures contract. With current hibernated attitude where obsolete regulators do the talking and wise men observe, we risk to see market going down further. Those who hold crypto assets for their fundamentals will keep holding them even in regulatory uncertainty, fundamental believers will start questioning when technological fundamentals will be questioned. I found a tweet from Charles Hoskinson indicative to this sentiment “I rarely comment on price, but I will say this about the market. The price collapse you are seeing across all crypto is coming from fear over a regulatory crackdown, whales taking massive profits, thin markets, and inexperienced retail investors. No one can change or stop this”. I have a feeling this will eventually lead to a more sane and stabilized market, no need to see 500% gain in a month, something that is moving within double digit pace over a longer period seems okay.

Passing the bills: Regarding how things look between two parties in Congress - there is a sentiment that crypto will have sort of a bipartisan leaning bill to offer the congress, where both democrats and republicans are supportive to introduce regulation said Bart Chilton (ex CFTC commissioner now Omega One advisor). This gives an outlook that when elected officials will try to review any crypto bills coming to their offices, bill might not spark a fierce debate between free market supporters and Krugman-like preachers. Although crypto contagioning neighboring industries might become a concern to any elected representative who will then push hard on regulations and this will result in bipartisan a.k.a status quo enactment. But you can not urge these Senators and Representatives to give these bills fair share of attention, when they have more pressing and populist topics to address including FCC, trade, immigration, agriculture and wars among others.

Litigations: Now I want to bring up Tezos litigation example that seems to be over. I find that it is very interesting in the light of few factors, one that it has raised record amount of money, another that project wants to introduce governance model in blockchain and third the fact that this project was stalled by litigation. To summarize the story Breitmans (husband and wife behind Tezos) won over chairman (who conducted Tezos sale) of nonprofit foundation by settlement where chairman stepped down from the foundation. $232 million raised during ICO were frozen, no beta, not even tokens were distributed to the investors. Now with new chair Tezos project must start gaining more momentum. Fight started by the foundation chairman raising concerns that Breitmans tried to exert power over foundation. Now as things have cleared, Tezos is hiring and moving ahead with team of ex Goldman, Morgan and Bridgewaters. I’m generally interested in how project moves ahead and if it is able to provide a governance framework, but these things aside in future we should see more of a core teams breaking up, leaving projects and moving from one project to another. Most of the time big projects heavily rely on the founders and their vision and we vest our trust into their honesty to move these projects ahead. Of course some projects enjoy high participation and will withstand outflowing founder but in case of Tezos we see that some structures that can be legally binding between the founding parties can result in litigations that can stall promising projects, this further raises my concerns regarding what is the best legal structure to launch a project. I admit that we do not see this too often but this is a precedent and I’m taking a note of it.

Another piece of litigation news that caught my interest was that of Craig Wright (self-proclaimed Satoshi) or $10 billion worthwhile lawsuit. In this case, Wright is being sued by Kleiman’s estate (deceased partner of Wright) for IP and bitcoin appropriation. Seemingly fake signatures left Kleiman’s estate out of $5.5 billion in bitcoin ownership rights. Compared to Tezos litigation where this one will lead is hard to say, from the examples of Tezos and Wright, the ideology of founder anonymity in such decentralized networks prevails above mentioned risks, but the risk that it creates is that projects usually need a leader to move ahead, if they do not have such a leader they should be outstanding and disruptive projects as bitcoin was. Paying attention to who’s the author in a mediocre project is important, because a great leader might push the project, these kind of projects do not need anonymous founders. Widespread great projects that started dispersed and do not identify with a leader will be led by collective motivation, you can consider them as anonymous, by taking out central figures and legally binding relationship between founders, we remove risks of them running through disputes.

Twitterverse: Now the thing that seems most disturbing is the twitterverse of crypto nutheads. It looks like a pure kool-aid-drinking experiment, it is represented on almost all sorts of discussions and in tweet-tones, I’d rather see tweets that question grounded concepts, rather than a contest of the cynicism and wit. Another phenomena are twitter’s cryptolawyers who downplay serious topics due to their agenda or on the contrary spike up a mere news apocalyptically, there is no distanced approach that would provide an in depth analysis and that would challenge both regulators and crypto community to rethink their established models (like it’s been there for generations). Don’t believe anything you read unless you dedicate time and do the research around the issue, there are lot of publishers who are of a poor quality and who are widely followed, I’ve seen large number of people who read onion-like news and take their statements as truth, if we have fake news in broad media, imagine how distorted the news are in the community where redditors are the newsmakers. If you master the skill of DYOR (Do Your Own Research) you’ll end up in great places and I’d attribute DYOR skills to the way news around crypto are channeled - you always have to pull a thread, pick trusted resource and dig into the fundamentals. We don't get bored by twitter people, we get bored by the herdism they represent, and we do not seek a new luminary, we are just looking for a fresher perspective.

Blitz news: three jurisdictions with quick approaches to crypto: Israel told commercial banks that they should not discriminate crypto businesses and onboard them, Lichtenstein bank decided to offer you crypto and provide custody with it, Austria might move worrily towards crypto and regulate it as gold. As far as SEC’s enforcement actions go they halted arisebank ICO that did raise $600 million and scammed people in claiming they would buy FDIC-insured banks, many are still for some no apparent reason waiting for central banks to unveil “fedcoins” and lastly Salt’s loan demand being far bigger than what they offer.

Do you believe in crypto hippie fable that goes like this - Final step to anchor crypto’s position will be its full integration to the derivatives market. A roadmap will be - crypto IRA accounts, clearer regulations, bubble period past, insured accounts and ETF product offerings. Through derivative market crypto assets will finally stabilize to the point where stable coins and scammers will have no say, where price volatility won’t force honest players to move out benefiting hard core speculators, where spoofys won’t be able to work, because in a deep market, price discovery will be more efficient and not easy to manipulate. By decreasing volatility and making crypto a boring next door asset, we will read headlines about daytraders purchasing water futures contracts, shorting regions by megaliters at a time, while shorting bitcoin will not be exotic and prices will move more homogeneously, the hippie fable of free market and banking the unbanked will be in full action. There are just so many things that can go wrong.

law, finance, technologyGiorgi Gurgenidze