Market downtrends are never a fun experience. Since November 2021, we have been grinding downwards across all markets. Each time we get these opportunities, I have the same plan, slowly accrue more tokens, especially after going through the largest pump and dump in the world.
Global Currency Pump and Dump
Every single central bank has been endlessly printing money since the last financial crisis in 2008.
Why do I continually harp on this point?
It is going to end poorly.
Free money as a percentage of GDP. Most countries are operating above GDP, and some are as high as 200% of GDP. With interest, these debts continually get more significant and more unlikely to be repaid.
All countries are spending money they don’t have, with an average of 140% of GDP being spent. 140%, people.
2008 was the first taste of major bailouts, and we have been addicted since.
Little by little, they bought assets, slowly building a base and bidding up prices.
Then, in 2020, they pumped an absurd amount of free money into the market. Prices ripped.
After letting the printers go wild, central banks planned for a soft landing by selling 120 billion dollars a month worth of assets and raising rates at a breakneck pace. They extracted money from the system and left the neophyte covid traders holding the bag.
Central banks wiped ~$50 trillion off the world’s balance sheets, and significant legacy assets still have inflated prices. Can prices continue to fall before they get back to “normal?”
But what about Crypto?
ETH/USD
Ethereum is the most exciting token to watch for the next few months. The ecosystem has been changed with the switch to proof of stake. The incoming free supply of Ethereum has been reduced by 99% over the past 46 days, and the price is down from the ATH by about 68%. If we had not switched to PoS ~552,652.81, ETH would have been created instead of 2,433 ETH.
Change in supply from PoW to PoS. If you have not checked this out yet, visit Ultrasound.money for a fantastic dashboard on Ethereum’s transition.
If you have followed crypto for the past few years, Bitcoin's halving every four years is the only comparison to the considerable supply reduction. If we infer from price action around these events, Ethereum has a good risk/reward setup.
ETH/USD 1D chart. RSI is showing recovery from June. If you want to have access to indicators
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ETH has broken out of a year-long downward trend coming on the heels of the Ethereum Merger. The price range with the most volume is the 1200-1300 dollar range over the past year, and June’s dip into the 800s was very short-lived. Volume on this week’s breakout was some of the highest daily volumes since the defi cascade fall in June 2022 and May 2021.
Another point of value is staking versus mining.
With high mining costs for PoW tokens, we are seeing large Bitcoin miners failing left and right. The price to produce bitcoin is higher than the cost currently. These companies must sell Bitcoin to stay afloat or take on additional debt.
The world's biggest Bitcoin miner is going bust. This is what happens when Bitcoin trades below its production cost for too long.
3,838
With the switch to proof of stake, Ethereum no longer has massive sell pressure to produce mined tokens, and instead, more users are trying to acquire staking nodes. The percent of total supply vs. staked Ethereum is low compared to other PoS Layer 1’s at roughly 12% of the entire supply.
The largest PoS competitors have over 70% of the supply staked, and I see ethereum trending toward 40-50% over time. This would cause lower APY for stakers but, over time, would increase security and price as free supply is locked away. In the current environment, many individuals are still not participating in staking due to rewards being locked until the Shanghai update.
I am excited for what comes next for Ethereum as it is a great time to accumulate. If you are interested in more info about the merger. You can find out more through my previous article.
Please comment if you have any questions, and I can answer your questions further. As with all of my writing, this is not financial advice but my opinion. I cannot stress enough how important it is to do your own research on all financial endeavors. I hope these newsletters can help investors realize the current economic systems’ downfalls and usher in a more equitable system without intermediaries. Let’s build something together.
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