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\u201cif you told me two years ago that everyone who bought a bored ape would have now lost 200K and gone blind, i would have said \u2018yeah, probably.\u2019\u201d<\/p>\n
\u2014 MNateShyamalan<\/a><\/p>\n<\/blockquote>\n
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2023: Our Dumb Year<\/h3>\n
We shot our mouths off a year ago<\/a>, and again in March<\/a>, and made way too many testable predictions for a good psychic. How did we do?<\/p>\n
The crypto collapse that began in 2022<\/a> with the collapses of algorithmic stablecoin Terra-Luna and crypto hedge fund Three Arrows Capital continued \u2014 with failures such as investment firm Genesis<\/a> (a massive bad loan to 3AC) and custodian Prime Trust<\/a> (who were playing Terra-Luna<\/a> with customer funds).<\/p>\n
We predicted the US regulators would go absolutely feral now that the Blockchain Eight<\/a> in Congress weren\u2019t actively hobbling them from going after the crooks. 2023 was the year of regulators cutting loose \u2014 with not only multiple SEC and CFTC actions but FinCEN and OFAC taking on crypto money laundering.<\/p>\n
2023 was also the year of Sam Bankman-Fried! Just not in the way he was hoping<\/a>. FTX<\/a> and Celsius<\/a> turned out to be even more screwed up than anyone had thought possible. The world found out how Effective Altruism works<\/a>! It\u2019s rich assholes making excuses why greed is good. Plus, we assume, some good people.<\/p>\n
Various exchanges tried to step in to replace FTX as the dodgy crypto futures exchange of choice \u2014 Wintermute<\/a> and Justin Sun\u2019s HTX (formerly Huobi) both had a good go. But really, it was mostly just Binance. Even BitMEX, the OG derivatives platform, is way down on volume.<\/p>\n
The big money got shy. US commodities traders like Jump Trading found there was a bit too much regulatory heat<\/a> around crypto, so they are pulling away from the business.<\/p>\n
Stablecoins weren\u2019t stable. Binance USD was shut down<\/a>. The Pax Dollar is still around, though it dipped to 85 cents<\/a> at one point. Circle\u2019s USDC issuance has halved. Tethers keep magically appearing from nowhere.<\/a><\/p>\n
Crypto media is still screwed, as we noted in our most recent crypto collapse newsletter.<\/a><\/p>\n
Hoo boy, did we call trouble for banks that let crypto in the door. Crypto caused a historic string of bank failures in 2023, taking out Silvergate<\/a>, Signature<\/a>, Farmington\/Moonstone<\/a>, and Heartland Tri-State<\/a> \u2014 and Silicon Valley Bank\u2019s collapse put USDC\u2019s backing reserve into danger.<\/a><\/p>\n
The bitcoin price went up, in a totally organic fashion!<\/a> Helped by five billion tethers printed from nowhere. So we missed on that one. Fresh new dollars still failed to show up in the crypto trading market, as Coinbase had to reveal to the world<\/a>. The public still hates crypto.<\/p>\n
Crypto didn\u2019t come up with anything stupider than NFTs \u2014 but with ordinals, which have been clogging the bitcoin<\/a> and TON<\/a> blockchains, they\u2019ve come up with a stupider NFT.<\/p>\n
The only prediction we really missed was that Binance or Tether would be taken down. Neither was completely shut down in 2023 \u2014 but they\u2019ve both been co-opted by the feds,<\/a> which is halfway there.<\/p>\n
What we\u2019re pretty sure will happen in 2024<\/h3>\n
Binance is the largest crypto exchange and it runs \u2014 or ran \u2014 on money laundering.<\/a> Founder Changpeng \u201cCZ\u201d Zhao and Binance both entered a plea deal<\/a> with the US Department of Justice in November 2023.<\/p>\n
We predict that Binance is going to have an extremely hard time complying with its new monitoring obligations to FinCEN, let alone running a sustainable business if it can\u2019t bank for crooks. If Binance doesn’t file for bankruptcy or get forced into liquidation, we expect it to greatly diminish.<\/p>\n
If Binance complies at all, the past data on their customers should be a treasure trove for the feds and a disaster for bad actors in crypto.<\/p>\n
CZ, who is stuck in the US while he awaits sentencing in February, is likely to get an actual jail term \u2014 or supervised release at an absolute minimum. He\u2019s not just walking with a fine.<\/p>\n
Regulators aren\u2019t letting up. In the US, the SEC, the CFTC, and the New York Attorney General are on a roll, viciously applying things like \u201clong-standing laws\u201d to crypto firms. We anticipate more enforcement suits and criminal indictments in the New Year.<\/p>\n
The SEC will approve a cash-create bitcoin ETF<\/a> in 2024 \u2014 and it will fall on its butt(coin). The SEC will not approve an in-kind ETF. There won\u2019t be a drastic flow of new cash into these ETFs.<\/p>\n
Sometime in April or May 2024, the next bitcoin mining reward halving \u2014 to 3.125 BTC per block, from the current 6.25 \u2014 will mean the bitcoin price would have to be at least $60,000 for mining to be sustainable. Texas can\u2019t subsidize this<\/a> forever. Several more miners will go broke<\/a>, and good riddance.<\/p>\n
Crypto will keep trying to pump itself up \u2014 expect lots of tether printing and a string of bitcoin pumps.<\/p>\n
What we\u2019d like to see happen in 2024<\/h3>\n
Tether executives should<\/i> finally get nailed. We would love to see another Liberty Reserve<\/a> \u2014 the company\u2019s executives indicted and its website seized by the US Global Illicit Finance Team. But we\u2019ve been saying that for a while. Perhaps Tether can sell out to the feds fast enough.<\/p>\n
Coinbase should<\/i> substantially lose against the SEC<\/a>, which has been extremely strong on the separation of securities functions. We expect Coinbase to survive, but in a diminished capacity. Their main hope is that a bitcoin spot ETF will be successful, and they can make a bit of money as a custodian. Otherwise, we don\u2019t see much of a future for them.<\/p>\n
Kraken, which the SEC similarly came down on in 2023<\/a>, will likely have to figure out some new business model. There\u2019s no future for crypto exchanges in the US. The regulators are gunning for the entire business.<\/p>\n
We have no idea who\u2019s buying MicroStrategy stock (Nasdaq: MSTR). Michael Saylor\u2019s company is still<\/i> buying bitcoins! It\u2019s like a bitcoin ETF you can\u2019t cash out of, but even worse than Grayscale\u2019s GBTC.<\/a> In any sane world, Microstrategy would be broke already.<\/p>\n
We doubt the public stink has come off crypto enough for the big guys to pump a fresh bubble into existence by the end of 2024 \u2014 but we don\u2019t want to risk underestimating human stupidity here.<\/p>\n
The future of AI<\/h3>\n
Lots of blockchain companies have been pivoting to AI<\/a>, the new buzzword. The current AI market<\/a> is an attempt by venture capitalists to pretend that tech is still in a zero-interest world. It just isn\u2019t. The bills are going to come due.<\/p>\n
We foresee AI companies getting obliterated with copyright and trademark claims \u2014 the obvious consequence of training your models on other people\u2019s work. Some of those people have considerable legal resources.<\/p>\n
The dumbest people you know<\/a> are going to rant against Luddite boomers like yourself for not buying into their nonsense. These people will pivot to another tech at the slightest provocation. Just look at the Twitter posters who pivoted effortlessly from NFTs to AI \u2014 and then to superconductors for a few weeks, based on two irreproducible lab reports.<\/a><\/p>\n
ChatGPT will not turn the world into paper clips. That\u2019s Microsoft\u2019s job.<\/a><\/p>\n
And in conclusion:<\/h3>\n
(taps the sign)<\/i><\/p>\n
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Image: Snake eyes dice<\/a> by Dennis Hill from Wikimedia Commons, CC-by<\/em><\/p>\n
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