All Been Crypto — Week 26 Jan 2024

Another week market rolling over with BTC dipping blow 40k but then recovering somewhat ending the week -2% ETH underperforming -10% and biggest losers BTC MEME inscriptions ORDI and SATS -25% as the excitement seems to be cooling off. Big finger pointing towards why post EFT we have been down only is on GBTC where we continue to see large outflows that could continue for a while. So far we saw 4bn outflows and of the 25bn the fund is holding and while overall net inflows were still larger 500mm inflows the fresh minting has slowed faster than GBTC outflows. In other news Nexo is suing the Bulgarian government, we had ALT airdrop, the craze about EigenLayers restaking points entering feverish levels, Ether execution client Nethermind had a bug, and Tornado Cash founders raising for a legal defense fund. Enjoy reading!

Bat Tai Chi — btc21@mail.com

HEADLINES:

GBTC outflows when will they end?

The narrative is slowly shifting from ETF will get everyone excited and pumped to this was a sell the news event and eyeballs are now on the outflows and bleeding from GBTC. We went from 25bn to 20bn now over the course of the past 2 weeks since listing and estimates are that 25–30% of GBTC would be redeemed quickly. Meaning that we would have another few weeks of this pressure. And while BitMex Research does a good daily here and of course Eric Balchunas who notice that the pace has slowed down a bit. If you wana dooms day well then we got chatter again about Mt Gox repayments hitting the market and US Gov also selling. Of course if you wana look at the glass half full there were >4.5bn of inflows into the new spot Bitcoin EFTs and overall even after GBTC outflows we still positive 500mm.That quite a few GBTC sellers were forced like FTX estate who sold ~1bn means that first of all they were front out of the gates so that has been depleted and second it means that of the fresh inflows a good junk is not just rotating from GBTC into cheaper options but actually new investors coming in. Blackrock continues to marketing although the old school way while Bitwise clearly listening to the audience. They have published their BTC address for the ETF so anyone can verify on chain that they actually have the assets. Not that it would matter much because actually non of the other ETFs have such transparency but it’s clear that they wanted to make a statement and folks loved it. There were quickly some ‘donations’ leading to a few interesting unprecedented questions about ‘overcollateralization’ so clearly great marketing.

Nethermind — renewed debate about ETH client diversity

Nethermind the second largest execution software for ETH validators experienced a bug this week. It was a manageable incident, but the episode revived a long-simmering debate in the Ethereum ecosystem around the need for “client diversity.” This is nothing new that Geth has >80% of market share and Nethermidn being second with 8%. There’s obviously reasons why Geth is preferred as it is considered the more robust one and has so far not had any major incidents but obviously client diversity is built for redundancy so that if something does happen then at least the network would not be impaired. This centralization and critical concentration risk is a common theme around ETH with Geth being one vector, flashbots and lido another two where efficient markets is pushing towards centralization but protocol is trying to enshrine redundancy and diversity. It’s also noteworthy that outside of Ethereum I’m not aware of any other major chain having this level of redundancy on the client software.

Tornado Cash legal defense fund

Roman Storm the co-developer of Tornadocash went to twitter and launched a campaign for raising funding for an ongoing legal battle. He together with Alexey Pertsev were arrested last year and charged with money laundering for their part in the creation of Tornado Cash. The defense fund has already received more than $350K and backing from prominent privacy figures like Edward Snowded but also Messari’s Ryan Selkis calling Tornado cash short of the most important project in crypto. Other supporters include Pablo Sabbatella, of security firm Blockfence, Ameen Soleimani, the founder of SpankChain, and Ryan Sean Adams, co-founder of Bankless.The case is about much more than crypto it’s about whether code is free speech and to what extent you can hold writers of code responsible for what users are later doing on a permissionless protocol. Unfortunately this will still keep us occupied for a while.

QUOTES:

If you can help, please help. Privacy is not a crime.

Edward Snowden

Ethereum is winning the client diversity war with many node operators committed to switching off of the current execution layer supermajority client (Geth). We should see Geth below 66% within the next couple of months. Bullish.

Anthony Sassano — Ethereum Researcher

2 years later… This [Canada court ruling Trudau’s Trucker protest freezing was unconstitutional] is why self-custody crypto is so important to freedom. The government can do heinous, immoral shit, violate the constitution, steal your savings, wrongfully imprison you, etc. and get away with it for YEARS before justice prevails.

Jesse Powell — Kraken Founder