ETH might be about to do a GME
Firstly, this is not financial advice, rather the ramblings of a madman, who is observing even madder markets, and is probably wrong.
Tl;dr at the bottom.
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Where are we at now?
Essentially we are the mid-clown stage of the cycle. BTC is going sideways and everyone is bored of it now, even at the time of writing Elon is tweeting garbage to keep us entertained. ETH, and some ‘better’ shitcoins are going up at a reasonable rate, whilst the dogeshit is going mental.
Based on macro environment and legacy markets, which BTC is now totally in kilter with (as a high beta product) due to institutional takeover from autists on the internet, there’s no expectation that it will a) continue its previous gains (10x or whatever since 2020) over the forthcoming months … or b) die a sudden ‘death’ like 2018, barring a black swan. Even the most ardent of BTC bulls are calling for (only) 70k “soon”, and Saylor will keep dip buying. I think it’s most likely we range for another few months before markets set a direction (my guess: up).
So what does that mean for the rest of crypto? The clown will continue until BTC either shits the bed or suddenly drives to the upside, grabbing liquidity. “Alt season” if you like.
My hypothesis is that ETH is about to go totally mental and see a squeeze/bubble akin to GME. This will be the retail version in crypto.
Why?
Everyone macro fund is rotating into ETH
Everybody is talking about this, it is not unknown. See examples here, here, here and so on. So demand is bigger than ever before from big boys, but this is new for ETH.
Current supply is being locked up and not sold
ETH is being used as collateral. You can take your ETH, send to FTX, and long all the shite you like. Or if you like, you can put it in protocols like Maker, Aave or Comp and borrow DEFI tokens against that collateral. You can then take that borrowed (say DAI) and buy even moar DEFI. It gets better though, because you can then take all those DEFI tokens and use them collateral in exchanges or other DEFI protocols. It’s likely that multiple new billion dollar ecosystems will be built on top of ETH without ETH ever being sold. (do not research what will happen if this starts to unwind, that is the other side of the trade, which will come)
Future supply is about to decrease by 90%
ETH is going from an inflationary to deflationary model. They are literally changing the supply economics to enable lower fees. This will result in a 90% reduction in issuance equivalent to 3 consecutive Bitcoin halving events, it is utterly balmy (source).The net annual buy pressure of PoS and EIP-1559 relative to today is greater than the deposit contract and Grayscale holdings combined (source). Most validators will just collect ETH and not sell. Daily sell pressure will go from 22.3k to 2.6k per day. There are estimates that up to 70% of gas spent on a transaction could be burned. The result will be a giant liquidity crisis. 1970s OPEC tokenomics. You get the idea, call it what you like, a high school kid could tell you what will happen when demand stays the same (or likely increases, with resulting fomo), and supply decreases (by a currently unfathomable factor).
There are no sellers left anyway
All ETH has been leaving exchanges for months, as shown above, and is either held in cold storage or locked into yield vaults.
No one can even sell if they wanted to as gas fees are a joke
Open metamask and try to send some ETH now I dare you. You need to be a millionaire to transact on ETH, most people have small amounts and will not start sending it to exchanges to sell. They’ll just hold it as an ‘investment’.
ETH PoS is ‘green’
Obviously the hurr durr muh fossil fuels argument is total Western liberal rebbib nonsense, but TSLA is no longer accepting BTC due to fossil fuel consumption. ETH will cut its energy consumption by 99% when it moves to POS. People with money like this stuff, it creates a narrative.
We are at peak retail
Coinbase is #1 in the US and European app store at the time of writing this, what the fuck. More demand. Sleepy Joe will keep airdropping more money to more people too, and a lot of it is going into crypto.
Current rise is spot led
Quite a peculiar observation is that few people are longing ETH perps, and so on. As stated before, institutions and funds are buying spot, the fomo is not here yet.
No one is actually longing it. This has been the case for a while.
There is huge open short interest which is fuel
Only Finex publish this, but hmm, where have we seen this before?
BTC/ETH key levels about to get busted
We are now approaching borderline meme arguments but memes are very important in creating narratives.
So there’s historical resistance here. But what happens if we just blast through? Few talk about this…
ETH has better use cases than ever
In 2018 ETH was used as a ticket to the shitcoin casino. We still have a shitcoin casino, but now with DEFI, NFTs, and other actual use cases, ETH is somewhat ‘valuable’. Again, you can argue until you’re blue in the face if ETH is useful or not, but the argument that it is is stronger than ever.
Flippening argument
As above, who cares about if the argument holds true or not, let weirdos on twitter debate the flippening, we are interested in what happens if people believe it. I don’t want to know the answer, I want to know what the majority of people intermittently believe, and profit from it. The thesis for ETH ‘flipping’ BTC is bigger than ever. Do you want to be right or do you want to make money? Arthur Hayes basically leaked his DMs with Su Zhu of 3AC and he believes the chance is 50% (Hayes puts it at 30%).
We are in price discovery anyway and it’s happened before
$4000 at publishing, who knows what the true price is?
Happened before in 2018. With BTC, many times. Open a book, we will repeat again, life always does, it is the way.
The most likely outcome is the funniest
[in John Oliver voice] it’s the current year.
Tl;dr /conclusion
We are about to enter peak demand. As outlined above, on paper you have the best scenario and narrative ever for investing in ETH, institutions are buying like never before, and retail is about to go full fomo.
On the supply side, you have a grey-swan style radical tokenomics change, at a time when almost noboby is either willing or able to sell anyway.
As Nikhil Shamapant (@squishchaos) put it: What drives [ETH] $150k? Increased illiquidity, increased demand, catalyst, narrative adoption.
Will this happen? Probably not. These events are very rare. But if you’re a gambloor, the +ev bet is to play it. This is an entirely new asset class with as of yet undiscovered squeeze mechanics that can not be comprehended when compared to traditional markets. There’s no playbook here. In terms of the bet, I prefer a combo of opening deep OTM calls, and leveraged longs, or ETHBULL token, rather than holding max spot - as am 60 IQ brain so probs wrong and we slow bleed to zero and end up wageslavin’.
