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The End of the Deflationary Asset EraDeflationary assets - aka artificial scarcity - is a product of the mediocre mind. Exponential growth and real social progress comes from the idea of "growing the pie". It's weird how people don't use that phrase anymore since it has become such a foreign concept at this point. Bitcoin  (and now Ethereum), NFTs, real-estate (both IRL and the metaverse), healthcare, education, and the economy as a whole has succumbed to the "scarcity mindset" and is in danger of collapsing on itself since it doesn't know how to grow its ecosystem from its base. Those mythical 100000x returns doesn't come from flipping or nickle-and-diming individuals but from growing the ecosystem as a whole. To keep the good times going, the response should be to increase capacity, not try to ration out your existing stock. Ethereum was particularly disappointing to watch this year because they had the capability to be so much more but chose the mediocre path when they started burning their own supply. Like Bitcoin, they put an expiration date on themselves and can now only expect modest returns from here on out. To be fair, "growing the pie" is very difficult and requires a higher degree of creativity and ability to spot new win-win scenarios from seemingly thin air. But that's why we have geniuses and entrepreneurs to fill that role that typical biz-dev types are unable to do. As the scarcity economies continues to do what it does - shrink - it's unfortunately going to take innocent bystanders with them. We're going to find that most of our tax dollars have been working to keep the illusion of sustainability rather than of real growth. But the silver lining is that as the status quo continues to implode on itself, the opportunity to grow the pie once again becomes possible. It's a cycle that has happened before and will happen again. With that, it's at least possible to navigate through the chaos. Good luck, folks. 🤞
BITFINEX:XTZUSDLong
by RyanTanaka
Too Good To Be True? Staking Rewards and the RecessionAs some analysts have predicted, the public's interest in crypto/Web3 projects have shifted from proof-of-work over to proof-of-stake, following Ethereum's "merge" a few weeks ago. ATOM and ALGO in particular did very well this week (though it did level off eventually) as what seems to be a partial migration of crypto money flowing from one area to the next. The pattern is just starting now so time will tell if it's a trend or a blip, but as we head further into a global recession, the idea of people "abandoning" stocks and other traditional fiat assets becomes more a possibility over time. We can look at some of the predictions being made right now in the industry, and its pros and cons. 1. Crypto Will Go Down With Fiat Given that crypto and the stock market have traditionally moved in parallel for the most part, it will continue to do the same during the downturn. This assumes that the low-interest rates of 2008+ onwards was also fueling the crypto hype and will follow the same pattern of prices plunging as cheap borrowing falls to the wayside. While there's certainly a case there, this assumes that the economy will behave "as normal" during the next downturn - which may bring a different type of risk to the table. 2. Money Will Flow into Bitcoin/Ethereum This is the main mantra of the "maxis" out there - they assume that people will lose faith in fiat as a whole, and convert their stocks/cash into a "reliable deflationary asset" like Bitcoin or (now) Ethereum. Deflationary assets - while some will call "ponzi-like" in its modeling - do objectively favor existing holders over newer ones, and can often cause problems with onboarding and long-term growth since it makes it more difficult for new money to come in. Given the two projects massive media/marketing presence last year, are there any more people out there to onboard? Probably not - but they are holding out for the idea that they will be proven right, one day. 3. Money Will Flow into "Cash-Like" Assets Like Dogecoin Traditional financial wisdom says that during recessions, "cash is king" - and we have seen some indication that money is starting to flow back into cash, especially the USD. (The USD is traditionally seen as the most "stable" and is typically where fiat assets flow into during recessions.) What does this mean for crypto? Well, up until now the narrative has been that out of the well-known coins out there, Dogecoin is the most "cash-like" since it's been actually used to buy and sell things at low costs. While the idea is interesting, DOGE has a few problems associated with it - that it still runs on proof-of-work (which is losing favor over time) and that being a fork of Bitcoin, it's technology is also being rapidly obsolete. (It cannot support NFT minting, for example.) There are plans for DOGE to move over to proof-of-stake eventually, but the timeline is TBD. 4. Money Will Flow into Staking Rewards As with ATOM/ALGO this past week, some lesser-known proof-of-stake coins have made its move - currently coins that offer competitive staking rewards are beating both the banks and the major proof-of-work coins, whom are simply unable to offer those types of rewards. ETH2 is now technically proof-of-stake, but its staking mechanisms aren't "liquid" - i.e. you don't know when you can get your money out. Some coins offer very high rewards (13%+) but is that too good to be true? Time will tell whether or not this model is sustainable or not. 5. Money Will Flow into Coins that Have Utility Arguably crypto's least talked about topic in public - coins that have real-life use-cases and actual products may start to see some gains as utility creates new converts over to particular projects. As the money for hype marketing strategies start to run low, many of the coins that have been running on it will start to drop out, making it easier for coins with real customers and revenue to stand out. Some coins have no value other than "store of value" - some coins have robust DeFi options but basically operates like an accounting firm - but there are a few projects out there that are attempting to expand into the worlds of direct applications. This is probably the most optimistic take on Web3's future as a whole, but the path of getting there isn't likely to be smooth - they don't call it "creative destruction" for nothing, after all. Of the projects out there, Tezos (XTZ) stands out as one of the few projects that have their hands in "everything" - with a diverse portfolio of projects in many sectors and brands across the world. (ETH does too, but their gas-fee problem has slowed technical and partnership development to a halt.) -- The actual outcome will probably some combination of the trends above, and is likely to get very complicated as time goes on, but I do think that it's important to keep an eye out for how key factions and ideas are circulating in the space right now since a lot of things are likely to change very quickly in the near future as we head further into what could potentially be the biggest global recession ever recorded in human history. "Higher numbers = good" has been the main focus of the crypto industry up until now but as time goes on we're likely to see more complex and nuanced takes on how the economy works and how Web3 fits into it as a whole. There might be some growing pains involved but this is how our understanding of economics matures, imo.
BITFINEX:XTZUSDLong
by RyanTanaka
How Governance Affects a Cryptocurrency's Coin Supply and PriceAs of last year, the top 3 most well-known coins - Bitcoin, Ethereum, Dogecoin - have all become "predictable" in terms of its coin supply. BTC has always had a fixed supply cap, ETH has become aggressively deflationary after its EIP-1559 upgrade started "burning" its supply, and Dogecoin is technically "disinflationary" since the rate at which the protocol issues its coins is set to slow down gradually over time. (People have estimated ~5% going downwards to 1% or less over the course of many years.) What all 3 coins have in common: 1) the supply curves for these coins are fixed and predictable 2) political leverage correlates directly with the ownership of money itself 3) the economic trajectories of each coin are basically unchangeable without some sort of centralized control Bitcoin and Dogecoin's protocol decisions are handled by the mining community (they decide which blocks to continue mining, in case there is a disagreement), and now that Ethereum has moved over to proof-of-stake, most of its major decisions will be decided by the core team itself. With proof-of-work, hash power is political leverage, with proof-of-stake, the coins itself does the same. While maxis focus on the differences between the two, at the end of the day, leverage over the system is measured in terms of how much resources you're willing to spend on your particular "vote" - it just depends on which you prefer - hash-power, or money-power. To be fair, this is how most coins operate right now since it is currently not possible to reliably do a "one person one vote" model (as is typically done in developed democracies) since identifying an anonymous wallet as a "person" is extremely difficult. So as a lesser evil, we use money-invested (aka your "stake") as means of measuring how much influence one should have on an ecosystem as a whole. (In this regard, most cryptocurrencies are similar to corporate shareholder models.) Until we have a better way of identifying people online as being "real", we're likely to be stuck with this model for a while, but not all coin systems are created equal - some will probably have better long-term viability than others. And a lot of that will be determined by how each coin handles its governance procedures. Proof-of-work systems right now have no means of reliably doing voting/governance on-chain - as a result, most coins opt to do their voting through third-party systems or platforms. While this can sometimes work, there is no "receipt" of whether the tally was legitimate or not - you just have to trust that the people conducting the polls were doing it in good faith. BTC/DOGE has never had on-chain governance and likely never will, while ETH currently possesses the potential to do, but seems unlikely now that it has also become deflationary. The "fixed supply" argument is similar to the "buy gold" argument in that there is an inherent distrust of supply curves that are "flexible" - the idea that when there is less of something it's going to be worth more is an intuitive argument that makes sense to a lot of people, at least on the surface. But ideally, you want the price of a coin to go up because there's more demand for it, rather than inflating it artificially by burning your supply - the less there is of something, the more out of reach it becomes for newcomers and people will less money, after all. So when a project puts "fixed supply" as part of its core value proposition, it's basically prioritizing the short-term appeasement of existing holders at the expense of future growth. We see a similar type of scarcity mindset (the "I got mine" syndrome) in assets like real-estate and gold as well, which are also both about to face corrections of their own. An asset starts to "bubble" when prices increase but quality goes down - then "pops" when the demand for it bottoms out as people realize that it's not worth it. Ideally, you want the economy to be flexible enough to handle swings in demand/usage, while keeping incentives aligned between all parties (investors, validators, users) at all times. It requires a very careful balancing act that exists somewhere in between fixed and infinite supply - and even better if these decisions are made through consensus mechanism rather than a unilateral decision made behind closed doors. (Tezos' self-amending protocol, combined with its on-chain governance system stands out as unique in this regard.) -- So what to do if you're an existing HODLer? Well, short to medium term, coins like Bitcoin, Ethereum, and Dogecoin will probably maintain their price as long as people come see it as a viable alternative to traditional assets as we get further into the recession -- that's the big bet that many are taking right now. But it does come with the understanding that it's probably only likely to happen once or twice more before the market saturates completely and hits its peak. Here crypto is at a disadvantage compared to assets like real-estate or tangible goods, since there's nothing forcing people to use BTC/ETH in particular - there are many other options in the market, after all. For more discussions about coin supply issues, here: www.reddit.com
COINBASE:XTZUSDEducation
by RyanTanaka
XTZ at $1.66 as bullish momentum inflatesTezos price analysis shows a bullish bias trend XTZ prices have sought support at $1.64 Resistance for XTZ is present at $1.74 Tezos price analysis is bullish, with the XTZ/USD pair rising to the $1.69 level. The price action recently created a bullish engulfing candlestick pattern, which indicates that the bears are losing control. Currently, the price is just below the channel’s upper boundary at $1.74. A breakout above this level could see Tezos target the next resistance level at the $2.00 level. On the other hand, a failure to move past $1.74 may see the price pull back to test support at the $1.64 mark.
COINBASE:XTZUSD
by henryartem