Concentrated Capital - 15 Years of Crypto Theses, Market Update
Sharing crypto education deck prepared for YPO chapter, feel free to reproduce. State of the (bear)market
YPO chapter educational event
I’ll be honest I wish I’d updated you, my readers, more often. Last month has been busy and fun. I’m running a deep research and continuing to flesh out my thesis, it is coming together nicely and I’m asking you for some more patience to get to it.
Meanwhile, I had an honor to be invited to YPO regional chapter with a task to educate and bring up to speed the group of highly successful entrepreneurs with businesses outside crypto and often outside digital at all.
It isn’t a simple question, how could I condense all the crypto context into a single 30 minute keynote. Luckily I was also in the process of deepening my thesis and was solving a similar problem: reflecting on the overall journey of all of us as an industry and where it leads us to next.
I’ve selected the following structure for the keynote:
First of all, key innovation that gave birth to the industry we know. It always starts with a breakthrough idea and a nonlinear distribution of it, infecting the world
That key idea unleashed the Cambrian explosion of experimental applications of it, some of which were sticky and some didn’t work out
These experiment directions move over their lifecycles and stages of maturity: Solidified, Established, Emerging.
Sharing the deck with you, it gives a bird’s-eye view of the industry and what we were able to achieve in the last 15 years. Feel free to borrow and reproduce if you ever have a similar goal.
I am proud of how it turned out to be, 10 days preparation was worth it. Please click through if you didn’t.
Market Update
Thesis holds
Our Four Year cycle thesis holds since formulated end of November.
TGA
Although we expected the Treasury General Account to be spent rapidly after shutdown reopening, the government isn’t rushing into emptying it. After the modest drawdown of $200B it began to even get refilled and is sitting back at $1T mark. As a reminder, funds sitting in this account is a liquidity withdrawn from the system and funds spent - liquidity injection.
This partially explains short term crypto weakness and inability to take the 104/110k levels back despite liquidations being unbalanced in a record level
Liquidation map
New Fed Chair and thesis
Meanwhile one big risk to our thesis has been mostly addressed: new Fed Governor pick. To reiterate, the risk was that the new fed would play the Trump promises of running economy hot. Lowering rates alone wouldn’t do the trick, but massive expansion of Fed balance sheet might have been so impactful that it would invalidate our thesis of weak 2026.
The chair pick Kevin Warsh is known for being a vocal advocate against balance sheet expansion. But keeping the rates low. Which is good for our thesis and short term bad for risk assets.
The market has incorporated this sharply with Bitcoin breaking sharply down towards $81k level and triggered historic pop of the commodities markets. It was always meant to pop at some point, the announcement just helped a little.
You can follow condensed train of thought of the new Fed chair here:
and here
Iran
Another short term risk to the markets is Iran escalation. Two weeks ago when protests suddenly broke out US vowed to support protesters if force would be used against them. US ended up being loud but backing down last minute due to the lack of forces in the region: military was busy with Venezuela and other groups. Since then carrier groups and battleships were given orders to arrive in Middle East, this buildup is close to the final stage and we expect the Round Two of the tensions to take place in February
Will be back soon
Spending time reflecting on the crypto industry evolution and putting together the deck helped me sharpen the thesis. Looking forward to getting back to you with it updated.