Defy the Banks and Ponzis. Also, is Jim Cramer Wrong Again?

Level 1 - NGMI

Welcome Avatar! We’re not here to convince you on the direction of the crypto market over the next 48 hours. In the end, everyone you talk to will have an opinion on where the market is heading and we’re more than happy to give that out.

The bigger thing we do want to ask, is if the technology of DeFi is sound?

This is the “billion” dollar question especially if we look at the global financial system as a whole.

DeFi Signs of Life - Market Cap

Source

As you can see the industry is showing signs of life. Going from $34 billion to $45B since the start of the year (a 32% gain) (BTC up around 37% and ETH up about 35%). Directionally, by looking at this, the conclusion is that you’re better off avoiding the alts. There is just one problem with that logic. If you look at the market capitalization changes, we can delete out the dead projects with no shot of recovery!

Simply filter for the better performing coins (avoid any that had specific news that day) and you get something that looks like this.

In simple steps:

• Look at the top 50 or so performers since the start of the year

• Avoid any hype/meme coin that had a special announcement

• Look at the bottom 100 projects or so and simply delete out the blatant zeros

What you’re going to be left with is the following:

• A set of coins that survived the bear market (thus far of course, to avoid market predictions)

• Projects that are likely doing slightly better than spot ETH/BTC due to the sheer market size of the coins

• At minimum, information on what type of announcements are considered valuable to crypto

Mathematically, these coins would be doing better than ETH/BTC and just like the prior cycles and prior booms/busts you’d have a list of the “good companies”. Even companies like Amazon looked like they were going to zero and were relatively quick to recover after the tech crash in 2001.

The Market can be strange in short time frames. That said, it does tell you who the major winners are if you can wait it out and keep your cool for a few months. Even if you bought in June of 2002 you were better off than all of the fake companies from the tech bubble.

Conclusion: As you can see from this exercise alone this leaves you with the following question: “Is DeFi a Fad?” If you believe it is a fad and will never work then that is one thing. If you believe that it is isn’t a fad and has proper use cases, then read on as we’ll outline some interesting things over the past year (despite one of the worst market cycles in history!)

What Does DeFi Do?

For those that want a bigger longer explanation you can start here. For those that do not need the long overview we can consider the following:

• Smart Contracts: We know “ETH is a scam” to the bitcoin maxis. That said it is the only real decentralized smart contract system that works.

  • Meanwhile, Saudi Arabia announced that it will accept non-dollar currencies for oil (source) and the UAE stated that a key role for crypto was available (source)

    • Bitcoin could be used but what is the main issues with Bitcoin? You can’t unsend the transaction. There is a push function no pull function

      • What does DeFi do? It allows you to create a smart contract that releases based on signed contract of pre-set rules. Which is exactly how commodity contracts work (contracts is even in the name!)

• No Bank Run Possible: We’re well aware that Blockfi, Celsius (not the caffeine drink Iguana probably drinks all day), LUNA and Voyager all went to zero. We’re also aware that NEXO is likely a zero after the investigation. This was all known because it was CeFi it was not DeFi.

  • The DeFi projects? They actually worked and worked well. This may make some people upset as they were over levered but the contracts executed correctly. Look at Alameda Research as an example. SBF was able to get away with a wide range of illegal activity. However, even his team was not allowed to “by pass code” - debts due to DeFi protocols were either repaid in full, or liquidated for $72,000 (Source)

    • This is important to us because it shows that even the most powerful people could not override the contracts. It was correctly run and there was no “bank run” possible due to the operation of the protocol

• Lending on FX: The last one is a bit futuristic. Right now you’re probably saying “okay it is safer than CeFi but that doesn’t mean much”. It sure does. CeFi is exactly how a traditional banking system works with the backstop of the government printing trillions

  • Now that Russia/Ukraine happened, countries are aware that sanctions could cripple their economies, if you want to create the same trade agreements without being forced to use centralized banks what would you do?

    • You create a stable Ruble and a stable Dirham. Now you can begin to blend the two worlds on chain with no sanction risk. Scary stuff but 100% possible at this point

At this point you can see where this is heading. While it is certainly possible to deal with large numbers and have BTC push functions, the more likely scenario is that governments as large as Russia do not want to simply “give up” their currencies. They back a stable Ruble and use that on chain. Both parties feel like they have control of their unit of account. Control is everything when you are dealing with billionaires. If you 50 year old boomer boss micromanages your life for 40 hours a week just imagine the intensity of a Saudi Prince.

Conclusion: Price changed in a dramatic way. Various scams have taken DeFi down even more than it should have (LUNA and CEL are not DeFi they are CeFi!). The bigger question is if the use case changed as well. Making the same internet parallel when Amazon crashed to nearly $0, did that mean the fax machine was slated for a comeback? Betting on the past rarely works.

Is Jim Cramer Right

We’re sure you’ve seen this gif circulating crypto twitter at this point.

Shan Belew Ⓜ️🕸 @MASTERBTCLTC

Jim Cramer wants you to sell

He also stated to buy Gold Instead of Crypto Here

That said, the question is still the same. Forget what Jim is saying. Forget what anyone else is saying. It’s better to look at the fundamentals of what DeFi actually does and ask if it solves a real world problem.

Our answer to that of course is yes, since we’ve spent our waking hours using it and realize there are many use cases that would reduce the need for middle men and shrink the friction in international trade. It takes days to settle a wire transfer and if you’re hoping to settle complex futures contracts with multiple currencies it would not make life any easier. Much better to use a system that can’t be meddled with vs. putting your trust in the hands of any individual. Which was the original purpose of crypto on day one.

Conclusion: Does the mainstream media understand what crypto does? Do they use DeFi and know the difference between BlockFi and Maker/Aave?

These are questions for you. The other question is if you think adoption will grow 3, 5, 10 years from now (not tomorrow or next week). Conviction is what matters.

If you’re interested in staying up to speed on all things DeFi then you know where to find us anon.

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Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are opinions from an anonymous group of cartoon animals with Wall Street and Software backgrounds.

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