THE PHENOM CRYPTO LETTER

Hey there!

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Let me take a moment to introduce ourselves and give you a bit of background on what we're all about. We put out a weekly newsletter that dives deep into the world of digital assets. We're a small but passionate private investment company, founded by Eric Muschinski, and we've been in the game since we first started buying Bitcoin back in 2015. Over the years, we've grown our expertise and knowledge, always staying on top of the ever-changing landscape of cryptocurrency and blockchain technology.

I'm Will, one of the analysts here, and I'm the one who gets to write the weekly letter you receive. My job is to research market trends, analyze data, and provide you with insightful commentary and updates on the digital asset market. Our goal is to keep you informed and help you make smart investment decisions.

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Here’s what we’ve got for you this week:

• Roaring Kitty is Back!

• Is $ETH a Good Investment?

• Art of Taking Profits

• Tornado Cash Dev Goes to Prison

MARKET RUNDOWN

The market came alive again this week with a renewed excitement reminiscent of the good old days (memes stocks to the moon!). We also were reminded that goverment powers are increasingly attacking the space. Here are a few of the most notable developments affecting the market this week.

1. Sentencing of Tornado Cash Developer: The crypto world faced a stark reminder of increasing regulatory scrutiny over decentralized finance (DeFi) platforms when a key developer of Tornado Cash, a cryptocurrency mixing service, was jailed for facilitating money laundering. This event could set a precedent for holding developers accountable for their creations' misuse, potentially deterring innovation and reducing venture capital in blockchain technology. This is insane in our opinion and will have a massive chilling effect.

2. Roaring Kitty's Return to Twitter: Keith Gill, aka Roaring Kitty, returned to Twitter, likely reigniting retail investor interest. Known for his role in the 2021 GameStop frenzy, his actions have historically influenced market movements, especially in retail-favored stocks. His comeback pumped meme stocks AMC and Gamestop over 100% in a day. Welcome back Gill!

3. Legislative Developments: New proposals in various countries aim to regulate cryptocurrencies, addressing taxation, AML compliance, and consumer protection. Opinions are mixed; some see it as a step towards mainstream acceptance, while others fear it may stifle innovation.

4. Market Sentiment and Stability Concerns: Volatility in traditional financial markets, influenced by economic data and geopolitical tensions, affects cryptocurrency markets. Investors are cautious due to uncertain economic indicators like inflation and employment data, which impact liquidity and investment in crypto assets. Global liquidity is still low but its starting to creep back up as central backs increase their balance sheets. We hope to see a lot more money enter the space later this summer.

5. Technological Advances and Adoption: Blockchain advancements and increased institutional adoption are boosting the market. Major banks experimenting with blockchain for cross-border transactions and tech giants integrating crypto payments are creating a positive outlook for long-term investors.

Top Movers:

• (-) Ethena ($ENA) -24% Ethena down bad as whales capitulate to losses

• (-)Worldcoin ($WLD) -18% Sam Altmen’s Worldcoin is down on analyst comparisions to SBF’s low float playbook w/ FTX

• (+) Pepe ($PEPE) +18% The frog is king this week

• (+) Floki ($FLOKI) +16% Retail pumps memes

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IS $ETH A GOOD INVESTMENT?

Today, we're diving into Ethereum ($ETH) and an impending supply shock that could make waves in the investment world.

What’s Happening?

Supply shocks aren’t new, but in blockchain, they work differently. Unlike traditional assets, you can’t just create more tokens. If demand rises while supply stays fixed or decreases, prices can surge dramatically.

Why Ethereum Stands Out

Ethereum has a unique mechanism introduced by EIP 1559, which continuously decreases $ETH supply through burning. As network activity increases, so do transaction fees, driving up $ETH demand due to higher staking yields. This creates a cycle of rising demand and shrinking supply.

Current Supply and Burn Rates

• $ETH Supply: 119,663,333 (down from 120,530,930 in October 2022).

• Deflationary Mechanisms: EIP 1559 and The Merge have made $ETH supply deflationary, decreasing by 0.22% per year.

• Holder Dynamics:

  • 50% of $ETH hasn’t moved in 2+ years.

  • 20% hasn’t moved in 5+ years.

  • 7% hasn’t moved in 7+ years.

$ETH in Smart Contracts

• Staked $ETH: Over 32 million $ETH, about 26% of the total supply.

• DeFi Usage: $ETH used in DeFi protocols and locked in bridges is about 6% of the total supply.

• Potential for Growth: Staking rates are expected to rise, potentially locking up to 50% of $ETH by mid-2026.

Demand Drivers

• Speculation: Likely the main driver today.

• Staking: Over 26% of supply staked, potentially rising to 50%.

• Gas Fees: Essential for all transactions, with L2 solutions increasing demand.

• ETF Inflows: Expected Ethereum Spot ETF could significantly boost demand, following Bitcoin's ETF precedent.

The Big Opportunity

Ethereum's upcoming ETF approval could lead to a parabolic price move, driven by:

• Smaller market cap compared to Bitcoin.

• Shrinking supply and significant portion locked in smart contracts.

Conclusion

Ethereum's tokenomics, combined with the potential ETF approval, set the stage for a major price surge. Hold on to your $ETH – its moment is coming.

READING CORNER

Overwhelmed by all the content you could be reading? Don’t worry, We’ve got you. We’ve narrowed down a few we think are worth checking out.

BLOCKBUZZ

Quick Hitters from the week

1. Tornado Cash Developer Receives Prison Sentence: Alexey Pertsev sentenced to over five years for his involvement with the cryptocurrency mixer.

2. Wisconsin's Investment in Bitcoin ETFs: State of Wisconsin Investment Board discloses a $163 million investment in spot bitcoin ETFs.

3. SEC Responds to Coinbase Accusations: In a recent filing, the SEC rebuffs Coinbase's claims, stating the platform cannot compel the regulator to create entirely new crypto regulations.

4. Jack Dorsey's Bitcoin Forecast: Predicts Bitcoin will surpass the $1 million mark by 2030, highlighting his continued commitment to the cryptocurrency sector.

5. Mark Cuban's Political Warning: The billionaire entrepreneur cautions President Joe Biden regarding Donald Trump's new strategic 'weapon.'

6. Ripple CEO Cautions Against Tether Scrutiny: Warns that intensified U.S. regulatory attention on Tether could pose risks to the broader cryptocurrency ecosystem.

7. Solana's Potential Surge Tied to Memecoin Election: An analyst predicts that Solana could reach $400, buoyed by election-related memecoin enthusiasm.

THE TWITTERVERSE

A collection of the most interesting stuff on Crypto Twitter this week

WAGMI

For the (crypto) Culture

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