* within acceptable margins of error
By Amy Castor and David Gerard
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“if you told me two years ago that everyone who bought a bored ape would have now lost 200K and gone blind, i would have said ‘yeah, probably.’”
2023: Our Dumb Year
We shot our mouths off a year ago, and again in March, and made way too many testable predictions for a good psychic. How did we do?
The crypto collapse that began in 2022 with the collapses of algorithmic stablecoin Terra-Luna and crypto hedge fund Three Arrows Capital continued — with failures such as investment firm Genesis (a massive bad loan to 3AC) and custodian Prime Trust (who were playing Terra-Luna with customer funds).
We predicted the US regulators would go absolutely feral now that the Blockchain Eight in Congress weren’t actively hobbling them from going after the crooks. 2023 was the year of regulators cutting loose — with not only multiple SEC and CFTC actions but FinCEN and OFAC taking on crypto money laundering.
2023 was also the year of Sam Bankman-Fried! Just not in the way he was hoping. FTX and Celsius turned out to be even more screwed up than anyone had thought possible. The world found out how Effective Altruism works! It’s rich assholes making excuses why greed is good. Plus, we assume, some good people.
Various exchanges tried to step in to replace FTX as the dodgy crypto futures exchange of choice — Wintermute and Justin Sun’s HTX (formerly Huobi) both had a good go. But really, it was mostly just Binance. Even BitMEX, the OG derivatives platform, is way down on volume.
The big money got shy. US commodities traders like Jump Trading found there was a bit too much regulatory heat around crypto, so they are pulling away from the business.
Stablecoins weren’t stable. Binance USD was shut down. The Pax Dollar is still around, though it dipped to 85 cents at one point. Circle’s USDC issuance has halved. Tethers keep magically appearing from nowhere.
Crypto media is still screwed, as we noted in our most recent crypto collapse newsletter.
Hoo boy, did we call trouble for banks that let crypto in the door. Crypto caused a historic string of bank failures in 2023, taking out Silvergate, Signature, Farmington/Moonstone, and Heartland Tri-State — and Silicon Valley Bank’s collapse put USDC’s backing reserve into danger.
The bitcoin price went up, in a totally organic fashion! Helped by five billion tethers printed from nowhere. So we missed on that one. Fresh new dollars still failed to show up in the crypto trading market, as Coinbase had to reveal to the world. The public still hates crypto.
Crypto didn’t come up with anything stupider than NFTs — but with ordinals, which have been clogging the bitcoin and TON blockchains, they’ve come up with a stupider NFT.
The only prediction we really missed was that Binance or Tether would be taken down. Neither was completely shut down in 2023 — but they’ve both been co-opted by the feds, which is halfway there.
What we’re pretty sure will happen in 2024
Binance is the largest crypto exchange and it runs — or ran — on money laundering. Founder Changpeng “CZ” Zhao and Binance both entered a plea deal with the US Department of Justice in November 2023.
We predict that Binance is going to have an extremely hard time complying with its new monitoring obligations to FinCEN, let alone running a sustainable business if it can’t bank for crooks. If Binance files for bankruptcy or gets forced into liquidation, we expect it to greatly diminish.
If Binance complies at all, the past data on their customers should be a treasure trove for the feds and a disaster for bad actors in crypto.
CZ, who is stuck in the US while he awaits sentencing in February, is likely to get an actual jail term — or supervised release at an absolute minimum. He’s not just walking with a fine.
Regulators aren’t letting up. In the US, the SEC, the CFTC, and the New York Attorney General are on a roll, viciously applying things like “long-standing laws” to crypto firms. We anticipate more enforcement suits and criminal indictments in the New Year.
The SEC will approve a cash-create bitcoin ETF in 2024 — and it will fall on its butt(coin). The SEC will not approve an in-kind ETF. There won’t be a drastic flow of cash into these ETFs.
Sometime in April or May 2024, the next bitcoin mining reward halving — to 3.125 BTC per block, from the current 6.25 — will mean the bitcoin price would have to be at least $60,000 for mining to be sustainable. Texas can’t subsidize this forever. Several more miners will go broke, and good riddance.
Crypto will keep trying to pump itself up — expect lots of tether printing and a string of bitcoin pumps.
What we’d like to see happen in 2024
Tether executives should finally get nailed. We would love to see another Liberty Reserve — the company’s executives indicted and its website seized by the US Global Illicit Finance Team. But we’ve been saying that for a while. Perhaps Tether can sell out to the feds fast enough.
Coinbase should substantially lose against the SEC, which has been extremely strong on the separation of securities functions. We expect Coinbase to survive, but in a diminished capacity. Their main hope is that a bitcoin spot ETF will be successful, and they can make a bit of money as a custodian. Otherwise, we don’t see much of a future for them.
Kraken, which the SEC similarly came down on in 2023, will likely have to figure out some new business model. There’s no future for crypto exchanges in the US. The regulators are gunning for the entire business.
We have no idea who’s buying MicroStrategy stock (Nasdaq: MSTR). Michael Saylor’s company is still buying bitcoins! It’s like a bitcoin ETF you can’t cash out of, but even worse than Grayscale’s GBTC. In any sane world, Microstrategy would be broke already.
We doubt the public stink has come off crypto enough for the big guys to pump a fresh bubble into existence by the end of 2024 — but we don’t want to risk underestimating human stupidity here.
The future of AI
Lots of blockchain companies have been pivoting to AI, the new buzzword. The current AI market is an attempt by venture capitalists to pretend that tech is still in a zero-interest world. It just isn’t. The bills are going to come due.
We foresee AI companies getting obliterated with copyright and trademark claims — the obvious consequence of training your models on other people’s work. Some of those people have considerable legal resources.
The dumbest people you know are going to rant against Luddite boomers like yourself for not buying into their nonsense. These people will pivot to another tech at the slightest provocation. Just look at the Twitter posters who pivoted effortlessly from NFTs to AI — and then to superconductors for a few weeks, based on two irreproducible lab reports.
ChatGPT will not turn the world into paper clips. That’s Microsoft’s job.
And in conclusion:
(taps the sign)
