Best Twitter threads of the day – August 29th

1/ BTC has lagged the performance of other crypto assets through the last cycle

most traders intuitively feel that BTC trades “heavy” – why is this happening?

there’s two simple metrics we can look at to validate what we intuitively feel: pic.twitter.com/wOB30wJi6X

— Joshua Lim (@joshua_j_lim) August 29, 2022

2/ first metric is the ETH/BTC ratio, ETH price divided by BTC price, which is 0.0733. this is still near multi-year highs of 0.0880 which we touched prior to the Fed-induced meltdown in risk assets in Dec 2021

— Joshua Lim (@joshua_j_lim) August 29, 2022

3/ the “flippening” when ETH mkt cap = BTC mkt cap occurs at ETH/BTC ratio of 0.0159. sizable positioning in ETH calls reflects mkt consensus of continued ETH outperformance

charts below show ETH put/call ratio is only 0.24, substantially lower than BTC’s at 0.53 pic.twitter.com/Cttbg601bd

— Joshua Lim (@joshua_j_lim) August 29, 2022

4/ second metric is BTC dominance, measuring BTC’s % of aggregate crypto mkt cap. it's stayed at historical lows of 40% despite the bear mkt.

historically, BTC dominance rises in bear mkts, but we have yet to see it perform this cycle, likely because of ETH’s increasing share pic.twitter.com/rSNLiYnUJT

— Joshua Lim (@joshua_j_lim) August 29, 2022

5/ what explains BTC's persistent heaviness? we present three qualitative reasons:

first, the institutions are no longer “coming”… they are already here. BTC is accessible to everyone using CME futures, exchange-listed products and even via direct investment (see Coinbase AUC) pic.twitter.com/U6kbaOqGao

— Joshua Lim (@joshua_j_lim) August 29, 2022

6/ as the historical gateway asset into crypto exposure, BTC is already a sizable % of the crypto allocation for most tradfi investors – this not only means it’s the asset that gets de-risked when the market turns, but also the asset that gets shorted as a beta hedge

— Joshua Lim (@joshua_j_lim) August 29, 2022

7/ which brings us to our second point, going short BTC is the easiest alternative for both tradfi and cryptonative investors. BTC linear derivatives trade around $30bn per day and still make up 44% of all open interest, despite the uptick in ETH speculation pic.twitter.com/L3yxzFAUU4

— Joshua Lim (@joshua_j_lim) August 29, 2022

8/ BTC is not only being used as a short leg vs alts, we're also seeing macro PMs trade it vs equities / other risk assets, weighing on it further pic.twitter.com/AlKW5FLV66

— Joshua Lim (@joshua_j_lim) August 29, 2022

9/ on a more practical level, ETH lenders are likely to recall going into the Merge to avoid fork complications, resulting in higher borrow costs (AAVE rates ticking up nearing optimal utilization now)

BTC is the hedge instrument of least resistance pic.twitter.com/Zclm3HFrh0

— Joshua Lim (@joshua_j_lim) August 29, 2022

10/ finally, BTC forward prospects are challenged, the mkt knows it:

a) BTC’s store of value proposition is being trumped by ETH’s sound money narrative

b) long-only funds finally understand what ETH is this cycle and are favoring it as the new entry point into the asset class

— Joshua Lim (@joshua_j_lim) August 29, 2022

11/
c) every cryptonative fund in the world is positioning for the Merge in some way

d) ETH is looking deflationary post-Merge, while BTC has an uncertain supply event from the Mt Gox distro hanging over it

e) we just had 9% inflation, and BTC "failed" as an inflation hedge pic.twitter.com/RE3A7dBmSX

— Joshua Lim (@joshua_j_lim) August 29, 2022

12/ can BTC remain king going fwd? only time will tell if the ETH narrative post-Merge is strong enough to overthrow the status quo

in the meantime, expect BTC to continue to trade like a funding asset and preferred hedging instrument for the entire asset class

— Joshua Lim (@joshua_j_lim) August 29, 2022

1/ Over the past year $3B has been stolen from DeFi with 2/3 of that total coming from bridges.

For the "multichain future" to survive, these risks must be resolved.

Let's discuss bridges, hacks that have occurred, and how bridges are mitigating risk. pic.twitter.com/z0EQ7rQ2ro

— Messari (@MessariCrypto) August 29, 2022

2/ A cross-chain bridge enables the transfer of data, primarily token assets, between blockchains.

A bridge derives security from either the parties that oversee its operation or the underlying chain and the algorithms that operate the bridge. pic.twitter.com/ysQohiPq03

— Messari (@MessariCrypto) August 29, 2022

3/ Bridges are an attractive target for hackers.

All of the previously noted bridge heists fall into one of three categories:

+Backend exploit
+Multi-signature compromise
+Smart contract vulnerability/implementation error pic.twitter.com/xSMNs61R9O

— Messari (@MessariCrypto) August 29, 2022

4/ Protocols like Rainbow Bridge are adapting to these exploits.

The Rainbow Bridge transfers assets between @Ethereum, @NEARProtocol, and @auroraisnear networks.

On two separate occasions, Rainbow Bridge avoided the attacks through its automatic mitigation system (watchdogs). pic.twitter.com/483dszjeP3

— Messari (@MessariCrypto) August 29, 2022

If the dollar keeps going, it's going to really break things. It has literally done parabolic… pic.twitter.com/hZExmpFVSc

— Raoul Pal (@RaoulGMI) August 29, 2022

There is literally nothing until 120 if we break this weak trend line… pic.twitter.com/463QZvax8D

— Raoul Pal (@RaoulGMI) August 29, 2022

And deviation from trend suggests it can get to 120 too… pic.twitter.com/wFIutgVuVK

— Raoul Pal (@RaoulGMI) August 29, 2022

That is not good for oil…its already $60 over valued versus the ADXY pic.twitter.com/TYvMDURPWi

— Raoul Pal (@RaoulGMI) August 29, 2022

But it could cause a nasty week in risk assets. I dont think equities make new lows but Im not sure of that. Same with crypto.

Personally, I think we get saved by weak economic data this week. pic.twitter.com/tzpMPmTg5X

— Raoul Pal (@RaoulGMI) August 29, 2022

And if the bond market turns, everything eventually turns. Bonds are their most overvalued vs the business cycle, ever…Fair value is 1.5% and 1% or lower in ISM hits 40 early next year. pic.twitter.com/Gq1JI1qWo0

— Raoul Pal (@RaoulGMI) August 29, 2022

And no, CPI is not going to stay high..I think it goes negative. pic.twitter.com/t9AFs9IzIe

— Raoul Pal (@RaoulGMI) August 29, 2022