Open source is starting to play itself out dramatically guys. Self-custody is getting easier with many companies and solutions available. The LN is developing quickly and isn't good for CEX businesses, because trading platforms and DEX's (like LNmarkets, Robosats, etc) are establishing themselves, and major apps (CashApp, Strike) are emerging.

The government is in attack mode.

Brian Armstrong's tweets and behavior are becoming more concerning. Today he flew to DC, begged for meetings with regulators, and sat in a cafeteria tweeting to government officials to stop by and talk to him if they can.

This is because he knows what I know after going through Coinbase's 10k financial reports: the company cannot remain solvent without staking and without unregulated access to DeFI. And if their stablecoin USDC faces any type of impairment or restrictions, then they'll need to access the debt market and will become a favorite WSB meme stock quickly. Also looking at Glassnode, bitcoin continues to relentlessly fall off exchanges. Coinbase couldn't even turn a profit at the height of the bull market when regulations were non-existent. And they wasted $1B on an NFT platform that does under $1k in volume weekly. It's over. Binance is in worse shape in my opinion because of the DOJ, and because their BNB liability can implode the company as fast as Luna or FTX went down. Kraken is better off, but not too far behind.

And no, don't trust that your funds are safe if you're foolish enough to hold funds on these platforms.

Things can move quickly. Get them the fuck off. Now. There's a final rash of bankruptcies coming, and they'll be bigger than the previous ones. None of these companies can survive a lower low in this bear market. Also none of them can consolidate with one another because of government scrutiny and their access to debt (via their own stables, or native tokens) is impaired. The only companies surviving this bear are bitcoin-only companies. Ones that do not carry any liability of "crypto". My go-to exchanges are the DEX's Robosats and Bisq, and the platforms CashApp and Swan. I keep 90% of my bitcoin in L1 cold storage. And the other 10% is on the LN, usually 4x leveraged when there's a large bitcoin decline using a platform like LNmarkets, or I'll arbitrage DEX's, or I'll sell the liquidity to other channels.

"Not your keys, not your coins."

—Gary Gensler, on MSNBC Friday, Feb 10th


These companies have billions worth of assets in their balance sheets, however fucked their business models might be they have lots of money to invest to new ventures.

Swan, River, Strike, and CashApp might be screwed too.


Sure. Those platforms are highly dependent on centralized liquidity providers that represent a single point of failure.

Swan lost Texas recently afaik since Prime Trust (temporarily) lost money transmitter licenses there.

If I were a regulator trying to choke the market, I would go after the businesses that enable MTL "pass through" where companies can build a widget on top of the brokerage without MTL.

Check out article I wrote. Liquidity fragility to me is no different from overall fragility since it means single point of failure for falling out of compliance. Some brokerages as a service might be more robust than others, but all of it is somewhat opaque.

65 sats \ 0 replies \ @pi 13 Feb

The end of CEXes will mark the beginning of the end of the whole shitcoin scam market. They are two sides of the same coin.

The government is in attack mode.

100% agree. They are trying to hit hard, like the last battle.

Good to see you on SN. I remember your articles on r/bitcoin, unsure if you're still active there also.

As a note I think more could be done to bring /r/bitcoin people over.

13 sats \ 2 replies \ @Kaffi 14 Feb

It’s disgusting how many people on r/cryptocurrency are defending coinbase and blaming the sec for making staking unaffordable when it’s entirely on vitaliks shoulders. 32eth is a ridiculous minimum amount and the whole pos consensus mechanism is a freaking joke

And it's necessary for how the block building and other things work in the flawed system. The Foundation should just bend the knee, submit the securities paperwork, and give OFAC a seat on their board.

Ill be honest it seems like they already did. Eth is massively censored and it seems like Joe Lubin already bribed the old sec director to label Eth as not a security.

Terrifies me to read this right now, I have some work to do!

So staking moves offshore.

Big deal.

Who cares.

Coinbase, Binance, Kraken, Swan, Strike -- all your willing KYC collaborators -- still work fine until the US bans crypto, and then they go out overnight.

Staking is already offshore for most CEX's.

When your validators are hyper-centralized, and the databasing they use is hyper-centralized, then records, tracking, and censorship are quite easy. The government could also get major DEX's to stop trading staking derivatives, which would decollateralize all the revolving loans used for staking. This isn't a problem most have thought much about. Nobody has to deal with the political problems of banning "crypto". They simply need to impair its liquidity, especially when 87% of shitcoin volume comes from stablecoins, and a growing amount from staking derivatives. Bad design, bad incentives, faux decentralization, and loose strings all over the government is pulling.

Capital: concentrated Energy: distributed

This is a very interesting subject, there is clearly an attack on bitcoin and it's no longer covert now. I had hope we would have a smoother transition, but the way things are turning this market will end up underground and this is clearly not good for wider adoption. I don't see how people like Saylor will be able to hold the asset if it cannot go to an exchange that follows all the rules, these guys/institutions simply cannot use Bisq or Robosats. This begs the question: should we try to fight the system in its own terms and try to legally work this out, or should we just let it go and continue in a way that will tear us apart from the statu quo?

This is an attack on the companies issuing unregistered securities we call crypto, not the social construct we know as Bitcoin. Do not conflate the downfall of crypto with Bitcoin.

This is good for Bitcoin, and this is good for everyone who would have otherwise been scammed by crypto companies.

I think you are right, but I am not confident that everyone will see it the same way. I think anyone who looks at it long enough, with open perspective, will see it this way, but public sentiment is hard to change once set.

There is already a social mental barrier to Bitcoin and the scams of crypto being the same thing. Public sentiment is already set. Letting the law sweep up the mess and bring down the companies while the social construct remains unaffected, is a net positive in my view. Don't worry about the company adoption and the bank adoption and the central bank adoption. Just focus on the community building, being a better person, building your community up and educating on the ground about Bitcoin and how its a social construct in depth and detail.

Yeah I'd say whatever is left of "crypto" will have to take a giant step towards bitcoin for liquidity, establishing trading pairs, censorship resistance, etc. I definitely feel the crackdown is an enormous good. It's the faux decentralized ideologues that just get to me. If you're tokenizing a company, a scam, a gamble, moonshot, unicorn, fine. But when you affinity scam sound money, and decentralization, we end up in the same place we were in the late 90s with .com companies. Amazon and Netflix (hard to believe it was started in 1997) were indistinguishable from all the other scams and were traded as such in March 2000. This year is going to be astounding for bitcoin as soon as we thresh the grain from the chaff. March will probably see extreme volatility.

Bring on a lower low this cycle, if it means the end of these shitcoin scammers!

Good post.

I need to add, LNMarkets is at best a naive good-faith actor, and at worst an actual bad-faith actor. I think they have good fantastic intentions, but every time the founder gets asked hard questions, or served feedback, about the counterparty risk in his clearing/pricing architecture/model he simply pretends to not see/understand the question.

They thought staking would be their saving grace but it was their downfall.

well said