gm friends —

Crypto markets are inefficient. News is up, prices are down. Do what you want, but I’m taking Buffet’s famous advice (I’m buying).

Today’s topics:

• 📈 Markets: Why we’re about to moon (NFA)

• 🚀 Ethereum ETF Predictions

• 0️⃣ ZeroLend: Permissionless crypto borrowing and lending

Check out this week’s YouTube show for a deeper dive!

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Markets: Why we’re about to moon (NFA)

Buffet says “Be fearful when others are greedy and greedy when others are fearful”. Others are fearful so I’m being greedy.

Why is everyone fearful you ask? Because prices stopped going “up only” for a few weeks. Seriously, that’s it.

Crypto markets are extremely reflexive - market sentiment has a self-reinforcing effect. Optimism begets more optimism, driving prices higher, and vice versa.

Once prices stopped going up every week (due to many short-term factors) people got pessimistic, and reflexivity led to more selloffs.

But forget about sentiment, let’s unpack the facts:

1. Ethereum ETF trading is imminent - makes buying the second-largest crypto asset much easier for the people and institutions with all the money

2. ETH & BTC are within spitting distance of all-time highs - historically, most crypto gains occur after ATHs have been sustainably broken. We’re not there yet, but we’re close (then it’s really game time)

3. Normal people still don’t care about crypto and altcoin prices are down horrendously - using past cycles as a guide, this won’t be the case at peak prices

4. Improved regulatory climate - crypto has somehow become an election issue in the United States (we’ve come a long way). Both sides of the aisle are jockeying for the crypto vote and money

5. Wall Street still loves crypto - this is probably the biggest change from the last crypto cycle that everyone forgets. Larry Fink and the rest of Wall Street finally love the coins. Don’t believe me? VanEck’s twitter pfp is a pudgy penguin…

6. Interest rates are bound to decline - the federal reserve’s fed funds rate is still very restrictive at over 5%. Interest rates will likely decline over the next year, a bullish catalyst for financial assets including crypto. Money printer go brrr, coins go up.

Prices could go down in the near term of course, but the facts above suggest that the current down moves are mostly reflexive and not driven by persistent underlying factors.

Crypto’s underlying drivers over the medium-term are bullish. I’m very optimistic for the next year. Barring an FTX-style Black Swan event, another crypto moon mission is in the cards.

I’m NOT a financial advisor and this is NOT financial advice but I’d bet good money (I basically am - see my portfolio) that ETH and BTC hit new all time highs this year.

Hit the comments and tell me why I’m wrong (seriously).

Ethereum ETF Predictions

Ethereum spot ETFs will start trading on US exchanges within the next couple of weeks. As we draw closer, everyone is giving their predictions of how much money the products will attract (aka their “flows”).

Bitwise’s (one of the asset managers offering an ETF) CIO Matt Hougan predicts that the ETFs will attract $15 billion in net flows in their first 18 months.

Note that he said net flows. Net flows are the difference between cash inflows and outflows for all of the ETFs over a period of time.

For reference, the Bitcoin ETFs have attracted ~$15 billion in net flows since they launched in January (~6 months). Hougan’s estimate implies that ETH’s net flows will average ~1/3 of what we’ve seen from Bitcoin so far.

This is a reasonable estimate imo. ETH has ~1/3 the market cap of BTC. So if investors allocate to BTC and ETH based on their market caps, we arrive at Hougan’s estimate. If you want a more detailed breakdown of his estimate, check out the full X thread here.

But let’s be clear - 1/3 of BTC’s net flows would be a HUGE success. The Bitcoin ETF. The Bitcoin ETF launch was the most successful ETF launch in history. Replicating even a fraction of that success could solidify ETH’s position in institutional portfolios.

Another noteworthy prediction comes from Galaxy Research, which estimates $3 to $7.5 billion in net flows into ETH ETFs within the first five months. This range suggests that even on the lower end, ETH would capture 20% of Bitcoin’s flows, and on the higher end, it could attract up to 50%. These predictions underscore the significant interest and potential impact of ETH ETFs on the market.

Market dynamics and investor behavior also support these optimistic predictions. There’s a substantial amount of capital parked in money market funds due to high interest rates.

When interest rates eventually drop (Money printer go brrr), a significant portion of this capital is expected to flow into higher-yielding assets, including stocks and now crypto. This influx of capital could act as a tailwind for both BTC and ETH, potentially boosting ETF flows further in the coming months.

While exact figures vary, the overall sentiment is bullish for the Ethereum ETFs. The combination of institutional interest and favorable market conditions suggests that these ETFs could see substantial inflows

As always, these predictions should be taken with a grain of salt, but we’re ETH mega bulls here at Internet Capital - hopefully we’re right 🫡.

ZeroLend: Permissionless Borrowing & Lending

I’m bringing back the app of the week. News is great, but learning how crypto apps work is probably more important for understanding the space. If this sucks and you just want the news lmk.

If you’re interested in more advanced topics stay tuned for our deep dive here!

Other News

• Solana ETF Filings - VanEck and 21Shares have filed for a Solana ETF. Approval is unlikely this year, but keep your eyes peeled for developments

• Mt. Gox to Begin BTC Repayments - 10 years after being hacked, the defunct crypto exchange is set to begin BTC repayments to customers

• Coinbase Sues SEC & FDIC - the top crypto exchange is accusing the regulators of trying to cut the crypto industry off from banking

• Coinbase Partners with Stripe - the partnership involves Stripe incorporating Coinbase’s layer 2 network Base into its crypto payout products

• Jump Crypto President Steps Down - just a week after the CFTC announced a probe into Jump crypto, Kanav Kariya announces his resignation

• MegaETH Raises $20 Million - the ethereum layer 2 network dubbing itself the first “real-time blockchain” has raised money from Dragonfly, Vitalik Buterin, Joseph Lubin, and others

Thanks for reading!

Don’t want to fall behind in crypto? Subscribe, follow us on X and check out our YouTube Channel to never miss an update!