Market On Open, Thursday 4 September

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Blah Blah Crypto Blah

by Alex King, CEO, Cestrian Capital Research, Inc

There are two worlds in finance; old-line securities people, and crypto people. They don’t understand one another all that well. Much of Wall St. still thinks of crypto as the Wild West and much of Decentraland considers Wall St. to be obsolete. But a small cadre of folks right at the center of the industry dismissed as TradFi (better than LegacyFi I suppose) have long spotted the opportunity to embrace certain aspects of the crypto world and use it to improve the profitability of the old world. It has taken nearly a decade to get there, but with the recent rollbacks of regulation, permitting more and more incursion of crypto into everyday financial life, crypto is finally ready for prime time.

Not all crypto is created equal, however. Bitcoin remains the most liquid cryptocurrency and its use cases - money transfer, money store outside of banks, and of course gambling - remain viable and valuable. Solana features a lightweight, fast underlying database / blockchain (which word you use defines your tribe as TradFi or Crypto btw) and a growing number of stablecoins and other applications using this blockchain. But the standout for bridging old and new worlds is Ethereum, the blockchain which requires the cryptocurrency Ether as payment for transaction processing / gas fees (same comment re. choice of lexicon).

Wall St. is in the process of deregulating the securities industry under the very gaze of the SEC, and it’s doing it to improve profitability of, yes you guessed it, Wall St. You may think Wall St. is quite profitable enough but these days finance bros cannot hold a candle to AI bros, so clearly something has to be done. This deregulation is called tokenization and it’s a way to digitize real-world things then to parse them into tokens which could be ownership shares, rights of visitation, free ice-creams for life, whatever. These tokens are yet to be truly defined in law but one thing I can say with certainty is that they will confer fewer rights upon the bearer and fewer obligations upon the issuer than do securities.

Tokenization is happening on the Ethereum blockchain, and if you want to play, you need Ether to pay. The Ethereum blockchain is securities-industry-level reliable, it can store a large number of fields (properties) for any one token, it has bank-like capabilities of paying ’native yield’ for Ether deposited / staked there and of holding Ether as collateral for customized obligations (“programmable collateral”).

This train has left the station and it is not coming back.

If you are schooled in finance, to prosper you now need to understand crypto. Don’t like it? Tough - that’s how it is.

If you are schooled in crypto, to prosper you now need to understand finance. Again, no choice about it unless you choose poor.

I’m excited about the crypto research we publish - we’re right at the center of these two worlds and can share a perspective understood by few.

You can get our crypto work in our Inner Circle service (including real-time chat, trade alerts, live webinars and more) or, if you prefer, as a simple newsletter in our Big Money Crypto service. In each case you can add algorithmic trading signals which are designed to take the emotion out of investing in the key cryptocurrencies (Ether, Bitcoin, Solana) and related stocks (Robinhood, Coinbase, others).

You don’t have to subscribe to our stuff of course.

Just don’t miss out on understanding this new world. I am absolutely certain that anyone with their head in the sand - whether they lean old-line or crypto - will have to learn to live with the regret, and in fairly short order too, because these changes are happening fast.

Anyway, let’s get to work. As usual we cover equity indices, key sectors, bonds, volatility, crypto, oil and more below.