Looks like we rolled the boulder to the top of the hill and we’re chasing it back down the other side, but this is still Colton from Hedgehog, the app that helps you buy baskets of cryptocurrency and automate your digital asset exposure wherever you custody funds. Don’t forget we also now support an on-chain TBILL token for those of you who want highly liquid, Aaa-rated US government debt, and you can reply here for more details!

Even though the high of being on top of our previous all-time high was all too brief, perhaps because many holders were waiting for such an event to dump their bags, I’m still happy because the energy in the space is palpable. So palpable, I actually want to take a minute to moderate some expectations so we don’t get too caught up in the hype:

A rolling stone gathers no moss

The macro environment is crazy right now. New York Community bank just halted trading on a down candle usually reserved for memecoins, and took a fat $1 billion capital injection to prevent loss of customer funds. Meanwhile, the Federal Deposit Insurance Corporation, or the FDIC, just reported that the number of weak banks has increased by 18% over Q4 2023. It is not a good look for the banking industry, which is still reeling from unexpected rate changes in 2022, and shows serious weakness in the balance sheets of several regional banks. Store some of your treasury on-chain to make sure that you don’t get locked up in any one bank’s bankruptcy proceedings!

We are in uncharted territory as fundamentals are showing conflicting signals, with weakening credit metrics, an unusually long-lived yield curve inversion, and simultaneously bullish equity and digital asset markets. Historically recessions are often preceded by bubbles, so make sure that you are sitting on reliable forms of cash and risk-free yields in addition to the speculative aspects of your portfolio. This market needs a breather, and we are unlikely to get one any time soon.

Coin of ages

The other day, one of my employees asked an astute question about Bitcoin: if there's a limited number of coins and the miners earn rewards with each block, what happens when you run out of coins to produce blocks?

He wasn't familiar with the halving schedule, so he didn't realize that this won't happen for about 100 years, but it did bring up some good points about what's going to happen in 100 years:

  • the miners will have to rely on transaction fees only to pay for their mining operations, meaning transaction fees will go up as block rewards do down, ceteris paribus
  • the new issuance of Bitcoin will stop and so the velocity of Bitcoin will slow as only existing market participants will be able to dispose it
  • (this is regardless of the status quo where most Bitcoin owners today have not moved their funds in over 2 years!)
  • low velocity of money combined with high transaction fees means that small transfers of a few sats may be uneconomical, relegating Bitcoin to an asset held mostly by institutions and governments
  • (this trend is already accelerating, as more than 1 in 500 Bitcoin that will ever exist are already in corporate coffers of the likes of Microstrategy, Coinbase, Tesla, or SpaceX)
  • and so the developers, miners, and holders will eventually have to make a choice: keep Bitcoin a store of value and use derivatives to make the free exchange of Bitcoin accessible to the common man, or else add significant figures or an inflation rate to the protocol in order to encourage use as a medium of exchange

The history of Bitcoin is full of these forks in the protocol: Litecoin, Monero, Dogecoin, Bitcoin Cash, and others. Each one was developed for a niche product requirement indicated by the users of Bitcoin, and we only expect this proliferation to continue as new needs for our financial instruments arise.

That's why at Hedgehog, we advocate for a more holistic approach to digital assets. Owning Bitcoin is only the first step to a sensible exposure to the sector as a whole, as the properties of money are likely only to get more strange and multifaceted as autonomous agents and artificial intelligence begin to create novel methods of deploying compute and amortizing their runtimes.

There will be demand for currencies and networks with different guarantees, whether that's on Ethereum, Solana, MOVE chains, Substrate network, or Cosmos IBC, and while we may not have a crystal ball about which one is going to be the most in-demand, we have a feeling that there will be more than one which large numbers of people will pay to use.

Weekly feature

This week we’re featuring SHIB, the well-known Ethereum memecoin that tried to vampire attack DOGE for memecoin dominance. It’s had some serious price movement over the past couple weeks and may be at the root of a general belief in memecoin season, rocketing another doge derivative called WIF to the top of the Binance daily price change charts, and perhaps influencing the rise of BONK on Solana. If you ask @punk6529, power is all about seizing the memes of production, and he’s not wrong.

The whole edifice of humanity is powered by shared trust in each other, which is exactly why we call forms of money credit. Is it credible to believe that things will work out if you give someone your time and energy? Is it credible to believe that your government will protect you and feed you if you follow their orders and restrictions? Is it credible to believe that the token given to you by a stranger; whether that’s paper, metal, or an entry on a distributed ledger represented by a dog mascot; will be respected as a sign you did valuable work and should receive similar valuable work in return? The more memeable a token, the more likely people are to agree together to use it as social and financial currency. Or at least that’s the theory.

If you want a really concentrated bet on memecoins, you can employ a cross-chain strategy for BONK, WIF, SHIB, PEPE, and DOGE, but these coins are ~0.8-0.95 correlated so you should be ready to post some stop-losses to capitalize when memeseason is over.

I’m thinking I want to get into mineral mining, semiconductor fab, and data centers. Think you can refer me to anyone?

Keep hedging,
— Colton