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“Crypto is everything you don’t understand about computers, combined with everything you don’t understand about money.”

— John Oliver

Thursday computers and money mailbag

Q: Why is crypto down so much?

So many reasons!

For bitcoin, it’s ETF outflows ($2.5 billion this week), a shrinking MSTR premium (just 1.6x NAV now), the falling odds of a bitcoin strategic reserve, and the law of large numbers (BTC’s $1.7 trillion market cap).

For ether, it’s ETF outflows ($200 million this week), the Bybit hack (Lazarus is exiting the Ethereum ecosystem much faster than thought possible), and the law of large numbers (ETH’s $280 billion market cap).

For most everything else, it’s the memecoin crash.

Memecoin trading volumes have tanked in the wake of the LIBRA debacle and that’s a problem for most revenue-generating protocols because most crypto revenue is downstream of memecoin trading.  

Revenue on Solana, for example, fell to $2.5 million yesterday, down from a high of $57 million on the day President Trump launched his memecoin. 

$2.5 million is still pretty good, and evidence that despite the downturn there’s a lot happening onchain.

There’s even a lot of memecoins happening: Pump.fun somehow managed to generate $1.1 million of revenue yesterday, per data from Blockworks Research.

That’s down from a recent average of about $2.5 million, but it still seems like a lot to me given all the recent revelations about how rigged the memecoin market is.

One estimate found that 95% of memecoins saw insider wallets sell more than 50% of holdings within three days of launch.

But if memecoin enthusiasts are willing to tolerate even that level of extraction, maybe the revenue they generate will be stickier than you’d think.

Q: Should US banks custody crypto?

Everyone seems to think so, but I’m not convinced. Because if Bybit can’t hold on to its crypto, I wouldn’t trust banks to do any better.

My non-technical understanding of the latest North Korean exploit is that the hacker compromised the computer of someone at Bybit who has the authority to initiate and sign transactions (i.e., one of their multisig signers). 

The hacker then initiated a transaction (a transfer between two internal Bybit wallets), which looked benign to Bybit’s other multisig signers.

But somewhere in the parameters, the hackers had overwritten a 0 with a 1 and that imperceptible change meant that the signers were unwittingly approving a transfer of $1.4 billion of ETH to North Korea. 

“You need to make sure you validate all the parameters,” Galaxy Digital’s Shahar Shamai advised on a call yesterday. “Validate each and every one of the parameters and make sure you know what they mean.” 

Good luck with that!

No normal human would notice the change of a single digit in the bewildering parameters of a crypto transaction — least of all the kind of human who works at a bank.

There are ways to mitigate the risks, of course, but I’m not sure how effective they’d be at, say, Citigroup (which recently said it’s considering offering crypto custody). 

Are banks, for example, going to move their crypto around using only Chromebooks that they factory reset every few months?

That’s one of the safety measures recommended by the Security Alliance, but I can’t imagine Citigroup’s compliance department signing off on something like that. (You can’t even use Telegram at a bank, let alone a factory-reset Chromebook.)

Big banks also employ tens of thousands of people, offering a huge attack surface for the kind of social engineering used in the Bybit attack.

That’s a problem because the attack started a bank run (in crypto, exchanges are also banks). 

Bybit weathered the run admirably, but that’s because Bybit, unlike regular banks, is fully reserved.

$1.4 billion isn’t enough to sink a fractionally reserved bank like Citigroup, of course. 

But what if crypto got much bigger and a medium-sized bank lost tens of billions worth of customers’ digital assets in a hack?

Computers and money can both be hard to understand, and crypto, being a mix of the two, is even harder.

So, I don’t know, maybe banks should leave crypto custody to the natives? 

Q: Will politicians be banned from issuing memecoins?

It won’t ever pass, but the Modern Emoluments and Malfeasance Enforcement (MEME) Act proposed this morning seems like a sensible update on the constitutional idea that elected officials shouldn’t be allowed to monetize their political power (via crypto or otherwise).

Case in point: It’s impossible to read this week’s news that the SEC is preparing to drop the fraud case it brought against Justin Sun without suspecting that Sun is receiving favorable treatment because he’s an investor in the Trump-family DeFi project, World Liberty Financial.

These two things may not be connected — the SEC seems to be dropping most of its crypto cases — but even the appearance of a quid pro quo is detrimental to the perception of both crypto and government. 

On the other hand, everything is transactional now (e.g., Ukraine policy, EB5 passports, weaponized tariffs), so this is hardly a crypto-specific issue.

Q: Is Jack Dorsey Satoshi?

In the first episode of the new Blockworks podcast Supply Shock, the “professional cypherpunk” Jameson Loop makes a convincing case that he is not.

Among other debunking clues, Loop found that Jack Dorsey and Satoshi had different sleep schedules, and that Dorsey was sometimes busy doing things like giving a talk at an Apple Store at the same time Satoshi was posting on the Bitcoin Talk forum.

It would be hard, although I guess not completely impossible, for the same person to be doing both those things at the same time.

Loop has also debunked my previous opinion that Hal Finney was Satoshi, so now I have zero guesses as to who Satoshi might really be. 

But that is for the best — Bitcoin lore is much stronger if Satoshi remains anon.

Q: Should GME buy BTC?

No. 

A letter sent to GameStop management this week urged them to reinvest its Treasury cash into bitcoin, because among other things, “cash has a negative real return.”

It doesn’t.

GameStop’s cash is held in short-term Treasurys that yield about 4.25% — which is 1.25% above the rate of inflation, which means cash has a positive real return.

(The letter instead compares the 4.25% Treasury yield with M2 money supply growing at 6.5%, but that is apples to oranges.)

The purchasing power of GameStop’s cash is currently growing, so there’s no reason to switch it into bitcoin. 

Money can be confusing, but it’s not that confusing.

— Byron Gilliam

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1. Stablecoin legislation is subcommittee’s first priority, says Lummis

2. Fundraise, ‘open-minded’ SEC to fuel Bitwise growth

3. Lessons in monetary plumbing with Andy Constan

4. Avalanche Foundation launches Visa credit card for IRL payments

5. Profiting from disaster: Firms look to capitalize on Bybit hack

Introducing: Supply Shock With The Bitcoin Historian

On the Margin is becoming a new show: Supply Shock, covering all things Bitcoin. Felix passes the baton to new host Pete Rizzo, who dives into deep lore, the state of Bitcoin innovation and much more. 

Listen to Supply Shock on Spotify, Apple Podcasts or YouTube.

With capital rotating, regulation evolving, and liquidity shifting, the smartest players are already adjusting.

• Paul Brody (EY) on where enterprises are deploying blockchain beyond the headlines.

• Ambre Soubiran (Kaiko) on the market trends that funds are acting on before retail catches up.

• Jake Chervinsky (Variant) on the legal shifts that could create—or kill—new opportunities.

• Rob Hadick (Dragonfly) on the allocation strategies driving institutional plays this year.

Some will watch. Others will act. Which side are you on?

📅 March 18-20 | NYC