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We are looking to aggressively add to our position over the next 90 days or so and of course always reserve the right to alter course or change direction. Full Disclosure: we are long from $1.81-$1.96 where we built 95% of our position and have added twice monthly in smaller increments since.
We don't know what the overall markets will or will not do. We do expect some fairly strong correlation between equities and crypto to continue as markets digest whether the Fed is bluffing or if it will in fact shrink its balance sheet. Wall Street establishment types like Jamie Dimon pound the drum for multiple Fed hikes in 2022; but looming labor and supply shortages, crumbling consumer confidence and retail sales, and Spyder possibly testing it's (god forbid) 200 DMA might have something to do with the Fed reconsidering. We shall see nonetheless. Neither are we capable of forecasting geopolitics and market reactions.
First, a quick reminder of some recent work published here on this platform:
Fed Prepping Bitcoin To Absorb Multiple Bubbles?
BTC As Collateral and $20M Per Bitcoin
Why even bother with Tezos and why are we analyzing it and investing in it? Let's take a step back first. We seek alternative opportunities with asymmetric upside where we consider there to be a reasonable probability and likelihood of an eventual "winner takes all" or "winner takes most" outcome . . . . . eventually. For example: we entered initially in 2013 looking at this in a similar way, and we are now quite confident Bitcoin will play a "winner takes most" role in the Store of Value category and ultimately the same in the market for the best collateral (there are many more but for the sake of reference here we mention these two).
We look at Tezos having an excellent shot at gaining a "winner takes most" position in the market for the "picks and shovels" feeding NFTs, DeFi, gaming, and many other spaces where smart contracts are useful and there is a need for a cheap, easy to use, and easy to upgrade solution. Rather than trying to invest in the "best" DeFi platform or NFT platform, we are much more enamored with finding where the best tools and services are coming from to fuel these rapidly growing markets and ecosystems.
Another major factor, which we have emphasized multiple times previously, is the very clear and established distinction between Ethereum and Tezos. Both are Layer 1 Protocols. We are not contending, or have ever, that Ether would vanish or disappear. On the contrary, we expect Ethereum to continue on powered by its cult following and self-promotion, but it sure does have a lot of work upcoming to grow into its current market value. There are also very serious issues with the ease and ability to upgrade, costs structures and fees to use it, and the issue around miners embracing a move to Proof of Stake (and why switch anyways if Eth on POW is so amazing?).
In short, we expect Ether and its legion of white labeled copycat chains and protocols to continue and ramp up the dogmatic worshiping of all things based on Eth. Whatever. We like the slow and methodical approach by Tezos. Consistent upgrades without a glitch. Paying baking/staking rewards like clockwork. No gimmicks or unhelpful noise.
Momentum
Here is a look at contract calls over the last year on Tezos to include the month to date performance for January of 2022:
It appears possible that we will see another new monthly all time high in January. For context, Tezos is currently running at a total transaction run rate of 25% of that of Ethereum. Please see this post for more context on the growth in Tezos usage and contract calls
We also point out active and ongoing partnerships and arrangements with Quincy Jones and OneOf (Doja Cat, Whitney Houston, Keith Richards among the big names), Ubisoft and plugging in the nuts and bolts of gaming, Hic Et Nunc, and Rarible as notable examples of real world usage of Tezos and awareness.
Price and Volume
Tezos continues to set highers highs and higher lows while operating within a relatively easy to identify zone or set of trend lines and overall trend. It's very clear that during 2021 and here in 2022 there is significantly more volume and higher overall prices than in 2020 and 2019.
The market says ETH is worth more than 100x that of XTZ. We disagree. We see a crypto future where there are a small handful of coins that legitimately survive and have legitimate ecosystems and levels of real activity (tokens perhaps an infinite number). Our contention is that Bitcoin will ultimately dominate say 80% or so of crypto as a whole between L1 and L2 applications and beyond, but outside of BTC there will be a handful of very important coins and projects. Tezos is among those in our view. It's inevitable, particularly with DAOs, that there will be persistent demand for the lowest friction and transaction fees possible and an easy and seamless way to make changes and implement them. Tezos is superior to Ethereum on both of those fronts and many more, and the market is offering a gift here.
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