{"id":2719,"date":"2023-09-25T13:34:31","date_gmt":"2023-09-25T11:34:31","guid":{"rendered":"https:\/\/www.mereau-finance.com\/letter\/lettre-n29-rotation-des-capitaux-sur-bitcoin-layer-2-investisseur-maudit\/"},"modified":"2023-09-25T13:34:31","modified_gmt":"2023-09-25T11:34:31","slug":"newsletter-no-29-capital-rotation-into-bitcoin-layer-2-cursed-investor","status":"publish","type":"letter","link":"https:\/\/www.mereau-finance.com\/en\/letter\/lettre-n29-rotation-des-capitaux-sur-bitcoin-layer-2-investisseur-maudit\/","title":{"rendered":"Letter No. 29: Capital rotation on Bitcoin, Layer 2, The cursed investor."},"content":{"rendered":"

Hello everyone,<\/p>\n\n\n\n

The purpose of this letter is to inform you about the current situation of the crypto-asset market as well as recent news in this field. This letter is not investment advice, but merely a sharing of my personal point of view.<\/p>\n\n\n\n

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News<\/h3>\n\n\n\n
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European Union: DAC8, companies will soon have to report all your cryptocurrency transactions to the tax authorities<\/a>. Will crypto companies in European Union countries have to report all transactions and transfers in the future, regardless of the amounts? Yes, according to the European Parliament, which has just approved a new common rule, DAC8. What does it entail, and is this the end of anonymity in Europe?<\/p>\n\n\n\n

\u2013<\/p>\n\n\n\n

Ethereum (ETH): 1 year after The Merge, what is the assessment and what are the outlooks?<\/a> Exactly one year ago, around 8:42 a.m. Paris time, the Ethereum (ETH) blockchain successfully completed a historic upgrade: The Merge. What did this bring to the network? What happened next? What is planned from now on? Let's review it all.<\/p>\n\n\n\n

\u2013<\/p>\n\n\n\n

Crypto: Germany's 1st bank to hold cryptocurrencies for institutional clients<\/a> Are the largest private financial companies about to adopt cryptocurrencies? Deutsche Bank, Germany's leading bank, has announced a partnership with the Swiss company Taurus to offer cryptocurrency custody services to its institutional clients. The German bank is thus joining major French and Anglo-Saxon banks in this race for crypto-friendly services.<\/p>\n\n\n\n

\u2013<\/p>\n\n\n\n

\u00abNo Support for a Central Bank Digital Currency\u00bb: In the United States, the digital dollar divides the political establishment <\/a> Could the Federal Reserve face strong opposition if it chose to develop a digital dollar? Yes, from the Republicans. The US opposition party is indeed trying to prevent the development of a central bank digital currency (CBDC), which it considers dangerous for the country's economic balance.<\/p>\n\n\n\n

\u2013<\/p>\n\n\n\n

Binance unveils opBNB, its Layer 2 solution based on Optimism\u2019s OP Stack, designed to reduce transaction fees. <\/a> Binance's BNB Chain developers have just made the launch of opBNB on its mainnet official. The layer 2, based on Optimism's OP Stack, was designed to increase the scalability of the BNB Chain while reducing its transaction fees. An overview of opBNB, which is officially entering the layer 2 ecosystem arena.<\/p>\n\n\n\n

\u2013<\/p>\n\n\n\n

France: Digital asset management company Fipto raises 15 million dollars. <\/a> The French company Fipto has just completed a funding round that raised $15 million. The blockchain-based international payment service aims to facilitate international payments and the management of digital assets for businesses.<\/p>\n\n\n\n

\u2013<\/p>\n\n\n\n

Global recession: JPMorgan CEO issues a warning. <\/a>Is a severe recession on the horizon in the coming months and years? That\u2019s the view of JPMorgan\u2019s CEO, who points out that corporate profits are just one indicator. What does he foresee?<\/p>\n\n\n\n

\u2013<\/p>\n\n\n\n

The company Blockchain Capital is offering two new funds totaling 580 million dollars<\/a>. Who said venture capitalists had lost interest in the crypto ecosystem? Venture capital firm Blockchain Capital has just closed two new funds totaling $580 million. A closer look at this new initiative.<\/p>\n\n\n\n

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Fundamental Analysis<\/h3>\n\n\n\n
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Bitcoin's price over the last six years in euros and on a logarithmic scale.
Source : https:\/\/www.coingecko.com\/fr<\/a><\/figcaption><\/figure>\n\n\n\n
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At the time of writing, the price of Bitcoin is 27,100$ (on 09\/20\/23).<\/p>\n\n\n\n

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Capital Turnover in Bitcoin: <\/span><\/strong><\/h4>\n\n\n\n
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The Realized HODL Ratio (RHODL) is a market indicator that tracks the balance between wealth held in recently moved coins (<1 week) and that held by longer-term investors (1 to 2 years). In this chart, Glassnode has applied a 2-year median (equivalent to half a cycle) to establish a threshold value for periods when capital flow patterns shift from a bullish to a bearish market structure. <\/p>\n\n\n\n

We can see that according to this metric, the year 2023 saw a modest influx of new investors. However, the RHODL ratio has only just rivaled the 2-year median level. The influx of new investors is positive but relatively weak in terms of momentum. This looks similar to the year 2020 of the previous cycle: we are likely at the same period as January\/February 2020 and we can see this on the chart below. Obviously, we must omit the Covid-19 \u00abblack swan\u00bb event that occurred in March 2020. These events are always possible in the future, but we cannot anticipate them and factor them into long-term cycles. Ultimately, these events have no long-term impact. <\/a><\/p>\n\n\n\n

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RHODL Ratio, Wealth Distribution Cycles
Glassnode
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The future will go through Layer 2: <\/span><\/strong><\/h4>\n\n\n\n
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One of the main criticisms of Ethereum is that, during periods of heightened activity, base layer transactions can be slow and expensive. While the roadmap for creating a scalable platform has been heavily debated, layer 2s such as Arbitrum, Optimism, and Polygon are now the ways to solve this problem. <\/p>\n\n\n\n

Layer 2 solutions are \u00aboff-chain\u00bb solutions. In other words, they are standalone protocols whose primary purpose is to offload traffic from the parent blockchain.<\/p>\n\n\n\n

These protocols are built following a different philosophy. Where traditional Layer 1s prioritize security and decentralization, it is essential for Layer 2s to favor scalability. The considerable advantage of Layer 2s comes from their dependence on their parent blockchain, thus inheriting its security.<\/p>\n\n\n\n

Several methods exist to improve scalability. Most of them rely on a simple principle: combine multiple transactions into a single operation<\/strong>. The transaction is then sent to the main blockchain, where it will be validated.<\/p>\n\n\n\n

We believe that the race for Layer 1 solutions is over and that now is the time for competition and development in the Layer 2 space. The future will involve multiple Layer 2 solutions,<\/span><\/strong> perhaps each specializing in a segment.<\/p>\n\n\n\n

Below, we can see the relative transaction shares of Layer 2 plus those of Ethereum. There are other Layer 2s currently under development and\/or that do not yet have tokens. We are monitoring them closely. There will likely be fierce competition in Layer 2s in the coming years.<\/p>\n\n\n\n

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Relative share of Layer 2 + Ethereum transactions
Pantera<\/figcaption><\/figure>\n\n\n\n
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The important thing is to be invested for the long term<\/strong> :<\/span><\/h4>\n\n\n\n
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Here is an interesting simulation by Occam Investing: what if an investor were the worst investor in the world? The market would crash immediately <\/strong>after <\/strong>that he has invested. What would be this investor's return? cursed <\/strong>? Let us take the data going back to 1926. The chart shows the returns of the cursed investor who bought on the eve of one of the worst bear markets<\/strong> in all of history.<\/p>\n\n\n\n

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Source : Ken French Data<\/a><\/em><\/figcaption><\/figure>\n\n\n\n

The black line at the very top corresponds to l<\/strong>The average return of the S&P 500 between 1926 and 2019 (approximately 10% per year). The colored lines represent the number of years it took our "cursed" investor to return to the average. There is the Internet bubble<\/strong> en gray<\/strong>, the Black Monday<\/strong> from 1987 to rose<\/strong>.<\/p>\n\n\n\n

Unsurprisingly: the short term is catastrophic. The 2008 financial crisis gave rise to a drawdown <\/strong>(decline from the peak to the trough of a cycle) particularly hard over one year. But let's take a step back. Let's look at the long-term figures (measured in decades, not years).<\/p>\n\n\n\n

As time goes on, the cursed investor's return tends toward the long-term average.<\/span><\/strong><\/p>\n\n\n\n

All things come to those who wait. Even after the biggest crash in history in 1929. The key: stay invested.<\/span><\/strong><\/p>\n\n\n\n

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Our service<\/strong><\/h3>\n\n\n\n
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We offer a discretionary portfolio management service specializing in digital assets. We provide comprehensive, end-to-end human guidance in this space by tailoring your portfolio allocation to your risk profile and situation. <\/p>\n\n\n\n

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Our turnkey management allows you to take advantage of this sector's growth without worrying about choosing the digital assets to put in your portfolio, conducting in-depth token research, dealing with volatility, or handling rebalancing, etc. All you have to do is read your monthly reports and invest regularly with a long-term horizon (4 years and more). <\/p>\n\n\n\n

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We do not engage in algorithmic trading or day trading; we invest for the long term in projects that we know and understand. We make monthly rebalancing adjustments in the portfolios and conduct in-depth research on the assets (especially their tokenomics) that we include in our portfolios. <\/p>\n\n\n\n

Check out our website: https:\/\/www.mereau-finance.com\/<\/a><\/p>\n\n\n\n

If you have any questions, comments, or would like to know more about our service, please feel free to contact us at this email address: tristan.g@crypto-assets-management.com<\/a> or to schedule a phone appointment with us via this link.<\/a><\/p>\n\n\n\n

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Discovery Pack<\/strong><\/h2>\n\n\n\n
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Investment of under \u20ac20,000 <\/strong><\/p>\n\n\n\n

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