February 03, 2025 | Read Online

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"I buy when things are low and no one wants them."

— Hetty Green

Cash is still king — in crypto

Hetty Green is the most powerful financier you've probably never heard of.

Born in 1834, Green learned finance as a child by reading financial documents from her family's whaling business to her grandfather after he lost his eyesight.

When Hetty's parents sent her to New York City to mingle in high society at the age of 20, her mother was bitterly disappointed that she returned without securing a husband.

Her father, however, was delighted that she had spent only $200 of her $1,200 budget — and that she had invested the rest in high-yield bonds.

Hetty did eventually get married, to Edward Green, a wealthy businessman who shared her interest in finance and investing.

But he did not share her good investing sense: In the financial panic of 1884, Hetty was forced to bail him out of the huge losses he incurred buying booming railroad shares with borrowed money.

She reluctantly covered his losses with the profits she had made buying distressed railroad bonds (without leverage) in a previous panic.

As annoyed as she was with her husband (she never forgave him), that unfortunate incident helped spread the word that Hetty Green would have money to lend when others did not — so much so that she became a lender of last resort on Wall Street.

In 1907, she bailed out the city of New York with a $1.5 million loan that no bank was neither willing nor able to offer.

In 1911, the New York Times acknowledged her unrivaled importance with the headline "Hetty Green Cuts Rates" — a testament to her status as something of a one-woman federal reserve.

She rose to that status by keeping a large amount of cash on hand and only using it to buy when stocks, bonds, loans and real estate were low and no one else wanted them.

This happened quite frequently because the prime decades of Hetty's investing career included the financial panics of 1873, 1884, 1893, 1896, 1901 and 1911.

When each of these panics occurred, Hetty was one of the few investors who had enough ready cash to profit from them.

The axiom "cash is king" stems from this era of hard money when financial panics were so frequent that the best way to invest was simply to wait for the next panic.

That doesn't work so well anymore.

It's now been 17 years since the last great financial panic, and if you've been sitting in cash since then, you've missed a 700% rally in the S&P 500.

(Note: 2020 doesn't qualify because it was so brief.)

The cost of missing out on 17 years of stock market highs so outweighs the benefit of buying the occasional crash that even a strategy of buying only at the highs is more profitable than attempting to time it.

Hetty would struggle with that, but in this era of smoother business cycles, an activist FOMC, and ever-growing budget deficits, the first axiom for investors is no longer "cash is king" but "buy and hold" — timing the market has given way to time in the market.

Unless it's the crypto market, in which case, cash still rules.

Sell when you can, not when you have to

Recommending cash may sound heretical in a space that scorns fiat and reveres HODLing, but what more evidence in favor of caution do you need than this weekend's price action?

On Sunday, ETH and SOL fell nearly 20%, XRP and DOGE fell as much as 30% and many other prominent tokens fell even more — all on the same news about tariffs that failed to move stocks even 2% lower this morning.

If it wasn't for crypto, you might not even have known there was anything to worry about.

Crypto investors can probably be forgiven for wondering why they should bear the brunt of bad news on something as unrelated to the future of finance as a trade war.

But we only have ourselves to blame — there are simply too many crypto tokens and (at current valuations) not enough money to buy them in a selloff.

There are now over 30 million tokens for investors to choose from (a number that's growing by about a million each week) — and a relatively static pool of investors to keep them all afloat.

In this, crypto is the opposite of equities, where investors' capital is always growing and the number of stocks to invest it in is usually shrinking: The number of publicly listed companies in the US fell from 8,090 in 1996 to just 4,642 in 2022.

The supply of money, by contrast, is up roughly sixfold in that time — which means (directionally, at least) there's 500% more money chasing the shares of 50% fewer companies.

Also, the biggest of these companies have fewer shares to sell.

Apple, for example, may no longer be growing much, but it's still shrinking its share count: The number of Apple shares outstanding has fallen from 25 billion in 2013 to 15 billion now.

Perhaps more impressively, Microsoft, Alphabet and Meta have managed to make their gargantuan investments in AI infrastructure while continuing to shrink their share counts.

And it's not just cash-rich tech companies: Autozone, a humble retailer of auto parts, has reduced its share outstanding from 153 million shares in 1998 to just 17 million now.

By contrast, there's $300 million worth of new bitcoin available to investors each week, ETH remains similarly inflationary and there are approximately five billion new Dogecoin created each year.

But crypto investors continue to buy these tokens with abandon — as evidenced by this weekend's price action.

Sunday might have been the largest liquidation event in crypto history, with an estimated $10 billion of leveraged longs stopped out in the mini-crash — a crash caused by news entirely unrelated to crypto.

This is very much Edward Green-type behavior, of which Hetty Green would thoroughly disapprove.

She would have nonetheless appreciated the opportunity to buy from all those forced sellers on Sunday — and also the frequency with which these opportunities keep arising.

For however long they do, cash will remain king in crypto.

— Byron Gilliam

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Trading Crypto's Weekend Meltdown

The 1000x hosts discuss crypto's weekend liquidation event and how to trade the upcoming week. Tune in for a deep dive into altcoins' weak performance, Bitcoin's role in a multipolar world and more.

Listen to 1000x on Spotify, Apple Podcasts or YouTube.

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Noelle Acheson @NoelleInMadrid

Replying to@NoelleInMadrid

Either way, a strong message was delivered over the weekend. Uncertainty will be higher on the global economic stage going forward, partners will be rethinking alliances, and we'll be talking more about currency risk premiums.

4:57 PM • Feb 3, 2025

1 Like 0 Retweets

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Uma Roy @pumatheuma

Consensus take: L2 interop is broken today.

Narrative violation: the solution is simple and does not need any fancy new protocols or infra.

The simple solution: a major L2 infra team needs to vertically integrate their existing stack from the protocol to UX layer, and enable… x.com/i/web/status/1…