Charting Price Clues, Liquidity, & Market Musings

Chart of the Week – The SEC Won’t Let Me Be, Or Let Me Be Me

Anyone who’s hung around the cryptoverse long enough – or had to cough up money this week to pay taxes on last year’s gains – knows there’s material differences in how countries regulate crypto assets. The longstanding gorilla in the room for many has been the SEC, whose primary job is to regulate securities markets and “protect investors” from dubious activities like market manipulation, fraud, etc.

But even highly-regulated markets like public equities suffer from their fair share of pitfalls. Just look at the performance of many overly hyped IPOs recently, which have seen their stock prices crater despite all the pre-public enthusiasm surrounding them. The Renaissance IPO ETF, which tracks a portfolio of the largest, most liquid, newly-listed US IPOs, is down over 35% YTD. Makes ETH’s 18% decline this year a bit easier to swallow.

Part of this underperformance is a function of unfavorable market conditions, no doubt. But the same could be said for any market, especially one like crypto that’s still in its infancy. No matter how rigorous the pre-IPO process is, there’s always going to be risk that a company fails or can’t execute on its vision or has to pivot their entire strategy because what they’re doing simply isn’t working. Just because a company chooses the traditional path to go public doesn’t “protect” average investors from aping into hyped up names with serious downside price risk.

Many of these companies were built by founders with big dreams and ambitious visions, just like those we find in crypto. Many of these companies have earmarked the proceeds from their offerings to double down on their business and invest in new growth initiatives, just like we see in crypto. Not every protocol issuing a token or seeking some kind of liquidity event is doing so just to help their founders or investors get rich. Liquidity can unlock a lot of value for a protocol if pursued for the right reasons, just like it can for a growing company.

Investing in any market has its risks. At a certain point, we need to put more responsibility on investors to make their own decisions about where to put their own money. We also need to give investors access to tools (like hedging instruments and derivatives) that allow them to structure their own protection if they seek it, which is an area the U.S. is slacking. Maybe this last rant is misplaced, or maybe we’re just sick