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GM. This is Milk Road, the daily newsletter that brings you the good, the bad, and the ugly of crypto - without the fluffy bullsh*t.

Today we’re bringing you the first part of a 2-part special:

• The Bull Case: Why the crypto market could bounce back soon

• The Bear Case: Why the crypto market could bleed a little longer

Yesterday we asked which one you wanted to see first. And you answered.

56% of Roaders voted for The Bear Case.

Here are some of our favorite comments:

• David: “Better to know that your girlfriend is cheating on you than knowing that her super fine best friend wants to stir your oatmeal.”

• JunkSteak (what a username): “Buttermilk is sour enough as is, don’t let it sit longer.”

• RustyShaw: “The dessert tastes (reads) better after choking down those unwanted veggies”

Most of you just wanna rip the Band-Aid off, so let’s do it.

[WARNING: the following bear market edition may make you sweat in new places. Not for the faint of heart]

4 REASONS THE BEAR MARKET COULD CONTINUE

Crypto is battling a 4-headed monster right now. Each “head” represents a reason why the bear market could continue longer.

Today, we’re gonna take a look at each one and explain why they’re a problem. We’re also gonna rate each one on the Milk Road Worry-Meter.

(1 = “I ain’t worried bout nothin”. 10 = “Help mommy, I’m scared”)

THREAT #4: CRYPTO HACKS

What’s the problem: crypto has been plagued with hundreds of hacks.

In fact - there have been over 400 hacks, resulting in over $8B stolen since 2021.

I repeat, 8 BILLION dollars.

When I first joined crypto, it felt like you were hit by a stun grenade every time you’d hear of a major hack. They were rare.

Fast forward to today, hacks are a weekly event. They happen just because it’s Tuesday.

Why it’s a problem: hacks are sh*tty, but crypto hacks are extra sh*tty…

In traditional finance: you can get hacked but there’s a process in place to help recover your funds.

It can be long (and painful). But nonetheless, there is a process.

In crypto: there is no process. No customer support. No 1-800-I-GOT-REKT number to call for help.

Nada.

As more people get hacked, more people will end up leaving the industry. (or worse, they’ll never even enter the industry due to the fear of getting hacked)

Milk Road Worry-Meter: 6

While crypto hacks have been slow this year (only ~$1B has been stolen so far in 2023), they’ve recently started to pick back up again.

And the problem isn’t just the hacks themselves, it’s also who’s behind them.

Without further adieu, meet your hackers…Kim Jung Un and The Boyz.

[Side note: that kid sitting down might have the scariest job of all time. I’d rather be the guy who used to be Mike Tyson’s personal punching bag.]

Okay, back to what I was saying.

Over the last 102 days, N. Korean hackers have stolen ~$270M from crypto projects. That’s an average of ~$2.64M, every single day for the last 3+ months... (!!)

In total, it’s estimated that North Korean hackers have stolen $3B+ from the crypto industry.

Basically, crypto is Kim Jung Un’s new piggy bank. And not only are investors getting rekt, but the stolen funds are also being used to buy some new toys (aka nuclear missiles).

It’s a double whammy and a big stain on the industry’s name.

As long as projects continue to ignore security problems, crypto will continue to be the Wild Wild West of Crime.

THREAT #3: CRYPTO’S LIQUIDITY DROUGHT

What’s the problem: liquidity and trading volumes across crypto are down, big time.

• Both on-chain and off-chain volumes are at historical lows, according to Glassnode.

• Trading on centralized exchanges is at multi-year lows.

• Weekly NFT volume is also at a multi-year low.

In other words, crypto is drier than the Sahara desert.

Why it’s a problem: crypto is a lot like a college party…when there’s a lot of liquidity, it’s a great time.

But once the liquidity runs out, things start to get rough. People lose patience and you’ll see 4 dudes fighting over a tiny Coronita beer.

The same thing is happening in crypto - investors argue all day long while trading (and dumping on) each other.

Milk Road Worry-Meter: 5

It’s getting ugly out there in the markets and without new liquidity coming in (aka new investors), it’ll be hard for crypto projects to see any real growth in the near future.

**static noise**

We interrupt your regularly scheduled programming to bring you a quick word from our sponsor…

TRY YOUR LUCK AT UP TO 1000 BTC

Everyone loves a good guessing game. My childhood claim to fame was guessing how much candy was in the jar at the fair.

Well, Phemex is turning it up a notch. They’re giving all of their loyal Soul Pass holders the ability to guess the future price of Bitcoin.

The bombshell? The prize pool could consist of 1000 BTC.

That’s right, up to 1000 BTC. Here’s how it works:

• Mint your Phemex Soul Pass, this is the only requirement to enter this epic giveaway.

• Submit your prediction on what the price range of BTC will be on October 31st, and make sure to cast your vote by the end of September.

• Each price range corresponds to a potential prize pool, with the biggest prize pool of 1000 BTC corresponding to a price of $50k+. Winners will share the prize pool with other accurate predictors in the same price range. This follows Phemex’s recent 100 ETH giveaway that Soul Pass holders got to join with no strings attached.

  Mint your Phemex Soul Pass to join the fun!

**static noise**

And now back to your regularly scheduled programming…

THREAT #2: CRYPTO REGULATION

What’s the problem: U.S. regulators are cracking down on anything and everything under the crypto sun.

The SEC and CFTC have charged…

• Crypto exchanges

• DeFi protocols

• NFT projects

• Celebrities and investment firms that promote any of the above

It’s been one big regulation party where instead of music and drinks, there are criminal charges and 100-page lawsuits.

Why it’s a problem: Unnecessary regulation will stifle innovation in the crypto space.

When big players are forced to pay multi-million dollar fines and shut down certain operations, it leads to fewer companies and VCs investing money (and time) into crypto-related projects.

Or worse, they’ll just leave the market entirely.

Milk Road Worry-Meter: 8

Regulation is needed to bring crypto out of the shadows and into mass adoption but, right now, regulators are acting like middle school safety patrols - they’re writing everyone up with charges.

As long as the trend continues, it will be extremely hard for crypto to reach the masses.

THREAT #1: BINANCE TROUBLES

What’s the problem: this year has been filled with drama for Binance.

The crypto exchange has…

• Got sued by the SEC, CFTC, DOJ, and everything else in the federal alphabet soup

• Been accused of commingling funds

• Lost a handful of key executives after they quit

That’s just to name a few things. (If you want to see a full list of all the drama, you can check it out here)

Why it’s a problem: Binance is the largest exchange in the world and it isn’t even close.

It currently has a 51.7% market share.

The next closest competitor (UpBit) has an 8.1% market share.

So if Binance were to blow up, it could be catastrophic for the crypto market…

Milk Road Worry-Meter: 5

Here are Milk Road, we’re big on “innocent until proven guilty”. So although there are a ton of allegations against Binance, we aren’t hitting the panic button just yet.

With that being said… if some of the rumors are true and if Binance were to end up collapsing, our Milk Road Worry-Meter would go from 5 —> 100, real quick.

It would be the single largest Black Swan event in the history of crypto.

Worse than Luna and FTX - combined.

Alright, folks. That’s enough scares for the day.

My palms are sweaty, knees weak, arms are heavy.

The good news? Tomorrow’s edition is all rainbows and sunshine.

We’re gonna talk about The Bull Case for why the crypto markets could make a comeback in the near future.

Keep your eyes peeled on those inboxes!

BITE-SIZED COOKIES 🍪

The SEC charged Stoner Cats for illegally offering unregistered securities. The Mila Kunis-backed NFT project has agreed to pay $1M in penalties and destroy any NFTs the company holds.

FTX received court approval to sell $3.4B worth of crypto. According to the plan - FTX will sell $100M per week, but it could be increased to $200M on an individual token basis.

Huobi rebranded to “HTX” to celebrate its 10-year anniversary. The crypto exchange also has a new slogan: “HTX, Just Trade It”. (Creativity: 1/10. It’s a Walmart version of Nike’s slogan)

Coinbase confirmed it will add support for the Bitcoin Lightning Network. The leading U.S.-based exchange said the integration will take time, but they’re already working on it.

MILKY MEMES 🤣

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.