The price of Bitcoin is holding up quite well in the short-term as Robinhood fires 23% of its workforce, Bitcoin cheerleader and now former CEO of MicroStrategy quits his post, and another security debacle.

Security infrastructure in any unregulated market is paramount simply because the assets aren’t insured.

Once taken, might as well gift the robbers a card on the way out.

The stakes become higher when hackers know they are less likely to be chased after or quantified once they steal what they are looking for.

Regulated and insured industries are tied to government oversight and when that’s the case, congressional committees often look into industries they are directly tied to if things run amuck.

The optics couldn’t be worse for crypto as we bounce from consecutive security breakdown to the next.

It’s almost as if the last coin not getting hacked will be the last one standing.

It’s getting that bad as the crypto “winter” has triggered a wave of bankruptcies and encouraged smash-and-grab hacking schemes preying on crypto holders who are down and out.

This time it was Solano, which is the 4^th biggest cryptocurrency, with a market cap only behind Cardano (ADA), Ethereum (ETH), and the bellwether Bitcoin (BTC).

Solana, known for its speedy transactions, has become the target of the crypto most recent hack after users reported that funds have been drained from internet-connected “hot” wallets.

An unknown actor drained funds from 7,767 wallets on the Solana network resulting in upwards of potentially $50-$100 million.

The attack – which has affected only “hot” wallets or wallets that are always connected to the internet, allowing people to store and send tokens easily – does not appear to be limited to Solana.

Users have reported that USDCs were emptied as well.

The attack has compromised other wallets including Phantom, Slope, Solflare, and TrustWallet. Wallets drained should be treated as compromised and abandoned, Solana warned as it encouraged users to switch to hardware or “cold” wallets.

Phantom, a fast-growing Solana-based wallet that hit $1.2 billion in valuation in January, said it’s “working closely with other teams to get to the bottom of a reported vulnerability in the Solana ecosystem.”

Developers still don’t know how the hack happened and might never figure it out.

The hackers are that far ahead of the game.

Solana spokesperson Chris Kraeuter said the company’s engineers “are currently working with multiple security researchers and ecosystem teams to identify the root cause of the exploit, which is unknown at this time.”

The Solana attack comes hot on the heels of hackers exploiting almost $200 million in digital assets from cross-chain messaging protocol Nomad.

The “free-for-all” attack, which saw more than 41 addresses drain $152 million — 80% of the stolen funds – was made possible by a recent update to one of Nomad’s smart contracts that made it easy for users to spoof transactions.

The word is out there and hackers are clued up, they are moving fast to take advantage of the green shoots nature of the security infrastructure.

An infrastructure not tested by time is prone to gaps in defense and that is what we are seeing.

I have the conviction that if the bellwether Bitcoin is taken down by hackers, that could be the beginning of the end for crypto for this iteration.

In that unlikely scenario, we will experience a precipitous drop from the $23,000 per coin today.

After Bitcoin’s nosedive from $31,000 to $19,000, the digital gold has transitioned into a phase of low volatility.

This lull has helped out stabilize the asset class.

At one point, $12,000 was on the table but now, as recessionary fears have started to creep back into the market psyche, an expectation of loosening the liquidity regime appears to be in the cards.

Or so that is what the market is pricing in and when we look at the Fed Funds rate, it shows a forecast of interest rate cuts starting after March 2023.

Interest rate cuts are highly bullish for cryptocurrency because lower interest rates mean easier access to borrowing money to pour into alternative assets like crypto.

The tighter the money policy, the more conservative investors become preferring to invest in real estate and energy assets.

This year certainly hasn’t been the year of Bitcoin, yet we roll into the last half of the year hoping that 2023 will deliver rate cuts to crypto traders.

Positive signs have been filtering through following the Federal Reserve's announcement to raise interest rates by 75 basis points, bitcoin climbed over $24,000.

Ethereum has more than doubled bitcoin’s gains over the same period, jumping as much as 57%.

The future expectation of rate cuts has been boosted because of US Central Bank Governor Jerome Powell’s weak testimony.

Signaling the bringing forward of rate cuts because a recession could come is bullish Bitcoin.

However, the current problem we have is 9.1% inflation devouring the 2.5% Fed Funds rate.

The probable result is when the Fed finally does pivot to a more dovish stance, it will do so while admitting defeat to inflation.

In the most recent Cleveland Fed inflation expectations, July is estimated to be 8.8%.

To be sure, the total market capitalization for all crypto assets is still down roughly 60% from its peak reached in November 2021. But cryptocurrency prices have rebounded over the first half of July with fresh buying having sent the sector's total market cap back above $1 trillion.

The 200-day moving average (DMA), which traders use as a technical gauge for whether an asset's trend is broadly higher or lower, still sits far above current levels and is declining for both bitcoin and ether.

As far as crypto fundamentals go, Ethereum's merger is a potential positive for markets through the summer. Core developers of the Ethereum blockchain have slated its software upgrade from proof-of-work to proof-of-stake, the so-called "Merge," for as early as the week of September 19.

People like hearing hard dates and we are still waiting for one from Ethereum.

Ultimately, what is abundantly clear is that the lack of appetite to raise rates is good news for all risk assets as we move forward into 2023.

This means we won’t see a repeat of a disastrous sell-off that occurred the past year in crypto.

Since the middle of June, the bitcoin dip has been bought and I can easily see a scenario where crypto continues to inch up if inflation comes down to a 5-7% range which is entirely possible.

Crypto, the industry itself, has a lot of work to do, but the macro picture is what is powering the price right now.

In the crypto community, investors fiercely defend why Bitcoin (BTC) will be more valuable than Ethereum (ETH) or vice versa in the future.

It was only just last year, we were presented with a situation where both were going up, and primarily because of the law of numbers, the growth rates for ETH were higher because the coin was priced in the low thousands.

When the pronounced equity selloff started to really accelerate at the beginning of this year, it offered a snapshot into which currency is best suited to endure heavy systemic stress.

The winner, and not even close I might add, was and still is Bitcoin.

Saying Ethereum has been having a hard time is an understatement, it has sunk from a peak of $4,800 to $1,000 today.

In relative terms, BTC has outperformed ETH by around 40% during this equity turmoil showing itself as still the best in show and the only reasonable crypto to invest in.

I am on record for saying ETH would be higher than BTC in the future earlier last year because of the accelerated growth input of the asset in a growth industry.

That all changed once the dynamics reversed and tailwinds became headwinds, and now, we are really witnessing ETH’s true colors.

It simply isn’t as good as BTC period.

I have heard of some pundits pushing back the timeline of when ETH will surpass BTC to 2030.

I would respond by saying what is that based on?

Hope?

I do believe the upcoming system shift to proof-of-stake (PoS) will take absolutely no part in ETH usurping the crypto throne ten years from now.

Investors don’t care if the coin is produced using hydrocarbon energy or windmills.

It’s not really a big deal to them.

I would probably say it will never happen, pointing out that BTC is digital gold while ETH is the second iteration of the internet.

I have seen nothing that suggests that ETH's software or code is so much superior to that of BTC so much so that we are about to experience a revolutionary shift.

It’s not that at all.

To say that “there’s plenty of room for both” is also something I don’t agree with because I believe this is a winner take all type of proposition which is an inherent dynamic embedded in technology.

There are over 20,000 crypto coins and most of them are scams. 

Even if ETH reduces hydrocarbon energy and increases its security, that doesn’t mean that BTC will have less security advances relative to ETH over time.

Even more ironic is the PoS switch means that the system will need to run a validator as the backbone of the network.

The validator is expected to maintain sufficient hardware and connectivity to participate in block validation and proposal.

In return, the validator is paid in ETH (their staked balance increases).

Validators miss out on ether rewards if they fail to participate when called upon, and their existing stake can be destroyed if they behave dishonestly.

Once activated, validators receive new blocks from peers on the Ethereum network.

No offense, this sounds like a centralized version of ETH and not a decentralized coin.

Proof-of-work is when any random guy can hook up to a power grid and produce a BTC which he can take proceeds from. He has no control over the system and nobody knows who he is.

The validators being held by a code of conduct and penalized or rewarded by that is absolutely what I consider centralization.

Ultimately, I don’t believe ETH has any special advantage over BTC and the PoS switch is a lot of marketing chutzpah.

The fact is that BTC has outperformed ETH when the equity sushi hit the fan and honestly, who cares about PoS.

Investors care about preserving the value of their portfolios.

If a choice between one, invest in BTC and avoid ETH.