It’s not escaped anyone’s attention that Monero (XMR) has been an underperformer as of late. Its price
as a percentage of Bitcoin has continued to lag markedly, and has given off some technically bearish
signals. The price action has led many to question the overall thesis behind its fundamental support
and belief in it – both as an investment and as a cornerstone to life with economic liberty in a digital
It moved from its high versus Bitcoin of almost 3.5% at the peak of the last cycle, to around 0.6% at the
time of our most recent valuation in the TCV August 2021 Issue. Since then, and as of this writing, it’s
trading at under 0.4% of BTC – pressing against its lows from last March.
So what gives?
I can’t claim to know the whole story, but I do see a few relevant items I think are worth considering (I’d
also suggest checking out Ed Bugos’ take in his October 20th BTC/USD Update, which despite the
headline, also covers Monero).
The first one is something that I myself am guilty of – emphasizing the investment return potential of
other privacy coins.
Though I try to be fair and balanced when discussing the risk/return potential of different projects, it’s
hard to not get lured in by the math. Whether it’s coins which are direct comparables as money (Pirate
Chain/ARRR and Wownero/WOW) or those that otherwise live within the private ecosystem
(Dero/DERO and Equilibria/XEQ), it seems the risk/reward for investing is skewed in favor of the
smaller, non-Monero projects.
While this is true on one level, it actually becomes false on another, as it suffers from a fallacy of
composition. Namely, what is good and works for one person, does not necessarily work for the whole.
If someone forsakes XMR for the newest 50-bagger prospect, then two things happen (especially if that
prospect is a complementary privacy coin, and it’s a whale doing it):
1) The price of XMR goes down (obviously).
Those abandoning ship might not care. If they’re selling their XMR to buy another privacy project which
they think has more upside, then they may think it doesn’t matter what happens to XMR.
This is an incorrect assessment though. It very much matters what happens to XMR, both in the
near-term and longer-term (which I’ll address momentarily), and it’s connected to the second thing that
2) The privacy coin market as a whole, which is currently ‘fronted’ by Monero, loses momentum and
Monero losing market cap doesn’t just impact Monero. It allows the privacy movement to be labelled as
fringe, and therefore somewhat illegitimate as a mainstream-accepted base layer.
This is probably easiest to see in the opposite case (one where Monero moons).
Think of what message it would send to the marketplace if Monero, in the next 3 months, went to
It would certainly raise a lot of people’s eyebrows and curiosity.
Remember, there is a whole generation of crypto-investors who have only gotten involved in the space
in the last 12 months, and have never heard of Monero. Why should they have? It’s not been in the
top 10. Not even top 20. Better to focus on Matic and Solana, right? (ugh)
If Monero all of a sudden skyrocketed, it would get people asking a lot of questions – namely, “What is
When they learn it’s a privacy coin, they’ll begin putting 2 and 2 together and realize that there must be
something about other coins that is not private.
And people would understand – at least at a high level. They wouldn’t struggle to figure out why privacy
was valuable. They would internally “get it”, so it would be met with new streams of support.
Conversely, when Monero tanks, it allows the naysayers to dismiss it.
“TPTB just wouldn’t let it succeed. It’s a losing battle.”
“It’s not a viable long-term investment.”
“People don’t really care about privacy.”
If you’re thinking that this doesn’t impact you and your other privacy-coin stash, think again. Once
again, it’s easiest to see in the reverse situation – one where Monero moons.
In a world where the market signals that millions of people do care about privacy, then all the other
ancillary private alt-coin projects will be that much more valuable. The ‘multiplier’ effect of their returns
would actually kick in. But if you think that they’ll get there without a wider acknowledgement for the
importance of privacy (and therefore, Monero as the backbone to this economy), you’re kidding
So – what can be done about this?
My first recommendation is: don’t be afraid to HODL Monero.
It’s not for nothing that we have Monero as our biggest portfolio holding after Bitcoin. It underpins so
many of our other picks that to not have a confident stake would be akin to building castles in the
clouds. They need some firm foundation to take hold and provide support.
I know it can be tempting for many to just use Monero ‘transactionally’. That is, only buying it when you
need it to perform some specific function – whether that be managing your coin control between
different exchanges or purchasing specific goods and services. But in my humble opinion, that’s doing
everyone else, and yourself, a disservice.
While I certainly don’t begrudge anyone for wanting to maximize their forecasted investment returns, it’s
critical to remember we don’t live in isolation. All our trades and activities affect everything else. If no
one is left supporting the foundation of the leading layer-1 privacy coin, then we run the risk of letting it
slide. In such a scenario, we’d be sending a message that we don’t really support the privacy economy
– we only do so if it’s for a trade.
By HODLing Monero you are actually doing your part in supporting your private altcoin bag at the same
time. There’s an old saying – a rising tide lifts all boats. Well in this instance, that tide is Monero and
the boats are your privacy altcoin stashes.
And guess what – if enough people contribute and do this, it will actually become a self-fulfilling
prophecy of capital appreciation and we’ll all win, not just on Monero but the private mega-pumps
That said, I do recognize that it can be a tough ask to consider something that, on one level, might
seem uneconomic. After all, you might argue that pure economic forces should determine everything –
and Monero should sink or swim on its economic merit alone, without any additional help. To this I
would call to mind the old saying, “Nature unaided fails.” I personally believe that it’s very appropriate
to help things along when they need it. Otherwise, why are we even here?
It’s also important to remember that there’s more at stake here than just the return on your portfolio.
We’re trying to rebuild our world into something that’s fair, free and liberty minded, and establishing
privacy coins at its core is critical.
My suggestion to you is that today, you take a good look at your portfolio and ask yourself – are you
being short-term greedy or long-term greedy? Being short-term greedy is chasing the next biggest
returns as you see them – not promoting the longevity of the space. Being long-term greedy is making
sure you are doing your part to support the ecosystem (and your long-term massive gains) by keeping
some core amount in a socially and politically important project.
The funny thing is, it actually doesn’t take that much of a shift in HODL and new investment allocation
behavior to create a massive impact on the price of Monero.
In the TDV September 2021 Dispatch I discussed a way of evaluating Bitcoin based upon new
money-flows on the one hand, and block rewards/emission rates on the other. The idea is that for the
price of a coin to reach a state of balance, those two need to equal one another. This allows us to
solve for how much money needs to flow in to get to a particular price (and stay there) long-term. So
let’s look at that for Monero.
XMR’s block time is ~2 minutes, and the award today is ~0.83 XMR. That means that each day, there
are ~720 new blocks which create just under 600 new XMR each day. Annually, that equates to ~220k
For Monero to find price equilibrium at $2,000 per XMR, new money inflows would need to absorb
those 220k XMR at that average price. 220k x $2,000 = ~$440m per year.
That may seem like a lot, but it actually isn’t when placed in the right context. In the last year, when
institutional investors only first began to get involved in Bitcoin, we know that at least about $10 billion
was poured into it. Today’s $60k+ BTC implies at least $20 billion of new money is streaming in BTC
annually (and like last year’s estimate, the truth is probably multiples higher). We’re talking about
needing only around 2% of that flow to get XMR back on the moon-trajectory.
Thinking of this another way, we only need 1,000,000 people to buy ~$440 worth of XMR every year.
Considering that it’s estimated that about 13% of Americans, or an estimated 33 million people bought
or sold some crypto last year, then we’d need to ‘convert’ only about 3% to get there, even without
institutional participation. Add onto this the fact that we’re actually addressing a global user base, and
some will surely contribute a lot more than $440 each and it’s a very achievable goal.
Whether you HODL in-line with our TCV portfolio allocations, or deviate is of course entirely up to you.
But if after taking stock of your allocations you realize you’ve been giving XMR short-shrift, please
consider that shifting even a small amount may do more to help things than you’ve been giving it credit
for. Every bit helps, and I for one consider the feeling and intention behind such an act to be extremely
important. It’s planting good seeds in the earth for tomorrow’s harvest.
Please don’t get me wrong and think that I’m sounding the alarm bells on Monero. I guess I am a little,
but only preemptively. I still believe it’s poised to perform extremely well as privacy comes to the fore –
especially as more institutional money pours into the market in this next up-phase of the cycle.
After all, new institutional and ‘smart’ money investors means a lot of additional research (something
which by the way, the last bull market was lacking). We can expect that in this cycle, it’s only a matter
of time before increasing numbers of them begin establishing institutional positions. After all, they will
discover that Bitcoin is not private, and that the value proposition for Monero is huge.
The markets may be voting machines in the short-term, but are weighing machines in the long-term, and Monero is due to
But as another saying goes, God helps those who help themselves – so to the extent that we all do this
together, even if it means carving out an incremental pocket for a HODL, we’ll get there much faster.
After all, what we’re looking for is escape velocity.
The next issue I’d like to expand upon is something that’s gotten some attention as of late – the
prospect that Monero is suffering from coordinated artificial price suppression.
It’s difficult to say with certainty that Monero’s price is actively being suppressed. However, considering
the benefits to the status quo in keeping its price down (as detailed above), it’s sensible to at least
consider whether some attempt at doing so might occur.
Thankfully, a significant mitigant to this prospect is relatively straightforward, and is something Rafael
recently highlighted on Twitter.
Bringing your Monero into your own private wallet (off from exchanges) is a critical way to support
Monero’s price and prospects. In addition to ‘Not your keys not your crypto’, removing them from
exchanges has the ability to short-circuit attempts to suppress its price.
This has to do with the way one might keep its price down – namely, selling Monero short. There are
two ways someone could do this:
1) Borrow Monero (from an exchange) and use that to short sell.
Removing your Monero from the exchange makes this more difficult and expensive for any prospective
2) Naked short sell.
This is something only the exchanges themselves are likely to be able to do. Much like fractional
reserve banking, they can ‘create’ new Monero (to short) based upon what their expectations are for
withdrawals. In other words, if they think it’s likely that at any point in time they won’t be hit with too
many XMR withdrawals (effectively a short squeeze), then they can continue shorting it, even far in
excess of all the XMR they hold in their custody.
Removing your Monero from exchanges disrupts this potential activity as well. It puts the exchanges
on notice that they don’t have unlimited ‘fractional reserve’ Monero to use as short-selling ammunition,
and in fact, could spark a squeeze. (It could be interesting to watch if withdrawal delays begin
occurring as people start cashing out. That could be an indicator that the exchanges, or those for
whom the exchanges are processing these trades, are getting caught in a short squeeze.)
Finally, I’d like to offer one more suggestion for consideration in the same vein.
Let’s not slow down in our efforts to educate others on privacy in the crypto-sphere.
Remember that the stumbling block for huge numbers of people is not a lack of appreciation for privacy
in general. Most people have that, at least on a high level. The problem is that so many people still
don’t understand that:
a) Bitcoin and other surveillance coins aren’t private, and
b) Privacy in crypto matters way more than most people realize.
It’s easy to forget that the vast majority of people out there have no idea that Bitcoin isn’t
Taking it upon ourselves to educate others on these points is something that’s important to furthering
the cause. After all, if most of the growth in crypto in the next few years is in people that haven’t yet
invested, then that means that the volume of newbies who haven’t a clue about privacy or Monero will
be enormous. We need to be persistent in getting their focus and attention, and educating them on
things that matter.
Part of that education though is to do with the second point above. It’s not enough to just flag that
Bitcoin is public. Many people might say, “So what?”
It’s important to help people understand why it matters – how when you don’t have privacy, you can be
monitored, tracked and controlled. Thankfully (in some ways), the state of the world around us is
making this increasingly apparent – even for those who are slow to connect the dots (or just don’t want
Let’s hold onto our vision at all times. It’s not just about making enough money in crypto to escape from
the world. It’s about being part of something that actually makes the world worth living in to begin with.
And for that, we need to back critical projects in a real way