US Regulation vs Abroad: How Could Policy Shape Crypto's Future?
BTC backed USD? | Upcoming Trading Catalysts | Coinbase Sues SEC
GM, this is your Daily Bolt briefing.
In today’s edition, we’ve provided two extended reports for you to analyze. First, we give you the latest on BRICS and the global de-dollarisation movement; and how the US could extend the USD’s status as global reserve currency by backing it with Bitcoin.
We’ve also included insights from two prominent institutional traders in the industry. Avi Felman from GoldenTree and Jonah Van Bourg from Cumberland, share their market analyses and viewpoints on the latest market developments in their new podcast, 1000x.
After learning from industry experts, read our Note of the Day, where we go in-depth on the latest happenings that affect all crypto ecosystems, from regulatory headwinds to ETH staking updates, and more.⬇️
Keep your guard up in the market.
1/ What Bitcoin Did Ep. 650 - Possible Recession, BRICS and Hyperbitcoinization
Preview: In this episode, Peter McCormack from What Bitcoin Did invites James Lavish to discuss the current economic situation, possible recession, BRICS, and hyperbitcoinization. Read our notes below to learn more. Click here to listen to the full episode (74 mins).
Read our Note (10 mins) and save 64 mins.
Here are some key takeaways:
A recession is inevitable in both the US and the UK.
The yield curve has been inverted since last July, which is a strong indicator that we are heading toward a recession.
In the current environment, yields decrease as you go further out on the yield curve, indicating that people believe interest rates will be lower in the future due to an impending recession.
Lavish believes that technology creates deflationary pressures because it eliminates supply chains and distribution chains, reducing costs for businesses but also reducing GDP since these components are no longer being created or sold separately.
According to Lavish, inflation is necessary to increase GDP in nominal dollars, which increases the tax base and allows for more debt to be paid off.
Lavish believes treasuries and inflation are a way of stealing from people constantly. He states that this is a form of silent tax that hits certain people worse than others.
Lavish thinks central banks manipulate money through QE (Quantitative Easing) and bonds.
Lavish questions that if people get rid of central banks and bonds, GDP becomes something insignificant.
Lavish thinks recessions can be good for wiping out weak businesses and jobs that aren’t really needed. Strong businesses will survive during a recession.
According to Lavish, during a credit event or recession, everything sells off, so it’s important to be prepared for a market downturn.
Lavish says he has invested in safe assets such as gold and silver as well as Bitcoin.
Lavish thinks that the growth in the number of BRICS Nations (Brazil, Russia, India, China, and South Africa) could be healthy for Bitcoin.
According to Lavish, if the US backs its currency with Bitcoin, it will remain the global reserve asset even if other nations adopt Bitcoin.
Lavish states that if other nations adopt Bitcoin widely and it becomes a natural reserve asset, people may turn to it instead of the US dollar. If this happens while the treasury is printing trillions of dollars, hyperbitcoinization could occur. If the US cooperates by backing its currency with Bitcoin, it will remain the global reserve asset.
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2/ 1000x Podcast - Return of Retail: Where's The Fast Money?
Preview: In this first episode of 1000x Podcast, Avi Felman and Jonah Van Bourg join to discuss how markets responded to the banking crash, what catalysts are on the horizon, and where prices will trend next. Click here to watch the full episode (47 mins).
Read our Note (7 mins) and save 40 mins.
Here are some key takeaways:
Jonah Van Bourg believes the recent drop in crypto prices is a retracement and not the start of a downtrend. He thinks the market can absorb upcoming liquidations and remains optimistic about the regulatory climate becoming less restrictive. He remains bullish in the medium to long term.
Avi analyzed the lack of retail participation in the market, noting that retail investors tend to buy breakouts more than dips. He questions if the original set of buyers will return to the market and drive prices up.
Avi explains that Bitcoin's trend has seemingly broken, and if he had to guess, he thinks Bitcoin’s price might decrease to $24k in a month.
Jonah Van Bourg speculates that central banks like China might be accumulating non-dollar-denominated assets, such as gold and crypto, to reduce their exposure to US dollar-denominated holdings. He thinks that if central banks are accumulating non-dollar-denominated assets like gold, they might be doing something similar with crypto.
Van Bourg thinks that when a big buyer enters the market, it can significantly impact prices, and the recent absence of such a buyer could explain the recent drop in crypto prices.
Avi Felman agrees with Van Bourg's speculation and notes that countries like China and India have been accumulating gold. Avi also notes that there is a possibility of government-funded vehicles buying crypto.
Felman also emphasizes the importance of contextualizing trades within the broader market conditions and trends. He provides examples of how market reactions to the news, like Dogecoin’s moves following Elon Musk's tweets or Sandbox’s native token $SAND's partnership with Saudi Arabia, can vary based on the market's overall behavior and sentiment. In the current market, Felman advises being cautious with such trades due to low trading interest.
Avi Felman asks Jonah about his concerns with the debt ceiling, to which Jonah recalls the 2011 downgrade of the United States from AAA due to a potential unwillingness to pay.
He points out that the political vitriol is now higher than ever and that if the government were to default, it would be an unprecedented event in financial history, making the supposed risk-free rate no longer risk-free. In such a scenario, Jonah suggests that assets like gold or Bitcoin could see significant gains.
Avi notes that Bitcoin's correlation with gold has increased recently, but the supply side story is still a concern due to government sales of Bitcoin and other sales of Bitcoin.
Avi suggests that a potential U.S. default could temporarily push up Bitcoin's price, followed by a retracement, similar to the banking crisis, and the event may convert more long-term holders.
Avi suggests that the owners of $PEPE are most likely already deep into crypto, unlike those who bought $SHIBA during its bull run, who were mostly new to the market.
Felman notes that app chains have not gained much traction due to poor UI/UX and a lack of developer interest.
Jonah Van Bourg considers it a contrarian moment to bet on alternative Layer 1 solutions and app chains.
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Bankless - Outlook of Cyrpto in 2022, Regulations, Future for Coinbase
In this Weekly Roll-Ups episode of Bankless Podcast which took place on April 28, 2023, host David Hoffman and Ryan Sean Adams discuss the latest news about Coinbase suing the SEC. They also talk about Polynya Post about Top 5 Chains by Economic Activity, Updates on Binance and Voyagers crypto deal, Ethereum Staking winners and losers, and more. Read our notes below to learn more.
Background
David Hoffman - Host of Bankless Podcast
Ryan Sean Adams - Host of Bankless Podcast
Bankless Podcast - Bankless explores the frontier of crypto money and crypto finance.
Brian Armstrong - Co-founder & CEO at Coinbase
Paul Grewal - Chief Legal Officer at Coinbase
Coinbase - a secure online platform for buying, selling, transferring, and storing cryptocurrency.
Ethereum - is the community-run technology powering the cryptocurrency ether (ETH) and thousands of decentralized applications.
Mt. Gox and U.S. Government Wallets Transactions
There is news breaking on Twitter that Mt. Gox and the U.S. government wallets are making a transaction. Ryan notes that this news may cause a market sell-off. But it turns out that this news was just a false alert.
Ethereum Staking Dashboard from THE BLOCK
This Dashboash from THE BLOCK is the Ether supply deposited in the Beacon chain since December 2020.
This chart shows the upward movement for the entire time not until the Shapella withdrawal fork happened.
David notes that because of the Shapella hard fork, people thought that mass withdrawals were coming. As can be seen on this chart, the amount of Ether staked dropped from 18 million to 17.5 million and then continued its uptrend.
According to David, withdrawals seem to have slowed down and deposits have continued.
Winners and Losers of the Ethereum Market Share Dashboard from hildobby
David notes that this dashboard shows that Kraken Exchange is the big loser of Ethereum market share since they lost all their staked ETH.
This dashboard also shows that Coinbase, Houbi, and Gemini are also net outflows of Ether.
This chart shows that solo stakers are the winners since their Ethereum market shares grew by 1.5%.
David thinks that the withdrawal/deposit ratio of Ethereum staking has already bottomed.
David notes that Lido has not yet enabled withdrawals.
Polynya Post about Top 5 Chains by Economic Activity
Polynya is a pseudonymous L2 researcher.
The Top 5 Chains by Economic Activity according to Polynya are:
Ethereum
Bitcoin
Arbitrum
Tron
Binance Smart Chain
According to Ryan, Tron has a lot of Tether activity right now.
Ryan also said that people in Argentina right now are using stablecoins on Tron and Binance Smart Chain.
Coinbase Suing the SEC and MetaLawMan Comments on this Case
Paul Grewal, the Chief Legal Officer at Coinbase says that they filed a narrow action in the U.S. Circuit Court to compel the SEC to respond “yes” or “no” to a rulemaking they filed last July. Coinbase is asking the SEC to provide regulatory guidelines to the crypto industry.
According to David, Coinbase is suing the SEC for not doing its job in a reasonable amount of time pertaining to Coinbase’s petition last July.
MetaLawMan claims that this case will move fast unlike the Ripple case. There will be no discovery, just a briefing, and a hearing.
MetaLawMan also notes that Coinbase has an All-star legal team led by Eugene Scalia. Eugene Scalia is the former Secretary of Labor and son of deceased Supreme Court Justice Antonin Scalia.
MetaLawMan expects major industry players to pile in with amicus briefs supporting Coinbase’s position.
Shield NFT
Coinbase starts a Stand with Crypto campaign where people can mint a commemorative Shield NFT. The minting has a Zora Mint fee of 0.000777 ETH.
John Oliver on Mainstream Things in Crypto
John Oliver quotes that in a financial system where the only real currency is confidence, scammers are going to thrive.
John Oliver notes that the main thing that people can do in crypto is gamble with more crypto.
John Oliver reminds his audience that if they really want to invest in crypto they need to do it with due diligence and never put in more than they can afford to lose.
Ryan commented that it is hubris to claim that all crypto is a scam.
Updates on Voyager and Binance.US Deal
Voyager tweets that they received a letter on April 25, 2021, from Binance.US, terminating the asset purchase agreement.
Binance.US cites regulatory challenges for the termination of that deal. Binance.US tweeted that the hostile and uncertain regulatory climate in the United States has introduced an unpredictable operating environment impacting the entire American business community.
Sam Bankman-Fried’s Parent’s Restriction
David states that a judge approved restrictions for SBF’s parents. SBF’s parents are now getting strict cellphone monitoring while SBF is under house arrest.
A consultant will be reviewing keystroke logs and screenshots of Joseph Bankman’s and Barbara Fried’s cell phones 3 times per week.
Monitoring software is on SBF’s phones that photograph the user every 5 minutes.
Lens Bonsai Layer 3
Lens protocol is deploying a layer-3 roll-up to process transactions and support the next generation of Web 3 social users.
This layer-3 roll-up is deployed on Polygon since this is where Lens protocol is deployed.
MiCA Going Through
Patrick Hansen tweeted on April 20th that after 2.5 years of consultation, heated debates, last-minute amendments, and very close votes in the committee, the EU Parliament’s plenary passed the new EU crypto framework with an impressive majority of 517 MEPs for and 30 votes against.
According to Ryan, Europe doesn’t have a problem if Ethereum is a security or a commodity.
TransUnion Defi Credit Score
TransUnion a credit scoring company is working with some of its partners to deliver credit scoring to the blockchain.
David said that TransUnion is an oracle for credit scores on the blockchain.
Ryan notes that DeFi needs credit scoring.
Phi Bankless
Phi Land is like a 3D landscape used for building a little metaverse for yourself. You can put objects on the land based on what you’ve done on your Ethereum wallet. For example, if you trade on UniSwap you will get a UniSwap building, If you traded on OpenSea you will get an OpenSea ship.
Running an ETH Node
According to David, no one can shut down Ethereum.
According to Ryan, the protocol of liberalism is not anti-status but anti-authoritarian.
The protocol of Liberalism is preserving property rights, censorship resistance, and freedom of speech.
What is David Bullish On?
David believes that this AI alignment problem is going to sweep the world slowly.
Crypto is going to provide some tools that are part of the solution we need to live in an AI world.
What is Ryan Bullish On?
Ryan said that he is bullish that the U.S. is not going the way of China in terms of banning crypto.
Seeing Gary Gensler being grilled at the hearing, Ryan thinks that crypto has a lot of friends in Congress.
Ryan believes that the crypto industry will win the court of opinion.
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Show Information
Medium: Podcast (Youtube)
Show: Bankless
Show Title: Coinbase SUES the SEC! What You Need to Know
Show Date: April 28, 2023