One must consider why Bitcoin emerged in 2009. Also what have the central banks and the financial system been doing in the past 15 years or so.
Category: Investing
Secret and Not So Secret Buyers
After the run up, Bitcoin dominance in the crypto market remains intact. Most altcoins have more volatility than BTC, so prices are now cooling off.
With BTC back to ~$60k, the bullrun has not yet started even though the US, China and the EU are increasing liquidity. New crypto ETFs are also coming online and Blackrock mentioned Bitcoin as “a unique portfolio diversifier”.
Yet, prices are not moving up.
Yesterday US ports on the East Coast decided to begin their strike. The issue is the planned automation of port operations through robotics and AI. When ports shut down even for a couple of weeks, this moves markets. With the upcoming elections in a little over a month, the timing of the strike is not a coincidence.
Stock markets and overall financial markets could potentially be looking at a collapse in October 2024. This will determine when the crypto bull market begins. Any liquidity shock will lead to more money printing. This is reflected most in commodities markets.
Goldman Sachs released a report identifying or revealing “secret buyers” in the gold market. The crypto market also has secret and not so secret buyers.
One Final Shakeout?
MIchael Saylor is the CEO of MicroStrategy, a company that is heavily invested in Bitcoin. Owning shares of MicroStrategy is one way of participating in the crypto market without buying ETFs or Bitcoin itself.
This is a presentation given by Michael Saylor on money and economic development, as well as the role of Bitcoin and blockchain technology, from a historic perspective.
The video title says the gold rush starts NOW, but there could be a final shakeout coming.
The ECB dropped rates by 0.25% this week and the Fed will lower rates this comng week. Depending on whether the rate decision is 0.25% or 0.50%, markets may provide a strong reaction.
How low? BTC could even go to the 45k level. We will see.
If It’s Not Broke….
As the saying goes, if it’s not broke, don’t fix it.
The Fed provided forward guidance on rates at Jackson Hole on Friday. Rates are going down. The real economy is not doing well and neither are financial markets. The downward revision of the last jobs report is one sign of this. The housing market is another, as house prices are cratering. Meanwhile stock markets are making new all-time highs.
There will be another non-farm payrolls report before the September 2024 Fed meeting and all of this in an election year. Whatever the Fed does (at the end of the day they will print, a lot), there are signs that the system is broken and there will be some kind of monetary reform down the road. As the USD is the global reserve currency, this will necessarily be a global reform.
This is where crypto and blockchain technology comes in. First, the boring regulatory part (scroll down for more juice).
The time for US stablecoin regulation is now
For the US to fully realize the benefits of these new technologies, we need Congress to pass a strong legal framework for stablecoins
Candace Kelly, Blockworks
The EU has already presented its stablecoin framework under the so-called “Stablecoins Regime” of the Markets in Crypto-Assets Regulation (MiCA). Tether (USDT), the largest stablecoin, has critized these regulations as there could be a concentration of risk. Tether may be removed from European exchanges as a result.
Stablecoins are popping up everywhere and legislation is being put in place. The most recent announcement coming from Russia:
The (Russian) government plans to issue stablecoins linked to the Yuan and BRICS currency basket.
CoinChapter
The State of Wyoming is also looking to launch its own stablecoin in Q1 2025.
There are platforms that allow the creation and management of stablecoins, such as M^O. The BIS (Bank for International Settlements) has a project called Pyxtrial aimed at managing the balance sheets of stablecoins and other tokenized RWAs (real-world assets).
Pyxtrial demonstrated that the balance sheets of asset-backed stablecoins can be supervised.
Project Pyxtrial has the potential to monitor other tokenised products that are backed by real-world assets. The technology is a first step towards a tool that could support supervisors and regulators in proactively detecting issues in stablecoin backing and aid the development of policy frameworks based on integrated data.
BIS
Once the stablecoin framework and the tools are in place, crypto and blockchain development will speed up. A few test grounds already exist. Here are a few exciting ones, presented in videos: El Salvador, Argentina and Liberland.
Stablecoins will not solve the problems in the financial system, but they are necessary for the next stage. Crypto projects need to work within the developing regulatory framework. The arrest of Telegram founder Pavel Durov in Paris yesterday is an example. French authorities attested “a lack of moderation and cooperation with law enforcement” (disposable mobile numbers, data sharing in investigations etc.). In a recent interview with Tucker Carlson, Durov said the FBI has interest in Telegram’s source code. This should work both ways between those desiring freedom those desiring control of everything (read: open source code CBDCs).
Crypto Bullrun Beginning
BTC and altcoins have possibly started the next bullrun. Although confirmation on charts could take a couple of weeks, capital has started flowing into the market. Glassnode also published data that 75% of BTC wallets have been dormant for over 6 months, meaning long term holders have not sold into the summer weakness.
In September, markets are expecting the first in a series of rate cuts from the Fed. Cryptos react very sensitively to liquidity and the rate cut will probably provide the impetus to move crypto markets into the next bullrun. Naturally, a dip is still possible, but it is becoming unlikely with the current capital flows.
There are also developments that could cause people to view BTC and some altcoins as a safe haven. Banks are in trouble and there will be a consolidation of smaller banks. It is not a secret.
“We have identified the banks that have high commercial real estate concentrations, particularly office and retail and other ones that have been affected a lot,” he said. “This is a problem that we’ll be working on for years more, I’m sure. There will be bank failures, but not the big banks.”
Jerome Powell, Fortune, March 7, 2024
“Panics in banks are invisible. That means most people have no idea when their bank is in BANKRUPT. WHY not get smart and keep some of your money in real money…. Gold, silver, and Bitcoin?”
Robert Kiyosaki
The next Fed meeting is on Sept 17 to Sept 18. Someone not in the market might want to consider a dollar-cost-averaging strategy until then.
Dubai Allows Salary Payments in Crypto
Reflecting the growing acceptance of cryptos in the region, a court in Dubai has confirmed crypto salary payments to be legal.
The Dubai Court of First Instance has affirmed the legality of crypto payments for salaries under employment contracts in a landmark ruling on Aug. 15.
CryptoSlate
Meanwhile Franklin Templeton with $1.5 trillion assets under management has applied for a license to operate a crypto ETF index fund. The SEC signalled it will once again take a (long) while to process.
There is also speculation that Blackrock, with $10 trillion assets under management, could be looking into launching its own blockchain ecosystem. This does immediately raise interoperability questions, but they could get significant portions of the RWA (real world asset) sector to join them. The loser would be Ethereum.
On-chain data platform Token Terminal has set the stage for a potential seismic shift in the crypto ecosystem. It predicts that $10 trillion asset management giant and exchange-traded fund (ETF) issuer BlackRock is preparing to unveil its blockchain platform.
MITrade
The current market cap of the entire crypto industry is around $2 trillion, but it is projected to grow up to $100 trillion in the next 10 years.
Uncertainty Remains as Institutions Keep Buying
The US Marshal Service moved BTC to a prime wallet on Coinbase this week. This means they are selling the BTC seized from Silk Road operations. Institutions are buying as retail money is not yet flowing into the crypto market.
AI stocks are recovering, but there could be more downside before the next leg up. There seems to be a correlation with the unwinding USDJPY carry trade and the AI stock valuations. A large investment bank suggested the unwinding is 75% done. This is meaningful as BTC behaves like a tech stock and it dominates the crypto market (~55%). AI is also one of the leading narratives in the crypto market.
Overall, markets are pricing in 4 rate cuts in 2024. This means stocks will be going up, but leadership may not be in the older tech stocks. On Monday last week, the DOJ defined Google a monopolist.
Naturally insitutional investors prefer to purchase at lower prices, so uncertainty remains and there is a possibility for a dip into the 45k range on BTC.
Blackswan Coming to Crypto Markets?
Bitcoin and altcoins started falling again yesterday. On Saturday evening a tiny news event emerged that could potentially lead to something bigger.
Defunct crypto exchange Celsius has filed a lawsuit against Tether, seeking $3.5 billion in BTC returns, damages, and legal fees, alleging misappropriation of assets.
CoinGraph News
The key term is misappropriation of assets. Tether (USDT) has been criticized for not revealing its capital structure or ownership, held offshore. According to consumer protection organizations this poses a systemic risk to USDT holders. It is not known whether the company has the liquidity or even assets to stem outflows.
Over the weekend the CEO of USDT came out critizing the new European MiCa regulations with the same argumentation, systemic risk.
Tether CEO: MiCA regulation poses “systemic risk” to stablecoins and even the banking system
Tether CEO Paolo Ardoino criticized the EU’s MiCA regulation, stating it poses systemic risks to stablecoins and the broader banking system. He argues that instead of enhancing safety, MiCA introduces significant risks. Effective since June 30, MiCA imposes strict rules on stablecoin operations within the European Economic Area, including requiring at least 60% of reserves to be held in EU bank accounts. Ardoino noted that this could lead to vulnerabilities similar to those seen in bank runs due to the partial reserve banking system and the low insurance limit of $100,000 for cash deposits in the EU, which he feels is insufficient for large issuers like Tether.
@MONEY (Telegram Channel)
In 2018 an article was published on Hackernoon: “What Happens When the Tether Shit Hits the Fan?”.
Your material wealth in crypto is likely to take a heavy hit when Tether implodes.
BambouClub
It is possible that regulators will be taking a closer look at Tether in the near future.
In other news Trump’s son Eric posted on X that a big announcement is coming.
I’ve truly fallen in love with crypto and DeFi – Stay tuned for a big announcement.
Eric Trump
Last week, political meme token TrumpCoin plummeted as developers withdrew $50 million in liquidity. All developers of altcoins have at least some unlocked tokens, which means they can sell them. If crypto markets are rattled with Tether shocks, it is likely there will be plenty of selling going on and many coins will become less active or relevant.
Chart courtesy of @CoingraphNews
Will Bankruns Take Place?
The Federal Deposit Insurance Corporation (FDIC) has placed 63 lenders on its Problem Bank List. These institutions are at risk of insolvency.
The FDIC holds only 1.35% reserves, meaning there is a critical point where practically the entire banking system collapses. This applies to the European banking system as well.
If bank customers decide to bring their money into safety, a lot of the capital will find its way into precious metals and cryptos, with Bitcoin dominating the crypto market (around 55%).
There was a leaked video from an FDIC meeting where bankruns were discussed, but it has been removed from the internet. In the discussion FDIC officials confirmed that bankruns would of course take place.
Central banks and other financial institutions have the option to place all bank deposits on to a blockchain to handle liquidations and they are also working on an On-Demand-Liquidity tool, on the blockchain. Subscribers will receive more information on tis and other developments. Signups will be available in the coming week.