Bitcoin ETF Price Predictions!

The big question now is not ‘will we get a spot Bitcoin ETF?’ but ‘just how much is a spot Bitcoin ETF going to pump our bags by and should I start ordering yacht catalogues?’ Or a variation on that theme, at any rate.  

We can be pretty certain that money will flow into BTC via these ETFs, but just how much and over what period of time is much harder to gauge. And, a question that many perhaps haven’t considered: where exactly is this money going to come from? The answers to all three questions are, as you might expect, rather nuanced.

Some of the best people to turn to for these answers are the good folks at Glassnode. Analysis of this kind is their bread and butter, after all. They’ve produced a helpful report, which examines the likely impact of these ETFs and what levels of inflows we’re likely to see. It offers some vital insights as to what could be coming down the pipe.

Crucially, it also considers some factors that many of us may have overlooked, such as the comparison with gold ETFs and the consideration of how much of BTC’s supply is illiquid. As you can imagine, there’s a lot to take into account with this sort of analysis and Glassnode have done an excellent job of drawing it all together.

And of course, rather than wade through the report yourself, you can instead check out today’s video, wherein we break down all the key information for you. So, if you want to get a read on what the future might hold, you know what to do. 

You can watch that video here.

📈 Crypto Market Forecast 📈

There’s lots to look out for this week, so don’t start fretting about Christmas shopping just yet. On the macro side, we have tax loss harvesting. This is basically when investors sell their worst-performing assets to incur a capital loss. They then use this taxable loss to offset any capital gains they’ve made from their best portfolio. The result is a lower tax bill (in theory). 

Most tax loss harvesting apparently happens around this time (late November and early December). Logically, cryptocurrencies like BTC have been some of the best performing assets of the year, so investors won’t be selling those (or tech stocks), especially with the ETFs around the corner. However, the same cannot be said for US bonds. 

As some of you may have heard, US bonds have been crashing for almost three years straight due to a combination of high inflation and rising interest rates. Logically, this means that investors are likely to sell these bonds towards the end of the year to realise their losses so they can offset the gains they’ve made on assets like cryptocurrencies (funny that). 

If this happens, it could potentially slow down crypto and other assets, at least in the short term. That’s because selling US bonds causes interest rates in the US to rise. Tax loss harvesting could be enough to push these long-term rates higher. Alternatively, it’s possible that we could see the Fed talk hawkish ahead of its next meeting (though this seems unlikely). 

On the crypto side meanwhile, we have the Treasury Department seemingly announcing its intentions to go after USDT stablecoin issuer Tether. This is not surprising given that US politicians were calling on the Treasury to investigate both Binance and Tether’s ties to terrorist financing. With Binance out of the way, it stands to reason that Tether would be their next target.

However, if you watched our video about the Binance settlement, you’ll know that Tether already seems to be working with US authorities. You’ll also know that the Binance settlement had next to no effect on the crypto market. In fact, the crypto market rallied, because investors knew that it meant a spot Bitcoin ETF approval is much more likely as a result. 

So, if we were to play devil’s advocate and assume the absolute worst case (a Tether investigation) - what would that look like? 

Well, let’s assume Tether would go a similar route as Binance and settle, what effects would that have on the crypto market? It all depends on the details of the settlement, but there seems to be a precedent in place for an orderly unwind. This is what US regulators did with BUSD, bringing its market cap from $23 billion to less than $2 billion. 

If US regulators decide to try and unwind USDT in the same way, then it could have mixed effects on the crypto market. On the one hand, it would further increase the likelihood of a spot Bitcoin ETF approval. On the other hand, however, it could do damage to exchanges and altcoins that rely on USDT, namely those offering derivatives

But, as with Binance, it’s in the interest of all involved parties to ensure minimal disruption to the crypto ecosystem. This means that a Tether settlement (assuming it happens), would likely look very similar to the Binance settlement. The real wildcard appears to be Tron, which is starting to come under scrutiny from mainstream media outlets. 

This is a bigger deal than you think, because Tron has an algorithmic stablecoin called USDD, which works almost exactly like Terra’s UST did before it collapsed. USDD is backed by 1 billion dollars’ worth of TRX and 500 million dollars’ worth of BTC. A TRX death spiral because of USDD would do serious damage to USDT, because most of the USDT in circulation exists on Tron. 

Let’s hope those headlines about Tron are nothing more than FUD… 

💯 Deal of The Week 💯

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In order to do that, you are going to need a quick and effective crypto on/off ramp. 

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💥 Atomic Fission 💥

Last week was a busy one for the Cosmos community, as members were busy debating one of the most controversial Cosmos Hub proposals thus far - Proposal #848 (AKA the ‘ATOM Halving’ proposal).

Proposal #848 passed with 41.1% of the network voting ‘for’, versus 31.9% voting ‘against’, with 6.6% voting for a veto and 20.4% abstaining. The turnout was 71.8%.

Specifically, the proposal sought to reduce ATOM’s max annual inflation rate from 14% to 10%, effectively reducing its staking APR by almost half, from 19% to 13.4%.

This divided the community, with one side as proponents and the other as the resistance. 

The primary thesis of the proponents was that Cosmos was overpaying for security by raising inflation rates to incentivise staking. They argued that, by reducing ATOM’s inflation, they were effectively reducing supply and thereby allowing for ATOM to naturally accrue value. 

The resistance meanwhile included the likes of Tendermint founder Jae Kwon. While there were no vocal drivers of the resistance, many speculated that the primary opposition to Proposal #848 came from the ‘financial’ concerns of the resistance members, i.e. concerns about a loss of revenue from staking rewards.

In fact, these speculations intensified when Jae announced he was planning to ‘coordinate’ a split via a hard fork of the main chain. The new chain, titled ‘AtomOne,’ would reportedly reward members of the resistance who voted against Proposal #848 with an airdrop of the chain’s new token, ‘ATOM1’.

Judging the proposal at first glance, many regarded the split as nothing deeper than a disagreement over staking rewards. 

However, a closer look at Jae’s previous rants and proposals reveals something quite the opposite. Notably, Jae’s primary opposition to Proposal #848 seems to come from a reluctance to position ATOM as a form of ‘money’ rather than ‘governance.’

Specifically, Jae doesn’t want ATOM to become the asset underpinning the Cosmos financial system. The primary goal for proponents of Proposal #848 was to enable ATOM to become similar to BTC and ETH as a form of ‘sound money’ asset being used in DeFi.

Instead, Jae believes the primary destiny for ATOM should be one where it claims the role of being the ‘most decentralised governance token,’ while allowing for a secondary native token to take on the mantle of ‘money’ in the ecosystem. 

The reasoning for this is simple – Cosmos is an interconnected network of ‘sovereign’ blockchains that can each leverage the security and consensus guarantees offered by the ‘root chain’ Cosmos Hub. This means that ATOM holders can either stake ATOM directly on Cosmos Hub or stake it independently on any of these sovereign chains (also called ‘zones’ in the Cosmos ecosystem).

According to Jae, the problem with this approach in using ATOM for both interchain security and ‘core security’ on the Cosmos Hub is that it makes it an inefficient and less secure system dependent on ATOM’s inflation rate.

For example, when inflation rates are high, a large number of ATOM holders, including those uninterested in governance, are incentivised to stake their ATOM to farm rewards. Jae argues that these farming-driven stakers would resort to staking on ‘dead zones’ – zones that are not active, and therefore less susceptible to slashing risks. He states that this results in only a minority of ATOM coins being staked on the Cosmos Hub and the majority being dispersed across the Interchain ecosystem. 

This places the security of Cosmos Hub at risk, as it lowers the threshold of ATOM tokens needed to take over the Cosmos Hub.

Conversely, when inflation rates are low, Jae believes that the number of stakers on Cosmos Hub would again significantly decline, as holders would instead be incentivised to use ATOM as a form of money to engage in DeFi, which could potentially offer higher yields.

Since both scenarios place the security of Cosmos Hub at risk, Jae believes a secondary token, that can act as both a utility token for interchain security and as a form of money in DeFi, would be better-suited. This is supposedly what Jae’s current AtomOne hard fork seeks to achieve.

In fact, a previous iteration of AtomOne came last year during the ‘Atom 2.0’ proposal. While that proposal sought to introduce a secondary token called ‘Photon’, the current iteration goes a step further by leveraging liquid staking as a measure to collaboratively secure the main Cosmos Hub in addition to the AtomOne Hub. 

There’s simply far too much in the proposal to fit in one article, sadly. So, we recommend you give it a deeper read, as it’s truly fascinating stuff.

In summary, we believe Jae’s fork is a net positive for the Cosmos ecosystem. While it may seem like a division between communities on the face of it, AtomOne actually seeks to co-exist symbiotically with the original Cosmos Hub.

📊 Personal Portfolio 📊

The portfolios of everyone at Team Coin Bureau (including Guy) are now available in the Coin Bureau Club. Not only that, but you can also see everyone’s crypto watchlists as well. Apparently, a few names are being added to some of those watchlists this week…

So, if you want to benefit from some of the most exclusive member’s alpha there is, be sure to join today! 

Sign up here 👉

🔮 Video Pipeline 🔮

  • Worst Crypto Mistakes: What to avoid!
  • Institutional Adoption: What’s the scale and what does it mean for you?
  • Crypto Sectors to Watch: New Narratives for The Bull Run
  • How Bitcoin Mining Can Be Used To Optimise Power Grids?

🏆 What's New at This Week? 🏆

CoinStats Swap Guide: The Easiest Way to Swap Crypto?

Wake: New open-source tooling on Ethereum to stop bugs!

Playa3ull Games Review 2024: Next-Generation Web3 Gaming Platform!

M6 Labs: Hostile Takeover Attempt by Kyber Hacker?

Unifying Ethereum: Abstraction & Interoperability

📖 Quote of the Week 📖

This week saw the passing of Charlie Munger, a revered and iconic investor. While his views on Bitcoin and crypto frustrated many in those communities, we can still learn a lot from such an experienced and storied individual. Which is why his thoughts on learning resonate so much with us at Coin Bureau. Our goal is to help the world know more about crypto - and knowledge is a gift that everyone has the power to give.

The best thing a human being can do is to help another human being know more” - Charlie Munger 

Team Coin Bureau

Disclosure: Authors may own cryptoassets named in this newsletter. These are unqualified opinions, and a Coin Bureau newsletter, is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor.

Guy Turner

Guy is one of the founding members and face of the Coin Bureau. Like many of us, he is just an average joe who became “crypto curious” back in 2013. After recognising the potential of blockchain technology, Guy set off on a mission to create crypto educational content, working with others to start the Coin Bureau website and released our first video on YouTube in 2019. You can learn more about him in his Who is Guy? blogpost.

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