Could Bitcoin Become the New Ethereum?
In November 2021, Bitcoin’s Taproot upgrade took place without much fanfare. Changes to Bitcoin’s core software are rare and many argue that the original code written by Satoshi doesn’t need tweaking. Others say Bitcoin needs to adapt and evolve or it will die.
This debate has been reignited this year by a slew of developments on Bitcoin made possible by that Taproot upgrade nearly two years ago. The Ordinals protocol has brought NFTs to Bitcoin and the BRC-20 standard has enabled the creation of tokens on its blockchain. These developments have made headlines and stoked the flames of division which have long existed in the Bitcoin community.
In today’s video, we take a deep dive into Ordinals and BRC-20s and examine what they are and what they mean for Bitcoin. Is this a new and exciting stage in Bitcoin’s history, or is Satoshi’s creation being desecrated? Can Bitcoin continue to thrive in its current form, or does it need to take a leaf out of Ethereum’s book? And, what could possibly go wrong?
You can watch that video here.
📈 Crypto Market Forecast 📈
It’s going to be another interesting week. We could either see a continuation of the chaos in the crypto market, or a relief rally which is long overdue (at least according to the technicals). I lean towards the latter, especially since the biggest macro factors for this month (CPI for May and the Fed’s interest rate decision) are in the rear-view mirror.
Speaking of which, the Fed’s decision to pause was not surprising at all. Besides the fact that headline CPI for May came in cooler than expected, the Fed is aware of the tightening effect that refilling the Treasury General Account will have. If you watched our video about that, you’ll know it’ll suck money out of the markets, especially this month.
What’s interesting is that the balance in the TGA has only just started to increase. This is probably because the Treasury first has to repay the money it had been taking from other areas of the government as part of its emergency measures after the debt ceiling limit was hit. The recent increase in the TGA’s balance suggests that the actual refill is about to start.
Obviously, the resulting liquidity drain could drag down the markets, but it’s possible that this liquidity drain operates with a lag. This is something we noticed when we did our video about the TGA, and it’s something that wasn’t mentioned in that video. Assuming there is a lag, then it again leaves the door open to a recovery rally for crypto in the coming weeks.
This begs the question of what’s going to happen with the stock market, given that it’s in a similar position from a macro perspective. The answer seems to be that stocks will keep doing what they’re doing until something bearish comes up. In case you haven’t noticed, stocks have been rallying like crazy and investors are feeling extremely greedy.
As you might have noticed, crypto hasn’t been all that correlated to stocks recently. The bad news is that it means that crypto can continue to crash even while stocks rally. The good news is that it means that crypto-specific factors are the only ones moving the crypto market. This can make it easier to understand why prices are pumping or dumping.
The primary crypto factor at play recently has been regulations, and so far the crackdown has been focused on centralised exchanges and arguably centralised crypto projects. However, it’s possible that we could see this crackdown expand to other crypto niches like DeFi. The constant chatter about the SEC’s new definition of ‘exchange’ is why one could suspect this.
Another crypto-specific factor that seems to have flown under the radar is the bankruptcy processes of all the crypto platforms and exchanges that went under as a result of Terra and FTX. Voyager is reportedly going to allow withdrawals as soon as this Tuesday. That said, these withdrawals and redemptions haven’t - so far - impacted crypto prices.
On that note, the news that Blackrock has filed for a Bitcoin Trust with the SEC leads one to believe that Grayscale is in trouble. For context, Grayscale operates the largest Bitcoin Trust. In our opinion, the only reason why Blackrock would throw its hat into the ring is if Grayscale was teetering. This wouldn’t be surprising, given that Grayscale’s parent company (DCG) is strapped for cash.
Speculation aside, there’s another black swan that you need to keep on your radar in the coming weeks, and it has to do with Tether’s USDT. There’s been lots of FUD flying around over the last few days, and that tells me that Tether is being put back on the radar of regulators. This increased attention could attract unwanted scrutiny, and that could lead to some issues for USDT.
To be clear, we don’t believe that Tether will go under, but any significant deviation from USDT’s peg could cause issues for some exchanges. Consider that USDT’s primary demand driver is leveraged trading. USDT’s supply being at record highs tells us that there’s immense amount of leverage on exchanges. A significant depeg could cause unwanted liquidations that do serious damage.
It’s times like these that you need to keep your crypto on a hardware wallet and only use trustworthy and regulated exchanges when trading. You can get discounts on both on the Coin Bureau Deals page.
🌊 Prometheum: SEC’s Puppet? 🌊
About three weeks ago, Prometheum, an unknown New York-based crypto firm, made headlines for getting approval as a licensed Special Purpose Broker-Dealer from FINRA.
The approval was significant because it made Prometheum the first “qualified custodian” crypto firm to offer custody services for digital asset “securities.”
The licence approval seemed to signal that there was indeed a way for crypto companies to be regulated by the SEC. Prometheum CEO Aaron Kaplan even appeared on an episode of the Unchained Podcast, explaining how Prometheum’s licensing demonstrated a clear path forward for crypto in the United States.
This seemed like quite the breakthrough when you consider that heavyweights such as Coinbase and Kraken have been fighting against the SEC for years, criticising the regulator for the lack of regulatory clarity and a proper licensing regime in the US.
Safe to say, a lot of people were puzzled about how a seemingly obscure firm was the first to secure these regulatory licences. However, not much attention was paid and the news was quickly forgotten.
Until the moment when Aaron Kaplan appeared at a House Financial Services Committee Congressional hearing on the 13th June.
Kaplan’s testimony before the Committee seemed to show strong support for the SEC, while criticising much of the crypto industry.
Specifically, Kaplan testified that there was no need for new regulation, as existing securities laws were sufficient for regulating crypto - a view notably shared by… the SEC.
Feathers were ruffled, to put it mildly. Many members of the digital assets industry began wondering if Prometheum had received preferential treatment from regulators.
This suspicion hardened when Kaplan called the SEC “the most capable financial markets regulatory agency in the world” in his prepared testimony. Some extremely strategic brown-nosing, if you ask me.
Spidey senses duly tingling, crypto lobby group the Blockchain Association filed a FOIA request on the SEC's interactions with Prometheum, while Matt Walsh of Castle Island Ventures and Adam Cochran of CEHV conducted their own investigations of the firm.
Cochran and Walsh’s digging revealed a number of shocking details about Prometheum. For example, the bulk of Prometheum’s regulatory approvals seemed to fall into place after the firm hired a bunch of former FINRA and SEC employees.
Prometheum also raised funds from Wanxiang - a purported Chinese Communist Party (CCP) affiliate and it paid $1.5M to Network 1 Financial Securities - a shady broker with a Chinese-affiliated firm and a horrible compliance track record of more than 20 regulatory or civil actions against it. Notably, Network 1 was the broker behind the Ice Tea company that pivoted to a blockchain project in 2017 and which then turned out to be a scam.
Fortunately however, Kaplan’s comments before the committee did not go unchecked.
Representative Mike Flood addressed the flaw in Kaplan’s stance by pointing out that Prometheum’s inability to offer trading services for BTC or ETH, due to doubts over their regulatory statuses, thus prevented the firm providing trading services for 65% of the $1 trillion crypto market cap.
Flood also pointed out that, as a regulated broker, Prometheum could only offer trading services for registered securities. Kaplan himself admitted that most of the crypto market was made of unregistered securities.
Simply put, without new legislation defining what makes a digital asset a security, no tokens would come in to register themselves as a security.
It seems fitting to end this piece by dropping a link to this song by songaday.world that beautifully sums up what is yet another bizarre sequence of events in this crazy industry we love so much.
📊 Personal Portfolio 📊
BTC 35.84% | ETH 30.92% | USDC 18.24% | USDT 7.29% | USD 3.70% | ATOM 2.86% | DOT 1.15%
🔥 Deal of The Week 🔥
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If that’s something that you are looking to do, then you’ll probably be looking to use a top-notch crypto exchange to get the best bang for your sats.
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🔮 Video Pipeline 🔮
- Janet Yellen Testimony: Impact on crypto & the economy?
- Crypto Around The World News Update
- FED Press Conference: What you need to know!
- EU AI Regulations: A brave new world!
🏆 What's New At CoinBureau.com This Week? 🏆
📖 Quote of the Week 📖
In this bear market, it’s more important than ever to keep focused on the fundamentals of Bitcoin and crypto. That’s because it’s hard not to get disheartened by lacklustre price performance. But remember, price is driven by supply and demand; value is driven by fundamentals.
“In the short run, the market is a voting machine. In the long run, it is a weighing machine” - Benjamin Graham
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 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.