Cryptos To Watch in The Bull Market!
The bear market grinds on, but that’s all the more reason to begin looking ahead. Better days will return for crypto and those who are prepared will be in line to make the biggest gains.
Before we can start homing in on promising projects, we need to have an idea of what categories of cryptos are likely to do well in the next bull market. Only then can we begin looking for individual winners.
Promising crypto categories are the focus of today’s video. Our research team has identified where they think the stars of the next bull market are likely to emerge from and, while some may be already on your radar, there are some wildcards in there too. Notepads at the ready and remember: those who fail to prepare, prepare to fail.
You can watch that video here.
📈 Crypto Market Forecast 📈
DeFi could be about to blow up in both a good and a bad way. Let’s start with the good way. The Uniswap community is currently discussing a proposal that will see a portion of trading fees from the DEX go to the community treasury. The details of the proposal foreshadow a subsequent proposal, which could see a portion of these trading fees used to buy back and burn the UNI token. If passed, it’s extremely likely that other DeFi protocols will follow suit.
If you watched today’s video, you’ll know that DeFi protocols generate the most fees (outside of BTC and ETH). Introducing new tokenomics that leverage even just a small portion of these fees to increase the value of their governance tokens could cause a massive pump. The caveat is that, due to the bear market, demand and fees for DeFi protocols have been low. Introducing these tokenomics could also create unforeseen regulatory risks and scrutiny.
This brings me to the bad way that DeFi could be about to blow up. As you may have heard, the US government is in the middle of debating whether to raise the debt ceiling. If they don’t figure out a deal by 1st June, the US government could default on its debt. Treasury Secretary Janet Yellen recently warned that this would cause chaos in global markets. However, it would also cause massive issues for stablecoins and DeFi by extension.
As you may know, most of the stablecoins in circulation are backed by US government debt, AKA US bonds. This puts them at risk. To be clear, the US government almost certainly isn’t going to default, but the volatility in the bond market could cause issues for stablecoins like USDC, which is used primarily in DeFi. Fortunately, USDC issuer Circle has adjusted the composition of its reserves in case the debt ceiling isn’t raised by the 1st June deadline.
Unfortunately, USDT faces a risk here. Tether recently revealed that almost 10% of the USDT in circulation is backed by money held in money market funds. For context, money market funds invest in a range of different low-risk interest rate products, including US government debt. In a recent episode of Real Vision, former Lehman Brothers trader Jared Dillian warned that money market funds could stop withdrawals if volatility in the bond market continues. This could cause issues for stablecoins with large reserves in money market funds.
Whereas a USDC depegging could cause chaos in DeFi, a USDT depegging would cause chaos in the general crypto market, since it’s used for trading. To be clear, we’re not saying that USDT will depeg. It’s very likely that Tether has since adjusted its reserves accordingly. Even so, the debt ceiling debate could cause volatility for USDT and USDC. As one of my colleagues said though, if the US government does default on its debt, crypto will be the least of our concerns…
If you’re wondering why, consider what Russia and China will do in such an event. Not good.
🤦♂️ The SEC’s At It Again! 🤦♂️
This week, industry participants finally filed their comments on the US Securities and Exchange Commission’s (SEC’s) proposed change to the custody rule.
TLDR: several investment advisors are not fans of the proposed changes.
A number of big players including Andreessen Horowitz, Paradigm, the Blockchain Association, Coinbase and Grayscale criticised the proposed rule and accused the SEC of attempting to overstep its statutory authority.
If you have no idea what I’m talking about, here’s a quick primer:
About two months ago, the SEC proposed several changes to its custody rule.
For those unaware, the ‘custody rule’ as it stands currently requires registered investment advisers (RIAs) to custody clients’ funds and securities with a “qualified custodian” in separate accounts under that client’s name.
The SEC has proposed to broaden the application of this rule beyond client funds or securities by covering “all client assets” under an investment adviser - including crypto.
This means that RIAs will need to ensure that everything they manage on behalf of their clients is now custodied with a qualified custodian. Safe to say, this will fundamentally disrupt the way 15,000 RIAs have managed operations so far.
Of course, the SEC stated, as always, that its motive for changing the rules was to afford additional protection for investors. However, industry participants, especially those who manage crypto assets, argue that the SEC’s intended changes actually have the opposite effect.
They state that the rule changes effectively place a “shadow ban” on crypto assets by discouraging digital asset-native custodians from continuing to provide custodial services. They argue that this in turn reduces rather than increases protections for advisory clients.
The comment letters commonly point to three instances in which the new rules negatively affect RIAs, custodians and investors.
The first relates to the expansion of the scope of the custody rule. Industry participants argue that the SEC’s requirement to hold assets like crypto only with qualified custodians severely impacts the returns an RIA can provide to their clients.
Specifically, it refers to instances in which the services offered by a qualified custodian are incompatible with the technical features of a particular blockchain activity or strategy (eg, staking and interacting with dapps). They argue that this restricts what an RIA can do with their clients’ assets and effectively kicks DeFi out of the picture.
The second and third instances relate to the rules affecting custodians. In the second instance, RIAs argue that the new rules deprive them of the ability to trade on some of the largest liquidity pools for crypto assets (ie, centralised exchanges).
This is because centralised crypto exchanges do not meet the definition of a qualified custodian, which requires the segregation of client assets. RIAs argue that this impacts their duty to seek the best execution for client trades by limiting their ability to determine the most suitable trading venues.
In the third instance, industry participants argue that the additional controls on custodians proposed under the new rules will actually hurt competition in the industry. They state that the new rules result in the concentration of service providers by limiting the number of eligible crypto custodians.
Having considered the various problems, the comment letters have suggested a number of alternatives that the SEC must consider. This includes removing the ban on RIA client trades on crypto exchanges and providing RIAs with the ability to exercise their discretion in selecting custodial options, including using MPC technology subject to additional controls.
It will be interesting to see whether the SEC will actually take these criticisms and suggestions to heart. However, given the recent anti-crypto stance that the agency has taken under Gary G, I wouldn’t count on it.
📊 Personal Portfolio 📊
BTC 35.36% | ETH 31.38% | USDC 17.77% | USDT 7.11% | USD 3.59% | ATOM 3.49% | DOT 1.30%
🔥 Deal of The Week 🔥
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🔮 Video Pipeline 🔮
- Gold vs. Bitcoin: The Ultimate Showdown!
- S&P Global Crypto Report: What you need to know!
- Credit Crunch Incoming: Is disaster looming?
- CoinTelegraph Crypto Outlook: Are the good times coming back?
📖 Quote of the Week 📖
Many people are asking which crypto coin is guaranteed to make them a good return. The answer is none. No cryptocurrency, stock or asset of any type is guaranteed to generate you positive returns. Heck, even US government treasuries can come with risk. But, there is one investment that’s always sound:
“An investment in knowledge pays the best interest” - Benjamin Franklin
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.