How Could They Do This?!
Something that never ceases to amaze me is exactly how opaque, unstable and unfair traditional markets can be. We have seen this time and again from the mortgage meltdown, to the Gamestop saga and everything in between.
However, last month we saw yet another financial scandal unfold. One that showed just how risky the traditional financial markets are and how they can unravel at a moment's notice.
This was the recent nickel short squeeze that almost paralysed the market. A crisis that saw the exchange on which nickel contracts trade not only shut down trading but also reverse an entire day’s buying and selling.
What makes the story even more crazy is who was on the other side of those trades. A billionaire and his banker backers who got rescued by the powers that be.
In my video today, I am going to be doing a deep dive into this tawdry episode. I will be explaining exactly how this happened, who was involved, and what we can take from it.
So, if you want a bit of intrigue this Sunday afternoon, you can watch that video here.
📊 Main Portfolio 📊
Took a bit of profit on SOL, DOT & APE. Part of this was moved into LUNA and the rest is being hodled in UST. I remain bullish on LUNA in most part, given the demand for UST in staking & other DeFi activities.
I am also considering gaining additional exposure to some other L1 hedges. I have a keen eye on AVAX given the recent developments on Avalanche. I will keep you guys updated on this in my telegram channel.
ETH 32.09% | BTC 22.03% | SOL 8.73% | UST 6.25% | DOT 5.97% | ATOM 5.13% | RUNE 3.82% | LUNA 2.98% | APE 2.15% | FTM 1.77% | AR 1.69% | ADA 1.68% | HNT 1.62% | MATIC 1.29% | INJ 1.16% | LINK 0.69% | YGG 0.54% | XDEFI 0.39%
🖼 NFT Portfolio 🖼
MAYC 96.15% | Meebit 3.85%
📈 Thoughts on Market 📈
I’ve lost count of the tweets and headlines that imply or even claim the Bitcoin Conference in Miami was a sell the news event. To be fair, it is a convincing idea on the surface. The crypto market crashed just before it kicked off, and the sell-off only accelerated as all the exciting announcements came out. I am not so convinced however, and here’s why.
First, the crypto market started crashing well before the event began, specifically on Tuesday. As it so happens, the stock market started crashing on Tuesday too, specifically at around 10 am EST. What happened at 10am EST on Tuesday? Federal Reserve governor Lael Brainard said that the Fed will be reducing its balance sheet soon and ‘at a rapid pace.'
Then came Wednesday, which was not a run-of-the-mill day. That’s because the Fed released the minutes (summary) of its March meeting, and they showed that it's not only looking to double the rate at which it will be increasing interest rates, but it’ll also be offloading up to 95 billion dollars from its balance sheet every month, starting in May.
As many of you will know by now, raising interest rates makes borrowing more expensive, and it also makes any existing debt more expensive. This can cause a crash across the board, as overleveraged investors sell off assets to cover their increased debt burdens. Here’s the kicker: it’s not just the Fed that decides interest rates, but also the free market.
The way this works is a bit more complicated, but, as with most things in economics, it all has to do with supply and demand. If the demand for government bonds is low, then interest rates are high. If the demand for government bonds is high, then interest rates are low. Here’s another kicker: the Fed has also been one of the biggest drivers of demand for government bonds.
In response to the pandemic, the Fed effectively doubled its balance sheet from $4.5 trillion to $9 trillion. This consists mostly of government bonds and mortgage-backed securities, of which it was purchasing tens of billions of dollars worth. So riddle me this: what happens when it starts selling off all these bonds? Logically, interest rates will rise even faster.
And now for the biggest kicker of them all: this Tuesday the Bureau of Labour Statistics will be releasing the official inflation figures for March 2022 via the CPI (AKA the CP Lie). In case you haven’t noticed, the supply chain disruptions that are occurring as a result of Russia’s invasion of Ukraine has accelerated inflation, and most of this inflation happened in March.
Put simply, the markets are terrified that the inflation figure for March will be a shocker, and that this will cause the Fed to double down on its already hawkish stance. From where I’m standing, it looks like this is exactly what’s going to happen, but we won’t know for sure what the Fed is planning until its press conference in early May. Expect lots of volatility until then…
🌴 Initial Thoughts of Bitcoin Miami 🌴
I’m still digesting everything I saw and heard at Bitcoin 2022 in the Magic City, but there’s no question of what the highlight of the whole trip was for me. I will never forget how lovely it was to meet so many Coin Bureau fans who came up to say hello, say how much they enjoyed our work, and - of course - talk crypto. I lost count of how many of you I was lucky enough to meet, but it was a pleasure to chat with every single one of you. I knew of course that Coin Bureau had the best fans in the world, but it’s always nice to have one’s opinions confirmed!
The conference itself was a dizzying experience and, if you needed confirmation that Bitcoin is an unstoppable force for global good, then you certainly got it here. From talking with people who attended previous events, it was clear that Bitcoin 2022 was of a different order of magnitude: bigger, slicker and more ambitious than ever before.
I arrived at the conference on Thursday, which was the first day it was open to general admission ticket holders. Industry Day had happened the day before, yet it was impossible to miss the heavy corporate and institutional presence at the Convention Centre. As I wandered through the exhibition hall with two of my Bureau colleagues, we were struck by the staggering number of businesses leveraging both Bitcoin and the wider world of crypto. There were plenty of well-established brands on display, but they were outnumbered by the unfamiliar up-and-comers. The sector is growing exponentially.
This was reflected in the roster of speakers and events taking place in the cavernous main hall and in smaller, more intimate spaces around the venue. If I have one regret from my two days here, it’s that I didn’t catch nearly as many of these as I would have liked. That said, there was so much going on, and so many awesome people to talk to, that it would have been impossible to see and do everything on my list.
The first event I managed to catch was one of the best, a panel discussion hosted by David Zell under the banner of ‘Overcoming Inertia’ with Allen Farrington, Glenn Greenwald, Dr. Jo Jorgenson and Andrew Yang. It would be hard to find four sharper, more astute people to listen to and Bitcoin is lucky to have them in its corner. Farrington is one of the best writers and thinkers in the space; Greenwald one of the most fearless defenders of civil liberties; while Jorgenson and Yang represent the best hope American politics has of breaking away from the moribund and partisan two-party hegemony it labours under.
All four were bullish on Bitcoin and what it could do for the world and for freedom, but weren’t afraid to sugarcoat our situation. ‘CBDCs are coming’ warned Farrington, while Yang proved that he is a politician who doesn’t play to the gallery. When asked whether he would pardon Ross Ulbricht if elected president, he replied that presidential pardons were becoming tools for political gain and there were others more deserving of them. A brave answer, given the setting and the audience. If you’d like a more detailed breakdown of the conversation, you can check out Bitcoin’s Magazine’s coverage of it here.
Much has been written already about the speeches from Jack Mallers, Peter Thiel (gosh, that was a bit weird, wasn’t it?), Jordan Peterson, senator Cynthia Lummis, Mike Novogratz and others. I was lucky enough to catch several of them and I’ll give you more of my thoughts over the coming week, as there isn’t room here to do them justice.
The announcement of Strike’s integration with Shopify is yet more good news for mass adoption and, of course, we had progress on legal tender from the likes of Honduras and Madeira, as well as the news that Mexico is seriously discussing it. Let’s face it though, we were all hoping for something more sensational on that front, to measure up to last year’s news from El Salvador. We didn’t get it and the resultant disappointment seems to be partially reflected in the markets.
Despite this, I’m left feeling more optimistic than ever. Sure, it would have been great to have another whole nation state gobble down the orange pill, but remember that Bitcoin and crypto still face stiff resistance from the powers that be. The progress towards global adoption is not going to be smooth or quick.
Nevertheless, I’m heartened by the discussions I had with people around the conference. All over the world, hundreds of millions of people are starting to use crypto to free themselves from the constraints of the old financial system. In places like Pakistan, Vietnam, Indonesia, Latin America and countless others, adoption is gathering pace much faster than we think. This doesn’t generate the sort of headlines that send prices soaring, but believe me, we ain’t seen nothing yet.
💲 Bitcoin: Payments or a Portfolio? 💲
Speaking of Bitcoin Miami, there was something that came up in two of the talks that I found warranted a bit more thought. This is the Bitcoin Paradox. This paradox was best exemplified in the presentations of Zap Inc. founder Jack Mallers and Microstrategy CEO Michael Saylor. The former pushed for BTC as currency, and the latter pushed for BTC as money.
Confused? Allow me to explain.
Currency is something that’s used as an actual currency, i.e. for everyday transactions. By contrast, money is typically the thing that backs the currency in circulation. As a simple example, cash was once a currency that was backed by gold, which was the money. Today cash is still the currency, but there’s no money backing it (though some senile politicians would beg to differ).
The Bitcoin whitepaper is titled ‘Bitcoin: A Peer-to-Peer Electronic Cash System’. If I told you today that BTC was digital cash, you would probably laugh. ‘Digital cash? No, digital gold!’ is probably what you would say. If I asked you why, you’d probably explain that Bitcoin can’t scale to the point of becoming a global electronic cash system, but its monetary policy mirrors gold’s.
In other words, you would say BTC isn’t a currency, it’s money.
The thing is that there’s more to BTC than Bitcoin. In 2015, a pair of clever college kids came up with the Lightning Network, a layer 2 scaling solution for Bitcoin that can make BTC payments scalable enough for the entire planet (unironically). I won’t get into the Lightning Network here, but I seriously suggest checking out my video about it. Easily one of the coolest L2s out there.
As some of you will know, the Lightning Network is what makes BTC as legal tender in El Salvador possible. The Lightning Network is also what makes Zap Inc.’s Strike wallet possible, and Zap actually helped El Salvador set up it's Bitcoin infrastructure. Naturally, Zap Inc. CEO Jack Mallers has been all about getting people to spend BTC as currency via Lightning.
If we accept the premise that BTC payments can safely scale globally via Lightning (which some people debate), then does that now make BTC a currency? If you asked Microstrategy CEO Michael Saylor, he would say no. In fact, he would tell you to never part with your BTC under any circumstances ever, because it’s increasing in value over time; BTC is sound money like gold.
So, which is it? Is BTC currency or is it money? If you ask me, it’s both, and this sounds like a paradox at first until you realise that the very idea of currency vs. money is the product of a financial era that’s slowly coming to an end. There are of course grand currency experiments like Terra backing UST with BTC, but what about USD inflation? What happens when currency fails?
To be honest, I don’t have the answer here, because we haven’t yet seen a global financial system where the currency is truly the money. This could simply be because past economies lacked the technologies to make this work, or it could be because this merging of currency and money doesn’t work due to deflation. One thing’s for sure though: BTC is damn valuable.
🔥 Deal of The Week 🔥
I know it can be tempting to rock onto that crypto exchange, buy that crypto and just let it sit there. However, we know that nothing really beats the benefits of self custodying that crypto.
And when it comes to self custody solutions, if you want to get the best security money can buy and treat your crypto like the million dollars it could one day be, then you’ll want to get yourself a hardware wallet. I’ve also talked about the top five hardware wallets in my video here!
So, how do I personally store my crypto? Well, I use a Trezor hardware wallet. This device stores over 1,000 cryptos - so I imagine even the most enthusiastic altcoin dabbler will be able to store all their coins here.
🔮 Video Pipeline 🔮
- Chainalysis Crypto Crime Report
- VeChain update: Is VET still worth it?
- What Happened at Bitcoin Miami?
- The Fed is tightening: What it means!
- Solana Update: Where is SOL heading?
- Banker & Politicians in a SWF Gravy Train
🏆 What's New At CoinBureau.com This Week? 🏆
✅ Big Time Studios: The Best AAA Blockchain Game?
✅ BlockFi vs Celsius: Head to Head Review
✅ NFT Wallets: Keep your Collectibles Safe
✅ Mango Markets: Sweetest Fruit on the Solana Defi Tree?
✅ Bitcoin as the World Reserve Currency- Possible, or Probable?
That’s all for this week! Thanks as always for all the support.
Guy your crypto guy
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.