July 4, 2021 - Is This The Biggest Crypto Risk??
The growth of stablecoins over the past year has been monumental. The total market cap has almost tripled as companies such as Tether, Circle, Paxos and many more have been minting coins.
The total market cap of all outstanding stablecoins is now over $100 billion. Not only that, but stablecoins are fundamental to crypto market liquidity. More crypto is traded against stablecoins than is traded against other fiat.
This has left many concerned about the reliance of crypto markets on stablecoin volumes. More specifically, if there was ever a clampdown or “run” on stablecoin redemptions, could the issuers still meet them?
Or what happens if there was ever a confidence crisis in one of the stablecoins and the market tried to dump it?
These are questions that have been asked but not really answered. This is because it is extremely hard to determine what could happen in a “tail risk” event like this. We have never had a crisis like this and crypto markets have never been stressed by stablecoin contagion.
So in my video today, I talk about the stablecoin market.
I give you an overview of how it is currently positioned and how regulators, exchanges and other market participants are viewing its rise. I analyse the potential risks out there and dive into accusations of market manipulation - all your questions answered.
You can watch that right here.
📊 Portfolio Update 📊
Decided to pull the trigger on some more SOL. As I covered last week, by being one of the most well funded ecosystems, Solana has a lot of firepower to brute force adoption of its revolutionary tech.
No other changes apart from that. I may consider adding to my ETH stack depending on how things progress with the London upgrade.
As usual, you can follow my daily moves in my only official Telegram channel.
ETH 32.68% | BTC 26.48% | USDC 10.69% | ADA 8.12% | SOL 5.39% | DOT 3.40% | YFI 3.07% | LINK 2.57% | INJ 2.52% | RUNE 1.77% | ATOM 1.56% | AVAX 0.74% | REN 0.61% | LIT 0.40%
🔭 Trends I have Noticed 🔭
✅ Bitcoin’s Biggest Tests
Two of the biggest tests for Bitcoin this year are playing out in front of our very eyes. This also has nothing to do with price but more about adoption and network security.
The first of these has to do with the country wide experiment that is taking place in El Salvador. I covered the Latam adoption in much more depth in a recent video of mine.
However, one of the most interesting steps in El Salvador so far was the recent announcement that every citizen was eligible for a $30 Bitcoin airdrop from their government. All they needed to do in order to claim this was download the government’s Bitcoin wallet app.
Privacy concerns aside, the interesting test here will be to see how many people actually accept it. Not only that, but it will also be quite telling to see how many of those that do claim it actually end up using it as a medium of exchange.
It will be the ultimate comparison where people will have the option to either pay in Bitcoin or USD. Which methods they decide to start using could help us determine whether Bitcoin as a global currency could ever work at scale.
Since the move by El Salvador to make Bitcoin a legal tender, I have seen two opposing viewpoints. Some claim that it won’t be picking up because transactions are too slow and expensive. Others show the extent to which cryptocurrency is already being used to pay for goods and services.
So, I will be watching those usage stats quite closely over the coming months.
The next Bitcoin test that we have relates to network security. I am of course talking about the current mining landscape and how quickly it can adapt.
As I have covered on numerous occasions, I think that the Chinese Bitcoin Mining ban will be good for the ecosystem. In the long term it will mean that the network will be less susceptible to China FUD - feel free to watch my video on it.
Now, in response to the crackdown, Chinese mining farms have been closing down their operations at a breakneck pace. Check out this image of one farm that is packing up its ASIC mining rigs.
So, in response to the shutting down of all their mining operations, there has been a monumental fall in hashpower. A fall was always expected but just how large - no one knew. You can see the full scale of the drop in this chart.
As the Bitcoin network was designed, mining difficulty has to adjust in order to bring more marginal miners into the fold. We have just had the largest drop in Bitcoin’s history.
So, the question now is - how long before hash rate returns? Will it incentivise marginal miners to start their rigs? Will the reduced cost of mining make other regions more cost effective? Will this further drive Chinese mining companies to these regions?
It will be one of the biggest tests of the Bitcoin network to date. One that I will of course be keeping a close eye on!
✅ Binance Crackdown Continues
Binance is the king of exchanges. There is no doubt about it. However, more recently it has come under a lot of scrutiny in numerous locations around the world. This is not because of the fact that it has done anything wrong. However, it seems to have been a victim of its own success.
Binance launched back in 2017 in a cryptocurrency sector that was still relatively new. A sector that was mostly dominated by retail traders and whales. One where regulations around crypto assets were sparse and contradictory.
However, given how quickly Binance has grown, it has run up against the boundaries of which it can operate without treading on regulatory toes.
Let’s take a look at some of those regulatory announcements over the past 2 weeks…
Firstly, you had news coming out of Japan that said Binance is not registered to operate in their country. This is mainly because of the fact that Binance does not hold a license to operate in Japan.
Then, about a week ago, you had the announcement by the FCA that Binance is not legally allowed to operate in the UK. Turns out that this only applied to their UK entitywhich was supposed to launch as Binance UK. However, this announcement did disconcert a few people.
Then you had some news that the Thai SEC has filed a criminal complaint against Binance. Similarly to the Japanese warning, this was mainly because Binance was seen to be operating an exchange in the country without the requisite licences.
Finally, just yesterday you had news that the Cayman Islands regulators have said that Binance is not registered on the island and as such, they are not “authorized by the Authority to operate a cryptocurrency exchange from or within the Cayman Islands”.
So, what do you notice is the common thread here?
It is the fact that Binance does not have the requisite licences. That therefore means that the only thing that is required is to obtain them. This is something that Binance has already done for their Singaporean company. They have applied for a license to provide “digital token services”.
You may of course be asking why they had not done this in other countries before the crackdown?
Well, I can only assume it is because crypto specific laws did not exist yet. And, if they did then they were contradictory and the application process itself was incredibly laborious and convoluted. Countries like Singapore have made the process incredibly simplified (one of the reasons they have so many crypto businesses based there).
Of course, these recent actions have now forced Binance’s hand and they will have to go through these application processes. It is my guess that they are likely to get a whole bunch of licences for different companies. If there are particular instrument / token restrictions in these respective countries then they may operate a separate Binance branded exchange - similar to Binance US.
Irrespective of what Binance does decide to do, this just shows how tough it is going to be for centralised exchanges to continue operating globally. This is also one of the reasons that CZ himself is so bullish on DeFi and DEX’s. For example, CZ himself has said that he fully expects Defi to cannibalise his exchange. It’s also not a coincidence that there has been so much focus from Binance on BSC.
Of course, decentralised exchanges are nowhere near newbie friendly. There are risks that come from using a platform that has no stopgap or user protections. There are risks that come from taking full control of your web wallet and performing decentralised swaps. They need to be more intuitive and better understood - part of the reason I do what I do.
The point is that the landscape is changing. If a juggernaut like Binance is finding the operating conditions tough, you can bet that other exchanges will also be in similar positions.
The two alternatives I see are you can either apply to be compliant, or you can decentralise. They appear to be trying to do both.
🔝 Top Newbie Tips 🔝
It’s not just regulators that are likely to throw a spanner in the works when it comes to using your preferred crypto exchange - it’s also the banks.
There have been numerous reports of banks making it difficult to fund & withdraw crypto from exchanges. This includes banks here in the UK such as TSB, Barclays, Monzo and Starling bank. Further afield, there have also been banks down in South Africa that block funds and I am sure that there are a number of other countries that are making it similarly difficult.
The point of the matter is that you need to make sure that you still have smooth and functional fiat-crypto on/off ramps. I hope by now that you've cashed out at least a few times even just to make sure that it's possible. As with exchange accounts, it's a good idea to have multiple entry and exit points for fiat to crypto, and one of my personal favorites is cryptocurrency debit cards. These include the likes of crypto.com, Binance etc.
Now you might be wondering - what's going on with the market right now and what comes next? I'm still of the opinion that this bull market isn't over, and we're just in a Wyckoff accumulation phase (watch this video if you have no idea what that is).
My strongest evidence of this comes from other macro factors, namely the fact that the stock market continues to hit all time highs. Crypto is more correlated to stocks than ever, so how can we have all time highs in one while the other stagnates?
I've noticed that we're seeing a lot of commonly used crypto trading models and technical analysis methods being completely violated. I'm referring specifically to Plan B's stock to flow which seems to be getting more incorrect by the day, and this is obviously spooking a lot of people who put a lot of faith in that model.
Rather than completely do away with the Stock To Flow or TA, consider for a moment that what you're seeing is a low resolution image of institutional buying and selling behavior. As a friendly reminder, over 86% of daily trading volume comes from large investors according to Chainalysis. If this is true, the thought that little fish like you and me could influence price is a bit ridiculous. It's something that's outside of our hands, and that's pretty terrifying but also liberating.
Like Wyckoff said, just watch the market like it was all the actions of a single person pulling the strings behind the scenes. What’s really interesting is that if you look closely enough, you can see that some of these investors are sending signals to themselves behind the scenes. If they conspired behind the scenes to manipulate, that would of course be illegal. But if that information is out in the open for everyone to access, it’s not.
Here's an interesting article I found that suggests BTC could drop back down to the 25k range. This would coincidentally correspond to the spring phase in Wyckoff's accumulation pattern.
So, the point I am trying to make is that there is a lot more to the markets right now than meets the eye.
🔥 Deals of The Week 🔥
It’s been a pretty good week for crypto markets. But here’s the question: are you all set to take maximum advantage of that potential next leg up?
After all, a wise man once said: “You may have the opportunity of a lifetime, but the trick is to make money in the lifetime of the opportunity”.
But what crypto platforms should you be looking at to maximize your portfolio? Well there are a couple I am leveraging myself, right now!
💵 Celsius: Are you holding Bitcoin or altcoins waiting for the price to be sent into the stratosphere? Well, you have two options:
1) You can just store them in a hardware wallet and have that crypto sitting there doing nothing.
2) Or you could put that crypto to work on a crypto lending platform. This gives you continued price exposure to the crypto markets and earns you interest whilst you wait! So yep, you can get even more crypto that way.
If you are interested in option two, then you might be interested to know that Celsiusoffers up to 6.2% interest on BTC and up to 13.99% on altcoins. Also, if you are sitting on stablecoins, you can earn 8.88% interest on them whilst you wait to unearth that gem of an opportunity - pretty handy!
Even better, if you deposit $400 on Celsius you get $50 FREE! Just use the code: COINBUREAU
👉 Sign Up To Celsius To Earn Crypto Interest & Get $50 FREE When You Dep $400+
💸 Best Way To Buy Crypto With Fiat: Maybe you are not content with your exposure to crypto markets and want to top up that portfolio? Well, if you are living in Europe, UK, Canada, Singapore and Switzerland then the Swissborg app is probably the solution you are looking for.
I’ve been personally using Swissborg for a while now and I have to say the app is amazingly simple and easy to use. I was also blown away when I cashed out a bit of crypto and discovered it had landed in my bank account within five minutes. So yep, if you are looking for a way to get in and out of crypto, then you definitely need to try this out!
Also, if you deposit €50 you’ll get up to €100 in CHSB tokens for FREE!
👉 Sign Up To Swissborg & Get Up To €100 FREE
🗞️ Crypto News Focus 🗞️
- The End of Elon Musk’s Influence? - It seems that Elon’s power over the crypto community is waning after his latest tweets failed to boost Dogecoin or BTC.
- Ethereum Sets Record - Daily active addresses surpass Bitcoin for the first time in history!
- Who Are These Guys? - Co-chair of blockchain caucus says that governments must have the power to reverse crypto transactions - that’s not how it works, mate!
🔮 Video Pipeline 🔮
- 5 most well funded Cryptocurrencies
- Top 5 ICOs by ROI & why they did so well!
- 101 guide to the new Binance NFT marketplace
- Crypto trading bots: do they work?
- Top crypto partnerships of 2021
- CBDC development updates
- BIS report on cryptocurrency investors
🏆 What's New At CoinBureau.com This Week? 🏆
✅ Tornado Cash Review: Bringing Privacy to Ethereum
✅ Clover Finance Review: Foundational Layer For Cross-Chain Compatibility
✅ What Is Sharding? Complete Beginner’s Guide
✅ The Basics of Crypto Trading: Complete 101 Guide
✅ Crypto Trading vs. Crypto Investing: Complete Beginner’s Guide
✅ What Are Parachains? Complete Beginner’s Guide
That’s all for this week folks. However, I would just like to say this crypto journey has been crazy for me. Never in my wildest dreams did I think that the channel would get this big and that’s all thanks to you.
For a guy that has gone through life with no one giving a damn, I have found it particularly touching that some of you guys have approached me in my hometown of London. I even managed to catch one of these selfies on film!
So, if you are in London and spot me out and about, then don’t be shy. I’m an approachable type of chap and it is the least I can do, seeing that you guys are the reason why the channel is where it is today!
Thanks so much for all the continued support and I hope you enjoy my latest vid!
Guy your crypto guy
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.