If the last few weeks have been any indication, it’s that some pretty stringent regulations could be on their way. Regulators have been waiting for a reason to implement draconian controls over cryptocurrency and the recent collapse of CeFi lenders could be that reason.
Be that as it may, it’s important to have an idea of what these potential regulations could be so that we are well prepared to deal with them when they are eventually rolled out.
Some of the most likely controls that could be implemented are those that have been “recommended” by the Financial Action Task Force, or FATF. I have talked about this organisation ad nauseum on the channel and more recently, it has released its latest report on crypto.
What’s perhaps most alarming about this is the fact that the report coincides with a confidential conference held last month where FATF members discussed crypto, CBDCs and digital IDs – you know, all the fun stuff.
So, you can bet that some of what was discussed could have found its way into this report. And, in my video today, I will be breaking it down, piece by wretched piece.
You can watch that right here.
📊 My Personal Portfolio 📊
ETH 37.21% | BTC 34.33% | USDC 6.52% | SOL 5.65% | DOT 4.20% | ATOM 3.36% | RUNE 1.79% | ADA 1.42% | MATIC 1.30% | NEAR 1.25% | HNT 1.22% | FTM 0.71% | LINK 0.57% | INJ 0.46%
📈 Thoughts on Market 📈
This is when things get interesting. If you’ve been keeping up with my market analyses, you’ll know I have been watching the bear flags appearing on BTC’s daily and weekly timeframes. By this point however, it’s becoming clear that neither of these bear flags is playing out. In fact, we seem to be seeing a double bottom on the daily, and a three white soldiers pattern too.
If you watched our video about swing trading, you’ll know that these patterns are signs of a trend reversal. Given that we’ve basically been in a downtrend since March, this could mean we’re about to see a few months of gradual green. It’s too soon to say just how much we could recover, but prior support and resistance suggests a 30k target with even bigger gains for alts. I’ll repeat that it’s too soon to say.
Now, if you’re wondering how this is possible, the answer is the Federal Reserve, or rather the absence thereof. Later this month (specifically July 27th), the Fed will be holding its last meeting until late September, as per its calendar. This means that there will be a 2 month period where the markets will have some relative peace, as the Fed board won’t be around to raise interest rates.
Even so, there’s still a wildcard in this equation, and that’s the aforementioned July 27th meeting. As many of you will know, US inflation for June came in red hot at 9.1% last week, and many investors are now expecting a 1% interest rate hike from the Fed. According to the CME however, it looks like traders are still split on whether it’ll be 0.75% or the full 1 percent. A bigger than expected hike could cause another crash.
Even if this happens though, investors seem to be focused on the inflation figures for July and August which will (hopefully) come in lower than June’s. If they do, then this will lower the likelihood that the Fed will raise rates when its board members return from their holiday in September. The only problem with this expectation is that there are other macro factors at play that could accelerate inflation, namely Russia’s gas pipeline pause.
For those who missed the memo, one of Russia’s largest gas pipelines to Europe is currently undergoing its annual maintenance, which is expected to be completed this upcoming Thursday (July 21st). The fear is that Russia won’t be turning the taps back on, which could throw Europe into a recession. Obviously, this would send shockwaves through the global financial system. There’s also China, but I’ll come back to that later.
These and other reasons are why the recent recovery rally in crypto and stocks is unlikely to last for long. Even if it does last for the next few months, winter is looking really bad for just about every country due to energy costs, food shortages, and a potential return of lockdowns. It seems that investors are aware of this, which is why many of them still expect BTC to drop as low as 10-13k, something we also predicted in a recent video.
When could the current recovery rally end, you ask? Well I suspect it will be sometime in September, and that’s because this is when Ethereum developers are expecting The Merge to occur. On paper, this will be bullish for the crypto market as a whole, but there could be an issue with The Merge, or even an unexpectedly high rate hike from the Fed. Either one would crash crypto.
In any case, it’s going to be an interesting couple of months, especially since other altcoins like Cardano are expected to see their own major upgrades. There’s going to be some exciting announcements coming from the Coin Bureau too, but I won’t spoil anything here. I’ll be dropping hints on my socials and Coin Bureau Clips, so be sure to follow me there!
😤 The Stablecoin Competition Continues 😤
I know many of you read my newsletter for alpha, so here’s some alpha: stablecoins are way more important to the crypto market and crypto trading than you think. Here’s a great example: Last week the market cap of all major stablecoins declined while the total crypto market cap increased. What does that tell you? People are moving billions out of stablecoins into crypto.
Because of these and other reasons (such as the possibility that the non-US world could flock to stablecoins if their currencies collapse), I’ve been keeping a close eye on what stablecoin issuers have been up to. That’s why I was excited to see the news that USDC issuer Circle had disclosed more details about the assets backing its 55+ billion stablecoin tokens.
As per Circle’s disclosure, around 75% of USDC is backed by short-term US government debt, and 25% is backed by actual US dollars. This is slightly different from what Circle said was backing USDC last summer, when we did a video about the assets backing the biggest stablecoins. The disclosure also implies that Blackrock is the custodian of said government debt.
Another stablecoin headline came from Aave, which is planning its own decentralised stablecoin called GHO. As per the governance proposal, it will be possible to mint GHO using any deposited assets on Aave as collateral. Meanwhile, all fees and interest payments associated with minting GHO will be directed to the Aave treasury to ensure the protocol’s longevity.
This is more significant than you think, because Aave’s GHO could dethrone MakerDAO’s DAI as the largest decentralised stablecoin. That’s simply because DAI isn’t all that decentralised – it’s backed primarily by USDC, and its community is pushing to pass a proposal for some of the DAI in circulation to be backed by US government and corporate debt, just like USDC!
Aave GHO, if done right, could eventually dethrone Circle’s USDC and even Tether’s USDT. This is because governments around the world are in the process of passing laws that would put limits on the size of centralised stablecoins, starting with the European Union. If the GHO stablecoin is truly decentralised, there would be no way to limit or control its growth.
The caveat is that a decentralised stablecoin is going to have a harder time gaining real world adoption. It will be more difficult to convince a Swiss city to adopt it as a de facto currency and certainly more difficult to convince merchants to adopt it as a means of payment. At the same time however, a decentralised stablecoin could be adopted under certain conditions.
Besides limits being put on the market caps of centralised stablecoins, another factor that’s likely to limit their growth going forward is the insistence that they comply with money-related laws. This could be anything from restricting access to sanctioned countries to requiring KYC, or even requiring users to submit detailed info about transactions, as per the FATF’s travel rule.
Decentralised stablecoins will not be subject to these restrictions, and if we end up in a situation where most of the world’s fiat currencies are collapsing in value against the US dollar, a decentralised stablecoin could be seen as a superior safe haven to centralised stablecoins. This all assumes that governments won’t try forcing their CBDCs upon citizens, and I’m sure they will try (and fail). Speaking of countries forcing CBDCs…
🇨🇳 Cracks Are Emerging 🇨🇳
While most people appear to be focused on what is going on in the west, it’s what is going on in China that should alarm us. That’s because it could be on the brink of a serious credit crisis, the likes of which we haven’t seen before.
Quite simply, it seems as if China’s credit market is moving into a new phase of distress. While the Evergrande default from last year threatened the country’s massive property sector, it appears as if payment risk on the debt is spreading to a wider variety of borrowers. This is perhaps best illustrated by the stress in the Chinese dollar bond market.
Investors are dumping the bonds on some investment grade companies such as Vanke (the second largest developer). Vanke is almost double the size of Evergrande and plays a much more fundamental role in China’s broader economy than the latter.
Of course, it’s not just offshore creditors that are heavily exposed to these companies. Onshore banks have been feeding their insatiable appetite for risk, which implies that their balance sheets could also be impacted by further deterioration.
What makes matters even worse for these banks is the fact that homebuyers across the country are refusing to service their mortgages. Buyers of 25 projects across 22 cities aren’t paying their mortgages as a result of project delays and a drop in real estate prices. Therefore, the banks are being squeezed from both ends by the developers and the borrowers.
If the banks are unable to pay back the depositors, that’s when things take an even more dramatic turn. Bank runs could ensue and bring the entire banking system to its knees. By many accounts, this is already beginning to happen and I will be doing a video on it in the coming days.
Things also could not have happened at a worse time for the world’s second largest economy. It has reported Q2 GDP growth numbers of 0.4%. This is one of the lowest growth rates on record and is all as a result of China’s battle to the death with closing down Covid. Of course, there are many who think this number could also be overstated – including myself.
It’s safe to say that things are precariously balanced in China. And, given that the country is not known for transparency, we don’t really have the best bearing for how bad things really are.
🔥 Deal of The Week 🔥
As crypto businesses have been going under at a rapid pace, there is one company that has stepped in to fill the breach. FTX remains one of the most well run exchanges that has been expanding at a rapid pace.
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If you want to learn more about FTX and make sure it is the right exchange for you, then you’ll want to watch our dedicated FTX video!
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Folks from the 🇺🇸 will want to head over to FTX US instead. There you will get the same signup deal as everyone else!
🔮 Video Pipeline 🔮
- Institutions Are Trying To Kill Crypto: Here’s How!
- Chinese Bank Runs: The Sign of Something Bigger?
- Reddit Study: Crypto Holders Vs Traders
- CoinGecko Crypto Market Report Q2
🏆 What’s New At CoinBureau.com This Week? 🏆
✅ APECoin Review: FOMO for the Ordinary Folk
That’s all for this week folks. The whole Coin Bureau gang would like to thank you for joining us on this crazy journey through the good times and now the bad.
Guy your crypto guy