Show This Video To All Your Friends!
Would you invest in something you don't fully understand? Everyone has a different answer to that question and it's a particularly pertinent one when it comes to Bitcoin and cryptocurrency more broadly.
The fact is that even many BTC hodlers don't entirely understand what Bitcoin is or how it works. For some, their faith in the promise of future BTC gains is enough. After all, how many people drive a car but couldn't tell you exactly how it works if their life depended on it?
But there are many investors out there - current and future - who do want to understand where they're putting their money. A good number of them won't want to hold so much as a sat without that knowledge.
In today's video, we've gone back to basics with a beginner's guide to Bitcoin. Perhaps you'll want to refresh your memory of what Bitcoin is and how it works. Or perhaps you want to help others get to grips with it ahead of the next bull market. If that's the case, be sure to share this video with them - they'll thank you for it one day!
You can watch that video here.
📈 Crypto Market Forecast 📈
In case you missed the news, US politicians finally approved a bill to raise the debt ceiling. We’ll be doing a video explaining exactly what’s in that bill and what it could mean for the crypto market later this week. All you need to know for now is that it could suck lots of liquidity (money) out of the markets in the coming week. The Treasury Department is reportedly planning on issuing over 150 billion dollars of debt this week alone. This could drag down the crypto markets, depending on what duration of debt is issued (short term vs long term).
Regardless of the outcome, it is exponentially preferable to the potential alternative. A technical default would have been devastating for the markets, especially crypto. That’s mainly because most stablecoins are backed by US government debt. Some of you might recall that USDC issuer Circle had recently adjusted its reserves in preparation for such a default. It sounds like Tether wasn’t being nearly as cautious - CTO Paolo Ardoino was seemingly unconcerned about a debt default in a recent interview. Good thing he was right.
On that note, we could see some interesting things happening with stablecoins this week. As I mentioned in yesterday's video, Coinbase recently launched an international derivatives exchange with trading pairs against USDC. These trading pairs will reportedly go live tomorrow, and this could increase the demand for USDC. At the same time, MakerDAO passed an unprecedented vote to ditch Paxos’ USDP as reserves. This could further increase the demand for USDC, assuming that it’s used to replace the USDP reserves.
To put things into perspective, almost half of the USDP in circulation is being used to back the DAI stablecoin - 500 million to be exact. This huge decrease in market cap will further cut into Paxos’ passive revenues on its stablecoin reserves, which have been on the decline ever since it was ordered to stop issuing BUSD. This could be Circle’s way of attacking Binance indirectly, but it’s hard to say for sure. Regardless, it’s clear that the regulatory scrutiny around Binance has been increasing lately, and this could continue.
Speaking of regulations, you need to be paying attention to any headlines about the Financial Action Task Force or FATF. That’s because it has the power to put countries on so-called ‘grey lists’ and ‘black lists’ if they don’t comply with the international organisation’s so-called ‘recommendations’. Countries that end up on the grey list have a harder time interacting with the global financial system, whereas countries on the black list are cut out of it completely. Consider that the UAE was put on the FATF’s grey list early last year.
This begs the question of why countries end up on the FATF’s lists. In theory, it’s because of illicit financial activity. In practice however, it appears that crypto adoption may be a key criterion. A few weeks ago, Pakistan’s Finance Minister said that the FATF required the country to ban crypto forever to get off the grey list. Now the FATF is reportedly scrutinising Qatar for its crypto adoption. This does not bode well for countries like the UAE. This also does not bode well for other emerging crypto hubs such as Hong Kong, which is also working with the UAE.
Individual crypto projects appear to be facing regulatory scrutiny as well. If you watched our summary of a recent hearing about crypto regulation in the US, you might remember that one politician made an off the cuff comment about the SEC thinking Filecoin is a security. Well, over the last few weeks we’ve seen a few institutions stop offering the FIL coin to their clients. This could be a sign that an enforcement action of some kind is imminent. It makes sense that the SEC would target Filecoin - it’s critical crypto infrastructure, namely for DeFi.
It’s not just crypto projects that are at risk of a regulatory crackdown these days either. It seems that US regulators are going after anything that could compete with the Fed’s upcoming FedNow payment system, which is scheduled for release in July. Well, a US government agency recently warned that money stored in mobile payment apps may not be insured. The agency in question is the Consumer Financial Protection Bureau or CFPB, which was apparently behind the original operation choke point. Probably nothing.
I mean, they wouldn’t go as far as creating issues for mobile payment apps so that people switch to FedNow when it’s released, right?...
😖 Is DeFi Broken? 😖
A few days ago, I happened to come across an article interestingly titled “Why Defi is Broken and How to Fix It, Pt 1.”
After reading his latest piece, I can safely say that it had a message worth sharing.
The message is quite simple: DeFi as it exists today is unsuitable for mainstream adoption and it urgently needs a fundamental rework.
Don’t worry, this isn’t a doomsday hit piece against crypto or DeFi. It’s a chance to start a larger conversation on potential solutions.
Allow me to explain.
Hacks and exploits have been synonymous with DeFi for quite some time now. A quick look at websites like rekt.news or web3isgoinggreat.com will reveal that DeFi exploits are actually an almost weekly occurrence in crypto.
A Chainalysis report even called 2022 the “biggest year ever for crypto hacking” after records show that over $3.8 billion in crypto was stolen that year, primarily from DeFi Protocols.
While investing more in security and audits might seem like the most obvious solution, Dan states that his experience over the years has proved that this is not enough. Instead, he argues that we need to fundamentally rethink how DeFi protocols are designed and secured.
What does that mean?
Well, Dan believes the current DeFi ecosystem is predominantly made up of protocols that have too many external dependencies (that is, external factors that can dictate the core functioning of the protocol) such as DAO-based protocol governance, upgradability and oracle systems to name a few.
Dan believes that the best way to mitigate the effects of these attacks is to build a modular DeFi ecosystem made of layers built on top of ‘true’ DeFi primitives.
He defines these ‘true’ DeFi primitives as “contracts with zero external dependencies, other than those of the blockchain it is deployed upon”.
In other words, we need to build individual, customisable user interfaces or composable protocol layers on top of permissionless, non-upgradable contracts or protocols.
Notably, Dan focuses on ‘Oracle-free Protocols’ as the most recent re-emergence of such DeFi primitives. Among decentralised exchanges, Uniswap v1 and to an extent v2 and v3 as well are the best examples of such an oracle-free ‘true’ Defi primitive.
He also points to the viability of oracle-free protocols in lending markets (a section of DeFi that heavily depends on oracles) by citing the launch of products such as Ajna, Ethereum Credit Guild, Metastreet’s Automated Tranche Maker, and Blur/Paradigm’s Blend.
However, Dan does admit that completely oracle-free protocols might not be everyone's cup of tea. This is due to the degree of manual risk management assumed by users in use cases such as lending markets. He explores how oracle-free protocols with a "Bring Your Own Oracle (BYOO)" model might be a good middle ground instead.
I highly recommend that you give his article a read.
In summary, Dan states that the key lies in moving as much logic and as many dependencies as possible out of the lowest-level primitives. Let's see who picks up the ball and runs with it.
📊 Personal Portfolio 📊
BTC 35.07% | ETH 32.40% | USDC 17.41% | USDT 6.97% | USD 3.52% | ATOM 3.37% | DOT 1.27%
🔥 Deal of The Week 🔥
Last month we ran our inaugural $15k trading competition on Bitget!
This was exclusive to anyone who signed up with a Coin Bureau link - which means that participants had a much greater chance of winning a prize!
That $15k prize pool was payable in USDT and the entrants from the May competition will have their USDT credited directly to their Bitget accounts around the 10th of June. So, if you participated, keep an eye out for those promo payments!
Not sure where you came in May’s promo? Well, you can check out the final leaderboard standings here!
Now, if you are upset that you weren’t able to participate in that trading competition, then we have some good news for you!
That’s because we have been able to convince Bitget to run the same competition in June with an equivalent $15,000 prize pool!
To take part all you must do is to sign up to Bitget via the Coin Bureau link and place a trade! You will then see yourself appear on the leaderboard for June - where you can see what prize you could be in-line for!
Check out the leaderboard standings for June’s trading competition!
On top of this trading competition, signing up to Bitget will also get you an exclusive a 20% trading fee discount and a bonus up to $40,000 on top of that!
🔮 Video Pipeline 🔮
- Pro-Crypto Presidential Candidates: The hope for crypto!
- WEF Crypto Regulations: Time to panic?
- Debt Ceiling Liquidity Drain: What next?
- Bitcoin Ordinals Evolution: This you need to know!
🏆 What's New At CoinBureau.com This Week? 🏆
📖 Quote of the Week 📖
This week, the US congress finally raised the debt ceiling. This means that the government, which is saddled with $31.5 trillion of national debt, can start borrowing again. By some estimates, the interest payments on that debt could become the third-largest national expense in less than 10 years. So, while the current crisis has been averted, the longer-term timebomb just keeps on ticking.
“Every time you borrow money, you’re robbing your future self” - Nathan W. Morris
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.