The Biggest Risk To The Markets?

It can be hard to keep up with all the worrying stuff going on in this troubled world of ours. Much of the focus recently has been on the conflicts in the Middle East and their potential to escalate into something even more serious. Meanwhile, the war in Ukraine rumbles on.

However, there’s another part of the world that has been keeping many people awake at night - and with good reason. If tensions between Taiwan and China were to boil over into conflict, the resulting conflagration could spell global catastrophe.

In short, China views Taiwan as part of its territory and Chinese premier Xi Jinping has stated many times that he intends to reunite the two countries. Taiwan meanwhile asserts its independence and has a rather important ally backing it up - none other than the US of A. Taiwan also happens to be the place where most of the world’s semiconductors are manufactured.

So, a Chinese attack on Taiwan would not only see the world’s two superpowers in likely direct confrontation, but would also cripple the global economy. That’s simply because pretty much everything, from smartphones, to cars, to computers and countless others besides needs semiconductors in order to work. It’s a truly frightening scenario.

With Taiwan having recently held an election, the result of which didn’t go down well in Beijing, should we be starting to really worry? That’s exactly what we look at in today’s video. We weigh up the recent developments in that neck of the woods and look at how the Taiwanese themselves feel about their big and scary neighbour. We also give some vital background to the current situation and examine just how likely it is that Taiwan becomes the next geopolitical flashpoint. And of course, what it might all mean for crypto.

You can watch that video here.

📈 Crypto Market Forecast 📈

This coming week, macro will be driving the crypto market. In the driver’s seat, we have Fed chairman Jerome Powell, who will be taking the stage this Wednesday after the Fed announces its latest decision on interest rates. The consensus is that the Fed will keep interest rates where they are, and that’s probably what will happen.

What nobody can predict, however, is what Jerome will say once he’s behind the mic. If he’s hawkish (giving hints that interest rates could stay higher for longer), then the markets could see a sudden dip, particularly because they’re pricing in lots of rate cuts. For what it’s worth, we believe Jerome will keep the dovish talk going.

This is simply because 2024 is an election year (and a contentious one at that). The Fed likely doesn’t want to rock the boat in either direction. More importantly, Jerome’s comments during the Fed’s press conference last December give the impression that the trend of monetary policy is more dovish (indicative of lower interest rates).

But that’s just who’s in the driver’s seat. In the passenger seat, we have Treasury Secretary Janet Yellen, who may very well be the real driver of this macro vehicle. On the same day that Jerome goes out on stage, the Treasury will be announcing how the US government plans to fund itself over the next quarter - what durations of debt it will issue.

This is more significant than you think, because the duration of debt the Treasury decides to issue will likely have a huge impact on interest rates. That’s because interest rates are in part determined by the yields on various durations of US government debt, which are in turn determined by supply and demand (more supply = higher yields and vice versa).

Here’s where things get interesting. As most of you will know, Q1 of each year is when taxes get paid. In practical terms, this means that governments (including the US government) don’t have to issue as much debt to fund themselves, because they have more money coming in. This means there’s a good chance there won’t be much debt issuance, which will drive yields lower.

Not only that, but the Treasury noted in its last funding announcement that it is planning on buying back some durations of its debt (presumably because they have lower liquidity). This is something that was revealed by Wall Street Journal Fed watcher Nick Timiraos way back in May last year. Per his tweet, the Treasury Department hasn’t done this since the year 2000!

Logically, these debt repurchases will likely further stimulate the economy, and the stimulative effects will likely be priced in by the markets as soon as they’re announced. Newsflash, it will be bullish. This is something that was underscored by Bitmex co-founder Arthur Hayes in a recent blog post, where he also predicted that the Fed would end the Bank Term Funding Program (BTFP).

It turns out Arthur was spot on. In case you missed the memo, the Fed recently announced it will end the BTFP in March - a year after it was introduced to combat the banking crisis of 2023. Now, you’d be forgiven for thinking this means there will be another banking crisis in March. As macro analyst Andy Constan noted though, the banks can extend their borrowing by one year before the deadline. In other words, the banking crisis will be a problem for March 2025, not this year.

But that’s further in the future. The announcements we’re likely to get from the Fed and the Treasury this week will be extremely bullish for crypto. That’s just because they will both have the fundamental effect of bringing down interest rates.

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🧐 Runes Mania 🧐

Do you remember how the Ordinals protocol took over the Bitcoin community a year ago?

Well, something similar is happening again with Casey Rodarmor’s next idea - ‘Runes.’

We realise some of you might be confused or out of the loop with the Bitcoin meta-layer ecosystem, so we recommend checking out 0xSea’s X thread for a full deep dive into its evolution.

For those short on time, here’s a brief TLDR of the Bitcoin Ordinals’ history, based on 0xSea’s thread.

The whole ‘Bitcoin inscriptions’ craze started when the aforementioned Casey Rodarmor launched the Ordinals protocol in December 2022. People fell in love with Ordinals, as it allowed anyone to record (AKA inscribe) data directly on the units of value (Satoshis) of the Bitcoin blockchain. Users primarily used it as a medium to mimic the ‘NFT’ tech on chains like Ethereum.  

Inspired by the success of Ordinals, an anonymous developer called domodata launched the ‘BRC-20’ protocol on March 8, 2023, to allow users to launch altcoins using Ordinals. The BRC-20 project also saw similar success to Ordinals, with some BRC-20 tokens even getting listings on major centralised exchanges like Binance. In fact, at some point, BRC-20 transactions began accounting for the majority of inscriptions on the Ordinals protocol.

However, Ordinals creator Casey was sceptical about the BRC-20 project. He published a blog post in which he stated that the issue with BRC-20 tokens is that they spam Bitcoin with “junk” unspent transaction outputs, or UTXOs.

In order to offer something similar to BRC-20 but using a different approach, Casey revealed that he was working on a new homogeneous token protocol called ‘Runes.’ Notably, Runes supposedly addresses some of the shortcomings of BRC-20s from a technical standpoint. However, the official launch of Runes is still months away.

You are now up to speed.

As we just mentioned, the official Runes launch is still a few months in the future. However, it appears the hype around the protocol is starting to pick up already.

Over the past week, Crypto Twitter was filled with conversation about a couple of projects that are reportedly attempting to claim the ‘first-mover’ advantage on the hype surrounding the Runes protocol.

To make it easy to follow, here are some clarifications – the Runes protocol is a project by Casey Rodarmor that will act as the base layer to create ‘fungible tokens’, AKA altcoins. The projects that launched this week are attempting to launch as altcoins on the Runes protocol. They are attempting to use the word ‘Rune’ as a marketing ploy for their altcoin.

Having said that, the first of these projects is Rune Coin (not to be confused with Thorchain’s RUNE). Notably, the Rune Coin endeavour seems to be connected to Inscription Number 126. This means that an OG Ordinals user is behind the project. Interestingly, the project seems to be taking a gamified approach to onboarding its community.

For context, the team behind the project airdropped 21,000 inscriptions called ‘RSICs’ to various members of the Ordinals community. All 21,000 RSICs or ‘Rune Specific Inscription Circuits’ trace their lineage to Inscription 126.

However, the project has been receiving a lot of criticism on Crypto Twitter for its marketing tactics and distribution model. Notably, the project marketed itself as the first ‘Rune’ on Bitcoin. Leonidas, a notable influencer within the Ordinals ecosystem, noted this claim as a red flag, due to its misleading nature.

Others have accused the project of not following a ‘fair distribution’ model. According to a few tweets, the RSICs were distributed to wallets actively trading Ordinals collections ranking at the top in terms of volume on Magic Eden. The team explained that they didn’t want the RSICs to be sent to “sleepers”, or pure collectors, due to their gamification mechanics. This explanation has not gone well with the broader community.

Another factor that seems to be plaguing the project seems to stem from a popular theory that claims the NodeMonkes founder ‘Rocktoshi’ is behind the Rune Coin/RSIC project due to their connection with Inscription 126. Rocktoshi seems to have gained a bad reputation among some members of the community.

The second project, following the launch of ‘Rune Coin’ is ‘Runestone.’ Notably, Runestone is being launched by Leonidas – the influencer who called out Rune Coin for its red flags. Runestones will reportedly follow a fair distribution model which rewards all users who participated during the first year of the Ordinals protocol. The project seems to have been received positively by some members of the community, while others seem to prefer Rune Coin over Runestone. Some have even taken a realist approach.

We believe this is just the start of a wave of similar projects that will attempt to capitalise on the hype surrounding the Runes protocol. Whether these projects can survive until the actual launch of the protocol remains to be seen.

🔮 Video Pipeline 🔮

* How To Find Top Early Stage Projects?
* Davos Summary: What They Said!
* Wealth Report: The True Distribution Of Wealth And Ultra High Net
Worth Individuals
* Coinshares Report: The Most Interesting Conclusions!

🏆 What's New at This Week? 🏆

* How to Buy Bitcoin In Canada
* Crypto Tax Calculator Review 2024: Crypto Tax Streamlined!
* How to Buy Bitcoin in the US 2024: Bitcoin Buying Guide!
* Crypto Investing: 8 Blockchain Games you NEED to Check Out!
* Best Crypto Tax Software in 2024: Top 7 Tax Tools for Crypto
* M6 Labs: Calm Before The Storm
* First Round of Speakers for TOKEN2049 Dubai Revealed

📖 Quote of the Week 📖

There seems to be a lot of questionable crypto advice floating around on social media platforms. Suggestions of “easy 1000x” returns and “risk free investments”. Be careful who you follow, as it could cost you all your gains in the next bull run.  

“There is nothing more hateful than bad advice” - Sophocles

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 Turner

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.

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