The Coming Crisis - It’s Not What You Think!
Let’s face it - 2022 has thrown all kinds of crazy at us.
War, inflation, pandemic, geopolitics and general turmoil. While I have covered many of these on the channel before, none come quite as close to the biggest risk of all - a global food crisis.
At first I wanted to believe that talk of food shortages was nothing but alarmism. But, after seeing some of these shortages in my local grocery store, it began to dawn on me that there may be something more to talk about.
After the head of the Bank of England warned that we were heading towards a global food crisis, I thought I'd dig a little deeper into what is going on.
In my video today, I break down exactly what’s happening with the global food supply chain. Despite what many may think, it’s not all entirely related to the war in Ukraine.
It's a combination of factors that are threatening a food shortage the likes of which we haven’t seen since the second world war.
You can watch that video here.
📊 Main Portfolio 📊
As I mentioned in my post yesterday, in this bear market I want to gain more exposure to BTC & ETH. The former because it performs better in these conditions vs. alts, and the latter because of the upcoming merge. As such, I sold out of 10% of all positions in other altcoins and allocated the proceeds to BTC & ETH in equal proportion.
As always, I will keep you updated with moves in my Telegram. Updated portfolio is:
ETH 40.34% | BTC 31.90% | SOL 6.27% | DOT 5.16% | ATOM 3.59% | RUNE 2.07% | NEAR 1.87% | APE 1.71% | ADA 1.47% | AR 1.30% | FTM 0.99% | MATIC 0.99% | HNT 0.98% | INJ 0.70% | LINK 0.54% | XDEFI 0.12%
🖼 NFT Portfolio 🖼
MAYC 94.62% | Meebit 5.38%
📈 Thoughts on Market 📈
It seems the crypto market has finally found some support after Terra’s terrifying collapse. What’s interesting is that around 274 million dollars flowed into crypto funds during that week - the highest inflows since the start of the year. As noted by Coinshares, this suggests that institutions took Terra’s fallout as an opportunity to buy the dip. Not everyone is buying, though.
One on-chain metric we’ve been keeping a close eye on lately is how much BTC Bitcoin miners have been selling. Not surprisingly, they’ve been selling quite a bit, and though the selling wave seems to have peaked, it’s not quite over yet. This makes sense given that a January report found a BTC price below 34k means many Bitcoin miners would have to sell to stay solvent.
The good news is that we’re finally starting to see what’s left of the speculative greed flushed out of the crypto market, as shown by the sudden spike in Bitcoin Dominance. This corresponds to extreme fear on the Crypto Fear & Greed Index, which is a level that we haven’t seen since March 2020. For context, the Fear & Greed Index factors in Bitcoin Dominance.
At the same time, Ethereum looks like it’s on schedule to transition from proof of work to proof of stake as soon as this August. This is significantly sooner than the revised 2023 timeline, which has since been updated to Q3/Q4 2022 on Ethereum’s official roadmap. This news probably played a role in the small rally we saw in the crypto market at the end of last week.
As an additional bonus, we just finished 8 weeks of losses for BTC, something that has never been seen since Bitcoin began in 2009. As we’ve been saying, there’s only so long that prices can go down, but then again, BTC’s spectacular long term decline might be because of its increased correlation with the stock markets, which have seen 7+ week declines before.
We’re seeing some interesting moves at the macro level as well. The one that seems to have brought the crypto market back up a bit late last week was China’s sudden decision to cut interest rates. Some are seeing this as a sign that other central banks could slow their interest rate increases, but the recent rhetoric by Fed chairman Jerome Powell suggests otherwise.
There is one thing that could cause central banks to reverse course however, and that’s another pandemic. It now appears as if the new scare is the monkeypox virus. The first case was detected here in London earlier this month, and it seems to be getting serious because the US government recently announced a big purchase of monkeypox vaccines in response.
As many of you will know, monkeypox can be deadly, and there’s also apparently no treatment for it. The only real protection is to get exposed to a weakened version of the virus. What’s scary is that an unspecified European country also purchased vaccines the day after the US. The World Health Organisation even held an emergency meeting on Friday.
So yeah, this new situation seems to be getting serious, but so far it looks like the markets haven’t picked it up. I seriously hope it’s much ado about nothing, but I also thought that about Covid back in 2019! So, this is one of those known unknowns we should be keeping our eyes on.
🤔 Liquid Staking And Centralisation Risks 🤔
I’ve been interested in liquid staking for quite some time now, and after seeing all the data by Nansen suggesting that institutions are increasingly staking their ETH in liquid staking protocols, I realised that we needed to do a deep dive into one of these platforms. I’ll be covering Lido Finance to start, since it’s the largest. As far as Ethereum goes, Lido now holds 33% of all staked ETH.
As you can imagine, this has led to lots of debates about whether this staking distribution threatens Ethereum’s security once it transitions to proof of stake, especially since many believe Lido will hold 50% of all staked ETH in the near future. Lido isn’t the only entity staking lots of ETH on behalf of ETH holders either, and they’re also likely to see the same sort of adoption.
Now, some (including me) would argue that the gradual centralisation of stake is one of the many inevitabilities of proof of stake, but there seems to be more to this particular story. That’s because Lido and other liquid staking platforms only hold a fraction of the stake for the other proof of stake cryptocurrencies they support. As far as I can tell, Ethereum is the only outlier.
This begs the question of what’s going on, and I think the answer is obvious: opportunity cost. At the moment, anyone who stakes ETH must keep it locked until sometime after Ethereum transitions to proof of stake. Even then, it sounds like there’s going to be caps on how much validators can withdraw so as to not crash ETH’s price, since many will probably want to sell.
Given that the exact timing of Ethereum’s transition to proof of stake is uncertain, it’s quite rational to stake using a third party platform that lets you freely trade that staked ETH in a tokenised form. The reason why we don’t see the same phenomenon with other proof of stake cryptocurrencies is ultimately certainty around opportunity cost: the lock / unlock is known.
As such, it’s possible we will see a slowdown in the popularity of liquid staking providers for Ethereum once there’s certainty around when exactly Ethereum will transition to proof of stake and how long ETH stakers will have to wait before being able to sell. The paradox is that this certainty will probably only come once Ethereum has actually transitioned to proof of stake.
Does this mean Ethereum’s proof of stake will begin with a centralised validator set? Well, not exactly. That’s because Lido and other liquid staking providers run multiple validator nodes for each cryptocurrency to support its decentralisation. There is of course a discussion to be had about whether that counts as decentralisation, and I actually just did a video about that topic.
In any case, it sounds like Ethereum is pushing ahead with proof of stake regardless of this supposed staking risk. This makes sense given that Ethereum’s Beacon Chain is closing in on a whopping 400 thousand validators. This will almost certainly make Ethereum the most decentralised cryptocurrency out there. Too bad it won’t do all that much for scalability.
😱 Wall Street Sharks Circling 😱
It’s been over 2 weeks since the collapse of Terra’s UST. Since that time, it has received extensive coverage from the crypto and mainstream media alike. We recently did a complete deep dive into the matter in our post-mortem video.
I don’t want to get into the discussion of whether the protocol was poorly designed and hence was susceptible to the “death spiral”. It is clear that this was earlier brought to their attention and Do Kwon’s brash dismissal is coming back to haunt him.
My broader question is who could have been behind the attack and whether there were other intentions?
After reading some of the comments on my video, some appeared to dismiss the notion that this attack could have come from outside the crypto space.
However, I still believe that this was the actions of someone in TradeFi (or not connected to crypto at all).
That is because anyone who operates in crypto knew how much collateral damage there would be from a collapse. A collapse that was many multiples of the potential gains they would have made in the exploit. By some estimates, the attacker was able to make about $800m + in gains from the attack.
However, if you count the damage to the Terra ecosystem (including the Terra blockchain and all those projects built on Terra), it was over $80bn or more. Then of course you have to consider the negative market impact this had on the broader crypto sector. The market dump drove mass liquidations and price volatility that rekt many new investors.
On top of this, there was also the risk of the FUD spreading to other stablecoins. As we saw, there was a massive run on redemptions of USDT and this led to a fall from the peg. Thankfully, the fear subsided, the peg was regained and Tether took steps to cut its commercial paper. However, the attack itself increased the likelihood of this black swan event.
It’s not even the money that was lost in the attack. The collapse has drawn a great deal of attention from regulators all around the world. From the US, to the UK, EU and in Asia. They needed an excuse to come after crypto and this was a golden ticket.
Yes, as mentioned in my newsletter last week, there is a case to be made for common sense regulations. But, as we have seen so many times in the past, reactionary regulations are the norm in periods of distress.
Then of course there is the negative publicity that came from the collapse. The stories of people who have lost their life savings in crypto are bound to slow adoption. The media is having a field day with the Terra collapse. And, while they are justified in their attacks of the project and founder itself, they are turning this into an attack on the broader crypto industry.
The point is that none of this was good for the crypto space. And if you are a company, hedge fund, VC, investor or project founder, this attack was against your own interests.
It’s for this reason that I think the attack emanated from somewhere outside of crypto.
Perhaps they were being opportunistic and decided to take advantage of a vulnerable protocol. Or perhaps they knew the damage that it would cause and viewed the profit of the attack as a sweetener - we lack the evidence to prove anything.
However, let’s hope that we learn something from it. That we build stronger and more robust protocols and we avoid getting caught up in the hubris of Defi dreams. Crypto will survive if we can adapt quicker than the TradeFi sharks can attack.
💻 Want A Job In Crypto? 💻
One of the most common questions that we get asked is: How do I get a job in crypto?
Indeed, it can sometimes be tough to navigate the talent space in crypto. Many seem to be intimidated by the fact that they are still new to crypto. Others may think that their non-programmer background could limit the pool of available roles.
Well, the truth is that crypto is such a vast ecosystem now, that there is probably a job out there right now that is perfectly suited for your experience or background. The industry is starving for talent of all types and despite hiring freezes at other tech companies, crypto job openings are still accelerating. Talent that can command top tier pay packages.
Want to assess your job options in the crypto industry and see if you can find the right job for you? Well, our friends at CB Recruitment can help!
🔮 Video Pipeline 🔮
- A TradeFi Scandal For The Ages
- Fed Financial Stability Report: What you need to know!
- The State of Crypto in 2022
- The IMF: Everything You Need To Know!
- Lido Finance: Is Liquid Staking Worth It?
- Is There Still a Future in GameFi?
- When Will The Bear Market End?
🏆 What's New At CoinBureau.com This Week? 🏆
✅ Binance vs Coinbase in 2022 - Which is the BEST Crypto Exchange?
✅ Can you Still Make Money Mining Bitcoin in 2022?
That’s all for now. However, everyone at Team Coin Bureau would like to thank you for continuing to support our work in crypto education. Everyone in the team knows we are truly blessed to be able to pursue our passion for crypto full-time and that’s all down to you!
Team Coin Bureau
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.