The Fed is on a Mission of PAIN!!
Last week, Jerome Powell held his first press conference since July and what he said sent shockwaves through global markets.
That’s because it was one of the most hawkish speeches that a Fed official has given in recent memory. Powell made it clear that he was determined to break the back of inflation. And, if that means causing damage to the economy, so be it.
A great deal was covered in this press conference and it gave perhaps the clearest guidance yet about what could be coming in the months ahead.
Today, I am going to break down that press conference for you. I will be going over some of the most important answers Jerome gave to the questions put to him and what all this could mean for future Fed policy and your portfolio.
You can watch that video here.
📊 My Personal Portfolio 📊
BTC 36.87% | ETH 35.81% | SOL 8.20% | ATOM 4.91% | USDC 4.29% | DOT 3.90% | ADA 1.42% | MATIC 1.40% | NEAR 1.30% | RUNE 1.29% | INJ 0.61%
📈Guy’s Forward Guidance 📈
Whenever I see the crypto market suddenly pump during times like these, I remind myself of what is possibly the most important fact out there right now: retail has not capitulated yet. Although the most concrete data for this is a couple of months old, it looks like this continues to hold true. This begs the question of when retail investors will finally capitulate.
Enter the messiest macro landscape you’ve ever seen: British pension funds nearly defaulting, gas pipelines to Europe being blown up under mysterious circumstances, protests erupting around the world, and populist leaders being elected. All this uncertainty has been keeping investors on edge, but it seems even these events haven’t shaken retail.
This again begs the question: when will retail investors finally capitulate? Some research suggests that they will begin once big stocks like Apple and Tesla start to crash. This makes sense given how many retail investors aped into these blue chip stocks during the pandemic. Well, APPL is down 7% over the last week, but it seems there is still no retail capitulation!
This leaves us with only one possible factor, and that is a black swan event of some kind. Something needs to happen that nobody is pricing in - something that’s so crazy nobody thought it could ever happen. Russia using tactical nuclear weapons in Ukraine is one elephant in the room. China taking advantage of the chaos to invade Taiwan is another.
To be clear, I am not saying either of these two things will happen. They just seem to be the only two black swan events that would cause the kind of retail capitulation that comes before the bottom in the stock market and the crypto market. A third scenario to consider a civil war in the United States because of the upcoming midterms, something Bill Gates is predicting.
Given how horrible 2022 has been, I wouldn’t be surprised if all three of these scenarios came to pass. Then again, it could be something as simple as a sovereign debt crisis and/or a currency crisis on a global scale. After all, we’re already starting to see countries like Japan intervene to protect their national currencies. Don’t even get me started about the UK.
The craziest part of all of this is that winter hasn’t even started yet, and the world is already starting to tear at the seams. It turns out that ignoring the physics of energy has some serious negative consequences. This makes me wonder whether the people in power are incompetent or evil. Regardless, one thing’s for sure: they will not let this crisis go to waste.
🛑 Reversible Transactions: My Hot Take 🛑
In case you missed the memo, researchers at Stanford University recently proposed making it possible to reverse transactions on Ethereum using a new token standard. The proposal caused quite a stir in the crypto community because transactions in cryptocurrency are supposed to be final. My hot take: reversibility is a Pandora’s box we don’t want to open.
I’ll start by acknowledging the arguments of those who are in favour of the proposal. Reversible transactions would make it possible to stop scammers, hackers, and all sorts of bad actors on Ethereum. It would also ensure that honest actors retain their funds. More importantly, the reversibility would be an opt-in feature via new ERC token standards.
On the surface then this proposal shouldn’t be a problem, even if it’s passed. Those who want to use the new token standard can do so, and those that don’t want to don’t have to. However, it’s not that simple. There are many US politicians who want the government to be able to reverse cryptocurrency transactions on Bitcoin and other blockchains. I’m serious.
So, let’s say the proposal is passed. At first it will be opt-in, but as soon as regulators around the world get wind of it, how quickly do you think they will move to pass regulations requiring cryptocurrency exchanges to only support these types of tokens on Ethereum? How long before they demand that the same feature be introduced to other cryptocurrencies?
The answer is not long at all. At that point, smart contract cryptocurrencies would just become payment rails like Visa. Come to think of it, this is exactly what the institutions have been calling for since the beginning of cryptocurrency. It was often said in the context of scaling. Now cryptos are more scalable. Will the next context be compliance? Seems so!
The question then is what this would mean for smart contract cryptocurrencies like Ethereum and others that would be inevitably forced to introduce these token standards. Well, you’ll be happy to know that these proposals would likely result in lots of institutional investment. All these smart contract crypto coins would rally as a result, making everyone filthy rich!
That is unless of course you consider financial freedom to mean not just having money, but having the ability to buy what you want, when you want. This definition of financial freedom is one that the average person will learn the hard way once CBDCs are rolled out. Apparently this is a definition that is foreign to some crypto holders as well.
Say, did you see that headline about the Norwegian Central Bank building its CBDC on Ethereum? Nah, it’s probably nothing…
⚖️ Are They Coming For DAOs?? ⚖️
“Regulation by enforcement” seems to be the flavour of the season. Barely two months have passed since the Tornado Cash Sanctions controversy, and we seem to once again be in the midst of another potentially historic development in the crypto regulatory sphere. This time, a US regulator kicked up a storm by filing a civil enforcement action against members of a decentralised autonomous organisation (DAO).
The regulator in question is the US Commodity Futures Trading Commission (CFTC) and the DAO in question is the Ooki DAO, which governs the defi lending protocol called ‘Ooki’.
To cut a long story short, the CFTC had gone after the founders of the Ooki protocol for illegally offering services that qualify as “regulated transactions.” These usually require registration with the authority.
However, it didn’t stop there…
The CFTC also filed a civil enforcement action against the Ooki DAO claiming the decentralised governance body was as complicit in carrying out the unlawful activities as the founders were.
The CFTC identified Ooki DAO as "an unincorporated association comprised of holders of Ooki Tokens” and accused the DAO of using its structure to evade regulatory oversight. While most of us might not have seen that coming, crypto lawyers have been warning us for a while.
Given the decentralised nature of the DAO, the CFTC also took an interesting approach in serving the case. It posted the documents on the DAO’s governance forum and even uploaded the documents on the Help chatbox of the website. Whether this qualifies as proper service is somewhat questionable.
The filing calls on anyone who has ever voted on a governance proposal in the Ooki DAO forum to be liable to answer the enforcement action. Now, based on how this plays out in court, we could soon see a significant shift in the way governance functions in decentralised protocols and communities. I don’t know about you, but in my opinion, a decentralised body is the most fundamental aspect of DeFi and crypto. Whether it be used for consensus mechanisms in running a blockchain or executing governance decisions in DeFi protocols.
One thing I do wonder is how they plan to enforce this action on DAO members – given the anonymous nature of blockchain addresses. My immediate guess is they’ll attempt to track down identities by using the services of blockchain tracking firms like Chainalysis. Or maybe they’ll go for the simpler route and just read your ENS domain address that you’ve likely plastered all over your social media.
I’m just kidding about the second part… right?
Either way, the Ooki DAO is planning to raise funds so that they can effectively fight this out in court. It’s also worth noting that not everyone in the CFTC agrees with its current course of action. For example, Commissioner Summer K. Mersinger published a dissenting statement in which she criticised the regulator’s lack of “legal authority” in bringing such an action against a DAO and described it as “blatant regulation by enforcement.” I’m thankful to see there are at least a few dissenting voices within the agency.
I will be keeping my eyes peeled over the next few days/months/years to see how this case plays out in court. I reckon you should too, unless you want to find regulators being the ones pulling the rug.
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🔮 Video Pipeline 🔮
- Circle: The company that’s taking over crypto.
- The Budget that BROKE The UK.
- US politicians: Stock trading ban!
- IMF crypto report summary: What they say!
- Personal Carbon Credit Scores: They Are Coming!
🏆 What's New At CoinBureau.com This Week? 🏆
That’s all for this week. We would like to thank you for all your support because without it we simply couldn’t continue to pursue our passion of crypto education. So, thanks to all of you 🙏
Guy your crypto guy
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.