The Next Downturn: Why You NEED To Pay Attention ⚠️

Wen recession, eh?High inflation: check. High interest rates: check. So where’s the economic downturn we’ve been promised for so long now? After all, the sooner it starts, the sooner we can get it over with.

Although it may seem like a recession is long overdue, given all the economic turmoil of the last few years, predicting when it will hit - if it hits at all - is notoriously difficult. Indeed, some would argue that it’s already happened and we’re out the other side. It all makes trying to predict the weather look relatively straightforward.

In today’s video, we examine the possibility of a recession in-depth. We look at the various indicators used by economists and investors to determine when we need to batten down the hatches. We also take a cold, hard look at what a recession could look like and what it will mean for you, your portfolio, and the markets. Spoiler alert: it could soon get pretty ugly.

You can watch that video (if you dare) over here.

📈 Crypto Market Forecast 📈

Last week was volatile, and it looks like this week will be too. As always, that’s because there are lots of macro and crypto factors queuing up to push the market around. The difference is that the effects these catalysts could have are not as obvious.

For macro catalysts, we have the minutes of the Fed’s latest meeting earlier this month. For context, the minutes will contain a summary of what was said behind closed doors during that May 1st conclave. If it’s clear that the Fed is starting to get concerned about sticky inflation, then the markets could see a small correction.

Conversely, if the minutes reveal that the Fed is more focused on the economy, AKA employment, then the markets could see a small rally. For reference, many analysts believe that the Fed subtly turned its focus from inflation to employment at its most recent meeting.

This ties into the second and third macro catalysts, which are the weekly jobless claims and updated consumer confidence figures, expected on Thursday and Friday, respectively. For reference, weekly jobless claims have been rising and consumer sentiment has been falling. If this trend continues, then it could be paradoxically bullish, due to lower rate expectations.

Another factor to be on the lookout for lies somewhere between crypto and macro, and that’s Nvidia’s Q1 earnings, which, like the Fed’s minutes, will be published this Tuesday. For those unaware, NVIDIA has basically been leading the stock market higher on the back of all the AI hype. The fact that TSMC’s Q1 earnings came in higher suggests Nvidia’s could reveal the same.

According to macro analyst Cem Karsan, the markets are currently positioned to expect the same kind of volatility we saw around the CPI print last week. In other words, Nvidia’s Q1 earnings will be as big of a catalyst for the markets as the CPI. So long as these earnings meet or beat expectations, the volatility will be to the upside (which again seems likely).

This relates to the upcoming crypto factors, of which the biggest is the likely rejection of the spot Ethereum ETF applications. FYI, it’s believed that the final decision date is next Thursday, and that they will be rejected because the SEC will launch formal lawsuits against entities in Ethereum’s ecosystem, wherein they’ll claim that ETH is a security.

As we’ve mentioned before however, it’s possible that the spot Ethereum ETFs will be approved, simply because the SEC’s enforcement division is not in charge of approving ETFs. This is going to make the next few days rather interesting, as every day without a lawsuit will likely raise hopes that the approval could happen after all.

On the flipside, if the SEC denies the spot Ethereum ETFs and/or follows through with suing Consensys, Uniswap, etc., then it may have a neutral effect on the crypto market. That’s simply because all this has likely already been priced in. As we mentioned in last week’s newsletter, this means that there’s theoretically a greater risk of an upside surprise this week with ETH.

Again though, this ultimately depends on the contents of the lawsuits, if they occur. In case it wasn’t clear enough, these lawsuits are likely to materialise by this Thursday, assuming their purpose is to justify the denial of the spot Ethereum ETFs. If we don’t see the lawsuits by Thursday, then it’s anyone’s guess when they could appear, but we’re entering the window wherein they could happen.

In sum then, there seem to be more upside surprises in store for the crypto market this week. While it’s possible that these macro and crypto catalysts will cause some downside, the risk (so to speak) remains to the upside. Just remember that nothing goes up only.

🔗 Chain Abstraction: Key To Mass Adoption? 🔗

Humankind is this planet’s most advanced and civilised life form simply because we’ve constantly innovated to create a better way of living over the millennia.

Whether it’s been through discovering that using fire to cook food makes it easier to digest; devising a complex spoken and written language system; harnessing electricity; or even creating the printing press to democratise access to information, we’ve consistently been pushed into a higher state of civilisation by various triggers.

That said, in the past half-century we’ve encountered two major triggers that have changed the way human society fundamentally functions. The first was the birth of the internet in the 1980s.

The second was Satoshi Nakamoto's publication of the Bitcoin whitepaper in 2008.

And no, that’s not an exaggeration. The Bitcoin whitepaper was the first academic material to successfully popularise the idea of using blockchain technology to create ‘magic internet money’ that exists beyond the control and influence of individual nation states.

It provides a financial safe haven for individuals suffering from the volatility of geopolitical situations and serves as the ideal demonstration of how blockchain tech could be leveraged to create secure, transparent, sovereign, decentralised and efficient systems on the Internet.

Ever since, blockchain developers have aggressively attempted to bring other use cases to the blockchain, ultimately leading to the conceptualisation of Ethereum in 2013.

Over a decade later, Ethereum is still respected as the king of smart contract blockchains. However, inherent scaling limits have resulted in the constant search for more efficient and scalable alternatives. In turn, this has created thousands of scaling solutions and competing blockchains, each with its own programming language, architecture and consensus systems.

Ironically, these systems, which were created to aid the mass adoption of cryptocurrencies and blockchain tech, have resulted in a fragmented, complex and negative user experience that severely hinders such adoption.

This is why more projects are now shifting their focus towards creating consumer-facing, and easy-to-use blockchain products.

Over the past few years, this has been led by innovations in multi-chain communication layers and new standards such as ERC-4337, which creates a simpler user experience at the account level. While they undoubtedly moved the needle, they did not effectively address the problem of fragmented blockchain ecosystems.

This is why the next generation of projects looking to achieve mass adoption are now focusing on something called ‘chain abstraction.’ In simple terms, chain abstraction tech allows users to interact with different blockchain and crypto projects without even realising they are doing so.

This concept may sound familiar if you’ve heard of ‘account abstraction’ before.

But there’s one fundamental difference between the two concepts. The common term ‘abstraction’ refers to the simple act of eliminating complexities. The subject of this abstraction, however, differs between the two concepts.

In this sense, account abstraction focuses on removing complexities associated with a user’s account. This typically includes technical stuff such as private key management/recovery, gas fees and signing a batch of transactions.

On the other hand, chain abstraction focuses on eliminating complexities associated with a user’s interaction across different chains. This typically includes technical stuff such as routing, gas conversion, construction, ordering, and other cross-chain operations.

For example, if an NFT marketplace user on Ethereum wishes to buy an NFT on Solana, they currently need to download a new wallet, store a new seed phrase, and find a bridge to move funds cross-chain before being able to buy the NFT.

It shouldn’t be this complex. To truly achieve mass adoption, users need to be able to do all of this in as few clicks as possible. On that note, different projects are taking different approaches to achieve chain abstraction.

All of these approaches are highly technical and frankly the nuances between them would take intense study to gain a complete understanding. If you’re feeling so inclined, here’s the ultimate list of resources for chain abstraction.

That said, for now, we’ll stick to briefly highlighting some of the key projects currently pioneering chain abstraction. The most prominent ones are Near Protocol, Particle Network, XION (Burnt), Socket, Omni, and ZetaChain.

Near Protocol’s chain abstraction stack focuses on ‘account aggregation’ and features tech such as its native domain name system, the ‘blockchain operating system’ and ‘chain signatures’ to achieve multichain, non-custodial accounts capable of cross-chain transactions.

Particle Network, on the other hand, has built a modular Cosmos L1 to serve as a universal settlement layer that enables chain abstraction across the EVM, Bitcoin, Solana, and more. It offers a more developer-centred solution. Its Universal SDK allows new developers to integrate ‘universal accounts’ into their dApps. These universal accounts allow developers to package their transactions into user operations spanning across chains. In simple terms, this enables users to pay for gas in any token and immediately control smart accounts on all chains.

Socket achieves chain abstraction by offering a modular and adaptable framework for chain-agnostic applications. As a core mechanism, it uses its Modular Order Flow Auction (MOFA) model to establish a marketplace for transmitters and user requests. Xion meanwhile is a general chain abstraction protocol with a meta-account design that allows agnostic signature, parameterised fee layer, and state machine updates.

All said, the concept of chain abstraction also raises its share of concerns. One of these is security, as also highlighted by Ethereum founder Vitalik Buterin. Specifically, Vitalik stated that chain abstraction will lead to a ‘desensitization’ of security issues as more chains become interconnected.

While I’m sure we’ll find workarounds to these concerns, it’s becoming clear that chain abstraction will be one of the most widely focused-upon areas in crypto over the coming years.

🔥 Hot Deal of The Week 🔥

About 2 weeks ago, we revealed that the Coin Bureau had invested in Foxy, a “culture coin” building on Linea. Of course, we want you guys to also be part of the Foxy movement. So, if you are interested, there is a 100 million Foxy airdrop campaign running from today until the 30th of May.

To take part, all you must do is to sign up to Bybit and trade Foxy!

👉 Sign up to Bybit and get up to $60k in rewards + 0% in maker fees for 30 days!

🔮 Video Pipeline 🔮

* Buy Now Pay Later: What it means for the economy
* Why Is Everything So Expensive? What’s going on and how to stay ahead?
* Fantom Update: Potential for 2024?
* Richest Families In The World: How do they control everything?

🏆 What's New at This Week? 🏆

* M6 Labs Crypto Market Pulse: Assessing The Golden Year Of Airdrops
* 1inch Exchange Review: Leading DEX Aggregator
* Applications of Blockchain in Government: Transparency and Accountability
* 6 Best Hardware Wallets for 2024: Top Crypto Wallets Reviewed!
* Hopr Review 2024: Decentralised Privacy-Enhancing Protocol
* Kraken vs. Coinbase 2024: Detailed Comparative Analysis!
* Fantom Review: DAG Based DeFi Powerhouse

📖 Quote of the Week 📖

Having success in the crypto market is not only about knowing when to buy, but also when not to buy. Don’t let FOMO impact your investing decisions.  

“The two most powerful warriors are patience and time.” - Leo Tolstoy

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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