If you had told me just a year ago that central banks could soon be buying bitcoin, I would have asked for some of the hopium you were smoking.
However, according to a recent report by the Bank for International Settlements (BIS), this could be a reality in 2025. That’s because the “bank of central bankers” has provided the clearest framework yet for how central banks could allocate crypto to their balance sheets.
The importance of this cannot be overstated. Central banks hold trillions of dollars on their balance sheets and the framework could allow for them to hold as much as 2% of their total portfolios in crypto assets. That could mean hundreds of billions of dollars finding their way into crypto.
Of course, as with anything banker-related, the devil is in the detail. So, in my latest video, I break down this report and explain the pros and cons of crypto adoption by these supranational masters of the universe.
You can watch that here.
📊 My Personal Portfolio 📊
USDC 43.55% | ETH 26.01% | BTC 25.19% | ATOM 3.85% | DOT 1.35%
📈 Guy’s Forward Guidance 📈
The crypto market has been chopping sideways for weeks, and it looks like it’s finally about to break to the downside. All that’s left is a catalyst to cause the break, and there’s no shortage of macro and crypto-specific factors that could play this role. Let’s start with an interesting combination of macro factors: inflation, recession, and the possibility of a Fed pivot.
Last Thursday, a Twitter account which tracks the stock trades of US politicians reported that a Republican politician had suddenly sold off over 12 million dollars worth of stocks, of which 10 million dollars were in oil stocks. Logically, this suggests that he thinks the price of oil is about to plummet. We can only speculate on why he thinks that. Perhaps it’s because of a Saudi oil deal, or the start of a recession.
The cause is arguably irrelevant, as it’s the impact of lower oil prices that’s important here. High energy costs have contributed significantly to high inflation, and central banks have ultimately been raising interest rates to fight inflation. The upcoming decline in oil prices this US politician seems to see therefore suggests that the Fed could pause, or even pivot.
The pivot possibility is where the macro factors get very interesting, because a new one has come on the scene over the last couple of weeks. China is reopening, infections are soaring, and millions, if not tens of millions of Chinese are starting to travel. This is leading to fears that a new COVID variant could emerge. If it does, central banks could be forced to pivot.
Did I mention there was lots of insider selling by politicians shortly before the pandemic?
Now, when it comes to crypto-specific factors, it looks like we’re entering a second wave of capitulation from Bitcoin miners. This is basically because publicly traded crypto miners are being squeezed by a combination of debt and high energy prices. I still believe there will be more regions which pause Bitcoin mining in the coming months besides British Columbia.
Then there’s the SEC’s ongoing case against Ripple, the outcome of which was expected to be announced earlier this month. If the SEC wins its case then almost every altcoin is guaranteed to crash, since SEC chairman Gary Gensler has made it clear that everything except BTC is fair game. Let’s hope he’s ousted for his FTX connections before then.
Speaking of which, we’re still only starting to understand how much the collapse of FTX and Alameda Research has affected the crypto industry. It sounds like Digital Currency Group is still struggling to get the funding it needs to stay afloat. Gemini is also finding itself in legal trouble because of its Gemini Earn product, which imploded after Genesis Global got rekt.
What I’m wondering now is what Bahamian authorities will do with the 3.5 billion dollars in FTX assets they recently confirmed they have custody of. I could see a scenario where these assets are liquidated to compensate creditors. Oddly enough, wallets linked to Alameda have already been dumping altcoins, but it’s not the Bahamas authorities.
🇺🇸 Supercycle Speculation 🇺🇸
2022 has been a horrible year for crypto, so let’s start 2023 off with a nice big dose of hopium. The possibility of a supercycle is something that was heavily speculated on during the most recent crypto bull market, especially after BTC rallied back up to the 60k levels. In short, supercycle speculators thought that crypto adoption would hit critical mass, causing the prices of most cryptocurrencies to essentially go up indefinitely, with minimal corrections.
Although a crypto supercycle obviously didn’t occur this time, I think it could occur next time. This is simply because all of the fundamentals for it to happen are starting to fall into place. For starters, crypto regulations are being rolled out around the world, and this will create the clarity required for institutions to get involved. More importantly, from 2025 central banks will be able to hold cryptocurrencies (as discussed in today’s video).
That’s just the institutional side. On the retail side, big tech companies have been testing crypto integrations, mostly involving NFTs. Most of these NFT integrations are still at the testing stage, but should be fully functional by the time the next crypto bull market comes around. Now consider that governments are becoming concerned about deep fakes. NFTs were literally designed to confirm that content is authentic, and will likely be leveraged here. They could also prove to have immense value in political fundraising (more on that below).
On that note, governments are also in the process of rolling out digital IDs and central bank digital currencies (CBDCs). Once the average person realises how dystopian these technologies are, they will start to look for alternatives. With some luck, crypto will have developed to the point where it is a viable alternative, and we will see millions if not billions of people opt out of the hyper-centralised systems the central planners are building.
Last but not least, there’s the rapid devaluation of fiat currencies all around the world. The idea that crypto prices could continue to go up only sounds impossible until you remember that the value of cryptocurrencies is measured in fiat terms. What’s even crazier is that the same phenomenon probably wouldn’t be seen with any other asset class. That’s because governments will inevitably implement capital controls if their currencies really start to slide.
In terms of timeline, I suspect that the next crypto bull market will begin sometime in 2024, possibly as late as 2025. It would likely last until 2026 or 2027, at which point all of the fundamentals I just mentioned would be in place – regulations, mass adoption, and reasons for people to adopt cryptocurrency besides speculation (fighting deep fakes, digital ID and CBDC alternatives etc). If this happens, 2023 will be the final year for true accumulation.
Just something to keep in mind for the next 12 months!
📲 NFTs and Fund Raising 📲
The NFT market, like the broader crypto market, has seen its share of ups and downs this market cycle. We’ve seen NFT projects come in so many forms – from being offered as unique profile pictures to representing ownership of in-game digital assets, granting holders exclusive perks and more. This cycle has really seen NFTs bring in the crowd, so to speak.
But through it all, there has been one model of NFT project that I’ve found to offer a more supportive and non-speculative use case – fundraising. Particularly, we saw countries using NFTs in fundraising for war efforts, decentralised entities using them for building their legal defence funds, and creators building NFT projects whose proceeds are directed to charitable organisations and causes.
And, according to a recent advisory opinion shared by the United States Federal Election Commission (FEC), we could soon see political committees in the US using NFTs as an incentive when raising campaign contributions. This is expected to offer political committees and candidates a unique and innovative way to engage with supporters.
However, the advisory opinion only addresses the distribution of NFTs as souvenirs to campaign donors. I wonder if we could see these NFT souvenirs being allowed to offer exclusive perks to holders. We’ve already seen an example of these ‘perks’ in the self-themed NFT collection launched by former US president Donald Trump.
Trump’s NFTs automatically entered holders in a lottery whose grand prize included a Zoom call, a dinner in Miami or a cocktail hour at Mar-a-Lago meetup with the man himself. Regardless of any ‘perk unlocks’, I expect these NFT souvenirs to create substantial incentives for younger or more tech-savvy individuals to proactively donate towards political campaigns. Besides, people showcasing their support by sporting souvenirs from political campaigns or charitable causes has been a trend since the mid-2000s.
In summary, fundraising with NFTs has allowed crypto industry natives to be more proactive in aiding real-world efforts. This is especially true for campaigns that rely on grassroots support which may not have the same level of funding as their opponents.
It will be interesting to see whether more politicians and charities make use of NFTs in the coming year.
🔥 Deal of The Week 🔥
Congrats on making it through a pretty rough 2022! With last year in the rearview mirror, it is natural to start taking stock of things and make those New Year resolutions.
One of the biggest lessons that one could have learned in 2022 was the importance of self custody of your crypto. And, when it comes to the gold standard in self custody, nothing beats a hardware wallet.
The Coin Bureau Team has tested out many of these devices over time, but there are four particular standouts.
1. Trezor: Supports 1000+ cryptos and is beginner friendly to set up. This is also the most widely used hardware wallet amongst the Coin Bureau Team.
2. Ledger: Store 1000+ cryptos with a mobile-friendly device and earn rewards by staking your crypto assets.
3. NGRAVE: Perhaps the coldest and most secure hardware wallet in the world. This device is 100% offline and gives you top protection against online hackers. One for the truly security-minded hodlers.
4. Ellipal: Top air-gapped cold wallet. Not only is it easy to use, but it also sports anti-tamper-proof features as well.
🔮 Video Pipeline 🔮
- Online censorship is coming: What you need to know!
- Saxo Bank predictions: Outrageous or on the money?
- Digital Euro Update: Cause for concern?
🏆 What’s New At CoinBureau.com This Week? 🏆
✅ Fundamental Analysis of NFTs: Crypto’s Newest Asset Class
🥳 So long 2023! 🥳
And, speaking of the coming year, it only remains for me to wish you all the best for 2023 and thank you for your continued support. The last year has been tough for crypto and many more challenges lie ahead. However, the industry has survived the shocks and will weather the rest of the storm. I and my team here at Coin Bureau will be covering it all for you and we greatly appreciate your continued support. Thank you for sticking with us and stay tuned for lots of exciting developments here at the Bureau over the next twelve months. Happy new year!
Guy your crypto guyDisclosure: 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.