the latest BIS annual economic report
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This is the Future That They Want

By Guy

There are many different visions for how the future of finance should look. Most of us hope for a future of independence and freedom. 

On the other hand however, there are institutions that are fundamentally opposed to said freedom. The “powers that be” will never allow us to just be free, as that would mean severing their puppet strings.

Some of the biggest financial puppeteers in the world today are central banks. These central banks also have a member’s club and that’s the Bank for International Settlements (BIS). An organisation that has for the past two years been attacking cryptocurrency in all its forms. 

Well, not exactly all…

That’s because the folks at the BIS have been some of the staunchest supporters of central bank digital currencies (CBDCs) and have been laying out their vision for a financial future that borders on the dystopian. They have been doing this through a number of reports, which we have been covering on the channel. 

Last week, they dropped their latest report and it’s a beauty – so I think it’s my duty to break it down for you. It really is an eye-opener. 

You can watch that video here. 

📊 My Personal Portfolio 📊

BTC 36.20% | ETH 33.80% | USDC 7.68% | SOL 5.40% | DOT 4.61% | ATOM 3.44% | RUNE 1.67% | ADA 1.63% | HNT 1.46% | NEAR 1.31% | MATIC 0.94% | FTM 0.76% | LINK 0.62% | INJ 0.48%

📈 Thoughts on Market 📈

Just when you thought we were finally about to get a recovery rally, the bear market bites back with a vengeance. As many of you will know, crypto is highly correlated with the stock market these days, especially tech stocks. As it so happens, tech stocks posted their worst quarter in years, and so too did BTC. 

If you watched our video about how low the crypto market could go, you’ll know that we could see another 40-50 percent drop from current prices (note that’s for BTC, it could be much worse for alts). This seems to be consistent with the 20 percent drawdown some stock market analysts are expecting later this year. Their theory is that many investors are still expecting company profits to improve in the second half of the year, and that these expectations will not be met.

Another macro factor affecting the crypto market is the possibility that the United States will enter a recession. This is now being forecasted by the Federal Reserve Bank of Atlanta, which is expecting US GDP to contract by 1 percent for the second quarter of this year. For reference, two consecutive quarters of negative GDP is considered to count as a recession. Some would say we’re there already. 

As far as crypto-specific factors go, they can all be summed up in one word: contagion. Many crypto companies and projects are still feeling the effects of the collapse of Celsius and Three Arrows Capital, both of which we have videos about. Voyager Digital is the latest crypto platform to pause withdrawals because of this contagion. Many are wondering whether BlockFi could follow down the same route, although a recent deal with FTX could potentially avert this.

Tether’s USDT stablecoin is also under attack, at least according to Tether CTO Paulo Ardoino. In case you missed the memo, USDT’s market cap has shrunk by nearly 18 billion dollars since Terra’s collapse in early May. This is basically because it caused many USDT holders to question whether the stablecoin they’re holding is 100% backed, especially since Tether hasn’t been all that transparent about its reserves. For what it’s worth, it sounds like Tether will finally be doing an actual audit. Let’s see how that goes. 

At this point, the only thing that really has me concerned about the crypto market is that I haven’t seen as many headlines about crypto projects and companies raising millions from VCs. Not only does it suggest that capital is starting to dry up, along with the demand for risk, but it could be a sign that the crypto contagion is starting to find its way to much bigger entities. It looks like some of these bigger entities include Bitcoin mining companies.

🤯 What’s Up With Bitcoin Mining? 🤯

With the recent crash in the crypto markets, many of you might be wondering whether this has had any effect on Bitcoin miners. After all, there’s some evidence to suggest that BTC being below $20k is doing serious damage to miner profits. As with many crypto headlines however, there is more to this story than meets the eye.

Let’s get the elephant in the room out of the way first – most Bitcoin miners will continue to make profits, so long as BTC stays above 7-8k. This is based on our own manual calculations, which were coincidentally confirmed by Arcane Research in a Bloomberg article earlier this week. The thing is that Bitcoin miners are paying more than mere production costs these days.

Like many other crypto companies, many Bitcoin miners have taken on lots of debt to expand their operations at an exponential rate. Even though they’re all still profitable on paper, it seems that some are coming close to defaulting on their debt payments. This is part of why we’ve seen some miner capitulation over the last couple of months, and it has likely contributed to the broader crypto market crash.

There’s another factor at play here too, and that’s that most Bitcoin miners aren’t just mining BTC. Many of them are mining ETH as well. With Ethereum transitioning to proof of stake (we hope) by the end of the year, this means that Bitcoin miners will be missing revenue they otherwise would have had – not good for future debt payments. Before you say they should have planned for it, recall that the merge was suddenly rescheduled to an earlier date after it was initially delayed earlier this year. 

Logically, there’s an easy solution to this issue, and that’s to offload ETH and sell Ethereum mining machines (while they’re still worth something) and use the proceeds to buy more Bitcoin mining machines. 

A few Bitcoin miners have started doing this already, and that actually might be why ETH took such a big beating around the Ropsten testnet merge – Bitcoin miners realised the Ethereum developers are on track and they need to transition their operations away from Ethereum ASAP. 

Obviously this is much easier said than done, because it’s going to take lots of time and money for these Bitcoin miners to procure the equipment they need to plug the hole in their pockets that will soon be left by ETH. 

Given the current state of the crypto market and the fact that they’ve borrowed so much already, they’re probably having a hard time securing the capital they need for this mostly last-minute transition. Higher energy costs are also doing a lot of damage, but I’ll save that second factor for my video about Bitcoin mining later this week. Stay tuned!

🔨 Celsius Goes Cold 🔨

It’s been almost 3 weeks since that ill-fated day when Celsius decided that they would be pausing withdrawals. Since that time, there has been precious little communication from the lender (if any). Perhaps this is because they have nothing to say, or perhaps it’s on legal advice. 

Whatever the reason, it is leaving many users of the platform to rely on news stories that have been increasingly at odds with the stated goals of the firm when it initially froze withdrawals. 

As I said in my video 2 weeks ago, what happens with Celsius depends on whether it is functionally insolvent (lacks liquidity) or balance sheet insolvent (liabilities exceed assets). 

From the news that we had been getting over the past week, it seems increasingly likely that it’s the latter outcome. For example, there were reports that FTX had initially been interested in acquiring Celsius, but instead decided to walk away from the deal when they discovered a $2bn hole in Celsius’s balance sheet. 

This would of course imply that Celsius does not have enough assets available to pay out all their liabilities and are therefore insolvent. If this is indeed the case, then the most likely route that Celsius will have to take is a bankruptcy filing. 

This isn’t a great outcome for users and that’s mainly because of what can be salvaged with the assets and where in the debt seniority those users are. When it comes to the first one, no one really knows how much Celsius is able to realise from their remaining assets. We must remember that a great deal of these assets are locked up and illiquid – i.e., harder to realise.

There are reports that Goldman Sachs is speaking to investors about potentially raising $2bn to buy the remaining assets of Celsius. If this is the case, it is unlikely to be enough to cover the liabilities. 

And, if it isn’t enough, you also have to remember that Celsius users were “unsecured creditors” and these creditors usually have to go to the back of the queue in the event of a bankruptcy. How much more of Celsius’s debt is attributable to senior debtors is also not known – but you can be sure it’s not an insignificant amount. 

Therefore, if Celsius was to go into bankruptcy, then it would be very unlikely that users would see all their remaining funds returned to them. Haircuts may have to be taken and payouts from bankruptcies take forever to land. 

So, things are unfortunately not looking up for Celsius users. That being said, all hope is not lost. It appears as if Celsius is reluctant to enter the formal bankruptcy stage, despite their advisors recommending it. This led some to believe that last-ditch attempts were underway to avoid the worst. I do hope that they are able to avoid that bankruptcy, but it appears as if the markets and time are not on their side. Either way, we will be keeping a close eye on the situation. 

🔥 Question of The Week 🔥

I was taken aback by how many people showed up to the inaugural Coin Bureau event in London this May. It was great to meet so many of you and myself and the rest of the Coin Bureau team had a blast.

So much so that we are thinking about holding another event in May 2023! Now, according to the YouTube analytics, about 30% of you are based in the US and we understand that it was quite a trek for US folks to attend the event earlier this year. 

That is why we are looking to hold the next event in the US. However, given current market conditions, we need your help to see if there is enough interest to move ahead and plan this next event. 

I’d be grateful if you could give us a minute of your time to fill in the questionnaire below to help us assess the viability of holding another Coin Bureau event in 2023!

👉 Fill in the Coin Bureau Live 2023 questionnaire!

🔮 Video Pipeline 🔮

  • Why You Should Watch The Miners!
  • Are We In a Recession?
  • Chainalysis DeFi Report: What it Says!
  • Chainlink Update: Does LINK Still Have Potential?

🏆 What’s New At CoinBureau.com This Week? 🏆

FTX vs FTX US: Which one is BEST for You?

Huobi Global Review 2022: Good Exchange with DEEP Liquidity

Trader Joe Review 2022: Complete Guide to the Top DEX on Avalanche

That’s all for this week. Everyone at Coin Bureau HQ would like to thank you for inspiring us to continue creating the content you love – bear market or not. 

Guy your crypto guy

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