What The FED Has Coming!!
This week we have one of the most important Fed meetings of the year. That’s because in this meeting, the Fed’s board is expected to start increasing interest rates.
However, it's how aggressively they are planning to do so that could determine the trajectory of all markets including cryptocurrency.
So, how is this meeting likely to go?
Well, it's hard to tell. That’s because the current macroeconomic backdrop is uncertain and things are changing by the day.
However, one of our best bets to ascertain which way this meeting could go is through the comments made by Jerome Powell. And, from a recent congressional testimony by the man himself, we have over 2 hours of insight to examine.
That’s exactly what I will be covering today! I will be breaking down this testimony into its most important parts and giving you my take on what this could mean for the markets.
Therefore, if you want to get the bird’s eye view of what could go down this week, then it’s a video you can’t afford to miss.
You can watch that here.
📊 Main Portfolio 📊
No changes to the portfolio this week. Conditions were too volatile and I was just happy to hodl my stacks. There are a few coins / tokens which I am considering adding and I will keep you updated in my Telegram channel.
ETH 30.28% | BTC 24.51% | DOT 8.54% | SOL 8.32% | ATOM 6.29% | UST 3.65% | RUNE 3.42% | LUNA 3.30% | FTM 2.88% | HNT 1.89% | ADA 1.57% | MATIC 1.52% | INJ 1.11% | AR 0.96% | YGG 0.73% | LINK 0.72% | XDEFI 0.29%
🖼 NFT Portfolio 🖼
MAYC 96.73% | Meebit 3.27%
📈 Thoughts on Market 📈
The uncertainty continues, but crypto seems to be holding strong, all things considered. What’s interesting is that BTC seems to be doing much better than the Nasdaq or even the S&P 500.
Besides the fact that BTC has recently been highly correlated with stocks, there are significant crypto-specific headwinds that the crypto market continues to face.
For starters, there’s the executive order that was looming over the crypto market for weeks. When media outlets started talking about it again early last week, I expected to see a lot more volatility in the crypto market, specifically to the downside. However, the market remained relatively stable, and even pumped a bit when the Treasury Department accidentally published a press release (more on that next).
Next, there’s Russia’s invasion of Ukraine and the concerns that cryptocurrency will be used to circumvent the sanctions levied on the Russian government. Although scrutiny in this area continues, the crypto market seems relatively unfazed, despite the fact that it could result in a regulatory crackdown in some jurisdictions.
Then there’s the news that regulators in the European Union are looking to apply the travel rule to every single crypto transaction. This would require everyone to report the counterparties in crypto transactions above a certain amount (in this case 1000 EUR) to authorities for tax purposes. This is eerily similar to provisions in the infrastructure bill, but markets didn’t budge.
As a cherry on top, we had the SEC recently come out and reject two more spot Bitcoin ETF applications. This is significant because the approval of a spot Bitcoin ETF would have a direct effect on the price of BTC, unlike the Bitcoin futures ETFs we have now. Historically, SEC rejections of spot Bitcoin ETF applications have resulted in a dip, but not this time around.
This begs the question of why these events that were previously devastating to the crypto market are having next to no effect today. The most likely reason is that all the run-of-the-mill retail investors have already sold, so the FUD has next to no effect. There also hasn’t been that much interest in the crypto market in general, so these headlines aren’t getting much attention.
There’s another possibility however, and that’s that the crypto market is at a sort of crossroads because of the narrative around BTC. First BTC was seen as a risk-on asset correlated to the stock market. Then BTC was seen as an inflation hedge similar to gold. Now we’re seeing the narrative of BTC as uncensorable money emerge. So which one is it? Or could it be all three?
I guess we’re about to find out…
🧐 Executive Order 🧐
This week, we saw that long awaited Executive Order finally issued. This had many people on the edge of their seats about what could be included, especially in the context of what was happening at the time (Russian sanctions etc).
However, thanks to an initial leak of a statement from the Treasury, we got a glimpse into the tone it would be taking. An Executive Order that would attempt to foster innovation in the space while maintaining investor protection.
When it was finally issued the day after, many in the space (including me) not only breathed a sigh of relief but were also pleasantly surprised. That’s because the tone that was set the previous day by Yellen’s leaked press release was carried through with the Executive Order.
While there were still concerns about crypto being used for illicit purposes without sufficient oversight, Biden did say the rise of cryptocurrencies was “an opportunity to reinforce American leadership in the global financial system and at the technological frontier.”
There was quite a bit to cover in the EO, but here are some of the most important points:
- No Bans or Regulations: Contrary to the FUD, there were no bans or knee-jerk reactions to curtail crypto use and adoption. In fact, the EO was specific in that more research was required in order to better craft regulations. Regulations that could still foster innovation, as well as protect investors.
- No new government bodies: Something else that was rumoured to be in the works was a specific agency that would craft crypto legislation. This does not appear to be the case. However, there was a directive for federal agencies, such as the Federal Trade Commission, the SEC and the CFTC to coordinate their efforts with respect to their oversight of the crypto industry.
- R&D on CBDCs: The EO did state that research on a US CBDC is encouraged with “the highest urgency”. This was on the back of the acknowledgement that over 100 other countries are already looking into CBDCs. More specifically, the EO will ask the Fed, as well as any other relevant agencies or departments within the federal government, to look at the possible risks of a CBDC, in addition to the possible benefits.
But, what is most important about this Executive Order for me is the fact that it shows how thinking has evolved within the administration. Biden has not been the most pro-crypto White House by any stretch of the imagination and the fact that even he now realises the importance of crypto innovation is telling.
As Kristin Smith of the Blockchain association said in a recent post, this is a major milestone for the industry in the United States. Jerry Brito of CoinCenter also said that the EO shows that the Federal government recognises cryptocurrency as a “legitimate, serious, and important part of the economy and society, and I think it’s a good signal to serious people who’ve been holding back from getting involved”.
It’s of course in no small part thanks to individuals like Kristin and Jerry and their organisations who have been standing up for the industry in Washington. From the big battles over the infrastructure bill provision last year, to this relatively positive Executive Order.
There are of course also those pro-crypto politicians who have been standing up for the industry since last year. These include the likes of Tom Emmer, Pat Toomey and Cynthia Lummis, to name but a few.
While this is a victory for the crypto industry, our work is not done. There are still anti-crypto zealots who seek to hinder our progress. There are still countries that have yet to appreciate the value that this technology brings. But, if we can make the case for crypto as well as the above have done in the US, then crypto really is unstoppable.
🔐 Code is Law (sort of) 🔐
Yesterday I was reading through the crypto news and I came across an interesting article by CoinDesk about a pending governance proposal on Juno, a smart contract-focused project in the Cosmos ecosystem. This governance proposal seeks to take cryptocurrency away from the largest JUNO holder. There’s a lot to unpack here, but let’s start by explaining how we got to this point.
Most projects in the Cosmos ecosystem do an airdrop to get their coins out. These airdrops typically go to ATOM holders, ATOM stakers, and/or liquidity providers on the Osmosis DEX. It’s believed that someone was able to game the airdrop process for JUNO using multiple wallets and got a whopping 3.1 million JUNO. For reference, they were supposed to get 50,000 JUNO.
Naturally, the Juno community is pretty pissed off, and governance Proposal 16 (which concludes in 2 days and is currently passing) seeks to reduce ‘the gamer’s’ JUNO holdings to 50k. The excess JUNO will be sent to the community pool. The rationale for doing this is not just out of fairness, but of security - the gamer holds a significant amount of voting and staking power.
The obvious concern here is that this will set a dangerous precedent for crypto projects with on-chain governance. Basically, it will send a signal that it’s okay for the community to come together and vote to take away someone else’s cryptocurrency (or worse). This is similar to the controversial Polkadot proposal from September 2020 to forgive a slashed Polkadot validator.
What’s funny is that the controversial Polkadot proposal ended up passing, yet we didn’t suddenly see every crypto with on-chain governance begin forgiving slashed validators via vote. As such, it’s unlikely that the Juno proposal will have any significant impact on how other ecosystems operate, and it probably won’t even set a precedent for Juno’s ecosystems.
What the Juno proposal does do is reveal how careful this industry has to be with cryptocurrency governance. Given the circumstances of this situation, I reckon the Juno community made the right call. However, some would argue that crypto code is law. All ‘the gamer’ did was take advantage of what he/she would probably say was a poorly-designed airdrop mechanism.
This debate ultimately boils down to whether the end justifies the means or if the means justify the end. I’m no philosopher, but I’ve lived long enough to know that the answer is a bit of both. Context matters a lot, but so does precedent. From where I’m standing, the dangerous precedent is not the action of taking away someone else’s crypto, but the ability to do so in the first place.
This is significant because the ESG crowd is obsessed with the governance component of cryptocurrency. How long before regulators demand that crypto communities vote to remove certain tokens, protocols, or even people from the blockchain itself? That’s the real risk I see here, and it seems to be a risk that the Bitcoin community has been aware of since the start.
🔥 Deal of The Week 🔥
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🔮 Video Pipeline 🔮
- Thorchain update: All you need to know!
- Cosmos tutorial and hot ecosystem projects
- Fractional NFTs: Why You Shouldn’t Touch Them!
- Fantom Update: What you need to know!
- Cryptocurrencies that will survive the bear market
- How to tell when a crypto is dead?
🏆 What's New At CoinBureau.com This Week? 🏆
✅ Exodus Wallet Review: Everything You Need to Know
✅ Trust Wallet Review: Complete Wallet Overview
✅ SundaeSwap: Decentralized Finance on Cardano
✅ OKX Exchange: Complete Rebranding Overview
That’s all for this week guys. As always I would like to thank you for supporting the Bureau - it is this support that allows us to beaver away everyday and create the best crypto content we can!
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.