This is Why Everything is SO Expensive! 💸

It’s inflation, right? That’s why everything costs so damn much these days: governments and central banks have printed money to keep their heads above water, the value of fiat shitcoins has tumbled and prices have risen faster than wages. Case closed.

Well, up to a point. Inflation certainly has been devastating for all but the very wealthy and, in truth, even they are feeling its effects. However, to say that inflation and currency devaluation are to blame for all our money-related woes is over-simplifying things. There is a whole lot more to this story.

Did you know, for example, why Nigeria’s shattered economy helps illustrate how poorly prepared we are for the future? How Nvidia’s surging share price points to a whole heap of trouble down the line? Or how we’d all better pray to our Lord Satoshi that Canada’s housing market holds up?

In today’s video, we examine the root causes of the precipitous increase in the cost of living, which has made so many people feel like they’re running just to stand still. We delve into the supply and demand dynamics that underpin inflation and look at how fragile the world we live in really is. And, as matters look to get even worse before they get better, we show you some steps you can take to try and escape the rising tide.

You can watch that video here.

📈 Crypto Market Forecast 📈

It’s been a wild week in the crypto market, and that’s mainly because of crypto-specific factors, particularly the approval of the spot Ethereum ETFs. The coming week could be similarly wild, as there are many more crypto factors on the horizon. There’s also one macro factor to keep in mind, though it may not move the crypto market as much, given that it’s not as significant.

Starting with crypto factors then, the biggest ones to watch out for are potential lawsuits against Uniswap and/or Consensys by the SEC. This is because Uniswap recently responded to the SEC’s Wells Notice. Historically, the SEC has sued in 80% of Well Notice cases, regardless of the response. The SEC needs time to review and decide how to proceed, so it may be a few days before any further action is taken.

In theory, the recent politicisation of crypto could protect Uniswap and/or Consensys from being sued. The catch is that this politicisation only seems to be coming from politicians. SEC chairman Gary Gensler doesn’t look like he’s backing down. This is likely also the case for Gurbir Grewal, the equally anti-crypto character who’s in charge of the SEC’s enforcement division.

Speaking of politicians, you may have heard that the House recently passed a pro-crypto bill. The bill is pro-crypto because it basically gives the CFTC more authority over the crypto market, and the CFTC is perceived to be more crypto-friendly than the SEC. Unfortunately, it could be months before the bill is voted on by the Senate, and there’s no guarantee it will pass.

On the flipside, it’s looking likely that president Joe Biden will sign the recent resolution that was passed by US politicians. To clarify, the resolution and the pro-crypto bill are two separate things. Whereas the crypto bill could take months to pass, the resolution already has. All that’s left is for Biden to sign it. Having said that he would veto, it's believed he could now approve - bullish.

On the crypto-specific front meanwhile, Solana will be undergoing a much-needed upgrade this week that will alleviate the congestion issues it’s been experiencing due to the memecoin craze. Considering the recent approval of the spot Ethereum ETFs, there is likely to be increased speculation that Solana is next. The upcoming upgrade could add fuel to that speculative fire.

Similarly, the London Stock Exchange’s listing of Bitcoin and Ethereum ETPs this week could further bolster inflows for both BTC and ETH, lifting the rest of the crypto market along with them. However, as we’ve seen with the Hong Kong ETFs, approvals do not guarantee inflows. The caveat in this case is that the UK is more similar to the US, and London is a bigger financial hub than Hong Kong. Let's hope the Brits are bullish on BTC.

On that note, another key development to watch for relates to the EU’s upcoming stablecoin regulations, which are set to go into force at the end of June, specifically June 30th. Some exchanges could start announcing their plans for what to do with their USDT and USDC pairs as soon as this week. Binance already confirmed it would be delisting these pairs last September.

It would make sense for exchanges to announce more specific plans one month in advance (i.e. by the end of this week), though it seems that some are not planning to make any changes just yet. These include Kraken, which recently rejected reports that it was considering delisting USDT for EU users. This could change though, and again, one month's notice would make sense.

This begs the question of what to do if you’re based in the EU and hold altcoins that only trade against the likes of USDT. The answer is that you need to contact the exchanges you’re using to ask them whether they plan on replacing these USDT pairs with, say, EUR pairs. Unfortunately, DEXes may not be an option as the EU is planning to regulate those too.

With a bit of luck, Circle’s registration in France and subsequent application for the relevant licences last year will mean that EU holders will still have access to USDC. This underscores the fact that regulatory uncertainty continues, despite the apparent clarity in some jurisdictions. Until this clarity comes, crypto may continue its volatile chop.

This ties into the macro factors. There’s only one major macro factor this week, and that’s the PCE print for April, which will be published this Friday. As most of you will know, the PCE is the Fed’s favourite inflation gauge. If it comes in hot, it could cause a small dip, and vice versa. The catch is that crypto seems to be squarely focused on regulations for now, and for good reason.

Let’s just hope China doesn’t surprise us with some kind of escalation in the South China Sea…

🧐 Low Float High FDV 🧐

'Low Float High FDV' coins have been the hot topic of discussion this week.

Crypto X has been flooded with thought pieces on the topic all week long. So, why is everyone so obsessed and should you even care?

The short answer is ‘yes’ – if you care about not becoming exit liquidity, that is.

Without discussing the low float high FDV trend, you won’t understand why every new launch has been going ‘down only’; why private market investors are the real winners, and why it’s crucial to adjust expectations on average returns from the crypto market if you’re a retail investor.

As stated before, a lot has been said on the topic already, but we’ll condense the relevance of this discussion and its key takeaways into as few words as possible.

First, what does 'low float high FDV' even mean?

Put simply, low float high FDV refers to a growing trend of new projects almost exclusively being launched with high valuations (FDV) and a low initial circulating supply (float).

A high FDV places a ceiling on the price growth for an asset relative to the overall crypto market cap in the long term. When you couple this with an aggressive token unlock schedule, it results in down only price action for the token. For post-token launch ‘market’ buyers, this means there is very little sustainable upside.

The discussion surrounding this launch model has been going on for a few months now, but it gained critical mass after Binance Research published a report last Friday titled 'Low Float & High FDV: How Did We Get Here?’.

The report highlighted that, over the last three years, the initial circulating supply of new projects at launch has been steadily decreasing. Notably, it stated that the average circulating supply on launch for new projects has fallen from 41% in 2022 to 12.3% in 2024. However, we’ll caveat that the accuracy of this analysis has been questioned by Haseeb Qureshi, the managing partner of VC firm Dragonfly Capital.

That said, the report estimated that approximately US$155B worth of tokens will be unlocked from 2024 to 2030. Without a corresponding increase in buy-side demand and capital flows, this points to substantial selling pressure.

Coincidentally, just a few hours after the Binance report, X user Flow posted a chart which showed that the price action of over 80% of the new projects that launched on Binance in the last six months was in the red.

In other words, damning evidence that more projects are now focusing on generating short-term price pumps and are thus sabotaging the long-term price potential of their native tokens.

Many have blamed different factors for this phenomenon, including an influx of private market capital, aggressive valuations, and even market pressure to list on Tier-1 centralised exchanges like Binance.

However, as noted by UpOnly podcast host Cobie in his recent substack article, the most prominent among them is private market dynamics. We encourage you to give this a read.

The TLDR is that Cobie attributes market maturation and private market trades pre-token launch as the fundamental reason for the rise in low float high FDV tokens. He explains that as the market matures, more private capital investors, such as VCs, are looking to get into crypto. This has resulted in project teams being able to raise funding at substantially higher valuations compared with a few years ago.

While these tokens sold to private market investors are technically ‘locked,’ the higher demand for private market deals results in locked tokens being traded behind the scenes with other private market investors through OTC deals using trust and legal enforcement as their guarantees.

Cobie calls this the ‘phantom market.’ This phantom market plays a huge role in the rise of low float high FDV tokens. Notably, as more phantom market trades happen pre-launch, there is more pressure on sophisticated private market participants and the team to ensure these inflated valuations are maintained post token launch. One of the easier ways to manipulate valuations is to have a low token float.

However, retail investors oblivious to this dynamic continue to ape into new tokens while solely looking at market cap and ignoring the impact FDV has on these tokens in the long term.

If that’s the case then what’s the solution?

Interestingly, some believe a growing realisation of low float high FDV dynamics among retail investors is the reason behind the recent popularity of memecoins, which are comparatively considered to be ‘fair launches’ that have all of their supply in circulation.

Does this mean ‘fair launches’ are the way to go?

Well, not really. As noted by X user Average JO, many of these ‘fair launches’ aren’t really fair. Most of these projects have their own predatory problems such as indefinite tax farms, hidden KOL rounds, and short-term pump-chasing anon teams.

Instead, a more sustainable solution would be to actively focus on changing token launch trends.

On that note, Spartan Group’s Kelvin Koh believes the optimal thing for a project to do is to modify year one vesting schedules to ensure there is enough circulating supply for price discovery. He believes there needs to be at least 20% of tokens in circulation, if not more.

However, as noted by Haseeb, the problem with this approach is that most top-tier VCs that are under SEC supervision via Rule 144a are mandated by law to have at least a one-year cliff and a multiyear vest before they get their tokens.

Axie Infinity co-founder Jihoz believes a better solution would be to increase float by concentrating on larger airdrops and other community-focused token incentive events. Impossible Finance’s Calvin, on the other hand, believes ‘node sales’ are the way to go.  Specifically, he believes node sales will encourage the formation of a long-term, committed and decentralised community.

While we can’t predict which of these solutions will gain traction, it’s become clear that a shift in the way projects will launch tokens is needed. We’ve already seen the first signs of this happening, with Binance announcing new criteria for the projects it lists.

If you want to stay ahead of the market, it’s time for you to put more thought into the projects you ape into from now on.

🔥 Hot Deal of The Week 🔥

With all this talk of ETFs and investment products, we just cannot forget the age old adage “not your keys, not your crypto”.

Self custody is vital for you to secure your generational wealth money bags. And, when it comes to holding your own keys, there is nothing that quite compares to the rock solid security of a hardware wallet. Ice cold storage for a red hot market.

So, you might want to pick up your Trezor hardware wallet up now, whilst you can and prepare for that altseason.

👉 Get your Trezor

🔮 Video Pipeline 🔮

* Retirement: How much do you actually need to quit working?
* Vanguard: Their attitudes to crypto and what it might mean for crypto?
* Sui Update: Any potential in 2024?
* Hong Kong ETFs: What they mean for the markets?

🏆 What's New at This Week? 🏆

* Beyond Worldcoin: Top Digital Identity Networks
* What Are Bitcoin Runes?
* M6 Labs Crypto Market Pulse: Assessing The Golden Year Of Airdrops
* Top 7 Solana Wallets 2024: A Home for your SOL Tokens

📖 Quote of the Week 📖

This past week was perhaps one of the most consequential in the history of our industry. That’s because it’s become incredibly clear that the winds of change are blowing through Washington and the hostility to crypto there is wavering. Let’s savour this victory, but also not forget that the fight goes on.   

“Through perseverance many people win success out of what seemed destined to be certain failure.” - Benjamin Disraeli

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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