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In This Issue:
Wall Street Has No Clue
Bitcoin Thoughts And Analysis
Legacy Markets
Australia Gets Liquidated
CBDC Anti-Surveillance State Act
Wall Street Has No Clue
Yesterday morning, a middle-aged investment banker on Wall Street made his way to his desk and sifted through the news his interns had prepared for him. At the bottom of the pile was a story labeled "potential junk."
The headline read: "Coinbase to Launch Layer 2 Solution."
Perplexed, the banker scratched his head and took a chance on opening the folder his interns had prepared. This is what he found inside.
Overview:
βκκκκ κ€κ κ κκκκκͺκ, κκ¦κ -κκ¦κκ, κΈκα―κκκ¦ακκͺ-κκͺκ€κκ€κΈκκ© κκκ κκͺκκκ κ2 κκκ€κκ κκ¦ κκͺκ€κ€κ κκ κ κ€κκΌκ κκ€κκκ€κ¦κ€ κκκκͺκ κκ¦ κ κκ3. κκκκͺκ κκκ€κκΈκ€κ€κ κ¦κ€ κκ κ κκκκ κκκκκ€κκ κκ¦κΈκκ© κκ€κΈ κκκκ© κκκ€κκΈ κκ¦κͺ κκ κ κακκ¦κκ€κ€κ κκκ€κ€κ€κκ κκκκ€κκ .β
After realizing the potential significance of the last story he had just read, our banker begrudgingly decided to clear his head by using a few eyedrops and give the overview one more chance, putting all his brainpower into understanding the implications of the news.
βBase is a secure, low-cost, developer-friendly Ethereum L2 built to bring the next billion users to web3. Start building on the Base testnet today and stay tuned for the upcoming mainnet launch.β
Feeling bewildered by the technical jargon in the story about "Coinbase launching a layer 2 solution," and not having any prior knowledge about Ethereum, L2, or the third web, our fund manager frustratingly decided to defer to the notes prepared by his interns. Perhaps they had a better understanding of what this all meant.
Intern Notes:
The latest news reveals that Coinbase is launching a new product called "Base," which is a layer 2 network built on Ethereum and powered by Optimism. This developer-friendly platform aims to onboard the next one billion users into the cryptoeconomy and supports Coinbase's mission to be the most accessible crypto platform, with the ability to serve over 110 million users and $80 billion in assets.
It is important to note that Base is not an isolated network; rather, it is a bridge within the cryptoeconomy. As it is built on Ethereum, developers from various ecosystems are encouraged to use Base and bring their innovations with them. The software will be open-source with a full commitment to decentralization.
Through Base, developers will have access to the tools necessary to create lending platforms, decentralized exchanges (DEXs), non-fungible tokens (NFTs), games, stablecoins, wallets, and other applications. The layer 2 network will be permissionless, and infrastructure will be provided for all types of applications. There will be no token, and ETH will be the base layer. The platform will be freely available, scalable, secure, and open source, much like Polygon, Optimism, and Arbitrum, combined with the Coinbase fanbase and developer army.
Additionally, there will be a Base Ecosystem Fund that supports early-stage projects. The roadmap for the mainnet is expected to be released in the coming weeks.
Our annoyed fund manager slams the folder on his desk, curses like a sailor, and accuses Coinbase of trying to replace him. Surprisingly, our banker is right for once. Coinbase is, in fact, replacing him, his fund, and his clients through the democratization and open availability of pure digital finance, all at the same time.
Of course, this story is made up, but it's not too far from the truth. The reality is that only a fraction of Wall Street actually understands what Coinbase is aiming to do with Base, and it took me, a crypto-native, a second take to understand it. However, this isn't a bad thing, and let me explain why.
We must remind ourselves that Coinbase has always prioritized being a "beginner-friendly" platform. Therefore, Coinbase will not launch anything they believe their users are incapable of using or benefiting from. Although Coinbase would love for all 110 million users to utilize Base, realistically, only a fraction of them will use it. But the majority of us will still benefit, making it a huge win-win.
I particularly like the simple motto that Base uses to describe its vision, "onchain is the new online."
Here are my takeaways from Base. First, it is a significant win for the entire industry. Coinbase will benefit from the success of Ethereum, and vice versa. Second, Coinbase has an entirely new revenue stream that we are only beginning to understand. BSC did $342 million in volume and $1.28 million in fees all within the last 24 hours. On the news of the announcement, COIN was down but eventually recovered to end the day slightly positive. Wall Street still has no idea what is coming.
Playing devil's advocate, we must consider how the SEC could interfere with Base. Although Base is smart to not release a token, it is still possible for the SEC to find an angle to claim that Base enables the creation and/or sale of securities. I'm not prepared to answer this question, but I imagine Coinbase's legal team has already considered it. Coinbase has been denied before by offering products that the SEC didn't like, and I doubt they want to make the same mistake twice. As we've learned, Coinbase is ready to go to court if need be.
Wall Street is so f**ked. Base for the win.
Bitcoin Thoughts And Analysis
Bitcoin is the same price as yesterday. And the day before. Thatβs it for now.
Legacy Markets
US stock-index futures fell while the dollar rose amid concerns over accelerating inflation in the world's largest economy, disappointing earnings, and geopolitical tensions. Contracts on the S&P 500 and Nasdaq 100 slipped at least 0.5% each, and Chinese technology stocks led a selloff in Asia. Meanwhile, European stocks rose as traders chased value-stock opportunities. Traders are awaiting the Federal Reserve's preferred measure of inflation, the Personal Consumption Expenditures Price Index, as they navigate tightening monetary conditions, but decelerating growth, sluggish corporate performance, geopolitical tensions from Russia to North Korea, and centralization of power in China all complicate the investment landscape.
In commodities, oil extended Thursday's advance, and bitcoin was on pace for its second monthly advance, breaking with stocks and other riskier assets that have slid amid renewed concern about rising interest rates.
Key events this week:
US PCE deflator, personal spending, new home sales, University of Michigan consumer sentiment, Friday
Russiaβs invasion of Ukraine hits the one-year mark, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.5% as of 6:16 a.m. New York time
Nasdaq 100 futures fell 0.9%
Futures on the Dow Jones Industrial Average fell 0.4%
The Stoxx Europe 600 was little changed
The MSCI World index fell 0.1%
Currencies
The Bloomberg Dollar Spot Index rose 0.3%
The euro was little changed at $1.0587
The British pound fell 0.1% to $1.2000
The Japanese yen fell 0.4% to 135.24 per dollar
Cryptocurrencies
Bitcoin was little changed at $23,892.48
Ether rose 0.3% to $1,649.88
Bonds
The yield on 10-year Treasuries advanced two basis points to 3.90%
Germanyβs 10-year yield was little changed at 2.47%
Britainβs 10-year yield declined one basis point to 3.58%
Commodities
West Texas Intermediate crude rose 0.5% to $75.80 a barrel
Gold futures rose 0.2% to $1,829.60 an ounce
Australia Gets Liquidated
Of all the possible liquidations that could occur this year, it was surprising to see futures traders in Australia join the ranks. Recently, Binance users in Australia who trade derivatives were taken aback when they found out that their accounts and positions had been closed without any prior warning. According to the press release, traders who used these products were not "wholesale investors," which meant they were not authorized to conduct futures trades legally in the country.
My assumption is that Binance was likely caught off guard by regulators, and so they responded with a knee-jerk reaction to their customers. Fortunately, Binance is working on compensation for users who lost money, but there's no real way to compensate a trader by closing their position. I have included Binance's official announcement below.
βBinance Australia recognizes and apologizes for the inconvenience to users. We are committed to providing users with the best customer experience while following all relevant Australian laws.
Following a review of the onboarding process for Binance Australia Derivatives, some users were identified to have incorrectly been classified as Wholesale Investors.
We have taken proactive measures to notify the affected individuals whose access to certain products may be restricted to help make sure any transition is as smooth as possible. Binance Australia Derivatives are working on a remediation and compensation plan.β
CBDC Anti-Surveillance State Act
U.S. Congressman Tom Emmer (R-MN) has been a significant advocate for defending Bitcoin and the crypto industry on Capitol Hill. Currently, Representative Emmer is in the news for introducing a new bill that would prevent the Federal Reserve from directly issuing a central bank digital currency (CBDC) - a taste of their own medicine. Dubbed the "CBDC Anti-Surveillance State Act," several representatives have already expressed their support for passing the bill. Here is an excerpt from the bill:
βExcept as specifically authorized under this Act, a Federal Reserve bank may not offer products or services directly to an individual, or maintain an account on behalf of an individual, or issue a central bank digital currency directly to an individual. The Board of Governors of the Federal Reserve System and the Federal Open Market Committee may not use any central bank digital currency to implement monetary policy.β
The bill is being seen as a response to the Federal Reserve's ongoing research into creating a CBDC, which some fear could result in an unprecedented level of government surveillance. The proposed bill would serve as a safeguard against potential government overreach and would ensure that the use of digital assets remains a matter of individual choice rather than government mandate.
Many supporters of the crypto industry are hailing this as a significant step in the right direction for the industry's future, as it shows that key policymakers are willing to stand up for the values of decentralization, individual sovereignty, and free-market principles.
TheΒ views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.