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In This Issue:
The Fed Wants Banks To Collapse
Bitcoin Thoughts And Analysis
Legacy Markets
Venmo Is Becoming More Crypto-Friendly
Ordinals Are Still On The Rise
Bitcoin Failed In This Country
How The DeFi Market Can Be 100x Larger | Sidney Powell, Maple Finance
The Fed Wants Banks To Collapse
As per our release schedule, it is time for another episode of ‘The Fed F**ked Up Again.’
On February 14, 2023, the Federal Reserve Board attended a closed-door meeting, in which the Federal Reserve Bank of Kansas City and an oversight committee staffer briefed them on the consequences of raising interest rates. Now, two and a half months later, the public has access to the meeting's details, and the information is nothing short of shocking.
The presenters used straightforward and strong language to emphasize that the Fed's decision to continue raising rates could lead to severe consequences. The warning went beyond a general caution: it was explicitly stated that banks like SVB would collapse. More on this later.
The presentation's third slide, titled "Financial Risks Are Growing For Many Banks," warned the Fed that "as interest rates increase, banks with large market value losses could face heightened financial and risk management challenges." The slide's first statement will be discussed next.
To present a counter-argument, let's consider how the first line of the slide could be accurate while the subsequent risks persist.
Banks mainly benefit from rising interest rates through net interest margin (NIM). When rates rise, banks improve their NIM, which is the difference between the interest they earn on loans and investments and the interest they pay on deposits. Other benefits of rising rates generally include increased deposits, reduced credit risk, and a healthier balance sheet.
However, apart from NIM, none of the intended benefits have materialized, leading to the collapse of Silicon Valley Bank, Signature Bank, First Republic Bank, and potentially more. The Fed's decision-making process seems to be driven by old-fashioned thinking and a reluctance to adapt to the present situation.
The cycle repeats itself ad infinitum.
The presentation given to the Fed specifically warned about “deposit declines,” “unrealized losses” and “liquidity concerns,” the exact things we are waiting to unfold now as the Fed continues on its crusade to raise rates. SVB was named as an example well before its collapse, yet nothing was done. The Fed knew SVB would collapse and they helped it right along. Look at the slide below.
The presentation explicitly warned the Fed about "deposit declines," "unrealized losses," and "liquidity concerns"—the very issues we now face as the Fed persists in raising rates. The collapse of SVB was anticipated, yet no action was taken. The Fed knew the bank would fail but proceeded to raise rates anyway.
Despite the Fed being warned by experts, they have raised rates twice since the presentation. While I may not have all the answers to fix this problem, one potential solution is Bitcoin.
I realize this has become a common conclusion in such discussions, but I genuinely believe Bitcoin could be one of the only viable solutions. The Fed got us into this predicament and knows that raising rates will lead to more banks failing, yet they continue down this path. Experts predict that interest rates will rise by another quarter point in just a few days, with a high likelihood of this occurring. 80%.
If you care to see the full presentation, you can click the link HERE. We deserve better.
Bitcoin is better.
Bitcoin Thoughts And Analysis
Who needs a chart when you can just look at the price? $28,600. That is the same key level that we have endlessly discussed. It’s where price currently is and where price effectively closed the week.
Price is simply ranging. Nothing to see here.
Legacy Markets
US stock futures experienced a slight decline and Treasury yields dropped as investors evaluated JPMorgan Chase & Co.'s winning bid to acquire crisis-stricken lender First Republic Bank. Despite closures in many major European and Asian markets for a holiday, the S&P 500 and Nasdaq 100 showed modest drops. First Republic Bank's shares plummeted 46% in premarket trading before being halted. JPMorgan acquired around $173 billion of First Republic's loans, $30 billion of securities, and $92 billion in deposits as part of an emergency government-led intervention. This week, central banks, including the Federal Reserve, the European Central Bank, and the Reserve Bank of Australia, will announce interest rate decisions.
Here are some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 8:20 a.m. New York time
Nasdaq 100 futures fell 0.2%
Futures on the Dow Jones Industrial Average were little changed
Currencies
The Bloomberg Dollar Spot Index was little changed
The Japanese yen fell 0.4% to 136.85 per dollar
Cryptocurrencies
Bitcoin fell 2.8% to $28,527.76
Ether fell 2.5% to $1,846.24
Bonds
The yield on 10-year Treasuries advanced eight basis points to 3.50%
Commodities
West Texas Intermediate crude fell 2.1% to $75.19 a barrel
Gold futures were little changed
Venmo Is Becoming More Crypto-Friendly
Starting in May 2023, Venmo and PayPal users will be able to effortlessly transfer cryptocurrency to friends and family within the Venmo ecosystem. This development marks Venmo's boldest move in the crypto space since they first allowed users to buy, hold, and sell cryptocurrencies in 2021. Given that Venmo is primarily known for facilitating value transfers, this decision demonstrates the platform's understanding of its users and promotes the mainstream adoption of cryptocurrencies. The next logical step for Venmo could be to encourage users to make payments to merchants in the U.S. using crypto. To illustrate the impact of this new feature, here are some key statistics that highlight Venmo's significant presence in the payments industry.
More than 75 million people use Venmo, and most users are located in the U.S.
In 2021, Venmo processed $230 billion in total payment volume, a 44% increase year-on-year.
Over two million merchants accept Venmo in the U.S. as of 2021.
Ordinals Are Still On The Rise
It feels like just yesterday I mentioned that Ordinals would soon surpass one million inscriptions. Since then, the number of inscriptions has exceeded 2.5 million, and a new record was set this weekend when over 200,000 inscriptions were made in a single day. Alongside Ordinals breaking records, analytics from IntoTheBlock reveal that "the weekly average of daily Bitcoin transactions was around 396,000, its highest level since December 2017." This surge is due to Ordinals and the growing focus on text-based inscriptions, which has led to the development of a BRC-20 token standard.
Despite the concerns of Bitcoin enthusiasts who may not want to see their preferred currency associated with a new wave of low-quality tokens, it seems that nothing can stop these so-called "shitcoiners" from pursuing their goals. Whether you like them or not, it's becoming clear that Ordinals will play a significant role in the next bull market.
Bitcoin Failed In This Country
Bitcoin Magazine recently published an article discussing why Bitcoin failed in the Central African Republic (CAR). I commend them for their honest reporting on this topic, as the magazine typically advocates for Bitcoin's success. While Bitcoin can solve many problems, the CAR demonstrates that it cannot fix everything. The country is simply too poor to adopt Bitcoin, lacking the necessary infrastructure and technology for a digital currency to flourish. Moreover, a nation facing such poverty should prioritize its limited resources for essentials like food, water, and shelter rather than investing in Bitcoin. I encourage you to read this article to gain more insights and learn from this unsuccessful experiment.
How The DeFi Market Can Be 100x Larger | Sidney Powell, Maple Finance
Sidney Powell, CEO and Co-Founder of Maple Finance came to my show to to discuss how they tolenize T-bills and other assets and why he thinks DeFi can become 100 times larger than it is right now.
In this episode with Sidney, we discussed:
Maple finance
What happened with the risk appetite?
Institutional clients
FTX affect
Does DeFi mitigates the risks
DeFi Can Be 100x Larger
AI role
Tokenizing assets
Staking in the US
Lending business
Mining lending
What Celsius clients do in 2023?
Peculiarities of crypto market making
The 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.