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In This Issue:
The Problem With Predictions
Bitcoin Thoughts And Analysis
Legacy Markets
One-Fifth Of All Ethereum Is Staked
Jay Clayton Speaks On The Spot Bitcoin ETF
Standard Chartered Ups The Ante
Grayscale Came To Play
The Problem With Predictions
Nearly eighteen months ago, I crafted one of my favorite introductions titled, “The Knowns And Unknowns.” This piece was intended to underscore the sheer unpredictability embedded within the future of cryptocurrency. I began the newsletter with these words: “It is nearly impossible to predict what the landscape of crypto will look like in the future. Much of what we know now was a pipe dream even a year ago.”
Do you agree?
When this letter was inked, the overall market sentiment was still basking in the glory of record-breaking market highs, spurred by unbridled greed. The overarching narrative of that time hinted at MicroStrategy's impending role as the torchbearer leading a legion of corporations into the crypto realm. Simultaneously, the conjecture was that developing nations would be the pioneers in adopting a Bitcoin standard. If you possess an accurate sense of chronology, you'll realize our inability to foresee the impending ‘unknown unknowns.'
Approximately 45 days subsequent to the penning of that letter, Luna experienced a catastrophic downfall, the initial in a series of domino effects leading ultimately to FTX’s unfortunate collapse. This cascading calamity created a lingering contagion, the effects of which we are still grappling with today. The excerpt below provides a snapshot of what were considered the 'knowns,' 'unknowns,' and 'unknown unknowns' at that juncture.
To condense this into a nutshell, predictions are futile. Nobody anticipated the events of 2022 to transpire as they did, and anyone asserting to have 'known' is merely the beneficiary of a fortuitous guess.
"Geothermal vents" were the wildcard, the 'unknown unknown,' if you will. And this was merely weeks before the entire industry collapsed.
Here's the gist: if I dared to hazard a prediction about Bitcoin or the crypto scene a year from now, I'd look back at that guess with the same chuckle I have when I revisit last year's assessment. The current hopeful outlook is that an ETF will get the green light, crypto will make its mark in the 2024 election, and Coinbase will either settle or win its case. But if there's one thing crypto's shown us, it's that the hot topics a year from now will likely be totally off our current radar.
No one saw ChatGPT coming this year, and AI is just getting started – predicting what's next for crypto is anybody's guess. But even so, there are some basic truths that stay consistent year after year, which is why I keep investing despite the wild unpredictability.
The first is that crypto is always on the move, always pressing ahead. Despite some pretty heavy industry hiccups, with 2022 as the prime example, the sector keeps adapting and learning from its boo-boos. I've yet to see the Bitcoin community take any serious steps backwards.
The second is that Bitcoin keeps making a real difference in people's lives. I touched on this in the "Knowns and Unknowns" letter and I want to hammer it home again here:
The third is that Bitcoin is essential for the world. If there comes a time when I look at the current monetary system and truly believe it's doing a stellar job meeting everyone's needs, I'd happily sell my Bitcoin and call it a day. But with each passing day, that scenario seems increasingly like a pipe dream. Institutions like BlackRock are validating the belief we've clung to for years – the world needs Bitcoin.
To wrap this up, I want to toss out a challenge: jot down your own 'unknown unknowns' and revisit them in a year. This little exercise will be a stark reminder of how rapidly the industry evolves and how much we're still in the dark about what's on the horizon.
2024 will be unrecognizable compared to this year, and so it goes. That's the thrill of getting in on the ground floor with an asset like this.
Bitcoin Thoughts And Analysis
See that red range? Price has been in it for a few weeks. And there’s nothing to do. Go find a hobby, Bitcoin will likely be here when you get back.
If you are trading, you long above the range and short below - with confirmed closes, not just wicks. That’s it.
Legacy Markets
European stocks and U.S. futures experienced some fluctuations on Tuesday, as the optimism sparked by China's latest economic support measures was tempered by warnings of sustained high interest rates from policymakers.
The Stoxx Europe 600 index reduced early gains after Francois Villeroy de Galhau, a member of the Governing Council, noted that the European Central Bank is close to concluding its rate hikes, although interest rates will remain at a "high plateau" for some time. The UK's stock benchmark also fell in response to recent wage data that increases pressure on the Bank of England to continue raising rates.
Meanwhile, luxury goods makers, miners, and construction companies in Europe experienced a boost following China's announcement of measures to support its faltering real estate sector, which also hinted at more forthcoming stimulus. Notably, LVMH, L’Oreal SA, and Richemont saw stock increases, while Daimler Truck Holding AG shares jumped following a stock buyback announcement.
However, futures on the S&P 500 and Nasdaq 100 struggled to maintain gains after Federal Reserve officials emphasized the need for further tightening this year, raising concerns of a possible recession. U.S. Treasury yields fell, and the dollar declined for a third day.
Central bank officials in Europe and the U.S. suggest they're nearing a turning point in battling inflation but warn that longer-lasting high rates are necessary to ensure price stability. This presents a mixed blessing for stock investors who've had a challenging start to the second half of the year following strong gains in the first six months. Upcoming second-quarter earnings will provide further material for consideration.
In other developments, U.S. consumer-price data due Wednesday will offer more insight into the outlook for prices and interest rates, while the ECB is expected to raise rates on July 27. In the UK, wage growth data is set to impact the central bank's decision on rates in August. In Asia, equities saw a more than 1% rise, with significant gains in Hong Kong, South Korea, and Taiwan.
Iron ore, other metals, and crude oil saw increases as well due to expectations that China's stimulus measures will bolster demand. Gold prices remained relatively stable.
Key events this week:
St. Louis Fed President James Bullard speaks, Tuesday
Canada rate decision, Wednesday
Bank of England Governor Andrew Bailey speaks, Wednesday
US CPI, Wednesday
Federal Reserve issues Beige Book, Wednesday
Fed speakers include Neel Kashkari, Loretta Mester, Raphael Bostic, Wednesday
China trade, Thursday
Eurozone industrial production, Thursday
US initial jobless claims, PPI, Thursday
US University of Michigan consumer sentiment, Friday
US banks kick off earnings, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.2% as of 9:57 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average fell 0.2%
The MSCI Asia Pacific Index rose 1.1%
The MSCI Emerging Markets Index rose 1.2%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro was little changed at $1.1005
The Japanese yen rose 0.5% to 140.57 per dollar
The offshore yuan rose 0.3% to 7.2091 per dollar
The British pound rose 0.2% to $1.2887
Cryptocurrencies
Bitcoin fell 0.9% to $30,520.34
Ether fell 0.7% to $1,879.52
Bonds
The yield on 10-year Treasuries declined three basis points to 3.96%
Germany’s 10-year yield declined three basis points to 2.61%
Britain’s 10-year yield declined three basis points to 4.61%
Commodities
Brent crude rose 0.5% to $78.10 a barrel
Spot gold rose 0.6% to $1,937.33 an ounce
One-Fifth Of All Ethereum Is Staked
Out of the 120 million ETH supply, over 21 million ETH are currently staked to secure the network, backed by the efforts of approximately 657,000 validators. From April onwards, an additional 1 million ETH has been staked each month. If this trend continues, we anticipate an additional 6 million ETH to be staked by year's end. Assuming a stable supply, this will increase the total percentage of staked ETH to 22.5%. The intriguing question that emerges is investor behavior during a major Ethereum rally. Will the momentum of staking be maintained or even accelerate? Or will investors rush to cash in, leading to a sharp exit? Only time will tell.
Jay Clayton Speaks On The Spot Bitcoin ETF
Consider the potential course of crypto in the U.S. if Jay Clayton had retained his position as the SEC chairman for a few more years. Although Clayton didn't green light a spot Bitcoin ETF during his tenure, the state of the industry today might have been improved under his continued leadership.
Of course, this is pure conjecture, but with Clayton at the helm, the SEC may not have pursued such aggressive policies towards the crypto industry. It's possible that a more favorable regulatory framework might have been established, especially in comparison to the actions of the current SEC chair, Gary Gensler.
Recently, Clayton offered an encouraging perspective on the spot Bitcoin ETF in an interview. Reflecting on its potential approval, his comments on the matter were promising.
“Now we've seen a development all the way to the point where companies whose reputation in the market matters… are willing to put their name on it [Bitcoin]. The fact that we have institutions that know markets better than anybody and are willing to put their reputation behind it, I find it remarkable. The spot ETF should be approved, it’s been a while already. If the filers are right, then it would be hard to resist approving a Bitcoin ETF.”
For those keeping track, we are stuck with Gary Gensler until June 5, 2026. Fun times ahead.
Standard Chartered Ups The Ante
What catches my eye about Standard Chartered's wager is that just a quarter ago, the bank was forecasting Bitcoin to hit $100,000. Now, after only three months, they've hiked up that prediction by 20%. You might be wondering what's sparked this shift. The explanation they've given is: “Increased miner profitability per BTC mined means they can sell less while maintaining cash inflows, reducing net BTC supply and pushing BTC prices higher.”
I've got no beef with folks changing their tune, but one thing to keep an eye on during a bull run is these fresh price predictions - they can be a telltale sign that the market's getting a bit too hot. Rewind to 2017 - everyone was bandying around figures of $20k to $25k until Bitcoin punched through the $15k ceiling. Suddenly, everyone was dead sure $50k and $100k were within spitting distance. So when you hear the crowd starting to chant figures like $500k or even $1m this time around, proceed with caution.
Grayscale Came To Play
The premise is simple. Grayscale is arguing that “the 2x Bitcoin Strategy ETF is exposed to even more risks of the Bitcoin markets than Grayscale’s proposed spot Bitcoin ETP.” It's the same argument we've all been making, but now it's been formally lodged with the SEC, all decked out in legal lingo. Continuing on its current trajectory isn't a great look for the SEC unless it's keen on attracting pressure from Congress. The SEC can't keep up this stance indefinitely.
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.