Central Bankers Control Politicians: Here’s how!

The term ‘bond vigilante’ may conjure images of the next film in the 007 franchise, but in actual fact it’s rather more consequential (sorry James). Bond vigilantes exert a great deal more control over our daily lives than almost anyone realises.

The term refers to large holders of government bonds (i.e. debt) who could sell said bonds in order to put pressure on the government in question. So for example, a country’s central bank could sell, or hint that it might sell, some of the bonds it holds if it’s unhappy with a particular policy coming from that country’s government. This can be a highly effective strategy, as selling bonds generally causes a rise in interest rates, which governments usually don’t want to see.

As a result, governments and politicians often find themselves beholden to, or at the mercy of, bond vigilantes such as central banks and pension funds. This gives the bond vigilantes an enormous amount of power and they are believed to have recently been wielding that power in several countries.

In today’s video, we unpack what’s been going on with bond vigilantes and look at why their recent shenanigans could mean there’s some serious trouble ahead. We explain why bond vigilantes are so powerful, where they’ve been operating of late and why everyone should be paying close attention to what happens in the bond markets over the next few months.

You can watch that video here.

📈 Crypto Market Forecast 📈

It’s been a stormy week in the crypto market, and the rain could continue for a while. This, as always, ultimately depends on what happens with the macro and crypto factors that have been moving the markets. On the macro front, the Fed’s interest rate policy has been front and centre, and the CPI for June (which comes out this Thursday) will likely cause quite a bit of volatility.

The same could happen if president Joe Biden bows out or even steps down. To clarify, these are two different things. The former would involve Biden no longer running for reelection later this year, whereas the latter would involve Biden actually stepping down as president. Predictions markets are starting to price in the possibility of the latter, which could likewise cause market volatility.

It’s not just US politics that could cause market volatility either. If you watched today’s video, you’ll know that there's a possibility that the UK’s new Labour government could run into the same bond market issues Liz Truss did after she became prime minister in 2022. Basically, bond investors could sell to protest against Labour’s fiscal policies, forcing the Bank of England to intervene and stimulate.

Make no mistake, this would be incredibly bullish for crypto, as it would result in an increase in net liquidity (global supply of money). The same is true if French bond markets protest after today’s election. This would likewise require central bank intervention and increase global money supply. You may have heard that the Bank of Japan is on the ropes as well.

When it comes to crypto-specific factors meanwhile, the one on everyone’s lips is the return of BTC to Mt. Gox creditors. Given that these creditors are up almost 100x since 2014, when Mt. Gox collapsed, it’s likely that many of them will sell. Although Mt. Gox has already begun distributing this BTC to claimants, it could reportedly take weeks for them to actually claim this BTC and sell.

This is certainly good news for BTC, but unfortunately altcoins seem to be facing their fair share of hurdles. Some of you might recall that the CFTC recently began investigating Jump Crypto. This could be bearish for SOL and Solana killers, as Jump has been involved in both. The fact that Jump Crypto’s CEO recently resigned suggests the investigation is serious.

Similarly, there are rumours that the SEC is now investigating crypto VC firms. This could be bearish for altcoins more broadly, as crypto VCs have their hands in almost every crypto project. Some would argue this scrutiny is long overdue given how much crypto VCs have been dumping on retail. Even so, this could have downstream effects on select altcoins.

Finally we have the elephant in the room, which is the unstoppable US stock market. It’s possible that last week’s all-time highs for the S&P and Nasdaq were the local top. This is likely if Biden steps down as president. That’s because it would create lots of uncertainty for investors. The same could happen if this week’s CPI print comes in higher than expected - more rate hikes.

It’s safe to say it’s going to be another exciting week!

💸 Crypto Marketing 💸

Polkadot, one of the star projects from the previous cycle, was the subject of discussion all over Crypto X this week.

This was ironic, since Polkadot went viral due to discussions about the project’s poor marketing spend. In other words, it went viral for not being viral enough.

The discussions come after the Polkadot Treasury published its mid-year financial report for H1 2024. Notably, the report revealed that the Treasury spent a total of $87 million in H1 2024, of which the largest spend (approx. 42%) was on “Outreach.”

If you don’t know what ‘outreach’ means, it simply refers to all the money spent on attracting new users, developers, and businesses to the Polkadot ecosystem. This includes money spent on marketing campaigns, influencers, sponsorship deals and crypto events.

For context, the Polkadot Treasury’s total spending in H1 2024 is almost three times (in USD terms) what it spent in the entirety of 2023. Additionally, out of all categories of spending, outreach saw the largest growth, going from roughly $8 million in 2023 to over $37 million in just the first half of 2024. That’s almost a 4x increase (so far) in money spent on outreach last year and we’re only halfway through this one.

Given this huge increase in outreach spending, one would expect the project to have onboarded a significant number of new users this year. But, as web3 marketer Stacy Muur points out, the Polkadot network instead saw a 14% decrease in the daily active users, a 59% decrease in new accounts and only a 15% increase in DOT holders.

Maybe the money instead helped boost the morale of existing holders?

Well, as data from Coinmarketcap shows, that doesn’t seem to be the case either. Specifically, besides a brief rally in March, the price of DOT has been trending downwards consistently. In fact, it’s currently trading at a price last seen in November 2023.

This clearly shows that money did nothing to boost the Polkadot ecosystem. That said, as some Polkadot community members have argued, the bigger part of this spend was for long-term commitments. These include platform integrations, media campaigns and even $9 million paid towards a marketing partnership with Inter Miami FC for the next year and a half. This has led some to argue that we are yet to see the real benefits of the Polkadot Treasury’s latest marketing spend.

While this may or may not be true, we think there’s a more fundamental problem at play here.

To be specific, we believe most of Polkadot’s lack of traction can be attributed to a ‘product’ issue rather than a ‘marketing’ issue.

Irrespective of how much money gets thrown towards outreach, we believe their results will only be effective if there are enough projects within the ecosystem to retain users.

For instance, along with an increase in expenditure, the H1 2024 report also revealed that the Polkadot Treasury’s income for H1 2024 was a mere 39,444 DOT. Notably, this is an 87.4% decrease compared to the 313,443 DOT in income received by the Polkadot Treasury in H2 2023.

The reason for this large difference in income is that H2 2023 saw the “inscriptions” craze trigger significant on-chain activity within the Polkadot ecosystem. This demonstrates the need for projects driving reliable and consistent activity.

However, this ability to retain useful projects within its ecosystem appears to be exactly where Polkadot is lacking.

For instance, Manta Network founder Victor Ji and Moonwell contributor Luke have both spoken out about the lack of support provided by Parity Technologies (the developer of Polkadot) when it comes to building protocols on top of Polkadot. The primary criticism seems to be a fundamental lack of ‘usability.’ Interestingly, similar sentiments have also been voiced by users of Polkadot. As one user points out, “You could do NOTHING on the chains other than stake.”

These concerns only become more pressing, especially when you realise that the Polkadot Treasury has just over $245 million worth of DOT tokens left for spending. Some estimates show that this gives them roughly two years before the Treasury runs out.

The sad irony in all this is that, since July 2023, all spending decisions relating to the Polkadot Treasury have been made collectively by DOT holders, without any intermediary bodies. This means that said DOT holders, who were the most enraged at the recent financial report, have been the ones recklessly approving these spending decisions all along.

🔥 Hot Deal of The Week 🔥

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🔮 Video Pipeline 🔮

* Crypto VC’s: What they are buying!
* Coinbase Report: The current state of the market!
* Cantillon Effect: Who’s profiting from the money printer?
* BRICs CBDC: Update on this new potential currency!
 
🏆 What's New at CoinBureau.com This Week? 🏆

* Bitcoin And Stock Market Correlation: An Empirical Study
* Aave Review 2024: Decentralized Lending Platform
* The Top 5 Privacy Coins of 2024
* The Open Network Review: Deep Dive into TON's Capabilities

📖 Quote of the Week 📖

There’s no question that the crypto market is currently going through a rough patch. But, over time, crypto has proven resilient, time after time. Short-term movements are a great way to separate the believers from the rest. From the impatient to the patient. From the weak to the strong.  

“Ask yourself this question: ‘Will this matter a year from now?” - Richard Carlson

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.