Q1 Was Wild! What’s Coming Next?

Crypto sure did pack a lot into the first quarter of 2024. At times it felt like the whole market was in a tearing rush to reach the moon before the halving had a chance to happen. And now, breathe…

With the market having cooled during Q2, it’s a good time to take stock of the first few months of the year to help us make sense of what may lie ahead. Fortunately, a recent report by CoinGecko - one of those websites you likely spend a significant chunk of your life visiting - has done the hard work for us.

CoinGecko’s Q1 report provides an excellent digest of the first three months of this year and, in today’s video, we break it down for you and tell you what it all means. No one can know for sure what the future holds, but getting a sense of the most likely scenarios and preparing accordingly is the way to win in this market. This video will help you do just that.

You can watch it right here.

📈 Crypto Market Forecast 📈

After a few stormy weeks, it looks like the crypto market is finally in for some milder weather. That’s because there aren’t any major macro or crypto factors that could push prices around. There are just a few macro and crypto tailwinds that could support a slow grind higher, as Arthur Hayes and others are predicting.

Arthur’s thesis of this slow grind higher is rooted in the Fed’s QT tapering and the Treasury’s bond buyback program, something we forecast in last week’s newsletter. However, if you watched our video about the Bitcoin halving and its impact on BTC, you’ll know we could see a slowdown in the coming months, and the options markets seem to agree (for now).

Arthur’s thesis could still be right in the short-term though, and that’s because of those aforementioned tailwinds. The main macro tailwind is the weakening of the USD, per the DXY and declining bond yields. As some of you will know, assets tend to be inversely correlated to the USD. Weaker USD = stronger asset markets. Similarly, declining yields are bullish for risk assets, in this case altcoins.

Oil prices also appear to be softening, and some of you may have seen that the prices of other hot commodities, such as cocoa, are also starting to cool off. As most of you will know, a decline in oil prices should help bring down inflation (at least the official figures), which should in turn give the Fed room to cut - something which would be bullish for all assets.

More importantly, falling oil prices suggest that the markets think we’re unlikely to see further escalation in the Middle East, a factor that’s been weighing on crypto and stocks. The caveat is that there’s still a real risk of a re-escalation, as Israel has made it clear that it will finish its operations in Gaza regardless of any hostage deals or other negotiations.

As for the crypto tailwinds meanwhile, the biggest one is the spot Bitcoin ETF flows. As some of you may know, spot ETF outflows have accelerated recently, with BlackRock’s IBIT experiencing its first day of outflows. However, it seems that this trend is reversing, as outflows are slowing, foreshadowing a return to net inflows.

Here’s where things get interesting. Late last week, the Chinese yuan and the Russian ruble strengthened against the USD. It’s possible that this has some geopolitical significance, but it’s more probable that it’s because of the Fed’s and Treasury’s actions. Regardless, this is significant for crypto because of the strict capital controls that both countries have.

If the yuan continues to strengthen, it’s possible that the CCP will feel comfortable allowing mainland Chinese investors to get exposure to the spot Bitcoin and spot Ethereum ETFs that were recently listed in Hong Kong. Consider that the Hong Kong ETFs have already seen over 200 million dollars of inflows. That’s another tailwind (if it continues).  

Similarly, if the ruble continues to strengthen, the Russian government may walk back its plans to ban all crypto exchanges in the country on September 1st. Notably, the plans to ban crypto exchanges are part of a bill which will effectively legalise Bitcoin mining in the country. Consider that the Russian government was reportedly open to using BTC for international trade.

The caveat here is that US politicians are starting to scrutinise the use of crypto and crypto mining by enemy countries. This is something we predicted would happen as a result of Iran’s attack on Israel. Lo and behold, Elizabeth Warren (who else?) is now leading the charge for a crackdown on Iran’s Bitcoin mining operations. Note Iran is reportedly using crypto for international trade as of August 2022.  

In sum then, the crypto market is likely to see some much-needed reprieve this week thanks to macro and crypto tailwinds, but could still see some downside surprises. Whether the tailwinds are enough to cause a full-on recovery rally remains to be seen. The muted response to BlackRock’s recent bullish comments suggests investors aren’t paying attention. Perhaps that presents an opportunity…

🤔 Heroglyphs: The Decentralisation Hero? 🤔

As Ethereum endures a time of crisis, a new hero emerges.

One of Ethereum’s early star developers ‘0xMaki’ (Sushiswap’s co-founder) recently emerged from the shadows after a long hiatus to announce the launch of his newest project - Heroglyphs.

Heroglyphs is an Ethereum protocol that allows certain special users of Ethereum to leverage a particular byproduct of Ethereum’s proof of stake validation called “Graffiti.”

A Graffiti is a small piece of passive and arbitrary data element included in a block’s header. Heroglyphs allow these special Ethereum users to create and transfer things such as NFTs, memecoins, or even decentralised gaming mechanics on Graffiti. This is similar to inscriptions on Bitcoin.

I know that at first glance the project appears to be nothing more than a cheap attempt to replicate the hype surrounding Bitcoin’s Runes and Ordinals protocols on Ethereum.

However, a closer look will show you why this new project may end up playing the most pivotal role in securing Ethereum’s future. To understand how, here’s some context.

If you’ve been following the market for the past few months, you’ll know that the price of ETH has been under-performing relative to most of the market.

This has largely been due to the harsh regulatory climate for Ethereum within the United States. The country’s regulators have been going full throttle with their efforts to label ETH a security.

For instance, last week we received reports confirming that the SEC’s Director of Enforcement, Gurbir Grewal, issued an internal Formal Order on March 28th, 2023, announcing an investigation into “Ethereum 2.0.” This coincided with the moment Ethereum shifted to its proof of stake consensus mechanism.

The order authorised SEC employees and contractors to investigate and subpoena parties involved in the buying and selling of ETH. This included the entities associated with the Ethereum Foundation, and products that facilitate this process such as Metamask – the self-custodial wallet product by Consensys - and Uniswap’s decentralised exchange.

If ETH is designated as a security, the SEC will have the power to dictate the terms of how ETH interacts with the US market. This includes restricting who can buy the asset, as well as the service providers offering access to it. This spells doom for US-based developers and investors, many of whom form a significant part of the Ethereum community.

On that note, one of the primary tools being used by crypto projects such as Ethereum to fight back against a security designation is the Hinman documents.

These documents, which were released last June, are a set of emails tied to the SEC’s former director of corporation finance, William Hinman. They reveal that the SEC considers network decentralisation to be an important guideline in assessing whether or not a digital asset should be classified as a security.

This is why the role of liquid staking services such as Lido Finance and Rocket Pool within the Ethereum ecosystem has been a recurring topic of conversation among ETH holders. These service providers have had a visible effect on increasing network centralisation.

This means that, in order to lower the risk of ETH being classified as a security, we need to decrease the percentage of ETH staked with these liquid staking providers. However, education about the issue doesn’t seem to have had much effect on reducing their dominance.

This shouldn’t be too surprising considering that, for most retail investors, short-term financial gain is the only priority. Nothing moves the crypto community to action better than financial incentives after all.

This is exactly where 0xMaki’s new project Heroglyphs could completely shift things in the right direction to help secure ETH’s future as a non-security.

As explained before, Heroglyphs is an Ethereum protocol that allows certain special users of the network to create ‘inscription-based’ assets on Ethereum.

These special users are complete validators (aka solo stakers) on the Ethereum network. Currently, for users who don’t have large stacks of ETH, becoming a complete validator is less profitable than delegating to liquid staking service providers.

Heroglyphs is attempting to change that by incentivising more decentralisation on the network by aligning exclusive financial incentives for Ethereum users who run their own complete validators.

In plain terms, it will allow these solo stakers to exclusively create a new special kind of token (aka memecoins) with a specified total supply, emission schedule and initial distribution. The idea is for these exclusive tokens to become the hot new way for speculators to create memecoins. This will allow complete validators to get access to another layer of rewards for their stakes, and for being active.

Whether this gains long-term adoption is yet to be seen. However, early signs are encouraging, as we’ve already seen over $5.6M worth of ETH being spent to mint Heroglyphs since launch. We suggest you keep your eyes peeled as to how this unfolds.

🔥 Hot Deal of The Week 🔥

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🔮 Video Pipeline 🔮

* Fidelity Q1 Report: Crypto market overview for Q!!
* Kucoin Ultimate Guide: Everything you need to know!
* Financial Nihilism: What it is and the impact it is having!
* Memecoin Institutional Investors: How have they been investing in memecoins?

🏆 What's New at CoinBureau.com This Week? 🏆

* Best Avalanche Wallets: Top 7 Options for Secure AVAX Storage!
* Ethena Review: Innovative Finance Or Too Good to Be True?
* BingX Review 2024: Features, Security and Pros + Cons
* Best Base DApps 2024: Base Projects to Watch!

📖 Quote of the Week 📖

No one said it would be up only. The crypto markets are volatile and you need to have a longer-term perspective. When in doubt, zoom out.

“It’s not that I’m so smart, it’s just that I stay with problems longer” - Albert Einstein
 

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.