The Housing Market is Collapsing - What It Means!

Once upon a time, owning your own home was something a great many people could reasonably aspire to. Sure, it usually involved hard work and a bit of sacrifice, but it wasn’t an unrealistic dream. Today, however, it is - and that’s something we should all be concerned about.

In places like the US, Canada, the UK, and Australia, the majority of young people are despairing of ever having a place they can call their own. There are many reasons for this, from rising interest rates to the sub-prime crisis and yes, the pandemic, but they all add up to a societal shift which could have dire implications further down the line.

In these circumstances, you’d imagine that the news that the housing market is in trouble would bring joy to the hearts of those shut out of it. However, the crisis that’s brewing now is set to throw up a fresh set of problems. From falling supply, to tighter lending requirements and the dreaded ‘lock-in effect’, the path to home ownership remains littered with tripwires.

In today’s video, we break down the current state of the housing market and examine what it all means for those trying to get their foot on the ladder. Will the great wealth transfer come to the rescue, or is the housing market slowly rugging us all?

You can watch that video here.

📈 Crypto Market Forecast 📈

It’s going to be an interesting week. That’s because the macro and crypto backdrops both look like they’re going to be mixed. On the macro front, the big story is the conflict between Iran and Israel, which seems to have been put on pause. What’s fascinating is that Israel reportedly agreed to end the war in Gaza within two weeks if the US struck Iran for them.

In other words, it’s possible that the escalation between Iran and Israel was part of larger negotiations, and not just with Israel. Consider that Iran is one of China’s major oil suppliers. Now, consider that the US has reportedly signed a trade deal with China. Some would say the timing is a coincidence. Others would say it’s a result of China worrying about its Iranian oil supply if the conflict between Iran and Israel had continued, something the US could have easily allowed to happen.

In any case, the key takeaway is that the tensions in the Middle East seem to have taken a U-turn, and we could be seeing something similar with the tariffs. In case you missed the news, the Trump administration is reportedly considering delaying the tariff deadline again. For context, the tariffs were supposed to be finalized by July 8-9. It’s not clear what the new date is.

The most significant pivot, however, seems to be coming from the Federal Reserve. Last week, Fed chairman Jerome Powell seemed a lot less hawkish than usual. Although he said the Fed would continue to take a wait-and-see approach, he noted that the Fed could start cutting if inflation continues to fall over the summer, and even said that the current level of rates is restrictive.

While the mainstream media claims that the subsequent drop in bond yields and the DXY was due to Trump’s rhetoric around replacing Jerome, it’s arguably clear to see that the drop happened as a result of Jerome’s dovish testimony. Then again, it could have been the softer-than-expected jobs data, the weak GDP revision, or even a combination of all the above.

Regardless of the cause, the outcome is the same - bond yields down, DXY down. Historically speaking, this is a bullish macro backdrop for crypto, because both result in an increase in global liquidity. The caveat is that it takes time for this liquidity to flow into crypto. Estimates on exactly how long this lag is vary, but it’s likely to be a few weeks at the very least.

As it so happens, this improving macro backdrop lines up perfectly with the long list of crypto catalysts we’re likely to see in the coming weeks. For starters, World Liberty Financial’s WLFI token will soon become tradable according to a recent announcement. This will increase the attention being paid to crypto for better or for worse, particularly when the protocol itself goes live.

It’s also easy to forget that the SEC is working on a temporary exemptive order that would basically make everything in crypto legal in the US for a limited time. The SEC has not specified when this exemptive order will occur, but most crypto projects are eagerly waiting for it to be enacted. Chances are, this is when we’ll see protocols like World Liberty Financial launch.

Meanwhile, in Congress, the House is expected to vote on the GENIUS Act in the coming weeks, now that it’s been passed by the Senate. Some House politicians are saying they’ll pass the GENIUS Act if it's accompanied by the CLARITY act. For reference, the House has its own competing stablecoin regulation called the STABLE Act. The CLARITY Act is for other cryptos.

At the same time, White House AI and Crypto Czar David Sacks said that the GENIUS Act will become law sometime in July, with the CLARITY becoming law by the end of September. When you combine these bullish crypto catalysts with a bullish macro backdrop, it paints a bullish picture for the summer, but there could still be another couple weeks of chop first.

That’s simply because the conflict in the Middle East could potentially restart, as could the uncertainty around the tariffs ahead of the initial July 8-9 deadline. As the saying goes, though, bull markets tend to climb a wall of worry, and the proof can be seen in the slow melt-up in stocks. It’s possible we will start to see crypto follow suit in the next couple of weeks.

🏦 Token-Equity Convergence 🏦

Over the past couple of years, there’s been a growing overlap between the digital asset and traditional finance industries. This can in part be attributed to the positive regulatory treatment of digital assets around the world, particularly in the US.

We now live in a world where spot crypto ETFs are popular financial products, and the number of publicly-listed companies adopting crypto asset treasury operations is ever-growing. For instance, in just the past month, we’ve seen more than 12 publicly-listed firms announce new plans to create some form of crypto asset treasury. These include firms like Bakkt (a crypto custody firm), ProCap BTC (a Bitcoin-native financial services firm), Aurora Mobile (a Chinese marketing company listed on the Nasdaq), Green Minerals (a Norwegian deep-sea mining firm,) and Sequans Communications (a Paris-based internet-of-things firm).

The number of corporate crypto treasury firms increases rapidly when you also include private entities. For instance, two of the most interesting private entities to announce crypto treasuries recently were Lingerie Fighting Championships (a Las Vegas-based women’s MMA league) and Paris Saint-Germain (a top-tier football club).

Of course, Strategy (formerly MicroStrategy) – a business intelligence firm led by Bitcoin bull Michael Saylor - was the first to pioneer this strategy in August 2020. Since then, the price of Strategy’s stock (MSTR) has risen from around $14 to nearly $390 at the time of writing – that’s approximately a 28x price multiple. During the same time, BTC went from roughly $11,500 to $107,000 – a 9x multiple.

On the other hand, Strategy’s primary business (providing business consulting services) only makes around $100 million in quarterly revenue, far smaller than its market capitalisation of $110 billion. That said, data from bitcointreasuries.net shows that MSTR currently trades at a mNAV of 1.7, which means that MSTR is trading at 1.7 times the current value of its BTC holdings. In other words, MSTR’s valuation has emerged to be a leveraged play on BTC itself, instead of its underlying business.

With that context, it should be easy to see why other publicly-listed firms, which have nothing to do with crypto, are suddenly being tempted to create corporate Bitcoin treasuries. On the same note, it’s also easy to understand why this rapid popularity has resulted in some well-founded scepticism among market observers.

After all, if these publicly-traded stocks are currently trading at a premium due to BTC’s recent price appreciation, wouldn’t they also trade at a discount when the price of BTC rapidly falls during a crypto bear market? Moreover, given the equity market’s tendency to avoid big price volatility, what would happen to the publicly-listed firms adopting these crypto treasury strategies? Are we in a bubble?

Well, yes and no.

Crypto research firm Presto Labs recently published a report outlining two major risks for crypto treasury firms during such a scenario – liquidation risk and activist risk.

Liquidation risk refers to a scenario in which crypto treasury firms are forced to sell their crypto holdings in an effort to meet ongoing financial obligations. This is especially relevant for any firm that finances its crypto asset acquisitions using collateralized debt. In theory, this would lead to cascading sell pressure that could effectively leave some of these firms bankrupt. Think Celsius, Genesis, and Three Arrows Capital-type cascades.

However, Presto notes that such a collateral liquidation-led cascade is unlikely to happen. They note that of the $44 billion in capital raised or pending by the 12 largest US-based publicly-listed crypto treasury firms, only 33% is debt financed. Moreover, a large portion (87%) of that 33% in debt financing is confirmed as unsecured debt. This means that there isn’t any crypto collateral at risk of liquidation.

Assuming the rest is fully collateralised by crypto treasuries, they still represent only a fraction of the total funding raised by these firms. If all things remain unchanged in the lead up to the bear market, a systemic risk from crypto treasury firms going bankrupt is unlikely.

As for activist risk, it refers to the hostile takeover of crypto treasury firms by mercenary parties looking to profit from the liquidation of these firms, especially ones that are trading at an mNAV below 1. In simpler terms, firms whose crypto treasuries are worth more than their share value. However, Presto again notes that most activist investors tend to realise gains by exiting when the NAV discount narrows. In other words, they prefer selling the stock when it goes back to being at par with NAV rather than pursuing a liquidation of the firm.  

While it’s true that crypto treasury firms will inevitably see some rough price action during the inevitable bear market, the chances of there being a systemic risk to both the equity markets and the crypto market from such a scenario are quite low.

Rather, what we expect to see in the years ahead is a continued increase in firms adopting corporate crypto treasuries. The only difference is that most of these firms will likely use their corporate treasuries to actively produce value instead of staying as price proxies or leveraged bets to spot price action in the crypto markets. This includes firms using their corporate treasuries to secure blockchain networks and earn yield. In fact, Bit Digital recently made an announcement about pursuing a dedicated Ethereum-based corporate treasury strategy to achieve the same.

Likewise, we suspect Bitcoin treasury companies could soon explore possibilities for generating yield through their BTC holdings. BitcoinFi could be a dominating narrative in future cycles. Regardless, the convergence between equity and crypto tokens is fast accelerating. Position accordingly.

🔥 Hot Deal Of The Week 🔥

It's been a volatile week, but with great volatility comes great opportunity. To take advantage of those price swings, you’ll need a great exchange!

One exchange that members of the Coin Bureau Team have been using more recently is Toobit. Over there, we have been able to secure a really special deal where you’ll get up to 100,000 USDT in welcome bonus and a fee discount up to 50% for life!

👉 Get that crazy Toobit deal whilst you can!

🔮 Video Pipeline 🔮

* RWA TradFi Web2: The race to tokenise real-world assets!
* Financial Repression: Governments are using repressive policies & the impact on us!
* The Fourth Turning: The theory of historical cycles & how this reshapes everything!
* Bretton Woods: The rise and fall of the modern monetary system…
* Crypto Trading For Beginners: Ultimate beginners guide - all you need to know!

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

* Your Ultimate Guide to the Top Crypto Exchanges in the UK
* HODL Explained: The Significance of Holding in Cryptocurrency
* Exploring Monad Crypto: A Detailed Review of Its Features and Performance
* Mining Pi Coins Made Simple: A Comprehensive Tutorial
* Comparing Crypto and Forex: Which is the Better Investment For Beginners?
* Solflare and Phantom: A Comprehensive Comparison of Crypto Wallets

📖 Quote of the Week 📖

Did the Israel-Iran FUD cause you to sell your Bitcoin or other assets? If not, congratulations, you’ve clearly been paying attention.

“In bear markets, stocks return to their rightful owners.” - JP Morgan

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.