These Are The Biggest Crypto Whales EVER!

When Germany spooked the market recently by selling off all 50,000 of its BTC, it prompted renewed scrutiny of what other nation states are sitting on massive stacks of sats. The obvious concern is that they may be tempted to follow Germany’s example.

As it turns out, a number of other countries hold significant amounts of BTC and, in some cases, much more than Germany did before it paper-handed the whole bag. Unlike El Salvador however, which has bought its BTC transparently on the open market, these nations have in many cases (though not all) acquired their holdings by confiscating them from criminals. And, there have been rich pickings from this source.

In today’s video, we examine which countries hold the most BTC and look at how they got their hands on it. We assess the likelihood of them dumping on the market and flag up the one big reason why the may choose to join the ranks of us diamond-handed HODLers instead.

You can watch that video here.

📈 Crypto Market Forecast 📈

It looks like it’s going to be another volatile week for crypto. Tomorrow (Monday), we will find out what big investors think about Trump’s speech at the Bitcoin Conference yesterday. For context, BTC’s trading volume has been very low over the weekends. This increases volatility, which means that any big moves over the last 24 hours should be taken with a pinch of salt.

As with all major crypto and macro catalysts, it’s wise to wait until markets open before jumping to conclusions about a new bullish or bearish trend that occurred during off trading hours. Besides price action, the best way to measure how big investors in the markets are feeling is via the spot Bitcoin ETF flows, which have been flat in recent days, but could pick up as soon as tomorrow.

On that note, you may have seen that the spot Ethereum ETFs have had net outflows. If you look closely however, you’ll notice that most of these outflows have been coming from Grayscale’s Ethereum ETF, whose combination of higher fees and arbitrage is driving outflows, as it did with the spot Bitcoin ETFs. The other spot Ethereum ETFs have had modest inflows.

What this means is that large investors are definitely interested in ETH. All that’s left is for some catalyst to come that wakes up the average investor to that fact, and for the long overdue BTC-ETH rotation to begin. It looks like this could happen as soon as Wednesday, when the Fed announces its next interest rate decision. Any dovishness could be bullish for ETH and altcoins.

Similarly, if the employment figures for July come in weaker than expected this Friday, then it could likewise be bullish for ETH and altcoins. That’s because it would lead to expectations of more Fed cuts. Conversely, the Fed could come out hawkish on Wednesday and employment figures could come in stronger than expected on Friday. That would obviously be bearish.

Speaking of which, the Fed isn’t the only entity to pay attention to this week. The Treasury Department will also be publishing various documents as part of its quarterly refunding announcement (QRA) on Monday and Wednesday. For reference, the QRA is when the Treasury announces how much debt it will issue, and, as of late, how much debt it will buy back as part of its buyback program.

If the Treasury announces its going to issue more debt than investors expect (or even in different denominations to what investors expected), this could be bearish for the markets as it would result in bond market volatility (which you can watch using the MOVE index, by the way). Less than expected bond buybacks could have a similar effect on the markets.

And of course, it will be bullish if the Treasury issues less debt and/or does more bond buybacks.

But, back to politics. As you may have heard, it looks like the Democrat party in the US is lining up behind Kamala Harris as its presidential nominee. Many in the crypto community are hoping that Kamala and the Democrats will take this as an opportunity to extend an olive branch to the crypto industry. It’s possible that it could happen over the next week.

As bullish as it would be for crypto if Trump becomes president, it would be even more bullish if the crypto industry could be confident that it will be good for the markets regardless of who wins in November. In fact, this would be the most bullish outcome, and it looks like the mainstream media is pushing for it. Let’s see.

🥓  Big Fat Thesis 🥓   

Where does value accumulate in crypto?

The underlying technology stack, or the applications/companies building on top of them – which one is more valuable?

Well, if you asked anyone in crypto a few years ago, they would have told you it’s the underlying protocol. Joel Monegro, a partner at VC firm Placeholder, famously called it the ‘fat protocol thesis.’ He argued that the permissionless nature of blockchain infrastructure, combined with speculation, would always make “the market cap of the protocol grow faster than the combined value of the applications built on top.”

At the time, this was true. Even now, a few layer 1 chains have a market cap that far outweighs the combined value of their underlying protocols and applications. The primary reasons for this are network effects and limited composability.

You see, applications only build where they can find users. Up until recently, the status quo of crypto infrastructure was ‘fragmentation.’ Cross-chain and multi-chain capabilities were still conceptual and experimental. This meant that any economic liquidity captured by a particular layer 1 chain was highly sticky given the limited outlets for the capital to flow into other chains.

In such an environment, application developers relied heavily on network effects within the dominant layer 1 for bootstrapping traction for their product. This led to more development within one protocol, which in turn led to users speculating about a higher potential for future growth of the underlying protocol.

However, things have been changing this cycle.

A breakthrough in cross-chain and multi-chain capabilities has made capital outflows much cheaper, subsequently increasing competition for economic liquidity at the protocol layer. A shift from a monolithic architecture to a modular one has also optimised performance and costs of operation, making modular blockchains a better option for developers looking for specialised performance capabilities more suited to their particular application. All these factors have weakened the concentration of power previously held by protocols.

At the same time, we’ve been seeing a rise in the number of applications whose core unique selling point is a simpler user experience. These include applications that abstract complexities and reduce the steps taken to execute a particular action on the blockchain. For example, Telegram trading bots allow users to trade long-tail assets from the comfort of the messaging interface of the social media platform Telegram.

We’ve also recently seen innovation in embedded crypto applications. For example, Solana Blinks and Farcaster Frames allow developers to embed interactable blockchain applications within any existing Web2 webpage. Such embedded experiences take focus away from the base protocol layer and instead concentrate it on the application itself.

These developments have led many to claim that we’re beginning to see the revival of ‘Fat Apps.’ 

The Fat App Thesis claims that we’ll see value accrual being concentrated on the application layer of the stack, where the control of users and order flow keeps apps in a privileged position. This is the current state of tech trends in Web2 – applications like Facebook, Google, Instagram, Snapchat, TikTok and Spotify have created multi-billion dollar companies.

That said, we’d argue that we’re still quite far away from a purely ‘fat app’ approach to value accrual in crypto. The primary reason is that crypto and Web3 more broadly are still early in their technological maturation cycle – adoption has not reached its tipping point yet.

This means that, in the current four-year cycle, we’ll likely see a mix of fat apps and fat protocols driving the growth of the market. In fact, identifying whether a particular ecosystem is more ‘fat app’ or ‘fat protocol’ would allow you to predict which side would see outsized gains during the bull market.

How do you find that?

To quote Monad founder Keone Hon, “he who owns the customer captures the value.”

For instance, Ethereum is a classic example of a ‘fat protocol.’ The presence of immense economic liquidity on the network makes it an attractive choice for other players looking to leverage or borrow the benefits of the liquidity. These include staking and restaking protocols such as Eigenlayer.

On the other hand, the Cosmos ecosystem is a classic example of what a ‘fat app’ economy looks like. The success of appchains on Cosmos does not directly result in value accrual for the ATOM token. Essentially, Fat Apps are those whose demand is not inherently tethered to the underlying protocol. Another example is Pudgy Penguins – a popular NFT collection on Ethereum. The project recently announced that it was building its own chain. The primary demand for its NFTs stem from the strength of its IP instead of its association with the Ethereum blockchain

That said, fat applications and fat protocols do not necessarily exist in mutual exclusivity. For instance, Berachain, a layer 1 blockchain featuring a novel consensus mechanism called Proof-of-Liquidity, is attempting to use novel tokenomics and governance structures to redirect value accrual from the protocol layer to the application layer.

Berachain’s Head of Defi claims that the “fatness of the protocol” is determined by the “thicccness” of its applications. He calls this the Fat Bera thesis.

That said, it's clear that newer dynamics keep emerging as the crypto ecosystem attains more maturity. What trend we’ll see next cycle is anyone’s guess.

🔮 Video Pipeline 🔮

* CMC Report: How is the outlook for 2024?

* BIS Report: Startling revelations!

* Top 10 Crypto Telegram Channels: You Need to Follow These

* Top 5 Market Indicators You NEED To Know

* Toncoin Review: TON Price Predictions & Potential

* Top 5 Crypto Stocks to Watch
 
🏆 What's New at CoinBureau.com This Week? 🏆

* Ledger Stax Review: Exploring Features and Security

* Blofin Copy Trading: Simplifying Crypto Trading

* Top Yield Bearing Stablecoins: Enhance Your Crypto Portfolio

* Top NFT Marketplaces: OpenSea, Rarible and More!

📖 Quote of the Week 📖

Over a long enough period of time, fundamentals will be borne out. However, that period of time can be much longer than you anticipate.  

“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves” - Peter Lynch

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.