This is What The World is Planning For Crypto

Gary Gensler’s gang is even bigger than we thought. Not only does he lord it over his foot soldiers at the SEC, but he’s also the big cheese of an even more formidable cabal - one that many people may never have heard of. Ladies and gentlemen, I give you IOSCO: the International Organization of Securities Commissions.

Yes, that’s right: another international organisation that’s answerable to no one and who nobody ever voted for. Pretty much every securities and futures regulator in the world is represented here, although as with so many other big, international organisations, it’s the US that basically calls the shots.

And, also like so many other such organisations, IOSCO has it in for crypto, or, to be precise, for DeFi. It recently published a report - with the SEC’s grubby fingerprints all over it - that makes nine “recommendations” for how DeFi should be regulated. Spoiler alert: some of them are pretty damn scary. Do you hold any DAO governance tokens? Well, you might someday be getting a knock on your door from your country’s regulator. Probably nothing.

Despite all its world-changing potential, the DeFi sector is facing some stiff headwinds in the coming months and years. Tough battles lie ahead. This report of IOSCO’s shows just what DeFi is going to be up against. So, in today’s video, we break down what the report says and what these “recommendations” could mean for the future of DeFi and for crypto as a whole.

You can watch that video here.

📈 Crypto Market Forecast 📈

If all goes according to plan, this will be a historic week for crypto. Obviously, that’s because the spot Bitcoin ETF is expected to be approved by the 10th January. Given all the news about the SEC meeting with asset managers, asking for finalised applications and all that jazz, it seems like it’s now or never. In other words, it looks like a delay is off the table.

But of course, that hasn’t stopped some from speculating that the SEC would suddenly decide to delay the spot Bitcoin ETF decisions until the final deadline in March. Others believe that the SEC will even reject all the applications. Obviously, the chances of that happening are slim to none. That’s simply because the SEC would get sued and it would lose.

If you don’t understand why, remember what happened with Grayscale and the SEC.

So, let’s conform with the status quo and say that the spot Bitcoin ETF approval happens within the next 72 hours. What happens next? For starters, it’s important to remember that a spot Bitcoin ETF approval and a spot Bitcoin ETF listing are two different things. Per Bloomberg’s ETF analysts, the listings themselves could be delayed by more than a month.

In practical terms, this means that the spot Bitcoin ETF approval would effectively create a second bullish catalyst for BTC and the rest of the crypto market. It goes without saying that BTC would rally on the news of the approval. Many crypto analysts believe the news alone would be enough to push BTC up to 50k - a more than 10% pump from current prices.

But what about the actual spot Bitcoin ETF listings? This is where things get interesting. If it’s announced that the listings will happen shortly after the approval, then BTC would likely continue to pump around 50k. Notably, this would keep all of the attention on BTC, and likely result in altcoins lagging behind, as they have been over the last year, most notably ETH.

On the flipside, if it’s announced that the listings will happen more than a month after the approval, it’s hard to see how investors would remain focused on BTC for so long. In this scenario, it seems more likely that we would start to see capital flow into altcoins, particularly ETH, given that it has pending spot ETF applications of its own (with final deadlines in May).  

This begs the question of what happens once the spot Bitcoin ETFs are approved; specifically, how much they would see in the way of inflows. This is truly the multi-billion-dollar question, and it’s one that almost everyone in crypto has tried to answer, including us. The short answer is that nobody knows for sure, but estimates seem to range between $10 and 30 billion.

Before you run off and go leveraged long BTC, there’s something you need to consider, and that’s that markets are forward-looking. In plain English, today’s prices often reflect what investors believe will happen in the future. In theory, this doesn’t apply to inflows, as they haven’t happened yet. In practice though, this rule could be even more valid.

According to macro analyst Jim Bianco, when you combine the inflows that have gone into existing Bitcoin ETFs, Grayscale’s Bitcoin Trust, MicroStrategy stock and other proxy investments popular with institutions looking to get BTC exposure, the total works out to roughly the average inflows of what most analysts expect the Bitcoin ETFs to experience.

Jim underscored this statistic by saying that institutional investors aren’t just going to sit on the sidelines and wait until the spot Bitcoin ETFs list to make a profit. He firmly believes that most of these inflows have already happened by proxy, and warned that if the inflows are lacklustre, like they were for the futures Ethereum ETFs last October, it will become a sell-the-news event.

From our perspective, the inflows into the spot Bitcoin ETFs depends on two things: whether institutions see BTC as a safe haven or a risk asset, and whether the markets are in a risk-on or risk-off environment at the time the ETFs are listed. It seems that BTC is still seen as a risk asset by most, so large inflows would require accommodative conditions (lower interest rates etc.)

As it so happens, these accommodative conditions are in place. Bullish!

🐉 The Year of The Dragon 🐉

New Year, new Narrative.

That’s right folks, 2024 is the Year of the Wood Dragon, as per the Chinese Zodiac.

This is a year that signifies good fortune and success in Eastern culture. This means that many crypto investors in the Eastern hemisphere are likely to take riskier bets.

We can already picture some of you being sceptical, but many in the East believe greatly in the power of religious and cultural signs and symbols. In fact, just a couple of months ago Bloomberg published a report on Chinese stock market investors jumping into dragon-themed stocks due to their belief in the auspicious nature of the symbol.

Having said that, I should point out that this narrative is not completely driven by just symbolism. For reference, we’ve been seeing crypto projects slowly shift or expand operations and services from the West to the East over the past couple of years. These include the likes of Gemini, Bitstamp, Ripple, CME Group and Maple Finance.

This is largely due in part to the suffocating regulatory stance taken by the US, which has resulted in projects migrating to more accommodative jurisdictions such as Singapore, Hong Kong, South Korea and Japan.

China also seems to have set its sights on a more aggressive growth strategy in 2024. It appears to have set the stage for quantitative easing. Additionally, Hong Kong’s Securities and Futures Commission also recently announced that it was prepared to start accepting applications for spot crypto ETFs. This means that we could see a massive influx of interest from institutional investors in the Eastern hemisphere as well.

With all these tailwinds, it wouldn’t be far-fetched to say that the ‘Year of the Dragon’ narrative has legs. Some believe this could lead to a revival of last year’s ‘Chinese crypto’ narrative. If so, we may potentially see Chinese projects like Conflux Network, Filecoin, and Neo blockchain do well.

Others are bullish about dragon-themed projects or memecoins doing well due to the narrative. Some have even gone as far as placing bets on the portfolio companies of VCs with ‘dragon’ in their name (eg, Dragonfly Capital) doing well. Honestly, everyone just seems to be betting on Chinese investors (and the broader Asian ecosystem) being absolute degenerates.

While Japan seems to have already embraced the start of the Year of the Dragon from Jan 1st, the Chinese ‘Year of the Dragon’ only officially begins on Feb 10th.

We have no idea how this will turn out, but, as always, keep in mind that narratives are a fickle species. Sentiments can change as quickly as they appear.

Always better to be seated at a safe distance from the fire than directly in it.

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🔮 Video Pipeline 🔮

* Polygon CEO Interview: Big year for MATIC?
* ETH VS Solana: Which provides the best opportunity?
* How To Find The Next Hot Memecoin?
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📖 Quote of the Week 📖

Risk is a natural part of life and it’s an especially important concept in investing. Sure, you can sit on the sidelines concerned about potential “black swans” in the market. But, you have to also be equally comfortable forgoing some of the potential gains that could come from that. As they say, nothing ventured, nothing gained.

“The biggest risk of all is not taking one” - Mellody Hobson

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.