World Economy at a Turning Point: Report Reveals All

If you’ve had the sense recently that everything seems to be coming to a head in the world, then don’t worry, you’re not alone. It’s increasingly beginning to feel like we’re approaching a crossroads in history.

On the bad side, this means we could see some serious societal upheaval over the next few years, as debt, inflation and deglobalisation conspire to turn the world upside down. On a more positive note, this reshaping of the global order, coupled with the productivity gains from new technologies like AI, could eventually usher in a new era of equality and prosperity.

One of the entities with unrivalled insight into the economic currents swirling beneath the surface is the Bank for International Settlements or BIS - the bank for central banks. It recently published its annual report on the state of the world economy and its findings do indeed suggest that something big is lurking just over the horizon.

In today’s video, we break down the BIS’s monster of a report and give you the key takeaways from it. We look at the problems that are keeping the BIS’s boffins up at night, the things they think may get us out of the hole we’re currently in and what else they’re cooking up for all of us.

You can watch that video here.

📈 Crypto Market Forecast 📈

It looks like crypto could finally be in for a somewhat calm week. This is because there don’t seem to be any obvious crypto or macro factors that could move the markets (besides leverage, of course). On the macro side, there’s really nothing coming up, at least in terms of economic data. The only thing to watch for there is the weekly jobless claims, which come out on Thursday.

Obviously, another big macro factor that everyone is watching is the risk of additional escalation in the Middle East. So far though, these concerns seem to be overblown. That’s simply because the oil market has remained relatively calm. It stands to reason that if the risks of escalation were serious, then oil prices would be spiking just like they were back in the spring.

A less obvious macro factor that’s been emerging is the yen. The Bank of Japan raised interest rates for the second time in decades last week. This has caused the yen to rally, which has likely put pressure on assets everywhere, as investors have been borrowing yen to buy other assets. Yen going up makes these yen debts more expensive, causing the forced sales of other assets.

You can refer to this video if you want more info about that.

On the crypto side meanwhile, it seems everyone missed the news that the SEC is no longer looking to label cryptos as securities in its lawsuit against Binance. This is incredibly bullish for altcoins, as it suggests the SEC’s regulatory scrutiny is being scaled back. It’s safe to say that this is happening for political reasons, and foreshadows additional crypto support from the Democrats.

Specifically, it foreshadows the possibility that Kamala Harris’ campaign will feature its own pro-crypto stance. This is reportedly in the works already, with the Harris campaign reaching out to key players in the crypto industry. If these rumours materialise into actions, then November could be bullish for crypto regardless of who wins. This would be the most optimal scenario.

On that note, one of the crypto companies the Harris campaign reached out to was reportedly USDC issuer Circle. You may recall that Circle is looking to list its stock on exchanges later this year. The fact that Circle’s private valuation has been popping up in the news lately may not be a coincidence. It may be a way of testing the waters before an IPO, but probably not this week.

Speaking of which, it’s easy to forget that Tether has been helping support the crypto market for over a year now. To refresh your memory, the stablecoin issuer promised to use a portion of its profits from its enormous USDT reserves to buy BTC. Tether’s latest attestation revealed a record-breaking profit of over $5.2 billion in the first half of 2024. That’s a lot of BTC buys.

At the same time, the spot Bitcoin ETFs continue to see modest albeit suppressed inflows. It really seems like the only selling pressure has been coming from large entities like the German government and possibly the US government (which moved two billion in BTC last week). By contrast, Mt. Gox creditors seem to have been HODLing, which is certainly a good sign.

In sum then, the crypto market is likely to keep chopping for the next week, unless we get a bullish or bearish surprise of some kind.


💰 Booming BTCFi 💰

A close look at fundraising data will show that venture capital firms and angel investors have been pouring serious cash into companies and teams building applications/programming layers for the industry’s genesis chain – Bitcoin.

From a numbers standpoint, this makes sense – BTC, the native asset of the Bitcoin network, is the largest asset of the entire crypto market with a market capitalisation of $1.2 trillion (roughly accounting for 55% of the total cryptocurrency market cap). It’s common sense that innovation follows the money.

However, what’s interesting is that this common sense didn’t seem to apply until recently. In fact, any perversion (aka innovation) of Bitcoin’s ‘original’ design was heavily frowned upon and debated. This is why major upgrades to the network such as SegWit and Taproot have been intensely debated (remember the Blocksize Wars?) and have taken years to implement.

That said, over 80% of all investments made towards the development of the Bitcoin ecosystem have come over the past year-and-a-half. Despite its history, more developers appear to be willing to innovate on Bitcoin recently.

What brought about this change?

Well, a myriad of factors have coalesced to bring about Bitcoin’s current state of affairs. To keep it simple, we’ve decided to broadly group them under three main developments.

The first is what we describe as a growing realisation of Bitcoin’s fragility. You see, with every halving that passes, network participants have become increasingly aware of a core problem present in Bitcoin’s existing security model – something we’ve spoken about in detail in a previous issue of this newsletter.

The TLDR is that Bitcoin’s halving mechanism results in the BTC rewards given to miners for securing the Bitcoin network dropping consistently as time goes on, while the value of the network being secured is expected to simultaneously increase. In layman's terms, less money for more impactful work over time.

This means that miners cannot depend purely on BTC block rewards to remain profitable in the long term. One of the most viable paths that the network can take to combat this problem is to subsidise the decreasing coinbase rewards with an increase in transaction fees earned by miners.

In fact, Bitcoin founder Satoshi Nakamoto foresaw this future. You’ll find evidence of this in the Bitcoin whitepaper, as well as in statements made by Satoshi on the Bitcointalk forum. Satoshi believed the revenue from transaction fees would become the main compensation for miners 20 years after Bitcoin’s genesis. Given how we’re almost at year 15, some of the smarter builders in the space are preparing to lay the first roads leading toward the inevitable future.

The second development is that recent product launches have acted as viable proofs of concept for the potential demand for ‘financialised’ Bitcoin. You see, over the past two years, we’ve seen the launch of several sub-asset metalayers for the Bitcoin ecosystem. These include protocols such as Ordinals, BRC-20s, TRAC, and Runes. The innovations introduced by these protocols allow users to mimic the trading of fungible (i.e., similar to ERC-20s) and non-fungible assets (i.e., similar to NFTs on Ethereum) on the Bitcoin layer 1 network.

These products saw significant demand, along with a rise in network activity for a few months after their launch. For instance, the average daily sales volume of Bitcoin Ordinals briefly surpassed Ethereum in March. A Dune Dashboard by CryptoKoryo also shows that Runes-related transactions accounted for a significant portion of all transactions on the Bitcoin network for two months after launch.

While the demand for these primitives was not sustained, builders understood this was merely a fragmentation and UX problem, and were able to glimpse the bigger picture. One where ancient BTC whales are finally free to use their BTC holdings natively on-chain.

This brings us to our third development - the weakening of Bitcoin’s Old Guard and the rise of new innovators.

You see, the launch of Bitcoin ETFs and the subsequent discussions of BTC being made a strategic reserve asset for the largest nation states has strengthened its position as ‘digital gold.’ This means that Bitcoin-based financial products offered by TradFi incumbents will eventually be the norm for investing in Bitcoin. However, as former BitMEX CEO Arthur Hayes notes in a recent article, the rising popularity of these TradFi products such as spot Bitcoin ETFs will result in a future where these TradFi incumbents hold most of the Bitcoin in circulation.

This also means that most of this Bitcoin will rarely move on chain. This has resulted in the Old Guard, who are aware of the inherent security problem with the Bitcoin network, softening their previous resistance towards the on-chain financialisation of it.

Coincidentally, this has strengthened the voices of new-generation Bitcoiners – ones who have grown up enjoying the flexibility provided by smart contract blockchains such as Ethereum. This new generation of Bitcoiners includes proponents such as Punk3700 and Udi Wertheimer who have made significant contributions towards proposing basic smart contract capabilities for the Bitcoin layer 1.

That said, there’s no doubt BTCFi will be one of the more serious categories of development this cycle. Some of the more significant BTCFi projects that are spearheading this movement include Babylon (a BTC staking protocol); Nubit (a Bitcoin-native Data Availability Layer); Lombard (Liquid staked BTC), and Build On Bitcoin (a hybrid L2 that combines the security of Bitcoin with the versatility of Ethereum).

The effects of these new protocols on Bitcoin over the coming months and years will be fascinating to see. And, could they present an existential threat to some of the other crypto projects out there?

🔥 Hot Deal of The Week 🔥

It’s been a really rough week for crypto. However, some would say that when “there is blood in the streets”, it could be an opportunity for some bargain altcoin deals. So, if you are looking to pick up some alts, you’ll probably be looking for a top-notch exchange to make those moves.

Serious traders will understand the value of trading fee discounts and bonuses. These can really impact your profit over the course of a market cycle. Therefore, you might want to look at BloFin, it is a new exchange we have stumbled across and have been able to negotiate the best deal we’ve ever been able to at an exchange!

At BloFin you can get up to a $100k bonus and an exclusive 70% trading fee discount!

Give Blofin a try and secure that deal!


🔮 Video Pipeline 🔮

* Top Solana Projects: Which should you have on your radar?
* CoinGecko Report: Crypto outlook for 2024!
* Government Debt: How it could impact us all?
* Coinbase Earnings: What these signal for the crypto markets?
 
🏆 What's New at CoinBureau.com This Week? 🏆

* BloFin Earn Review 2024: Exploring BloFin's Staking Features
* Top Secret Network Wallets: Your Guide to Privacy and Security
* Ledger Flex Review 2024: Top Choice for Digital Asset Security?
* Beyond Ledger and Trezor: Top Seedless Wallets of 2024

📖 Quote of the Week 📖

The past few months have been challenging for the crypto market. Just when we think things could be turning, the macro gods throw up new variables to knock us off track. But, always remember that in crypto, time rewards those who persevere.

“Success seems to be largely a matter of hanging on after others have let go.” - William Feather

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.