I know, I know, there was no forecast post this week if you don’t count my BoJ post from Tuesday. We’re still gonna call this a review anyways.
If you are a new reader, there are helpful links at the bottom of this post.
We hit a subscriber milestone so this post is free and will include a giveaway for a 1-year subscription, more information on that giveaway is in Section 5.
Table of Contents
Consensus
International Citizenship
Coinbase and the SEC
Coinbase Bermuda
HELOCs on Blockchain
The BoJ
Crypto Macro
Price Action
STX Upgrades
SUI Mainnet Launch
Conclusion
Subscription Giveaway
Internal References
1. Consensus
I attended Consensus in Austin this past week and had a great time. For those of you I met at the conference or the after-events, it was a gratifying experience on my side to hear words of appreciation. We’re always our own worst critics and I often am sitting here saying “I’m not writing enough,” and it’s nice to hear appreciation stating that I’m providing a lot of content. It means a lot, also every single one of you that said hi, or that I got to meet was incredibly based. No soyboys in the audience. This is the biggest compliment I could receive.
Let’s get on to the action. I’ll be covering some of the things I’ve learned or come across during the convention or during outside events both in here and in the Crypto Macro section, let’s start with the most useful.
International Citizenship
We’ve spoken at length here about the difficulties that being an American poses in this space. We use VPNs to get around this for platforms that don’t require an ID, but what about those that do require an ID?
We’ve all previously been locked out, but now, the tiny island country of Palau is offering digital citizenship to anyone who applies for $250/year.
I only just learned about this yesterday from someone I trust who has already gone through the process and been approved. You get a physical ID, you will have a physical address in Palau, and can use the ID to pass the KYC checks required for most online financial services. I have no idea how long this will be available for, but I am applying right now, and if this is something that would be useful for you (do you want access to Binance and not just Binance.us?), then I suggest signing up sooner rather than later. Every shortcut or by-pass gets closed up eventually. Realistically, this will work for the major CExes for probably ~1 year or less, but for minor financial services, or if you just want a physical ID and address outside of the US, this will probably work for several years.
Coinbase and the SEC
Obviously, we’ve covered how Gensler and the SEC are operating as if the US is a shithole country in prior weeks. On Thursday at Consensus, Coinbase released an official video response to the SEC prior to Coinbase’s CLO coming on stage to speak his mind on their response, etc.
The Wells notice that the SEC sent to Coinbase is not a guarantee of suit against Coinbase, but it is a notice of potential charges that may be brought against the prospective respondent. The SEC has 180 days to officially file charges against the respondent after submitting a Wells notice. Coinbase’s Wells Notice was submitted to them on March 23, which would put the deadline for charges at September 27th.
The SEC will likely struggle to effectively levy charges against Coinbase without outing themselves as having failed in their own duty. When Coinbase became publicly traded they had to jump through several hoops including the SEC approving their business model as being within the law. Meaning that the SEC reviewed Coinbase’s form S-1 filing, and approved it in 2021. The SEC could have rejected the filing which goes into detail about how the assets listed on Coinbase are selected and reviewed if they thought those assets were unregistered securities. The SEC can’t make the excuse that the technology was too new for them to accurately assess it, because as we’ve covered before, the SEC can’t make new law and can only interpret existing law as it applies in its enforcement actions. The existing law regarding the definition of a security is from the Securities and Exchange Act of 1934, and the Howey Test which is derived from a 1946 Supreme Court Case.
BUT
Coinbase’s Wells Response is fairly long, but there are still major concerns. Who watches the watchmen? Who cares if the SEC acted outside of the law? Who is going to punish them for that? Who is going to prosecute them for that? Let’s say by some miracle Congress and the Senate actually prosecute/impeach them for doing that, then what? If it’s determined that the initial approval of Coinbase’s S-1 was in violation of the law the end result is still the same. Coinbase will be forced to shut down, holders of COIN 0.00%↑ will still have to take it on the chin and the business will either be forced to wholly restructure or close their US operations.
Coinbase Bermuda
The SEC is a tyrant, but we live in a country where there is no punishment for such at the government level, and here is where we likely enter Coinbase’s true backup plan. Coinbase has secured a license to operate in Bermuda. They’re going to go overseas and focus on serving international clients and let the US market wither without them. It’s what I would do. For the time being coinbase is trying to make sure that they win in the court of public opinion by making sure the SEC is painted as the villain in a move that will ultimately impoverish Americans who own the coinbase stock and those who will lose access to Coinbase and the Coinbase wallet when the SEC ultimately wins because they operate with zero congressional oversight.
The only solution is to leave, and if in the future we have an administration and a government that becomes more friendly to blockchain it is unlikely that they or any of the other entities that get chased away will come back.
A similar story occurred in South Korea, at one time it was the country with the most crypto wallets per capita in the world. But they had a government that was extremely unfriendly to crypto and began clamping down in 2018, and matters were made worse in 2021 as the admin essentially made it almost impossible for CExes to operate in South Korea. Most CExes were chased out except for 3 with UpBit monopolizing the market. Consider my words from the March 2022 article I linked above about South Korea and the timing for such to occur in the US.
Why the focus on South Korea? This is an example of how quickly the legislative door can shut for your usage of a centralized exchange. From late 2019 to 2021 the South Korean government figured out a way to legislate rules for financial transactions that made it impossible for any centralized exchange registered to do business within the country to send assets to an anonymous crypto wallet. Just 2 years. I often say that I expect the same to come into play here in the US sometime between 2023 and 2024. For those of you that are new to crypto, consider this your period to learn while it is still relatively easy and unregulated.
It’s 2023 right now, and the writing is on the wall. Did you take the last year to learn and pull your assets on-chain? Do you have a functioning VPN, can you ambulate through Discord, find information, and participate in blockchain without needing a CEx at all? If so, great job, you’re ready. But if not, consider this your wake-up call. The centralized entities you depend on to onboard fiat will slowly withdraw or be taken down and become inaccessible. I don’t think Coinbase will get a favorable outcome from its fight against the SEC. Just like South Korea, we’ll see our national blockchain businesses and companies move overseas. The South Korean presidential election in 2022 brought in a Crypto-friendly president, and standardized regulation with tax-free operation until 2025 to give them all time to collect data and fall in line with standardized regulation, but many of those South Korean companies are in Singapore or Switzerland and they aren’t coming back. The legislative clamp-down resulted in a permanent loss of tax base and global competitiveness.
The US will get the same result.
HELOCs on Blockchain
On Wednesday I got to meet with a digital acquaintance of mine in person and learn a bit more about some of the bags he’s carrying (in crypto, everything is bag-talk). One of the projects he’s in that he’s quite happy with is called Figure. They are a blockchain-based lender that offers HELOCs (Home Equity Letter of Credit) and uses AI to approve applications within minutes while minimizing fees by removing many of the middlemen typically involved in this process. You can read a decent description of how it works here.
Figure is currently the largest non-bank home equity lender in the US and offers the lowest starting interest rate of all of the major lenders (including the banks). This sort of disruptive usage of blockchain technology is exactly the sort of world I envision will be brought to fruition.
Cut out the middlemen, use transparent code to determine what happens and how, and then allow people to interact with that code as fast as their computers will allow. What was previously a 60-day process of qualifying, contracts, and interviews has now turned into a 5-minute application, and verification process with the slowest part of the process being the wire transfer to your bank. It’s blockchain technology, but you the user don’t even know that it is, nor do you have to have a wallet.
2. The BoJ
We already covered the meat of my expectations for forward guidance for the BoJ and its impact on US treasuries in the post at the start of this week, so we’ll just discuss their meeting here.
As expected, there were no changes to the overnight rate.
Also as expected, Ueda provided comments that show he is now officially targeting inflation rates in order to justify a move upward in interest rates.
They are going to be setting inflation targets, and managing that in the same exact way that Powell was claiming to do. QE and low-interest rates until the target is reached.
Here is the exact quote from Ueda:
“But if wage growth and inflation accelerates faster than expected and warrants tightening monetary policy, the BOJ stands ready to respond such as by raising interest rates,”
As I stated at the start of the week, we will now see the BoJ being brought in line with the rest of the Western world in terms of the economic school of thought driving it. New Keynesianism will be the rule for Japan for the next 10 years.
3. Crypto Macro
Price Action
If you are new to looking at my charts, please refer to my post on Basic Technical Chart Reading to understand how and why I identify certain zones as well as some of the basic information on the chart.
We are still hanging out in between the $30,332 and $28,810 support and resistance zones. However, we are losing strength in terms of the balance of buyers vs. sellers so I don’t see us pushing up beyond $30,332 anytime soon without some odd black swan event occurring. Even things like the collapse of First Republic Bank aren’t really enough to move the needle in terms of people flying to perceived safety from bank receivership/bankruptcy. I expect instead for a new support zone to emerge around $27,338 (not marked on the chart yet) and for us to bounce around between there and $30k for the next week or two.
Please remember that as a potential debt ceiling increase gets closer and closer we also have the implied forward markets for treasuries impacting asset prices. If people expect the US Treasury to start dumping treasury bonds on the markets again as Congress allows them to issue more debt, then we will see holders of treasuries front-running this and selling their treasuries on the secondary market which will drive up the interest rates. And as interest rates get pushed up, fund managers will have to rebalance out of risk and into short/mid-term treasuries again. The threat of this occurring is likely going to keep asset prices flat/depressed once we get close to a credible bill to increase the debt limit.
You may wish to point out that the House did vote on a $1.5 trillion debt ceiling increase, but this bill will not be approved by the Senate nor by Biden. It’s a Republican bill, and on principle, the Democrat Senate and President will never sign off on it. This does mean that we will get to play in the sun and likely see another pump in asset prices when it gets rejected. To their credit, the House Republicans haven’t folded just yet and are at the moment putting forward a strong face. This means that in the near term, any chance of the debt ceiling being raised is still zero, and we may get another month or 2 to play in the sun and enjoy the rising asset prices before the other side of the storm hits.
So for the next week or two, we’ll see asset prices flat, but unless something changes at the legislative level I don’t see a reason why BTC can’t be challenging the next support level of $34,782 by the end of next month.
STX Upgrades
Time for some more Alpha from Consensus. I got the chance to speak with a rather based developer for STX named Max Efremov who gave me some alpha about the timeframe within which BTC will be able to be natively wrapped to the STX blockchain without a bridge or centralized entity.
The project will be called sBTC and will allow for Bitcoin to be transacted 1:1 to and from the STX network with each transaction secured by the entire STX network. The whitepaper is here. This will allow for DeFi with what is essentially native BTC. The timeframe for this is for the token and functionality to go live by the end of 2023, or potentially early next year.
If it functions in a safe and reliable way it will allow for the STX network to grow exponentially in TVL as it will unlock Bitcoin for use in DeFi without having to go through a centralized entity like wBTC. This is a gigantic step in security for those wishing to deploy BTC without having to give up custody of it to a centralized entity.
As usual, I’m bullish.
SUI Mainnet Launch
Another protocol worth discussing is SUI. I’ve been hearing about this one for a while but not looking into it because I just couldn’t be assed to do so. My bad.
I don’t really give a fuck at all about the technical specifications of the network in this case. TPS? Irrelevant. Everybody brags about transaction speeds of thousands, tens of thousands, or hundreds of thousands per second. I’m sure the network is plenty fast at this point.
The main reason I’m interested is because of the number of projects they have gotten to build on SUI for the main-net launch on May 3rd. Even 3 different cross-chain NFT projects I’m involved in will be launching sister projects on SUI.
The main narrative they are presenting is one centered around gas fees. Essentially the gas fee will be fixed against a $ cost. So if a transaction is $0.02, it will always be $0.02 and the amount of SUI spent on the transaction will adjust to make sure it never costs more than $0.02.
You can look through the ecosystem of projects being built on SUI here.
Whether the chain is broken or not just doesn’t matter at this point in the cycle. Hype is everything, and SUI has done a great job building hype and getting new projects to build on it. They will likely be a great mover during this next bull cycle as it rears its head in 2024 and 2025.
Solana was a broken chain, but it still pumped from $1 to over $200 on hype alone. Being a new chain during a bull cycle makes it much easier to drive narratives than being an old/existing chain.
SUI had a fixed token sale (in which US residents were not able to participate. Get a Palau ID, seriously) on Bybit, OKX, and KuCoin. The tokens were valued at $0.10 each, with users capped at 10,000 SUI, or $1,000 worth.
SUI is a dPOS (delegated Proof of Stake) chain, meaning that you can stake SUI to earn a portion of the network transaction fees that were collected and you can delegate your staked SUI to the node(s) of your choice. It’s likely that some nodes will offer rewards for staking and some may offer better APY or better security. Who knows? I can’t yet tell you as the network isn’t up yet. Or you can hold on to your SUI and use it in DeFi. One of the first dApps to launch will be a liquid staking and DEx protocol, so you should be able to deploy staked SUI into DeFi just fine.
SUI’s tokenomics can be found here.
I have yet to find information about how much of the 10,000,000,000 total SUI will be liquid at the time of the main-net launch. All that I know is that not all of it will be liquid as a portion will be vested and become liquid over time, likely for a few years.
Having a hard cap on supply is nice. I suspect that when this protocol matures (if it survives, lol) the hard cap and cyclical nature of stakers being rewarded gas fees means that it can be its own self-sustaining economy so long as the network is being used.
If you’re in the US watching from the sideline, I wouldn’t recommend buying it on day 1 when it’s available on KuCoin and a few other exchanges that we do have access to. As a US citizen, you can either use KuCoin (limited to 1-2 BTC withdrawal limit per 24 hours) with no leverage, or you can buy yourself a Palau digital ID and create an account with full access. You’re not going to be able to link your bank account to the CEx, but you can transfer in BTC or ETH that you’ve been purchasing and DCAing over the past year and use that to buy SUI.
This is one of the key reasons it’s important to DCA BTC and ETH while you are still learning. Because when you’re ready to ape into stuff it likely is going to be on CExes that US citizens have limited access to. So you can easily send 0.03 BTC or some small amount over (whatever is small to you) and acquire some tokens to then withdraw to your wallet and begin being a degen with.
As far as I’m aware, OKX and KuCoin will be the 2 CExes that will have SUI listed upon mainnet launch. Again, don’t buy it on day 1, you should observe price movement, I suspect it will at some point fall to or below its $0.10 pre-sale price by Autumn if not sooner. We’ll also get some time to watch DeFi grow and become more functional and safe in that time period as well. We should be able to time a perfect entrance before the next treasury crisis emerges and before the next Bitcoin halvening (April 2024).
4. Conclusion
I had a great time at Consensus, it was nice to meet those of you I did meet.
The SEC will likely chase Coinbase out of the US.
If you are American, consider applying for digital citizenship in Palau.
The BoJ has become a Westernized institution.
Assets will be sideways for 1-2 weeks and then line-go-up unless an unforeseen major event occurs.
Bullish STX for this winter.
Bullish SUI for the upcoming cycle.
5. Subscription Giveaway
As I stated above, we hit another subscriber milestone so I’m giving away a 1-year subscription for free. This is open to anyone who either has a paid or free subscription. The only user excluded from this is one who I accidentally comped for 8 years because my phone froze while trying to give them 1 year. A nine-year comped subscription just wouldn’t be fair to everybody else.
This will be an easy one, if you could snap your fingers and receive dual citizenship to the country of your choice, which one would you choose and why? Write your answer in the comments and I will randomly choose one of you to receive a comped subscription for 1 year.
The winner will be chosen on May 7th, so you have a whole week to comment.
6. Internal References
If you’re new and have a question, please read the FAQ post first.
If you wish to search through my entire substack, please refer to this guide post.
Please refer to the Definitions page for any terms or abbreviations that I use that you don’t understand. If a term is missing, please let me know.
The Substack app is out, consider using that instead of email or your browser.
Gotta go with Singapore, I enjoy the lifestyle, it's close enough to a lot of other countries I'd love to visit, and there's an incredible concentration of wealth there. The closer you are to wealth, the more of it you have the opportunity to grab up.
That’s an easy one, Rhodesia. Reasons: based.