[ad_1]
Sign up for The Tokenist’s free daily newsletter and never miss a breaking development in macro finance.
- Looming BTC Selloffs Spoil $30k Hope: What’s Next
- Binance.US Leaves Voyager Customers Hanging
- A Decentralized Approach to Payment for Order Flow
- An Overview of the AI-Powered Investor Frenzy
- Powell’s Interview with “Zelensky”
- Bitcoin Collapses $2K+ After False Alarm Sends Traders Panicking (source)
If you took a day’s break from following crypto prices, the current water flow would seem pretty calm.
But this week — it wasn’t.
On Wednesday, Bitcoin was quickly approaching the $30k level once again.
Updates hit the news regarding another bank on the brink of trouble — First Republic (FRC).
Bitcoin’s price action responded with a sharp upward dash, just as we saw with the news of Signature and Silicon Valley banks:
With the exception of crypto-facilitating Silvergate, Bitcoin has thrived on news of US banks going under in 2023. Image credit: Trading View.
But before Wednesday came to a close, other news overshadowed Bitcoin’s upward trajectory and shot down the movement towards $30k.
This news turned out to be fake though. Well, maybe ‘premature’ is a better term.
Referencing blockchain analytics firm Arkham, DB (a well-known crypto twitter account providing alerts of market-moving news with 289k followers) was seemingly the culprit that cut short BTC’s rally by $2k.
Image courtesy of Twitter.
Yet in reality, no other analysts could corrobate the news of Mt Gox wallets actually moving BTC. Thus far, the consensus is that the market has yet to see that movement.
Initially, Arkham took the blame for the ‘fake news’, saying a small subset of users received incorrect alerts, with one of them being DB.
Yet Arkham later explained it wasn’t their fault, as Bitcoin’s flash crash didn’t coincide with the tweet’s timeline.
In the aftermath, as of early Friday, Bitcoin is back in the $29k — $29.5k, while the flash crash liquidated over $318 million from the wider crypto market.
Bullish betters (green longs) took the brunt of liquidations when BTC dived, at $189.6 million, on Wednesday. Image credit: Coinglass.
Regardless of the noise in the communication channels, one thing is for certain. The market’s perception of the alert tells us that it would negatively react to the US government or Mt. Gox wallets moving Bitcoin.
The reasoning is simple:
This would increase Bitcoin’s circulating supply. And if buyers don’t step up, the selling pressure would do its work and drop the BTC price. This could then spiral to further selloffs as timid Bitcoin investors get spooked — sparking an avalanche of selling pressure.
So, how big is this potential flood exactly?
According to Glassnode analytics, the US government holds 137,890 BTC, while the Mt. Gox trustee holds 205,514 BTC. For comparison, one of the top evangelist Bitcoin whales, Michael Saylor’s MicroStrategy, holds 140k BTC.
That’s a lot of Bitcoin to unleash on the market in a short amount of time.
Even so, we’ve seen this dynamic with Bitcoin miners many times before. As they pay for operating expenses, miners go through phases of BTC selloffs, followed by BTC accumulation.
At present, average daily sell pressure is holding at around 28,000 BTC daily.
The YTD average of BTC exchange inflow, a key metric used in determining BTC’s selling pressure. Image credit: Glassnode
Silk Road BTC to Hit the Markets in 2023, Too
On March 31, court documents related to the Silk Road case revealed that the US government plans to sell 41,491 BTC across four batches throughout 2023. This would indeed add substantial selling pressure, as much as +50% to the average daily.
However, the US government does have a policy to minimize the impact. The US Marshals Service (USMS), in charge of unloading seized assets, does this by:
- NOT setting public auction date and time in advance, until shortly before the auction.
- Spreading the public auction over several days.
- Fragmenting offerings into smaller chunks, as to prevent whales from accumulating and disrupting the market.
With that said, combined with Mt. Gox-linked wallets, Bitcoin price is poised to enter a greater volatility phase. After all, for those who invested in Bitcoin when it was under $1,000 (Mt. Gox was hacked in 2014), it’s easy to see how they’d want to cash out right now.
Yet, if you would ask Geoff Kendrick, head of digital assets research at Standard Chartered bank, he would tell you this about Bitcoin’s price long-term, by the end of 2024:
“While sources of uncertainty remain, we think the pathway to the USD 100,000 level is becoming clearer.”
In the end, it’s fair to expect some volatility in the near-term — even if only as a knee-jerk reaction to the announcement of additional BTC entering the tradable market.
- BinanceUS Gives Up On $1B Voyager Acquisition (source)
Remember when the SEC argued against BinanceUS buying Voyager Digital’s assets? And then Judge Wiles reprimanded the watchdog agency and approved the sale?
“I cannot put the entire case into indeterminate deep freeze while regulators figure out whether they believe there are problems with the transaction and plan”.
Well, the entire drama was all for nothing.
On Tuesday, BinanceUS informed the public they are opting out of the $1 billion purchase agreement.
The cited reason for the pullout is “hostile and uncertain regulatory climate in the United States”.
This is a reference to increased anti-crypto belligerence which many refer to as Operation Chokepoint 2.0.
Even former SEC Chair, Jay Clayton, recently said “the courts are not an efficient place to resolve classification issues in securities” on SquawkCNBC.
What does that mean for Voyager’s customers? At the time of declared bankruptcy in July 2022, Voyager declared its assets within $1–10 billion range, notwithstanding liabilities. So, the BinanceUS deal was set for the minimum.
Voyager served 3.5 million customers, who deposited around $1.3 billion worth of digital assets in Voyager’s custody. The bankrupt exchange/lender now plans to proceed with direct distributions.
The details are still in the works.
But a looming question remains.
Are Voyager’s customers better off without BinanceUS acquiring Voyager’s assets?
If the answer to that is an objective ‘no’, then we just witnessed a clear example of a US regulator intentionally failing to do its job in protecting investors.
Such a situation would only add further strength to the argument behind Operation Chokepoint 2.0.
- DFlow, a DeFi Payment-For-Order-Flow Protocol, Raises $5.5M (source)
It looks like the SEC’s proposed overhaul of retail investing could be made obsolete. The GameStop short-squeeze saga highlighted the main stumbling block — payment for order flow (PFOF).
PFOF got a bad rap because of misaligned incentives. On one hand, brokers (like Robinhood) make profits by directing customers’ orders to certain market makers (like Citadel Securities).
On the other hand, these market makers are then incentivized to provide less-than-optimal execution prices on trades.
This is by necessity as the market maker has to be compensated for providing order flows (liquidity) in the first place. As a result, customers can trade at zero-commissions, but that could be illusory without taking into account execution prices.
After all, how would traders know if they missed on better offers?
Then imagine the same individual behind the market maker also owns a large hedge fund.
Funny enough, that’s the current reality. Ken Griffin is the founder of Citadel Securities, which provides billions of dollars in order flow to brokerages like Robinhood (primarily retail traders). Griffin is also the CEO of Citadel LLC, a hedge fund with $62.3 billion in AUM.
Isn’t that kind of like the owner of an NBA franchise also being the referee for his own team — and blacking out the game whenever making a call?
This conundrum could come to an end even without the SEC’s involvement, thanks to blockchain tech.
One of the first in this unexplored arena is DFlow. The team raised $5.5 million this week on the promise of a decentralized PFOF.
Interesting. So how would it work?
Through auctions. Specifically, through order flow auctions (OFAs). Let’s say a wallet app, as an order flow source, would want to monetize its orders.
By connecting to DFlow Chain, the wallet would run the order through a bidding process between market makers.
DFlow’s model of decentralized PFOF powered through blockchain tech. Image credit: DFlow
DFlow would then algorithmically ensure that the bids would be better for customers than the minimum Consolidated Best Price (CBP).
Of course, such a protocol would have to tap into a variety of decentralized and centralized exchanges (market makers) to make it happen.
What stands out from this model is that everything would be transparent. All orders and price improvements are automated via smart contracts and verifiable as such.
Whether decentralized PFOF takes steam, or if another platform steals DFlow’s glory, is another story.
But as many retail traders apes learned through the GME and AMC stock stonk saga, the need for a clearer system with fair incentives is there.
- How VC Funding is Shifting from Crypto to AI (source)
OpenAI’s ChatGPT has unleashed the investor floodgates. And for good reason.
The large language model (LLM) had a spectacular showing thus far. Compared to other startups like GitHub and Stack Overflow, both favored by software engineers, OpenAI is in a league of its own.
AI user activity left behind established developer hubs. Yet, it also invigorated the GitHub code repository. Image credit: SimilarWeb
And where there is unprecedented interest, there is money to be made. Predictably, venture capital (VC) is already on the move.
In Q1 2023, AI startups became the beneficiaries of an $18 billion funding inflow. Not just toward OpenAI, which got $10 billion from Microsoft, but also SandboxAQ, Alternyx, Adept AI, and Anthropic.
Less known SandboxAQ, which plugs AI into sensor networks, raised $500 million. This is just the tip of the spear, as over 3,000 AI startups raised $52.1 billion in 2022.
Yet, true revolutionary deployment will likely take off from the big players — Meta, Microsoft, TikTok, Nvidia, and Apple. They are in a proverbial AI war now as the winner will likely be the one who scales the best.
The problem is, the computing power necessary to power AI prompts for hundreds of millions of users is enormous. Dylan Patel at SemiAnalysis, a semiconductor research firm, puts the daily cost at $700,000 for such AI infrastructure. In turn, each user prompt costs around 30 cents.
Likewise, the hardware requirements are huge. OpenAI uses nearly 30,000 Nvidia A100 GPUs dedicated to machine learning. Thanks to these scaling requirements, the AI exuberance has already done wonders for both Nvidia (NVDA) and Microsoft (MSFT) stocks.
As a dedicated hardware supplier for the emerging AI ecosystem, Nvidia gained the largest speculative inflows this year. Image credit: Trading View.
But the AI landscape is just beginning to form. Much is expected of Apple, who would want to optimize AI to such an extent as to be able to run on devices internally. Some researchers have already figured out how to run LLMs on MacBook Pro.
Squeezing computing juice to power AI on personal devices is the next frontier, among many. Image credit: Simon Willison
In other fascinating AI news, deployment is accelerating at a breakneck pace:
- Boston Dynamics linked ChatGPT with its Spot doggy robot.
- TikTok launched AI for users’ avatar profile pictures.
- Will Depue launched WebGPT which runs inside a browser.
- McKay Wrigley gave GPT-4 accurate vision.
- Apple unveiled Quartz, an AI-powered health coach.
At this point, even researchers have difficulties grasping the monumental shift on the way. But one thing is for sure. AI tooling brings the potential for financial liberation to another level.
Enjoy 5MF? Click to forward it to three friends.
- Fed’s Jerome Powell Tricked by Russian Pranksters Posing as Zelenskiy (source)
The Russia-Ukraine war has a significant impact on the entire world.
Add that impact — and its full potential — to the magnetic personality of Volodymyr Zelensky, and we have a unique situation developing.
Posing as Zelensky to secure high-profile interviews with world leaders is somehow becoming a common theme.
Pranksters stealing Zelensky’s visage have an incredible track record. They’ve had Christine Lagarde, European Central Bank President, admit that digital euros will be used for financial control.
They also had former French President, François Hollande, admit that Minsk Agreements signed in 2015 were a ploy to arm Ukraine, not form peace.
With a track record like that, what did the pranksters get out of Jerome Powell, the Federal Reserve Chair?
Here’s the 5min recording.
No, this is not a deep AI fake or fake news as initially thought.
Pranksters had the interview with Powell back in January, with the Fed spokesperson admitting as much yesterday.
“Chair Powell participated in a conversation in January with someone who misrepresented himself as the Ukrainian president,”
What stood out is that Powell essentially stated what has been previously speculated.
Namely, hiking rates to the point of inducing a recession is necessary to quench inflation.
“This is what it takes to get inflation down. To get inflation off of the highest level in 40 years…what we need is a period of slower growth so that the economy can cool off, so that the labor market can cool off, so that wages can cool off”
This is not surprising one bit, as we outlined exactly this dynamic on multiple occassions.
The “cool off” phrasing simply refers to weaker economic activity, lower wages and a higher unemployment rate, as they all cut demand. And reduced demand leads to lower prices, which is why recessions are typically considered inflation’s kryptonite in the first place.
“That’s the only way we know to bring inflation down. And it can be painful, but we don’t know of any painless way for inflation to come down.”
Nonetheless, the clarity of Powell’s language here is amazing. At every FOMC meeting, Powell garnished his talking points in coded FedSpeak, which we always try to decode here.
But to put forward such blatant clarity in his own words, is something we haven’t seen too much of from Powell.
This business outlook index by the Philadelphia Fed clearly deserves more attention.
The survey shows another sharp drop in economic activity, approaching historical lows.
This indicator has consistently foreshadowed economic downturns when reaching similarly depressed levels in the past 50 years.
To add:
The current tightening of lending conditions among banking institutions is likely to exacerbate the risk of a recession in corporate earnings.
Despite this, credit spreads at 2% and VIX below 20% do not accurately reflect the severity of the situation, and both are poised to rise significantly from today’s levels.
Bear market probability is at a level NEVER seen since the 1950s
Buckle up
Detailed look at GDP and prior quarters
People are resorting to buy-now-pay-later services to finance all of their purchases.
You can finance a $2.00 Starbucks coffee over three weeks if you wanted to.
50% of Gen-Z will be using buy-now-pay-later services by 2025.
Consumers aren’t healthy.
[ad_2]
Source link