14th July 2024 > > The CCC is back!

tl;dr

A criticism, an apology, a dig at the bureaucrats (we haven’t had one for a while), an unlikely wish, and the tantalising prospect of fully opening the doors to TradFi.

Market Snap

Market Wrap

Lovely jubbly, those leveraged shorts are building once again, increasing the risk of a short squeeze higher. A snap move up may very well break for good the recent despondency over the sideways action of the last quarter.

There has been much discussion in crypto forums about bull and bear traps. Techies seem to believe they own these terms, but they do not. Bull and bear traps are natural facets of markets, and exist independently of drawing squiggles on a graph. The other core misunderstanding is a failure to appreciate that they are mutually exclusive. You cannot have a bull trap in a bull market, you cannot have a bear trap in a bear market. And be in doubt, this is a bull market with legs, and one that will outlive the usual four-year cycle.

Remember these simple rules, and you can cut through a lot of the nonsense that is spouted from various analysts.

Curious Cryptos’ Commentary – Interregnum

Apologies for the rather reduced CCC schedule over the last fortnight or so. A road trip from the Chamonix valley via Luxembourg and Bruges back to CC Towers would be enough of a distraction in itself, without a dodgy network adaptor in my laptop refusing to work when needed. But don’t worry, normal service is now resumed, at least until Campo Sancho.

Still, I see you have all done sterling work in my absence taking us from below $54k to breaching $60k to the upside once more. Perhaps you don’t need me after all.

Curious Cryptos’ Commentary – Germany

There is something curious going on amongst the civil servants working for the German government.

The government wallets held more than 40,000 BTC valued at over $2bn, BTC that had been seized by law enforcement officials, and sadly not because the government had seen fit to bolster its balance sheet and its credentials with hard assets. Until now that is …

A previous Chancellor of the Exchequer for the UK was taken by surprise when he found out that if you advertise in advance that you are selling a commodity in size (gold in this case), then the market tends to go down not up. We may laugh at the naivety on display, but that is actual taxpayers’ money that was thrown away. In any other job that would surely result in immediate dismissal for incompetence, but the public sector works rather differently to real life.

In recent days and weeks, Germany has been transferring BTC to centralised cryptocurrency exchanges, such as Coinbase, Kraken, and Bitstamp. These transfers are public knowledge and are a clear indication that a large seller is in town. This naturally depresses the price of BTC relative to where it would be otherwise, reducing the value of those assets when sold, hurting taxpayers.

The alternative approach is to sell quietly using the OTC market, through which large trades occur off-market. This would likely maximise the benefits to taxpayers, though perhaps that is a concept too far for some civil servants to understand.

But now BTC has moved the other way – from centralised exchanges into the publicly identified German government’s wallet, and then back out again.

We will probably never know the real reason for this, but if Germany has taken heed of El Salvador’s ground-breaking desire to own BTC, then how many other sovereign countries will follow?

…

That all sounds a little far-fetched? Probably, but anyway:

https://www.youtube.com/watch?v=4kVDtK0s_WU&t=2s

Curious Cryptos’ Commentary – SAB 121

Sadly, I must report that the House of Representatives failed to overturn the Presidential veto of the bill declaring SAB 121 to be dead (https://www.curiouscryptos.com/post/6th-july-2024-panic-sab-121). A two-thirds majority was required to remove the veto restoring this key plank of Choke Point 3.0, but in the end the split of 55/45 was not enough.

A consortium of banking lobby groups has clearly been reading the CCC of late, penning this complaint to lawmakers about SAB 121:

“SAB 121 represents a significant departure from longstanding accounting treatment for custodial assets and threatens the industry’s ability to provide its customers with safe and sound custody of digital assets.”

…

Happily, this may not be the end of the story.

After the first legislative defeat Gensler commented that SAB 121 was merely “an accounting policy.”

Bloomberg reports that some banks can bypass SAB 121 if they take additional measures:

https://news.bloombergtax.com/financial-accounting/sec-allows-some-exceptions-to-crypto-accounting-rule-compliance

If this report is correct, the barrier to ignoring SAB 121 is set very low:

“Several large banks that have consulted with SEC staff starting in 2023 got the green light to bypass the balance sheet reporting by ensuring their customers’ assets would be protected in the event of a bankruptcy or failure. Other steps such as internal safeguards meant to better protect those holdings would address legal risks tied to the burgeoning asset class, the source (at the SEC) said.”

Tick, tick, and tick again - these are all standard requirements for the custody of any asset.

It appears that one of the single biggest stumbling blocks in the way of wholesale TradFi adoption of cryptos is soon to tumble. Probably too late for Gensler to save his job, but that is undoubtedly uppermost in his mind.