26th May 2023 > > Exodus.

tl;dr

Decisions by individuals within governments and regulatory bodies cannot just be ignored when they impact us negatively.

Market Snap (at time of writing)

Market Wrap

BTC miners Riot Blockchain and Marathon Digital Holdings are under attack with 13% and 25% of their shares respectively lent to short sellers. This is despite the recent dramatic revenue improvements related to the growth of ordinals and BRC-20 coins. That sounds like an ideal combination to all contrarians out there.

Occasional Series – Jeremy Hunt

Chancellor of the Exchequer Jeremy Hunt has said he is “comfortable” with a recession in the UK if it brings down inflation, completely ignoring the impact of his own decisions that have deliberately and materially raised inflation. Recessions have real-world ramifications for the poor and vulnerable in our society, something about which he clearly has no concerns.

Hunt by name, hunt by nature.

Curious Cryptos’ Commentary – Exodus from the US

In case you missed it, centralised cryptocurrency exchange Hotbit recently announced its closure (https://www.curiouscryptos.com/post/23rd-may-2023-hotbit-and-web3-protection).

But they are not the only crypto infrastructure firm re-evaluating their options.

Unbanked provides fiat on/off ramp and custody services. Or rather it did:

https://unbanked.com/unbanked-will-be-winding-down/

The company makes plain its frustration with the regulatory landscape in the US and Operation ChokePoint 2.0:

“We believed that building Unbanked on-shore in the United States would be the smart long-term play. While other crypto companies grew rapidly off-shore by avoiding strict regulation, we believed that engaging with regulators and following their arduous processes would ultimately position Unbanked to come out ahead. We unfortunately learned this was not the case and taking this path lead (sic) to a lot of wasted time and excessive costs. To state it bluntly, US regulators are actively trying to stop companies (banks and fintechs) from supporting crypto assets – even when the companies are trying to do it correctly and by the book.”

BottlePay is another one:

https://help.bottlepay.com/en/articles/7902589-the-bottlepay-app-is-closing-down

BottlePay is not dissimilar to Unbanked offering an on/off ramp and custody services.

And in what is surely a big blow to crypto adoption in the US, Digital Currency Group is shuttering it prime brokerage subsidiary TradeBlock:

"Due to the state of the broader economy and prolonged crypto winter, along with the challenging regulatory environment for digital assets in the U.S., we made the decision to sunset the institutional trading platform side of the business, known as TradeBlock, effective May 31, 2023."

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Not all these problems can be blamed on the US government or the regulators, but it’s clear that the current political environment around cryptos in the US is a deterrent to the crypto industry.

The result is that crypto businesses will develop elsewhere with the tax dollars following, probably largely to the EU. Protection for US investors is lower than would otherwise be (reference the fraudulent fiasco at FTX), and the costs for US investors is higher.

This is a less than ideal outcome for the US in my opinion.

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There is a lesson here for the UK government, in a different context.

Windfall taxes on North Sea oil and gas producers play well in focus groups, but the law of unintended consequences is absolute. The material and rapid reduction in investment in the North Sea ensures that over the next few years tax receipts will be lower than they would otherwise be in the absence of the windfall tax. Our energy supply chain becomes more fragile with higher costs for both individuals and businesses leading to lower growth, higher inflation, higher interest rates and a net loss in prosperity for all of us. Meanwhile, UK carbon emissions increase as our energy needs are met by producers in the Middle East helping to fund regimes who are intolerant of dissent and actively work against both the rights of women and the rights of all minority groups.

This is a less than ideal outcome for the UK in my opinion.