Your daily briefing of some of the most important stories from the crypto, finance, and tech space.
Kamikazinomics Shifts Up A Gear
Weekly roundup! The debt ceiling dance continues. Bitcoin drifts, but there are positive signs. Dogecoiners go crazy for NFTs. Ledger misreads the room. And don't even mention the SEC...
The News From Planet REX—Saturday, May 20, 2023
The Apes are engaging in their regular activity of squaring off and posturing with an elaborate, choreographed dance designed both to display aggression but simultaneously establish consensus. The aim is nominally to appease their foremost deity, the dollar, by thwarting an enemy of their own making known as "debt ceiling", thereby contriving to support and pleasure the dollar in the manner that each sub-faction believes to be most fitting, without actually going to war against each other.
We believe this is some kind of complex mating ritual, since it takes place in a room called Congress, though to be honest, we're not sure. More research is needed.
"Debt Ceiling? Eh, It'll Be Fine. Probably."
In the US, the red and blue teams are playing chicken over the debt ceiling. Neither are winning—though we might be seeing the first signs of compromise. Yields on one-month T-Bills recently hit their highest since at least 2001, reflecting not only rising interest rates but the risk investors feel they are taking in lending money to the US government. Those rates have since backed off a little, indicating that the market is less worried than it was.
Current interest payments on the existing $31 trillion debt are around $400 billion annually, or 7-8% of annual government spending, which the US can't afford without raising the ceiling.
Meanwhile, Australia's central bank has stated it will do "whatever it takes" to bring inflation down, even if that means further interest rate rises. That has not gone down well with the highly-indebted Australian public.
No big moves for bitcoin this week. The crypto markets have spent the last few days in a holding pattern, waiting for more information after a tumultuous couple of weeks. BTC has stayed within a fairly narrow range, and still just above the important 200-week moving average. It's currently trading much where it started the week, around the $26,800 mark. All in all, no more than a bored shrug from BTC.
The picture might appear quiet, but under the surface, more is going on. On-chain metrics are flipping bullish, as the percentage of total bitcoin value represented by younger coins begins to increase. Over one million wallets now hold a whole bitcoin, indicating that new holders have been taking advantage of lower prices. The figure is up around 190,000 in the last 15 months. A number of prominent analysts expect significant run-ups to the $35-40k range in the coming weeks—if $27k holds.
XRC-20 Tokens Claim The Spotlight
This week, the on-chain news has been all about the Ordinals, and the fees. You'll know that the launch of BRC-20 tokens (aka the ability to mint NFTs on Bitcoin) has sent transaction volumes and fees rocketing. Well, fresh off the back of that Bitcoin Ordinals hype, other blockchain networks have rolled out their own versions, resulting in massively increased transaction volumes across the board.
Litecoin transactions have soared by 500%, driven by the implementation of the LRC-20 standard, while Dogecoin adoption of NFTs has witnessed highs of over 1 million txs per day—around twice Bitcoin's daily transactions—from a baseline of just 20,000 tx/day.
Lightning Labs is releasing a new version of the Taproot Assets protocol, which will make issuing assets on Bitcoin and Lightning around four times more efficient than at present, hopefully helping to clear record levels of network congestion.
Meanwhile, Ethereum's NFT scene is languishing. However, developers do appear to have addressed the finality issues that affected the blockchain twice last week. Updates to two popular clients may have solved the issue, while persuasively making the case for improved client diversity. With around 38% of the network relying on the Prysm client, there is a potential centralization risk.
Off-chain, the SEC has asked the Court of Appeals to refuse Coinbase's demand to hurry up and provide the clarity that the crypto industry desperately needs to function properly in the US. The SEC's view is that Coinbase has no right to this, that the process of creating such laws could take many years, and that in the meantime, they will continue to take enforcement action as they see fit.
In essence, the SEC is saying: "We move slowly. That's our thing. If you don't like it, then that's a 'you' problem."
Opinion within the SEC is not homogeneous. Hester "Crypto Mom" Pierce has warned that the US risks falling behind the UK and Europe, which recently signed key regulation into law.
Lastly, Ledger's latest update appears to have been an own goal, raising concerns that the popular hardware crypto wallet may have hidden vulnerabilities.
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