There are around 190 banks in the United States that are at risk of going under. That means 5% of all the banks in the country could be staring into the abyss.
This scenario has been carefully modelled in a recent research report, which was released in the days that followed the collapse of Silicon Valley Bank (SVB). The researchers ran a number of mathematical models in order to determine the fragility of the broader banking system.
And, it’s not looking good. That deathly scenario of bank failures could become reality if just under half of all ‘uninsured’ depositors decide to withdraw their funds. Could we be on the precipice of another massive banking crisis akin to 2008?
Well, in my video today, I break down that report into its most important parts. I also explain what criteria to use when judging a bank’s risk and give some pointers as to how you can protect yourself.
You can watch that video here.
📊 Personal Portfolio 📊
BTC 36.36% | ETH 30.53% | USDC 17.54% | USDT 7.02% | ATOM 3.55% | USD 3.54% | DOT 1.44%
📈 Guy’s Forward Guidance 📈
It’s been telling to watch traders on Crypto Twitter analyse the recent rally. At first they were obviously bullish, because BTC and other altcoins were breaking through key levels. As time went on however, those who were bullish started to flip bearish as they started to question the rather suspect price action. After all, it seems strange that crypto would be completely unaffected when, for example, Coinbase is being officially targeted by the SEC.
When you see this divergence, the first thing you should do is check if there are any macro factors moving the crypto market. That’s because it’s either crypto or macro that’s driving crypto prices. One macro factor that could be contributing to the current rally is the banking crisis, which has underscored the importance of Bitcoin in a fractional reserve financial system. The thing is that the institutions don’t seem to be buying it – outflows from BTC ETPs have continued.
In fact, it looks like the only entities that have been buying lately are those in the crypto industry. Binance comes to mind here. Earlier this month, CZ announced that the exchange would be converting 1 billion BUSD into BTC, ETH, BNB and other altcoins. What’s interesting is that there’s been a massive flow of USDC out of Binance recently as well. Binance’s holdings of USDC went from over 4 billion to almost nothing in 2 weeks.
Could Binance have converted some of that USDC into other cryptos too? Possibly. Regardless, it’s clear that someone has been buying, and that whales have been simultaneously selling. We’ve been watching Whale Alert closely, and whales have lately been dumping large amounts of ETH and SOL on Coinbase. Something else that’s a bit concerning given the circumstances is Coinbase ending support for Algorand staking.
The circumstances in question relate to the ongoing crackdown on the crypto industry in the United States, which only seems to be getting worse. Besides the Biden administration singling out stablecoins in its recent economic report, the SEC also put out an ominous warning to everyone who’s been buying cryptocurrency.
It looks like the US wants to finish up its crypto crackdown before FedNow is launched in July. I believe that regulators are specifically targeting crypto companies and projects that compete directly with FedNow, and the recent takedowns of Signature and Silvergate are evidence to this end. I strongly suggest staying away from cryptos and companies the Fed takes issues with. Hint: anything payments-related.
Not financial advice, of course…
🤔 A Tale Of Two Crypto Bull Runs 🤔
The recent rally in crypto has had a lot of people thinking, when the bull market is finally in full swing, which altcoins are likely to rally? In our view, this ultimately depends on whether inflation is here to stay, or whether it's truly transitory. If inflation is here to stay, then it means that central banks could keep rates higher for longer. If inflation is transitory, then we could see zero rates very soon. The consensus seems to be the former.
But, let’s start with the latter, because that’s the macro regime we’re all used to. In a world with zero or negative interest rates, speculation is the name of the game. I would argue that the ultimate speculative bet in cryptocurrency is that an altcoin of some kind becomes bigger than Bitcoin or Ethereum. This is why there was so much hype around ‘Ethereum killers’ during the last cycle, and it resulted in massive gains for cryptos like Cardano’s ADA.
As such, if we see zero or negative interest rates again, then it’s likely that alternative layer 1 blockchains will be the best bet during the next crypto bull market. The difference is that it’s now clear that Ethereum won’t be dethroned, just like Bitcoin won’t be dethroned. I find it fascinating that we’re starting to see new layer 1s brand themselves as ‘Solana killers’. It’s possible this means that Solana killers will do the best, potentially including SOL itself.
But, this assumes that we see zero or negative interest rates again, which is not the current consensus. In a non-zero interest rate environment, fundamentals are the name of the game, specifically the ability for a crypto project or protocol to turn an actual profit. Judging by CryptoFees, Ethereum would be the best bet, followed by Bitcoin, and the biggest DeFi protocols. This is simply because these cryptos and protocols earn the most in fees.
Ethereum will actually have a huge advantage in a non-zero interest rate environment, because ETH is likely to be deflationary, due to base fee burns. This fundamentally depends on whether the yields earned from ETH staking will be greater than the yields you can earn on stuff like US government debt. This is uncertain but, with enough transaction fees, ETH will be superior. It’s almost as if Ethereum devs have been preparing for this…
That said, there is a third possible scenario for the next crypto bull market, and that’s a combination of both. Although high inflation is expected, it won’t be believed until it is seen. Inflation is likely to be very volatile, meaning we could see periods when we have near zero inflation, and periods when it's in the double digits. When inflation falls the first time, we will see the first scenario play out, but when it comes back, the second scenario will take over.
Perhaps this deserves a video…
🤖 AI & Crypto 🤖
In just the past month, we’ve seen major tech companies and platforms such as Google, OpenAI, Microsoft, LinkedIn, Nvidia, Amazon and Baidu come out with a number of major AI-related announcements.
Unsurprisingly, crypto investors and industry leaders are no different. A number of them, including Binance and Tron, have begun placing more bets on cryptocurrencies and blockchain projects that claim to leverage AI.
Given all that, one tends to wonder how much of this interaction between AI and the blockchain is actually meaningful. This is an especially pertinent question when you consider the sheer number of AI crypto scams going around.
The most common narrative when it comes to the blockchain providing value for AI is the idea of a ‘decentralised AI system’. Put simply, this is a concept that refers to using a distributed and decentralised network to carry out AI processes.
Well, let’s take a look.
Some of the benefits of such a system are supposed to be a more transparent data source, data authenticity, distributed computing power and better security.
That all sounds mighty swell, but the fact is that many of those benefits can’t be realised with the current state of infrastructure.
Allow me to explain.
One of the common ideas to implement such a system is the use of the mining rigs and infrastructure of crypto mining farms to carry out the high-performance computing appropriate for AI processes hosted on decentralised, blockchain-based networks.
However, as explained by Near Protocol founder Illia Polosukhin in a recent Unchained Podcast episode, the decentralised training of AI models is extremely difficult, due to the high speed of connectivity required to train them.
He points out that the hardware used to train AI models is orders of magnitude higher spec than that used to mine cryptocurrencies. Moreover, apart from the high cost of acquiring the necessary hardware, its actual availability is restricted. Currently, the hardware being used to train large language models (LLMs) like GPT is only sold to institutional-grade bulk buyers.
This makes the decentralised training of LLMs like GPT virtually impossible. However, Illia points out that, while the idea of a decentralised AI model might be far-fetched, the blockchain does provide value when it comes to data collection. This is due to its open-source and decentralised ethos allowing AI models to crowdsource data.
Another somewhat futuristic idea of the blockchain’s value proposition for AI is the ability of an autonomous AI to use cryptocurrencies to interact with real-world or other cyber entities independently. This is a speculative use case based on a perceived reluctance of centralised entities to provide AI models with banking capabilities.
Imagine that, a sentient AI bot paying you with Bitcoin to access your services.
But, enough about what the blockchain can do for AI, let’s talk about what AI can do for the blockchain.
Well, currently, there are two common use cases for AI in decentralised systems such as a blockchain. The first relates to dapp development, specifically, developers using AI to analyse open-source code. This includes using AI to audit code and smart contracts in order to detect and respond to potential security threats in real time.
Secondly, using AI to help crypto users find information more easily. A prime example here would be AI translating and analysing data from on-chain data platforms to human-readable content. By analysing data from previous transactions and predicting future patterns, AI could potentially help optimise transaction times, reduce fees, and improve overall efficiency.
In conclusion then, the potential for AI and blockchain to work together is definitely plausible. However, hoping for a moon-shot from a random AI crypto coin is, needless to say, a long shot at best.
🎉 Event Promo 🎉
The last Coin Bureau conference took place in May 2022, and boy does it feel like a long time ago. A lot has happened since then…
That means there’s all more reason to host another one – there’s going to be plenty to talk about, after all. So, we’re delighted to announce that this year’s Coin Bureau Live event is now officially scheduled for the 10th June and it’s already shaping up to be a cracker.
We will be back at the De Vere Grand Connaught Rooms in the heart of London for an all-day event featuring some of your favourite crypto content creators and other big names from across the industry. Guy and guests will be discussing the events of the last year and looking forward to the future at one of London’s most impressive venues.
As well as our brilliant guest speakers and unmissable panel discussions, there will also be canapes, drinks and free tea and coffee included with your ticket.
Speaking of which, tickets are now on sale and, if you’re quick, you’ll be able to snap up an early bird discount. Don’t delay though, because they’re selling fast!
👉 You can secure your tickets right here.
We can’t wait to see you there.
🔮 Video Pipeline 🔮
- USDC Depeg Analysis: Anything to worry about?
- Jerome Powell Press Conference: What you need to know!
- White HouseEconomic Report: Crypto edition
- US Treasury CBDC Study: Troubling times?
- What’s On My Phone? Top 5 Crypto Apps!
🏆 What's New At CoinBureau.com This Week? 🏆
✅ Cryptocurrency Beginner’s Guide: Crypto Simplified!
That’s all for this one and thanks as always for supporting our work!
Team Coin BureauDisclosure: Authors may own cryptoassets named in this newsletter. These are unqualified opinions, and a Coin Bureau newsletter, is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor.
