Cryptocurrency for Beginners: with Crypto Casey

US Regulatory Gridlock (Will Crypto Last?) - Last Week Crypto

June 13, 2021 Crypto Casey Season 2021 Episode 24
Cryptocurrency for Beginners: with Crypto Casey
US Regulatory Gridlock (Will Crypto Last?) - Last Week Crypto
Show Notes Transcript

This is another episode of a weekly cryptocurrency news series called Last Week Crypto.

We cover the latest global news stories affecting the cryptocurrency markets June 6th through the 12th of 2021.


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======== VIDEO SUMMARY ========

This week we will discuss how most media we encounter can’t be trusted (big shocker, right), updates on the reverse repo situation, gridlock within most regulatory entities in the US and what it means for crypto, and some of my thoughts on El Salvador's bitcoin adoption.


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Had an unexpected week off because I didn’t really find a lot of time to make a high-quality video for you guys while in Miami, but here we are. Back at it again.

Hello, I’m Crypto Casey, and welcome to another episode of Last Week Crypto.

Every Sunday, we review the performance of the largest cryptocurrencies, top gainers, as well as the latest global news stories affecting the crypto markets this past week.

This week we will discuss how most media we encounter can’t be trusted (big shocker, right), updates on the reverse repo situation, gridlock within most regulatory entities in the US and what it means for crypto, and some of my thoughts on El Salvador's bitcoin adoption.

To check out the links to all of the articles we discuss, go to CryptoCasey.com/Last-Week-Crypto.

This week’s episode is brought to you by Crypto.com, an exchange with over 100 different cryptocurrencies and over 20 different fiat currencies.

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Awesome. It’s time for Last Week Crypto

1 - Looking at the top cryptocurrencies by market cap, bitcoin down 3.6%, ETH down 10.5%

Binance Coin down 12.9%, and Cardano down 14.9%.

2 - Looking at the top gainers this week:

Amp up 58.1%, Theta Fuel up 8%

Waves, also up 8%, and Chiliz up 6.4%

It’s been a boring, bearish, sideways market for a while now. So let’s spice things up with further discussions about the underlying foundation of both the global financial system and crypto markets.

But first, I want some input from you guys. 

In light of all the coordinated manipulation of, not only the crypto markets by whales, or the price of the dollar and valuations in the stock market by the fed, but also, big surprise: media and the news on tv, mobile devices, internet searches, newspapers, everywhere. 

Literally almost everything that seemingly attracts our attention is actually forced in front of our faces regardless of how much you may try to avoid it. 

Recall a few episodes back when we looked at 3 - all these articles from all around the internet from Coindesk, Fortune, Bloomberg, Reuters, Economic Times, 4 - Financial Times, investment magazine, apple podcasts: all of these articles using this bizarre “gyrations” word to describe crypto’s price volatility.  

Yes, it’s a racket and clearly centralized money is doing all the “talking” to manipulate and drive market sentiment. From social media and the internet at large; and now, unsurprisingly, check out how: 5 - How hedge funds took over America’s struggling newspaper industry

6 - Since 2004, about 1,800 U.S. newspapers have closed. Newspapers have struggled to make money with the collapse of print advertising as readership moved online. Then, the digital advertising market quickly became dominated by big, centralized, corrupt tech companies like Google and Facebook. 

7 - Today, some of the largest newspaper groups in the country —such as Tribune, McClatchy and Media News Group — are owned, controlled by or in debt to hedge funds or private equity groups. 

In fact, hedge funds and other financial firms control half of the daily newspapers in the United States, according to a recent analysis by the Financial Times.

Lame. So, starting next week, I’m going to spend more time on breaking down how the current financial system works, economic theory, past and present policies at play, and when necessary, dig more deeply into any compelling headline news stories for the week. 

Because clearly, all we can we bank on the media and news doing is becoming more centralized, more manipulated, and more sensationalized to maintain and increase profits for those diabolical hedge funds and their bloody-thirsty FAANGs; and by FAANG, I mean the acronym for Facebook, Amazon, Apple, ya’ll know, our politicians’ puppet masters.

And while on the subject of politics, let’s ask ourselves what is: 8 - Our Greatest National Crisis? Denying the Great Debt Crisis

9 - Remember the 2012 Republican National Convention? Back then, the national debt problem was so fundamental to the GOP’s platform that the convention’s set design showcased a debt clock ticking away in real-time, edging closer to $16 trillion.

10 - And what are the overarching reasons why the U.S government is spending itself into an ever-deepening fiscal crisis? The simple answer is our government is trying to maintain its status as the world’s superpower in a competitive 21st century global economy while modernizing infrastructure and providing for the needs of its people.

11 - But, the hard truth is that our economy does not generate enough revenue to pay for what is required to do all three. For example, today the U.S. Debt Clock shows federal tax revenue at $3.4 trillion. That is a fraction of what the government owes just in unfunded liabilities of $149.2 trillion – payments promised to the American people.

12 - Our nation can’t continue down this path forever because, at some point, there will be forced entitlement cuts and, worse, national instability.

13 - National needs outpacing revenue also dramatically applies to infrastructure. President Biden proposed a $2 trillion infrastructure bill with much fanfare, widening the term’s traditional definition. And if the bill manages to pass, it will substantially increase the national debt. 

The need is there, but the funds are not. Everyone sees crumbling roads, bridges, and now the daunting task of fortifying cyber systems that operate critical infrastructure. The Colonial Pipeline hack showcased our national vulnerabilities -- to the delight of our enemies.

Let’s be honest, if you zoom out and take a look at the history of this country, it’s not on an ascent. It’s absolutely on a descent. The US is descending into a third world country while continuing to spend like a first world country.

14 - But the most severe crisis facing our nation is denying the debt crisis. Instead, our weak-kneed leaders are afraid to level with the American people about the implications of rising debt while the government spends at rates that far exceed tax revenue and GDP. 

When was the last time you heard the president or leaders of either party speak out about this painful issue? Yet, any solution starts with recognizing the problem. The Republican Party used to lead on the debt problem and should again.

The government isn’t the only one championing this “don’t panic, everything is fine and going as planned” narrative. As the 15 - Fed’s Reverse Repos Hit $503 Billion, a Liquidity Drain Undoing over 4 Months of Quantitative Easing.

And if you don’t know what reverse repos are, I dig into what they are and their current situation extensively in last week’s video. 15.5 - show thumbnail So you can use the link above to check it out if you’re interested.

But just so you can keep following along, basically there is so much money that has been injected, and continues to be injected into the US financial system that banks literally have no where to put the cash.

Show same animation from last video where all the cash is lifting the roof off the bank - Banks, hedge funds, and other financial institutions are literally bursting at the seams with excess cash to the point where they are actually paying other institutions to take their money. And when entities pay each other to take their money, it creates a zero interest rate situation,

Where instead of, for example, me lending you money that you pay me interest on, I actually give you money, and pay you interest to take it from me. Hence a negative interest rate. You make money to take the money.

So the reverse repo market is the least painful way for the Fed to attempt to avoid market rates from going negative. And, as you can imagine, half a trillion dollars in daily reverse repo activity means that things aren’t good. 

Nice. So going back to the “don’t panic, everything is fine and going as planned” narrative, here’s another not necessarily koolaid drinker, because, here’s the deal, all these guys in the government, the fed, big corporations, 

they all see the writing on the wall, they’re not entirely incompetent, so here’s another koolaid pusher, if you will: New York Fed President John Williams 

16 - He emphasized repeatedly that the reverse repo system “was working really well,” and “exactly as designed,” that there were “really, no concerns about that.” And he also shed light on where this tsunami of liquidity came from that the Fed took in: of course, the “banking system.”

17 - So he explained: “When we thought about and set this up, the reverse repo facility, a long time ago, we wanted to make sure, in a situation where we’re making asset purchases for our monetary policy goals, that the matching increase in liabilities would be distributed in the financial system efficiently and well. 

And a lot of it shows up in the banking system as reserves, but also some of it can show up through the overnight reverse repo facility.”

18 - “And we have seen that get used quite a bit recently. We expected that to happen. It’s working exactly as designed. Really, no concerns about that. It’s a system that was put in place so that we didn’t have problems, and we’re not having them,” he said.

Man, I don’t know about you, but this is strikingly similar to when the Titanic scraped up against that dang iceberg, and everyone was like, ah it’s cool. We good. This ship cain’t sink, won’t sink, definitely ain’t sinkin right now, fam. No way, no way, not the Titanic. Not on its maiden voyage.

Or it’s also like those movies with the rich dad who’s a hedge fund manager or some big wig in finance, who’s deal didn’t go that great, and he’s keeping it from his wife and kids who continue to spend crazy amounts of money that they don’t have, racking up the debt, while the dad is avoiding phone calls, hiding from people that he hasn’t paid.

It’s nuts. Anyways. As the government continues to print money and push “everything is going according to plan” flavored koolaid, another thing they are really bad at but do all the time: “argue and fight to push their corporate sponsors’ agendas” Eh hehm. I mean, think deeply about and carefully consider policies for the greater good of the american people and humanity at large.

Unfortunately, this process tends to end up in gridlock, which in most cases isn’t good. But in the case of crypto, I think it’s great. 

Let’s review a few articles and explore why. Check it out: the 19 - Fed explores ‘once in a century’ bid to remake the U.S. dollar

20 - The idea of creating a fully digital version of the U.S. dollar, which was unthinkable just a few years ago, has gained bipartisan interest from lawmakers as diverse as Sens. Elizabeth Warren and John Kennedy,

 because of its potential benefits for consumers who don’t have bank accounts. But it’s also sparking strong pushback from those with the most to lose: banks.

21 - “The United States should not implement a [central bank digital currency] simply because we can or because others are doing so,” the American Bankers Association said in a statement to lawmakers this week. 

The benefits “are theoretical, difficult to measure, and may be elusive,” while the negative consequences “could be severe,” the group wrote.

Hm, gridlock between the Fed and US banks? Bullish.

Why? 22 - “The decision on whether to adopt a central bank digital currency in the United States is appropriately a long way off,” BPI President and CEO Greg Baer said. “There are also complex and serious costs that will need to be considered.”

Why does this make me bullish? Well, let me reiterate my belief that the US is on the descent, a one-way ticket to becoming a third world country spending like a first world one. The more time that passes, the more money that is printed, the more debt that’s racked up, 

but more and most importantly, this time affords crypto the opportunity to continue to be developed, adopted, and so deeply and pervasively entrenched in not just the financial world, but all aspects of the world, 

that by the time the government, the fed, and any US regulatory entities are done pontificating about something they don’t understand, like at all, there’s not a damn thing they’ll be able to do about it, except capitulate. 

Okay, so what are the Fed and banks going to squabble about? Well, the banks don’t want the Fed controlling a centralized dollar because it renders them useless. No one is going to need to deposit, send, transfer, or withdraw funds using a bank anymore. They will be completely cut out of the equation.

But what’s in it for the Fed? Do they finally recognize how sinister and predatory banks are? Preying upon both the banked and bankless for decades upon decades, to line their greedy pockets and only looking out for themselves?

Ha, not a chance. 23 - “The Federal Reserve should continue to explore a digital currency because nearly every other country is doing that,” Sen. Bill Hagerty said at a hearing, citing the risk for the U.S. to lose its ability to deploy economic sanctions as effectively with decreased usage of the dollar.

Pfff, of course, if it’s not for profit, it’s for power. The banks are fighting for profit and the fed is fighting for power. But what about the government? Is there consensus between political parties?

Elizabeth Warren on behalf of the democrats: 24 - “Legitimate digital public money could help drive out bogus digital private money, while improving financial inclusion, efficiency, and the safety of our financial system — 

if that digital public money is well-designed and efficiently executed,” she said at a hearing on Wednesday, which she convened as chair of the Senate Banking Committee’s economic policy subcommittee.

Alright, so she’s for a centralized US dollar. But she’s got a contender: 25 - “What problem is a central bank digital currency trying to solve? In other words, do we need one? It’s not clear to me yet that we do,” Sen. Pat Toomey said. “In my view, turning the Fed into a retail bank is a terrible idea.”

And, “the fact that China is creating a digital currency does not mean it’s inevitable that the yuan would displace the U.S. dollar as the world’s reserve currency,” he said.

Ooh, gridlock within gridlock. Excellent. But wait, there’s more. Yet another powerful US regulatory entity is becoming a house divided on the crypto front - the Securities and Exchange Commission

26 - SEC’s Peirce Warns Against Stifling Crypto Innovation. “You can have pretty effective self-regulation,” Peirce said in an interview with the Financial Times.

27 - Hester Peirce, one of five commissioners on the U.S. Securities and Exchange Commissioner, said in an interview in the Financial Times that overzealous regulation of cryptocurrency in the U.S. could hinder innovation.

“I am concerned that the initial reaction of a regulator is always to say ‘I want to grab hold of this and make it like the markets I already regulate’,” Peirce told the Financial Times. “I am not sure that’s going to be great for innovation.” 

28 - In the Financial Times interview, Peirce pointed out that self-regulation remains a “pretty effective” way to address digital assets, a comment the FT suggested exposes a split at the top of the SEC, as its new chair, Gary Gensler, looks to tighten regulation of cryptocurrency.

And if you’ve tuned into previous episodes you know how keen SEC chair Gary Gensler is to impose regulations on the crypto markets, and also impose regulations on traditional stock trading services for the “gamification” built into the apps.

Well, his colleague Peirce disagrees: 29 - The SEC commissioner also defended what she called the “gamification” of capital markets seen earlier this year when retail traders used the Robinhood platform to drive up the price of shares of video-game retailer GameStop – a phenomenon that is under the scrutiny of regulators.

“Gamification is not necessarily a bad thing; making financial platforms more user-friendly is not a bad thing,” Peirce said. “Platforms like this should look like the other platforms in people’s lives.” 

Awesome. We’ve got gridlock between the [Fed vs Banks] fed and the banks, gridlock between senators in congress, gridlock between SEC commissioners, and I think this gridlock will be great for crypto. 

I mean it’s a win-win, we’ve got the government and regulatory entities doing what they do best: which is mostly nothing very badly, very lagardly and when they do manage to do something it is mostly nothing very badly, and very lagardly.

All the while crypto gets a chance to give covid a run for its money with its mutations, virality, and overall lethality to the current global financial system.

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Sweet. Alright I’m going to touch on some of my thoughts about El Salvador’s adoption of bitcoin and the kick back they’re receiving from the International Monetary Fund.

So El Savador: definitely bravo on full-on adoption of bitcoin as legal tender. I think it’s a small domino that later down the road could have significant effects on other countries’ decisions to follow suit.

I mean, the pros are a no-brainer, as it looks like over 70% Bankless of the population have no access to banks, this could also [attract investors] attract foreign investors, their vision to utilize clean, [clean bitcoin mining] geothermal energy to set up a robust bitcoin mining operation is great of course. 

I don’t think there are really any cons, just a couple of concerns. One, I’ve seen some narratives describing how El Salvador’s leader show this picture of Nayib: https://images.app.goo.gl/PNv4vmL4Cr2P1Ajz7
 Nayib Bukele may have made the declaration as a publicity stunt to distract from his authoritarian tendencies. 

I don’t have a comment on that one way or another though, as I would need to do more research to make my own judgement.

The other snafu is with the IMF or international monetary fund. It looks like 30 - El Salvador is seeking $1 billion dollars in funds from the International Monetary Fund, and some analysts have warned that Bukaylay’s sudden decision to embrace bitcoin could complicate those discussions.

An IMF spokesman said Thursday that the move “raises a number of macroeconomic, financial and legal issues that require very careful analysis” and that the organization would discuss its concerns with Bukaylay.

So I find this a little perplexing because, without breaking down how the IMF, or international monetary fund, works, here’s the cliff notes of the way I see it:

The IMF is basically a fund that consists of a mix of currencies from the world’s most powerful countries like the US, UK, France, Germany, etcetera. And they will approach smaller, third world countries, and be like, yo, it looks like you need some help. 

Specifically, it looks like you could use this really expensive, I don’t know, show animation of clear land, then a factory set on top of it water filtration system that could be built right about here, and it will take up, you know all this land right here, and I know you can’t afford it, but don’t worry, 

Show money going from text “IMF” to the land with the factory we are going to lend you the money from this International Monetary Fund, that totally exists for the greater good of humanity, not to, you know, put less developed countries into so much debt that we actually end up pretty much stealing this land and stuff this thing you needed is built on. Yeah no way, we don’t do that.

So how this is going to work is, we’re going to finance this thing, and all you gotta do is pass on the debt repayment show people around the land, then money going from the people to the text “IMF” of this loan on to your citizens, and if (or definitely when) the tax burden becomes unbearable, don’t worry about it, show the land with factory going to the text “IMF” this land and stuff is collateral. So if you can’t pay it, the land covers it. Legalized theft?

Sure, sometimes maybe the IMF does good deeds. But for the most part its legalized theft, allowing more powerful, affluent countries to steal land and resources from weaker, poorer countries under the guise that they are helping them build infrastructure for the greater good of their people.

So when the leader of El Salvador is in one breath, adopting bitcoin as legal currency to help his people, while in another breath is trying to secure a $1 billion dollar deal with the International Monetary Fund, 

that in end whatever the money is used for, will 100% become a burden of those very same people he’s supposedly trying to help - that just seems a bit contradictory.

However, before you berate me in the comments. I do need more time to dig into what El Salvador needs from the IMF deal and also learn more about their leader Bukaylay before forming a more researched and thoughtful opinion on the matter.

Awesome.

Well that was Last Week Crypto, with me Crypto Casey.

If you enjoyed the episode, please make sure to like this video and subscribe to my channel for more crypto content.

To check out the links to all of the articles we discussed, go to CryptoCasey.com/Last-Week-Crypto.

So do you think gridlock among US regulatory entities will be bullish for crypto?

Or do you think it will be bearish in the long run?

What are your thoughts on the El Salvador and IMF situation?

Let me know in the comments below.

Be safe out there.