Crypto Is Trying Out Traditional Finance’s Frustration in Hyperspeed, but It’s Going to Be Fine

What is going to be most interesting here is glimpse what occurs to bitcoin and other cryptos during these Hard Times.

The last time I wrote about a stablecoin, it failed gorgeously. So when a workmate of mine suggested I write about MakerDAO’s scheme to invest in U.S. Treasurys to back its security stablecoin DAI, I was reminded of the power I wield.

I’m totally joking, by the way. I don’t take myself that earnestly. But while we are on the topic of striking failure, we should talk about striking failure.

Just two weeks ago, this newsletter suggested that opaque, interweave platforms with excessive purchase were a danger to crypto investors. That was in the shadows of the fence fund Three Arrows Capital’s failure, but now Celsius and Roamer (two retail-focused yield-generating platforms) have put together restructuring plans.

The economy is looking not so good

The yield curve optern this week (see chart below). The yield curve inverting is often used as a warning indicator for a downturn. So that isn’t considerable on the surface.

Except when the yield curve upturn – which is what happened. Now, 10-year Exchequer yields are lower than 2-year Exchequer yields. Theoretically, this means bankers expect longer term rates to decrease. Practically, this means banks – which depend on loan at rates in excess of the “risk-free rate” (typically the 10-year Treasury yield) to make money – will lend less. And this will lead to a deceleration in economic activity.

Such is life in a debt-based financial system.

Also, a 75 basis point (bps) increase to interest rates in July is basically a foregone development at this point. (For more on what that means, check out the more accurate piece I wrote two months ago). Two months in a row would seem completely usual, but that’s just me. All eyes on July 27.

The digger are struggling

We touched on how excavate companies might soon surrender by selling some of their balance sheet bitcoins to fund operations as they struggle, given 2022 price production mentioned in last week’s newsletter. And just like that one of the largest diggers, Core Scientific (CORZ), report that it sold over 7,000 BTC in June. CORZ hasn’t discharged well in 2022, so it’s predictable that they had to dip into the coffers a bit.

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