Friday, May 12, 2023

What happened to BTC? Also, the debt ceiling, the Middle East, and pressure on the SEC.

“If the wind will not serve, take to the oars.” – Latin Proverb ||

I know, I know, I’m not supposed to publish again until next Tuesday, BUT the recovery from last Friday’s surgery is going better than expected, I’m not good at taking time off, and I missed you all. 🥰 I will skip tomorrow’s weekend version and also Monday’s daily, since it’s a public holiday where I live, in which we commemorate one of Madrid’s patron saints. San Isidro is also the patron saint of farmers, canonized because, among other miracles, an angel ploughed a field for him while he had a siesta under the tree. Very Spanish.

This will be short, though, because my husband is glaring at me.

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Programming notice: Back on Tuesday, May 16!  

WHAT I’M WATCHING

• Crypto slump. What did you all do to BTC while I was out? There are clearly more headwinds than tailwinds at the moment, from the macro narrative, market structure and regulatory hostility weather systems. More on this below.

• Debt ceiling. A meeting between President Biden and House Speaker Kevin McCarthy, originally scheduled for today, has been postponed to next week, which some are taking to mean that progress is being made on a possible deal. There is a small window for debt ceiling negotiations, based on when Biden and both chambers of Congress are simultaneously available, and it ends on Wednesday – this is key, as US Treasury Secretary Yellen has estimated that the government could run out of money as soon as June 1. At this stage Biden has more to lose politically than do the Republicans, especially given his currently low popularity. This makes a compromise to curb spending more likely, which may be fiscally prudent but which is not good for economic liquidity or growth.

• Bitcoin in the Middle East. Abu Dhabi, via its sovereign wealth fund-backed development company Zero Two, has entered into a partnership with bitcoin miner Marathon Digital Holdings to build the first large-scale bitcoin mining operation in the Middle East. We are likely to see more of this – the region has potentially abundant solar power as well as the support of a state-mandated push for economic diversification and a geopolitical interest in access to alternative financial rails. I don’t think it will be long before we find out that at least one sovereign wealth fund in the Middle East holds crypto (no inside information, this is speculation).

• More pressure on the SEC. The US Chamber of Commerce has filed a brief in the Coinbase v. SEC case in which it states that the financial regulator’s actions “are not just harmful policy; they are unlawful”. The whole thing is a strongly worded rebuke (for an official document), and concludes that the SEC should be ordered to respond to Coinbase’s rule-making petition. I confess I don’t know enough about the US legal system to know what the next steps are, but this feels pretty huge, especially given the growing likelihood that the US crypto market will become a political pawn in increasingly tense election manoeuvring.