Genesis Completes Bankruptcy

Genesis Global, a big name in the crypto lending world, has completed its bankruptcy restructuring process. After filing for bankruptcy in January 2023, the firm is now starting to distribute $4 billion in digital assets and cash to its remaining creditors.

Restructuring Process

In January 2023, Genesis Global filed for bankruptcy protection. This was a tough time for the company, which owed a lot of money to many people. The firm revealed it had over 100,000 creditors and liabilities that could reach up to $10 billion. Among the top creditors were well-known names like the crypto exchange Gemini, asset manager VanEck, and trading firm Cumberland.

Distribution of Assets

Now, Genesis has finished its restructuring process and is beginning to repay its creditors. The company will distribute about $4 billion in digital assets and U.S. dollars. Creditors will get back an average of 64% of their in-kind cryptocurrency repayments, although this amount will vary depending on the specific coin. For example, Bitcoin creditors will get back 51.28% of their Bitcoin, Ethereum creditors will receive 65.87% of their ETH, and Solana creditors will get back 29.58% of their SOL. Those who are owed stablecoins or U.S. dollars will receive 100% of their missing funds.

Transfers to Wallets

Wallets connected to Genesis have started transferring $1.5 billion worth of Bitcoin and Ether. The firm has reached out to its creditors with instructions on how to receive their funds. This marks a significant step in the process of repaying those who were owed money.

Recovery Rates

Genesis creditors will recover different percentages of their cryptocurrency depending on the coin. Bitcoin creditors will get back 51.28% of their Bitcoin, Ethereum creditors will receive 65.87% of their ETH, and Solana creditors will get back 29.58% of their SOL. Stablecoin and U.S. dollar creditors will receive 100% of their funds. Creditors will also be entitled to additional recoveries following the initial distribution, depending on ongoing claims reconciliation, contractual rights against third parties, and litigation.

Impact on Gemini

In May, Gemini announced that its clients had received full payouts from Genesis. Genesis was responsible for managing the assets in Gemini’s “Earn” product, which shut down following Genesis’ insolvency. This payout was a positive outcome for Gemini clients who had been worried about losing their investments.

Market Contagion Event

Genesis was one of many firms affected by the market contagion event following the market downturn of 2022. Many over-leveraged or poorly run businesses began to fail after the collapse of Terra. This event ultimately led to the catastrophic failure of the FTX crypto exchange. Genesis, which was already struggling due to the collapse of the Three Arrows Capital hedge fund, was further hit by the losses following the collapse of Alameda Research, run by convicted fraudster Sam Bankman-Fried.

Financial Troubles

Genesis’ financial troubles began with the collapse of the Three Arrows Capital hedge fund. To stay afloat, Genesis received a loan and a $1.1 billion promissory note from its parent company, Digital Currency Group (DCG). However, further losses after the collapse of Alameda Research forced Genesis to stop withdrawals and enter bankruptcy.

Lawsuit by New York Attorney General

Currently, DCG and Genesis are involved in a civil lawsuit brought by New York Attorney General Letitia James. She argues that the firms defrauded investors by lying about Genesis’ solvency and covering up a hole in its balance sheet. This lawsuit adds another layer of complexity to the already challenging situation for Genesis and its parent company.

Instructions for Creditors

Genesis has reached out to its creditors with detailed instructions on how to receive their funds. This step is crucial in ensuring that the distribution process goes smoothly and that creditors receive what they are owed without unnecessary delays.

Future Recoveries

Creditors can expect additional recoveries following the initial distribution of assets. These additional recoveries will depend on ongoing claims reconciliation, contractual rights against third parties, and ongoing litigation. This means that while creditors are receiving a portion of their funds now, there may be more to come in the future.

Closing

Genesis Global has taken significant steps to address its financial troubles and repay its creditors. Completing the bankruptcy restructuring and starting to distribute $4 billion in digital assets and cash is a major milestone. While the recovery rates vary by coin, the company is making efforts to ensure that creditors receive what they are owed. As Genesis continues to navigate legal challenges and work through claims reconciliation, creditors may see additional recoveries in the future.

Morgan Stanley to Allow Advisors to Pitch Bitcoin ETFs: A Major Move by a Big Bank

Morgan Stanley, a leading Wall Street bank, announced a groundbreaking move on Friday. The bank will soon allow its financial advisors to offer Bitcoin ETFs to certain clients. This decision marks the first time a major Wall Street bank has embraced Bitcoin ETFs in this way.

Bitcoin ETFs: What Are They?

Bitcoin ETFs, or Exchange-Traded Funds, are investment funds that track the price of Bitcoin. They offer a way for investors to buy and sell shares of Bitcoin without having to buy the cryptocurrency itself. Two specific funds that Morgan Stanley will offer are BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund.

Financial Advisors Ready to Offer Bitcoin ETFs

Morgan Stanley has a large team of about 15,000 financial advisors. Starting on August 7, these advisors can approach eligible clients to buy shares of the Bitcoin ETFs from BlackRock and Fidelity. This policy change is significant because it shows a big Wall Street bank is starting to embrace digital assets.

Who Can Invest?

Not everyone will be able to invest in these Bitcoin ETFs. Morgan Stanley has set strict criteria for eligible clients. Only clients with a net worth of at least $1.5 million, who are willing to take aggressive risks, and want to make speculative investments will be considered. These investments are only for taxable brokerage accounts and not for retirement accounts.

Why This Move Matters

This decision by Morgan Stanley is a clear sign that Bitcoin is becoming more accepted in mainstream finance. The U.S. Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs in January, making it easier for investors to access Bitcoin in a more traditional way. These ETFs are cheaper to own and easier to trade compared to buying Bitcoin directly.

Challenges Faced by Bitcoin

Bitcoin has faced many challenges over the years. It has survived market sell-offs and the dramatic collapse of the crypto exchange FTX. Despite criticism from big names in finance like JPMorgan Chase CEO Jamie Dimon and Berkshire Hathaway CEO Warren Buffett, Bitcoin continues to grow in popularity.

Other Major Banks and Bitcoin ETFs

While Morgan Stanley is leading the way, other major banks like Goldman Sachs, JPMorgan, Bank of America, and Wells Fargo are still cautious. They have not allowed their financial advisors to pitch Bitcoin ETFs and only allow trades if clients specifically request them.

Responding to Client Demand

Morgan Stanley decided to allow Bitcoin ETFs because of increasing demand from clients. The bank wants to stay competitive in the evolving market for digital assets. However, they are still cautious. The bank will closely monitor clients’ crypto holdings to ensure they do not have too much exposure to these volatile investments.

Phasing Out Other Crypto Investments

Previously, Morgan Stanley offered private funds from Galaxy and FS NYDIG, starting in 2021. However, these funds have been phased out. Now, the only approved crypto investments for solicited purchase at Morgan Stanley are the Bitcoin ETFs from BlackRock and Fidelity.

The Future of Ether ETFs

Morgan Stanley is also watching the market for newly approved Ether ETFs. Ether, like Bitcoin, is a popular cryptocurrency. The bank has not yet decided if they will offer access to Ether ETFs, but they are keeping an eye on how the market develops.

Conclusion

Morgan Stanley’s decision to allow financial advisors to pitch Bitcoin ETFs to eligible clients is a significant step for the bank and for the broader acceptance of digital assets in mainstream finance. This move shows that even the most traditional financial institutions are starting to recognize the growing importance of cryptocurrencies like Bitcoin.

Key Takeaways

• Morgan Stanley will allow financial advisors to offer Bitcoin ETFs to certain clients.
• Only clients with a net worth of at least $1.5 million and an aggressive risk tolerance can invest.
• The bank will offer BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund.
• This move is in response to client demand and marks a significant step in the acceptance of Bitcoin in mainstream finance.
• Other major banks like Goldman Sachs and JPMorgan are still cautious about Bitcoin ETFs.
• Morgan Stanley is monitoring the market for Ether ETFs but has not yet committed to offering them.

FAQs

What are Bitcoin ETFs?

Bitcoin ETFs are investment funds that track the price of Bitcoin. They allow investors to buy and sell shares of Bitcoin without owning the actual cryptocurrency.

Why is Morgan Stanley offering Bitcoin ETFs now?

Morgan Stanley is responding to increasing demand from clients and wants to stay competitive in the evolving market for digital assets.

Who can invest in these Bitcoin ETFs?

Only clients with a net worth of at least $1.5 million, who have an aggressive risk tolerance, and want to make speculative investments can invest in these Bitcoin ETFs.

Which Bitcoin ETFs are being offered?

Morgan Stanley will offer BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund.

Are other major banks offering Bitcoin ETFs?

Other major banks like Goldman Sachs, JPMorgan, Bank of America, and Wells Fargo are still cautious and have not allowed their financial advisors to pitch Bitcoin ETFs.

What is the future of Ether ETFs at Morgan Stanley?

Morgan Stanley is monitoring the market for newly approved Ether ETFs but has not yet committed to offering them.

Why is Morgan Stanley cautious about Bitcoin ETFs?

While the bank is responding to client demand, it wants to ensure clients do not have excessive exposure to the volatile asset class of cryptocurrencies.

What happened to Morgan Stanley’s previous crypto investments?

The private funds from Galaxy and FS NYDIG that Morgan Stanley offered starting in 2021 have been phased out.

Final Thoughts

Morgan Stanley’s move to allow financial advisors to offer Bitcoin ETFs is a major development in the financial world. It shows a growing acceptance of digital assets like Bitcoin among traditional financial institutions. As the market for cryptocurrencies continues to evolve, it will be interesting to see how other major banks respond and what new investment opportunities arise.

Institutional Inflows into the Cryptocurrency Market

Cryptocurrency prices might be low right now, but big changes are coming. A lot of money is about to flow into the crypto market, and it’s coming from major financial institutions. Experts believe that the third and fourth quarters of this year will see a huge increase in investments.

The Role of Bitcoin and Ethereum ETFs

One of the main reasons for this expected surge is the approval of ETFs for Bitcoin and Ethereum. The Bitcoin ETF started strong in January, but its momentum slowed down in the second quarter. Now, with Ethereum ETFs also available, things are looking up again. Big financial firms like Morgan Stanley, Wells Fargo, UBS, and Merrill Lynch are expected to approve these products soon. This approval could unlock trillions of dollars for the cryptocurrency market.

Access to ETFs

Not everyone can buy these ETFs right now. Retail investors and independent financial advisors can, but wealth managers at big platforms still can’t. Once institutions like Morgan Stanley and Wells Fargo allow their wealth managers to invest in these ETFs, we will see a massive inflow of capital. This will open up 70% of the market that currently doesn’t have access to these investment products.

BlackRock’s Influence

BlackRock, a major player in the investment world, has been talking about how crypto ETFs will be included in model portfolios by the end of the year. This means that many investors will have crypto as part of their standard investment packages. Over time, this will create a steady demand for cryptocurrencies.

Mainstream Acceptance

The growing interest from institutional investors is a big deal. It shows that cryptocurrencies are becoming more accepted in mainstream finance. Even the CEO of Goldman Sachs has acknowledged that Bitcoin could be a store of value. This kind of recognition from big financial leaders is significant.

Positive Market Catalysts

Several factors are creating a positive environment for the cryptocurrency market. Potential rate cuts by the Federal Reserve, the acceptance of leverage and margin in crypto ETFs, and the natural market cycles aligning with the upcoming election period are all helping. These factors are expected to drive the market upward.

Political Uncertainties

While political uncertainties exist, the overall outlook for institutional investment in cryptocurrencies is positive. More financial institutions and advisors are gaining access to crypto assets, which is likely to lead to substantial market growth.

Institutional Inflows and Market Dynamics

Institutional inflows into the cryptocurrency market are set to dramatically reshape the market landscape. The approval of major ETFs is one of the main catalysts for this influx. With the Bitcoin ETF seeing a strong start in January and Ethereum ETFs now available, the stage is set for a significant increase in market activity.

The Impact of Major Financial Institutions

The approval of ETFs by major financial institutions like Morgan Stanley, Wells Fargo, UBS, and Merrill Lynch will unlock trillions of dollars for the cryptocurrency market. Currently, only a fraction of the market can access these ETFs, primarily retail investors and independent financial advisors. The bulk of the capital, controlled by wealth managers at large platforms, is still untapped.

BlackRock’s Model Portfolios

BlackRock has stated that crypto ETFs will be incorporated into model portfolios by year-end. This move will introduce a steady demand for crypto assets as investors’ portfolios are regularly updated with new funds. The growing institutional interest signifies a broader acceptance and integration of cryptocurrencies into mainstream finance.

Goldman Sachs and the Store of Value Concept

The CEO of Goldman Sachs has acknowledged Bitcoin’s potential as a store of value. This recognition from a prominent financial leader reinforces the mainstream acceptance of cryptocurrencies. The convergence of several positive factors is creating a conducive environment for a bullish market trend.

Tailwinds for the Crypto Market

Several positive factors are helping the crypto market. These include potential rate cuts by the Federal Reserve, increasing acceptance of leverage and margin in crypto ETFs, and the natural market cycles aligning with the upcoming election period. Despite some political uncertainties, the overall trajectory for institutional investment in cryptocurrencies is clear.

The Future of Crypto Investment

With more financial institutions and advisors gaining access to these assets, the crypto market is poised for substantial growth. The long-term outlook for institutional inflows into the crypto space is overwhelmingly positive. Investors should prepare for a significant uptick in market activity as major financial players enter the arena.

The Impact of BlackRock and Other Institutions

BlackRock’s recent statements highlight the importance of crypto ETFs. They are expected to be part of model portfolios by the end of the year, introducing a steady demand for crypto assets. This move will make crypto a regular part of many investment portfolios, leading to a constant influx of capital.

Mainstream Finance Adoption

The acceptance of cryptocurrencies by major financial institutions like Goldman Sachs and BlackRock shows that crypto is becoming part of mainstream finance. The CEO of Goldman Sachs recently said that Bitcoin could be a store of value. This kind of recognition is significant for the future of crypto.

Positive Catalysts and Market Trends

Several factors are creating a positive environment for the crypto market. These include potential rate cuts by the Federal Reserve, increasing acceptance of leverage and margin in crypto ETFs, and the alignment of natural market cycles with the upcoming election period. These factors are expected to drive the market upward.

Political Uncertainties and Market Outlook

While political uncertainties exist, the overall outlook for institutional investment in cryptocurrencies is positive. More financial institutions and advisors are gaining access to crypto assets, which is likely to lead to substantial market growth. The long-term outlook for institutional inflows into the crypto space is overwhelmingly positive.

The Future

The future looks bright for institutional inflows into the cryptocurrency market. With the approval of major ETFs, the acceptance by mainstream financial institutions, and several positive market catalysts, we can expect substantial growth in the crypto market. Investors should be prepared for a significant increase in market activity as more financial players enter the space. Despite political uncertainties, the overall trajectory for institutional investment in cryptocurrencies is clear, and the market is poised for significant growth.

Crypto Liquidations Surge Amid Stock Market Downturn

The cryptocurrency market has experienced over $272 million in daily liquidations amid a stock market downturn. The cryptocurrency market experienced a surge in liquidations over the past 24 hours as the price of bitcoin dropped alongside a broader exodus from risk assets.

In the past 24 hours, a total of 81,838 traders were liquidated, with the total liquidations across centralized exchanges amounting to $272 million, according to data from Coinglass. Bitcoin was the leading cryptocurrency in the liquidations, with almost $78 million liquidated in the past 24 hours. Among these bitcoin liquidations, almost $44 million of them were long positions.

Stock Market Downturn

The downturn in the cryptocurrency market came as stocks tumbled on Friday. The S&P 500 was headed for its worst session in nearly two years, as a much weaker-than-expected U.S. July jobs report stoked fears of an impending recession. The Nasdaq Composite dropped 2.9%, pushing the tech-heavy index’s decline from its recent all-time high to over 10%. The Dow Jones Industrial Average fell 863 points, or 2.1%, and was down as much as 989 points at one point in early morning trading.

Bitcoin’s Future

One analyst said the largest digital asset by market capitalization could retrace again to the same support level. “We believe that the market is currently in an accumulation phase with a potential retest of the $62,500 support incoming in the near future. With no major movement expected in a specific direction, we recommend maintaining reduced exposure,” an analyst said.

However, he added that in the medium term, as the digital asset accumulates liquidity, bitcoin could potentially break out above the $70,000 resistance level. Fournier cited factors playing into bitcoin’s current range-bound performance. He said spot bitcoin exchange-traded funds have seen only small positive net flows over the two last days.

“This indicates indecisiveness from investors but still a generally positive overall sentiment,” he added. Fournier also highlighted a particular factor that could potentially delay a clear bullish trend for bitcoin.

Kamala Harris and Bitcoin

“Kamala Harris has greatly improved her odds of winning the U.S. presidential election, triggering fears of a possible anti-crypto stance and a reduction of the enthusiasm that followed Trump’s speech and promises,” Fournier said.

Some betting sites now place Harris’s chances of victory in November ahead of Donald Trump’s. The online prediction market PredictIt now shows Harris as the favorite to win in November, with shares of her victory selling for 52 cents, while shares for a Donald Trump victory are selling at 50 cents.

Cryptocurrency Regulations

Online exchange YouHodler’s Ruslan Lienkha said cryptocurrency investors are watchful of the current vice president’s strengthening odds on multiple online prediction markets, as they see a potential Harris victory as being bearish for the largest digital asset by market capitalization.

If investors believe a Democratic administration might impose stricter cryptocurrency regulations, bitcoin’s price could suffer. Harris’s momentum in crucial swing states could intensify these concerns.

Bitcoin Options 25% Delta Skew

The difference in implied volatility between out-of-the-money (OTM) calls and puts suggests that derivatives traders are hedging against the potential for further bitcoin downside. According to Deribit’s weekly analytics report, the bitcoin options 25% delta skew shows that OTM puts have higher implied volatility than OTM calls, indicating that the market might be expecting a bearish move.

Impact on Cryptocurrency Market

The current situation has caused a significant impact on the cryptocurrency market. The daily liquidations and the stock market downturn have led to a massive exodus from risk assets. This movement has also caused a drop in the price of bitcoin and other cryptocurrencies.

The S&P 500’s worst session in nearly two years and the Nasdaq Composite’s significant drop have shown how interconnected the stock and crypto markets can be. As investors move away from riskier assets, both markets experience declines.

Bitcoin Price Predictions

Analysts are keeping a close eye on bitcoin’s support and resistance levels. The potential retest of the $62,500 support level and the possibility of breaking above the $70,000 resistance level are crucial for the future of bitcoin. These levels will determine the direction of the market in the coming months.

Investor Sentiment

Investor sentiment plays a significant role in the cryptocurrency market. The small positive net flows into spot bitcoin exchange-traded funds indicate a cautious but generally positive outlook among investors. However, the indecisiveness in the market shows that many are still unsure about the future direction of bitcoin.

Political Factors

Political factors, such as Kamala Harris’s improved election odds, also influence the cryptocurrency market. The potential for stricter cryptocurrency regulations under a Democratic administration has raised concerns among investors. If Harris wins the presidential election, it could lead to significant changes in the regulatory landscape for cryptocurrencies.

Hedging Against Downside

Derivatives traders are taking measures to hedge against the potential downside in bitcoin. The higher implied volatility of OTM puts compared to OTM calls suggests that traders are preparing for a bearish move in the market. This hedging activity indicates caution and a focus on managing risk in the current volatile environment.

The cryptocurrency market is experiencing a surge in liquidations amid a broader stock market downturn. With over $272 million in daily liquidations and significant declines in major stock indices, investors are moving away from risk assets. Bitcoin’s support and resistance levels, investor sentiment, political factors, and hedging activities will all play a crucial role in determining the future direction of the cryptocurrency market.

MicroStrategy Stock Soars 1200% Thanks to Bitcoin

MicroStrategy Inc. (MSTR) has seen its stock skyrocket by 1200% since it started adding Bitcoin (BTC/USD) to its balance sheet. This impressive growth outpaces even the returns of tech giant NVIDIA Corporation (NASDAQ: NVDA), making MicroStrategy’s story worth exploring.

The Big Move

On August 10, 2020, MicroStrategy made a bold decision. It became the first publicly listed company to adopt Bitcoin as its primary reserve asset. This means the company decided to hold Bitcoin instead of traditional assets like cash. Since then, MicroStrategy’s stock has surged by nearly 1200%, outdoing even NVIDIA’s impressive 950% gain.

Why Bitcoin?

MicroStrategy’s co-founder Michael Saylor highlighted the reason behind this strategy during the firm’s second-quarter earnings call. The company wanted to escape the slow growth of being a non-big tech company. Initially, the goal was to track Bitcoin’s performance, but it evolved into outperforming Bitcoin itself. Since adopting Bitcoin, MicroStrategy’s stock returns have even outpaced Bitcoin’s own 488% increase.

MicroStrategy vs. Bitcoin and NVIDIA

It’s interesting to note that while MicroStrategy’s stock soared, Bitcoin’s price increased by 488% during the same period. This means MicroStrategy not only outperformed other companies but also the very asset it invested in. NVIDIA, another tech giant, saw a 950% increase, which is impressive but still less than MicroStrategy’s growth.

Second-Quarter Earnings

Despite the soaring stock, MicroStrategy reported lower-than-expected revenue for the second quarter. The company brought in $111.4 million, a 7.4% decrease from Q2 2023, and below analysts’ expectations of $119.3 million. However, the firm’s gross profit was $80.5 million.

Bitcoin Holdings and Impairment Losses

As of the latest update, MicroStrategy holds 226,500 BTC, worth over $14 billion at current prices. The company faced significant impairment losses due to Bitcoin’s price fluctuations, leading to a second consecutive quarterly loss. The carrying value of its Bitcoin holdings was $5.68 billion, with cumulative impairment losses of $2.64 billion. The original cost basis was $8.33 billion, with an average cost per Bitcoin at $36,798.

Bitcoin Yield KPI

To measure the performance of its Bitcoin strategy, MicroStrategy introduced a new Key Performance Indicator (KPI) called “Bitcoin Yield.” This KPI represents the percentage change period-to-period of the ratio between the firm’s Bitcoin holdings and its Assumed Diluted Shares Outstanding. The 2024 BTC Yield is 12.2% year-to-date, and the company aims for an annual BTC Yield of 4-8% from 2025-2027.

Equity Offering and Stock Split

MicroStrategy raised $800 million through 2.25% convertible senior notes due 2032 and redeemed $650 million in convertible senior notes due 2025. Additionally, the company announced a new $2 billion at-the-market equity offering program. To make its shares more accessible to smaller investors, MicroStrategy plans a 10-for-1 stock split, as announced by Michael Saylor.

Closing

MicroStrategy’s bold move to adopt Bitcoin as its primary reserve asset has paid off significantly. The company’s stock has soared by 1200%, outpacing both Bitcoin’s and NVIDIA’s gains. Despite facing impairment losses and reporting lower-than-expected revenue, MicroStrategy remains committed to its Bitcoin strategy, aiming to achieve positive Bitcoin Yield in the coming years. With new equity offerings and a planned stock split, MicroStrategy continues to adapt and grow in the ever-evolving financial landscape.

Under the leadership of Michael Saylor, MicroStrategy has positioned itself as a market leader in integrating Bitcoin into its corporate strategy. Saylor’s bold vision and commitment to Bitcoin have not only driven substantial stock gains but also set MicroStrategy apart from other tech companies. His consistent advocacy for Bitcoin and transparent communication about the company’s strategic goals inspire confidence among investors. By investing in MicroStrategy, potential shareholders align themselves with a company led by a visionary CEO who is dedicated to pioneering innovative financial strategies and driving long-term value through strategic Bitcoin investments.

Potential investors might consider buying MicroStrategy stock because of its strong association with Bitcoin. Since adopting Bitcoin as its primary reserve asset, MicroStrategy has seen a dramatic increase in its stock value, rising by 1200%. This impressive performance suggests that the company’s strategy of holding and acquiring Bitcoin can yield significant returns, especially as the cryptocurrency market continues to grow. Investors who believe in the long-term value and potential appreciation of Bitcoin might see MicroStrategy as a viable way to gain exposure to the digital asset.

Introduction: Where Are We in the Crypto Cycle?

Cryptocurrencies have been a hot topic for a while now. Many people are curious about where we are in the crypto cycle and if the momentum can continue. In this article, we’ll explore factors that influence long-term crypto growth, such as macroeconomic trends, regulatory shifts, and evolving use cases.

Crypto Prices and Market Trends

The prices of major crypto assets like Bitcoin and Ethereum have been moving in a broad range since March 2024. Some believe that the peak for this cycle happened in the first half of 2024. Here are a few reasons why:

1. Market Entrants: There haven’t been enough new people entering the market. Even with new spot Bitcoin and Ethereum ETFs, long-term holders have been selling.
2. Policy Easing: The big policy changes that helped the 2020/21 rally were due to the global pandemic, a rare event.
3. End-User Demand: There’s not enough demand from regular users through consumer applications, especially compared to the large supply of blockspace created by new scaling solutions.

These arguments make some sense but don’t fully consider all the risks for the next one or two years. Although nothing is certain, many factors suggest that crypto can still grow.

Global Monetary Policy and Crypto

Monetary policy, or how central banks manage money supply and interest rates, affects crypto. Over the past two years, developed markets have seen tight monetary policy, with high short-term interest rates. However, things are changing in 2024. For example, the European Central Bank and the Bank of Canada have cut rates, and interest rate markets are showing a more dovish outlook.

Interest Rates and the USD

The US has had higher interest rates compared to other major economies. This has kept the USD strong. But as interest rates may start to drop, the USD could weaken. If this happens, crypto prices might rise against the USD.

Central Bank Policies

Along with high interest rates, many central banks have reduced their balance sheets to fight inflation. This has led to high long-term real interest rates, negatively affecting housing markets. As central banks become more confident that inflation is under control, they might slow down the reduction of their balance sheets. This could lead to lower long-term real interest rates, another positive factor for the crypto cycle.

Asset Prices and Financial Crises

Policymakers have learned that they cannot allow systemically-relevant asset prices like housing, stocks, and bonds to fall unchecked. Falling asset prices can lead to financial crises, as seen in the 2008 crisis. Policymakers will likely ease policies aggressively if asset prices fall too much, which can benefit crypto. Bitcoin, for example, gains value as an asset outside the traditional financial system.

Improving Regulatory Environment

The regulatory environment for crypto in the US is improving. The upcoming US elections could further improve the situation, with prediction markets favoring the Republican party. They support crypto-friendly policies, such as self-custody of digital assets and Bitcoin mining. Even if the predictions are wrong, crypto might not become as partisan an issue as it was in 2022.

Stablecoin Legislation

Stablecoins are also getting attention. The next session of Congress might address stablecoin legislation. Stablecoins, like Tether, have grown significantly, with Tether owning almost $100 billion in US Treasury assets. This demand for US Treasuries from stablecoin issuers helps support the US economy.

Global Regulatory Climate

Beyond the US, other countries are also becoming more crypto-friendly. For instance, Hong Kong’s regulatory climate has become more supportive over the past year. There is also a possibility that China might lift its ban on crypto. If the US declares Bitcoin a strategic asset and supports USD-backed stablecoins, China might follow suit.

Crypto Infrastructure and Applications

Some people worry that the focus on infrastructure development in crypto is hurting the development of popular end-user applications. Recent Ethereum layer-2 launches are an example. Critics say this is fragmenting liquidity and causing a “vibecession” in the community.

Historical Concerns

Concerns about the state of crypto development are not new. In the 2020-2021 bull market, the high cost of blockspace was a major issue. Before that, scalability solutions were heavily criticized. However, these concerns often prove temporary and don’t affect long-term trends.

Future Applications

Despite current worries, the abundance of blockspace today provides a good environment for new applications to emerge. Prediction markets, for example, are becoming more popular as people use them to track outcomes like the US presidential election. This is more useful than traditional opinion polls.

Stablecoins and Growth

Stablecoins are growing rapidly and benefiting from the current scaling infrastructure. The market capitalization of stablecoins is over $160 billion, almost 80 times what it was five years ago. However, this is still a small fraction compared to major economies’ money supply. With more regulatory clarity, stablecoins can take advantage of the available blockspace to support global payment networks.

Cycle Timing Tools and On-Chain Data

Some concerns about the crypto cycle rely on on-chain data and cycle timing tools, especially for Bitcoin. One common metric is the market capitalization to realized capitalization ratio (MVRV). This shows the difference between the last market price and the price at which coins were last bought. However, as Bitcoin’s use cases expand, the relevance of these metrics may decrease.

Bitcoin and Ethereum ETFs

The introduction of ETFs for Bitcoin and Ethereum allows these assets to be used in broader portfolio strategies. This can increase transaction frequency and reduce the effectiveness of on-chain cycle timing metrics.

In summary, while some believe that the crypto cycle might have peaked, many factors suggest continued growth. Macroeconomic trends, regulatory shifts, and evolving use cases all point to a bright future for crypto. As the market continues to develop and adapt, it’s essential to stay informed and consider all aspects influencing the crypto cycle.

El Salvador’s Proposal to Use Cryptocurrency for Trade with Russia

Introduction

El Salvador has proposed a new way to settle trade with Russia: using cryptocurrency. This Central American nation wants to use digital currency instead of traditional financial systems. They are also interested in joining the BRICS bloc and might apply for membership in the next one or two years.

Ukraine-Russia Conflict Echoes in Central America

El Salvador has proposed using cryptocurrency to settle trade with Russia, according to Alexander Ilyukhin, the First Secretary of the Russian Embassy in Nicaragua. This move aims to help El Salvador overcome the challenges of its dollarized economy. El Salvador’s proposal comes amid the ongoing conflict between Russia and Ukraine. Ukrainian leader Volodymyr Zelensky has been urging El Salvador to support Kyiv against Russian forces. However, El Salvador’s government remains neutral and is focused on establishing trade ties with Russia.

Cryptocurrency as an Alternative Payment Method

Alexander Ilyukhin stated that El Salvador has difficulties with financial calculations because their official currency is the US dollar. As an alternative, El Salvador offers to use cryptocurrency for trade operations with Russia. This innovative approach could help both countries bypass traditional financial systems and avoid Western sanctions. The proposal highlights El Salvador’s interest in modernizing its trade practices and adopting digital currency for international trade settlements.

Challenges of a Dollarized Economy

El Salvador’s economy uses the US dollar as its official currency, which poses challenges in international trade. Traditional financial systems often involve complicated processes and can be influenced by external factors like sanctions. By using cryptocurrency, El Salvador aims to simplify these processes and avoid the restrictions that come with using the US dollar. This could make trade with Russia more straightforward and beneficial for both nations.

El Salvador’s Neutral Stance in the Russia-Ukraine Conflict

While the Russia-Ukraine conflict continues, El Salvador has chosen to remain neutral. Ukrainian leader Volodymyr Zelensky has called for El Salvador to support Ukraine, but the Central American nation is more interested in maintaining neutrality and developing trade relations with Russia. This neutral stance allows El Salvador to explore new economic opportunities without getting involved in the geopolitical tensions of the conflict.

Interest in Joining the BRICS Bloc

El Salvador has expressed a desire to join the BRICS bloc, a group of emerging economies that includes Brazil, Russia, India, China, and South Africa. Alexander Ilyukhin revealed that El Salvador might formally apply for BRICS membership within a year or two. Joining the BRICS bloc could help El Salvador attract foreign investment and gain economic independence from the US and the World Bank. The BRICS countries represent a significant portion of the world’s economic power, and membership could provide El Salvador with new opportunities for growth and development.

Attracting Foreign Investment

El Salvador’s interest in joining the BRICS bloc is driven by a desire to attract foreign investment. By becoming part of this group, El Salvador hopes to bring in investment from BRICS countries, which could boost its economy and create new job opportunities. The country is looking to diversify its sources of investment and reduce its reliance on traditional financial institutions like the World Bank.

Overcoming Challenges with Traditional Financial Systems

Traditional financial systems often involve complex processes and can be affected by international sanctions. El Salvador’s proposal to use cryptocurrency for trade with Russia aims to overcome these challenges. By adopting digital currency, El Salvador can streamline its trade operations and avoid the complications associated with using the US dollar. This innovative approach could set a precedent for other countries facing similar challenges in international trade.

Potential Benefits of Cryptocurrency in Trade

Using cryptocurrency for trade settlements offers several potential benefits. First, it can reduce transaction costs by eliminating the need for intermediaries like banks. Second, it provides greater transparency and security, as blockchain technology ensures that all transactions are recorded and cannot be altered. Third, it allows for faster and more efficient cross-border transactions, which can enhance trade relations between countries. For El Salvador, these benefits could translate into a more robust and resilient economy.

Creating a Bank to Handle Trade Settlements

When asked if using the two countries’ respective currencies to settle trades is an option, Alexander Ilyukhin mentioned that creating a bank to handle these transactions is possible. However, this route could expose traders to Western sanctions. By using cryptocurrency, El Salvador and Russia can avoid these sanctions and ensure that their trade relations remain unaffected by external pressures. This approach also aligns with El Salvador’s goal of achieving greater financial independence.

The Role of Cryptocurrency in Modernizing Trade Practices

El Salvador’s proposal to use cryptocurrency for trade with Russia reflects a broader trend of digital transformation in international trade. As more countries explore the use of digital currencies, traditional financial systems may need to adapt to these changes. For El Salvador, adopting cryptocurrency represents an opportunity to modernize its trade practices and position itself as a forward-thinking economy. This move could also encourage other countries to consider similar approaches to enhance their trade operations.

Implications for International Trade Settlements

If El Salvador’s proposal to use cryptocurrency for trade with Russia is successful, it could have significant implications for international trade settlements. Other countries may follow suit, adopting digital currencies to simplify their trade processes and avoid the challenges associated with traditional financial systems. This shift could lead to a more decentralized and efficient global trade system, with cryptocurrency playing a central role in facilitating cross-border transactions.

Economic Independence from the US and the World Bank

By proposing to use cryptocurrency for trade with Russia and seeking membership in the BRICS bloc, El Salvador aims to achieve greater economic independence from the US and the World Bank. This move reflects a broader desire to diversify its economic partnerships and reduce its reliance on traditional financial institutions. For El Salvador, achieving economic independence is crucial for its long-term growth and stability.

Future Prospects for El Salvador

El Salvador’s innovative approach to trade and its interest in joining the BRICS bloc indicate a forward-thinking strategy for its future. By embracing cryptocurrency and seeking new economic partnerships, the country aims to position itself as a leader in digital finance and international trade. These efforts could help El Salvador achieve sustainable economic growth and enhance its global standing.

Conclusion

El Salvador’s proposal to use cryptocurrency for trade with Russia represents a bold step towards modernizing its economy and achieving greater financial independence. By adopting digital currency, the country aims to overcome the challenges of its dollarized economy and simplify international trade processes. Additionally, its interest in joining the BRICS bloc reflects a desire to attract foreign investment and reduce reliance on traditional financial institutions. As El Salvador continues to explore these innovative approaches, it could set a precedent for other countries looking to enhance their trade operations and achieve economic independence.