Connecting the Dots
Episode 83 - Holy Cow This Timeline....
Welcome to the new subscribers that have joined us over the last week. The aim of this newsletter is to help you navigate the world of crypto. There’s an incredible amount of information out there so we try to distil it into the things you MUST know each week, covering both macro and crypto.
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Onto the newsletter. Here’s what you’re getting this week:
Macro Update: Guest Writer Noelle Acheson gives her views on this weeks macro.
Crypto Native News: OKX selects Malta as its MiCA hub, Kraken expands custody services to UK/Australia, Copper secures a TCSP license in Singapore, Chainbase raises $15m.
Institutional Corner: State Street exploring stablecoin and deposit token, Hong Kong running second round of consultation for stablecoins issuance guidelines.
Charts of the Week: CME Group futures now represent over 83% of the calendar futures market for Bitcoin and 65% for Ethereum, Memes leading month to date returns.
Top Jobs in Crypto: Featuring Revolut, Paysafe, Crypto.com, AlphaChain Capital, Kraken, Elliptic and Talos.
Macro Chart of the Week - U.S. Corporations now hold $4.11 Trillion in Cash, an all-time high. Hat tip to Barchart for the chart.
Macro Update
This is where we connect the dots between macro and crypto.
While we take a 2 week summer break, we have a guest writer for the macro section, our good friend Noelle Acheson. All views in the following section are those of Noelle’s.
Holy cow this timeline…
If ever there was a week that marked an inflection point in US politics and its impact on crypto markets, it has to be this one.
It started with a surge of approval of how Trump handled the horrifyingly close call last Saturday in the attempt on his life, which forced even Democrats to face up to what seemed at the time to be a likely Republican victory come November.
Given Trump’s full-throated embrace of the crypto ecosystem (especially of its generous support), this added to the build-up of tailwinds and triggered (or maybe encouraged) last weekend’s welcome move in the BTC and ETH prices.
This was amplified the following day by Elon Musk’s confirmation of his endorsement of the Republican candidate which, given Musk’s public support for BTC and DOGE, could end up further influencing Republican crypto policy.
And on Tuesday, Trump announced the choice of JD Vance, someone who holds more than $100,000 worth of BTC in his personal account, as his running mate.
Combined with prediction markets that were putting odds of a Trump victory at roughly 80%, it looked like the regulatory winds for the crypto ecosystem in the US were for sure changing.
But the economy?
Meanwhile, markets and analysts were parsing the likely economic stance of the Republican ticket, and here is where it gets even more interesting, as well as relevant for crypto prices.
Trump’s published platform includes, right behind closing the border and deporting immigrants, the commitment to “end inflation”.
Yet most of Trump’s proposed policies so far point to higher, not lower, inflation:
Across-the-board tariffs are inflationary. Sure, tariffs in his previous administration didn’t move the needle much, but a price hike on $18 billion worth of goods is not the same as a potential price hike on more than $3 trillion worth of goods. And while the goal would be to boost domestic production, that takes time and a lot of investment, also inflationary. And the higher input costs for American factories are going to result in more expensive goods than consumers are used to.
One of the main input costs where the difference is felt will be wages. Increased demand for labour at a time when the supply is being reduced through deportation will pump incomes, which is inflationary.
Tax cuts are inflationary, in that they put more disposable income in consumers’ hands.
And a weaker dollar, which Trump has explicitly said he wants, is inflationary as it further increases the cost of imports.
And yet, Trump doesn’t just want to end inflation – the title of Chapter 1 of his platform gives more detail: “Defeat inflation and quickly bring down all prices”. I mean…
In the snowball’s chance in hell he pulls this off, lower inflation means lower interest rates which should be good for risk assets, including crypto. Higher inflation, perhaps not so much, at least in the short-term.
But the dollar?
Things get even more complex and yet potentially dramatic when we look at what all this could mean for the US dollar.
Trump has often in the past said that he wants a weaker US dollar, as he blames its strength for hollowing out the US industrial base and for creating distorted trade balances. Only, this would require radically lower interest rates, which would be hard to achieve if inflation is showing signs of picking up.
And, get this, a key reason the US dollar has remained strong relative to other currencies over the past few decades is that it is the world’s reserve currency. A weaker dollar would lessen its appeal, even among foreign investors not worried about more dollar weaponization. This could call into question the dollar’s global role as a “store of value”, especially if other regions such as Japan or Switzerland change their monetary policy to attract foreign investors. But point 13 on the Trump platform is: “Keep the US Dollar as the world’s reserve currency.”
Enter JD Vance, the vice-presidential candidate, who has in the past spoken out against the “resource curse” of having the world’s reserve currency. He blames the strong dollar for America’s social malaise, for the “financialization” of the US economy, as well as for its “dependence” on foreign holders of US debt. He will no doubt support Trump’s desire for a weaker dollar, and could perhaps nudge his stance on maintaining its global status.
This should be good for BTC in that currency turmoil will enhance the appeal of a hard supply cap asset that can diversify reserves while remaining unaffected by geopolitics. The gold price has been telling us for months that people and institutions are already positioning for a dollar debasement.
And, of course, the USD is the denominator in the most-quoted BTC pair, so when the denominator goes down, all else equal, the value of the ratio goes up.
In sum, a lower dollar would be good for crypto.
Fine, but how exactly would they get the value of the US dollar down? One way is talking it down – traders are likely to pay attention a US president saying the dollar is too high. Maybe the Japanese could lend a hand by selling even more dollars to defend the yen – if the US lends the Bank of Japan the funds, this does not necessarily need to crash treasuries and push up yields.
But maybe, just maybe, and this will probably sound crazy but bear with me here… you’ve heard the rumours that Trump will announce the creation of a US Strategic Bitcoin Reserve at the Bitcoin conference in Nashville next week? Well, what if one way to get the dollar down was to sell a lot of dollars… to buy bitcoin?
No, I don’t really believe it either, and I initially dismissed the Strategic Reserve rumour as either a PR stunt or an attempt from some commentators to rekindle crypto markets. But, thinking about the stated economic goals of eliminating inflation while onshoring, cutting taxes and deporting workers, well, let’s just say that crazy economic ideas are already on the table. So, what’s one more?
Noelle Acheson, partner at Triple Crown Digital and author of the Crypto is Macro Now newsletter on Substack. Check it out here…
Native News
Key news from the crypto native space this week.
OKX has selected Malta as its MiCA hub as the new regulatory framework rolls out across the European Union. The firm said it chose Malta over other jurisdictions due to the country’s high regulatory standards and “forward-thinking” approach to blockchain and cryptocurrency, as well as OKX’s existing personnel and infrastructure based in Malta. Under the MiCA framework in the EU, OKX plans to offer spot trading, including EUR and USDC pairs, along with buy, sell, convert and staking services to eligible EU residents through its Malta entity. Once fully effective on 30 December this year, MiCA will enable crypto-asset exchanges to passport into EU countries and provide services across the entire region, OKX said. OKX Europe General Manager-Designate Erald Ghoos said “We’ve established our MiCA hub in Malta because it will enable us to provide world-class products to a diverse range of customers across Europe,” “These new regulatory standards, which aim to protect users while supporting the sustainable development of the crypto industry, also enable us to deepen our hiring and investment in Europe in the long-term. I can think of no better place to establish our MiCA hub than Malta due to its track record of prioritising customer safety and security.”
Kraken Institutional has expanded its custody service to new and existing clients in the UK and Australia. The move follows the launch of Kraken Custody in the U.S. in March, designed to let institutions store, manage and transfer funds securely within a single interface, integrated with the rest of Kraken’s product suite. Kraken claims the market is seeking more custody alternatives, launching its institutional services in February after BlackRock, Franklin Templeton and Grayscale Investments tapped Coinbase as their spot bitcoin exchange-traded fund custodian. “Custody has always been integral to the institutional crypto space and the recent success of the bitcoin ETFs has only underscored the need for a broader range of qualified custodians,” Tim Ogilvie, Head of Kraken Institutional, said in March. “Kraken has 12+ years of experience in safeguarding client assets and a qualified custody solution is a core part of a full-service institutional offering.”
Crypto custody firm Copper has secured a Trust or Company Service Provider (TCSP) license in Hong Kong. The license is a legal authorization granted by Hong Kong’s Companies Registry and permits the holder to provide trust and corporate services to institutions in the region. Dmitry Tokarev, founder and CEO of Copper “This is a key development in Copper’s expansion in the Asia Pacific market. Combining trust and efficiency is fundamental to our institution-first approach,” “This license approval in a key global hub only strengthens that unique offer, highlighting Copper’s compliance with Hong Kong’s regulatory frameworks and standards.”
Omnichain data network Chainbase has raised $15 million in Series A funding with Tencent Investment Group, Matrix Partners and Hash Global among the investors. Chainbase is an interoperability layer that is building the "first crypto world model", to deliver data from across the cryptocurrency spectrum. Its aim is to provide unbiased and transparent data that is not controlled by a small number of dominant companies. Chainbase will use its fresh capital to grow and spur adoption of its network and build up AI capabilities.
Institutional Corner
Top stories from the big institutions
State Street Corp. is exploring blockchain-based payment settlement options, including the creation of its own stablecoin and deposit token. State street are also evaluating joining digital-cash consortium efforts and examining settlement options through its investment in Fnality, a blockchain payment startup expanding into the US. The report highlights that State Street’s consideration of a deposit token would require approval from US banking regulators. The company has been expanding its digital-asset efforts, recently integrating its digital-assets focused team members into its overall business to foster closer integration between traditional finance and digital assets. State Street’s recent digital-asset survey of 300 investment institutions revealed that nearly half of institutions are prepared to trade digital assets on and off distributed ledgers and blockchains.
Hong Kong lawmaker Duncan Chiu said today that Hong Kong is currently running the second round of consultation for stablecoins issuance guidelines. Chiu said at a forum in Shanghai that he hopes Hong Kong would be set to release regulatory guidelines for stablecoin issuers in the middle of next year. Chiu’s comments come as the region aims to develop itself into a Web3 hub. Unlike its neighboring Chinese mainland’s broader crackdown on cryptocurrencies, Hong Kong has been more welcoming to crypto firms. In June, Hong Kong officially started its crypto licensing regime, allowing licensed exchanges to offer retail trading services. In August, a group of industry experts urged the Hong Kong government to issue its own stablecoin HKDG to compete with USDT And USDC.
Charts of the Week
Because charts are just as important as macro.
CME Group futures now represent over 83% of the calendar futures market for Bitcoin and 65% for Ethereum, highlighting CME's growing influence in institutional trading.
Memes leading the month to date returns. Hat tip to CCData for the chart.
Top Jobs in Crypto
Well, we all want to work in Crypto don’t we. Here’s a bit of help on your job search!
FinCrime Manager for Crypto at Revolut
Relationship Manager for Crypto at Paysafe
Senior Flow Trader - Quant Trading Team at Crypto.com
Quant Developer - DeFi at AlphaChain Capital
Senior Lead - Strategy at Kraken
Senior Enterprise Sales at Elliptic
Client Services Engineer at Talos
DISCLAIMER: The content in this newsletter is not financial advice. This newsletter is strictly educational and is not investment advice or a recommendation to buy or sell any assets or to make any financial decisions. Crypto markets are volatile, please be careful and do your own research.