What are the Indicators of the Next Crypto Bull Market? Are they at odds?

Recognizing if a crypto bull market is returning depends on which indicators we look at ultimately. Some indicators suggest that a bullish crypto market is just around the corner, while others suggest that the bear market will soon reoccur. This article examines these conflicting indicators, sheds light on what they signify in simple terms, and elucidates where the crypto market could be headed.

Price Action

First up is price action, as it’s everyone’s favorite indicator. Many crypto experts define a crypto bull market as a long period of positive price action. In other words, multiple months of higher highs and higher lows for the most significant cryptos. As the graph below indicates, BTC has had four consecutive months of positive price action, which began in January. BTC is, therefore, in a new bull market, according to Coinbureau’s basic definition. 

Screenshot: Coinmarketcap.com

However, there are a few caveats: First, this multi-month rally has yet to happen for most major altcoins apart from ETH.  Almost every major altcoin has been moving sideways over the last four months. In an actual crypto bull market, you see breadth in the positive price action meaning that most altcoins ride on BTCs’ coattails. 

The absence of this effect is evidence of a bear market rally, not a bull market. ETH's price action can provide additional proof of this being a bear market rally. ETH didn't have the same double top as BTC during the previous bull market. ETH’s price action looked more like what you'd see in a standard market cycle and could be due to institutional investment. 

Comparing ETH’s price action to the famous Wall Street cheat sheet suggests we're just past the anger stage. That said, ETH could easily be in the disbelief phase that comes before the beginning of a new bull market. 

Image credit: Newtraderu.com

This ties into the second caveat, and that's trading volume. Data from Coinmarketcap suggests that trading volume for BTC has continued to decline as prices have risen. This effect is even more pronounced for ETH. This divergence of increasing prices and falling volume is further evidence of a bear market rally and also suggests that a reversal could be imminent. 

However, this decline in trading volume could be due to institutional investors investing in crypto via centralized proxies like futures contracts that are settled in cash due to concerns around crypto regulation. It would explain why ETH's trading volume is so low relative to BTC. 

Screenshot: Coinmarketcap.com

Also, ETH has been looking extremely weak against BTC and has been in a long-term downtrend against BTC since around July of last year. The same trend can be seen in most major altcoins. Again for this to be an actual crypto bull market, there must be breadth and broad participation, at least among most major altcoins. 

To be fair, we could soon start to see more money rotate out of BTC into ETH and most major altcoins. If this happens, it will be additional evidence of a new bull market. For the time being, though, Bitcoin dominance continues to increase. For context, Bitcoin dominance measures how much of BTC’s total market cap comes from crypto. Bitcoin dominance is currently at around 46% and has been in a long-term uptrend since last September, showing no signs of slowing. 

Regulations 

If BTC doesn’t rotate into ETH and the most significant altcoins, it could be due to another factor previously mentioned: Crypto regulations. Like it or not, crypto regulations are required for institutions to invest their trillions into the crypto market. The largest institutional investors are based in the United States. US institutional investors were likely the most significant contributors to the previous crypto bull market. Unfortunately, the regulatory situation in the US has deteriorated significantly over the last few months.

In addition to the threats against specific crypto projects and companies by the SEC, the Fed and other banking regulators have been actively working to de-bank the crypto industry. Their primary targets have been 24/7 payment systems analogous to the Fed's upcoming Fed Now payment system. 

Stablecoin issuers are at the top of the Fed's hit list. It’s problematic because the crypto industry relies heavily on stablecoins to function. If anything were to happen to a stablecoin issuer in the United States, it could severely damage the crypto market and be a disaster for the entire DeFi niche. 

However, not all stablecoin issuers are based in the United States, and most crypto trading happens against offshore stablecoins, namely, Tether’s USDT. This means the crypto market would be mostly fine if a US-based stablecoin were taken down. A crackdown on a US stablecoin issuer may also not materialize. More importantly, other countries with many institutional investors are introducing sensible crypto regulations. 

This article about the countries that will drive the next crypto bull market discusses that the list includes the UAE, Saudi Arabia, Hong Kong, Singapore, and France. These jurisdictions will introduce these sensible crypto regulations very soon. France has technically done so already. The Markets in Crypto Assets (MiCa) regulation was passed by European politicians less than a month ago. Money is already flowing into EU crypto startups as a result.

Moreover, it looks like Hong Kong is next. Officials there recently announced that crypto licensing requirements would be revealed by the end of the month, with retail access to crypto coming on June 1st. Lots of money from the Chinese Mainland may enter the crypto market via Hong Kong. It's also likely that lots of crypto companies will relocate to the region. That's because Hong Kong requires banks to open accounts for crypto clients.

This is significant because crypto companies in crypto-friendly jurisdictions, like the UAE, are still reportedly struggling to open bank accounts. The caveat is that crypto investment from Hong Kong will reportedly be limited to the largest cryptocurrencies by market cap, and crypto niches like DeFi could be completely off-limits. Even so, there are many ways of accessing altcoins once you've acquired a crypto like BTC or ETH. 

Notwithstanding, the passing of favorable crypto regulations in these countries will likely be enough to increase the conviction in crypto’s recent price action and confirm that it's the beginning of a new bull market. However, this assumes that macro conditions encourage crypto investing in these regions. 

Interest Rates 

Interest rates are the primary macro factor moving the crypto market, specifically the interest rate decisions coming from the Federal Reserve. The fact that the Fed is near the end of its rate hiking cycle has contributed to the recent rally. Another contributor has been the expectation that the Fed will soon be forced to pivot, i.e., start lowering interest rates. Investors believe the Fed will do this in response to a crisis; an example could be the stress in the commercial real estate sector.

The irony to this expectation is that if the Fed is forced to pivot in response to a crisis, chances are the situation will also crash the markets. Case in point, sudden rate cuts have historically corresponded to stock market crashes, not rallies. A rate cut may have the same effect on the crypto market. However, in the absence of a crisis, only falling inflation will convince the Fed to pivot. As it happens, headline inflation has fallen fast over the last few months. The question is whether inflation will fall to the Fed’s 2% target, and the answer here is unclear. 

Image source: In2013dollars.com

Core inflation figures of all kinds suggest that services-related inflation isn't coming down nearly as quickly. If core inflation gets stuck at 4%, the Fed will likely keep interest rates slightly above that level. The longer the Fed keeps interest rates high, the higher the likelihood that markets will crash, that something in the financial system will break – or both. Risk assets like cryptocurrencies could be hit the hardest because they rely on lower interest rates for positive price action. 

Image source: Advisor Perspectives

For those who are wondering why this is, the answer is liquidity. Liquidity is the amount of money circulating in the market and the economy. As interest rates rise, liquidity gets drained out of the financial system as people rush to pay off more expensive debts and have difficulty accessing loans. As it happens, the supply of money in the US economy, as measured by M2, has been shrinking faster over the last few months than in decades.

This situation should have caused risk assets like crypto to crash, but they pumped instead. The simple explanation is that there is more to the world than the United States. Although the money supply has decreased in the US, countries like China and Japan have continued to stimulate, and this money has been slowly but surely finding its way into US assets. The caveat is that this stimulus may not continue for much longer, at least in China, where economic growth is returning. 

Another reason why risk assets have rallied is because of the Fed and the treasury. The Fed recently expanded its balance sheet in response to the banking crisis. Meanwhile, the treasury has been spending money from its de facto checking account due to the debt ceiling, which is increasing liquidity. However, the Fed's balance sheet recently started decreasing again, and the debt ceiling will soon be raised, allowing the treasury to reissue bonds. Both factors could further drain liquidity, further prolonging a crypto bear market. 

Geopolitics

As stated earlier, there is more to the world than the United States. Much of the world has been trying to escape the US dollar. This could positively affect the crypto market during the next bull cycle. Some countries, such as Iran, reportedly use crypto for trade, and others, such as Russia, may follow suit. This could change crypto's categorization from a risk asset to something analogous to a commodity, like gold, at least in these regions. 

Steady crypto demand from these regions could create a price floor for significant cryptos like BTC and ETH, the same way central banks created an apparent price floor for gold, and they accumulated record levels of gold last year. This was predominantly due to the sanctions against Russia, which caused many central banks to think twice about keeping large reserves in US dollar assets. 

In retrospect, sanctions could be the catalyst that killed the dollar. While these central banks haven't begun accumulating crypto yet, the Bank for International Settlements announced last December that central banks will be allowed to hold up to 2% of their balance sheets in crypto starting in 2025. By then, the crypto bull market should be in full swing, and if it's not, that will likely be the catalyst that kicks it off. Some central banks may have begun secretly accumulating crypto already. 

Additionally, trust in the financial system is deteriorating at a rapid rate, and the crypto market will continue to grow as trust in the traditional financial system continues to decline. This is evidenced by how much the crypto market pumped in response to the banking crisis. If the banking crisis continues in some form, you can expect to see more of the same positive price action for most cryptocurrencies.

Even if the banking crisis doesn't continue, central bank digital currencies (CBDCs) are coming, and they could have the same effect on the crypto market. The reason is that CBDCs will allow governments and central banks to control how you spend and save. As with the banking crisis, the average person will quickly realize that government money is not a safe place to store their wealth and will seek alternative stores of value.

The average person will likely allocate a small percentage of their portfolio to assets outside the financial system, including crypto. This percentage will become more extensive as these alternatives become easier to use. It's already happening worldwide; individuals and institutions are turning to crypto because their currencies are collapsing, their banking systems are struggling, or because CBDCs are being rolled out. This combined buying could set a price floor for many cryptocurrencies; this price floor will likely rise as the appeal of traditional currencies continues to decline. 

As such, we could be at the beginning of a crypto super cycle, or at least a crypto market cycle unlike any other. The caveat to this is that the incumbents will not go quietly. This potential supercycle will likely be accompanied by unprecedented price volatility as entities in the existing financial system try to crush or control crypto. Some would say this has already started, and the recent price action is proof.

The Crypto Market Cycle

As you may be aware, crypto tends to follow a four-year cycle and is believed to be because of the Bitcoin halving, which occurs roughly every four years. The last Bitcoin halving happened in May 2020, and what followed was an almost two-year-long crypto bull market. However, many argue that the crypto bull market began before the previous halving. BTC had already been in a strong uptrend for months, hitting $14k in May 2019. That early 2019 rally looks eerily similar to the one we're seeing now, four months of green; all be it with much more volume. 

This begs the question of whether history will repeat itself, specifically whether BTC will experience a flash crash that retests its bear market lows of around $15K. In theory, this is unlikely because the previous flash crash, when we saw BTC sink to about $3K, was caused by the beginning of the pandemic in March 2020. 

In practice, however, this is still possible, and that's because there are so many similar catalysts to choose from. 

• A 2008-style financial crisis caused by commercial real estate, 
• a war between China and the US over Taiwan, 
• civil wars due to inflation and political polarization, 
• or that global cyber attack predicted by the World Economic Forum. 

Even if history repeats, a retest of the crypto bear market lows will likely be short-lived. The fact remains that we're in the same time frame when the previous crypto bull market arguably began – one year before the next Bitcoin halving, which is scheduled for April 2024. However, this analysis only applies to BTC. 

As shown in the graph below, the historical price action of most major altcoins flatlined between May 2018 and the Bitcoin Halving in May 2020. You'll also see that most of them only hit their bottoms during the pandemic flash crash. This means that even if the crypto bull market has begun, you still have at least a year to accumulate your favorite altcoins, and you may still manage to catch the bottom of some of them. 

Screenshot: Coinmarket.com

The caveat is that some of these altcoins will never recover, especially if interest rates stay higher for longer. However, the effects of high-interest rates on the crypto market are not evident because the crypto market has never experienced a period of sustained high rates. Some argue that most cryptocurrencies, possibly even prominent altcoins like ETH, will not fare well under such conditions.

For established Proof of Stake cryptos, like ETH, the yield on staking rewards needs to be higher than the yields on traditional financial investments to capture the interest of institutions. In some cases, the rewards must be much higher to compensate for the additional risk of investing in crypto, e.g., Crypto vs. Bonds. 

For most other altcoins, there needs to be lots of speculation to receive heavy inflows, and these levels of speculation and inflows require lower interest rates. Some say the most speculative cryptos are all the Ethereum competitors, as they stand to capture the most value if they succeed. 

Image credit: Markethive.com

Speculation

As shared by Delphi Digital, “Crypto has primarily been a speculator’s market, and that’s still true today. But speculation isn’t inherently evil. The term “speculation” tends to carry a negative connotation. But, like most things, it sits on a spectrum. Hype and excitement drive interest, which attracts capital and gives entrepreneurs the resources to build innovative products leveraging new technologies.” 

Without speculation, capital wouldn’t flow to such risky ventures, and society would still be stuck in the stone age or the throes of tyranny due to escalating adverse events of today. Arguably, speculation is more than beneficial; it’s imperative at this stage. The crypto industry has gone through multiple hype cycles, each fueled by speculation on the back of emerging innovation triggers. Each hype cycle brought more attention, users, and capital to the crypto ecosystem and built upon the advances made by those previously.

This article explains why experts say a bear market is a good thing. There’s much truth in the mantra “bear markets are where you build” – many of today’s prominent protocols and applications were built in the depths of prior downturns. In the early stages of any emergent technology, much attention must be focused on the technical aspects of what’s being built.

The building is on one side of the equation; demand is on the other. It’s what’s needed to maximize the value of all the sweat equity that goes into bear market building. Demand leads to more usage, leading to faster feedback cycles, and better products, leading to more demand and use.

The visionaries and entrepreneurs see the need for innovation as the increasing pressure from the centralized totalitarian regime orchestrated by globalists tightens. To shift the balance of power, decentralization with an alternative financial system to the one currently failing us is a solution. 

A primary example of this is Markethive – The Ecosystem for Entrepreneurs. It is a community-funded pioneer in the blockchain and cryptocurrency space's social media, marketing, and broadcasting sector. 

Markethive is consistently delivering new integrations and updates to its platform in preparation for its launch into the crypto industry, and the timing couldn’t be better. It’s an entirely different animal and one of the most promising projects in the entire social media and marketing niche, with varied use cases and real-world applications that have the potential to change the media landscape. 

This next-generation platform perfectly exemplifies how this technology can benefit more people beyond just leveraged speculation. Markethive provides valuable utility for its community that understands the potential of applications in this new world.

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Citibank Report Says Asset Tokenization a “Killer Use Case” for Blockchain and CBDCs. What About Crypto?

Citibank's latest global perspectives and solutions report claims that tokenizing financial and real-world assets could be the "killer use-case" and a multi-trillion dollar opportunity. The report focuses on Asset Tokenization as the “killer use case” that blockchain needs to drive a breakthrough, with trillions of dollars worth of securities tokenized by the decade's end, forecasting up to $4 trillion. 

Citi is an investment bank on the list of the “Too Big To Fail” banks. Its 165-page research report is titled ‘Money, Tokens, and Games. Blockchains Next Billion Users and Trillions in Value’ and contains bold projections for Blockchain, NFTs, and Central Bank Digital Currencies. 

The report noted that the crypto industry is “approaching an inflection point,” and conversations by a few key figures in the crypto industry were aggregated in the research paper. The list includes Algorand founder Silvio Micali, Aave founder Stanley Kulechov, Ava Labs president John Wu, Polygon Labs president Ryan Wyatt,  and even Zooko Wilcox, the founder of Zcash.

The report pdf is very long, so here’s a summary of a few noteworthy sections and some counter-arguments of why it may be a little askew in these areas. Could it be intentional, or  maybe it’s just wishful thinking on their part? And what does it mean for the crypto industry?

Image credit: Citi GPS pdf
 

Report’s Brief Introduction 

The report begins with a brief introduction from Kathleen Boyle, the managing editor at Citibank, who, presumably, put this report together. She commences by explaining that the potential of blockchain has been overlooked primarily because it's a back-end technology, not a front-end technology like ChatGPT. She says successful blockchain adoption will be achieved when “Blockchain has a billion-plus users who do not even realize they are using the technology.” 

However, she does not say this adoption will come from crypto; it will come from Central Bank Digital Currencies (CBDCs). She also implies that the trillion-dollar opportunity of asset tokenization will come from the blockchains that power these CBDCs, not cryptocurrency blockchains. 

This starkly contrasts what the crypto headlines say about the report. – As DeFi Edge points out there are already some prominent crypto protocols focusing on real-world asset tokenization. This underscores the importance of whenever you hear an institution, be it a mega bank or a government, talking about the benefits and potential of blockchain technology, 99% of the time, they are not talking about cryptocurrency. In almost every case, they talk about private and permissioned blockchains they will control. 

This is why it's a bit scary to see Kathleen explain that blockchain needs “decentralized digital identities, zero-knowledge proofs, oracles, and secure bridges to achieve mass adoption.” She's probably not talking about the same technology we use in crypto. She's talking about different technology. Kathleen also notes that “regulatory considerations are also necessary to allow adoption and scalability without ‘hindering innovation’.” 

Image credit: Citi GPS pdf

Kathleen and her crew estimate the mass adoption of blockchain, not crypto, is 6 to 8 years away. Some would argue that the mass adoption of crypto will come much sooner than that, and the value of the assets tokenized on cryptocurrency blockchains will exceed the $4 trillion the report is projecting. Moreover, the sentiment of crypto heavyweights et al. believes the adoption of CBDCs and asset tokenization on private blockchains will be much lower than the authors' pitch. 

That's because data from the Bank for International Settlements (BIS), the bank for central banks, shows that only 4% – 12% of people will voluntarily adopt CBDCs. The same goes for tokenized assets on private blockchains. If governments control these blockchains, then having all your assets tokenized means you won't truly own them; the government will own them. This is precisely what entities like the World Economic Forum are pushing for. This article explains how you can reject what the globalists are planning.

Central Bank Digital Currencies – CBDCs 

The first part of the report worth covering is about CBDCs. The report projects that between 2 and 4 billion people will voluntarily adopt CBDCs. This is inconsistent with the adoption projections from the BIS and actual CBDC adoption in countries like Nigeria, where adoption is a fraction of a percent. 

It begins by revealing that the obsession with CBDCs comes from the fact that they will allow governments and central banks to micromanage monetary and fiscal policy. In other words, they can control how much you can spend, how much you can save, what you can buy, and so on. Citi’s authors estimate that as much as 20% of all the currency in circulation will be converted into CBDCs by 2030. They also claimed that; 

“The successful launch and adoption of CBDCs would lead to more stablecoin projects becoming mainstream. This is because the stablecoin protocol is now able to hold reserves in CBDCs, which are more stable and liquid than money market instruments.” 

For context, stablecoins are currently backed primarily by US government debt. This is a double-edged sword because it allows the US government to subsidize its spending but also risks crashing the bond market in the event of a stablecoin run. It sounds like stablecoins will soon be backed by CBDCs instead. This is concerning because if CBDCs back stablecoins, it gives governments and central banks de facto control of all the stablecoins in circulation. 

This, in turn, would give governments and central banks control of cryptocurrencies, whose ecosystems rely on stablecoins, such as Ethereum. Ethereum creator Vitalik Buterin said that stablecoins like USDC would have the power to decide future blockchain forks. What’s needed is a genuinely decentralized stablecoin to be developed that will protect crypto projects, like Ethereum, from future stablecoin control. 

The authors list countries that are working on CBDCs and include notes about which technologies they're using. Australia and Norway appear to use Ethereum as part of their CBDC development. It's safe to assume they will use some private version. To their credit, the authors also list risks associated with a CBDC rollout. These include competition between central banks because of currency competition, a loss of privacy, a loss of bank deposits leading to financial instability, and limited adoption. Critics argue that the latter isn't a risk.

Image credit: Citi GPS pdf

Regarding the adoption aspect, the authors highlight the less than 0.05% adoption rate of Nigeria’s eNaira and the slow adoption of the Bahamas Sand Dollar, with FTX’s collapse and C-19 said to be contributing factors to the loss in momentum. This makes their projection of wide-scale CBDC adoption that much more implausible. They blame the absence of said adoption so far on a lack of financial literacy. Arguably, financial literacy is precisely why people aren't adopting CBDCs. 

As explained in this article, it’s important to note the difference between CBDCs and cryptocurrencies. Certain institutions are already trying to market CBDCs as having the same benefits as cryptos as cryptocurrency adoption continues to rise.

Citi’s report presents timelines for when some CBDCs will be deployed. It states a digital Euro will be up and running around 2026. The digital pound will be ready by 2030, but the digital dollar is yet to be determined, and it slams the few brave US politicians for trying to stop its development. 

Decentralized Social Media – DeSo

The second part of the report is about decentralized social media (DeSo). Unfortunately, this chapter is relatively short because DeSo is highly critical due to the overwhelming efforts of governments to censor the internet. This article explains that governments worldwide are in the process of passing online censorship laws. In the European Union, these online censorship laws have already passed and are set to go into force in June this year. 

Since trust in institutions has been declining for decades and slumped after all the pandemic restrictions, their need for this crackdown makes sense. Trust in institutions is crucial for the financial status quo to continue. The recent banking crisis exemplifies what happens when that trust is entirely lost. This is why the authors note that “Blockchain's ability to create a shared, immutable, digital record of transactions could also help users see where particular information originated in order to judge its credibility. This could help build trust.”

The catch is that trust only exists when the blockchain is trustless. The report also notes that with DeSo, “ownership of content and control over the distribution channels remains with users.” This is required to resist online censorship, and it's the same principle that underlies all crypto. You are only financially free when you own and control your assets. 

The report’s authors include a conversation with Aave founder Stanley Kulechov; the remainder of the section is an interview with him. This is primarily because Stanley and the Aave team are working on the Lens protocol, a decentralized social media protocol that will serve as the backend for future DeSo platforms. Stanley believes that games and social media might be how most people become aware of blockchain technology. 

They are unaware that a monolithic crypto project in the DeSo space has been in development and is now up and running for the most part. The founder and architect of Markethive, Thomas Prendergast, envisioned the dystopian system we are experiencing currently and is ahead of the curve with a decentralized platform incorporating a social, marketing and broadcasting network for entrepreneurs that services as a cottage industry. Markethive is an ECOcentric DNA system. 

The Markethive ecosystem culminates with its unique, comprehensive economic center housing the wallets and account facilitation for the user, with merchant accounts for eCommerce facilitation, and enables creators to monetize their content. Its cryptocurrency, Hivecoin, is the cornerstone of this decentralized economic sanctuary and is a portal to sovereignty and financial freedom with gamification thrown in. This is where people are learning about and experiencing crypto and blockchain technology. 

Decentralized Digital Identity – DID

Another section of the report is about decentralized identity. Citi starts with a spooky sentence: "Decentralized identity is a core technology component that will enable regulatorily compliant uses of blockchain while still preserving anonymous/pseudonymous access.” 

They seem to suggest that the purpose of decentralized digital ID is not to do things like interact with cryptocurrency protocols but to be the “identity layer for the entire internet.” Logically, this means whoever controls this identity layer will have unprecedented power. 

Moreover, the report specifies that decentralized digital ID “Does not imply a lack of centralized parties in identity issuance or verification, but that the mechanism of owning, sharing and verifying identity is done in a permissionless, decentralized manner.” 

This is a problem because if the issuance and verification of a decentralized digital ID are centralized, the issuer or verifier can revoke your ability to interact with online services. That's not decentralization, underscoring the need for crypto to find a way to issue and verify digital ID in a decentralized manner. 

Consider that a decentralized digital ID tied to a government-issued document is no different from a centralized stablecoin. Ponder a scenario where your government-issued ID is digitized like the CBDCs backing stablecoins. Additionally, governments worldwide are actively working on rolling out Digital IDs. Countries are at different stages, but skepticism and pushback have existed. 

Naturally, the authors say that the need for digital ID comes from the relentless data collection by big tech. They don't say that most of these big tech companies are aligned with governments and that these so-called decentralized digital IDs will likely just provide this data directly to said governments. 

The authors showcase the recently released Polygon ID as an example of a decentralized digital ID solution, and the infographic suggests that it's built exactly how the authors describe it. There's a centralized issuer and verifier – you only control what you reveal on-chain. 

Image credit: Citi GPS pdf

The report also provides an example of an actual decentralized digital ID: the Ethereum Name Service (ENS). ENS lets you buy a decentralized domain name ending in .eth for those unfamiliar. It has no central issuer or verifier; it's entirely decentralized and is run by a DAO. With that said, you could argue that DAOs aren't that decentralized due to their governance structures. 

The authors appear to argue that an actual decentralized digital ID isn't a solution because it's not tied to so-called verifiable credentials such as government-issued IDs. Instead, they shill their version of decentralized digital ID, which they also call “Self-sovereign identity. They then provide examples of self-sovereign identities and include digital IDs developed by Microsoft and the European Union. To add insult to injury, the authors omit centralized control as one of the risks associated with this technology but imply that crypto is a risk. 

Smart Legal Contracts – SLC

The last part of the report is about so-called Smart Legal Contracts (SLC), also called Contracts 2.0. The authors start with a statistic, and that's that 60% – 80% of all business transactions involve a contract. They note that companies lose 9% of their profits and miss out on an additional 40% of profits from bad contracts. Nick Szabo is the creator of Smart Contracts; however, SLCs are not the same as his smart contracts. It’s the authors that deem them an official subset of Smart Contracts but with different characteristics. 

They clarify that smart legal contracts have no universally agreed-upon definition, but the main difference is they don't involve blockchains. Smart legal contracts are also legally enforceable in their countries of origin. By contrast, legal enforceability is rarely a consideration in smart contracts.

This begs the question of why smart legal contracts are required at all, and the authors reveal the answer. “Smart legal contracts are more dynamic to changing circumstances – to achieve legal compliance, they must include terms that allow them to be paused, modified, or rectified.” 

It sounds like the authors are insinuating that smart contracts cannot be legally compliant due to their immutability. If smart legal contracts don't exist on blockchains, can be adjusted on a whim, and occasionally require human execution, as noted by the authors, then it begs the question of what makes SLCs different from a standard digital contract. The authors don't have a clear answer here. 

To their credit, they concede that smart contracts are likely to be much more popular than smart legal contracts because they provide the following benefits. 

• They can exist indefinitely.
• They are transparent.
• They are tamper-proof.
• They are secure.
• They are built on a single source of truth. 

This section of the report is long and consists of the authors tripping over themselves to try and explain why smart legal contracts are the future despite being objectively inferior to smart contracts.

Image credit: Markethive.com

What Does This Mean For Crypto?

So here’s the big question – What does Citibank’s report mean for crypto? If anything, it reveals that institutional investors are looking at the crypto industry through a radically different lens from us retail investors. CBDCs, de facto digital IDs, and changeable smart contracts are not crypto. 

The few sections of the report about crypto were much shorter than those about dystopian technologies inspired by crypto. As mentioned, the chapter about decentralized social media was the shortest of all and could be interpreted as not a coincidence. 

Consider that the purpose of cryptocurrency is to replace megabanks like Citi, as well as most of the institutions that the other authors of this report work for. The first step to this replacement is the awareness of what crypto offers and why it's valuable. This information can be found on social media for now; however, with all the plans and legislations to continually broaden censorship of what authorities deem as mis/dis-information may see it disappear from the mainstream. 

In fact, leaked documents from the Department of Homeland Security stated that the US government was looking to censor information on social media, which fosters distrust in the financial system. Whoever still doubts that the government would resort to censoring financial information look no further than the recent banking crisis. In the subsequent hearings about the crisis, multiple US politicians pointed to social media as the cause of the bank runs that precipitated it. 

If you read this article about bank bail-ins, you'll know that US government officials discussed censoring discussions of bank runs on social media in their bank bail-in simulation late last year. It's more than likely that other governments would secretly consider the same behind closed doors. Now, I mention all of this because Citibank's report is part of what can only be described as an ongoing information war against cryptocurrency by the establishment. 

Another example is mainstream media articles about how Bitcoin mining is killing the planet, which is untrue. When it becomes clear to the establishment that they are losing this information war, they will resort to censorship to ensure that the trust in their increasingly unstable financial system remains. 

This crossroads is coming sooner than people think because everyone is waking up to CBDCs. People are also starting to wake up to the fact that not all cryptocurrencies are created equal, and the establishment is co-opting some crypto projects, companies, and technologies to usher in a dystopian new system. This system requires a digital ID; their fake decentralized digital IDs are the trojan horse. 

Always remember that blockchain does not equal crypto, and take every statement about crypto from megabanks and central banks with a massive grain of salt. The same goes for headlines about how mega and central banks embrace crypto. The likelihood is that they're doing the exact opposite. 

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Meme Coin Mania Meets Bitcoin: BRC-20 Offers New Challenges for Bitcoin Investors.

The world of cryptocurrency is no stranger to innovation and disruption. From the advent of Bitcoin in 2009 to the rise of Ethereum and the explosion of decentralized finance (DeFi), the crypto space has been at the forefront of technological advancement and financial experimentation. But in recent months, a new phenomenon has taken the crypto world by storm: meme coins.

These digital assets have little to no fundamental value but have gained massive popularity thanks to social media hype and viral marketing. Some of the most famous meme coins include Dogecoin, Shiba Inu, and SafeMoon. These coins have captured the imagination of millions of people worldwide, leading to a surge in demand and a corresponding increase in their market value.

But meme coins may not totally be a fad. They are also changing how we think about digital assets and blockchain technology. And with the introduction of the BRC-20 token standard, meme coins are now becoming part of the Bitcoin ecosystem, offering new opportunities for investors and enthusiasts alike. Investors are now experiencing a massive shift in the Bitcoin (BTC) ecosystem thanks to the new experimental token standard called "Bitcoin Request for Comment," or BRC-20, which has attracted much interest.

Over 4 million Ordinal inscriptions have been recorded on the Bitcoin blockchain as of the time of this writing. This new invention has the crypto community buzzing, with about 18,266 BRC-20 tokens created utilizing Ordinals and a soaring market capitalization reaching $409 million. Recently, non-ordinal BRC-20 transactions have been eclipsed by transactions involving the deployment, minting, and transfer of tokens. The proportion of BRC-20 transactions peaked on May 7 at 65%, demonstrating the protocol's expanding uptake.

Video source: Coindesk.com

Unlocking Bitcoin's Potential

For usage in smart contract applications, BRC-20 tokens are a cryptocurrency that operates on the Bitcoin network. BRC-20 transactions, in contrast to standard Bitcoin transactions, require the user to inscribe a new ordinal, lengthening the queue in the Bitcoin mempool. The size of BRC-20 tokens is around ten times smaller than picture inscriptions, although the mempool memory utilization is now lower than in March.

The average transaction price increased to $18.9, the highest level since May 2021, despite the decreased mempool utilization. This is brought on by the lengthy mempool wait, which makes users pay a higher gas charge for the miners to complete their transactions. The percentage of fees from Ordinals transactions has risen to 61%, with 99.5% coming from BRC-20. The fact that there has been a noticeable increase from the previous levels shows that BRC-20 is becoming increasingly popular within the Bitcoin community.

The percentage of transaction fees increased significantly from the 1-2% level seen since July 2021 to 31% on May 7. It's vital to remember that the costs are modest when expressed in BTC, even though this fee increase may worry some Bitcoin users. 

The Revolutionary Approach And Utility Of BRC-20

BRC-20 tokens have attracted much interest in the cryptocurrency sector, but their usability and DeFi capabilities still have the potential for improvement. BRC-20 tokens may see an upgrade in their DeFi capabilities due to the possibility of a layer 2 solution like Stacks to bridge BRC-20s, which may draw in additional users and investors. It will be interesting to see whether BRC-20 tokens can surpass their present restrictions and gain more excellent traction as a cryptocurrency.

Despite rising popularity and market capitalization, the utility of BRC-20 coins is still constrained by the absence of smart contract functionality. However, the possibility for a layer 2 solution might improve their DeFi capabilities, which could lead to a cryptocurrency that is more commonly used.

Image source: Twitter

Bitcoin Community Reacts

Since its introduction by a developer going by the fictitious name Domo in March, the BRC-20 token standard has generated a lot of discussion within the Bitcoin community. Using the Ordinals protocol, BRC-20 tokens make it simple for developers to manufacture fungible crypto assets. Individuals must encode JSON data containing crucial token information to produce a BRC-20 currency. Similar to an ERC-20 token contract on Ethereum, this information would provide essential information about the token, such as its name, symbol, and total quantity.

As of this writing, there are over 300,000 unconfirmed transactions in the Bitcoin mempool due to the spectacular issue of over 18,266 BRC20 tokens and the spike in Ordinal inscriptions exceeding 4 million. Ordspace has a complete list of these 10K+ BRC20 currencies and a US dollar value for each token. The BRC20 token economy has seen tokens soar with increases in the triple digits.

These tokens include PEPE, MEME, ORDI, $OG$, PUNK, SHIB, and DOMO, to name a few. A contentious discussion about whether fungible and non-fungible tokens (NFT) built on BTC merit confirmation alongside financial transactions has been rekindled by the storm of BRC-20s and Ordinal inscriptions.

Ethereum supporter Ryan Berckmans described the rivalry between BTC Core devs, miners, and ordinals as a "civil war." BRC-20 meme coins and ordinals are viewed as spam by several developers, including Dashjr. As a result of the rising demand for block space, transactions, and fees have surged, giving the impression that it is experiencing an "Ethereum moment", yet they are advantageous to Bitcoin miners who are making huge profits from this disaster. Divisions within the Bitcoin community are nothing new; they have existed in the past and will probably do so again as long as the crypto sector continues to exist.

Image by Markethive.com

Final Thoughts

The current situation makes it untenable for many who want to use Bitcoin for its intended purpose. When you look at the ideas behind meme coins, you will understand that they are purely pump and dump coins with no actual utility attached to them. However, some argue that utility may come on afterwards, such as in the many NFT projects that started off as a joke. 

The thing here is that most of these meme coins are launched by rogues who anonymously build a community through massive advertising campaigns that make people believe in the project. After a while, the project dies off, causing people to lose millions of dollars. The bitter truth about meme coins is that the people are the products or the actual jokes in these projects. Having these projects launched on the Bitcoin Blockchain creates many uncertainties and opportunities, as many would believe.

If you are a Bitcoin maximalist, there's a reasonable probability you're angry. Why? Several people waste block space and pollute the king of crypto with pointless projects. Unfortunately, since NFTs and DeFi on Bitcoin are such a big concern, you can't stop people from doing this.

Bitcoin takes out the corruption of humans because the humans that created it stepped away. Certainly, people will build corrupt and disruptive systems around it, as we see with the meme coins, but Bitcoin remains a simple, pure, and elegant currency. Bitcoin's lack of control by any institution or government empowers individuals with economic freedom and personal sovereignty. It's a game-changer. However, will the era of meme coin end anytime soon? Is Bitcoin the ideal place for this kind of project? Most likely not! We will have to wait and see how it all works out.

What Is The State Of Crypto In 2023? A Paradox Unpacked. 

We are currently seeing an antithesis in the crypto world and its market. In one respect, proposed crypto regulations worsen; unbalanced, even nonsensical, and interest rates are increasing. Conversely, coins and tokens are hitting multi-month highs, and new crypto projects are raising billions. 

Crypto VC firm Andreessen Horowitz, also called a16z, unpacks this paradox in its State of Crypto Report for 2023. It was published on March 11, 2023, revealing which issues are holding crypto back and which cryptos are about to explode. This article summarizes a16z's report and explains what it says and means for the crypto market. 

Image source; a16zcrypto.com

The report begins with an overview of what's been happening in crypto. There's been progress in research and development, setbacks from crypto companies collapsing, prices have been following the crypto cycle, bad regulation is creating uncertainty, and decentralization is becoming an opportunity. Note that all of these are related.

Most of the setbacks we've seen have been due to centralization. This centralization occurred because some entities wanted to maximize crypto market cycle gains. It has resulted in harmful regulations, and decentralization is the only real solution to both problems. 

Why Web3 Matters

The report's authors explain that they view Web3 as being more than a financial movement; it's an “evolution of the internet.” They see crypto blockchains as computers, not just ledgers, and therefore see crypto itself as a computing platform, not just an alternative to the existing financial system. 

Replacing the existing financial system is arguably the top priority of crypto projects and their sponsors. If the existing financial system continues on its current trajectory, it will result in Central Bank Digital Currencies and the loss of our economic freedom. But it widens the scope for upcoming decentralized social market networks and their communities’ sovereignty and potential wealth.

Image source; a16zcrypto.com
 

The authors explain that Web3 is built on decentralized cryptocurrency blockchains like Bitcoin and Ethereum. It is governed and owned by the communities of their respective projects and accrues value to the community rather than a centralized tech company, as is the practice with Web2. 

The Crypto Market Cycle

The second part of the report is about the crypto market cycle. According to the authors, crypto market cycles are caused by a positive feedback loop. Prices go up, which drives interest to go up, which generates new ideas to emerge, which causes new projects to appear, which causes prices to go up. 

Image source; a16zcrypto.com

The authors say there have been four crypto market cycles so far. This is consistent with the market cycles driven by the Bitcoin halving, which happens every four years; however, there is no mention of the Bitcoin halving and the vital role it seems to play in crypto market cycles. Instead, they focus on financial and product cycles that also follow a four-year cycle. 

For reference, macroeconomic conditions, such as interest rates, drive financial cycles and can fluctuate unpredictably. By contrast, product cycles are driven by supposedly more predictable consumer behavior and tech trends. As stated in the report, great products get built regardless of financial upswings and downswings. 

Image source; a16zcrypto.com

Some would argue that consumer behavior and tech trends depend heavily on macro conditions. After all, most of the funding for speculative technologies happens during low-interest rate periods. As such, entering a new period of higher interest rates could be bad for more speculative crypto projects. 

Trends To Watch

The third part of the report identifies what trends to watch, saying that blockchains are scaling through multiple promising paths. The authors highlight new Layer 1 blockchains, like Solana and Aptos, application-specific blockchains, like Cosmos and Polkadot, Layer 2s like Optimism and Polygon, and data storage cryptos, like Celestia as areas of interest. 

The authors then applaud Ethereum for cutting its energy use by 99.9% by changing its consensus from Proof of Work to Proof of Stake, known as The Merge, in September 2022. They then highlight the comparison with YouTube’s energy consumption rather than Bitcoin. The authors pointed out that Ethereum consumes 0.001% of YouTube's energy annually. It seems like an odd choice, but maybe they had emerging decentralized social media in mind.  

They reviewed the rising popularity of zero-knowledge proofs, stating that once practically impossible new technologies are becoming very real. The authors then examined the rapid growth of Web3 gaming, which has remained relatively unscathed by the crypto bear market. They say that Web3 games are a huge opportunity to welcome new users to crypto. 

Similarly, it's worth mentioning Markethive, a social media, marketing, and broadcasting platform in the decentralized arena, is ramping up its gamification as a way to earn crypto and for people to familiarize themselves and experience the cryptocurrency landscape. 

Participation in DAOs has also been steadily increasing. The spike in DAO participation over the last few months may have been due to increasing regulatory uncertainty as well as all the exploits and issues that have resulted in emergency proposals. The recent de-pegging of USDC is one of the many examples.

Regarding developer activity, the authors point out that the United States is falling behind. The percentage of crypto developers in the country has been declining for years due to the initially uncertain and now outright hostile regulatory environment, which could continue for some time. 

The authors then say to watch for three proposed crypto regulations. They include the bipartisan crypto bill by Senator Cynthia Lummis and Kirsten Gillibrand, seven pending crypto cases, including the SEC's case against Ripple, and three proposed crypto rules, including the SEC's crypto custody rule.

 
Image source; a16zcrypto.com

Crypto Market Metrics

The fourth part of the report lays out a series of crypto market metrics. The authors begin with the above image, which essentially means, ‘If you build it, they will come.’ This popular approach to cryptocurrency adoption has been successful for many worthy projects.

The first crypto market metric is the number of active developers. They found that the number of active developers rises during bull markets and stays high during bear markets. The second crypto market metric is the number of smart contracts, which continues to hit new, all-time highs, despite the crypto bear market. 

The third crypto market metric is the number of academic research publications related to crypto. The number spiked in 2021 and again in 2022, indicating crypto has become a significant area of academic research. 

The fourth crypto market metric is the number of people seeking crypto-related jobs. This statistic peaked soon after the crypto market did in late 2021, suggesting rising crypto prices generate interest in the crypto job market. The number of people looking for crypto-related jobs has remained high ever since.

Crypto Adoption Indicators

The first indicator is the number of active crypto wallet addresses, which grows steadily as Web3 adoption increases. The same is true for the second indicator, the number of blockchain transactions, which also continues to hit all-time highs due to better scaling technologies reducing transaction fees. 

The third indicator is the amount of transaction fees paid. According to the graph in the PDF report, it’s been on the decline stating that fees increase as demand rises but decrease as scaling tech supplies more blockspace. 

A similar decline is seen with the fourth indicator, the number of mobile wallet users. The authors give one possible explanation: There are increasingly more ways to engage with blockchains and web3 applications. From DeFi to Web3 games, various new applications create addresses for users to interact with without downloading or connecting a wallet.

The fifth indicator is the amount of trading volume on decentralized exchanges. (DEXs) DEX volume has been rising recently, likely due to a crackdown on centralized exchanges. The most recent spike in DEX volume is plausibly from Curve Finance when it de-pegged USDC. 

The sixth indicator is NFT buyers. The number of NFT buyers appears to be rising again over the last few months, possibly because NFTs have decreased in price and new buyers have been buying the dip. Also, no official legislation applies specifically to NFTs, so they have been safe from regulations. 

The seventh indicator is stablecoin trading volume which continues to grow. This could be due to the crackdown on centralized exchanges and the loss of trust crisis after FTX collapsed in late 2022.  

Image source; State Of Crypto 2023.pdf

What’s Next?

The last part of the report is aptly titled, What's Next? The authors commenced by estimating that crypto adoption is where internet adoption was in the 1990s, specifically, the mid-90s. Assuming crypto adoption follows the same trajectory, they forecast it will take until 2031 to hit one billion users. 

As per the image above, the authors list 12 things they expect to happen in crypto in 2023 and beyond. The first expectation is that some of the best Web3 products and protocols will be developed during the remainder of the crypto bear market. 

The second is that smart contract security will improve. The authors don't discuss the role of AI in this equation, but it can be used to create and audit crypto code. This will supercharge crypto development and security, providing it’s used ethically.

The third expectation is that zero-knowledge proofs will continue to become more popular. This makes sense, considering institutional investors require financial privacy, which is something that zero-knowledge proofs can provide.

The fourth expectation is that big tech will continue to take greater control of the Web2 internet, showing the average person just how vital Web3 is. We've covered this in the Markethive blog in the context of internet censorship; decentralized social media is the only solution. 

The fifth expectation is that Web3 gaming will become more popular. In short, there are three reasons why people adopt cryptocurrency; speculation, convenience (possibly necessity), or entertainment. That third adoption category has yet to be tapped, but it's coming. 

The sixth expectation is that there will be more crypto-specific hardware, particularly for zero-knowledge proofs. As blockchains have attracted millions of users, two critical demands around privacy and scalability have emerged. There is a movement to optimize algorithms for consumer-grade hardware to preserve decentralization and privacy.

The seventh expectation relates to the fourth: decentralized social networks will become popular due to issues with centralized social media. As previously mentioned, with all the internet censorship and more coming, trust in institutions and legacy media is declining rapidly, and more people will migrate to decentralized platforms. 

Interestingly, the eighth expectation is that “light” clients will make it possible for mobile devices to become more involved in crypto infrastructure. As a fun fact, over 90% of people access the internet from a mobile device. Logically, this means bringing crypto to mobile is a massive untapped opportunity. 

The ninth expectation is that there will be new forms of community governance in DAOs. Many believe that the existing token-based voting systems are leading to centralization; what's required is a radically new approach to governance.

The tenth expectation is that governments will pass bipartisan crypto regulations. This is a direct reference to US crypto regulations, but it could well apply globally.  It won't take long for politicians everywhere to realize that crypto is an economic and social opportunity, never mind all the crypto lobbyists wielding influence with incentives.

The 11th expectation ties into the fifth, and that's that non-speculative crypto use cases will emerge. Hopefully, these non-speculative use cases are related to convenience and not necessity. If they relate to need, it's probably because we're dealing with some seriously dystopian issues. 

The twelfth expectation is a relatively new phenomenon: hiring treasury management and sustainable funding will be a focus for DAOs. This seems to be a subtle reference to a new crypto niche called ReFi or Regenerative Finance, which involves investing in tokenized carbon credits. 

Image source; State Of Crypto 2023.pdf

What Does A16z’s Report Mean For the Crypto Market? 

One of the takeaways stated in the a16zcrypto overview of the report states that,

“Prices have steadied this year from the dizzying highs of 2021. The industry seems to be settling: speculation has cooled, and the story of how people durably, organically use, and interact with Web3 is starting to unfold.”

To others, the report reveals a lot more about how institutional investors are seeing the crypto market rather than how the crypto market is doing or how it's likely to perform in the future. Institutional investors are interested in being on the cutting edge of Web3 and cryptocurrency. However, they're also interested in ensuring they have some say in running these projects and protocols. This is fundamentally at odds with their decentralization imperative. 

It is also why institutional investors are so focused on crypto regulation. Some argue that they don’t care about how these regulations impact financial freedom. Ultimately, they want to know how to legally invest in and influence these projects and protocols.

The incumbents are hyper-aware of this and are actively trying to prevent sensible crypto regulations from being passed. They know that the actual end game of the crypto lobbyists is to replace the old financial system with a new, primarily centralized financial system, not a new decentralized one. 

A prime example is Circle; the stablecoin issuer has been aggressively lobbying politicians worldwide to pass regulations that set up its stablecoin as the gold standard and ban the circulation of decentralized stablecoins. This is not in the best interests of crypto; it is a blatant traditional finance tactic. 

That said, mass crypto adoption won’t happen overnight. Most proposed crypto regulations may be inconsistent with cryptos' core philosophies, but they are a necessary first step. Over time the centralization issues they cause will become more evident, and better crypto regulations will be passed. 

More importantly, the average person will start to understand the significance of things like decentralization. But before they understand the importance, they must know what they are and be comfortable with the associated annex. This will take years, per the author's projections. 

The upside to this situation is that we are, in fact, still in the early stages of crypto adoption, considering the relative absence of crypto regulations in developed countries. Ultimately, crypto regulations are required for institutions to invest in the industry; realistically, institutions have most of the money. They have the means to turn the crypto into a multi-trillion dollar asset class.

A Favorable Scenario

According to Coinbureau, the best part is that retail investors like us will eventually have the advantage because most understand there's more to crypto than paper money profits. The institutions don't see it that way, meaning they will sell every time a coin or token hits some arbitrary number in fiat currency terms. Meanwhile, retail investors will continue to buy regardless of the paper price, and for once, they won't be the ones getting dumped on. 

The money institutional investors get in return will lose value until it's converted into a CBCD, and all their assets will be tokenized on a blockchain the government controls. And when their CBDCs and tokenized assets are frozen because they did or said something against the state, they'll realize that crypto is the only asset that offers true financial freedom. By then, it'll be too late for them. All the retail investors who realize this early on will become the new institutional investors.

In closing, the report has identified an opportunity that recent setbacks emphasize the failure of opaque, centralized systems in contrast to the resilience of decentralized infrastructure. Decentralized crypto computing platforms can also counter the trend of power consolidating into the hands of a few giant tech corporations. The internet needs web3, and those who understand this will fight for the future of these technologies.

The Battle for Control: Why Governments Fear the Decentralized Nature of Bitcoin

Why is the government wary of Bitcoin? The simple answer to that question is "the loss of control!"

The government's most potent instrument for influencing the economy is controlling the money supply. The government wants total economic control because doing so would be politically advantageous. To make fresh money, the government borrows from banks. As a result, the government is increasing the amount of future debt that must be repaid to produce fiscal stimulus.

Thankfully, the government may depreciate the currency by reducing the debt's value. You get into trouble because you could want to hold onto the money as a store of value. Your savings will eventually lose value even if you have placed your funds in an interest-bearing account.

Governments are willing and ready to fight Bitcoin and other altcoins, not the blockchain technology that powers it. Several governments and banks have praised blockchain technology's workings, and they are keen to incorporate it into the system to move toward improving operational effectiveness. 

Governments worldwide are preparing to implement digital currencies (CBDC) to simplify the electronic transfer procedure. The government intends to use blockchain technology so that digital transactions are traceable and can be taxed because it records every transaction in the ledger. The caveat is the type of blockchain they will implement for their digital currencies. It is permissioned, so only central banks will see the transactions, not the public. 

Image source: 101 Blockchains

People's confidence was shaken by the tremendous financial crisis that the world was experiencing. Once the banking system fell, Bitcoin rose from the ashes, giving consumers a different way to control their money. Anybody with an internet connection may buy Bitcoin and safely save their money. Peer-to-peer technology powers the payment network. It is a decentralized coin that the government, and any third parties, cannot manipulate.

Fiat currencies credibility

Fiat refers to the traditional currency issued by the government. The government has declared that these currencies are valuable. People have understood that this pledge is meaningless because real assets do not back fiat currencies over time. Fiat money typically lacks both intrinsic value and utility value. It only has value because those who use it as an accounting unit or, in the case of currency, a means of exchange believe it has value. They believe businesses and other individuals will accept it for transactional purposes.

You will never be able to trade the money in for a can of beans or a bar of gold with the government. People only believe in fiat currencies because the government has the credit to issue them. To purchase either of those items, you must pay the seller of beans or gold in fiat money. 

Fiat currencies gained credibility through legal tender laws, central bank credibility, government backing, and the network effect. While a physical commodity does not support fiat currencies, it is backed by the government's ability to enforce legal tender laws and collect taxes, creating demand for the money. As long as people believe that the government will continue to back the currency and maintain its value, fiat currencies will continue to be accepted as a means of exchange.

The essence of control

Fiat money is totally under government control. They give central banks the authority to create or destroy money through monetary policy to affect the economy. The government also sets the rules for how these currencies may be moved so they can be traced and taxed. It makes it evident who stands to gain from this movement and aids in investigating illicit activity.

Control is necessary to ensure the safety and security of individuals and institutions. The government can set rules and regulations to prevent fraudulent or illegal activities, such as money laundering, and to protect consumers from financial scams or predatory lending practices. It also helps to prevent excessive speculation or manipulation of financial markets.

The government can regulate the money supply and influence economic activity by controlling the currency. By adjusting interest rates and using other monetary policy tools, central banks can help to stabilize inflation, support economic growth, and mitigate economic downturns. Central Banks like the Fed aim to protect the banks, giving them enormous powers to control the citizens. Money is power, and whoever controls the money controls power. This is exactly what the government wants.

How is Bitcoin valuable?

Long before Satoshi published his white paper on the Cryptography Mailing List in 2008, Bitcoin's history had already begun. Cryptographers first fought the battle for privacy and freedom in the digital era, then the Cypherpunks took up the cause, and now the Bitcoiners are carrying on the struggle.

Without question, Satoshi was brilliant, but he didn't create something from nothing. Instead, Satoshi shrewdly utilized existing technologies to produce the revolutionary new currency, Bitcoin. Note that because Satoshi Nakamoto chose to stay incognito, speculation has it that Satoshi could be a group rather than a single person.

Users of Bitcoin can escape the current financial system. Bitcoins don't actually exist in the physical world. They are produced by "miners" in cyberspace. Bitcoins are created by solving challenging algorithms that operate as a kind of global transaction verification rather than being written on paper or carved on metal.

This digital money (more accurately, cryptocurrency) can only be held digitally and transferred between buyers and sellers without an intermediary and is also awarded to miners when they correctly solve a block. The same idea applies to airline reward points on a more compact scale. The points may be used to pay for travel-related expenses like hotel and aircraft tickets. All of them utilize airline miles as virtual money.

The entire financial system's framework will collapse if Bitcoin is broadly embraced. This was a fantastic solution in light of the instances when the financial sector became corrupt. 

In a research paper from Galaxy Digital, the energy used by the Bitcoin network was quantified and compared to that of other industries, such as the banking industry. It was discovered that while the banking sector uses 263.72 TWh annually, Bitcoin uses just 113.89 TWh.

By analyzing some of Bitcoin's distinctive qualities and how they relate to and affect its energy consumption, the research provided context for Bitcoin's energy usage. Regrettably, such important information won't be permitted to appear in the mainstream media due to the world powers' campaign against Bitcoin.

Why do governments fear Bitcoin?

• Unbeatable

When Bitcoin first emerged, many who opposed it painted it as a hoax. But Bitcoin is still there and in the news fourteen years later. There is always a long way to go before most people use Bitcoin. More businesses and services are embracing Bitcoin daily, making it a legitimate payment option. Anybody wishing for cryptocurrency to disappear will not get their dream since it is here to stay.

The loss of control presented by Bitcoin is a crucial issue that worries governments and financial institutions. They still need to devise a mechanism to tax Bitcoin or any other cryptocurrency. The government cannot monitor the transactions or the revenue generated by them. You can see why the government discourages the idea, given that taxation is the primary source of governmental income.

The lack of a centralized authority and blockchain technology are the two defining characteristics of Bitcoin that give it power and acceptance. It establishes a secure network where users can remain pseudonymous. Yet when considered from the government's standpoint, this is a field it cannot regulate or meddle in. A lack of regulation for the government entails a lack of control and revenue. 

Additionally, because Bitcoin is a peer-to-peer system, there is no need for a central clearing house or authority to oversee the transfers. What earnings are being produced, who is selling, and who is buying the Bitcoins remain entirely hidden from the sources, which is something the government hates so much.

• Provides a lifeline

Even the most essential products and services are sometimes unavailable to many in nations like Venezuela, which has suffered hyperinflation. Reports demonstrate how Venezuelans are surviving hyperinflation with the help of Bitcoin. They use this cryptocurrency to order internationally couriered items online. This nation illustrates how the people have been let down by the government and conventional banking institutions. Yet, the government has attempted to crack down on the Bitcoin miners and traders rather than finding a solution to the financial crisis.

• Community Control and Crime Concerns

The two-headed monster of government hostility to cryptocurrency is because it continues to remain out of their total control. Yet, it also suggests that they sincerely worry about protecting the rights of residents and those looking to invest in risky assets.

Having said that, it is crucial to remember that not all government worries are unwarranted. It was premised on the idea that financial transactions were anonymous, and thus criminal activity was inevitable. Crimes like drug trafficking, terrorism, money laundering, and tax evasion may worsen with such a system. These may harm the rest of society. 

However, we must understand how Bitcoin can address the problems that traditional systems have caused, putting aside the likelihood of a wide variety of illegal acts that have garnered the headlines and painted them negatively. Recessions and unemployment have repeatedly been triggered by the central bank changing the money supply. The welfare of individuals is at risk because the global financial system thrives on avarice and corruption.

It's okay to try your luck with Bitcoin; remember that you're entrusting a very sophisticated system with your money. You may need to be more thoroughly knowledgeable about this industry; because you are interacting with individuals you don't know and entering a situation where you have few legal options.

The fight against Bitcoin requires large-scale coordination among nations 

Bitcoin's growth has been a concern for various governments, including the United States. The US government is projected to run a $1.4 trillion deficit in 2023. Even if the government shuts down the entire military and eliminates the Department of Defense's projected $800 billion budget, the budget would still be projected to operate in the red for 2023.

This indicates that the U.S. government's resources to fight against Bitcoin are limited. Still, it is clear that the government is targeting cryptocurrency to expand the reach of its financial surveillance. Approximately 86% of central banks are actively exploring the development of Central Bank Digital Currencies (CBDCs). This development could threaten the growth of cryptocurrencies, including Bitcoin.

Wall Street's push to open up access to Bitcoin investment is meeting resistance from a bipartisan group of lawmakers and regulators in Washington, which might also hinder the growth of Bitcoin. Some years ago, China, another country that has shown concern about the growth of Bitcoin, attempted to crack down on Bitcoin miners who effectively power the digital coins' accounting system by forcing its own banks to stop facilitating crypto use. If China can’t stop it, what do you think the countries that still practice freedom are going to do?

While the U.S. government's resources might be limited to fight against Bitcoin, the government might expand its arsenal through multilateral relations in targeting cryptocurrency to broaden the reach of its financial surveillance. 

As Bitcoin is internationalized, effective regulation would require the cooperation and approval of practically every nation-state. Still, it might be challenging to see countries focusing on Bitcoin in unison; even though the major world powers such as the United States and China have a bloc-like effect, there has been more coordination, often led by the U.S. government.

Extensive cooperation is needed to shut down the network effectively; otherwise, users will successfully conduct transactions and maintain the Bitcoin network in other countries. A gradual, nation-by-nation prohibition might harm total acceptance. 

At its most extreme, a very improbable state-led ban in the United States could prevent Bitcoin from accessing American-led financial institutions and markets with almost all global reach. However, a "global ban" or "government crackdown" will not be possible as Bitcoin can be used for transactional purposes across international borders.

The libertarian view

The allure of Bitcoin extends beyond its autonomy and financial stability. Digital money appeals to libertarians as well since they favor private property rights and minimal government involvement. Libertarians see Bitcoin as a method to avoid conventional financial institutions, which they believe are governed by governments and susceptible to heavy regulation. Bitcoin provides a decentralized financial system free from governmental control and inflationary monetary policies.

Because Bitcoin transactions are safe and transparent, they are consistent with libertarian values such as individual freedom and privacy. Bitcoin transactions cannot be controlled or changed thanks to permissionless blockchain technology, offering an unmatched level of security compared to conventional banking systems.

Bitcoin stands for control over one's financial future and the shielding of assets from governmental meddling for libertarians and those who share their views. Even if the appeal to libertarians may appear specialized, it is a sign that digital currencies can alter the financial landscape. It's conceivable that cryptocurrencies will become more widely accepted and used for various purposes as more people become aware of their benefits.

The bottom line 

Governments are wary of Bitcoin for several reasons, including its lack of central control, illicit activity use, consumer protection, volatility, and potential threat to national currencies. While some governments have taken steps to regulate Bitcoin and other cryptocurrencies, others have banned them altogether. As Bitcoin continues to gain mainstream acceptance, it will be interesting to see different approaches to how governments respond to this new form of currency.

It's important to note that while governments are wary of Bitcoin, they also recognize the potential benefits of blockchain technology, which underlies Bitcoin and other cryptocurrencies. Blockchain technology can potentially revolutionize various industries, including finance, healthcare, and logistics. The relationship between governments and cryptocurrencies is complex and evolving, and it will be interesting to see how it develops in the coming years.