Full Faith & Credit

The Rake Review: May 2023 - A Rollercoaster in U.S. Debt, Fiat Money and the Rise of Bitcoin

May 2023 proved to be a rollercoaster month in the world of economics and cryptocurrency. The (All Powerful & Mighty) United States, teetered on the brink of debt default. The debt ceiling was maxed and the Democrats and Republicans tussled for an agreement over raising the level of borrowing that the US was allowed. We wrote a full explainer yesterday here. Today the details of a deal finally emerged with the debt ceiling being suspended altogether. I wonder (sarcastically) if this move will stop the exponential growth of US debt?

Back in the day when dollars were backed by gold (real money), currency notes were quite literally gold certificates, exchangeable for gold. Check out the image below to see how it looked. Quite different from what Americans use as currency today, isn't it? Today, the basis of currency is trust. For instance, the note in the first image says, "In God We Trust". This begs the question - should we have to trust anyone when dealing with money?

Understanding 'Fiat Money'

The current fiat money system in the US isn't backed by any physical assets. It operates solely on the "Full Faith and Credit" of the U.S. government. This may have been a workable system back in the 70s, but in the face of an exponentially growing debt to GDP ratio of 130% and rising inflation, one can't help but question the solidity of this faith.

The Answer: Bitcoin

Perhaps, the answer to this conundrum lies in a predictable, non-debaseable form of currency – Bitcoin. The appeal of Bitcoin lies in its finite supply, making it immune to printing or manipulation.

As the piece linked here talks about Bitcoin may just be "The Ultimate Asset of the 21st Century"

But we could be way off the mark. Maybe you should trust this guy:

Binance Troubles Hurt Aussie Investors

As we highlighted on socials, Binance has had significant regulatory setbacks this month. Following regulatory enforcement action by the SEC, FTCA as well as being sued privately in the US, Binance left Canada entirely and has now lost its AFSL (Australian Financial Services Licence) and banking access in Australia. This is significant because Binance is the worlds largest exchange and has grown in market share since the FTX exit. This development had a stunning effect. Aussie investors were able to withdraw but not deposit which caused a decoupling to happen between the AUD denominated markets on Binance and the world price. For example BTC price denominated in AUD on Binance was at times 40% lower than what you could get at Stormrake.

The Impact & The Stormrake Difference

So, anyone that sold crypto into AUD on Binance was getting a 40% haircut. Anyone that withdrew AUD missed out on a 40% arb where they could have bought BTC, sent to Stormrake and sold into AUD for a 40% higher price and withdrawn to their bank account. Of course they could also have just kept the cheap BTC in Stormrake custody.

Allow us to toot our own horn for just one paragraph. As a Stormrake client you benefit from being able to get the best price of 20 exchanges all over the world and benefit from multi pronged banking networks. That means that when Binance or any other exchange has issues you will still be able to maximise your buy and sell prices. Stormrake currently tracks 6,000+ Markets around the world and over 1,000 tokens (But you may only need 1).

Market Update

Top 10 cryptocurrencies by market cap

Here is the fast five of what you need to know about the market in May 2023:

The Top 10 is exactly the same as last month.
XRP performed ok with a decision in its SEC case expected to be positive.
Pepe (The meme coin) made waves shooting to the moon rising to a Market Cap of over $1 Billion USD and halving since. Many Millionaires created.
BTC.D (Bitcoin Dominance) improved with BTC outperforming altcoins and the index going to almost 50%
Arbitrum performed well in tough conditions and could be the darling of the next bull run.

Video of the month

Yet another Kennedy is looking to get into the top office in the land. Robert F. Kennedy is one of a record 3 presidential hopefuls who fully support Bitcoin. For many Bitcoin is a single voter issue (They will not support a candidate who doesn't support Bitcoin). Here is his full keynote from Bitcoin 2023.

In the news

Binance pulls the pin on AUD pairs (Markets) following its loss of its AFSL and its banking relationship with Westpac. As a result Binance records significantly lower prices for crypto in AUD.
De-dollarisation escalates. Iran pushes ahead with de-dollarisation meeting with 11 significant countries. This (moving away from USD denominated trade) is "Not a Voluntary Choice" according to Iran's First Vice President. Weaponisation of the Dollar by the US is leading to global trade looking for an alternative.
Fees remain stubbornly high on ETH and BTC. Pepe craze and BRC-20 transactions force high fees despite not hitting a bull-market yet.
Pepe creates Millionaires as the Meme coin rises and falls.

Understanding Bitcoin: The Revolutionary Digital Asset

Bitcoin, the trailblazer of the cryptocurrency world, has become a household name in the past decade. Yet, many people still struggle to understand this digital asset and its significance in the current financial landscape. This piece aims to demystify Bitcoin for beginners and shed light on its fundamental principles.

Decoding Bitcoin

Introduced in 2009 by an anonymous entity known as Satoshi Nakamoto, Bitcoin is a decentralized digital currency operating without a central bank. The foundation of Bitcoin lies in the combination of economic incentives & blockchain technology, a public ledger containing all transaction data from anyone using Bitcoin.

Bitcoin: A Finite Resource

Unlike traditional currencies, Bitcoin has a limited supply. Only 21 million bitcoins can ever be mined, contributing to its scarcity and value. This characteristic sets Bitcoin apart from traditional money and positions it as "digital gold."

Decentralization and Security

Bitcoin's decentralized nature is its defining feature. No single entity has control over the network. Instead, transactions are verified by network nodes through cryptography and recorded on the blockchain. This lack of central authority not only fosters financial independence but also strengthens the security and transparency of transactions.

Bitcoin and the Evolution of Money

The invention of Bitcoin has challenged traditional concepts of money. It offers a better alternative to fiat currency, especially in an era marked by economic uncertainties and inflation fears. With its finite supply, Bitcoin could serve as a hedge against inflation, and its decentralized nature ensures user autonomy. In essence, Bitcoin is more than just a digital currency; it's a financial revolution that has disrupted our perceptions of money. As we continue to navigate the ever-changing financial landscape, understanding Bitcoin and its potential becomes increasingly crucial. Whether you're an investor, a trader, or a curious observer, the knowledge of Bitcoin empowers you to engage with the digital economy more effectively.

Memes of the month

This meme is now worth $1 Billion AUD.

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No Advice Warning

The information in this newsletter is general only. It should not be taken as constituting professional advice from the author - Stormrake PTY LTD.

Stormrake is not a financial adviser and does not provide financial product advice. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your unique circumstances. Stormrake is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by this newsletter.

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