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Debt Ceiling Wins


The News From Planet Ruby—Friday, June 2, 2023

The apes have completed another of their regular episodes of battle theater, a set piece involving two factions going to war over an enemy known as the "debt ceiling". The debt ceiling has once more outwitted them both and won, succeeding in its goal of expanding and consuming an ever-increasing portion of economic activity, as it has on 78 previous occasions. The debt ceiling will next become the object of scrutiny at the end of 2024, at which point we have every confidence it will triumph again.

A Bad Deal Is Better Than No Deal

The US's drama over the debt ceiling is at last over, at least for another 18 months. House Speaker McCarthy received harsh criticism from hard line Republicans for capitulating and agreeing to what they considered a bad deal. Nonetheless, there wasn't enough opposition to stop the bill passing its major hurdle in the House of Representatives—which was probably a good thing, given that there was no more time left to negotiate a better one. Approval in the Democrat-controlled Senate was a rubber stamp.

Although that source of anxiety is now out of the way, it doesn't fix the big picture of high inflation, stalling growth, and a fragile banking sector. At the end of May the market's expectation of another interest rate rise briefly spiked above 60%, following Fed comments that there is "no compelling reasons" not to, a significant change from just three weeks ago, when there was near certainty that rate hikes had ended. That concern has cooled somewhat, but still remains possible. New increases will further strengthen the dollar, which puts pressure on risk assets—including crypto—and give the managers of regional banks the most almighty headache.

Crypto Falters

Having rallied back to $28,000 as rumors of the debt ceiling deal firmed up, bitcoin corrected heavily early on Wednesday as profit-taking took over. A surge in the probability of another interest rate hike and increasing dollar strength kicked the legs out from under BTC and saw a sharp drop back below $27,000. As of publication time, bitcoin has not yet taken out the previous local low around $25,800, and remains in the range within which it's spent the last three weeks.

It's a sideways, if choppy, market. However, options and on-chain data suggest that the recent period of low volatility for bitcoin is set to end, with a big move on the cards. $24-25k is an area of particular interest to the downside, and of course $30k to the upside.

Fear The Walking Dead

Something strange is going on in the crypto world, and we're at a loss to explain it. The first sign of the problem was terminal gold bug and Bitcoin hater-in-chief Peter Schiff shilling a new art project, which includes images inscribed as Ordinals on the Bitcoin blockchain.

While we're on the subject, more than 10 million Ordinals have now been minted. Despite this success, or perhaps because of it, Casey Rodarmor has announced he will be stepping down as the lead maintainer of the Ordinals project, stating that he doesn't have enough time to continue working on it.

The second indication that something is deeply amiss is the concerning trend of crypto companies rising from the dead. Following recent news that FTX's new CEO is looking at reanimating the rotting corpse of the exchange, bankrupt lender Celsius is also considering restarting as a new company. Keep an eye out, and when you hear that MtGox 2.0 is on the way, the End Is Nigh.

Zombie image from The Walking Dead

Meanwhile founder and former CEO of FTX, Sam Bankman-Fried, is seeking to have the charges against him dropped. His lawyers are arguing that all 13 counts are regulatory issues, not federal crimes, and several should not be tried in court at all. SBF is currently confined to house arrest, and due back in court in October.

In better news, the debt ceiling deal means there will be no 30% Bitcoin mining tax in the US. Bitcoin's mining Difficulty is pushing a new all-time high, and Tether has announced it will be expanding into Bitcoin mining, with a Uruguay-based project that relies on renewable energy sources.

What's New In The SKALEVERSE?

Check out SKALE's recent post about Metaport, the SKALEVERSE's seamless interchain bridge. As the number of SKALE Chains increases, and interactions between dApps become more frequent, Metaport is going to play an increasingly important role in allowing liquidity to move frictionlessly around the ecosystem—with the ease of a regular transaction.

There's also an exciting announcement about Levitation, SKALE's new ZK protocol.

That's all for this week!

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