Yellen: "Are We Nearly There Yet?"

The News From Planet Ruby—Friday, May 26, 2023

We're on the edge of our seats on Planet Ruby, as the biggest sporting event on Earth moves into its final stages. Even two weeks ago we believed that the outcome was a foregone conclusion. Now, it appears that the two ape teams might in fact have been working together on an elaborate long con, and could—perhaps on the advice of their new AI master, ChatGPT—be about to rug the entire planet.

If we had nails, we'd be biting them.

"Show Us The Debt Ceiling Math", Say Republicans

Unsurprisingly, the debt ceiling has dominated financial news, as Republicans and Democrats differ on the best way to ensure the US maintains a facade of fiscal responsibility.

The Treasury Secretary has been sending repeated letters to various members of Congress, constantly "updating" the House despite the fact they contain no new information, and urging a deal before the Treasury runs out of cash in early June, possibly as early as June 1. Her approach is very similar to the "Are we nearly there yet?" method employed by small children on long car journeys, and it's entirely possible that a deal has already been done but not announced out of a desire to troll her. The hazy outline of a potential deal to raise the cap for two years is now visible, though work remains to be done.

One-month T-bill rates are a good indication of how worried the market is, and while they're higher than they might otherwise be, there are no signs of real panic yet. Apparently, traders view the apocalyptic warnings with some skepticism. Indeed, Republicans have openly questioned Yellen's X-date math, and asked to see the napkin on which she made her calculations.

The safe haven asset of choice in this world where the US threatens carnage? If you guessed the dollar, you were right. The DXY strengthened to a two-month high.

In other news, Wednesday's publication of the minutes from the last FOMC meeting suggest that inflation, once dismissed as transitory, is going to be transitory for a while longer. The committee was split on the best way forward. The market is now pricing in a considerably higher chance of an additional rate rise this year than it was a few weeks ago.

Crypto Blinks

Last week, bitcoin remained within a tight window, trading between $26,400 and $27,700. BTC respected the 200-week moving average as support, after testing it as resistance in February and finally breaking through in March.

That could have been a positive set-up, and looks like part of the script for a bull market. However, the macro backdrop has the capacity to throw all the cards in the air, as debt ceiling jitters spook traders across every asset class. The current environment of low liquidity (partly due to the withdrawal of major trading firms from the crypto space) is likely to exaggerate any big moves, as it takes less buying or selling pressure to move the market.

On Wednesday, BTC followed stonks lower as a risk-off sentiment prevailed. Bitcoin dropped through support and put in a low under $26,000. At time of publication it's trading around $26,500, just a couple of hundred dollars above the 200 weeky moving average.

Codename: Dumpster Fire 2.0

Court filings from FTX's new CEO hint that he may be considering relaunching the exchange from its radioactive ashes. While some in the crypto world consider this a positive step, remember that the laws of sequels dictate a higher body count and more elaborate death scenes.

Putting its money where its mouth is, Tether has announced a new crypto investment plan. The company will plow up to 15% of its net profit into BTC to diversify its reserves. (The bitcoin holdings are additional to the cash-like deposits that back USDT.) Tether has already holds almost 52,700 BTC, but this represents an organized approach to growing its bitcoin balance.

Gemini says that DCG, the parent company of Genesis, has missed a $630 million payment owed to the Winklevoss-owned exchange. The failed broker owes billions of dollars to its creditors, and Gemini is working to return $1.1 billion of assets from Genesis to its 200,000 Earn customers.

Following some spectacular and unexpected (by Ledger) backlash from the community, Ledger is waiting to release their controversial Recovery feature until they can open source more code. Further delays are expected due to the lengthy party thrown at Ledger HQ at the news that Trezor can be hacked.

Other News In Brief:

• The crypto community celebrated Bitcoin Pizza Day on May 22, 2010. Developer Laszlo Hanyecz made the first real-world transaction using bitcoin, paying another bitcointalk forum user 10,000 BTC for two Papa John's pizzas. 13 years later, the coins were worth $267 million.
• Coinbase has taken the next step in its court battle with the SEC, hoping to compel the regulator to provide the clarity the crypto industry needs.
• Ethereum's gas streak continues, with over 300,000 consecutive blocks coming in over the burn threshold—bad for users, good for holders banking on deflation.
• A hacker was able to gain total control over Tornado Cash governance by means of a malicious proposal. The hacker later offered to return control to the community.

What's New In The SKALEVERSE?

ConsenSys has announced they will be deprecating their Activate staking product for all tokens, including SKL. Holders will be able to manage their SKL stake via the Unagii platform.

And finally, in news that transcends all sectors, jurisdictions, languages, and cultures: Farewell, Tina Turner. You truly were Simply The Best.

That's all for this week!

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