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Coinbase Acquires Crypto Data Aggregator Zabo

  • Over the last three years, the startup established the Zabo API to connect users to any crypto exchange platform, wallet, protocol or account
  • Coinbase is scheduled to announce its Q2 earnings on August 10 with an expected earnings per share of 2.57 and an expected revenue of $1.83 billion

Coinbase is acquiring a cryptocurrency data aggregator, Zabo, according to a blog post announcement on Wednesday.

Zabo began in 2018 with a mission to build new tools to bring cryptocurrency into mainstream financial services, co-founders Christopher Brown and Alex Treece wrote in the blog.

Over the last three years, the startup established the Zabo API, which is a single application programming interface that connects users to any crypto exchange platform, wallet, protocol or account.

“The cryptocurrency industry is still early, and there are many fundamental technologies which need to be built to make the stack work for mainstream participants. Ultimately the technology needs to be safe and usable even as we see more groundbreaking innovation within the cryptocurrency space,” Brown said in an email to Blockworks. “We think this acquisition will help drive the development of key technologies.”

Zabo could not share the value of the deal or what the integration into Coinbase’s platform will look like. However, Brown said that the acquisition will take place “as soon as possible,” and the two companies are in the final stages of the process.

Coinbase’s mission “of increasing economic freedom in the world is bold and important,” Brown said. “Once we understood there is mutual benefit to be had with our team and technology, then it became an easy decision for us,” he added. 

In March 2020, Zabo announced a $2.5 million seed raise led by Moonshots Capital and was joined by Blockchange Ventures, Castle Island Ventures, Digital Currency Group, CoinShares, Tezos Foundation, Capital Factory and others.

In the last few months alone, Coinbase has has launched crypto savings high-yield USDC accounts, a prime brokerage service and expanded into borrowing bitcoin as collateral, among other developments. 

The first half of 2021 was one of the most active periods on record for crypto, said Brian Foster, a member of Coinbase’s Institutional Sales, Trading, and Prime Services team and Coinbase Ventures, in the company’s H1 2021 Review report. The first six months brought in new all-time highs in asset prices, user adoption and trader activity, Foster said. 

In Q1 2021, Coinbase had a net revenue of $1.597 billion, up 792% from $179 million in the year-ago quarter. During Q1, Coinbase also acquired Bison Trail, which will allow companies to send and store crypto, accept crypto payments and build their businesses with crypto-native infrastructure, it said in a shareholder letter

At the time, the company said that the rapid expansion of the crypto economy creates new challenges as competition is increasing among the marketplace as new groups join the space every month. While Coinbase said they welcome these challenges, they said they have to continue to move quickly to address them through action and growth.  

Coinbase is scheduled to announce its Q2 earnings on August 10 with an expected earnings per share of 2.57 and an expected revenue of $1.83 billion. 

Want more investor-focused content on digital assets? Join us September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket. Buy it now.

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Cryptos Inch Higher, Equities Topple Amid Delta Concerns: Markets Wrap

  • Ethereum surged more than 9% on Wednesday as the crypto sector awaits the Ethereum hard fork
  • Private-sector hires were sharply lower last month, falling from 680,000 in June to 330,000 new workers in July.

Following less-than-prime jobs data and Fed Vice Chairman’s market-moving remarks at a virtual appearance, Wall Street indices slumped on Wednesday. Widespread concerns over the Delta variant may have also added on to the markets losses, but cryptos inched higher.

The Fed’s Richard Clarida said that interest-rate hikes could start as early as the end of next year, adding that the rapid spread of the variant may stunt the country’s economic growth. 

Private-sector hires in US firms were sharply lower last month, falling from 680,000 in June to 330,000 new workers in July, according to an ADP employment report.

Following the onslaught of news, the S&P 500 and Dow Jones Industrial Average both fell 1% and 0.5%, respectively. 

Small wins were made by the tech-heavy Nasdaq composite. Robinhood Markets Inc. (HOOD) touched $85, hiking around 53% on Wednesday. The popular retail trading platform has jumped 140% since its IPO price of $38 last week. Paycom (PAYC) was up 11% as well, following better-than-expected earnings. The software company’s revenue for Q2 hiked up 33.3% to $242.15 million. Only the Nasdaq was ahead by market close.

Equities

  • The Dow was down -0.92% to 34,792.
  • S&P 500 declined -0.46% to 4,402.
  • Nasdaq had an uptick of 0.13% to 14,770.

Insight

Founding Principal of BKCoin Capital, Kevin Kang, weighed in on Wednesday’s markets activity.

“I think the market is translating the big miss on jobs reports and the Fed staying its course with accommodative policies. We can see the divergence between the S&P 500 and Nasdaq as low interest rates are good for growth stocks. Also crypto seems to be running on the back of SEC chair Gary Gensler making positive comments regarding crypto regulations as he said the lack of crypto regulation isn’t a good thing for the advancement of the technology and he was pro-innovation,” Kang, CFA, told Blockworks. “The sentiment in the market seems to have flipped completely these past two weeks as the market brushed off the news yesterday that the SEC will regulate cryptocurrency markets to the maximum extent possible.”

Tesla shares hit an intraday high of $724.90 following the news, while ether and bitcoin continued to hike up 8% and 5%, respectively.

As the S&P 500 fell Wednesday morning, Tesla shares and Bitcoin traded higher. Source: TradingView

In decentralized finance (DeFi), Genesis reported continued demand for DeFi tokens and ethereum lending in their Q2 Markets Observation report on Wednesday. While bitcoin trading previously accounted for 80% of overall spot trading, the largest cryptocurrency has fallen to 47% in Q2. However, ether has risen to 25% of overall trading volumes on the desk.

DeFi

  • Uniswap is trading at $23.29 with a total value locked of $4,497,369,839 up 1.1% in 24 hours at 4:00 pm ET. 
  • Chainlink is trading at $24.26, advancing 0.8% with trading volume at $1,228,574,228 in 24 hours at 4:00 pm ET.
  • DeFi:ETH is 31.1% at 4:00 pm ET.

Crypto

  • Bitcoin is trading around $39,731.30, up 3.64% in 24 hours at 4:00 pm ET.
  • Ether is trading around $2,711.06, advancing 8.87% in 24 hours at 4:00 pm ET.
  • ETH:BTC is at 0.0682, up 3.87% at 4:00 pm ET.
  • VIX is down -0.39% to 17.97 at 4:00 pm ET.

Insight

“Trends both in Genesis’s activity and the broader market confirm the changing role of bitcoin as the industry’s gateway asset, and highlight the emerging protagonism of Ethereum and decentralized finance,” said Matt Ballensweig, Head of Institutional Lending at Genesis. “Bitcoin’s dominance in terms of market cap declined from over 70% at the end of 2020 to under 45% at the end of Q2, as Ether and most of the main decentralized finance tokens more than doubled in price from the beginning of the year.”

Fixed Income

  • US 10-year treasury yields 1.184% as of 4:00 pm ET.

Commodities

  • Brent crude is down to $70.21 per barrel, declining -3.04%.
  • Gold fell -0.01% to $1,814.

Currencies

  • The US dollar strengethened 0.22%, according to the Bloomberg Dollar Spot Index.

In other news…

Ethereum Improvement Proposal (EIP) 1559, a form of ‘rent control’ on gas fees that comes at the expense of miners, is set to be implemented through Ethereum blockchain’s London hard fork, Blockworks reported on Wednesday.

We’re watching out for…

  • Bank of England’s interest rate decision will be announced on Thursday

That’s it for today’s markets wrap. I’ll see you back here tomorrow.

Want more investor-focused content on digital assets? Join us September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket. Buy it now.

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Senators Propose Infrastructure Bill Amendment to Lighten Crypto Reporting Requirements

  • The White House’s $1.2 trillion infrastructure deal includes provisions for a dramatic strengthening of tax enforcement of digital assets
  • Digital assets brokers would have a much higher requirement for tax reporting, but the definition of what constitutes a broker has proven to be problematic

Three US Senators have proposed an amendment to the $1.2 trillion infrastructure deal currently before Congress which would seek to revise one of the parts of the bill previously deemed an “imminent threat” to the country’s digital asset industry. 

In its current form the bill contains a provision called “Enhancement of Information Reporting for Brokers and Digital Assets,” as Blockworks has previously reported, which creates extensive reporting requirements for Brokers. The problem, however, is that the definition of broker is wide enough to cover miners, lightning nodes, and the like,” Jerry Brito, executive director of Coin Center, said in a Twitter post.

Senators Wyden, Lummus, and Toomey instead have proposed amendments to specifically exclude validators, hardware and software makers, as well as protocol developers from these tax reporting requirements. 

Rob Portman, one of the authors of the original bill, denies that the language is problematic and said on Twitter that “digital assets like bitcoin and other cryptocurrencies are a rapidly growing part of our economy.”

“The legislation does not impose new reporting requirements on software developers, crypto miners, node operators or other non-brokers,” he said on Twitter

In a prior statement, the Blockchain Association, an industry trade group, had said that the language in the bill would put many infrastructure providers in an impossible place. Bitcoin miners and software developers don’t have enough information on their users, like Social Security Numbers, to properly report tax details. 

“It would create this compliance nightmare,” Kristin Smith, the association’s executive director, said in a public statement. “So then people would have no choice but to either operate illegally, leave, or shut down.”

“While much more work needs to be done, this amendment is a responsible step toward fully incorporating digital assets into the US financial sector,” Senator Cynthia Lumis said in a public statement. “The digital asset and financial technology space is incredibly complicated, and we have spent long hours working in the Senate, with industry stakeholders, and with the administration to find a way to effectively integrate digital assets into our tax code without harming the technology or stifling innovation.”

This proposed amendment is supported by the Blockchain Association, Coinbase, Coin Center, Ribbit Capital, and Square, according to a public statement.

Want more investor-focused content on digital assets? Join us September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket. Buy it now.

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Victory Capital Launches Crypto Index Fund

  • Launch comes after Victory partnered with index provider Nasdaq and crypto investment firm Hashdex
  • Index that the fund tracks holds bitcoin and ethereum as well others including chainlink, litecoin and filecoin

Victory Capital has launched a private fund to offer qualified clients access to digital assets and has plans to broaden the strategy’s availability by offering it as an ETF.

The Texas-based company, which manages about $160 billion assets, has launched the Victory Hashdex Nasdaq Crypto Index Fund LLC, the firm announced Wednesday. The fund’s management fee is 175 basis points.

The offering tracks the Nasdaq Crypto Index, which holds multiple coins — a differentiator to competing offerings, Dhillon noted. As of June 1, the index held bitcoin and ethereum at weightings of about 62% and 32%, respectively, as well as smaller positions in litecoin, chainlink, bitcoin cash, uniswap, stellar lumens and filecoin.

“We have seen an evolution in crypto assets that is continuing, and we believe this is a viable asset class,” Mannik Dhillon, president of VictoryShares & Solutions, told Blockworks in an email. “Our private fund provides US accredited investors with the opportunity to gain broad-based exposure to crypto assets in a dynamic, adaptable way for a relatively low cost and without lockups.”

The launch comes after Victory announced plans to enter the cryptocurrency market through a partnership with Nasdaq and Hashdex. The latter firm, a Brazil-based asset manager founded in 2018, launched its own crypto ETF earlier this year using the same Nasdaq index. The product trades on the Bermuda Stock Exchange for accredited non-US investors.

Victory has filed an initial registration statement with the SEC to offer the strategy in an ETF vehicle, the firm also revealed Wednesday.

“We have always felt that if you build an institutional quality product you should try to bring it to as many investors as possible,” Dhillon said. “ETFs and their exchange-traded nature allow for more investors to easily access investment strategies, thereby further democratizing access to the asset class.”

ETFs that directly invest in crypto currently await approval by US regulators. SEC Chair Gary Gensler said Tuesday that he is looking forward in particular to the agency’s review of ETFs limited to bitcoin futures.

Dhillon noted that the dialogue around regulation and potential product approvals is great for investors. 

Further solidifying regulation of products and the crypto asset class in general will be a huge, positive evolutionary step for the industry — with regulation comes increased comfort and generally more demand from more investors embracing an asset class or investment,” he added. “As far as timing, only the SEC really knows, but we trust they will approach the topic objectively, methodically and with the attention and rigor it deserves.”

Want more investor-focused content on digital assets? Join us September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket. Buy it now.

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Aspen Digital Secures $8.8M in Pre-Series A

  • The company was seeded and co-founded by digital assets group Everest Ventures Group and TT Bond Partners, which is the boutique advisory firm of former HSBC Chairman John Bond
  • The company’s strategy is to target the segments of investors currently underserved by existing solutions in the marketplace, said Yang He, co-founder and CEO

Digital asset investment platform Aspen Digital has secured $8.8 million in pre-Series A funding as it continues to build solutions for the growing demand of institutional investments in the crypto space, the company said in a statement. 

The financing round was led by Liberty City Ventures and RIT Capital Partners, the investment trust founded by Jacob Rothschild, a British investment banker and member of the prominent Rothschild banking family. Additional investors include Cherubic Ventures, Token Bay Capital, Somerley Capital, and Chatchaval Jiaravanon & Chaval Jiaravanon. 

The company was seeded and co-founded by digital assets group Everest Ventures Group and TT Bond Partners, which is the boutique advisory firm of former HSBC Chairman John Bond. 

Aspen’s platform is tailored to asset managers, institutional investors and other professional investors through a single account, which brings together dozens of digital assets service providers like FTX, Celsius Network, Hex Trust and others. Through their accounts, users can trade, grow yield and automate investments, the company said. 

“Asset managers and family offices manage generational wealth, their primary goal is to manage risk by constructing a portfolio of diversified assets that will perform across economic cycles,” said Yang He, co-founder and CEO of Aspen in an email to Blockworks. 

Yang He, Co-founder of Aspen Digital

Digital assets are quickly maturing and becoming a new asset class and the main driving force for investors is the need to create a diversified portfolio and relentless search for risk-adjusted returns, He said.

The company is headquartered in Hong Kong, but plans to use the new funding to create a second headquarters and expand the team in London, which will serve clients in Europe and the Middle East. In the future, the company plans to establish a Singapore office to target the Southeast Asian market, which is continuously growing in the crypto space. 

The company’s strategy is to target the segments of investors currently underserved by existing solutions in the marketplace, He said. Right now, the focus is either on serving large institutional organizations like NYDIG and Anchorage Digital or appealing to the mass retail audience through applications like Coinbase and Binance, He added. 

“There is an underserved white space where family offices and asset managers are increasingly looking to create a diversified crypto portfolio, that’s where we are targeting,” He said. 

In the future, Aspen plans to have additional funding rounds post product launch and after it has gained more traction. 

“I don’t know for certain where crypto will go in the end, but what I do know is that crypto is quickly becoming a new, innovative asset class that can no longer be ignored by institutions,” He said. “We are here to help make digital assets investing more accessible by creating a platform that would give asset managers a single portal to create a diversified crypto portfolio.”

Want more investor-focused content on digital assets? Join us September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket. Buy it now.

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SEC Chair Gensler Prioritizes Crypto Platform Crackdown

  • Crypto industry “can’t stay astride the public policy” if it wants to last into late 2020s, Gensler said.
  • SEC chairman seems to hint that a bitcoin ETF with CME-traded bitcoin futures could be more likely to be approved.

SEC Chairman Gary Gensler said Tuesday that though he believes blockchain technology could continue to be a catalyst for change in the fields of finance and money, he warned against industry players working outside of regulatory frameworks.

The crypto asset class has ballooned to be worth about $1.6 trillion. This includes 77 tokens worth at least $1 billion each and 1,600 with at least a $1 million market capitalization, according to CoinMarketCap.

Speaking at the virtual Aspen Security Forum on Tuesday, Gensler laid out some of the “significant gaps” in investor protection that the SEC will be looking to crack down on when it comes to various crypto platforms. 

“In this digital, scarce speculative asset of bitcoin and others, we just don’t have enough investor protection, and frankly, at this time, it’s more like the Wild West,” he said.

President Biden nominated Gensler in February. Though Gensler previously taught courses on crypto finance, blockchain technology and money at the Massachusetts Institute of Technology, he said during the forum that he is now focused on guarding against illicit activity, and ensuring financial stability.

Keep reading for some of the main takeaways from Gensler’s latest comments. 

Crypto won’t last outside of policy frameworks

While public fiat monies fulfill the three functions of money — a store of value, unit of account, and medium of exchange — crypto assets generally do not, Gensler said. 

He labeled crypto assets as “highly speculative stores of value,” noting that when acting as a medium of exchange, it is used to evade anti-money laundering laws and tax collection. It can also enable extortion through ransomware, he added, like with the attack on Colonial Pipeline

“Right now, large parts of the field of crypto are … not operating within regulatory frameworks that protect investors and consumers, guard against illicit activity, ensure for financial stability, and yes, protect national security,” he said. “…If this innovation has any chance of surviving into the late 2020s and 2030s, it can’t stay astride the public policy.”

Gensler focused on regulating securities, platforms

The SEC chairman said that many crypto assets are being offered and sold as securities. He cited the definition of a security established by Congress in the 1930s, as well as the Howey Test, which refers to the US Supreme Court case for determining whether a transaction qualifies as an investment contract.

“Generally, folks buying these tokens are anticipating profits, and there’s a small group of entrepreneurs and technologists standing up and nurturing the projects,” Gensler explained. “I believe we have a crypto market now where many tokens may be unregistered securities, without required disclosures or market oversight. This leaves prices open to manipulation.”

The SEC chair argued that the legislative priority should center on crypto trading, lending and DeFi platforms. Though each token’s legal status depends on its own facts and circumstances, he said, it is unlikely that a platform with 100 tokens has zero securities.

“There’s dozens of platforms that say, ‘come here, lend us your crypto,’” Gensler said. “You can go online right now and find some that are touting 4% returns, 7% returns, 9% returns. …Who is looking after the investors as to those — are they good-faith actors that are really there, are they Ponzi schemes or are they somewhere in the middle?”

Gensler also said that stablecoins, cryptocurrencies backed by another asset in an attempt to offer price stability, also may be securities, in which case the SEC would apply federal laws to them.

In addition, he advocated for bolstering the SEC’s staff around crypto, noting that tripling the number of people may not even fully cover the field. However, he also said cooperation from the crypto companies themselves is perhaps more important.

“What I’m saying to those platforms is work with us and work with Congress if there’s things that might be appropriately shifted in our laws — additional authorities or adjustments,” he said. “It shouldn’t just be static.”

When will a bitcoin ETF be approved?

Though Gensler said he believes there is currently regulatory clarity around much of the crypto space, he noted that progress is being made when it comes to mutual funds and ETFs.

ProFunds launched a mutual fund last week that became the first publicly available US mutual fund or ETF designed to provide investment results that generally correspond to the performance of bitcoin. The offering primarily invests in bitcoin futures contracts, and does not invest directly in bitcoin.

There are already a number of funds that invest in bitcoin futures on the Chicago Mercantile Exchange, or CME, Gensler explained, adding that he anticipates there will be more filings for exchange-traded funds.

“I look forward to the staff’s review of such filings, particularly if those are limited to these CME-traded bitcoin futures,” he said.

His comments gave analysts hope that approvals are moving along.

“We can only speculate about what Gensler meant,” said Sumit Roy, a crypto editor and analyst for ETF.com. “But reading between the lines, I would assume he meant that a bitcoin ETF that holds CME-traded bitcoin futures would be more likely to be approved by the SEC.”

There are currently more than a dozen ETFs that would directly invest in crypto awaiting regulatory approval. The SEC has postponed the decision to greenlight or deny proposed products from VanEck, Valkyrie Digital Assets and others.

These ETFs planning to invest directly in bitcoin and other cryptocurrencies will continue to wait in registration, said Dave Nadig, chief investment officer and director of research at ETF Trends and ETF Database.

“[Gensler’s] comments have made it very clear that rolling regulated product up is going to be fine — that’s what a CME futures-based ETF would be,” Nadig told Blockworks. “I’ll be shocked if we don’t have a few new futures-based crypto ETF filed within the next few weeks.  

SEC Commissioner Hester Peirce said during a virtual event called The B-Word last month that she never would have imagined the SEC would not have approved a bitcoin ETF yet, especially as other countries are moving ahead with them.

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Earnings Push Equities Higher, Delta Concerns Linger: Markets Wrap

  • US closed higher Tuesday after Monday’s turbulent session
  • Second quarter earnings season continued with largely better-than-expected results

US stocks closed higher Tuesday as second quarter earnings continued to come in above expectations, mostly overshadowing concerns over the Delta variant and additional restrictions.

The S&P 500 rallied as companies largely beat on earnings estimates. Shares of Under Armour rose 7% after the athletic appeal company beat on second quarter profit expectations. Zillow Group and Moderna are among the companies set to report later this week.

Chinese tech giant Alibaba also reported higher-than-expected second quarter results, but shares lost 1.57% as China’s regulatory crackdown intensified. Similarly, Marriott International earnings showed a significant rebound from last year, but shares fell 1.82% as Delta variant concerns grow.

Investors and analysts are awaiting Friday’s jobs data. The non-farm payroll report will reveal when traders may start to see tapering from the Federal Reserve. Chairman Powell has indicated that there will only be a pullback in the easy-money policies when employment numbers start to improve.

Equities

  • The Dow rose 0.8%.
  • S&P 500 rallied 0.82%.
  • Nasdaq gained 0.55%.

Insight

Jim Paulsen, chief investment strategist at The Leuthold Group, weighed in on inventory liquidation and what we can expect in markets going forward.

“Dwindling inventories have held back real-GDP growth, and widespread shortages of numerous products have led to the recent spike in the inflation rate. These undercurrents have, in turn, set off a raging debate at the Federal Reserve and among investors as to whether this inflation is, in fact, transitory or incessant? But, overall, the inability of companies to keep pace with an explosive revival in consumer demand has become the primary economic problem.”

DeFi

  • Uniswap is trading at $21.21, down 5.26% in 24 hours at 4:00 pm ET.
  • Chainlink is trading at $23.36, gaining 1.65% in 24 hours at 4:00 pm ET.

Crypto

  • Bitcoin is trading around $38,052.15, down 2.1% in 24 hours at 4:00 pm ET.
  • Ether is trading around $2,474.83, falling 4.69% in 24 hours at 4:00 pm ET.
  • VIX is down 8.17% to 17.87 at 4:00 pm ET.

Fixed Income

  • US 10-year Treasury yields 1.17% as of 4:00 pm ET.

Commodities

  • Brent crude is at $72.49 per barrel, losing 1.02%.
  • Gold fell 0.11% to $1,810.84.

Currencies

  • The US dollar gained 0.01%, according to the Bloomberg Dollar Spot Index.

In other news…

Tomorrow the Ethereum blockchain is set to undergo a significant transformation, or “hard fork” as it’s called in the open source world. A hard fork is a split in the underlying base code of the software that takes it a different direction than before. Changes expected include lower gas fees and potentially higher prices for ETH.

That’s it for today’s markets wrap. I’ll see you back here tomorrow.

Want more investor-focused content on digital assets? Join us September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket. Buy it now.

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Podcast: Anthony Crudele on Crypto as an Inflation Hedge

In this episode of Blockworks’ podcast “Inflated Expectations,” Allison Reichel, Economic Strategist, sits down with Anthony Crudele, a 22-year futures veteran, CME member, and host of Futures Radio Show.

They cover the topics of the transition from traditional finance to crypto, the differences between gold and bitcoin, technical analysis as an art, whether or not a true inflation hedge exists, and the current expectations of the Federal Reserve.

Watch the full episode below:

Once a week, Reichel interviews industry experts, exploring the macroeconomic drivers of growth and the potential for the crypto-revolutionization of monetary regimes. 

Reichel is a Washington, D.C., based Economic Strategist, focusing on macroeconomic trends and the shifting crypto environment. In addition to her work at Blockworks, she is a PhD student in Economics, and also holds an M.A. and B.S. in Economics from George Mason University.

Subscribe to “Inflated Expectations” today on Apple or Spotify, or watch episodes on YouTube.

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The Monetary System of the Future

  • The monetary system of tomorrow could see a steady decline in unbanked populations toward zero.
  • The monetary system of tomorrow could empower people to become their own banks and reduce or eliminate governmental influence over personal finances.

In today’s monetary system, wage-earners never win, as fiat currencies depreciate faster than wages increase. While an ongoing debate about raising minimum wage rages, both sides often miss the bigger picture of why workers demand higher wages – their purchasing power has been eroded. Or rather, it has been stolen, some might say.

Inflation persists as an insidious form of stealth taxation. This is a feature of our present fiat monetary standard and not a bug.

In today’s system, wealth and income inequality often get blamed on capitalism, despite the fact that a centrally-planned and controlled economy represents the antithesis of a capitalist system.

Capitalism also requires capital, i.e. savings. When interest rates are at or near zero, the incentive to save vanishes. 

Capitalism cannot happen under central banks enforcing zero interest rate policy (ZIRP).

Capitalism also ceases to function amidst an utter lack of free market competition. In a world where centralized oligopolies for services like social media, ridesharing, or investing dominate the landscape, the solution in the past has often been to move away from capitalism altogether. 

But today, decentralization offers a better option. With peer-to-peer monetary networks, rideshare drivers can get paid directly. Social media platforms reward users for content creation and curation. Exchanges can function in the absence of centralized control.

What might the solution to all of this be? Is there any hope for the future?

Creating a solution

It’s somewhat of a misnomer to say that crypto is the lone solution.

The monetary system created by ruling elites, cherished by oligarchs and scorned by the rest of us can’t be fixed. Attempting to do so would only recreate some altered version of the status quo.

Instead, we can create something new entirely. There are a few potential options.

Adjusting the status quo

The first option would involve replacing the US dollar with a new reserve currency. The status quo would remain the same, albeit with a different currency in focus and a new superpower at the center. For example, the Chinese yuan could be made the world’s reserve currency. This would amount to rearranging chairs on the deck of the Titanic as it sinks into the depths of the ocean.

Re-engineering the system

The second option would involve some altered version of the current system. There has been some talk of the IMF potentially using its Special Drawing Rights (SDR) currency as a reserve currency, for example. Perhaps the IMF could absorb all the debts of every nation on Earth and become the central bank of central banks, issuing SDRs to all member nations. This would unite all nations under a single currency and system. 

Rebuilding the system

Rebuilding the system is the third option and the one we’d most like to see the world shift toward. 

The monetary system of tomorrow could be based on a deflationary bitcoin standard rather than an inflationary fiat standard. Workers could see their purchasing power increase over time as a result. Other cryptocurrencies could be allowed to compete freely on the market. Central banks would lose their monopoly on currency creation. 

The monetary system of tomorrow could empower people to become their own banks and reduce or eliminate governmental influence over personal finances. Some economists have asserted that doing so could be key to creating a sound money standard.

Famed Austrian economist and 1974 Nobel Laureate Fredrick Hayek once said:

“I don’t believe we shall ever have good money again before we take the thing out of the hands of the government, that is, we can’t take them violently out of the hands of the government, all we can do is by some sly roundabout way, introduce something that they can’t stop.”

Cryptocurrencies seem to fit that bill quite well.

Putting ideas into practice

How would all of this look in practical terms? 

One simple form it could take could be to replace the gold standard with the bitcoin standard. The Satoshi could be used as a unit of account, the Lightning network as a medium of exchange (or various altcoins tied to bitcoin, if individuals prefer), and bitcoin could be the ultimate store of value.

All other currencies, whether they be fiat, altcoin, stablecoin, metal, or something else, could be tied to bitcoin. The Bitcoin network’s scalability would become irrelevant in this case, as small transactions could either occur on layer-2’s like Lightning or using different currencies and networks.  

A revolution overdue

Digital assets are an idea whose time has come. The worldwide appetite for a new monetary standard appears to be large and growing. Nations like El Salvador have already begun to integrate bitcoin into their financial systems, and this is only the beginning.

People everywhere want to be empowered and enabled to take control of their financial futures. Decentralized cryptocurrencies might be the most perfect vehicle created to-date that could make this dream come true for billions around the globe. The differences between the old way and the new way would be like night and day.

A currency backed by code. A system based on permissionless equality instead of privileged access or exclusion. And a monetary standard rooted in deflation and rising living standards as opposed to inflation and increasing impoverishment.   

Such a reality is within reach. It’s our hope that the new Bretton Woods conference will sow the seeds for this new and brighter monetary landscape.

This article is part 5 in a 5-part series about Bretton Woods. Blockworks will be hosting a new Bretton Woods summit in the same location, 50 years later. Find out more about the conference and apply to attend today.

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Analysts Raise Q3 and Q4 Estimates After Blowout Q2 Season

  • We are past the halfway point of earnings season, and the results continue to come in hotter than anticipated
  • Eventually, there will be an economic slowdown, experts agree, but the pace will still likely be above pre-pandemic norm

We are now past the halfway point of the second quarter earnings season. As results continue to come in ahead of expectations, analysts are looking to raise estimates for the rest of the year. 

“People were expecting earnings of about $182 on the S&P this year, that number is now about $193, and based on the numbers that were reported for Q1 and Q2, I think that number is still too low,” Howard Ward, Gabelli Funds CIO of Growth Equities, said on a recent podcast

More than half of S&P 500 companies have reported so far, of which 92% have met or exceeded estimates. Eighty-six percent have outperformed on revenue, which is the most since the first quarter of 2008, according to data from FactSet. Revenues are up 21%, which is an all-time high. 

Companies with significant outperformance include JPMorgan Chase, Apple and Exxon Mobil. Moderna, ViacomCBS and AMC Networks are among companies set to report later this week. 

“On the earnings front, most of the systemically important companies (companies that can move the broader market depending on the earnings results) are behind us, so while there are still many more companies to report results, the impact will be much more micro-economic than on the broader market,” wrote Tom Essaye in a recent note.  

Analysts have been insisting for months that the market is in a state of ‘peak everything’ and there is nowhere to go but down, yet economic indicators continue to inch higher. Third and fourth quarter estimates have been steadily rising as Q2 results continue to outperform.  

At the beginning of July, analysts estimated third quarter S&P 500 earnings to be up 24.7% in the third quarter. Last week, experts raised their projection to 28.3%. Similarly, for the fourth quarter, analysts raised expectations from up 17.3% to up 20.3%, according to FactSet data. 

“The 2022 expectation right now is too low, that’s around $212, we have several years of continued good earnings growth ahead of us, I believe. In real estate, they say ‘location, location, location,’ and with stocks, I would say ‘earnings earnings earnings,” Ward said. 

An economic slowdown will come eventually, experts agree, but the pace will still likely be above pre-pandemic norms. 

“When you look at the economic growth, as strong as it is this year, 7% or 8% GDP is probably more like 4% next year,” said Ward. “We’re already in an economy that has seen peak growth on a quarter to quarter basis, and is beginning to slow. Slowing growth is generally a good environment for growth stocks, and when you get beyond next year, we’re probably going back to GDP growth that has a handle on it of about 2%.” 

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