Crypto volatility is to be expected. Many have made fortunes throughout bull, bear and crab markets. One individual managed to turn $4k to $100 million. More on this in today’s special feature.
🏛️ Federal Reservations About CBDCs
The United States Federal Reserve released a paper Thursday evaluating the idea of a Central Bank Digital Currency. CBDCs have been a polarizing issue over the past year.
The paper, titled “Money and Payments: The U.S. Dollar in the Age of Digital Transformation” offers a comprehensive evaluation on the prospect of the United States’ issuance of a CBDC.
A CBDC could have far-reaching and disruptive implications on the structure of the entire U.S. financial system.
A more attractive digital dollar could effectively replace commercial bank money, raising prices for retail customers and negatively impact investments like mutual funds, treasury bills and other short-term instruments.”
A CBDC would differ from existing digital money available to the general public because it would be a liability of the Federal Reserve, not of a commercial bank.
A CBDC could provide households and businesses a convenient, electronic form of central bank money, with the safety and liquidity that would entail:
Giving entrepreneurs a platform on which to create new financial products and services.
Supporting faster and cheaper payments, including those across borders.
Expansion of consumer access to the financial system.
Outside of these pros and cons, there are obvious centralization and privacy concerns when it comes to a government’s issuance of a centralized digital currency.
Whatever the outcome of the research, the Fed announced that further steps toward CBDC development will only be taken “in the context of broad public and cross-governmental support.”
Can CBDCs and cryptocurrencies coexist? Of course. But, the effect of a central bank issuing its own digital currency would impact the future of cryptocurrencies in profound ways.
We may find out exactly how sooner rather than later.
Our Market Meditations are longer format educational segments. Each letter features a Market Meditation which will deep dive and analyse a relevant crypto event, theme or tool.
🌱 Take Your $4k Seed to $100 Million
We hosted Seedphrase on our podcast on Thursday, who shared his incredible journey of $4k to $100 Million with us.
In February 2013, he was a university student studying psychology and walked away from a law school degree after gaining financial freedom from crypto. Seedphrase never wanted to be a part of the rate race and crypto gave him the opportunity to escape from that reality. He went full-time in crypto in 2017 and never looked back after making his first million in April 2017.
After travelling to 50 countries and living off of the profits he made during the 2017 crypto bull run, he got back into the space in early 2019 as an investor, investing in Axie Infinity. This is where it gets interesting.
He didn’t just stumble across Axie. In fact, he initially dismissed the concepts of NFTs.
Nevertheless, he used Twitter and Discord to find projects that ticked all of the boxes for him.
It took a lot of research until he came across Axie.
Back then, Axie had a “sleepy community” and was not spoken about too much.
It didn’t have a lot of volume.
Seemingly out of nowhere, Seedphrase entered the Axie community as one the biggest investors.
So what lessons can we learn from Seedphrase?
Seedphrase mentioned that he is an “all or nothing” guy, even quoting Warren Buffet:
“Be fearful when others are greedy and be greedy when others are fearful.”
It’s not just Axie Infinity he came across using his methodology, but also other projects like Megacryptopolis.
Let’s summarise a few of the other important points:
It’s all about the risk to reward ratio.
Seedphrase always looked for hidden gems. It is important to not be fearful about projects that are not hyped yet or don’t have a lot of volume, as long as the fundamentals of the project are there. Your decision is warranted and you can always back yourself.
Always look at the team and their history.
It gives you a good indication of whether they are the right team to be working on this project.
The future of crypto:
Danny believes NFTs will continue to perform incredibly well in 2022 due to record breaking volumes this month on Opensea, China’s increasing involvement in the space and the relatively low number of users.
Within the NFT space Danny is looking specifically into Music NFTs / Fashion NFTs / Photography NFTs and Gaming + Metaverse NFTs.
Look at the size of the marketplace:
What is the volume of the project?
How many users does the project have?
What is the market capitalisation?
Does the project have a loyal community?
What is the project’s roadmap?
Is there a token involved? Not only do these offer greater liquidity for an investment but can also appreciate greatly through staking and price appreciation.
If you want to hear more about Seedphrase’s unbelievable journey to financial freedom, one of the biggest landowners in Axie Infinity, and generally one of the most successful NFT investors we have come across, listen to the podcast here.
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📒 Will Bitcoin Miners Find a Safe Space?
After China finally enforced its ban on crypto trading and mining, many miners relocated to the US or Kazakhstan but according to the Cambridge Bitcoin Electricity Consumption Index, Russia holds the 3rd highest global hash rate distribution behind the US and Kazakhstan. For those who chose Kazakhstan or Russia, it has been anything but smooth sailing.
Russia’s central bank has repeatedly called for a ban on all crypto, mining included.
Just a few weeks ago Kazakhstan endured protests, which led to their president ordering the country’s major telecom provider to turn off their internet service, knocking off at least 15% of the bitcoin network.
In the meantime, US-based company Intel announced that it would be releasing a low voltage processor created solely for Bitcoin mining.
Block (formerly Square) another US-based company, publicized their plans to build an open bitcoin mining system, so anyone could easily purchase a mining rig.
Miners who relocated from China to Kazakhstan or Russia did so because of the cheap energy prices of coal-fired power plants. After the internet outage and Russia’s central bank announcement of an intended crypto ban, many of these miners will undoubtedly move their operations to North or South America.
Will the US be the safe haven that bitcoin miners are searching for, or will the governments of the world keep knocking crypto down like dominoes? The SEC’s Gary Gensler has previously stated that the US has no plans to outlaw bitcoin, so the US may be the refuge that bitcoin miners are looking for, at least in the short term.
Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here.
Disclosure. Some of the links we’ve included are affiliate, they give you rewards and discounts and earn us a commission. Additionally, the Market Meditator writers hold crypto assets. See our investment disclosures here.