🧘‍♂️ We Need To Talk

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Dear Meditators

Welcome to the 1,746 new Market Meditators who have joined us since last week. We are now a community of over 31,412!

🌀In today’s newsletter we discuss: 

  • 📈 The current state of the crypto markets 

  • 🥧 Crypto portfolio allocation 

  • 🇺🇸 The U.S. government’s stance on crypto 

  • 📆 Important crypto events coming up this week

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☔️ Don’t Rain on My Parade

It’s been a good weekend. BTC pumped over 10% between Friday and Sunday. The total cryptocurrency market cap grew by over $100 billion in the last three days. So why are we still seeing headlines like: “Panic Is Suddenly Spreading Among Bitcoin, Ethereum, BNB, XRP And Dogecoin Traders Even as the Market Soars Toward A $1.7 Trillion Price”? The answer is not so simple. 

  • The Good – Objective facts. Bitcoin and Ethereum (as well as many other cryptocurrencies) have significantly risen this weekend, both in price and market cap. The price of BTC is up over 45% from the July 20th low. 

  • The Bad – Zooming out, we still are a long way away from previous highs. Note, to get back to BTC All Time Highs (ATHs) we need another 60% from where we are trading currently. So there’s plenty of time to find and make a good move.

  • The Ugly – Whether you attribute FUD articles to market manipulation by whales, or, less cynically, a different perspective of the market, these highly publicized opinions can prey on people’s worst fears or wildest fantasies. 

  • Making Sense of it all. Sure, technical analysis can be subjective, but weeding out the hard facts and spending a little time learning some TA can ease fears and temper manias. For more on this, check out Friday’s technical analysis newsletter.

The goal of any investor or trader should be eliminating emotion from financial decisions. Small steps in this journey pay big dividends in the end. To learn more about technical analysis, check out our Technical Analysis guides here

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. 

🥧 Building A Crypto Portfolio: Part 1 

Most people enter the crypto scene through purchasing their first Bitcoin. If you’re a regular reader of the Market Meditations, you’ve likely already come across our: beginner’s guide to owning your first bitcoin

For many people, a simple dollar cost average strategy into Bitcoin is sufficient. They obtain exposure to the crypto asset class and indeed the leader of the crypto asset class. Others want to take things a step further, and develop a crypto portfolio. Today, we explore characteristics of crypto portfolios. In part 2 of this topic, we will discuss different portfolio allocations. 

By definition, a crypto portfolio includes a range of assets. In the crypto universe, these can broadly be categorized as:

  1. Payment Coins. It’s more rare to find coins that primarily deal in payments these days. That being said, Bitcoin (BTC), Ripple (XRP), Bitcoin Cash (BCH) and Litecoin (LTC) are examples of payment coins. Consider these the first generation cryptos that existed before Ethereum and the introduction of smart contracts.

  2. Stablecoins. Put simply, a stablecoin aims to track an underlying asset such as fiat currency. Examples include USDC and USDT. They allow users to cheaply and rapidly transfer value around the globe while maintaining price stability. Less known to market participants are the opportunities to earn passive income through stablecoin yields, for more on this check out our Passive Income Guide.

  3. Security tokens. Just like traditional securities, a security token can represent many things. It could be equity in a company, a bond issued by a project, or even voting rights. They’ve just been digitized and put on the blockchain. Security tokens fall under the jurisdiction of local regulators. As such, they must go through more rigorous review and due diligence.

  4. Utility tokens. BNB is an example of a utility token. Utility tokens are typically issued by projects in the fund raising stages of a coin offering. In theory, a token’s value should have a direct link to its utility’s value. These coins can also be used to pay for transaction fees when interacting with DApps.

  5. Governance tokens. Typical within the realm of DeFi platforms such as PancakeSwap, Uniswap or SushiSwap. Similar to utility tokens, their value should relate to the success of the underlying project. Holding a governance token can grant voting power on a project and even a share of the revenue!

Now we know the different components or make up of a crypto portfolio. What is a good mix? Is it possible to have too much exposure to a type of crypto? Find out in Part 2 of our crypto portfolio series.

If you want to receive part 2, consider becoming a FREE subscriber.

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🇺🇸 The U.S. Government Wants A Piece Of The Pie 

You may have heard that the U.S. is interested in a digital dollar. Lael Brainard from the Federal Reserve believes that the proliferation of stablecoins could fragment the payment system without a digital dollar. While this is controversial in its own right, we cannot deny that the U.S. is no longer ignoring cryptocurrency. More specifically, the U.S. wants to get their cut and try to get ahead of this monetary revolution currently taking place (click here to learn more). 

What exactly does the U.S. government want? 

  • Trading Firms and Brokers to report additional information about transactions, including those over $10,000. 

  • Crypto Tax Revenue will increase not because of a change in the tax rate, but because of the reporting amounts. 

  • This new update will bring close to $28 billion according to the New York Times and Bloomberg. 

Why is this a bad idea? 

  • Broad language will not make it possible for trading firms and brokers to comply since some of these organizations “have no visibility into users’ transactions”. 

  • It is an “imminent threat to [the] budding crypto industry here in America” because this update will cause firms and brokers to move away from the U.S. to international territories. 

  • If there are less individual players in the U.S., then the U.S. government will not reach their $28 billion target from this update. 

What does this mean for the general public? We know that regulation surrounding crypto means that the U.S. government (along with other governments) are taking crypto more seriously and while price may not be at an ATH, we should be excited for the future to come. 

On Mondays, our ‘Scan The Week’ section is designed to show our community what events and headlines we will be keeping an eye on.

Monday, 2nd August

  • 🤔Avalanche AMA
    Want to learn more about whale manipulation in DeFi? Start your week off with an AMA from the Co-Founder, Mihai.

Tuesday, 3rd August

  • Solana AMA
    Join the founder of Solana, Anatoly Yakovenko, on August 5th for an AMA with the Crypto Society.

Wednesday, 4th August

  • 🔥London Hard Fork EIP-1559
    Ethereum core devs have proposed block 12,965,000 for London Upgrade on Mainnet which will change Ethereum's fee market mechanism.

Friday, 6th August

  • 🇺🇸U.S. Job Report Day
    The first Friday of each month is the U.S. job report day. The status of the labour market is helpful when it comes to understanding the decisions of the U.S. Federal Reserve. For instance, Fed Chair Jerome Powell will use the report to help decide when to wind down the Fed’s stimulus programs. 

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🌎🧘‍♂️✍️ Stories in this newsletter were written by Kyle F., Misael Calleja, Nick T., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Gerasimos P.

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.