Crypto Party
Daily Ramble
The US infrastructure bill, which so much for the US crypto industry hinges upon, has been sausage-making at its finest. I’ve loosely tracked the progress over the weekend, and it’s nothing short of ugly. The legislative institutions of the US are absurdly dysfunctional. Senators argue and bicker over getting the bill passed to add more debt to the next generation of Americans in trade for jobs, some infrastructure, and many pet projects. Meanwhile, crypto, the fastest-growing global industry, is about to be exiled by way of impossible-to-meet taxation requirements. Literally, a square peg being pound into an orange. If that sounds nonsensical, you’ve got the point.
On the flip side, what’s been highly encouraging is the way the crypto community has managed itself. Within hours of the legislative threat rearing its ridiculous head, the community self-organized and began calling senators. A day later, a new amendment was proposed to rectify the wrongs offered by the US Treasury department via Senator Rob Portman. Major media outlets and politicians alike have eschewed the pushback from the crypto industry, shocked that they couldn’t slide the destructive amendment through the infrastructure bill’s legislative process with ease. The result: even if the crypto community loses the current battle, D.C. politicians have realized that there is a political constituency that is a serious and growing force in the populace.
As I mentioned in Friday’s Ramble, the bill seeks to extend the definition of “broker” to include multiple actors in the crypto community. The extended definition is one of the few ways that the bill seeks to pay for itself. A whopping $28B of the $550B bill’s expense is earmarked to be paid by the crypto community through the extension of the “broker” definition. Actors in the crypto space, like software developers, miners, and decentralized exchanges, would be forced to collect and report information on individuals’ transactions for the government to collect capital gains tax. The technology is literally designed to make the collection of this data impossible. That leaves these actors with the choice to either shut down US operations or operate illegally. The end goal seems to be to move large parts of the US crypto industry off-shore. Can anyone imagine what our world would look like if the internet were made illegal in the early 90s? Especially unconstitutional is the chilling effect on software developers who use free speech protected language to code their programs.
Last week's rumors proved true — the US Treasury is behind the “broker” language inserted just days before the infrastructure went to a vote. The head of the US Treasury is Janet Yellen, the prior Chairwoman of the US Federal Reserve. The Federal Reserve sets monetary policy, and the US Treasury sets financial policy in the US. With Janet Yellen, you’ve got the merger of the two. The US is in a debt spiral that it mathematically can’t crawl out of without printing more money. So having the two offices united is the most efficient route for flooding the market with money. Merging the two has only happened one other time in US history — WWII.
The US Treasury inserting this amendment at the last minute harkens back to the Mnuchin’s, the former US Treasury, attempt to thwart the crypto industry. Mnuchin attempted to push some last-minute policy change through FinCEN in the waning days of Trump’s time in office. The crypto industry fought back and got the effort punted for several months. Clearly, the US Treasury is working the angles to shut down crypto in the US. The obvious takeaway from Treasury’s efforts: crypto is a threat to their control of monetary management.
I love it. Genuinely. Why? We’re experiencing the beginning of the end game with crypto adoption. All pretenses are falling away as the US Treasury’s actions show crypto is a threat. Given the global nature of crypto, even if the US Treasury succeeds today, it will only slow down, not kill crypto adoption. Talented individuals will move to other countries to continue developing the technology, leaving Americans able to hold and store crypto but unable to participate in the upside of the economic opportunity of developing the industry. Most importantly, it cannot succeed in the long term because the growth of participants in the crypto industry makes it a political force to ignore at a politician’s peril. A political force that’s younger, optimistic, absent of the red/blue divide, and willing to fight. Does that sound an awful lot like the group of Americans you’d want to rebuild American institutions?
You’ve just unified a new political class, Ms. Yellen. Congratulations.
Art Imitates Life on the Interweb
Bitcoin Price Prediction
Weekend: $41.5k - $45k
Today: $42.2k - $49k
Tomorrow: $42.2k - $49k
Over the weekend, Bitcoin’s price moved into the $45k zone, where it found resistance and pulled back to $42.8k at the beginning of today’s session. It looks to be completing a bullish pivot at the moment, which should set the stage for a rally up to $49k. A break above $49k would put us back into our $49k-$65k range before the Elon Musk saga that started in May, i.e., bullish. There’s little I see in the charts that leads me to suspect we’re going to see the bears take charge at this point. If we should fall below $39k on a daily close, I’ll shift my perspective, but here and now, the bulls are full steam ahead on moving the ball to the $49k zone in the coming day or two.
Bitcoin Q & A
Q: How will Bitcoin be impacted in the US if the current infrastructure bill passes?
A: No one knows…yet.
The US infrastructure bill currently has language that will make mining activities and lightning network nodes fall under the extended definition of a “broker.” As a result, anyone conducting those activities will be operating illegally if the law passes as originally written. There are efforts underway to see the bill amended before it passes. All Americans interested in seeing the US participate in the crypto economy should call their senator to support the Wyden/Lummis amendment.
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