80/20 ISSUE 1 - THE PERFECT BULLISH STORM?

Was anyone expecting the week we have just witnessed?

After falling to sub $20,000, Bitcoin turned around and secured a new 2023 all-time high.

I can scarcely believe the figures on my screen as I'm typing this.

During the previous week, the Fed had suggested higher for longer interest rates, Silvergate bank had shutdown, and Silicon Valley Bank had experienced a bank run - not necessarily a mix of catalysts that would cause Bitcoin to rally - and yet...

So, what exactly is going on under the hood?

In this week's newsletter:

RECOGNISE - New stimulus hits the market

RESPOND - Are you overexposed to one stablecoin?

RESEARCH - Will the future of DeFi be built on Bitcoin? (+ new crypto to watch)

RECOGNISE - New stimulus hits the market

Bitcoin is rallying! And hard! So hard that there is a lot of talk about the world's leading cryptocurrency now breaking its overall macro downtrend, which it has been in since November 2021.

A lot of the macro downtrend are based on the breakdown of technical analysis indicators - so I always take them with a pinch of salt - but, they are certainly worth taking note of.

So, why is Bitcoin rallying?

Well, based on what I've read and seen this week it comes down to the potential for new stimulus.

Recap - during the COVID-19 pandemic, Central Banks all around the world flooded the economy with stimulus. 12 months later, Bitcoin peaked at its all time high. Coincidence? I think not.

Unfortunately, stimulus also led to high inflation, which can slow down an economy.

The Fed has been battling high inflation ever since with high interest rates and quantitative tightening.

However...over the last couple of weeks, the situation has changed. And at a rapid pace.

To deal with the collapse of Silicon Valley Bank, last weekend, the US Federal Reserve established something called the 'Bank Term Funding Program'.

This was created to make all depositors of the bank whole and is not just limited to SVB.

There's no need to go into the details of the program here - but, what's important to recognise is that the market is interpreting this as a very specific form of quantitative easing.

So much so, that JPMorgan announced during the week that the new program could inject up to $2 trillion into the economy.

$2 trillion! A figure that is said could "reverse the effects of quantitative tightening."

While there is no guarantees the 'bank backstop' will be used, it shows the lengths that the Federal Reserve will go to ensure banks remain stable...

AND is the prominent reason why Bitcoin has put its foot to the floor.

At the time of writing (Friday - 5:30pm GMT +4), Bitcoin is above the 50-week moving average, 200-week moving average, 50-day moving average, and 200-day moving average.

If it can maintain this until Sunday's weekly close it would be an extremely positive sign - but let's see.

Respond - Are you overexposed to one stablecoin?

In the aftermath of Silicon Valley Bank it was discovered that Circle, the developers behind the USDC stablecoin, had $3.3 billion worth of funds trapped inside.

This resulted in the USDC stablecoin de-pegging from $1 and falling to an all-time low of $0.88.

At that moment, it would have been pretty scary holding all of your cash reserves in USDC - something that is supposed to be STABLE.

So, one actionable point that I want you to take away from this newsletter is this:

• Diversify your stablecoin holdings.

Most of you may have heard the phrase "diversification is key to a good investment portfolio." It's a sentiment that I agree with.

But I often forget that it's something that can also be applied to stablecoin holdings.

While these digital assets are meant to be stable, there are no guarantees. You only need to look at those that held all of their savings in Terra's UST to know this.

So, consider splitting your cash reserves over several different stablecoins.

Then, if the worst happens - a stablecoin fails and never recovers - you will have only lost a percentage of your overall cash reserves.

A far better scenario than losing 100%!

Research - Will the future of DeFi be built on Bitcoin?

This is a question that I think is extremely important to answer and could prove to be a fruitful narrative during the next bull run.

Bitcoin remains the world's most decentralised and censorship resistant blockchain. No matter what anyone else launches (or claims), Bitcoin remains the most secure.

It's just got one failing - a lack of functionality.

BUT, that is slowly changing.

Already this year we have seen the explosion of Bitcoin-based NFTs thanks to the Ordinals protocol - which resulted in STX, the coin of Bitcoin's layer-2 Stacks network, absolutely skyrocketing.

While other smart contract blockchains (layer-1s) have worked on improved scalability, the majority still cannot contend with Bitcoin's security and consistency - I would be open to any suggestions if anyone can think of any.

So, as Bitcoin's functionality improves, thanks to the use of layer-2s and sidechains, I think it will only be natural for individuals and institutions to see this as an attractive option.

If you can access the same functionality on the most secure blockchain, wouldn't you?

Either way, this is why I wanted to flag this new narrative with you and tell you to get digging.

There are several projects that are looking to expand Bitcoin's use case - one of which I will be talking about in next week's videos.

And as a subscriber - you get the name of this crypto before everyone else. The crypto project I will be talking about this week is called Sovryn and it is looking to provide DeFi functionality with the backing of Bitcoin security.

The native token of the project is SOV and it is one that I am putting on my watch list.

And that's it for this week!

I hope you enjoyed this first edition of the 80/20 newsletter. Thank you for subscribing and being part of something brand new.

As always, if you have any feedback or you would like to see something different in the newsletter - please reach out. Every idea is a good idea.

Have a great weekend and I'll see you for the next one!

James

CEO & Founder of Access All Crypto

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