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GM. This is Milk Road, the heart healthy crypto newsletter.
(We trim the fat).
Here’s what we got for you today:
- ✍️ Rate cut expectations increased from 25 bps to 50 bps
- ✍️ $ETH/$BTC is bleeding, here’s what’s could fix it
- 🎙️ The Milk Road Show: PayPal’s Big Crypto Plan: 1 Billion Users with $PYUSD & Solana w/ PayPal Stablecoin Co-Creator 🍪 Circle moves HQ to NYC's One World Trade Center
Prices as of 9:30AM ET. Click here for our Fear & Greed Index
RATE CUT EXPECTATIONS INCREASED FROM 25 BPS TO 50 BPS 🔪
On paper, if lowering interest rates by 25 basis points (bps) is good, then cutting by 50 bps should be EVEN BETTER.
…so why are some people freaking out now that the majority of the market is expecting a 50 bp cut on Wednesday?
Freakout catalyst #1: While rate cuts bring extra liquidity (fresh cash) to the market – benefiting risk assets like crypto in the process – heavy cuts (50 bps+) are rare and often prelude recessions.
Freakout catalyst #2: Rate cuts aren’t the only way to pump the market with fresh liquidity – there’s also QE, which is the Fed’s process of:
Printing cash → loaning it to banks → who then loan it to companies/people → who then buy things (lifting the economy in the process). ⬆️
Now, rate cuts + QE is usually a recipe for increased market prices.
…but those looking to hit the panic button are finding an excuse to do so by pointing to the fact that we saw multiple rate cuts and QE throughout the global financial crisis in 2008.
Ok, now that you’re sufficiently freaked out – here are two key reasons NOT to hit the big red panic button:
1/ The 2008 Global Financial Crisis had a big, glaring catalyst (real estate collapsing)
Right now, we aren’t seeing any singular economy-nuking catalysts bubbling under the surface.
Sure, they might just be waiting to show themselves – but staying out of the market because of some yet-to-be-proven ‘unknown’ is a great way to lose exposure to high performing periods.
Which is way more important than you might think!
Missing the 10 best days in S&P market performance over a 30 year period would have reduced your total portfolio’s result by 54%! 🤯
2/ The Fed is willing to spend more to support the economy nowadays
In 2008, the Fed kept their purse strings tight – but nowadays, they’re willing to print in the trillions if it means keeping the markets healthy.
Here’s some data to make the Fed’s new approach really hit home…
Over a 49 year period (between 1959 and 2008), the US dollar grew to have a total supply of $7.5T.
That supply then doubled from 2008-2020 (~$7.5T to ~$15T) – meaning the Fed essentially printed close to a half century’s worth of dollars, in just over a decade. 🖨️
Downside: This isn’t great for the US dollar, as wild increases in supply debases its overall value.
Upside: When this newly printed cash finds its way into scarce assets (like crypto), it tends to have the opposite effect – increasing the assets value, instead of lowering it.
The takeaway: Times have changed. The Fed is now willing to print excessive amounts of cash if it means the economy will stay healthy. 👀
The key to avoiding getting hurt by this dollar devaluation? Putting your money into scarce assets that have a proven history of outperforming over time.
(Including, but not limited to: crypto).
🤔↓
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$ETH/$BTC IS BLEEDING, HERE’S WHAT COULD FIX IT 🧰
Oooft!
The $ETH/$BTC chart (aka $ETH’s performance priced in $BTC) ain’t lookin’ too hot.
It’s hovering around 3 year lows, in a long term downward trend 👇
Too technical? Say no more. Here’s that chart in a different format…
Ok. That sucks. So what could change it?
Let’s focus on three key issues/solutions…
Issue #1: $ETH got cheap.
Ethereum’s EIP-4844 upgrade helped to reduce the total fees collected by the Ethereum L1, all in the name of scaling (which is a net-good thing).
Problem is, a whole lot of people were valuing $ETH based on its fee revenue – so as fees began to drop, investors began to price $ETH lower. 📉
A potential solution? Innovation within the L2 ecosystem → leading to more users → leading to more fees being paid to the Ethereum L1.
(Either that, or investors stop valuing L1’s based on fee revenue – which we believe will inevitably go as close to zero as possible, over time).
Issue #2: The Ethereum ETFs aren’t attracting as much investment as the Bitcoin ETFs.
Right now, the demand needed to counteract the sell pressure coming (mainly) from the Grayscale Ethereum ETF just isn’t there.
Investors’ appetite for risk will need to increase in order to stem these net-outflows in the near term.
A potential solution? As rate cuts start to come in, big financial players may start to see greater future opportunities in risk assets, and begin to allocate in greater amounts.
Issue #3: Competition.
Bitcoin has won the ‘Store Of Value’ title fair and square (against rivals like Litecoin, Bitcoin Cash, and Bitcoin Satoshi Vision – lol). 🥇
But the Ethereum ecosystem is still fighting to win the title of ‘Fast, Cheap, Programmable Money’ against projects like Solana, and more recently, Aptos and Sui.
A potential solution? An increase in users/developers/market share that helps to bring new momentum to the Ethereum ecosystem and its surrounding narratives.
The quicker, and more effectively Ethereum can solve these issues, the more likely it is to outpace Bitcoin in price appreciation and break that downward trend. 🤝
Godspeed Ethereum, godspeed. 🫡
🤔↓
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THE ROAD TO 1B DAILY CRYPTO USERS 🛣️
How do we get a billion people into the crypto ecosystem?
Big questions require big guests.
In today’s episode of The Milk Road Show, we sat down with Neil Desilva, former CFO of PayPal Digital Currencies & Remittances, to help plot the route to 1B daily crypto users.
Breaking down:
- PayPal’s crypto strategy now and in the future
- Why they decided to launch a stablecoin (and why they chose Solana)
- Where all of this activity from PayPal, Mastercard, BlackRock & Stripe is headed
Click below to stream the episode on your favorite platform! 👇
P.S. Roadies! As of today, we're adjusting our episode release time from 9am to 3pm EST.
Which means you'll still receive your daily dose of alpha – except it’ll now be served fresh and piping hot alongside the newsletter. 🍲
YouTube | Spotify | Apple Podcasts
BITE-SIZED COOKIES FOR THE ROAD 🍪
Blockscout is your next-level block explorer. Multi-chain, highly configurable, and open-source, this essential DeFi tool gives access to all chain data and dApp functionalities. *
Ethereum staking is your chance to lock up $ETH, secure the network, and earn rewards. It’s a win-win for your wallet and the blockchain. Ready to dive in? Check out our guide!
Coinbase launched cbBTC, a DeFi-compatible version of Bitcoin, allowing users to integrate Bitcoin holdings into Ethereum-based DeFi ecosystems. This product seeks to provide an alternative to Wrapped Bitcoin and boost Ethereum’s DeFi space. - DL News
Changpeng Zhao, founder of Binance, will be released from prison on September 29, 2024, after serving a four-month sentence for anti-money laundering violations. His case was part of a larger DOJ investigation, which led to Binance paying a $4.3B fine.
Circle is relocating its headquarters from Boston to One World Trade Center in New York City by early 2025. The move strengthens its ties with traditional finance and comes ahead of a planned IPO.
Join forces with the Milk Man! We’re looking for a Twitter Specialist + Content Creator who can mix crypto knowledge with top-notch tweets. Think you’re the one? Apply today and let’s get this show on the road!
*this is sponsored content
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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
