Qrafty knows a lot about the liquidity war, Bitcoin moves ahead of CPI, and... Internation Cat Day!

BTC towards highs of ~ $30 000, ETH hovering at mid 1800's and BNB is ~ $250 per coin

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Qrafty the Crypto Badger
August 07, 2023

WaHaHa! đŸ‘ˆď¸ That’s “Hello, beautiful” in badger talk! Qrafty welcomes you to Coinqraft, the crypto newsletter for you: the smart and curious who wants to know all the juice about crypto, but doesn’t have time for the crazy crypto corners of the interwebs.

🦡 Qrafty just emerged victorious from the mysterious cryptographic wilderness, armed with a treasure trove of wisdom, juicy updates and memes! 🖖 

⚠️⚠️⚠️ First, a WARNING about PayPal’s coin: PYCOIN ⚠️⚠️⚠️

There are a bunch of fake PYCOIN coins that have sprouted on the Uniswap DEX. All those coins are fake! PayPal will offer the PYUSD pair only through their platform. There is no real PYCOIN on any exchange! That’s it! Qrafty has your back! KAPOW!!!

Now that we have that covered, on this beautiful new day, Qrafty presents the main story 👇️

Context from Qrafty: Circle’s USDC is in a place where it needs to back up its claims about their wallet size and the USD backings they have been claiming. It’s like a systemic check, a stress test if you want to go the traditional banking perspective…

It’s getting liquidity checked in the market, lead by Binance’s Changpeng Zhao (aka CZ) and Tron’s Justin Sun. Since Signature, Silicon Valley and Silvergate Bank crashed, getting in and out of crypto has become harder and harder. Also, Binance’s BUSD was declared a security by the SEC at the beginning of 2023.

What’s a liquidity check?

A liquidity check is when a crypto (financial) entity is suddenly forced to sustain massive outflows of liquidity of an asset, while remaining solvent and operational at the same time. It’s the proverbial shxt hitting the fan. But without a fan and without a… you know…

Some checks are small, stemming from rumors in the crypto ecosystem that create panic for a certain market actor, forcing it to provide liquidity for that situation.

How is that done, Qrafty?

It can be in the form of spreading a rumor on social media via “influencers” that a certain coin is having severe problems, and maybe some fake “evidence” to accompany it. This creates massive panic and people start selling. Which in turn creates a cascade of sales which drive the price down massively. By the time people find out it’s fake, the damage has been done. For a small exchange, for example, this can be a massive liquidity event.

  • There is also a scenario where the coin gets bought back up, so in this case the whole crash was created so that the right people enter a position they are profitable from immediately. But that’s a story for a different time.

These are usually temporary and it’s a play from bigger exchanges to either slow down a competitor or kill it for good. In crypto, if you have a bank run and don’t have access to capital at that moment, it’s sayonara baby! Even if you get back on the horse, it’s a loss of another type of capital, the most important one: trust.

But sometimes these turn from a liquidity check to a hit, then to the grave. The biggest and most recent was when CZ hit SBF with FTT, which started as a tweet and ended with the revelation of FTX’s bankruptcy and FTT’s crash.

How did CZ do that? He tweeted and implied that Binance might sell its FTT, which was FTX’s coin. That’s it.

CZ noticed that SBF (Sam Bankman Fried, the CEO of the FTX exchange) was overexposed a lot to the whole crypto ecosystem and understood that it was all based on FTT, the coin belonging to the exchange FTX. Alameda Research was also a part of the FTX/FTT ecosystem, theoretically they were supposed to make money through their investments. Theoretically.

Basically, SBF had a stake and money in almost all new crypto “companies” springing up like they were caffeinated squirrels on roller skates! He was spread like butter over too much bread and Qrafty knows it’s a really nasty feeling when that happens, isn’t it?

So CZ wanted to just hit FTT’s value a bit to throw Sam off balance. Or maybe he wanted to deliver the deadly blow publicly, like “all your bases are belonged to me”? That is for you to decide.

But what happened was that CZ’s tweet created a disruption of trust, which in turn slowly started a waterfall of sell orders for FTT (maybe that was the plan?), which created a domino effect that made it crash bad.

This, in turn, brought all of SBF’s crypto empire crashing into the ground, as it was as stable as a Jenga tower built by a toddler with buttered fingers during an earthquake drill!

One tweet, everything fell. So yeah, CZ understood that FTT was SBF’s Achilles Heel.

Ok Qrafty, so what’s going on with Circle and USDC?

The problem now is how to get out of crypto and into USD. You see… the relationship between USDT and USDC vis-a-vis the market is that you use USDC to get in or out of the crypto world and you use USDT to play around the crypto world. That is one of the reasons most coin pairs are denominated in USDT/COIN, and not so many in USDC/COIN. Another reason is that crypto people tend to have strong feelings toward USDC and Circle.

For big exchanges, liquidity needs are in the billions. These businesses are capital intensive and the need to access liquidity at good rates is extreme.

Up until this point, bigger crypto actors could access liquidity from banks like Signature, Silvergate or Silicon Valley Bank. All are closed now. Quite the coincidence and timing, huh?

Around the cryptoverse, Circle seems to be pretty much the only option available now to exit into $USD, the good old greenback. One thing to note here is that Circle doesn’t make money when they burn and mint USDC.

What is the problem with USDT, Qrafty?

It seems that it has become hard for CZ and Sun to redeem USD for USDT in large amounts. So they have to buy other coins in the market with their USDT (including Bitcoin, Ether, other stablecoins and pretty much everything they want). This is what Qrafty believes to be driving the price of Bitcoin during this time and guaranteeing its stability.

After buying the coins (BTC, ETH, etc.) with USDT, they go and sell them to Circle for USDC. Now they hold USDC, which they redeem for $USD from Circle. This makes Circle give out USD and burn USDC at a 1:1 ratio, which leads to USDC’s market cap going down; while USDT’s market cap is going up, because Tether. Got it?

So, again, the USDC market cap is slowly decreasing, because as Qrafty mentioned, they are burning USDC while providing access to $$$ liquidity for a big part of the crypto market. This includes CZ (Binance) and Justin SUN (Tron) who also need access to USD and liquidity for their exchanges and ecosystems.

So now Circle is seeing itself with a lot of USDT on their hands (along with other stables) and USDC leaving their vaults rapidly together with USD. And it’s filling up with USDT and other stables. Plus, USDC market cap is going down, which doesn’t look nice, but it’s normal to be so since they are redeeming those amounts.

There are also some obscure forces at play here, residing in the fact that Tether and Circle haven’t been audited for they reserves. Tether made an evaluation with a third party that Qrafty wrote about. But that’s not a real audit. And there are some LEO tokens on Tether’s balance, which looks like they issued it to sell a bit and extract the “value” of the tokens to make number look good sir on the books.

Circle also hasn’t been audited, although the CEO mentioned that “they have a plan on doing so”. Plans change, people forget.

Qrafty’s question: What happens when Circle refuses to accept USDT? What then? They have the $ liquidity and they can do that. It’s going to be fun 🙃 

🙃 Qrafty hopes that today’s main story brought brave badgery value to you! Now it’s time for a break, you deserve a bit of fun! 😇 đŸ‘‡ď¸ 

Bitcoin has been tightening dem Bollinger Bands you'd need a team of contortionist cats to fit in there! đŸ¤ŁđŸ¤ŁđŸ¤Ł Everyone is waiting for a move, any kind of move!

The people demand volatility! It jumped a bit today, but it wasn’t the directional move everyone is expecting.

A good giggle… priceless. For everything else there’s… laughing hysterically.

Here are the main news of the day

1. Bitcoin’s price jumping ahead of CPI, PPI and Ark ETF

Are we in for the beginning of a new bull run, or are we faking out again? Qrafty grabs a bag of popcorn and waits to see what will happen. CPI and PPI are important for FED’s monetary rates strategy. Ark ETF is important because it will get postponed to make way for the BlackRock ETF, Qrafty thinks. There’s also the possibility that BlackRock’s ETF isn’t approved…

Liquidity is at lows. Coins are screaming and barely holding on technical levels.

Mr. Dimon from Chase Bank says no more recession, mild stagnation and then moon. Mr. FED said that they might or might not raise rates, which is pretty clear, obviously.

Most are bullish on ETF’s being approved, but Qrafty doesn’t really understand why. Qrafty gets the liquidity part, it’s the philosophical turnaround Qrafty doesn’t get. What happened to Bitcoin is freedom from TradFi?

Liquidity is really low in the whole ecosystem, retail’s participation is close to non-existant and crypto’s media thunder has been stolen by AI and the usual political dramas.

So Qrafty asks: where is the bull case coming from? Who is putting upwards pressure on the price by buying? Who is propping up the market, aside from Mr. Saylor?

Institutions buying on the down low? Makes sense, definitely.

Can it be a fakeout and then a severe drop to make people believe it’s over? Sure it’s possible! That’s usually the scenario.

Can we have an ETF approval and then a crash? This is likely! It makes retail not to buy in and gives institutions time to buy low. A depressed market until after the elections is the best market for institutions to gobble up all dem bitcoinzzz and eeeeethh. Who is supporting the market now, except Mr. Michael Saylor, who’s a devotee of Bitcoin?

Or, this whole time the institutions have been buying and the momentum has been silently building?

Qrafty will keep that popcorn bag close by, time will tell. September isn’t usually a happy month…

It’s funny to say the least that BNB is up there first, along the token “alleged to be securities by the SEC”. It’s also weird to see this.

Why? Crypto coins as securities by the SEC tickles with irony; digital freedom meets traditional regulation. It's like fitting a futuristic spaceship into a classic car museum – a clash of worlds that humorously highlights the struggle of applying old rules to new, dynamic technologies.

Last few months have been really really bad in the cryptosphere. We must also take into consideration the cases they’re currently working on from the past, from the bullrun, which must have piled up. A lot of people were deceived… hopefully this phenomena will go down in time.

Qrafty has witnessed a lot of rug pulls and scams in the market. It’s important to have your own opinion and DYOR. Highly important! Please bear that in mind.

Ripple joined ISDA, a private swaps and derivatives organization whose members transact in the OTC derivatives market.

That’s a soup of words, Qrafty… Wth does that mean?

Think of it like a club for big league players like banks, corporations and the like where they play their own private game of money called OTC derivatives market. It’s like a Monopoly, but all players (including the banks and public utilities) are controlled by the same entities.

That doesn’t affect XRP’s price, nor does it any good (for now) for the XRP community or the project. Basically Ripple must get their selling shoes on and start convincing the club members to pay together, but use XRP. Which would be pretty damn good, considering that among the club members are BlackRock or JP Morgan Chase bank.

So that’s the biggest organization of centralized financial and politically connected institutions and entities in the US (and maybe planet?). It’s the fabulous folks that orchestrate the invisible borders of our everyday lives. The biggest collection of old white guys ever recorded in human history… well maybe the Romans could match it, but at least they had style! It’s pretty much the enemy of the entire crypto movement.

And Ripple is taking XRP, a really fast payments and especially settlements solution, to try to sell it to them. He’s not aiming for payments, Mr. Brad Garlinghouse is aiming for settlements. That’s Ripple’s aim in the derivatives market. And that’s what moves the needle for XRP, because it will be a liquidity tool for settlements. Which is a bazinga huge market, that can absorb XRP’s liquidity.

What does that mean, Qrafty?

At the end of the day, Ripple was always a corporation. It’s their DNA. It was only the logical path, as they mature as a company, to serve this kind of market actors. What Ripple has built over XRP is a corporate solution, just like the CBDC solution for central banks.

What was the problem?

No guidanc from the SEC or IRS, but yes to taxes paid for staking. You could either declare dem gainzzz as income at the time of the receipt or capital gains when you sold the coins.

What is staking?

Crypto staking is like turning your coins into magical gnomes that guard the blockchain treasure chest. You lock them up, and in return, they toss you extra coins. It's like having a coin army that also knows how to throw a party in your digital wallet!

The treasure chest keeps piling up from transaction fees from the usage the blockchain, and depending on how many magical gnomes you have on that blockchain, you receive compensation for securing it.

What changed?

You will be taxed when you “get control and dominion over a token”. As in when you own it and can sell, exchange it freely or do whatever you want with it.

At least a couple of Reddit communities are grinning wider than a Cheshire cat at a mouse disco! They're happier than a penguin with a lifetime supply of fish-shaped ice cream!

Their coin went up and some made some serious dough with dem gainzzz after being listen on Kraken! Good for them!

Hey hey 🙃 Qrafty hopes you are enjoying the experience here and would like to regularly get Qrafty’s letters, can click on the button below. Qrafty is really really grateful to have you here, so thank you!

Qrafty presents to you… the state of crypto!

Other stories from today worth noting

Feel that? What….? Your crypto IQ rising?… No no, let’s just focus on the crypto IQ, okay?

Qrafty, what is a Bitcoin ETF?

Picture this: Bitcoin's a rock star, and you're its biggest fan. A Bitcoin ETF is like nabbing backstage passes without the hassle of wrangling groupies. You're not babysitting Bitcoin; you're riding its investment tour bus while sipping virtual soda. It's VIP access to the digital concert of your financial dreams! 🎸🚀

Now, getting back to sane land, a Bitcoin ETF is a regulated way of betting on the direction of Bitcoins price, in a suited up institutional manner and environment, mkay? So you can ride Bitcoin’s highs and lows like a degenerate, but without actually buying the damn coin.

So why not buy Bitcoin directly, Qrafty?

Because you just want to enjoy the milk, not marry the cow! And people in TradFi just want to bet and be left alone to bet… why can’t they just bet without you people asking all these damn questions?

It’s especially interesting to bet on the direction of a movement in a public market when you can directly influence the liquidity for that movement from a not so public market or a dark pool, isn’t it?

But to make the idea clear with the Bitcoin ETF: it’s a fund that is traded on an exchange. The funds tracks one thing: Bitcoin’s price. That’s it! So institutions and other financial entities (pension funds, insurance funds, etc.) can get in on the BTC action without having to actually buy and/or hold Bitcoin.

It’s basically a ticker on a screen that tracks Bitcoin’s price and is legally allowed to bet on. Get it?

A bitcoin ETF would theoretically bring a lot of liquidity to the crypto markets, as these financial entities have huge capital holdings. At the same time, banks and hedge funds are the opposites of the ethos out of which the Bitcoin whitepaper was born. This should be a Bitcoin purist worse nightmare. The whole of TradFi profiting without participating in the ecosystem directly. Even worse, having the liquidity to move such a small market like a log raft in a terrible storm in the ocean.

Market Whispers

Did you buy the dip?!!!

Bitcoin had some moves today and moved towards the upper range of the channel, jumping almost 4%, when everyone was expecting to go to $25k. Of course, Bitcoin did exactly the opposite.

It’s clear, aliens are coming for Bitcoin!!! It’s just that they landed in a village in Peru and are making their way to a BTC ATM from there… they don’t know our ways!

And finally, today is 😻 International Cat Day! 😻 đŸ˜¸ So… Happy Cat Day! 😸😸😸

That’s all of Qrafty’s wisdom for today! Qrafty thanks you and wishes you to live each moment as if you are listening to the music you love most! Wahaha!