Someone Sound The Alarms

…HODL!

…Bitcoin is below $57,000!

That’s right. Today, bitcoin (BTC) touched a number we haven’t seen since… February.

Besides the obvious volatility that arises whenever Jerome Powell speaks (he didn’t cut interest rates by the way), crypto is running into a series of quantitative, qualitative, and narrative problems.

Let’s see what’s going down (besides our portfolios) in today’s newsletter.

ETFs Are Weak, Retail is Scared

The most important metric in the current cycle is ETF inflows.

And recently, those have been… soft.

In fact, last week BlackRock’s IBIT notched its first day of $0 in inflows since BTC ETFs were introduced in January.

While there are many reasons for this – including the ones explained below – the truth is that it is impacting prices.

The catalyst that got to us to a new all-time high is finally losing some momentum.

Have Bitcoin, Will Be Investigated

Regulators seem to be going after every person or company dealing with crypto in any way.

First up, we have Roger Ver, who has been arrested and is awaiting extradition for tax evasion on the sale of $240 million worth of bitcoin in Spain – regardless of renouncing his US citizenship in 2014…

Next, we have Binance’s CZ who has been sentenced to 4 months in prison following his company’s legal troubles…

And lastly, federal prosecutors today announced they are investigating Block (SQ) over, among other things, processing "multiple cryptocurrency transactions for terrorist groups."

Look, none of these people/companies are saints… far from it. But it does give a clear signal of what the government is focused on right now (not to mention the recent attacks on crypto privacy which we cover in story #2 below)…

The War on Crypto Privacy

“Shit, shit, and more shit” – was one reaction in our company Slack channel when asked about this week’s roundup of news.

A lot of that sentiment has to do with prices being down coupled with the onslaught of regulatory threats, arrests, and reactions clogging up the newswire.

To catch everyone up, over the past week there have been a number of attacks on non-custodial crypto services. These are services like self-hosted wallets or money mixers that value user privacy, don’t participate in Know-Your-Customer (KYC) standards, and where the crypto owner is fully responsible for managing their own funds.

In response to the latest wave of crackdowns – not to mention the ongoing SEC investigation into MetaMask, the most popular Ethereum access point – two bitcoin wallets (Wasabi & Phoenix) have decided to pull out of the US market. Other self-hosted wallets (Zeus) are standing firm.

As Always, Two Sides

The government will tell you that they are simply cracking down on illicit activity, terrorism financing, money laundering, etc.

But at the same time, you have crypto policy groups and advocates arguing that the government is once again practicing regulation by criminal enforcement. (CoinCenter and their very own Peter Van Valkenburgh talk a great deal about this, for those interested)

Overall, however you want to slice it, the recent events represent a serious warning to those operating outside the great sphere of surveillance.

Our Take

In a world not too long ago, circa 2018, your CoinSnacks editor’s were actively allocating a small portion of our crypto investments to something called privacy coins. These were coins like Zcash (ZEC), Monero (XMR), and ZenCash [Now Horizen (ZEN)], that preserved anonymity by obscuring the flow of money across their networks.

We did this simply because of diversification purposes. Privacy, known to be a backbone of crypto since its inception, and the coins that supported it stood the chance to appreciate in value over time as more people bought in.

You see, before things like DeFi and Web 3.0, crypto was way simpler. There were cryptocurrencies (bitcoin, ripple, etc.), cryptocommodities (ethereum), and a bunch of privacy coins. Maybe I’m missing one or two sectors, but that was about it!

But over the years, the privacy aspect of crypto has just about vanished. Everyone operating in crypto, especially here in the US, has slowly began to realize that if you don’t cooperate with authorities, you won’t survive.

Before we knew it, domestic exchanges and even the cold-wallet providers such as Ledger were implementing KYC features.

It’s kind of sad to think about.

Where in this world can you store money… without centralized risk… or without the ability of a government body accessing or tracing it?

Those that have survived up until this point, including the companies now facing charges, have subsequently served what people now refer to as the darkweb. And without a doubt, bad actors will in some way, shape, or form will be active in those corners of the internet.

But that doesn’t mean the right to online privacy isn’t a noble cause.

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