U.S. Avoids Default While Bitcoin’s Builders Continue Delivering Exciting Innovations
June 3, 2023
Stay up to date with our monthly crypto overview:
- The crypto asset market softened in May.
- The U.S. avoids defaults.
- Bitcoin (BTC) is down by 5.2% month-on-month.
Market Overview - May
The biggest market-moving news in May was the potential U.S. default, which was avoided just days before the country would no longer have been able to make its debt payments.
Treasury Secretary Janet Yellen warned about the U.S.’s insufficient resources for most of May. She stated that they would default unless the government raised the debt ceiling. Initially, she feared June 1st as the deadline but had since changed the date to June 5th.
This deadline put a lot of pressure on both the Democratic and Republican parties. President Biden and Kevin McCarthy met for emergency meetings, which ended in a back-and-forth between the two parties, both blaming the other party for the mess the country’s finances were in.
Eventually, both representatives found common ground and sent the debt-limit agreement to be approved with a congressional passage to the House of Representatives and then Congress, avoiding a default.
Despite the last-minute back and forth between lawmakers, it was always highly unlikely that they would allow a default. The consequences would be catastrophic and could seriously harm the U.S. dollar. But instead of coming up with sustainable solutions, they changed the goalposts and raised the debt ceiling again.
The dollar’s status as the world reserve currency has allowed the US to take liberties with its monetary policy. The U.S. dollar has managed to survive so long playing the debt game. To combat excessive government spending, the Fed simply prints more money and issues more debt. They were forcing the market to buy more and becoming dependent on the U.S. dollar.
This solves most short-term problems, but eventually, you get to the point of no return, and a U.S. default may be inevitable. Unless the United States starts to change course, the future of the U.S. dollar will be problematic.
Crypto Asset Market Performance Review
The crypto asset markets largely softened as a result of the U.S. default story, with Bitcoin (BTC) dropping a little over 5% month-on-month.
The biggest crypto winner this month has been Ripple’s XRP. XRP outperformed BTC and ETH, rallying by 10.00%* versus last month's close.
As you may have heard, Ripple is involved in a lawsuit with the SEC, which claims XRP is a security. However, things are increasingly pointing toward Ripple winning its case. This sparked a price rally by XRP-bulls, and XRP closed the month 10% higher than in May.
The second-best performer among the leading digital assets was Ethereum (ETH), which managed to close the month 1.1% higher. Some of that success is down to the ongoing withdrawals of staked ETH and Liquid ETH staking.
For the first time in 2023, Bitcoin recorded a negative month. Although new yearly highs were reached, the most prominent cryptocurrency showed big resistance and further support between $26,000 and $27,000.
Yet that didn’t stop builders and innovators from developing new ideas and products in the Bitcoin ecosystem. If anything, May was a great month for Bitcoin builders.
Bitcoin Tech Update
May was the biggest month for Bitcoin in terms of high-profile announcements and new products hitting the market. It’s exciting to see more layer applications and unique protocols being released. The Bitcoin tech ecosystem is alive, proving that you can build on top of Bitcoin once and for all!
Ark: A Layer Two Protocol for Cheap and Anonymous Off-chain Payments
Until now, the Lightning Network has been the biggest name in the Layer-2 world of Bitcoin. In case you haven’t tried it yet, we urge you to do so.
However, the Lightning Network has two issues: the complexity of getting channels up and running as well as the liquidity in the channels. This often leads to the foreclosure of channels or forces the channel owners to add more liquidity.
Ark aims to solve this problem by enabling anonymous, scalable off-chain payments through an untrusted intermediary called the Ark Service Provider (ASP). ASPs are always-on servers that provide liquidity to the network, similar to how Lightning service providers work.
The brain behind this innovation is Bitcoin developer Burak, who wrote about the launch of Ark on his blog. Users will not have to worry about trusting the ASP as a third party because ASPs cannot steal users’ funds or link senders and receivers. Users retain self-custody and can revert their funds to the base layer if something goes wrong on the second layer.
Although Ark is still in its early days of development and will take some time to grow, it’s exciting to see an alternative for users. Burak also stated that he sees a future where Ark and the Lightning Network co-exist alongside each other.
Fedi Launches Alpha Version
Fedi launched its Alpha version on the 22nd of May. After months of building, the team can finally show off what they’ve been working on.
In short, Fedi relies on Fedimint technology, which enables communities to use technology to take back control of their money, data, and more, all through the power of the community. The entire infrastructure is built on top of Bitcoin with Lightning.
Users can join a Federation, Fedi, in short, and contribute to the community by co-owning a piece of it with their wallet and providing funds. The goal is to create local communities and circular economies that run 100% on Bitcoin through Fedi.
NFTs Make Their Way to Bitcoin With the Launch of BRC-721E
Ordinals are the Bitcoin NFTs that have taken the world by storm. Just last week, they surpassed 10 million inscriptions. But this news was not the biggest announcement in May.
Because most of the NFT market is still on Ethereum, developers sought alternatives to bridge them to Bitcoin. That option is now available with the new BRC-721E token standard. BRC-721E enables the conversion of immutable, verifiable ERC-721 NFTs to Ordinals.
The Ordinals market introduced the new token standard — an Ordinals-based marketplace — and the Bitcoin Miladys NFT collection. BRC-721E could bring a new wave of NFT holders from Ethereum over to Bitcoin.
Strike Is Going Global
Just two years ago at Bitcoin Miami 2021, Strike’s CEO, Jack Mallers, announced plans for his Lightning startup. With his on-ramp, the 27-year-old stepped up and worked hard to adopt more people to Bitcoin. However, Strike was only available to U.S. users and businesses in El Salvador.
Now Strike announced its global expansion into 65+ countries. For now, they focus primarily on the Global South. After all, these regions need real-time settlement and remittances more than countries in the West.
Institutional Interest in Bitcoin
Institutional interest in Bitcoin also remains alive and kicking.
MicroStrategy Enables Lightning Addresses for Corporate Emails
The biggest publicly-traded Bitcoin holder has announced that from now on, people can send Bitcoin via the Lightning Network to MicroStrategy’s corporate email addresses. Chairman Michael Saylor already demonstrated this last month with a tweet and is excited to roll the feature out to more institutions later this year.
The announcement came at MicroStrategy World, the yearly conference where the company reveals new features. This is all part of a bigger vision, which MicroStrategy announced at the same event. The analytics and software giant aims to build the MicroStrategy Lightning Platform.
With this platform, Saylor keeps his promise from December 2022, when he announced MicroStrategy’s step into the Lightning world. Institutions can use the platform to build their wallet or integrate their infrastructure. This includes incentives, cashback, and payment options to reward the user directly and make him less dependent on big tech platforms or gatekeepers.
So far, no launch date has been announced. However, MicroStrategy is looking for institutions that want to participate in the Beta and become early adopters.
Bitcoin on Balance Sheets
While we didn’t have any public company announcing more Bitcoin on their balance sheets, we did hear some exciting news from Tether.
The biggest stablecoin issuer plans on investing up to 15% of monthly operating profits in Bitcoin. In their latest attestation, they proved that they hold roughly 2% of their portfolio in Bitcoin.
With this announcement, Tether plans on expanding that position and building a Bitcoin reserve. Tether’s purchase of Bitcoin is part of its conservative “approach to investment decisions aimed at strengthening, increasing, and diversifying its reserves.”
*Closing price data is from May 31, 2023