Foreign Bureau Weekly News Roundup

Here are the top stories in crypto this week:

• To Market: chop coins and tokens trade sideways as investors digest the fed's desire for more rate hikes and U.S politicians debate the debt ceiling
• Tethers BTC buys: crypto's largest stablecoin issuer announces it will use a portion of its monthly profits to stack SATs after revealing record q1 revenues
• Ripple versus SEC: xrp's Creator convinces the judge to force Gary Gensler and his gang to unseal sensitive documents that could shake up the crypto industry
• Important cbdc updates: Fed officials question the need for these dystopian digital currencies while Australia and Singapore test them for cross-border payments
• Ledger's new recovery feature: causes chaos and confusion in the crypto community raising questions about a secret back door

All this and More in just a moment. Good morning, afternoon, or evening. Thank you for tuning in my name is Guy and none of what follows his financial advice and here is the news:

Last week the crypto Market went mostly sideways. This seems to have been due to a general lack of catalysts that would take coins and tokens higher or lower. The only factors that appeared to play a role could have been the possibility of another fed hike and the possibility of a debt ceiling deal before the 1st of June deadline.

As some of you may have seen fed officials have been coming out and signaling that they're interested in raising interest rates by another 0.25 percent in June. This came as a surprise because investors were expecting a pause. As a result, the markets, including crypto, dipped in response to these comments.

If you watched our video about Jerome Powell's most recent press conference however, you'll know that the fed's decision to raise rates ultimately depends on the incoming data core inflation figures for April were still pretty elevated so it's not that surprising that fed officials are being more hawkish in any case on the other side of the equation we have the debt ceiling.

Every time there was news that U.S politicians had made progress on raising the debt ceiling the markets, including crypto, would see a small rally in response this is surprising considering the effects this would have on Market liquidity. you see the moment that the debt ceiling is raised the U.S treasury Department will begin issuing hundreds of billions of dollars of U.S bonds to refill its bank account at the fed the Practical effect of this will be to suck hundreds of billions of dollars out of the market this will affect risk assets the most now obviously a failure to raise the debt ceiling would do even more damage for context the last time the U.S government came close to a default was in 2011 and the stock market dropped by 17 in response.

Given that the crypto Market has twice the volatility this could result in a flash crash of almost 40 percent.

There are just two caveats here the first is that the US isn't the only driver of Market liquidity especially in crypto there could be other sources of liquidity that keep the crypto Market propped up while the treasury refills its bank account such as retail trading in Hong Kong starting from the 1st of June the second caveat is that a failure to raise the debt ceiling would likely result in immediate easing from the FED meaning lower interest rates and quantitative easing AKA buying up assets.
This would of course have a stimulative effect on the markets and would-be rocket fuel for risk assets like crypto in some then it's unclear exactly how the debt ceiling will affect the crypto Market but we could find out as soon as this week that's because the treasury is running out of money and it's possible that the actual deadline could be a bit sooner than the 1st of June it's best to be prepared for lots of crypto Market volatility now this ties in to what's been going on with tether the stablecoin issuer recently revealed that it had made record profits of 1.5 billion dollars in q1 this year this is because of all the interest it's been earning on the assets backing usdt usdt and other stable coins are of course backed mainly by U.S government debt logically this adds another dimension of risk to the debt ceiling debate any volatility in the U.S bond market due to the debt ceiling could lead to concerns about the collateral backing usdt and other stable coins this could result in a run on some of the major stable coins causing them to depeg now the good news is that Circle has already adjusted its reserves to hedge against this possibility the bad news is that it's not clear if tether has done the same this is concerning because it's q1 earnings note that almost 10 percent of the usdt in circulation was backed by money held in Money Market funds for