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Good morning everyone,

Bitcoin fell below US$59,000 on Thursday (Australian time). The largest cryptocurrency by market cap rallied nicely at the start of this week after last week's sell-off, only to give up the gains and fall back below the US$60,000 mark.

As mentioned last week, we're in the summer doldrums. (In Australia, we're in the winter doldrums. 🙃 ) There's a bearish cloud hanging over the market.

The now-defunct Mt. Gox crypto exchange is expected to start repaying victims of a 2014 hack any day now. In fact, it may have already started paying out.

In total, Mt. Gox will dump more than US$8 billion worth of Bitcoin and Bitcoin Cash (a coin forked from Bitcoin in 2017) on the market. The crypto community is worried that many of the victims of the hack will cash in on the repayments, as their holdings will have appreciated significantly since 2014.

No one knows how much Bitcoin will be sold and how much will be held. But this uncertainty is adding selling pressure to the market.

On the other hand, one could argue that with Mt. Gox, one of Bitcoin's biggest historical overhangs is disappearing forever.

Bitcoin has had to digest a couple of overhangs this year. The first was the overhang from Grayscale's GBTC fund, which has seen outflows of more than US$18 billion since January due to its flawed structure.

The second overhang is the Mt. Gox repayments.

Once we're on the other side, the market will be stronger.

Catalysts that could push the price higher in the second half of the year are the launch of Ether ETFs in the US, the US elections, and potential US interest rate cuts.

My bet is that we will end 2024 with a new all-time high.

Until then, stay the course.

DISCLAIMER: This newsletter is not financial advice. It does not take into account your financial situation, is general in nature, and is for educational purposes only.

Also, this newsletter contains affiliate links. This means that I may receive a commission from them. But for Crypto Down Under, I only choose products I use myself and can recommend wholeheartedly. Don’t forget to do your own research.

The intersection of crypto and politics

For this week's main story, I want to look at the intersection of crypto and politics.

It's been raining elections lately.

Originally, the US was the only G7 country scheduled to hold a national election this year. But then France and the UK announced snap elections.

While Britain's Labour Party is expected to return to 10 Downing Street today (Australia time), France could get its first prime minister from a far-right party, the National Rally, this coming weekend.

As crypto is regulated at the European Union level, I don't expect any of these elections to have a significant impact on crypto.

The only election that will have an impact on crypto this year is the US election in November. As I have argued here, I expect the impact of the US elections on crypto to be net positive, as both parties have started to embrace crypto, the Republicans to a much greater extent than the Democrats.

The rise of crypto-native prediction markets

But beyond the potential impact of political elections on the crypto industry, there's another fascinating intersection between crypto and politics.

Crypto investors are keen observers of the political circus. And with the rise of the prediction market Polymarket, they have finally been given the opportunity to bet on political events using cryptocurrency. (Absolutely no financial advice!)

I often find myself checking the odds on Polymarket for major events because they tend to give me a good feeling about where things are going.

On Polymarket, the UK election has attracted US$1.7 million in bets. And the result seems very clear to observers. You literally can't make money betting on Labour.

The French election has attracted far less money (only US$380,000), but the result seems just as clear. According to Polymarket, France is very likely to get its first far-right prime minister.

The US election predictions, which have attracted more than US$219 million in bets, contain two very interesting pieces of information.

First, the odds of Donald Trump winning stand at 62%.

Second, Kamala Harris' odds have overtaken those of Joe Biden.

In other words: People expect Joe Biden to drop out of the presidential race and Kamala Harris to replace him.

We'll see in the coming days if the crypto geeks are right!

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Political meme coins

Another interesting intersection between crypto and politics is the rise of PoliFi. (Again, absolutely no financial advice!)

PoliFi is short for Politics and Finance.

Essentially, it means that people are launching tokens to build financial instruments and communities around political issues and political leaders.

For example, there is a Joe Biden token.

And there is a Donald Trump token.

And there is a Kamala Harris token. (Which, unsurprisingly, is up today.)

It's important to note that all these coins are meme coins. They have no intrinsic value or utility. Their only use is to express alignment and assign cultural value.

The second thing to know is that most of them are caricatures. They deliberately misspell their names and come with badly drawn cartoons. It's internet culture, after all. People like to make fun of politicians.

Growing up in Germany, I used to trade Panini football stickers in the schoolyard during tournaments like the Euro or the World Cup. PoliFi is the crypto version of a Panini football sticker album, only for politics.

What does it all mean?

To me, the rise of crypto-native prediction markets like Polymarket and the advent of PoliFi mean two things.

First, crypto is expanding its reach into more areas of our lives. Crypto started out as a financial instrument, but today it has all sorts of use cases in commerce, gaming, art, and now politics.

Second, as I've argued here, we're in an era of financial nihilism. Because of structural problems, the numbers just don't add up for many young people in many countries to, say, buy a house. But instead of being more prudent, they start taking more risks, putting money into things like meme stocks and meme coins.

If you're like me, you'll find all this interesting, but you won't put your money into it. Because at the end of the day, it's just a bet.

I'm mainly invested in Bitcoin, but, man, I can see why people find a Jeo Boden token easier to understand than Bitcoin.

Have a great weekend everyone!

Want to store your bitcoin yourself in a cold wallet? Use the link below to purchase a Ledger Nano S Plus wallet.

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