← Coin Stories with Natalie Brunell
Coin Stories with Natalie Brunell
News Block: Tether Coming to Bitcoin | Fed's Powell on Banks & Crypto | $MSTR Launches $STRK Stock
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In this week's episode of the Coin Stories News Block, we cover these major headlines related to Bitcoin and global finance: A New Era for Stablecoins: Tether Is Coming to Bitcoin Fed’s Powell: “Banks Can Serve Crypto Customers” MicroStrategy...
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Welcome to the Coin Stories news block. I'm Natalie Brunel, and in just 10 minutes, the time it takes to mine a bitcoin block will provide you with insightful updates on bitcoin markets and the global economy. Everything you need to know in one block. Let's go. If there's been one success story in the world of broader crypto, it's without a doubt stablecoins. Over the last five years alone, the total supply of dollar denominated stablecoins has grown from $3.9 billion to more than 200 billion. The reason is pretty straightforward. Before stablecoins, getting your hands on dollars wasn't easy for a lot of people around the world. If you lived in a country with strict capital controls or hyperinflating currencies and you wanted dollars, your options were limited. You either had to deal with expensive, slow bank transfers, rely on cash, or go through shady black markets where dollars traded at a premium and forget about holding a dollar bank account unless you were wealthy or had connections in the right places. Then stablecoins came along and changed everything. Now anyone with an Internet connection can hold and send digital dollars without needing a bank. Transactions are fast, cheap and borderless. No wire fees, no delays, no middlemen. And unlike physical cash, stablecoins are easy to store and transfer. For people in inflationary economies or places with strict financial controls, stablecoins offered a better alternative. But it's not like dollar denominated stablecoins don't come with their own risks. First off, the dollar, of course, also loses value over time, just at a slower rate relative to other fiat currencies. Stablecoins do not remove this debasement risk. Secondly, there's counterparty risk. A stablecoin stability depends on the issuer being able to meet redemptions by properly managing its reserves, which typically consist of US Treasuries. If the issuer mismanages things, then the stablecoin could crash or break its peg and suddenly the stablecoin wouldn't be so stable at all. And thirdly, there's protocol risk. Most stablecoins today run on Ethereum, Tron or other blockchains. These are more centralized and less secure protocols than Bitcoin, so there's a risk that these could be hacked or transactions could be censored. Now, this all begs the question, could Bitcoin power stablecoins well? At the Plan B forum in El Salvador this week, Tether CEO Paolo Arduino and Lightning Lab CEO Elizabeth Stark announced on stage that Tether is coming to Bitcoin and the Lightning network, Now the largest stablecoin, with around 75% of the total market share and 350 million users, will run on the most decentralized and secure protocol in the world, Tether wrote. This integration combines Bitcoin's unmatched decentralization and security with the speed and scalability of the Lightning network, redefining how stablecoins can function within the Bitcoin ecosystem. This really has the potential to make a meaningful impact on global payments and Bitcoin adoption. Think about this. Tether transacted more than $10 trillion in volume in 2024. To put that into perspective, Visa did $16 trillion. Now, all of that stablecoin activity has the potential to flow through Bitcoin instead of other networks. And this unlocks huge opportunities. Merchants already accepting Bitcoin over Lightning can seamlessly add USDT using the same infrastructure, cross border payments faster, cheaper, more secure than ever. Plus, with Tether on Lightning, we're looking at a potential whole new wave of Bitcoin native decentralized finance, from lending and to the tokenization of real world assets and beyond. As Elizabeth Stark put it, quote, today marks a new era for stablecoins. Bringing USDT to Bitcoin combines the security and decentralization of Bitcoin with the speed and scalability of Lightning. Millions of people will now be able to use the most open, secure blockchain to send dollars globally. It all comes back to Bitcoin. All right. Shifting gears to the Federal Reserve this week, the Fed did exactly what everyone expected at its FOMC meeting. It kept interest rates unchange, citing strong economic growth and a solid labor market. But what really stood out were Powell's comments during the post FOMC press conference. One of the biggest takeaways, Powell said that the Fed, quote, doesn't need to wait for 2% inflation to cut rates. Now, to me, that reads as a signal that rate cuts are coming. But when and under what conditions remains the big question. Powell was also asked about the recent spike in bond yields, and he quickly distanced the Fed from the move, saying quote, unquote, long rates have moved up for reasons unrelated to our policy. Translation, the bond market is reacting to reckless government spending, not the Fed. Powell is suddenly pointing the finger at fiscal policy with its multi trillion dollar deficits and more than $36 trillion mountain of debt. Now, this whole FOMC meeting isn't going to sit well with President Trump, who just days ago said that borrowing costs should fall a lot. When asked about Trump's comments Powell dodged saying, quote, I'm not going to have any response or comment on what the President said said. But Trump wasn't having it. He quickly took to Truth Social and blasted the Fed for doing a terrible job and blamed the central bank for, quote, failing to stop the problem they created with inflation. The real question is how will Powell handle a president who is openly pressuring the Fed to cut rates? Will he stand firm or will he cave to political pressure if markets start tanking? We'll have to wait and see. But the most unexpected moment in the FOMC press conference came when Powell was asked about banks working with digital assets. Listen to this.
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Banks are perfectly able to serve crypto customers as long as they understand and can manage the risks. And it's safe, safe and sound, as many of our, a good number of our banks that we regulate and supervise do that. You know, the threshold has been a little higher for banks engaging in crypto activities, and that's because they're so new. And, you know, we don't want to make the mistake here. If you, if you're making a choice to conduct that activity inside a bank, which is inside the federal safety net with deposit insurance, then you want to be pretty sure that, that it's a safe and sound activity. So, you know, we're not against innovation and we certainly don't want to take actions that would cause banks to, you know, to terminate customers who are perfectly legal.
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Okay, so this is a major change in tune from the fed after the SEC rescinded SAB121, which will make it easier for banks to custody Bitcoin for their clients. The Fed now seems to be adjusting its stance to align with this broader shift. That said, the Fed still prohibits banks from holding Bitcoin as principal, meaning they can't put Bitcoin on their own balance sheets. This is a major roadblock for any US Commercial bank looking to adopt Bitcoin as a Treasury reserve asset or develop Bitcoin based payment services. Ironically, it might not be a US bank that adds Bitcoin to its balance sheet before a full foreign central bank does. And this week, reports surface that the central bank of the Czech Republic is considering adding Bitcoin to its reserves. The governor called Bitcoin an interesting asset for a large portfolio precisely because it's not correlated with bonds. Right now, they're still in the research phase. But if foreign central banks start accumulating Bitcoin, that could put serious pressure on the US to adopt a strategic Bitcoin reserve sooner rather than later. Or risk falling behind. This is the game theory of Bitcoin playing out. If one central bank starts accumulating btc, others will have no choice but to react. And with SAB 121 now rescinded, the next logical step would be for the Fed to update its own policy, allowing banks to hold Bitcoin on the balance sheets and further entrenching Bitcoin into the traditional financial system. All right, to finish this news block, let's turn our attention to MicroStrategy. On Monday, MicroStrategy continued its buying spree, adding another 10,107 bitcoin for 1.1 billion, and that brings the company's total holdings to a staggering 460,71,107 Bitcoin. But let's be honest, MicroStrategy buying another billion in Bitcoin barely qualifies as news anymore. At this point, it would be bigger news if the company stopped buying. The real headline this week is MicroStrategy just announced strike, a brand new financial product that will trade as a perpetual preferred stock. This product will trade publicly under the ticker STKR and is designed for long term investors who want Bitcoin exposure with less volatility. Unlike MicroStrategy's common stock, which offers a more leveraged and volatile option compared to Bitcoin, Strike is built for long term investors who want Bitcoin exposure without the wild swings. Think of it as a hybrid between fixed income and Bitcoin, and here's why that's a big deal. Strike pays a fixed dividend, making it attractive to fixed income investors. But it also acts as an uncapped perpetual call option on Bitcoin, meaning holders can ride Bitcoin's price appreciation indefinitely. Unlike MicroStrategy's convertible bonds, which have maturity dates and performance caps, Strike is a forever instrument, a long term play for those who believe in Bitcoin's future but don't want the rollercoaster ride of common stock and want to collect some income payments along the way. This is MicroStrategy doubling down on its mission, turning raw, highly volatile Bitcoin into financial products that investors want and need. So now with Strike, there's another way to get Bitcoin exposure with less volatility. A dividend. And it's built to be held for the long term. And here's the bigger picture. Bitcoin backed securities are officially a thing. It reminds me of something BlackRock CEO Larry Fink said on the company's last earnings call when he compared bitcoin to the early days of the mortgage market or high yield debt. I think this is what he meant. We're in the early innings of this brand new market and MicroStrategy is leading the charge. No wonder its executive chairman, Michael Saylor, was just featured on the COVID of Forbes as the Bitcoin alchemist. Expect more financial innovation, more Bitcoin backed securities, and more institutional money flowing into Bitcoin. Whether it's the ETFs, MicroStrategy stocks strike, convertible bonds, or something else, they all have one thing in common. They're funneling capital straight into Bitcoin. That's it for the newsblock, your weekly Bitcoin and economic news update. I'm Natalie Brunel. Make sure you're subscribed to Coinstory so you never miss an episode. This show is for educational purposes and should not be construed as investment advice. Until next time, keep stacking and make sure you check out our newsletter. TheNewsblock.substack.com.