Q9 Weekly | Oh, What a Feeling, When We’re Dancing on the Ceiling

Q9 Capital
6 min readJun 1


Oh, What a Feeling, When We’re Dancing on the Ceiling

  • First negative month of 2023 for crypto blue-chips
  • Chip maker Nvidia becomes trillion-dollar company
  • Markets hold their breath as debt ceiling deadline nears

Digital assets officially posted their first negative month of 2023. Markets have remained relatively cautious as we near the June 5th debt ceiling deadline and after a top US Fed official said on Weds that there is no compelling case to halt the central bank’s rate hike cycle.

Bitcoin Down 7% in May

Source: CoinDesk Indices

With the US at risk of defaulting in less than 5 days, there is no time to spare. But things seem to be progressing — the House of Representatives just voted to advance a bill to raise the US debt ceiling (despite a hard-line conservative revolt), a major victory that brings Washington significantly closer to averting a damaging default.

US National Debt Stands at $32 trillion

Source: FRED

As part of the debt ceiling negotiations, the proposed 30% tax on crypto miners appears to have been dropped according to Republican congressman Warren Davidson.

The yield curve for US government debt remains highly inverted, a clear indication that fixed-income investors expect further rate rises and a recession. The spread between 2- and 10-year Treasury yields remains negative (-75.8 bps), as short-term debt rates remain higher than longer-term debt.

This remains close to the widest yield differential above 10-year securities in more than four decades. Not exactly a ringing endorsement for the current economic strength of the US.

Treasury Yield Curve Significantly Inverted

Source: WorldGovernmentBonds

The recent calm in Bitcoin and Ether volatility should not lull market participants into a false sense of security. Although volatility has drifted into all-time-low territory, there any many upcoming macro-events and tail risks that could push BTC and ETH out of their recent boundaries.

BTC and ETH Volatility at Multi-Year Low

Source: AmberData

XRP has risen by more than 8% to $0.51 this month, beating most other blue-chips in May. There has been speculation that the SEC vs Ripple legal case could be settled within the next few weeks, which has driven XRP prices higher.

XRP Defies Broader Market Downturn

Source: TradingView

Trillion Dollar Baby

Nvidia became a trillion-dollar company on Tuesday morning, putting it in the rarefied air previously occupied by only a few large companies such as Apple and Microsoft.

Even as the market for crypto mining and gaming PC GPUs has cooled, the AI gold rush sees Nvidia selling shovels at just the right time. The last quarterly earnings report from Nvidia noted over $2bn in profit in three months. The stock’s value has tripled in less than eight-months, reflecting the surge in interest in artificial intelligence and rapid advances in generative AI.

80% of graphics processing units (GPUs) today are processed by Nvidia. The company’s business rapidly expanded during the pandemic when gaming took off, cloud adoption surged and crypto enthusiasts turned to its chips for mining coins. Nvidia’s latest bet on AI is expected to further fuel growth in the coming months any years.

Source: Visual Capitalist

Breaking Through the Ceiling

As we near the debt ceiling deadline of June 5th, markets remain relatively sanguine, providing a muted welcome to the House of Representatives passing a bill that would suspend the government’s borrowing limit and avert a default. Members of Congress must now finish the job and send the bill to the President’s desk to be signed into law without delay.

The spread on one-year CDS’ imply a 3.9% probability that the US could default, according to MSCI Research analysts. This suggests it is unlikely, but the tail risk is long and a default event would send huge shockwaves through markets worldwide.

But what does this all mean for crypto?

For starters, the Digital Asset Mining Energy (DAME) excise tax has been dropped. The proposal would have levied a 30% tax on any firm using computing resources to mine digital assets. Such an outcome isn’t surprising — not because of widespread resistance in the crypto industry but because of the general distaste from Republicans for any new taxes in the debt ceiling bill.

The words “crypto” and “cryptocurrencies” also don’t appear at all in the initial version of the deal. Its fair to say that this can be viewed as a positive given recent crackdowns from other bodies. In this case no news is good news.

This latest chapter of borrowing, spending and political instability further underlines the reason why cryptocurrencies hold value and provide portfolio diversification — particularly those with hard monetary supply caps like Bitcoin. Advocates for ETH are also trumpeting its deflationary nature.

As for Stablecoins, their woes seem to be tied more closely with that of the traditional financial sector. Dollar instability and the banking crisis have caused many investors to seek safe-harbour in BTC instead. Rising interest rates have also provided competition from other asset classes to yields on stablecoin deposit.

Total Stablecoin Supply Falling

Source: The Block

So far this year digital asset markets have exhibited their safe-haven characteristics and have shrugged off bank instability, the ongoing war between Russia and Ukraine, continuous rate hikes, a looming global recession and the US debt-ceiling fight (that may or may not be resolved).

Ongoing debates about the macroeconomic picture have analysts wondering when the next shoe will drop — but for now, crypto has seemingly lost interest in all conventional narratives that would normally spark a reaction from investors.

In the News…



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