Investors Eyeing Central Bank Pivot |
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| If one thing has been made clear over the last year, it is that crypto follows money flows.
As we are all painfully aware, crypto has been down-only since the Fed and other central banks began hiking interest rates. The hikes have been painful for stocks, crypto, the economy, and, worst of all, still aren’t effectively taming down inflation.
Regardless, Fed Chairman Jerome Powell, has stated that he is standing firm in his fight: “The longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched… we must keep at it until the job is done.” But, do you believe him? We aren’t so sure. Especially with the UN calling on the Fed and other central banks to stop hiking rates. For context, the UN estimates that increases by the Fed have already reduced poor countries’ economic output by $360 billion over three years, with more policy tightening doing even more harm. “We have the tools to calm inflation and support all vulnerable groups. But the current course of action is hurting the most vulnerable, especially in developing countries and risks tipping the world into a global recession.” Now look, if you read into how the UN expects the US to fight inflation without raising rates, it is quite laughable. But, their point that the US raising rates will lead to a global recession is certainly worth taking into account.
That’s because if the US did force the world into a global recession by continuously raising interest rates, oil consumption would nosedive (as would the price).
That’s why today OPEC+ (which produces more than half of the world’s oil) announced that they have had enough with the Fed’s shenanigans. After last month’s cut of 100,000 barrels of oil a day, today they announced a cut of two million barrels of oil a day to keep a bottom in the price of oil. Simply put, the Fed and OPEC+ are playing a game of chicken with the world’s economy on the line.
The question is – who will break first?
A World In Flux
By now, you might be wondering to yourself: Okay, what does any of this have to do with the equities/crypto markets?
Well, for starters, the market is always forward-looking. And based on the huge rally in equities over the past two days, it looks like it is starting to price in an interest-rate pivot.
Now, will the Fed actually pause? We don’t know. But if they do, everything (including bitcoin, given its steep ongoing correlation to equities) will, at least briefly, enjoy a wave of momentum.
Our main point, however, is that the global economy still remains in massive flux right now. As we just discussed, OPEC+ and the Fed are pretty much at war as of today. There’s a whole other war going on in Ukraine. The global energy outlook is a mess. Inflation is still rampant everywhere you look. Fiat currencies are increasingly volatile. And society’s distrust in governments is ever-increasing.
So guessing what bitcoin will do from here, beyond reacting to interest rates, is anyone's guess. We don't know. No one does. And that's the point.
Bitcoin is truly in uncharted territory right now.
Whether it will become a more defined hedge against inflation, fiat collapses, wars, economic recessions, and everything in between is near impossible to predict right now with everything going on. But with that said, a very real litmus test for bitcoin’s utility is likely on the horizon. And it may just take another economic catastrophe for us to see how it all pans out. |
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Uniswap Eyes $100-200 Million Raise in Expansion Plan |
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| Crypto might just have a new unicorn.
Uniswap, DeFi’s dominant decentralized exchange by trading volume, is raising between $100 million and $200 million at a $1 billion valuation.
Besides its huge amount of money, the round is notable for including mainstream names like Polychain Capital and Singapore’s sovereign fund. Clearly, something big is brewing here.
But what can it be? Why would a DEX need so much money?
The Uniswap Expansion Plan
The reason for Uniswap’s money thirst is simple: they need capital for their expansion plans.
Although the expansion plans aren’t set in stone, we can speculate on what might be on the way: - One confirmed development is the production of an NFT marketplace, as this has been underway since June when Uniswap bought NFT aggregator Genie. To understand why Uniswap wants to enter the NFT market, just imagine Uniswap combined with OpenSea. Utter dominance.
- Techcrunch also cites sources that claim Uniswap is developing a crypto wallet. This also makes a lot of sense for Uniswap as dominant crypto wallet Metamask pulls in millions of dollars daily from swap fees. Millions of dollars that a Uniswap wallet could capture instead.
- Another development that has been speculated about is the creation of a Uniswap appchain. What this means is that instead of being an app built on top of blockchains like Ethereum, Uniswap would become a blockchain itself. This article by crypto VC firm Nascent explains why this is attractive, but the TLDR is that appchains lower trade costs and enables Uniswap to capture more long-term value.
Although these are all great plans for Uniswap the protocol, they don’t directly point to value for UNI the token.
At this point, UNI is still just a valueless governance token, and none of these expansion plans seem to remedy that. Hopefully, that is changed in the future, but for now, UNI doesn’t look like a must-buy. |
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SEC “Catches” Kim Kardashian |
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| Another week, another SEC story on CoinSnacks.
Somehow, this one might be the most ridiculous yet.
On Monday, the SEC charged Kim Kardashian for failing to disclose that she was paid to promote a cryptocurrency. To her credit, Kim accepted responsibility and agreed to pay the $1.26 million fine.
Overall, a great day for SEC chairman Gary Gensler. He takes down another dirty crypto influencer, cuts a promo touting his greatness, and receives a lot of positive press.
But that’s not really the story.
The story is really how stupid this whole thing is.
Kim Kardashian, perhaps for the first time in her life, is a small fish in a big pond. For Gensler to revel in praise for catching her a year after her crime but not receive criticism for missing the whale-sized frauds of Terra and Celsius is a complete atrocity.
Is the point of the SEC to wrist-slap celebrities, or is it to protect investors? Unfortunately, we’re not sure anymore.
At some level, this is what we expect out of Gensler. He’s a wildly ambitious man who has hitched his career on being the crypto crusader. We would prefer if he focused more on stopping the staff bleeding that is preventing his agency from adequately doing their jobs, but ultimately, this is the path he’s chosen.
What really disappoints us is the excessive media coverage of the story. It’s just another example of the mainstream media’s agenda against crypto.
It’s ridiculous that we need to say this, but Kim Kardashian taking a payday to promote crypto does not mean that the entirety of crypto is a scam. Influencers take money to promote products all the time; it’s their job. Where is the media coverage on those products being scams? |
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EU Approves Comprehensive Crypto Regulation |
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| Crypto regulation is coming to the EU.
On October 5th, the European Council approved the Markets in Crypto Assets (MiCA) proposal and sent it to the chair of the European Parliament Committee on Economic and Monetary affairs. If it passes through another round of voting, the bill is set to become law sometime in early 2024.
The MiCA proposal is the most comprehensive crypto regulation framework yet introduced in Europe, with its overarching goal being to standardize crypto regulation among the 27 EU member states.
Although the proposal has been praised among crypto proponents for harmonizing European regulation, it is not completely free of criticism.
The primary point of contention is its cap on non-Euro stablecoins, which poses issues with the current dollar-dominated stablecoin market. Should this cap ultimately be included, then it is likely that USDC and USDT will lose some market share to a Euro-backed competitor.
The second controversial area is the crackdown on “crypto mixers”, such as Tornado Cash, which are designed to help users preserve their privacy. The right to privacy is considered sacrosanct in crypto, so it’ll be interesting to see how the industry handles this provision.
Overall, it is good to see the regulatory landscape becoming clearer. Hopefully the bill can be improved between now and 2024, so that it may set a strong precedent for future regulation. |
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