Wall Street’s slow embrace of crypto means we all have to start watching the Federal Reserve again. Gist Vile parsed through the latest Federal Open Market Committee (FOMC) policy statement on Wednesday to try and uncover some nuggets of useful information. You can think of it as an exercise in financial esoterics to uncover the hidden meaning behind the Fed’s decision-making. As it turns out, the decision to raise interest rates by 50 basis points was already expected, so the actual FOMC document provided very little new information. But, Fed Chair Jerome Powell sparked a late rally in crypto and stocks on Wednesday when he said 75 basis-point increases aren’t on the table.
You wanted the institutions to adopt crypto, didn’t you? Now, the asset class is trading almost in lockstep with other risk assets such as stocks, which means the Fed’s actions, words, intentions and expectations matter — at least for the foreseeable future.
Fed hikes interest rates by 50 basis points in effort to combat inflation
At the conclusion of their two-day policy meeting on Wednesday, FOMC members voted to raise the target for the federal funds rate to between 0.75% and 1%. That equates to a 50 basis-point increase for those keeping track. The last time the Fed hiked rates that much was over 20 years ago. Clearly, central bankers were wrong about inflation, or else they wouldn’t need to hike rates so aggressively. FYI: Central bankers are wrong about a lot of things. Yet, we have no choice but to wait in anticipation for their edicts. Whether the Fed will continue to hike aggressively into 2023 is a subject of fierce debate. My expectation is that they will be forced to stop once something breaks.
*FED RAISES RATES 50 BPS, TO START RUNOFF JUNE 1 AT $47.5B/MTH
*FED EXPECTS `ONGOING’ INCREASES IN RATES WILL BE APPROPRIATE
*FED: RUNOFF PACE TO RISE TO MAXIMUM $95B/MTH AFTER THREE MONTHS
— Christophe Barraud (@C_Barraud) May 4, 2022
Coinbase’s plans to purchase firm behind Mercado Bitcoin fall through Report
Everything was looking so positive for Coinbase in its planned acquisition of 2TM, the multi-billion dollar company behind Brazilian crypto exchange Mercado Bitcoin. But the acquisition plans fell through this week and nobody provided an explanation as to why. A Coinbase spokesperson gave a generic comment about the exchange being “committed to the Brazilian market” without elaborating further. But there could be something more behind this story. We tried to dissect it for you as carefully as possible.
Coinbase took out the first Bitcoin-backed loan from Goldman Sachs
Speaking of Coinbase, the United States exchange also made positive headlines this week after it was revealed to be the mystery company that took out Wall Street’s first Bitcoin-(BTC)-backed loan from Goldman Sachs. This is actually a huge development if you think about it. Not only does it signal Goldman’s utter capitulation on the topic of Bitcoin after trashing it for years, but it also cements legacy finance’s embrace of digital assets. Collateralized loans provide the issuer with certain guarantees in case a borrower defaults. Well, Bitcoin is good enough as collateral for Goldman Sachs.
MicroStrategy may explore ‘future yield generation opportunities’ on 95,643 BTC holdings
If you held 129,218 BTC, wouldn’t you try to make money off some of it? That’s what business intelligence firm MicroStrategy is aiming to do with a portion of its “unencumbered” Bitcoin. That’s just a fancy way of saying Bitcoin that isn’t pledged as collateral. MicroStrategy has 96,643 BTC on its books. CEO Michael Saylor has made it abundantly clear that he will continue to stack BTC regardless of its price. As of March 31, his company’s BTC holdings had a cumulative impermanent loss of more than $1 billion.
— Michael Saylor⚡️ (@saylor) May 3, 2022
Don’t miss out on the most bullish cryptocurrencies!
Although crypto markets haven’t given us a lot to be excited about, there are always diamonds in the rough that will outperform. On The Market Report this week, I engaged in a friendly debate with colleagues Jordan Finneseth and Benton Yuan about which crypto is the most bullish in 2022. You may be surprised to hear that I selected Dogecoin (DOGE), whereas Benton picked Ripple (XRP) and Jordan went with the lesser-known Kava (KAVA). Watch the replay below and let us know your pick for the most bullish crypto of 2022!
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