Fed Signals Rates Higher for Longer; CZ Rebukes the SEC; & Liquid Restaking Enters the Chat!
Market Landscape
During the September meeting, Jerome Powell, the head of the Federal Reserve, delivered a clear message: Interest rates will remain elevated until inflation convincingly inches closer to the 2.0% target. The Fed opted to maintain the current rates at 5.25% — 5.5% but kept the door open for a potential rate hike, holding firm to its expectation of a peak fed funds rate at 5.6%. Notably, the Fed’s latest projections also scaled back the potential rate cuts for 2024, from a previously anticipated 1.0% to 0.5%, signaling that the high-interest-rate environment might endure longer than initially predicted.
This somewhat hawkish stance by the Fed triggered a clear market reaction. Treasury yields surged notably, with both the 2-year and 10-year yields reaching cycle highs. This surge exerted downward pressure on returns in both the stock and bond markets, with particular underperformance observed in longer-duration segments, including technology and growth sectors. The good news for the crypto markets is that it maintained pretty steady through this news, with Bitcoin standing strong above $26,000. This divergence is an encouraging sign for the crypto world as it can be taken as a sign of strength when other risk assets were punished.
However, despite the Fed’s stubborn posture, several factors suggest they might find themselves more likely in a holding pattern in terms of rates. Core inflation is gradually trending lower, early signs of labor market cooling have emerged, and consumers, the bellwether of the economy, are drawing down their savings while grappling with higher oil prices. These factors create a complex landscape that could influence the Fed’s future decisions. If the divergent strength in crypto assets continues it could mark a shift in the tides of what many consider the most brutal bear market on record. If there are any surprise cuts to rates that should also be considered very bullish for the sector.
Quick Hitting Alpha
· Seychelles-based crypto exchange HTX, formerly known as Huobi, lost 5,000 ETH (worth nearly $8 million).
· JPMorgan has expressed disappointment in Ethereum’s performance following the Shanghai upgrade.
· Stader Labs experimented with a “liquid restaked token” aiming to enhance staking rewards.
· Binance and CEO Changpeng Zhao have filed a motion to dismiss the SEC’s lawsuit, alleging the agency overstepped its authority.
· The Nouns NFT community divided when a third of holders endorsed a fork, taking half of Nouns’ treasury.
· The US House Financial Services Committee passed the CBDC Anti-Surveillance State Act, pushing it toward a House of Representatives vote, aiming to block the potential issuance of a CBDC in the United States.
· Polygon experienced a surge in activity due to Pokémon NFT card sales on Courtyard.io, leading to increased trading and on-chain pack openings.
· Bored Ape Yacht Club continues to astound the crypto community with its latest partnership alongside renowned Japanese streetwear brand BAPE.
· Stanford University will be returning donations it received from the bankrupt crypto exchange FTX and its affiliates, which were primarily made by the FTX Foundation and related companies for pandemic-related prevention and research studies.
· Coinbase has initiated a grassroots advocacy campaign to promote regulatory clarity for the crypto industry in the US, with a focus on supporting a Republican-led bill passed by the House Financial Services Committee in July to establish a clear regulatory framework.
In The News
Getting Started with Rainbow Wallet’s Latest Release
Rainbow, known for its mobile wallet, has introduced a browser wallet extension compatible with Arc, Brave, Chrome, and Edge browsers, with Firefox and Safari support coming soon. This extension simplifies desktop crypto transactions, offering auto-token discovery, L2 support, built-in bridging, and an impersonation mode. Notably, Rainbow distinguishes itself with its Magic Menu and keyboard shortcut systems.
Enhancing Google Cloud’s blockchain data offering with 11 new chains in BigQuery
Google Cloud has expanded its BigQuery public datasets by adding eleven popular blockchains, facilitating comprehensive data analysis and enabling users to answer complex questions without operating nodes. These added chains include Avalanche, Arbitrum, Cronos, Ethereum (Görli), Fantom (Opera), Near, Optimism, Polkadot, Polygon Mainnet, Polygon Mumbai, and Tron. Google Cloud is also enhancing the Bitcoin BigQuery dataset for developers. Additionally, Google Cloud is creating managed datasets to offer richer data analysis options for the Web3 community and making on-chain data more accessible. They aim to collaborate with partners, startups, and data providers in the Web3 space.
Coinbase’s Ethereum Layer 2 solution, Base, aims to support millions of users and serve as the onchain platform for Coinbase products. It’s built on Optimism’s technology, aiming for Ethereum Layer 2 interconnectedness. However, it’s still in development and not fully decentralized yet. Since its full launch in August 2023, Base has seen remarkable growth with 15 million transactions, 1 million wallets, and over $371 million in TVL, making it the third-largest ETH Layer 2 platform. Key applications include Aerodrome, friend.tech, and the Stargate bridge. It has also become a hub for NFT projects due to Coinbase’s Onchain Summer festival. To use Base, you need a wallet like Coinbase Wallet or MetaMask and some ETH for transaction fees, like Ethereum.
Grab Launches Web3 Wallet for Singaporean Users
Grab, a major Southeast Asian “super app,” has launched a web3 wallet for Singaporean users with Polygon’s technology, enabling payments through XSGD stablecoin. However, it offers a centralized experience with PIN login, supporting XSGD and SG Pitstop Pack NFT vouchers but no other digital assets like ETH. This development is significant due to Grab’s large user base and wide-ranging services, but it exclusively works with the Polygon PoS Chain.
Bitcoin exchange volume tracks 5-year lows as Fed inspires BTC holding
Bitcoin exchanges are seeing a significant drop in trading volume, with daily volumes now at levels not seen since 2018, mainly due to prolonged price stagnation and growing macroeconomic uncertainty, particularly linked to the US economic policy. Short-term Bitcoin holders are facing unrealized losses as their cost basis exceeds the current spot price, and newcomers to the Bitcoin market are expected to resist price increases. Additionally, external interest in Bitcoin, as indicated by Google Trends data, is currently at its lowest point since October 2020.
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