A volatile week in crypto as a combination of elements pulled the markets in different directions.
I follow several crypto analysts and there are varying opinions on when BTC will bounce back into bull territory (positive growth) which means no one is very confident what will happen in the short term.
They all remain very optimistic about BTC in the long term though.
In world news, local and smaller nation governments are embracing crypto (Florida, Myanmar, El Salvador) while central banks across the world push back.
Here is a recap of a few noteworthy events to help make sense of what I observed this week in the crypto markets.
In this issue:
1 - Central Banks address inflation by raising interest rates in 2022
2 - Florida governor submits a proposal for businesses to pay taxes using crypto
3 - Myanmar’s new shadow government deems Tether stablecoin USDT an official currency
4 - Russia & UK Central Banks push back on crypto
5 - Shopify getting into the NFT space
6 - Sotheby’s made $100M from NFT sales in 2021
7 - Nike purchases NFT studio RTFKT
8 - Market performance summary (trends from the week)
1: After a long run of buying bonds (aka printing money), the Federal Reserve (US Central Bank) indicated they would slow down stimulus and raise interest rates in 2022.
The Bank of England (UK Central bank) raised interest rates as well.
The markets went up after the news as generally markets don’t like uncertainty, however, higher interest rates are often seen as unfavorable for businesses.
Some historical context, interest rates have been very low for many years.
It is interesting how high interest rates were back in 2006 - 2007 before the banking and housing crisis. Interest rates started to go down in 2007 (see the gray bars). Lehman Brothers failed in September of 2008 which started the economic recession.
(chart below: Federal Funds Rate - 20 Year Historical Chart)
Time will tell if this rate increase will lead to a similar trend (raised rates which are then lowered before an economic downturn).
What does this mean for crypto?
Not exactly sure yet. Higher interest rates in fiat currencies (US dollar, Euro) could push lending to crypto platforms (possible but not likely) however, the effect of higher interest rates may slow down the economy overall.
Rising inflation is a problem though, so it’s positive that the central banks are admitting and addressing this concern.
Links: WSJ: Europe’s Top Central Banks Take Divergent Tracks as They Confront Inflation
MarketWatch: Bitcoin, ether spikes despite Fed eyeing 3 rate hikes in 2022
2: In a move signaling wider crypto adoption, Florida governor Ron DeSantis has proposed that businesses have the option to pay taxes using crypto.
The move across the government sector (Miami mayor is also pro-crypto) signals a shift in the belief that crypto is a passing fad or not legitimate form of value exchange.
This follows his recommendation in a 2022-23 budget proposal that the state should offer $200K to the financial services department to facilitate acceptance of fees in digital currencies.
3: Myanmar (formerly Burma) is an Asian country that has experienced political unrest and is currently under a shadow government, the National Unity Government (NUG).
The NUG government has declared the United States dollar-based stablecoin Tether (USDT) as an official currency. Believing that using Tether would enhance trade speed and payment efficiency, the NUG will accept Tether for its ongoing fundraising campaign.
This is another indicator that smaller governments are looking to crypto for stable options, which for many smaller nations is a hedge against hyper inflation (lesson learned from Venezuela).
El Salvador named BTC an official currency earlier this year.
4: Russia & UK central banks push back on crypto. It’s not a surprise that central banks do not support crypto as it is a threat to their control over the money supply.
My hope is that more press around central bank resistance leads people to ask “why don’t central banks like crypto?”.
The answer to that question should lead you to wonder who the central banks are looking to support and protect.
The Bank of Russia officially banned mutual funds from investing in crypto like Bitcoin (BTC).
The Bank of Russia has taken a hard stance on cryptocurrencies and has barred some big banks from offering crypto investment services. The regulator argued that such services do not “meet the interests of investors and bear great risks.”
5: Shopify getting into the NFT space. This is big news as it signals a MAJOR e-commerce platform investing time and resources into this tech.
For those unfamiliar with NFTs, they are more than cool & quirky images that people are buying for loads of money using crypto. The tech has broad uses across real estate, art, entertainment & pop-culture and important documents.
I’ll post more soon about why understanding NFTs is important, but for now, Shopify hopping onboard is a big move signaling acceptance of this new tech.
6: Sotheby’s made $100 million in NFT sales this year. That is not the total amount the sales generated, that is their cut via commissions.
Sotheby’s is an icon in the high end art and collectible space. They represent the establishment in the traditional art world.
It’s amazing that they quickly moved to embrace this very untraditional art form and profited from it.
However, this has made many wonder (myself included) if the high end art world (e.g. paintings that sell for $10M+) is used as a cover for other transactions. Could NFTs serve that purpose too? Interesting question.
7: Nike gets into the metaverse through RTFKT studio purchase. (RTFKT is pronounced “artefact”.
The idea here is that RTFKT makes virtual sportswear and sneakers, which will let Nike have a brand presence in the metaverse.
Several big brands (Burger King, Adidas, McDonald’s) have been investing in the NFT & metaverse space, but purchasing a business in that sector is playing in a different league. Some speculate that pop culture and entertainment will find lots of uses for NFTs so it makes sense that a brand with a strong identity like Nike would want to be a leader in this new version of online entertainment.
8: Here are the top coins in the crypto market this week:
(If you are new to crypto, I don’t suggest buying anything on these lists right away. But the lists below are a good place to start researching different projects (coins) to see what they are all about. There is plenty of time to get started with crypto so don’t feel rushed to do anything)
Below is the top 10 coins by market cap (the total value of all the coins that have been minted for that cryptocurrency).
Below are the top 30 coins that have been trending this past week. Some are on the list of the top 10 by market cap, but many are smaller coins that are newer (investors may want to get in early if they believe the project has potential).
Fear & Greed Index: The overall market is in a state of “extreme fear”. That can mean it’s an opportune time to find undervalued deals, but it also indicates volatility and uncertainty.
Here’s a good post if you want to understand more about how to interpret the fear & greed index. spoiler: it’s an interesting metric but don’t rely on it too much.
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Molly