Our weekly crypto newsletter is here! Learn more about how the consumer price index is correlated to crypto, Celsius and Voyager filing for bankruptcy, and what the best crypto tools for 2022 are.
What Does the CPI Peak Mean for Crypto?
The consumer price index reached an annual peak of 9.1% this June, the highest year-over-year increase since 1981. As of this writing, the stock markets have fallen sharply, with the Dow Jones declining by 1.78% and the Nasdaq by 1.85%. The crypto markets have yet to see much of a drop, but that might not last too long.
Investors are now anticipating the Federal Reserve to increase interest rates by as much as 100 basis points due to Fed’s promise that it will try everything in its power to fight inflation. So why do markets tumble when interest rates go up? Will Bitcoin and other cryptos continue to rebound, or will they drop as well over the next few days?
While no one can predict the future, increasing interest rates will always make markets fall and decrease productivity. Why is that? Because borrowing becomes more expensive, so financing new investments (business or passive) becomes more expensive, and we see fewer market participants. Also, in a world that is so highly levered – corporate debt, student loan debt, consumer debt, housing debt, government debt – increasing interest rates can create a cascading effect as the cost to service that debt takes away from other uses of that capital.
Unfortunately, crypto has not decoupled yet from other markets as it has been highly correlated to traditional ones. As many institutions have entered the market, crypto is still considered a high-risk investment, no different than a tech stock. So when investors panic about possible interest rate hikes, sell-offs generally occur everywhere as many institutions and investors move to risk-free assets or cash.
Expanded Investigations Into Celsius and Voyager
After the recent implosion of the two crypto lending firms Celsius and Voyager, securities regulators in Texas and Alabama have expanded their investigations into the firms after new information came to light.
The early investigations primarily focused on the freeze of withdrawals from both platforms. However, the Texas State Securities board claimed that they’ve recently noticed that many crypto-lending firms may not have fully disclosed what they were doing on the backside with investors’ money.
To put things into perspective, Voyager had recently secured a $500 million loan from Sam Bankman-Fried’s Alameda Research within the last month. Not even two weeks afterward, they filed for Chapter 11 bankruptcy. As for Celsius, In a recent statement, they claimed: “these Chapter 11 cases provide the company with the best opportunity to stabilize the business and maximize value for all stakeholders”. They also noted their intentions to emerge from Chapter 11 “positioned for success” in the Crypto industry. While this may seem optimistic, the scrutiny has only intensified on the firms following the latest update on the investigation.
Best Crypto Tools for 2022
The crypto world can be pretty overwhelming to navigate, especially these days. Regulation is slowly creeping in, price action is as volatile as ever, new use cases keep emerging, and there’s always something new just around the corner. So, how do you possibly keep track of all this? Opening your first account on an exchange is a significant step forward, but there’s a lot more to it.
In order to find the most success in crypto, it’s crucial to arm yourself with the right tools. Aside from choosing an exchange that best suits your goals, you’ll also have to focus on things like the best wallet to store your assets, the most convenient news source to keep you up to date, trackers to follow your portfolio, and crucial market data indicators. Luckily, we’ve made a list of everything you’ll need to start your crypto journey the right way here: Best Cryptocurrency Tools for 2022 article.