The Weekly Pen: Banks, bitcoin, battle of the CEXes & peculiar puns

MONEY
INVESTING
CURRENCY
BLOCKCHAIN
BITCOIN
CRYPTO
By the Pen

The Pen team wrapped up week 44 with an ambivalent feeling about the global economy and the world of crypto and decentralized finance. Bringing you anecdotal analysis and assumptions wrapped up with sources and sayings from the financial markets, centralized and decentralized alike. Pegged with puns, week 44 offered top trending news on the FEDs' latest rate hike, local IT hack, META advances, and more adventures of bitcoin. Have a good read.

META GETTING NIFTY WITH NFT


In early 2022, Meta (the parent company of FACEBOOK), announced that they were going full NFT across their various social media platforms. Enabling users/creators to make, show and sell “digital collectibles” on their social media platform Instagram. Back in September, META opened NFT sharing on Instagram AND Facebook to all their US users, where US users can connect their crypto wallets to Instagram as part of the app’s new digital collectible feature, which the tech giant had been testing since May. Fast forward to this week, Meta is bringing NFT minting AND trading to Instagram with an end-to-end toolkit for creators to make, show and sell “digital collectibles” for all. To begin with, Meta has opened up the feature to a select group of creators and will onboard more creators in the coming weeks. When will it be open for all, and what will that mean for the world of art, creative works, business, and celebs with an already large userbase and popularity advantage over the rest? Does this mean Meta will go full Web3, with their Metaverse (so far flopped initiative), NFT marketplace, and perhaps integrating blockchain on posts and instant messaging platforms? Time will tell.

JPMORGAN AND THE BLOCKCHAIN AFFAIR


Jamie Dimon, CEO of JPMorgan Chase, and one of The Pen team's favorite “celebs” engaging in the world of Web3 is back again. This time after various contradictory rhetoric against crypto, from one day, calling cryptocurrencies decentralized Ponzi schemes and in 2021 saying that bitcoin is worthless, to less than a year later stating that bitcoin has an interesting upside for investors to now making their first trade on a public blockchain, what’s seen by the community as a monumental step for DeFi. Despite the CEO’s various skeptical comments about the coin, crypto, and seasonal crashes, the chief’s tone is slightly softer on stablecoins. Stablecoins, are digital tokens pegged to some other asset for example a fiat currency, or government bonds, offering a fundamental role in crypto market liquidity, forming the framework of the majority trading and lending activity. With Jamie’s volatile comments (pun not intended) on the world of decentralized finance, to using Polygon blockchain to trade tokenized cash deposits, could it be that the bank's stance against crypto is a marketing tactic to flush the flow of users from one market to their future JPM coin?

IT'S ALL ABOUT CEX

Binance, Coinbase, and FTX have been primal rivals in the CEXual world (CEX meaning centralized exchange). Competing to become the most active, preferred, and user-friendly platform for investors, traders, and institutional investors alike, the CEX platforms always thrives to outdo one another. First with coinbase partnering up with BlackRock to offer their institutional clients direct access to crypto, to FTX partnering with VISA to allow shoppers to spend their cryptocurrency and also having 25% of the largest hedge funds choosing coinbase for onboarding, to Binance investing $500m into twitter. The latter also has the most active venture fund investing $300m+ into companies this year which is 2x more than last year, looking to deploy north of $1BN in acquisitions and investing in new platform supporting startups and also a bank? Whatever the CEXual jealousy is about, whether to show who has the deeper pockets, bigger flex, larger DEX (sorry) ecosystems, it’s an ode to the progression of the decentralized finance space connecting with the centralized world of finance.

FEDERAL RESERVE RATE RAISE RAGE

On another note, the recent market turmoil has been caused by war, uncertainty, investor withdrawal, investment reluctancy, overvalued assets, and bursts of bubbles, followed by inflation, largely due to supply chain constraints from the covid crisis and of course the so-called quantitative easing, i.e. printing money into the society. This has led the Federal Reserve (USA’s central bank) to believe that by raising interest rates, more money will get back into the hands of the central system, hedging their overflow of too much money chasing too little goods, and thus equalizing and stabilizing inflation. Mark Twain famously said, “that history doesn’t always repeat itself, but it often rhymes”, and that might ring true for the historical market correction, crashes, and constraints investors and consumers alike have experienced in the past. The irony of it all is, that the FED adjust fed funds in response to what’s happening in the economy, but they’re also trying to match the mandates set by congress which is keeping prices stable and maximizing employment. In general, FED raises interest rates when the economy starts overheating. The paradoxical mismatch for FED’s rate hikes is that lower rates spur growth, while higher ones restrain spending, investment, and stock market valuations. When rates rise too quickly, demand may decline, causing businesses to reduce output and cut jobs. Here’s a look at the rate hikes in 2022:

  • March 17th: 0.25% to 0.50%
  • May 5th: 0.75% to 1.00%
  • June 16th: 1.5% to 1.75%
  • July 27th: 2.25% to 2.5%
  • Sept. 21st: 3.00% to 3.25%
  • Nov. 2nd: 3.75% to 4.00%

When and where is the next, where and when do we stop?

BITCOIN MINERS IN A MESS

Bitcoin mining is no longer profitable and many mining companies are considering bankruptcy or shutting down entirely. The rising energy prices and 2022's arch-nemesis inflation, combined with the looming recession are also not exactly positively affecting bitcoin mining profitability. Together with that, mining company stocks are all down year-to-date, and this is most likely to continue until the situation settles, but what situation? The energy crisis, the inflation, the lawmakers' crackdown to avoid energy shaming themselves, the war, what? Industry experts would want to see ways of hedging the downturn and offering better solutions to the existing energy crisis or maybe something entirely different….read on.

RAILWAY HACK AND BITCOIN

On a local level, in Denmark where Penning resides, the Danish railway IT system was hacked by what police allege as being a bit (again pun not intended) for financial crime. While it is still being investigated, indications are pointing at a group that was in the midst of mining bitcoins. Whether or not that’s true, governmental crackdowns on the mining industry have led industry players to resort to shady and unethical opportunities. While we still believe there are ways for miners and energy suppliers to work together for the benefit of society, lawmakers see it differently.

HAPPY BIRTHDAY BITCOIN

Staying on the chain (another unintentional one?) on bitcoin, this week marked the 14th anniversary of the release of Satoshi Nakamoto’s famous whitepaper titled “A peer-to-peer electronic cash system”. 14 years after the 08’ financial crisis, global meltdown (a dear child has many names – Nordic proverb) and now possibly entering another one, the anniversary symbolizes the birth and rise of a new economy on top of an existing and failed one. What’s coming next is equally exciting as it is daunting, but community members and investors alike are hopeful, if FED finally ends its failed fast track to hike rates, lawmakers legislate a growing economy for the benefit of the global economy and corrupt crypto companies are flushed out of the community.

Till we yield again

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