FEDERAL RESERVE

Fed Pauses Rates For First Time In 18 Month, Bullish Outlook on Economy

The Scoop: The Federal Reserve announced they will not raise interest rates this month, pausing them at 5.25% to 5.5%. This breaks a streak of raises over the last 11 FOMC meetings, with the first raise occurring in March of 2022 and the last in July of 2023. Meetings occur every two months.

Brighter Economic Outlook: The Fed's latest projections indicate optimism for the economy, forecasting a 2.1% growth this year, a rate more than double their previous prediction in June 2023. Additionally, the national unemployment rate is anticipated to stay at 3.8%, rather than the previously expected 4.1%.

A Mixed Bag: Despite the positive outlook, there are potential challenges ahead, including rising oil prices and the auto worker strike. The potential impact of these events could lead to a short-term spike in inflation.

Divided Committee: Overall, the Fed seems bullish on a ‘soft landing’, according to a statement following the meeting. However, the committee remains divided on potential future hikes, with 12 members forecasting another increase, while seven believe they will remain unchanged.

WHAT WE'RE WATCHING

🌍 A new report from Chainalysis states that, while Sub-Saharan Africa accounts for only 2.3% of global Bitcoin volume, Nigeria’s demand is surging as it faces increased economic challenges and rising inflation. ‘In no region is Bitcoin more dominant than Sub-Saharan Africa, as the world’s first cryptocurrency makes up a bigger share of transaction volume there than in any other region.’ 

🇮🇳 From a different Chainalysis report, Central & Southern Asia and Oceania (CSAO) are now major Bitcoin hubs of activity. India is at the forefront, with an estimated $268.9 billion in Bitcoin transactions annually, despite regulatory challenges.

📈 The percentages of BTC supply inactive for 1+, 2+, 3+, and 5+ years have reached new all-time highs. Strong holding behavior among Bitcoiners indicates a bullish outlook among holders long-term. Though, it could also mean many more lost coins than initially believed.

⚖️ Bankrupt crypto exchange FTX has filed a lawsuit against the parents of its founder and former CEO, Sam Bankman-Fried, accusing them of fraudulent transfers and misappropriation of millions of dollars. The court filing cites an $18.9 million payment for a property titled to the parents. Both defendants, professors at Stanford Law School, are alleged to have used their expertise to exploit the company's funds.

🏛️ The U.S. Financial Services Committee has passed the first bill against the use of Central Bank Digital Currencies (CBDCs). As reported last week, the Bill is headed by House Majority Whip Tom Emmer and aims to ban the creation of a CBDC by the Fed. While the bill has garnered significant congressional support, its future in the Democrat-led Senate remains uncertain.

Bitcoin Mining

Bitcoin Network Security Hits New All-Time High, Miners Struggle to Stay Competitive

The Scoop: Bitcoin's network experienced a record-breaking boost on Friday, with the network’s security (called "hash rate") surging to unprecedented levels.

Rapid Rise Recognized: This boost represents the largest one-day increase in the Bitcoin system's strength ever recorded, going from 400 eh/s (exahashes per second) to 500 eh/s.

Echoing Effects: As a result of this surge, the system automatically adjusted mining difficulty upward 5% to make participation more challenging. This adjustment, ranking as the sixth highest this year, indicates a growing industry - but this growth is not without its challenges.

Keeping Up: As Bitcoin's system adjusts to these rapid increases in strength, miners face greater…well…difficulty. The hash rate can also be viewed as a kind of measurement for how competitive the mining industry is. A heightened difficulty means miners need to find cheaper energy or more efficient equipment to continue operating.

POLL

Last Tuesday’s Poll Results

Do you believe a debt crisis will be good for Bitcoin in the short term?

Yes - 75%

No - 25%

👍 Yes: “If Bitcoin is to dominate, any attacks to weaken fiat should position Bitcoin with the upper hand and increase the case for Bitcoin. If nothing else, it should create an environment where people naturally look for alternatives. If Bitcoin can’t succeed in that environment, then it is of no use, at least as money.” - Beth

👎 No: “A debt crisis leading to overall decreased liquidity will likely stifle inflows to Bitcoin in the near term.” - William

IN THE LOOP

🇬🇧 The UK's Economic Crime and Corporate Transparency Bill is nearing final approval, aiming to grant local authorities with the power to freeze and confiscate crypto assets linked to crime. This legislation addresses legal barriers that have previously slowed the process of asset seizure and will enable the seizure of digital assets under the Proceeds of Crime Act 2002, even without an arrest or conviction.

🇭🇰 Hong Kong advances its stablecoin regulatory framework, with the HKMA seeking public feedback and aiming for a 2024 rollout. This move contrasts with mainland China's crypto ban and underscores Hong Kong's role as China's financial testing ground.

🇯🇵 Japanese Investment Bank Nomura just released the results of its digital asset survey of 300 institutional investors managing a collective $4.9 trillion. 90% of them said they want the endorsement of a major traditional financial institution before investing. 96% said they view Bitcoin as a diversification opportunity. Nomura will be launching a ‘Bitcoin Adoption Fund’.

Today’s newsletter was written by Colin and edited by Jordan.