Luke Conway

<div id="highlights-block_61e889eac96b6" class="highlights">
        <ul>
                <li>Bitcoin, ether and other cryptos had a rocky day but later rallied as well, with bitcoin retaking $40,000</li>
                <li>The Nasdaq jumped late in the session, ending the day up 3.7% while the Dow increased 1.55%</li>
            </ul>
    
</div>



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<p>After much anticipation, the Fed finally <a href="https://cms.blockworks.co/fed-raises-interest-rates-a-quarter-percentage-point/" target="_blank" rel="noreferrer noopener">announced</a> a rate hike of 0.25% Wednesday. The increase was in line with expectations, but the market's initial reaction was negative. Fed Chair Jerome Powell's opening statement acknowledged inflation well above the target range, blaming supply chain constraints.</p>



<p>"Inflation remains well above our longer-run goal of 2 percent," <a href="https://www.federalreserve.gov/live-broadcast.htm" target="_blank" rel="noreferrer noopener">Powell said</a>. "Aggregate demand is<br>strong, and bottlenecks and supply constraints are limiting how quickly production can respond."</p>



<p>"We understand that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing and transportation."</p>



<p>Today's Federal Open Markets Committee (FOMC) meeting is the first of eight this year, Powell said, and the Fed plans to increase rates on a meeting-by-meeting basis.</p>



<p>While equities experienced a dip immediately following the rate hike, they later rallied, with the S&amp;P 500 posting a 2.24% gain on the day. The Nasdaq jumped late in the session, ending the day up 3.7% while the Dow increased 1.55%.</p>


<p>[stock_market_widget type="accordion" template="chart" color="#5B35D5" assets="^GSPC,^IXIC,^DJI" start_expanded="true" display_currency_symbol="false" api="yf" chart_range="1mo" chart_interval="1d"]</p>



<p>Signaling that investors were divided on the rate change's potential impact on crypto markets, bitcoin had a bumpy day leading up to the rate hike, but it ended stock trading hours up 5.19%. Bitcoin has recently seen a series of higher lows and lower highs, suggesting a large volatile move up or down is on the horizon.</p>



<p>Aave, a decentralized finance platform that allows crypto lending and borrowing, was crypto’s biggest gainer of the day among the top 100 coins by market capitalization, with a 15.24% jump.</p>


<p>[stock_market_widget type="accordion" template="chart" color="#5B35D5" assets="BTC-USD,ETH-USD,AAVE-USD" start_expanded="true" display_currency_symbol="true" api="yf" chart_range="1mo" chart_interval="1d"]</p>



<h3 class="wp-block-heading">Top stories</h3>



<p><a href="https://cms.blockworks.co/new-digital-asset-manager-files-for-first-etf/" target="_blank" rel="noreferrer noopener">Story</a>: New Digital Asset Manager Files for First ETFHire 600 New Employees</p>



<ul class="wp-block-list"><li>Digital Funds founder Michael Willis said he expects digital assets to “replace the financial legacy system”</li><li>The company plans to file for a spot bitcoin ETF and other crypto-focused products</li></ul>



<p><a href="https://cms.blockworks.co/fed-raises-interest-rates-a-quarter-percentage-point/" target="_blank" rel="noreferrer noopener">Story</a>: Fed Raises Interest Rates a Quarter Percentage Point</p>



<ul class="wp-block-list"><li>The central bank signaled seven more rate hikes this year</li><li>Inflation is not likely to decline until the middle of 2022, Powell said</li></ul>



<p><a href="https://cms.blockworks.co/hsbc-buys-virtual-real-estate-in-sandbox-metaverse/" target="_blank" rel="noreferrer noopener">Story</a>: HSBC Buys Virtual Real Estate in Sandbox Metaverse</p>



<ul class="wp-block-list"><li>”The metaverse is how people will experience Web3 [and] the next generation of the Internet,” HSBC’s Suresh Balaji said</li><li>Rival megabank JPMorgan unveiled a virtual lounge last month in blockchain-based world Decentraland</li></ul>



<p><a href="https://cms.blockworks.co/the-y-combinator-of-web3-attracts-record-number-of-dao-startups/" target="_blank" rel="noreferrer noopener">Story</a>: The Y Combinator of Web3 Attracts Record Number of DAO Startups</p>



<ul class="wp-block-list"><li>“It looks like [the vast majority of] FAANG engineers and Web3 founders [want] to build in DAO tooling,” Alliance’s Qiao Wang told Blockworks</li><li>Ink Finance, specifically, facilitates mergers and acquisitions for DAOs</li></ul>



<h3 class="wp-block-heading">Going forward</h3>



<p>The looming initial rate hike has finally passed, leaving investors sighing in relief that markets were largely up. But the conflict in Ukraine and its implications for broader geopolitics will continue to cause market uncertainty. Investors should assume volatility is a mainstay in the current market dynamic.</p>



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<p><strong>Get the news in your inbox. Explore Blockworks newsletters:</strong></p>



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/thebreakdown"><strong>The Breakdown</strong></a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/empire"><strong>Empire</strong></a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance"><strong>Forward Guidance</strong></a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch"><strong>0xResearch</strong></a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed"><strong>Lightspeed</strong></a>: All things Solana.</li>



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<li><a href="https://blockworks.co/newsletter/supplyshock"><strong>Supply Shock</strong></a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>


Bitcoin

Market Wrap: BTC, Stocks Rally in Late Session Following Fed’s Rate Increase

<div id="highlights-block_61e889eac96b6" class="highlights">
        <ul>
                <li>Investors may expect a largely dovish stance from the Fed following its initial rate hike, causing markets to jump</li>
                <li>Bitcoin remained flat while major altcoins, such as ether and sol, saw a jump of around 2% or more</li>
            </ul>
    
</div>



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</script>



<p>Bitcoin remained flat Tuesday while other cryptocurrencies and equities rose despite the likelihood of pending Federal Reserve rate hikes and a worsening conflict in Ukraine.</p>



<p><meta charset="utf-8">Fed Chair Jerome Powell is scheduled to speak Wednesday after the regulator unveils its next move on interest rates.</p>



<p>The Fed is expected to raise interest rates by a quarter percent in its first increase since 2018. Earlier this month, Powell <a href="https://www.youtube.com/watch?v=0iKuhpwa0PE" target="_blank" rel="noreferrer noopener">testified before Congress</a>, saying "I’m inclined to propose and support a 25 basis point rate hike." </p>



<p>The central bank is "prepared to move more aggressively by raising the federal funds rate by more than 25 basis points," he added in regard to the rapidly rising inflation.</p>



<p>But the ongoing situation in Ukraine and its effect on the market may push the Fed to be less aggressive with rates to avoid recession. Investors may expect the Fed to remain largely dovish after its initial rate hike, which could explain Tuesday's jump in stocks.</p>



<p>All major US indices were up on the day, with the S&amp;P 500 rising 2.14% and the Nasdaq and Dow rising 3.16% and 1.82%, respectively.</p>


<p>[stock_market_widget type="accordion" template="chart" color="#5B35D5" assets="^GSPC,^IXIC,^DJI" start_expanded="true" display_currency_symbol="false" api="yf" chart_range="1mo" chart_interval="1d"]</p>



<p>Bitcoin has slowly consolidated over the last few weeks, forming higher lows — but also lower highs. The most popular cryptoasset is likely due for a large spike in either direction. Bitcoin ended stock trading Tuesday down by 0.39%, with ether pushed 1.96% higher.</p>



<p>The Graph, an indexing protocol for querying Ethereum and other networks, was crypto’s biggest gainer of the day among the top 100 coins by market capitalization, with an 18.34% pop.</p>


<p>[stock_market_widget type="accordion" template="chart" color="#5B35D5" assets="BTC-USD,ETH-USD,GRT1-USD" start_expanded="true" display_currency_symbol="true" api="yf" chart_range="1mo" chart_interval="1d"]</p>



<h3 class="wp-block-heading">Top stories</h3>



<p><a href="https://cms.blockworks.co/consensys-plans-to-redesign-metamask-and-hire-600-new-employees/" target="_blank" rel="noreferrer noopener">Story</a>: ConsenSys Plans To ‘Redesign’ MetaMask and Hire 600 New Employees</p>



<ul class="wp-block-list"><li>MetaMask eclipsed 30 million monthly active users in January</li><li>Proceeds from the round, led by ParaFi Capital, will be converted to ether</li></ul>



<p><a href="https://cms.blockworks.co/hashdex-set-to-launch-web3-etf-in-brazil-on-march-30/" target="_blank" rel="noreferrer noopener">Story</a>: Hashdex Set To Launch Web3 ETF in Brazil on March 30</p>



<ul class="wp-block-list"><li>The fund will allocate to digital assets native to smart contract blockchains such as Ethereum, Cardano and Solana</li><li>Hashdex has more than 250,000 investors in its products globally</li></ul>



<p><a href="https://cms.blockworks.co/binance-us-inches-closer-to-approval-in-all-50-states/" target="_blank" rel="noreferrer noopener">Story</a>: Binance.US Inches Closer to Approval in All 50 States</p>



<ul class="wp-block-list"><li>Binance.US is now available in Louisiana, making the exchange accessible in 45 states</li><li>Different states require different licenses from various regulatory agencies, making approval a lengthy process, Binance.US said</li></ul>



<p><a href="https://cms.blockworks.co/el-salvadors-volcano-bond-could-launch-this-week/" target="_blank" rel="noreferrer noopener">Story</a>: El Salvador’s ‘Volcano Bond’ Could Launch This Week</p>



<ul class="wp-block-list"><li>The so-called “volcano bonds” would be the first bitcoin-backed bonds issued by a country</li><li>The International Monetary Fund has urged El Salvador to remove bitcoin as legal tender, citing volatility and additional risk for the country’s citizens</li></ul>



<h3 class="wp-block-heading">Going forward</h3>



<p>Investors should be prepared for Wednesday's rate hike announcement and Fed Chair Powell's speech, which are likely to move markets. The unfolding situation in Ukraine and its geopolitical implications are also straining on markets, leading to further uncertainty and volatility. </p>



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<p><strong>Get the news in your inbox. Explore Blockworks newsletters:</strong></p>



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/thebreakdown"><strong>The Breakdown</strong></a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/empire"><strong>Empire</strong></a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance"><strong>Forward Guidance</strong></a>: The intersection of crypto, macro and policy.</li>



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<li><a href="https://blockworks.co/newsletter/supplyshock"><strong>Supply Shock</strong></a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>


Market Wrap: Stocks, Altcoins Rise Despite Rate Hikes and Ukraine Conflict

Casey Wagner

<div id="highlights-block_61e9e697ee93d" class="highlights">
        <ul>
                <li>The Federal Reserve released its Central Bank Digital Currency report Thursday but made no indication of a policy stance</li>
                <li>A CBDC would be the safest digital asset available to the general public, the report said</li>
            </ul>
    
</div>



<p>The Federal Reserve avoided taking a side on a central bank digital currency in its highly anticipated white paper released Thursday.&nbsp;</p>



<p>In the 40-page <a href="https://www.federalreserve.gov/publications/files/money-and-payments-20220120.pdf" target="_blank" rel="noreferrer noopener">report</a>, the Fed outlines the advantages and disadvantages of creating and implementing a CBDC, but made no policy recommendations. The report comes as other nations move forward with their own CBDC plans. </p>



<p>China and Russia have both expressed interest in creating CBDCs. China has already launched wallets to test its eCNY, which it hopes to have up and running by the Winter Olympics this year. <a href="https://cms.blockworks.co/russia-accelerating-cbdc-efforts-as-us-eu-ponder-swift-ban-of-russian-banks/" target="_blank" rel="noreferrer noopener">Russia</a> revealed in December that it was moving toward developing a CBDC, partly in response to the threat of Russian banks being possibly disconnected from the global financial system. </p>



<p>In June, the European Central Bank argued that central banks that chose not to establish official digital currencies were risking losing autonomy and control over their financial systems in its own <a href="https://www.ecb.europa.eu/pub/ire/html/ecb.ire202106~a058f84c61.en.html#toc18" target="_blank" rel="noreferrer noopener">report</a>. The Bahamas became the first nation to issue an official digital currency with the Sand Dollar’s launch in 2020. </p>



<p>The Fed has taken a more cautious approach. Fed chair Jerome Powell has repeatedly emphasized the need for the central bank to move carefully in any plans, stating in <a href="https://cms.blockworks.co/powell-us-does-not-have-to-be-first-with-a-cbdc/" target="_blank" rel="noreferrer noopener">March</a> that the US does not have to be first when it comes to a CBDC, but it does have an obligation to be the best. </p>



<p>In the report, researchers highlight the potential benefits and risks of a digital dollar.&nbsp;</p>



<p>“A CBDC would be the safest digital asset available to the general public, with no associated credit or liquidity risk,” the report said.&nbsp;</p>



<p>It could also help to “level the playing field in payment innovation for private-sector firms of all sizes.”&nbsp;</p>



<p>But a CBDC raises questions, too, researchers noted. The stability of the current financial system may be compromised and there may be unforeseen implications for the existing “financial-sector market structure.”&nbsp;</p>



<p>The Fed will be accepting public comment until May 20, 2022. Should the central bank decide to move forward with CBDC implementation, Congressional approval would be needed. The report also noted that the central bank has no plans to move forward with a CBDC without support from Congress and the executive branch.&nbsp;</p>



<p>“We look forward to engaging with the public, elected representatives and a broad range of stakeholders as we examine the positives and negatives of a central bank digital currency in the United States,” Fed chair Jerome Powell said in a statement.&nbsp;</p>


CBDC

Fed Opens Debate on CBDC, Takes No Policy Stance

Sam Martin

<div id="highlights-block_617725d07bf3f" class="highlights">
        <ul>
                <li>BTC and ETH momentum stalls on hawkish remarks from Fed Chair Jerome Powell</li>
                <li>Janet Yellen provides clarity over the definition of a &#8216;broker&#8217; as it relates to digital asset regulation</li>
            </ul>
    
</div>



<p>US Secretary of the Treasury Janet Yellen clarified that the definition of a &#8220;broker&#8221; does not include hardware wallet manufacturers, software developers, miners or providers of un-hosted wallets that do not take custody of funds.</p>



<p>Grayscale sent the US Securities and Exchange Commission (SEC) a letter arguing that the rejection of a spot-based BTC ETF is in violation of the Administrative Procedure Act (APA).</p>



<p>US Federal Reserve Chairman Jerome Powell agrees to retire the word &#8220;transitory&#8221; as it relates to inflation, citing supply-chain bottlenecks as a key driver.</p>



<p>BTC and ETH saw their momentum stall after Powell&#8217;s remarks, as risk-off sentiment took hold on expectations of tighter monetary policy to combat inflation. </p>



<p>NFT volumes have fallen drastically over the past 24 hours, namely Bored Ape Yacht Club. </p>



<h3 class="wp-block-heading"><strong>Latest in Macro:</strong></h3>



<ul class="wp-block-list"><li>S&amp;P 500: 4,567, -1.90%</li><li>NASDAQ: 15,537, -1.55%</li><li>Gold: $1,773, -.66%</li><li>WTI Crude Oil: $66.70, -4.65%</li><li>10-Year Treasury: 1.439%, -.09%</li></ul>



<h3 class="wp-block-heading"><strong>Latest in Crypto:</strong></h3>



<ul class="wp-block-list"><li>BTC: $57,721, -.91%</li><li>ETH: $4,670, +5.32%</li><li>ETH/BTC: 0.0808, +5.12%</li><li>BTC.D: 41.72%, -1.51%</li></ul>



<h3 class="wp-block-heading">Yellen provides regulatory clarity</h3>



<p>The $1 trillion bipartisan infrastructure bill that contained vague wording around cryptocurrency was signed into law on <a href="https://www.npr.org/2021/11/15/1055841358/biden-signs-1t-bipartisan-infrastructure-bill-into-law" target="_blank" rel="noreferrer noopener">November 15, 2021</a>. Although provisions will not go into effect until January of 2024, many experts in the digital asset industry have been worried it could lead to devastating repercussions for the emerging asset class.</p>



<p>The main cause for concern to this point has been the requirement for every broker to report their cryptocurrency gains in a type of 1099 form. Brokers would be expected to disclose the names and addresses of their customers. </p>



<p>The ambiguity around the definition of &#8220;broker&#8221; is <a href="https://www.cnbc.com/2021/11/09/how-bipartisan-infrastructure-bill-will-impact-crypto-investors.html" target="_blank" rel="noreferrer noopener">significant because</a> it could be interpreted to include hardware wallet manufacturers, software developers, miners or providers of un-hosted wallets. The reason that is such a problem is that the aforementioned parties do not have all of the information required to submit 1099&#8217;s, which would theoretically put them out of compliance with the law.</p>



<p>Today Yellen provided some much-needed clarity. She said that the guidance from the Financial Action Task Force (FATF) is consistent with the standing guidance from the Financial Crimes Enforcement Network (FinCEN) with regard to digital assets.</p>



<p>This means that the definition of &#8220;broker&#8221; does not include hardware wallet manufacturers, software developers, miners, or providers of un-hosted wallets who do not take custody of funds. Yellen went further to say that the guidance is not binding on jurisdictions and is in fact just guidance, <a href="https://www.banking.senate.gov/imo/media/doc/yellen_responses_to_toomey_qfrs.pdf" target="_blank" rel="noreferrer noopener">according</a> to a document laying out questions from Senator Pat Toomey (R-PA):</p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="942" height="1024" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/guidance-942x1024.png" alt="" class="wp-image-11950" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/guidance-942x1024.png?w=942 942w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/guidance-942x1024.png?w=276 276w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/guidance-942x1024.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/guidance-942x1024.png?w=1414 1414w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/guidance-942x1024.png?w=237 237w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/guidance-942x1024.png?w=240 240w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/guidance-942x1024.png?w=202 202w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/guidance-942x1024.png?w=74 74w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/guidance-942x1024.png?w=1710 1710w" sizes="auto, (max-width: 942px) 100vw, 942px" /><figcaption>Source: @jerrybrito</figcaption></figure></div>



<h3 class="wp-block-heading">Grayscale&#8217;s letter to the SEC</h3>



<p>Craig Salm, a member of the legal team at Grayscale, took to Twitter to announce that the firm has sent the SEC a letter arguing that the rejection of a spot-based BTC ETF is in violation of the APA. Grayscale <a href="https://grayscale.com/unpacking-the-news-a-new-argument-for-a-bitcoin-etf/" target="_blank" rel="noreferrer noopener">released a formal announcement</a> on their website. </p>



<figure class="wp-block-embed aligncenter is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="en" dir="ltr">Last night our attorneys at Davis Polk sent a letter to the SEC arguing that approval of <a href="https://twitter.com/hashtag/Bitcoin?src=hash&amp;ref_src=twsrc%5Etfw">#Bitcoin</a> futures-based ETFs, but not <a href="https://twitter.com/hashtag/Bitcoin?src=hash&amp;ref_src=twsrc%5Etfw">#Bitcoin</a> spot-based ETFs, like <a href="https://twitter.com/search?q=%24GBTC&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$GBTC</a>, is “arbitrary and capricious,” and therefore in violation of the Administrative Procedure Act (APA).</p>&mdash; Craig Salm (@CraigSalm) <a href="https://twitter.com/CraigSalm/status/1465739799688626179?ref_src=twsrc%5Etfw">November 30, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<h3 class="wp-block-heading">BTC and ETH stall on Powell&#8217;s remarks</h3>



<p>Powell appeared alongside Yellen before the Senate Banking, Housing and Urban Affairs Committee about the Coronavirus Aid, Relief and Economic Security (CARES) Act Tuesday for the first of two days of testimony, Blockworks <a href="https://cms.blockworks.co/powell-we-can-retire-the-term-transitory-inflation/" target="_blank" rel="noreferrer noopener">reported</a> earlier today. </p>



<p>The Federal Reserve has a different definition of the term &#8220;transitory inflation&#8221; than most Americans, Powell said, suggesting that the word be retired. With CPI prints coming in at the highest rates in the <a href="https://cms.blockworks.co/bonds-sell-off-on-6-2-cpi-print-bitcoin-liquidations-spur-correction-markets-wrap/" target="_blank" rel="noreferrer noopener">past 30 years</a>, it is safe to say inflation is no longer transitory due to ongoing supply-chain bottlenecks.</p>



<p>“We didn’t predict the supply side problems, and those are really [non-]linear and hard to predict,” Powell said. “That’s really what we missed, and that’s why professional forecasters had much lower expectations for inflation.”</p>



<p>Vice President, Kamala Harris, took to <a href="https://twitter.com/KamalaHarris/status/1465714500049461250?s=20" target="_blank" rel="noreferrer noopener">Twitter</a> to say that President Joe Biden has taken action to get the largest US ports operating 24/7 to reduce port congestion which is contributing to the supply-chain problems and therefore higher inflation. (See image below.)</p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="536" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/congestion-1024x536.jpg" alt="" class="wp-image-11951" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/congestion-1024x536.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/congestion-1024x536.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/congestion-1024x536.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/congestion-1024x536.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/congestion-1024x536.jpg?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/congestion-1024x536.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/congestion-1024x536.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/congestion-1024x536.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/congestion-1024x536.jpg?w=80 80w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Source: Flexport</figcaption></figure></div>



<p>If inflation pressures persist, Powell said, it may be appropriate to hasten the pace of asset purchase tapering, which the Fed <a href="https://cms.blockworks.co/fed-to-begin-tapering-this-month-bottlenecks-will-persist-well-into-2022/" target="_blank" rel="noreferrer noopener">announced</a> would begin this month.</p>



<p>Powell&#8217;s remarks sent both traditional financial markets and the digital asset market lower due to fears of tighter monetary policy. Prior to the testimony, ETH was within spitting distance of all-time highs while BTC topped $59,000 for a brief moment before they both corrected.</p>



<h3 class="wp-block-heading">The Fed and the market</h3>



<p>&#8220;The rates market quickly unpriced some of the Fed’s expected normalization path. This chart shows the Fed Funds curve as of Friday (dark blue) and a week before (light blue). In my view, Friday’s action wasn’t enough to slow down the Fed’s taper or projected rate hike path.&#8221; <a href="https://twitter.com/TimmerFidelity/status/1465429107890692110?s=20" target="_blank" rel="noreferrer noopener">wrote</a> Jurrien Timmer, director of global macro at Fidelity.</p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="563" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/fed-and-market-1024x563.jpg" alt="" class="wp-image-11952" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/fed-and-market-1024x563.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/fed-and-market-1024x563.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/fed-and-market-1024x563.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/fed-and-market-1024x563.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/fed-and-market-1024x563.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/fed-and-market-1024x563.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/fed-and-market-1024x563.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/fed-and-market-1024x563.jpg?w=1197 1197w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Source: @TimmerFidelity</figcaption></figure></div>



<p>Today&#8217;s remarks from Powell reaffirmed Jurrien&#8217;s expectations that the Fed plans to stick to the plan in terms of tapering and rate hikes in order to combat hot inflation. </p>



<p>&#8220;That means to get back to the kind of great labor market we had before the pandemic, we&#8217;re going to need a long expansion. To get that, we&#8217;re going to need price stability and the risk of persistent high inflation is also a major risk to getting back to such a labor market,&#8221; added Powell during the testimony. </p>



<p>The Fed&#8217;s acknowledgment of inflation and the dangers it brings to the economy makes it more likely that the Fed will lean towards tightening monetary policy over the near-to-medium term, hence the risk-off sentiment in markets after his remarks.</p>



<p>&#8220;The Fed chairman said the central bank will start discussing tapering faster than expected at its December meeting as the inflation pressures are higher than expected. Yellen also mentioned the uncertainty on the government funding situation after December 15, as well as Moderna&#8217;s CEO saying he expected the vaccines to be less effective against the new Omicron variant,&#8221; Kevin Kang, founding principal at BKCoin Capital, told Blockworks.</p>



<p>He continued by adding, &#8220;With the uncertainty in macro outlook, I don’t believe we’ll see the new all-time high in ETH in November. The dollar has rallied significantly this month, putting pressure on Bitcoin&#8217;s upside as well. However, we can certainly hope for the Santa Clause rally in December.&#8221;</p>



<h3 class="wp-block-heading">Non-Fungible Tokens (NFTs)</h3>



<p>Trading volume for many NFT projects has dropped significantly over the past day. Bored Ape Yacht Club has cooled down considerably after a hot week last week. </p>



<p>Trading data from <a href="https://opensea.io/rankings" target="_blank" rel="noreferrer noopener">OpenSea</a> and <a href="https://solanalysis.com" target="_blank" rel="noreferrer noopener">Solanalysis</a> of some of the top Solana and Ethereum projects can be found below:</p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="331" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.18.54-PM-1024x331.png" alt="" class="wp-image-11956" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.18.54-PM-1024x331.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.18.54-PM-1024x331.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.18.54-PM-1024x331.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.18.54-PM-1024x331.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.18.54-PM-1024x331.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.18.54-PM-1024x331.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.18.54-PM-1024x331.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.18.54-PM-1024x331.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.18.54-PM-1024x331.png?w=2048 2048w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Top Ethereum Projects</figcaption></figure></div>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="288" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.19.04-PM-1024x288.png" alt="" class="wp-image-11957" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.19.04-PM-1024x288.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.19.04-PM-1024x288.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.19.04-PM-1024x288.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.19.04-PM-1024x288.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.19.04-PM-1024x288.png?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.19.04-PM-1024x288.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.19.04-PM-1024x288.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.19.04-PM-1024x288.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-30-at-4.19.04-PM-1024x288.png?w=80 80w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Top Solana Projects </figcaption></figure></div>



<p>If you made it this far, thanks for reading! I am looking forward to catching up tomorrow.</p>



<hr class="wp-block-separator"/>



<p><strong>Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.</strong></p>



<hr class="wp-block-separator"/>


BTC, ETH Momentum Stalls; Yellen Clarifies Crypto Regulation: Markets Wrap

<div id="highlights-block_60e60ceb196ae" class="highlights">
        <ul>
                <li>Some FOMC members were optimistic about the progress of economic recovery, which the Fed has said must “substantially” improve before any policy changes take place</li>
                <li>Officials said inflation is due to supply chain and bottleneck issues and will be fleeting </li>
            </ul>
    
</div>



<p>Federal Reserve officials discussed the possibility of scaling back their unprecedented asset purchases, but how quickly the process will begin remains up in the air, according to the Federal Open Market Committee meeting <a href="https://www.federalreserve.gov/monetarypolicy/fomcminutes20210616.htm" target="_blank" rel="noreferrer noopener">minutes</a> released Wednesday. </p>



<p>“Various participants mentioned that they expected the conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had anticipated at previous meetings in light of incoming data,” the minutes stated.&nbsp;</p>



<p>The minutes were largely on par with what Chairman Jerome Powell had <a href="https://cms.blockworks.co/fed-keeps-interest-rates-bond-buying-the-same-again/" target="_blank" rel="noreferrer noopener">covered</a> previously during his press conference following the June 15-16 meeting. </p>



<p>Some FOMC members were optimistic about the progress of economic recovery, which the Fed said must “substantially” improve before any policy changes take place.&nbsp;</p>



<p>Committee members “judged that the economic outlook had continued to improve and that the most negative effects of the pandemic on the economy most likely had occurred,” the minutes said.&nbsp;</p>



<p>Officials also discussed inflation and generally agreed that higher prices are attributed to supply chain issues and bottlenecks, but will subside in time.&nbsp;</p>



<p>“Participants stated that they had expected inflation to move above 2% in the near term, in part as the drop in prices from early in the pandemic fell out of the calculation and past increases in oil prices passed through to consumer energy prices,” the record showed.&nbsp;</p>



<p>In the biggest increase since 1992, <a href="https://cms.blockworks.co/used-cars-pce-data-hint-that-inflation-may-be-transitory/" target="_blank" rel="noreferrer noopener">core PCE</a>, the Fed’s preferred inflation measurement, rose 3.4% year-over-year. The core index rose 0.5% from last month in May, lower than the expected 0.6%, according to data from the Commerce Department.</p>



<p>The Fed will continue to keep an eye on unemployment numbers, which rose slightly in June, and inflation. While the Fed’s united message has remained that inflation will be transitory, some officials are less confident.&nbsp;</p>



<p>Several participants emphasized “that uncertainty around the economic outlook was elevated and that it was too early to draw firm conclusions about the paths of the labor market and inflation,” according to the minutes. </p>



<h3 class="wp-block-heading">Inflation gauge to watch</h3>



<p>Investors and economists are also watching the Fed’s repurchase agreements, known as reverse repos. The Fed uses reverse repos, which provide short-term borrowing and lending, to increase money supply and ensure market liquidity.&nbsp;</p>



<p>Eligible banks and firms have been pouring cash into the reserve repo facility recently, even though the interest rate offered is near zero. In June, the amount of money held by the Fed through reverse repos reached a record $486 billion.&nbsp;</p>



<p>Also in June, the Fed increased the rate paid on reverse repos from zero to 0.05%, causing an increase in volumes. The rate increase is designed to encourage banks to keep money with the Fed and decrease the amount of money supply, thus helping to control inflation.&nbsp;</p>



<p>Eyes will be on the Fed next month when officials convene for the Jackson Hole policy retreat. Core PCE data released at the end of July will also be crucial in predicting the Fed’s next steps.</p>
