Casey Wagner

<div id="highlights-block_6210022bfaf3c" class="highlights">
        <ul>
                <li>The new restrictions take effect May 1</li>
                <li>The Fed is mulling the creation of a central bank digital currency</li>
            </ul>
    
</div>



<p>As US regulators hone in on digital assets, senior Federal Reserve officials will no longer be allowed to trade individual cryptocurrencies.</p>



<p>On the heels of public pressure to reign in trading practices, the new Fed rules — first broached <a href="https://cms.blockworks.co/fed-bans-policymakers-from-holding-individual-stocks-following-controversy/" target="_blank" rel="noreferrer noopener">in October</a> —  ban senior officials from purchasing individual stocks or sector funds, as well as from holding cryptocurrencies, commodities and foreign currencies. </p>



<p>Executives must give 45 days notice before buying or selling a security, which they cannot later reverse. The 12 Fed regional bank presidents will be required to publicly disclose securities transactions 30 days in advance.</p>



<p>The rules “aim to support public confidence in the impartiality and integrity of the Committee&#8217;s work by guarding against even the appearance of any conflict of interest,” the Fed said in a Friday <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20220218a.htm" target="_blank" rel="noreferrer noopener">statement</a>.</p>



<p>The move comes months after Federal Reserve governors Robert Kaplan and Eric Rosengren left their positions in September following controversy over personal trades.</p>



<p>The final makeup is more extensive than officials let on in October. More securities have been banned, and Chair Jay Powell now has the power to curtail the trades of relatives, including spouses and children, of officials.</p>



<p>Meanwhile, the Fed continues to investigate potential use cases and risks of central bank digital currencies (CBDCs). Fed Governor Lael Brainard on Friday urged officials to take digital asset technology seriously.</p>



<p>“The financial system is not standing still, and neither can we,” Brainard said at the US Monetary Policy Forum in New York. “The digital financial ecosystem is evolving rapidly and becoming increasingly connected with the traditional financial system.”</p>



<p>Under the new rules, officials will have 12 months from when the rules go into effect, May 1, to dispose of freshly banned holdings. New personnel will be given just six months to do so.</p>



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Federal Reserve Officials Banned From Owning Cryptocurrencies, Stocks After Public Outcry

<div id="highlights-block_620555b1b30cc" class="highlights">
        <ul>
                <li>US consumer prices are still on the rise, with January showing the largest year-on-year increase since 1982</li>
                <li>Inflation woes have already been priced into the market, analysts say, but rate hike speculation continues</li>
            </ul>
    
</div>



<p>US consumer prices were on the rise again in January, once again showing the biggest annual inflation increase in 40 years. In the 12 months through January, the consumer price index rose 7.6%, up from 7% in December, marking the largest year-on-year increase since 1982, according to the latest index <a href="https://www.bls.gov/news.release/cpi.nr0.htm" target="_blank" rel="noreferrer noopener">report</a>.</p>



<p>Bitcoin and ether lost 3.6% and 5.2%, respectively, immediately following the release of the report before paring gains later in the morning Thursday. Equities also experienced a slight dip at the open but mostly rose later in the trading session.</p>



<p>“US stocks recovered most of the inflation-driven losses as investors anticipate that pricing pressures could be peaking just before the Federal Reserve’s March policy meeting,” Edward Moya, senior market analyst at OANDA, said. “Two of the biggest inflationary pressures have been surging shelter prices and new vehicles, both of which seem poised to be improving next quarter.”</p>



<p>Economists expected a 7.3% increase in January. This is the eighth time in the last 10 months that economists have underestimated the change in inflation.</p>



<p>“[The CPI reading is] definitely higher than expectations and opens up the possibility of accelerating inflation — which is really bad,” said Joseph Wang, a former senior trader on the Fed’s open markets desk.</p>



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"><p><strong>“With a few Fed presidents already on record against a 50 basis point hike, I don&#8217;t think it&#8217;s likely.”</strong></p></blockquote>



<p>Last week, Wang told Blockworks he doesn’t expect such a move in March, but aggressive rate hikes later in the year remains a possibility.</p>



<p>“I suspect that they’re going to be very aggressive — maybe one hike, every meeting, maybe even 50 basis points at one meeting in the future,” Wang said.</p>



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="European Bonds Throw A Tantrum | Joseph Wang" width="1024" height="576" src="https://www.youtube.com/embed/nzj133KjX-s?start=1958&#038;feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



<p>On Thursday, Federal Reserve Bank of St. Louis President James Bullard, <a href="https://www.bloomberg.com/news/articles/2022-02-10/fed-s-bullard-backs-supersized-hike-seeks-full-point-by-july-1" target="_blank" rel="noreferrer noopener">told Bloomberg</a> that he is in favor of more rapid tightening of as much as a full percentage point by summer.</p>



<p>The odds of raising the target rate to 50-75 bps in March increased to 81%, following the comments, according to <a href="https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html" target="_blank" rel="noreferrer noopener">Fed funds futures</a>.</p>



<p>“The Fed has not started a rate cycle with a 50 bp increase since at least 1990,” Nicholas Colas, co-founder of DataTrek Research, wrote in a recent note. “Such a move would therefore be very unusual, but Chair Powell has repeatedly said the current environment is unlike any other in recent memory.”</p>



<p>Speculating when rate hikes might begin is difficult, Wang pointed out.</p>



<p>“The Fed hates to surprise the market, and the current futures pricing is too unclear,” said Wang. “I&#8217;d expect Fed speakers to come out in the coming days to telegraph clearly either way. They probably don&#8217;t know what to do yet, though.”</p>



<p>The Fed’s next Federal Open Market Committee meeting is scheduled for March 15 and 16. A summary of economic projections will also be released following the meeting.</p>



<p><em>This story was updated on Feb. 11 at 8:00 am ET, to reflect new comments by FOMC voter James Bullard.</em></p>



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



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Analysts Weigh Likelihood of March Rate Hikes as CPI Disappoints Again

Sam Martin

Could Bitcoin’s Price Action Be Signaling Macro Danger?: Markets Wrap

<div id="highlights-block_617725d07bf3f" class="highlights">
        <ul>
                <li>Bitwise released its outlook on DeFi, calling for Amazon-like disruption to the current financial system</li>
                <li>Coinbase Cloud aims to be the Amazon Web Services of digital asset infrastructure</li>
            </ul>
    
</div>



<p>Bitwise released its outlook on decentralized finance (DeFi) in <a href="https://s3.amazonaws.com/static.bitwiseinvestments.com/Research/Decentralized-Finance-DeFi-A-Primer-for-Professional-Investors-11-16-2021.pdf" target="_blank" rel="noreferrer noopener">a recently published report</a>.</p>



<p>DeFi provides anyone in the world with an internet connection and smartphone low-cost, high-speed, and instantaneously settled financial markets.</p>



<p>Borrowing and lending protocols, as well as decentralized exchanges (DEXs), currently make up a vast majority of DeFi activity, as regulation around the space remains largely uncertain.</p>



<p>Coinbase Cloud aims to be the Amazon Web Services of crypto by supporting digital asset infrastructure through its subsidiary, Bison Trails.</p>



<p>Ethereum NFTs are officially live on FTX US, <a href="https://twitter.com/Brett_FTXUS/status/1466075424010604547?s=20" target="_blank" rel="noreferrer noopener">according</a> to the company&#8217;s president, Brett Harrison.</p>



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



<ul class="wp-block-list"><li>S&amp;P 500: 4,513, -1.18%</li><li>NASDAQ: 15,254, -1.83%</li><li>Gold: $1,784, +0.46%</li><li>WTI Crude Oil: $65.48, -1.06%</li><li>10-Year Treasury: 1.405%, -0.036%</li></ul>



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



<ul class="wp-block-list"><li>BTC: $56,666, -.63%</li><li>ETH: $4,546, -1.54%</li><li>ETH/BTC: 0.0800, -1.51%</li><li>BTC.D: 41.73%, +0.28%</li></ul>



<h3 class="wp-block-heading">DeFi versus TradFi</h3>



<p><a href="https://bitwiseinvestments.com" target="_blank" rel="noreferrer noopener">Bitwise</a> released a report titled <a href="https://s3.amazonaws.com/static.bitwiseinvestments.com/Research/Decentralized-Finance-DeFi-A-Primer-for-Professional-Investors-11-16-2021.pdf" target="_blank" rel="noreferrer noopener">&#8216;Decentralized Finance (DeFi): A Primer for Professional Investors&#8217;</a>, which notes that though many industries have been reshaped by digital technologies, finance has not. Though there have been improvements to the user experience through apps like Venmo or Cash App, it adds, the underlying infrastructure behind payments has remained stagnant for decades.</p>



<p>&#8220;DeFi replaces traditional financial intermediaries with software: self-executing &#8216;smart contracts,&#8217; secured by blockchain technology, allow innovators to reimagine everything from lending to trading, asset management, and more,&#8221; the executive summary of the <a href="https://s3.amazonaws.com/static.bitwiseinvestments.com/Research/Decentralized-Finance-DeFi-A-Primer-for-Professional-Investors-11-16-2021.pdf" target="_blank" rel="noreferrer noopener">report</a> states.</p>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="488" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Defi-1024x488.jpg" alt="" class="wp-image-12005" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Defi-1024x488.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Defi-1024x488.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Defi-1024x488.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Defi-1024x488.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Defi-1024x488.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Defi-1024x488.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Defi-1024x488.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Defi-1024x488.jpg?w=1119 1119w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: Bitwise</figcaption></figure>



<h3 class="wp-block-heading">DeFi advantages</h3>



<ul class="wp-block-list"><li>Lower cost and speed<ul><li>DeFi services are able to cut out the costs of middlemen (employees, offices, transaction fees, etc.) because they utilize public infrastructure (blockchains) that execute smart contracts on behalf of the users.</li></ul></li><li>Composability<ul><li>Innovation occurs much faster in DeFi because problems solved for one protocol may be applied to a different set of problems. </li></ul></li><li>Two-sided markets<ul><li>Just as Uber aligns the supply of willing drivers to the demand of potential passengers needing to get from point A to point B, DeFi connects liquidity providers looking for yield to traders willing to pay swap fees on an automated market maker, such as <a href="https://app.uniswap.org/#/swap" target="_blank" rel="noreferrer noopener">Uniswap</a>.</li></ul></li></ul>



<p>There are nearly 4 million users and more than <a href="https://s3.amazonaws.com/static.bitwiseinvestments.com/Research/Decentralized-Finance-DeFi-A-Primer-for-Professional-Investors-11-16-2021.pdf" target="_blank" rel="noreferrer noopener">$200 billion of assets</a> in DeFi protocols today. The main difference between most applications consumers use today and DeFi is the lack of a centralized authority behind them. This ensures that anyone with an internet connection is free to use any application they desire.</p>



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="945" height="867" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/defi-eco.jpg" alt="" class="wp-image-12007" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/defi-eco.jpg?w=945 945w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/defi-eco.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/defi-eco.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/defi-eco.jpg?w=280 280w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/defi-eco.jpg?w=284 284w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/defi-eco.jpg?w=239 239w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/defi-eco.jpg?w=80 80w" sizes="(max-width: 945px) 100vw, 945px" /><figcaption>Source: Bitwise</figcaption></figure></div>



<h3 class="wp-block-heading">Primary applications today</h3>



<p>Of the roughly <a href="https://defillama.com" target="_blank" rel="noreferrer noopener">$280 billion of total value locked</a> in DeFi protocols, a vast majority of the liquidity revolves around two product markets: borrowing and lending protocols, and decentralized exchanges, according to DeFi Llama data.</p>



<h4 class="wp-block-heading">Borrowing and Lending</h4>



<p><a href="https://app.aave.com/#/markets" target="_blank" rel="noreferrer noopener">Aave</a>, which boasts more than $16 billion of liquidity, enables participants to lend out their assets in exchange for passive income. Borrowers can lock up collateral to take out loans at various annualized rates.</p>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="823" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/aave-1024x823.jpg" alt="" class="wp-image-12013" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/aave-1024x823.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/aave-1024x823.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/aave-1024x823.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/aave-1024x823.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/aave-1024x823.jpg?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/aave-1024x823.jpg?w=320 320w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/aave-1024x823.jpg?w=325 325w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/aave-1024x823.jpg?w=272 272w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/aave-1024x823.jpg?w=80 80w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: Bitwise</figcaption></figure>



<h4 class="wp-block-heading">DEXs</h4>



<p>Network participants are able to provide liquidity via asset pairs to a DEX in exchange for rewards that come in the form of swap fees generated and liquidity provider incentives. DEXs are similar to a brokerage account or the New York Stock Exchange, except they are run by self-executing smart contracts.</p>



<p>Today Uniswap, one of the largest DEXs built on top of Ethereum, has trading volumes that rival those seen by centralized crypto exchanges such as FTX and Coinbase.</p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="570" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/uni-1024x570.jpg" alt="" class="wp-image-12011" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/uni-1024x570.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/uni-1024x570.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/uni-1024x570.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/uni-1024x570.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/uni-1024x570.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/uni-1024x570.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/uni-1024x570.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/uni-1024x570.jpg?w=1460 1460w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: Bitwise</figcaption></figure></div>



<h3 class="wp-block-heading">Threats</h3>



<p>&#8220;JPMorgan, the world&#8217;s largest bank, boasts a market cap of [about] $508 billion, more than 3x the combined value of all DeFi apps combined,&#8221; Bitwise Research Analyst Ryan Rassmusan <a href="https://twitter.com/RasterlyRock/status/1461406941004115969?s=20" target="_blank" rel="noreferrer noopener">said</a> in a Nov. 18 Twitter post. &#8220;DeFi is tiny compared to the size of the industry that it aims to disrupt: [less than] 1% of the $24 [trillion] legacy finance market.&#8221;</p>



<p>The President&#8217;s Working Group on Financial Markets, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency recently released a <a href="https://home.treasury.gov/system/files/136/StableCoinReport_Nov1_508.pdf" target="_blank" rel="noreferrer noopener">report</a> on stablecoins and the need to regulate them. Lyn Alden, founder of Lyn Alden Investment Strategy, <a href="https://twitter.com/LynAldenContact/status/1465375630556553228?s=20" target="_blank" rel="noreferrer noopener">recently</a> pointed out that the fate of DeFi is in large part decided by centralized stablecoin issuers such as Tether and Circle, which are subject to the US&#8217;s jurisdiction.</p>



<p>The Fed <a href="https://www.federalreserve.gov/newsevents/pressreleases/bcreg20211123a.htm" target="_blank" rel="noreferrer noopener">stated</a> earlier this week that it would issue guidance for crypto regulation in the first half of 2022, which could prove to have a negative effect on the digital asset space during a time that coincides with <a href="https://cms.blockworks.co/powell-we-can-retire-the-term-transitory-inflation/" target="_blank" rel="noreferrer noopener">tighter monetary policy</a>.</p>



<p>SEC Chairman Gary Gensler <a href="https://cms.blockworks.co/gensler-says-centralized-regulation-is-path-for-crypto/" target="_blank" rel="noreferrer noopener">said today</a> that further enforcement against DeFi protocols is coming sooner rather than later.</p>



<h3 class="wp-block-heading">Coinbase Cloud</h3>



<p>&#8220;We&#8217;ve deployed 60,000 nodes that run your favourite crypto applications without interruptions and support over $30 [billion] assets staked to secure the world&#8217;s leading blockchain networks,&#8221; <a href="https://twitter.com/maraschmiedt/status/1466067585968054273?s=21">wrote</a> Mara Schmiedt, business and corporate development manager at Coinbase. </p>



<p>Coinbase is aiming to become the Amazon Web Services of crypto, Coinbase Chief Product Officer Surojit Chatterjee told <a href="https://www.forbes.com/sites/stevenehrlich/2021/12/01/inside-coinbases-budding-plan-to-become-the-aws-of-crypto/?sh=224091c7415c" target="_blank" rel="noreferrer noopener">Forbes</a>, making decentralized applications easier to launch through their product line at <a href="https://bisontrails.co">Bison Trails</a>. While there are other competitors in the infrastructure space, no other exchange in the US boasts more than 73 million verified users to leverage.</p>



<p>Ali Yahya, a general partner at a16z, compared Coinbase&#8217;s full suite of offerings to &#8220;just read/write infrastructure, which is what Alchemy does,&#8221; according to the Forbes article.</p>



<p>&#8220;All of the other products and services that Coinbase uniquely can bring to developers such as trading, fiat on-ramps, we offer a single place for people to build the full end-to-end experience that really doesn&#8217;t exist today,” he added.</p>



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



<p>Ethereum NFTs are officially live on FTX US, <a href="https://twitter.com/Brett_FTXUS/status/1466075424010604547?s=20" target="_blank" rel="noreferrer noopener">according</a> to Brett Harrison, the company&#8217;s president. Industry participants are unsure how the increased competition in secondary marketplaces for NFTs will affect OpenSea&#8217;s historically dominant marketshare.</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="329" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.32-PM-1024x329.png" alt="" class="wp-image-12015" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.32-PM-1024x329.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.32-PM-1024x329.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.32-PM-1024x329.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.32-PM-1024x329.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.32-PM-1024x329.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.32-PM-1024x329.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.32-PM-1024x329.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.32-PM-1024x329.png?w=1227 1227w" sizes="(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="285" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.41-PM-1024x285.png" alt="" class="wp-image-12016" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.41-PM-1024x285.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.41-PM-1024x285.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.41-PM-1024x285.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.41-PM-1024x285.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.41-PM-1024x285.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.41-PM-1024x285.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.41-PM-1024x285.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-01-at-3.49.41-PM-1024x285.png?w=1200 1200w" sizes="(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>



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<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>



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Bitwise Releases DeFi Outlook: Markets Wrap

<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="(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="(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="(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="(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="(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>



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