The Fed Giveth
And The Fed Taketh away
In the words of my girl Olivia Rodrigo: “God, it’s brutal out here.”
Markets continue to be a murder fest, and inflation as per CPI came in at 8.6% this week, the highest it’s been in 40 years. (And we all know it’s much higher than that, as the Bureau of Labor and Statistics like to juke the inputs that it uses to calculate inflation.)
All the Ivy League degree-holding, golf course-frequenting “experts” - the types who provide nothing of real value to the world - seem perplexed by this. Fuck these people.
We have the Fed driving us into a recession while the US Dollar continues to lose value. The combination of these two factors produces stagflation. Yet, here’s how our mainstream media thinks of the the Fed chair:
Staggering how stupid we are. It’s no wonder they don’t teach financial literacy in public schools. God only knows what would happen if most people understood what was going on.
Maybe the powers that be have realized, though, that people are starting to catch on. I mean, they recently put up fences around The Fed in DC. (Yes, I know, major government buildings also have fences around them, too; it’s almost like they know what’s coming.)
Anyway, you can expect a wave of red similar to what you are seeing on your equity and crypto charts when midterms come around and Democrats get absolutely slaughtered at the polls.
Before that, though, Biden will likely try to bribe the public with some degree of student loan forgiveness and maybe some other handouts. You’ll likely see the government implement price controls on consumer goods before midterms, as well.
All of this will be the equivalent of the government putting band aids on structural fault lines. And all that comes to mind when I think of this are the words of my man Immortal Technique: “Welcome to the 3rd world.”
What’s going on is not completely the Democrats’ fault, though. Almost 30% of the US Dollars that ever existed were printed under Trump. However, the Fed has also printed quite a bit more with Uncle Joey at the helm, and let us not forget that the US Dollar supply almost doubled under Obama.
“Did the banks buy our president? / the corporate bail-out heaven sent” -Strike Anywhere (2009)
Both parties have contributed to the illusion of increasing wealth. In reality, though, they were just debasing the denominator: the US Dollar. What they’ve done is something of a cross between true buffoonery and downright evil. We will likely pay dearly for all of this eventually. It will likely come in the form of either a collapse of the traditional financial system or totalitarianism - or both. Happy times.
For now, though, given that The Fed is the number one provider of liquidity to markets, the fact that it is now pulling both quantitative tightening (QT) levers at the same time - raising interest rates and rolling assets off of its balance sheet - means that we will likely continue to see more red in markets until The Fed changes course.
The above chart literally looks like a shitcoin chart. Remarkable.
Let’s move on to something more uplifting regarding those in power.
Crypto Spurs Bipartisanship in DC
I’d like to take a moment to applaud Sen. Kirsten Gillibrand (NY-D) and Sen. Cynthia Lummis (WY-R) for coming together to craft the Responsible Financial Innovation Act, a bill that calls for sensible regulation of the crypto industry.
I wrote a piece for Finder on what this bill means for crypto investors here. And guess what? You’ll have to click on the link to read it to learn more!
What I will share below, though, is the shit I talked on SEC Chair Gary Gensler in the piece. Because Sweet Baby Jesus, does it feel good to get paid to talk shit about Gary Gensler.
Below, I expanded on why I was happy to see that the Gillibrand-Lummis bill proposes that the Commodity Futures Trading Commission (CFTC) and not the SEC will oversee most of the crypto industry.
“Snubbing SEC Chair Gensler
This is significant as SEC chair Gary Gensler has suggested that most digital assets should be classified as securities.
The crypto community was mostly fond of Gensler at first, as he taught a course entitled “Blockchain and Money” at the Massachusetts Institute of Technology (MIT) and most in the community felt that they had an ally in Gensler.
Gensler has been proven to be anything but an ally, though, as he has taken tough action against centralized finance (CeFi) crypto companies like BlockFi, without providing the crypto industry with much guidance for how to offer crypto-related financial products and services moving forward.
Those in the crypto space who are still distrustful of Gensler will likely cheer this proposal to reduce his power to oversee the crypto industry.”
Now, the big question that remains in my mind is the following: Will assets like BTC and ETH increase in price as we enter what will likely be a commodity super cycle?
Right now, these assets trade more like tech stocks than commodities. They are really a combination of both, which is quite interesting. It will be interesting to see how they perform in the next six to 12 months.
Sell in May and Go away?
I commented how I think crypto might perform in the next few months in this article in The Street.
Excerpt:
“He [Corva] added that summer is a notoriously slow season for all markets, though, as traders tend to “sell in May and go away."
"It wouldn’t be surprising to see crypto markets trade in this support area - and maybe even dip a bit lower - for the next two to three months," Corva said.
And it’s not just crypto asset holders that are feeling the pain.
Corva said some who work in the industry are scared for their jobs after one of the largest crypto exchanges, Coinbase (COIN) - Get Coinbase Global Inc Report, recently rescinded job offers to employees who were set to start working for the company shortly.
Gemini, another major crypto exchange, laid off 10% of its staff this week.
"These layoffs and hiring freezes likely have more to do with the fact that both crypto and traditional markets are down and that financial conditions are tightening across the board," Corva said. "Traders and crypto employees alike are sitting tight as both crypto markets and the crypto industry remain against the ropes."
How Far We’ve Fallen: Lessons Learned in the Aftermath of the Terra (LUNA) Ecosystem Crash
The subheading above is the title of a piece I wrote for NASDAQ’s website this week. In my humble opinion, it’s one of the best pieces I’ve ever written, and I highly suggest that you read it. Plus, I used the word “gavone” in it. Someone - anyone - throw me some life bonus points.
Excerpt:
“There are many lessons to be learned in reflecting on this crash, as it’s not just the prices of the old version of LUNA — now Terra Luna Classic (LUNC) — and UST that have tanked, but also our ability to educate newcomers of the risks associated with investing in this class of asset.
[Also] We continue to manipulate blockchain networks in ways that the founder of the technology and inventor of Bitcoin, Satoshi Nakamoto, didn’t seem to intend for us.”
Speaking of Education…
So so awesome. I’ve said forever that the poor will benefit from bitcoin if someone gets them involved in the Bitcoin network early and educates them about the asset.
Really strong work by Jay-Z and Jack Dorsey. Read more about their efforts here.
Network Effects
Speaking of the Bitcoin network, I made a TikTok this week about network effects and Metcalfe’s Law, which states that networks become more valuable as more users join them. More below (and never mind the flattering cover image):
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Our Girl Is Back
Nance is back in the market, so things can’t be that bad, right?
I mean, girl was ripping calls last week.
God, it must be nice to trade on insider info.
Homework
John Collison, co-founder and president of Stripe, talks with world-class investor Stanley Druckenmiller in the video below. I recommend you watch.
Below is a quote from Druckenmiller from the interview:
Whew. That was a lot. I’m spent. Big hug. Talk next week.
Best,
Frank
Twitter: @frankcorva
Currently Reading: The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze, by Laura Shin
