There was a meeting of the Federal Reserve (the Fed) of the United States this week. And expectations were met. Indeed, The Fed announced the biggest interest rate hike in almost 30 years. In order to curb inflation, the US central bank has decided to raise the interest rate by 0.75 percentage points. On inflation, this Fed is obviously coming in quite late. It has been reactive rather than proactive. Now he wants to make up for lost time with more aggressive moves. It is already becoming clear that it is willing to create a recession to bring down inflation. In other words, the scenario of a “soft landing” is increasingly remote.
Australia’s central bank raised its rates. Also a historic rise. The Swiss National Bank raised its rates. Also a historic rise. And the European Central Bank announced that it would raise rates in July. At the same time, he announced that he would stop buying European debt. Spoiler alert: There is “panic” in the European bond market. Investors are seeking refuge in safe and stable assets in the face of fears of a possible recession. Which has meant a price collapse for the most speculative assets. Those assets that benefited the most from the strong injections of liquidity by central banks during the pandemic are the ones that are now suffering the most from the new measures and adjustments. Bitcoin in free fall.
“When the tide goes out, you can see who is swimming naked.” During bull cycles, everything is beautiful and beautiful. Greed is through the roof. And many take more risks than necessary thinking that nothing can go wrong. There is no market more deluded, naive and greedy than the crypto market. Beware of high levels of indebtedness. Combine this with the fact that many companies in this space are not properly regulated and the lack of transparency is abysmal, we’re sitting on a ticking time bomb. I’m talking about hedge funds, exchanges, lenders, nonbanks, neobanks, and whatnot. The Terra/Luna, Arrow Capital, and Celsius thing could be the start of something much more worrisome.
Reading Twitter, we can see that the crypto community is still in the denial phase (normal at the beginning of a bearish cycle). Curiously, the situation is presented as a normal, temporary and trivial event. You are falling into the sin of overconfidence, like the child who believes he is immortal or like the congregation that awaits the arrival of the end of the world trusting in the words of its pastor/prophet. Many deludedly think that the future of Bitcoin is written in its brief past. In other words, this crisis will surely be a “reboot “of the crypto winter of 2018 with a guaranteed end and nothing else. Sooner or later, we will realize that in such exceptional circumstances our ability to predict the future is not as sharp and precise. Namely, models are useless when we are entering a world very different from what we have lived before. We have to prepare for surprises.
Now, let’s take a critical look at this week’s most popular crypto news.
El Salvador “has not had losses” due to the fall in the price of Bitcoin, says the Minister of Finance
It is very rare for a politician to admit a mistake. The cost is very high. Also, I don’t think the minister is willing to contradict Bukele. Bukele has total control of his country. In El Salvador, what Bukele says is done. He is a Chavez (*in the early days), but without oil. Now, the Salvadoran debt is at least 84% of its GDP. The fiscal deficit is 5% of GDP. We must remember that El Salvador is a country that depends heavily on remittances from abroad and does not have a strong enough domestic financial market to finance itself.
El Salvador’s economy relies heavily on international financing. Sadly, salvage bonds have fallen by more than 50% since the adoption of Bitcoin as legal tender. In other words, El Salvador’s creditors are not very happy. In fact, most banks and agencies have downgraded the Salvadoran debt rating. And the country risk has risen considerably. In other words, Bukele does not inspire much confidence. How many BTC does El Salvador have? It is not known. What is the average purchase price? It is not known. That information is not public. Conjectures are drawn due to Bukele’s tweets. But, according to calculations, El Salvador is definitely in the red.
Tether Deploys USDT Token on the Tezos Blockchain
Sooner or later, the regulators will start to regulate. And, in all likelihood, they will start with stablecoins. You don’t have to be a genius to know that the first affected in this process will be the controversial Tether. New products are necessary. But Tether must make changes in the background.
Spanish Data Protection Agency warns about privacy issues in the metaverse
The business model of many of the companies investing in the metaverse revolves around user data. Obviously there is a privacy issue. Will there be more scrutiny from the regulations on this and other matters? Surely yes.
Court of Appeals Rules Do Kwon and Terraform Labs Must Heed SEC Subpoena Sent in September
After such a disaster, it would be sensible to assume that someone’s head has to roll. A cake of this size cannot be reduced to a matter of “personal responsibility” and that’s it, in the Spartan style of the libertarians. In other words, the fault lies with the swindled, because he allowed himself to be scammed. Of course they have to do an investigation. Hopefully the matter does not remain only in the show.
Research shows that in Latin America only 24% of comments on Metaverse are positive
We are still in the first phase of this story. “Metaverse” means nothing to most people. Facebook started with a few followers at Harvard University and then grew exponentially. At first, skeptics are always in the majority. In other words, the results of that research are not very surprising. The very new is a minority issue.
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