Vitalik dumps shitcoins before Fed confirms inflation not peaked
Vitalik Buterin timed the market’s next leg-down perfectly, selling up to $700,000 worth of shitcoins right before chair of the Federal Reserve, Jerome Powell testified in front of the Senate Banking Committee and rattled the markets.
Yesterday, Powell reminded everyone that the Federal Reserve will keep interest rates higher for longer than investors were expecting, and in addition, confirmed that it may also raise interest rates even higher than 5%. The current Federal Funds rate rests just above the 4.5% mark.
Powell’s testimony may have poured cold water over the dominant markets’ narrative which saw the year begin with a furious rally and one of the largest short-squeezes in recent history. The rally in question was largely driven by the narrative that inflation had peaked and that the Fed was going to pivot later this year.
The comments brought down stock and crypto markets. More than 69% of the trades in CME Interest Rates Futures bet that at the next Fed meeting, the interest rate will be raised by 50 basis points or more. Once again, Powell reiterated that inflation may stay elevated and that despite an economic slowdown, the job market was still very strong with an unemployment rate of 3.4% (the lowest since 1969). This clearly demonstrates that the Fed’s job to bring down inflation is far from complete.
He also argued that inflation was running lower than in the second half of last year but it’s higher than the latest Fed meeting. However, Powell also reminded his listeners that the Fed’s actions also have a lag in the system, meaning that it takes time for interest rate increases to affect the economy. To drive his point home, Powell said, “The road to inflation will be a long and bumpy one.”
Read more: Are big players like Grayscale and MicroStrategy moving bitcoin’s price?
Soon, however, the testimony turned to crypto with the pro-bitcoin senator Cynthia Lumnis asking the Fed chair about stablecoins and regulation. Specifically, Senator Lumnis asked Powell whether he thought that stablecoins have a place in the financial system despite a statement issued by the Federal Deposit Insurance Corporation.
The statement said that even after due diligence and AML regulation are applied, banks issuing crypto-assets on an open, public, or decentralized network are unlikely to be consistent with safe and sound banking practices.
Powell replied by saying that there are real concerns about permissionless and public blockchains, and the reason for these concerns is that these technologies have been susceptible to fraud and money laundering and the banking agencies don’t consider these activities as part of fairness or soundness.
However, when pressed on if he thought that stablecoins would have a place in the financial system if tightly regulated, Powell replied in the positive.
“I certainly think that with the appropriate regulation where the activity will get the same regulation as comparable products, I certainly think stablecoins can have a place in our financial system,” he said.
Many Senators applauded Powell’s work, saying that the Fed’s work to tame inflation was measured and reasonable. However, Senator Elizabeth Warren once again reiterated her point that Powell is not fit for his job. Warren accused Powell of gambling with people’s lives as he pressed on with interest rate increases with the aim of increasing unemployment.
Powell hit back, saying that it’s better to undergo temporary economic pain to have more economic stability in the long term.
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