Crypto Suffers as Inflation Reaches 40-Year High

Market Movers

• The largest coins by market cap were hit hard this past week, in large part due to the 40-year-high CPI data released on Friday

• FTX Token (FTT) was our pump coin of the week, rising just south of 10 percent

• FTT is the native crypto token of the crypto derivatives trading platform FTX

• FTX may sound familiar; the company ran a Super Bowl ad starring Larry David that went viral

First Sip 

MEME COINS

This’ll be short, but there’s another class of tokens we haven’t discussed yet—meme coins. Meme coins, like their name suggests, are based on a popular culture memes. Usually, they’re tokens with no added value, simply a way of buying into a meme, literally.

Unsurprisingly, what’s considered a popular meme changes often, and these coins mirror that with high volatility corresponding to their trading volume. Typically, they skyrocket and then crater, but some have maintained a reasonably high market cap for a while, like Dodgecoin and Shiba Inu. Still, many investors caution against meme coins, especially as long-term assets. It’s difficult to tell when the meme will run out and the majority of owners will exit their positions.

While there’s a lot of risk with these kinds of coins, there’s also an opportunity for massive gains by buying into the meme early and then selling before it craters. Keep seeking alpha.

Table Talk

CRYPTO TUMBLES AS INFLATION REACHES RECORD HIGHS

This past Friday, the Bureau of Labor Statistics (BLS) reported that the Consumer Price Index rose again in May, up 8.6% from a year ago, which marked its largest one-year increase since 1981 (via BLS). Not great. 

CPI percentage changes over the past year (via BLS)

The highest rise in price movements per individual sector, tracked by CPI, were in shelter, food, and gasoline. As expected, the crypto sector did not respond favorably as the top five major cryptocurrencies by market cap were all in the red for the week.

Public sentiment has become more fearful of a possible recession in the near future. The Michigan Consumer Index (MCSI), a monthly survey that measures how optimistic or pessimistic consumers are regarding their financial situation using 3 different metrics, recorded its lowest number in consumer sentiment (50.2) since 1978. This meant that consumers, according to the index, are more pessimistic now than they were in the depths of COVID, the 2008 financial crisis, and even the last time inflation peaked in 1981.

As many investors begin to consolidate into more low-risk assets during a time of rising inflation, crypto continues to face the repercussions. 

NFT Buzz 

UKRAINE TO USE NFTS TO SAVE CULTURE

Consensus 2022, CoinDesk’s annual crypto festival, took place this past week in Austin, Texas from Thursday to Sunday. Although a handful of crypto-whales took the stage at the event to educate attendees, Michael Chobanian, the President of the Blockchain Association of Ukraine, stood out more than most.

Chobanian speaking at Consensus 2022 (via Yahoo News)

Chobanian, who took the stage on Saturday, spoke in great length about his plan to digitize every aspect of Ukraine’s history that was destroyed from Russian invasions: “Today we are announcing a new project [aimed at] how we can save the DNA of the Ukrainian people, Ukrainian culture and Ukrainian history… Right now, they are bombing museums, churches, and cultural sites. So before they are destroyed...we're going to digitize every single piece of art or history that we have in museums. We're going to NFT it and put it on the blockchain” (via CoinDesk).

Chobanian also then went on to describe some of the benefits of putting Ukrainian artifacts on the blockchain: no one can delete it, anyone in the world can view it, and it will be preserved forever. NEAR protocol, a user-friendly layer 1 blockchain, was also announced as the first partner of the project.

Ukraine’s NFT mission serves as a reminder of the morally-positive effects that crypto can have on society. Web3 has already helped Ukraine as approximately $135M in crypto has already been raised for humanitarian and military aid (via CoinDesk).

DeFi Demographic 

SENATE CRYPTO BILL

Earlier this week, U.S. Senators Cynthia Lummis and Kirsten Gillibrand announced a crypto bill called the Responsible Financial Innovation Act, which is the latest iteration of a proposed form of government regulation over crypto (via WSJ). Crypto-friendly bills, like this one, have not done particularly well in the past as the U.S. Congress seems to want to take a hard stance on crypto.

This bill does do a few notable things. It takes commodity mirroring cryptocurrencies like Bitcoin and puts them under the jurisdiction of the CFTC (via CoinDesk). It also provides a provision of “needed legal charity” in the case of an exchange going bankrupt and assets users left on the exchange being wrapped up in the exchange’s assets for the bankruptcy proceeding (via CoinDesk). Finally, it looks to make stable coins hold 100% worth of collateral, a response to the UST collapse (via CoinDesk). This list is not exhaustive, though; you can read the guidance from Senator Lummis’s office about the bill here.

As we’ve said before, some regulation is inevitable, though we’ll see what it looks like in the coming months and years. This bill, while coming at a time when the industry is down, does show that many in the U.S. government believe the asset class will is here to stay. Bullish.

Final Cup 

• The CPI’s one-year gain of 8.6% marked the largest increase since 1981. Crypto, a risk asset to many, fell as many investors turned to more conservative approaches during uncertain times.

• Ukraine to launch NFT mission to help preserve their nation’s artifacts, and therefore culture at-risk from Russian attacks.

• The latest Senate crypto bill aims to provide greater regulatory clarity. We’ll be watching to see if it goes anywhere. Still, we’re bullish that lawmakers are devoting time to crypto regulation.

Meme of the Week (via Reddit)

This too shall pass.

- Pat + Ari ✌️

Disclaimer: None of this is investment advice, financial advice, or trading advice. CRYPTOPONG does not endorse any of the cryptocurrencies, DeFi applications, or NFT collections mentioned in this article. Perform your own due diligence and/or consult a financial advisor before investing.