Biden Issues Crypto Order; Inflation Expectations Hit Record High

The latest moves in crypto markets, in context

March 9, 2022

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Good morning, and welcome to First Mover. Here’s what’s happening this morning:

And check out the CoinDesk TV show “First Mover,” hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9:00 a.m. U.S. Eastern time. Today’s show will feature guests:

Today’s newsletter was edited by Omkar Godbole and produced by Parikshit Mishra.

Market Moves

By Omkar Godbole

Bitcoin consolidated on overnight gains after U.S. President Joe Biden signed a crypto order early Wednesday, directing federal agencies to coordinate their efforts to draft cryptocurrency regulations.

The executive order did not lay out specific positions the administration wants agencies to adopt or announce new regulations for the industry, CoinDesk's managing editor for global policy and regulation, Nikhilesh De, reported.

A senior administration official did a balancing act while talking to reporters, acknowledging potential opportunities for American innovation and competitiveness that digital assets could provide along with risks associated with the growth of the crypto sector.

Some analysts were worried that the long-awaited crypto order would announce stricter regulations, given the recent speculation of wealthy Russians using digital assets to circumvent sanctions imposed by the West.

However, those fears were put to rest late Tuesday after an unintentional release of U.S. Treasury Secretary Janet Yellen's remarks on Biden's the-then impending crypto order said the administration would support "reasonable innovation." Bitcoin picked up a bid after CoinDesk reported Yellen's comments, rising more than 7% to $42,000.

While most cryptocurrencies followed suit, privacy coins like monero and zcash backed off from Tuesday's high. Both coins surged over 25% on Tuesday, perhaps due to traders anticipating increased demand for privacy on fears of increased regulation.

"My best guess of what's going on: With stronger oversight confirmed, segments of the market that value privacy (for ideological or illicit reasons) will rotate away from trackable crypto assets like BTC and ETH. Or at least this is what traders are speculating on," Ilan Solot, a partner at the TagusCapital Multi-Strategy Fund, said in an email.

"Traders are thinking that other traders are thinking that oligarchs would buy privacy coins, so they buy privacy coins. But really, no one believes that oligarchs are buying," Solot added.

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Crypto Prices

Bitcoin (BTC)

See the latest price here

Ether (ETH)

See the latest price here

The following are the biggest movers in the CoinDesk 20 digital assets over the past 24 hours:

Biggest Gainers:

Biggest Losers:

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.

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Latest Headlines

Fintech Platform Cake DeFi Creates $100M Venture Capital Arm

Market Cap of Gold-Backed Cryptos Surpass $1B as Yellow Metal Nears Record High

US Inflation Expectations Hit Record High

By Omkar Godbole

The market-based measures of long-term inflation expectations in the U.S. continue to rise, offering positive cues to bitcoin.

The 10-year breakeven rate, derived from the spread between conventional and inflation-adjusted Treasury yields, rose to a new record high of 2.785% on Tuesday, surpassing the previous peak reached in 2005, according to the Federal Reserve Bank of St. Louis.

Bitcoin and U.S. 10-year breakeven rate (Source: Federal Reserve Bank of St. Louis)

The above chart shows bitcoin has often moved in lockstep with the 10-year breakeven rate since the March 2020 crash.

"Bitcoin’s 90-day correlation with the United Sates’ 10-year breakeven inflation rate, which reflects inflation expectations, moved higher from the second quarter [of 2021] onward," Babel Finance said in a 2021 crypto market review shared with CoinDesk early this week.

"As an asset with the same durability, exchangeability, and scarcity as gold, bitcoin began to partially replace gold as a trading instrument to hedge against inflation in the middle of the year," Babel Finance added.

Whale selling

Data tweeted by Blockware Solutions' William Clemente shows whales or large investors have been offloading coins over the past two weeks and the number of coins held by these wealthy investors has dropped to the lowest since September 2021.

A continued whale selling would be a cause for concern for the bulls.

Chart showing a renewed drop in the number of coins held by whales (Source: Glassnode)

ICYMI

In case you missed it, here are the most recent episodes of "First Mover" on CoinDesk TV:

Ukraine’s Digital Battle Against Russia, Role of China’s Digital Yuan in Russia Sanctions, an NFT Collection to Highlight Female Role Models

"First Mover" hosts speak to Ukraine Ministry of Digital Transformation Deputy Minister Alex Bornyakov as the United Nations records about 2 million refugees have left Ukraine as Russia's assault continues. Darrell Duffie of the Stanford Institute for Economic Policy Research weighs in on the role of China's digital yuan in Russia sanctions. Crypto market insights from crypto exchange OKX Director Adrian Yang. Plus, celebrating International Women's Day, Lisa Mayer, Boss Beauties founder and CEO, shares how her company is helping bring female empowerment to the community.

Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.

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