Fed Holds Rates Steady, No Clarity on Cuts

The Breakdown First Five - Thursday, June 13, 2024

Welcome back to The Breakdown First Five — the 5 most interesting and/or important stories in bitcoin, crypto, and markets to start your day.

5. Biden Accepting Bitcoin?

Reporting suggested that the Biden campaign is in talks with Coinbase to accept crypto donations. Sources said the campaign is paying attention to the issues around crypto and are looking for quick wins “to show that they're not the enemy.” Commentary was skeptical, suggesting this might be coming from personnel way down the pecking order. Most want to see substantial action, rather than empty platitudes. 

4. Curve Wars

Curve founder Michael Egorov is facing liquidation risk on multiple lending platforms after CRV fell 25%. He currently has around $20M in debt backed by $33M in CRV collateral across four platforms. This is Egorov’s second flirtation with becoming a systemic risk. In August, he faced a similar problem but was rumored to have taken bailout loans from wealthy crypto figureheads, which have now expired. Partial liquidations have already pushed down crypto markets broadly. 

3. Terraform Settles for $4.5B

Terraform Labs has asked the court to approve a settlement with the SEC. The company has agreed to pay $4.5B, including $3.5B in disgorgement of profits which will presumably be returned to Luna collapse victims. Former CEO Do Kwon will pay $200M into the Terraform bankruptcy estate and will be barred from being an officer or director of a public firm. The lingering question is whether Terraform actually has billions of dollars to pay the fine.

2. CPI Cools Marginally

CPI data for May came in a little cooler than expected. Headline CPI was 3.3%, Core at 3.4%. Both a slight downtick month over month, but moving at a glacial pace. Still, progress is progress and we now have two months in a row of cooling inflation. Food, energy and shelter inflation all cooled. Car Insurance, which was a major contributor to Q1 inflation also seems to have topped out. The report was enough for the Fed to claim “modest further progress.”

1. Still Waiting on Fed cuts

The FOMC meeting provided no clues on when rate cuts would begin, with the committee pushing back their timeline. Rates were held steady and the dot plot shifted to forecasting only one rate cut this year. The March dot plot had three cuts penciled in. Powell articulated the test, needing to be “more confident that inflation is moving down to 2 percent over time on a sustainable basis.” The addendum was unexpected deterioration in the labor market.