Fed Prepares for Rate Cuts Waller Says The Time Has Come

The Breakdown First Five - Monday, September 9, 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. CFTC Prediction Scramble

The CFTC has filed an emergency motion to block prediction markets on the US election being offered on Kalshi. A judge ruled in favor of Kalshi late last week but did not produce a written explanation. The CFTC has asked for a stay of 14 days so they can make an informed decision about an appeal. Kalshi is ready to launch the political contracts immediately, with the election coming up quickly. A big win for Kalshi, but could also be a massive win for Polymarket. 

4. Tether Buys a Farm

Tether extended their real world asset based investment strategy by investing $100M in farming. The stablecoin issuer has bought a 9.8% stake in Latin American agriculture giant Adecoagro, one of the largest milk and ethanol producers in the region. Tether has rapidly deployed capital in recent years, ranging from strategic crypto startup investments to AI and digital education. Tether framed it as an investment in land, which they said is a “crucial asset class.”

3. SEC Discovery Ordered

Coinbase has been granted access to a huge range of SEC documents as their lawsuit enters the discovery phase. Gensler’s personal communications are off limits, but the SEC will need to hand over reams of documents explaining their legal theory that crypto tokens are securities. The Ripple case turned on extensive discovery and the same could be true here. Coinbase appears to be building a case that the SEC’s legal analysis is inconsistent and incoherent. 

2. Job Print Soft-ish

Friday’s jobs report came in softer than expected, but not soft enough to spark panic. Unemployment ticked down slightly to 4.2%. Beneath the headlines the data looks pretty bad. U6 or ‘real’ unemployment is at a 3 year high of 7.9%. Full time jobs are in outright contraction, with lower quality part time jobs keeping the numbers afloat. It wasn’t not bad enough to force the Fed’s hand, but bad news is clearly bad news judging from the market reaction. 

1. The Time Has Come, Waller Said

The Fed is set to begin rate cuts next week, but officials are tight lipped on magnitude. Governor Christopher Waller said “the time has come” but didn’t guide a larger 50 basis point cut. However he did commit to advocating for front loaded cuts if appropriate. NY Fed President John Williams advocated moving towards neutral policy “over time” but didn’t get any more specific. No guidance makes it seem like 50 bps is off the table, is it a policy error?