Daily Digest 1/12
Insight on the biggest stories of the day. “Neither this post nor any other on cryptofal.com should be taken as financial advice. It is not.”
Crypto Rallies on Bad-As-Expected Inflation Data
As the days go on we are seeing more and more poor economic news that brings uncertainty to both the crypto and stock markets. This morning the release of the December Consumer Price Index (CPI) revealed that inflation is up once again. The good news is that it is rising on par with expectations. We have all personally seen the effects of inflation over the last few months as the price of groceries, gas, and anything needed to live continues to rise exponentially.
The report also revealed that this is the highest annual inflation rate in the last 40 years. This has caused the markets to pump a little bit after what felt like endless days of downward movement. Today’s rally is a strong indicator of how people do actually view BTC as a hedge against inflation. “These markets are 24/7, highly liquid, and have long been positioned as an asset class with hedging potential against portfolios that are more subject to easy money policies adopted by Central Banks over the past few years,” said John Nahas vice president of business development at Ava Labs.
The Nasdaq and the S&P 500 also rallied today with the release of this report by 0.7% and 0.9% respectively but has tapered off since the opening of the day. On the more optimistic side Tom Essaye thinks that “the market is now pricing in one, a March rate hike, two, four rate hikes total in 2022 and three, possible balance sheet reduction sometime in the second half of 2022.”
You can send now Bitcoin for free on Cash App, thanks to Lightning
Jack Dorsey is making another play to help make BTC as accessible and cheap as possible. Before today sending and receiving Bitcoin on Cash App was limited to the regular chain which is not as fast or as cheap as using the scaling solution known as the lightning network. Currently not all IOS operating systems will not be able to support the upgrade but Dorsey ensures that they will in the next couple of weeks.
The current block size on the Bitcoin blockchain is currently limited to 1MB. This means that on the first layer of the Bitcoin blockchain only seven transactions per second while the lightning network can theoretically process 40 million transactions per second. For even more context on how many transactions that is, using Ethereum you can process 15 transactions per second.
Just before the end of 2021 Dorsey voiced his opinion on how Web3 is not as decentralized as they claim to be. This is because of the large Venture Capital groups doing a lot of the funding and in turn holding a lot of decision-making power. This goes against the basics of what decentralized is supposed to be and that is why Jack Dorsey spoke out against it.
Dorsey has always been a supporter of the lightning network and has also implemented it on Twitter before he stepped down from his position of CEO to focus on building a Bitcoin-based decentralized exchange. If you decide to send someone a tip on Twitter for posting something cool the transaction will be processed on the lightning network.
While the price action of Bitcoin has been moving up today it is also important to note that sentiment is still negative at the moment. The average weighted sentiment is still down 1.2% for the week so far. While the news of rising inflation that was noted earlier caused positive price movement the fact that inflation is up over 7% in December is not positive news at all.
The price jump is based on people trying to hedge the rising inflation number but what are people going to do when they start to need more liquid capital going forward. They may have to be pulling those funds from their stock and crypto portfolios as a means to get by at certain points.
Just the other day the BTC fear and greed index swung to extreme fear which may have pushed us into a bit of a crypto winter. Hopefully, this keeps up moving forward because the slow movement has been tough on a lot of traders.