[Daily] Will Fed spoil the party?

Good morning! Welcome to The Daily Moon. Crypto bought and sold in Hong Kong is property. That’s what a Hong Kong court has said. It means that crypto is an asset held in a trust on behalf of owners. Similar to stocks. Guess it is way better than outright crypto bans. 🥳

As of Thursday, 7PM IST

The markets were volatile over continued sell-offs. Bitcoin was spooked by fears of a regulatory crackdown. Ethereum continued to see profit booking post the Shanghai upgrade. S&P 500 and Nasdaq were bearish on exits from technology stocks. Back home, Sensex and Nifty ended higher on renewed interest from foreign investors. 

BTC Mining Gets Tougher 

Bitcoin will hit yet another difficulty milestone on Friday. You’ll need more power and advanced mining hardware to produce the same amount of BTC. The positive is that the king crypto’s price has outpaced the difficulty. 

Again?Yes, there have been a couple of increases this year. Today, it will increase once again, from 47.89 trillion hashes to 48.53 hashes. This means that a miner has to make over 48 trillion guesses to mine a block. 

Tough times for miners?Not exactly. The last time this happened, Bitcoin was in the thick of winter. This time, however, BTC has rallied. That’s the reason why Bitcoin mining stocks such as Core Scientific and Marathon have zoomed. In fact, this category has even outperformed technology stocks. Analysts have even forecasted that if Bitcoin reaches $42,000, mining stocks may rise by ~50%. 💰

Having said that, miners may see a slowdown in hubs such as Texas due to new draft laws capping incentives and tax breaks. 

ICYMI While we are on the largest crypto, Bitcoin Core developer Dhruvkaran Mehta has quit the project. He has planned to launch a Bitcoin-focussed startup. 

Then why’s BTC down?A bunch of factors. The market was bearish over fears of another regulatory crackdown. BTC was also indirectly impacted due to an uneventful Congressional hearing in the US. When SEC chief Gary Gensler was asked during the hearing if ETH was a security, he declined to comment. 

Inflation Is Down But Not Out 

You may have heard of inflation numbers cooling off in most places. But look deeper and you’ll realise that the situation hasn’t normalised yet. Housing prices stay high all over the world. Unfortunately, the rate hike cycle has not ended.

This is confusing Inflation or price increases are lower than before. Fuel prices have fallen. But, groceries, airfares and even eating out remain expensive. Price rise hasn’t dropped enough across categories. 

In the UK, inflation hasn’t eased as expected. The inflation rate for March was 10.1%, which was lower than February but higher than market expectations. A Fed official also clarified that inflation is still “too high” and they will take steps to lower it. Steps=rate hikes. 

What’s in it for crypto?Crypto is somewhat impacted by the US Fed’s decisions, but not like before. For example, when the Fed hiked interest rates by 0.25% in March, Bitcoin fell briefly but rose soon after. The same goes for Ether which stayed bullish due to the euphoria around the Shapella upgrade.  

TL;DR Rate increases of ~0.25% may not shake crypto’s rally.

One EU Crypto Rule For All

The European Union just voted to bring a cryptocurrency legislation that will have to be followed by all 27 member states. If it gets passed into law, things will get tricky. 

MiCAMarkets in Crypto Assets is what it is called. It applies to companies they call crypto-asset service providers. So think of the likes of trading platforms or marketing crypto assets. 

We break down the main things it changes:

1. To publicly offer a crypto-asset, companies will have to produce a white paper.

2. The risks to investment will have to be spelled out upfront. 

3. Stablecoins will be subjected to higher requirements.

Is it good or bad?Well, considering everyone wants clearer regulation, this is not all bad. But industry folks have previously called out a possible increase in paperwork and higher scrutiny for crypto businesses. But hey, this is the EU. Everything invites greater scrutiny. The good thing is, the law will not come into effect immediately. 

Elon’s Got Beef With Microsoft

It’s been a week without Elon Musk making an appearance here. We were beginning to get worried. But trust the OG to keep things interesting. 

Lawsuit timeAs always, Musk is keeping things classy. Microsoft dropped Twitter from its advertising platform because they didn’t want to pay the API fees. A Twitter account tweeted this and Musk had his reply ready:

MeanwhileElon’s other company, Tesla’s first quarter numbers for 2023 show its Bitcoin holdings were unchanged from Q4 of 2022. Musk has said before that BTC was not “a good substitute for transactional currency”. His constant support for Dogecoin also lends itself to scrutiny time and again. We’d tell you what Tesla’s constant BTC holdings mean, but with Musk, one never knows. 

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Who are we? This newsletter’s ambition is to educate (and to entertain). The world of money is changing everyday and we want to help you decode what’s happening in the world of crypto, public markets in the US and India.