Is BTC the new Bond?

Good morning! Welcome to The Daily Moon. Coinbase wants to settle crypto disputes out of court. It has asked the US Supreme Court to halt two pending lawsuits so that the exchange can resolve it privately. The court cases involve scams and Dogecoin promotions. No wonder.  

The markets were volatile, with Bitcoin below $23,000 and Ethereum at ~$1,600. Nasdaq was flat in early trade. Back home, Sensex and Nifty tumbled on weak global cues. 

Is Bitcoin Closer To Bonds?

We thought Bitcoin was similar to stocks. Now it turns out that the crypto asset is closer to the US treasury bonds. Research shows that the US Fed’s rate hike decisions will help Bitcoin switch its movement towards the direction of US bonds.

What’s brought this change?So far, the rate hike decision was keenly awaited. But since inflation is the key consideration, the market expects more interest rate increases in this year. Due to this, bond yields fell. There are two possibilities: 

1. Deflation: A situation when prices of goods and services fall.

2. Recession: A period of economic slowdown where consumption is minimal. 

The 0.75% rate hike by the US Fed in July has pointed to an economic slump. Bond yields and commodities such as gold have fallen. Research said that once inflation recedes, bonds, gold, and Bitcoin will be on the same trackpath. Bitcoin prices rose  above $23,000 after the rate hike announcement. 

What about stocks?Bitcoin used to mirror technology stocks on Nasdaq. But Bitcoin became an outlier when it changed course to track global demand, while technology stocks had to manage revenue pressures and geopolitical issues. 

Data suggests that Bitcoin has gained while Nasdaq fell. This means that while more rate hikes could adversely affect stocks, Bitcoin will have an upside potential because of the correlation to bonds. It could soon become a global collateral, just like US Treasury bonds and gold. 

ETH Classic Is Not ETH

Ethereum’s Merge has fuelled a rally in the crypto. Its move to proof-of-stake will make projects faster and cheaper. But this transition may not boost Ethereum Classic, a decentralised platform that runs smart contracts on a proof-of-work model. 

FYI Ethereum Classic was formed after the original Ethereum blockchain split into two. The newer one is Ethereum and the older one is Ethereum Classic. 

How are they different?Ethereum Classic will continue on the PoW model, which involves using high-power computers to solve mathematical problems. Ethereum’s move to PoS will involve staking 32 Ethereum to become eligible network validators. Scalability is higher on Ethereum. 

Prices differ too. Considered a speculative asset, Ethereum Classic is priced at $35 levels, while the more stable Ethereum trades at ~$1,600. 

Why won’t the old version gain?Ethereum Classic is not involved in PoS projects. It has seen a temporary rally on expectations that PoW miners will switch to the Classic version. However, experts believe that lack of long-term growth prospects on Ethereum Classic will halt its rise. 

Heavyweights Pull Down Stocks

A six-day winning streak of the stock markets was snapped by a fall in large cap stocks. Sensex and Nifty closed lower due to a drop in share prices of Reliance Industries, State Bank of India, HDFC, and ICICI Bank. 

Cautious optimismWhile the market cheered the return of foreign institutional investors, there are fears of a global slowdown. RIL fell on a duty increase in crude oil produced within the country. Concerns over a potential conflict between US and China also led to a slide in equities. 

The RBI effectBank stocks were volatile ahead of RBI’s monetary policy decision on Friday. Analysts also expect the Indian rupee to reach historic lows based on how interest rates move. Global cues weren’t optimistic either, with the UK at the risk of recession after a 0.5% rate hike.

Solana Finds Hacker Links

Solana has found one link behind the ~$8 million hack. Slope, a web3 wallet provider for Solana layer 1 blockchain, was allegedly used by all affected investors.   

How is it connected?The blockchain found that all the private keys for the ~8,000 affected wallets were stored on a third party wallet Slope. When attackers exploited the servers and found the keys, the wallets were drained out. 

In fact, Solana co-founder Anatoly Yakovenko blamed Slope for the hack of his Twitter account as well. 

Users have been asked to regenerate their seed phrase in a different wallet immediately. 

FYI Seed phrase is a series of words created by a wallet that gives access to the crypto stored in it.  

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Who are we? There is a lot happening in our world. Everything has layers, and each layer has to be carefully peeled so you, the reader, know how the world of money is changing every day. That’s our promise. Help you unpeel the onions, which are the public markets in the US, India, and crypto, so that you know just a little more.