OVERVIEW

Big Tech Breakout Leaves Crypto Behind

Continued progress in disinflation helped renew hopes of at least one rate cut in 2024, but someone apparently forgot to tell crypto, which was mostly flat on the day. Meanwhile, big tech stocks led the U.S. stock market indexes to new highs, as risk-taking behavior remains intact. 🤑

In today’s Litepaper, we’ll cover the Fed’s latest projections and billion-dollar news from Terraform Labs and Tether.

Also on deck is a recap of the biggest crypto hacks in history and a crypto 101 on automated market makers. 📰

Before we dive in, here’s today’s crypto market heatmap:

And here’s a look at crypto’s total and altcoin market cap:

NEWS
Two “Billion Dollar Stories” In Crypto

The Securities and Exchange Commission (SEC) filed a “proposed final consent judgment,” requiring Terraform Labs to pay $3.58 billion in disgorgement (plus interest) and $420 million in a civil penalty. It would also block Do Kwon from becoming an officer or director of any public firm. 🚫

Terraform and its co-founder Do Kwon reached the settlement in principle with the SEC last Monday, with Do Kwon also having to pay $204 million toward a bankruptcy estate designed to provide harmed investors some restitution.

However, it’s noted that most of these penalties will be unpaid, given Terraform filed for bankruptcy in January, making this another unsecured claim in its Chapter 11 case. 👎

Still, the SEC said in its court filing that “Entry of this judgment would ensure the maximal return of funds to harmed investors and put Terraform out of business for good. Thus, this proposed judgment is fair, reasonable, and in the public interest.”

In other words, given the very shitty circumstances, something is better than nothing. 🤷

Meanwhile, Stablecoin developer Tether’s investment arm plans to make deals worth $1 billion over the next year. 💵

It’s focused primarily on financial infrastructure, artificial intelligence (AI), and biotech, with the company investing around $2 billion in these areas over the last two years.

CEO Paolo Ardoino told Bloomberg, “It’s all about investing in technology that helps with disintermediation with traditional finance. Less reliance on big tech companies like Google, Amazon, and Microsoft.”

Two billion-dollar stories, though one giveth and the other taketh away as we typically see in financial markets. ⚖️

NEWS
Dot Plots Reiterate Fed’s “Data-Dependent” Stance

The day started off with a weaker-than-expected consumer price index (CPI) reading, renewing downward progress in core inflation and reigniting hopes of several rate cuts coming during 2024. 🥳

Stocks and bonds both rallied sharply ahead of the Fed meeting, which included only a couple of key updates.

As expected, the Federal Reserve kept interest rates unchanged again, noting the “modest” progress in inflation toward its 2% target. That improved from its previous statement, which stated a lack of further progress. 👍

In terms of economic projections, only short-term expectations were impacted. Inflation’s downward progress has been slower than anticipated and the Fed has consistently stated it would keep rates higher for longer if needed to drive further progress toward its goal.

And further progress, we’re slowly but surely getting. Just look at the labor market softening and economic growth slowing its expansion rate. 🔻

With that in mind, we saw 2024 median inflation expectations tick up slightly, as did the median federal funds rate. 

A move from 4.60 in March to 5.10 in June signifies that we may only see one cut this year but that the Fed expects its longer-term projections to remain unchanged over 2025 and 2026. 🔺

So the core messaging has stayed the same: rate cuts are likely in 2024, but now we’ve gone from six down to three and now down to one being the base case. And then the Fed will play catchup (or down) in 2025 as the data allows. ◀️

While stocks and bonds closed higher on the day, they trended lower following the release of this information. So we’ll have to wait and see how things play out.

And if you’re interested in a great press conference summary, you can check out my good friend Callie Cox’s thread on X for more. 🧵