Economist Alex Kruger Says Inflation Data Will Dictate Next Phase of Bitcoin (BTC) and Crypto Market Cycle

A closely followed economist is keeping a close watch on inflation data as he believes the next update could determine the direction of the crypto markets.

Alex Kruger tells his 117,100 Twitter followers that inflation is now the number one concern of the Federal Reserve.

According to the economist, the Fed has turned hawkish as it considers multiple rate hikes and the tapering of asset purchases this year to combat rising inflation.

Kruger highlights that if the Fed goes through with its plans, the lack of liquidity in the system could negatively impact the crypto markets.

“Crypto assets are at the furthest end of the risk curve.

Just as they benefited from extraordinarily lax monetary policy, they suffer from unexpectedly tight monetary policy, as money shifts away into safer asset classes.”

With Bitcoin (BTC) down over 40% from its all-time high, Kruger says the latest consumer price index (CPI) data, an instrument to measure inflation, could dictate the next phase of the crypto market cycle.

“Wednesday we’ll have the US inflation data… If CPI surprises on the downside, expect prices to pop and trend for a while. If CPI surprises on the upside, ‘lights out,’ BTC is going into the $30,000. Tradfi [traditional finance] will make sure of it.

If the number comes in line with the forecasts, at 7.1%, hard to tell. Would make sense for bears to attempt to break the lows, fake breakout, and a rabid rally to ensue given the chart.

That said, crypto will follow Bitcoin, and Bitcoin will follow stocks.”

Kruger also says that he believes the Fed is prepared to see market drawdowns just to keep inflation under control.

“The Fed is saying it is willing to prick the bubble. The bear case is they do. The bull case is inflation starts to consistently surprise on the low side, and they don’t need to.

Inflation is everything.”

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

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Bitcoin Just Flashed ‘Very Rare’ Buy Signal, According to Crypto Hedge Fund CEO Su Zhu

Su Zhu, co-founder and CEO of crypto hedge fund Three Arrows Capital says Bitcoin just flashed a rare bullish signal.

Zhu points out to his 447,000 Twitter followers that Bitcoin’s dormancy flow metric has just reached a level only seen five other times in history.

“Dormancy flow buy signal on $BTC, very rare, only six times in history.”

Source: Su Zhu/Glassnode/Twitter

Dormancy flow refers to the average number of days that each spent coin had remained dormant before it was moved. The metric can be used to time market lows and assess whether the bull market remains in relatively normal conditions.

Another on-chain metric for Bitcoin that Zhu finds noteworthy is its illiquid supply. Illiquid supply refers to BTC in wallets with little history of selling. When illiquid supply goes up, it suggests an absence of sell pressure on BTC and raises chances of rallies.

“Illiquid supply has been rising sharply since July 2021, in line w the accumulation trend from Jan 2019 to Apr 2021.”

Source: Su Zhu/Glassnode/Twitter

According to Zhu, Bitcoin is in a long accumulation period with an overall bullish market structure.

“Bitcoin is in a multi-year process of higher highs and higher lows, with 2021 being a relatively quieter year in a backdrop of sideways accumulation.

Buying tops or selling bottoms can be quite dangerous in this regime, leading to significant underperformance of buy+hold.”

At time of writing, Bitcoin is trading at $42,785, up 3.5% on the day but still down nearly 40% from its all-time high above $69,000 in November 2021.

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

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IMF Economists Warn of ‘Contagion’ Risk in Increasingly Linked Bitcoin and Stock Markets

In brief

  • The price correlation between crypto and stock markets is increasing.
  • This poses a risk to countries with heavy crypto adoptions, say three IMF economists.

For roughly a decade, Bitcoin and other cryptocurrencies were treated as hedges against other types of assets, such as stocks. But post-COVID, the prices of crypto assets are increasingly mirroring equities as more people add risk assets to their portfolio.

That could signal trouble ahead, say three officials with the International Monetary Fund (IMF), the U.N. institution known for providing conditional loans to member countries. 

“The increased and sizeable co-movement and spillovers between crypto and equity markets indicate a growing interconnectedness between the two asset classes that permits the transmission of shocks that can destabilize financial markets,” write economists Adrian Tobias, Tara Iyer, and Mahvash S. Qureshi for the IMF’s blog. They cite new research from Iyer demonstrating a “risk of contagion across financial markets.”

As such, the trio calls for a global regulatory framework to mitigate threats to financial stability.

A recent report from crypto asset data company Kaiko pegged the correlation coefficient between the price of Bitcoin and the S&P 500 stock index at 0.61. The correlation between BTC and the Nasdaq was 0.58. Correlation coefficients range from -1 to 1. The closer to 1, the more closely they move together; the closer to -1, the more they diverge. 

The IMF authors note that the correlation doesn’t just extend to U.S. equities markets but to developing economies as well. It places the 2020-21 correlation between BTC and the MSCI emerging markets index at 0.34, a 17x jump from before.

Yet whereas equities markets are traditionally regulated by their host countries, many nations are still determining how to deal with crypto assets. While the Securities and Exchange Commission has oversight of stock markets in the U.S., for example, the diversity of crypto assets and platforms—NFTs, DeFi governance tokens and stablecoins, for instance, all have different utilities—leaves the sector without a single regulatory authority. It’s kind of like a shoddy NBA defense trying to employ zone coverage; sometimes it’s unclear who’s supposed to be guarding whom.

Tobias et al grasp that cryptocurrencies are swiftly gaining ground, writing, “Our analysis suggests that crypto assets are no longer on the fringe of the financial system.” Though their post veers away from being too prescriptive, they argue that any regulatory framework should include requirements for banks on their exposure to crypto—and how banks can interact with such assets.

If not, they warn, the increased correlation between crypto and stocks “could soon pose risks to financial stability especially in countries with widespread crypto adoption.”


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Cash App Integrates Bitcoin’s Lightning Network

Key Takeaways

  • Cash App, the payments app from Jack Dorsey’s Block Inc., has integrated the Lightning Network for Bitcoin payments.
  • The Lightning Network allows for off-chain payments, thereby reducing fees and improving transaction times.
  • Spiral, Block’s crypto division, previously released a Lightning Development Kit for use by other developers.

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Cash App, the payment app from Jack Dorsey’s Block, has added the option of making payments through the Lightning Network.

Lightning Will Improve Speed and Fees

Though Cash App did not announce the news publicly, some users have reported an in-app message revealing the update. It reads:

“We’ve just added Lightning Network. Use the fastest, free way to pay anyone in Bitcoin—just scan or send to a Lightning address.”

It is unclear whether the new feature is available to all users today. Some have reported that the feature is initially being made available to iOS users and that Android users have not seen the update.

Lightning is a second-layer network for Bitcoin that allows transactions to be settled off-chain on P2P payment channels. This approach reduces fees and improves transaction times.

In February 2019, Dorsey suggested the feature during an interview alongside Lightning Labs CEO Elizabeth Stark. At that time, Dorsey said Lightning would likely be integrated with Cash App when the company could find a way to make maximal use of its speed, noting that the addition was “not an ‘if,’ it’s more of a ‘when.

The feature has been expected imminently since November 2021, when TheTapeDrive editor-in-chief Steve Moser found data for the feature hidden in Cash App’s code.

Square Is Highly Involved With Crypto

Cash App introduced Bitcoin buying and selling in 2018 and has become increasingly involved with crypto since then.

Spiral, the firm’s crypto development division, released a Lightning Development Kit in December. That tool allows other developers to more easily integrate Lightning payments with their wallet or app.

Square has also invested in Bitcoin directly. It has purchased 8,027 BTC in two separate purchases. It bought 4,709 BTC in October 2020, followed by another 3,318 BTC in February 2021. The company’s total investment is currently worth $343 million.

Twitter, where Dorsey served as CEO before stepping down in November 2021, has also introduced Lightning support. Its Bitcoin tipping system is powered by the Lightning-based app Strike.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other cryptocurrencies. 

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Cardano Foundation Completes Funding To Plant 1 Million Trees

Last year, the Cardano Foundation announced that it was partnering with Veritree to plant a million trees. This partnership was part of the project’s commitment towards going carbon green and helping to combat climate change. Over the next few months, the foundation had continued to push this project, raising money in the process for the trees. Now, the foundation is ready to begin planting its million trees as it completes funding for its project.

Cardano To Plan 1 Million Trees In Kenya

In a recent tweet, Chief Executive Officer of the Cardano Foundation, Frederik Gregaard, confirmed that the project was now 100% funded and ready to go. The #CardanoForest project is aimed at planting trees to combat deforestation and restoring land and local ecosystems. With this, Cardano aims to push forward its Cardano Global Impact Challenge in what will be the first of many.

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It shows the Cardano Foundation’s commitment to the well-being of the environment and maintaining a green footprint. Partnering with blockchain startup Vertiree, which uses blockchain technology to aid tree-planting efforts across the globe and keeping track of the trees planted.

The funds for the 1 million trees project were sourced from the Cardano community, with those who donate 15 ADA and above receiving a Digital Land Restoration Certificate, as well as other rewards, and being able to exchange their ADA for TREE tokens on a 1:1 swap. For each ADA donated, one tree will be planted, and at the time of this writing, 1,001,000 have been funded through this initiative.

Gregaard confirms in his Twitter thread that the efforts of the #CardanoForest will focus on Mombasa, Kenya, to support land restoration and local ecosystem development activities. In addition, “All trees planted will be recorded on the Cardano blockchain for enhanced transparency and serve as public proof of land restoration activities,” the CEO said.

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Positioning To Help The Climate

Cardano being a proof of stake network has always been focused on helping the climate. Through its recent partnership with Veritree, it has taken this one step further by replenishing the forest resources of the world. The project plans to plant trees across a number of countries, including Kenya, Nepal, Madagascar, Indonesia, Senegal, and Haiti.

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This is in an effort to combat the effects of crypto mining on the climate, which uses a tremendous amount of energy to confirm transactions, in the case of proof of work mechanisms.

In a tweet, CEO Frederik Gregaard reiterates Cardano’s commitment to positioning the blockchain as a global leader in climate change.

As Cardano strives to be carbon-neutral, it is also working to change the narratives around blockchain technology and its benefit to humanity. “Together we all share a mission to see Cardano deliver as a blockchain for good,” said Gregaard.

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Republic of Palau and Cryptic Labs launch digital residency program

The Republic of Palau and blockchain development firm Cryptic Labs announced the launch of the Root Name System (RNS), a digital residency program on Tuesday.

To inaugurate the partnership between Palau, Cryptic Labs and the sovereign-backed digital residency program, Palau’s President Surangel S. Whipps Jr. signed an agreement to grant “all global users” digital residency through the RNS under the country’s Digital Residency Act.

The Republic of Palau is located in the western Pacific Ocean and consists of about 340 islands inhabited by 18,221 residents. President Whipps said:

“Our Digital Residency Program will have capacity for internationally recognized standards of identity verification to ensure that Palau upholds the rule of law and our reputational integrity. We welcome all global citizens to apply to participate in Palau’s digital residency program.”

The digital residency program provides a blockchain-based legal ID, digital residency to democratize access to global business opportunities, and geography-agnostic governance to aid in remote corporate formation and operation. It also allows users to gain an address, shipping services and digital signature verification.

By using RNS, the digital residency program boasts end-to-end encryption which lets users control how much location and ID data they want to share with others. Once approved, users will receive a physical ID card and an ID as a nonfungible token (NFT). This will be used to facilitate “secure ID verification and access to KYC functions and forms the foundation for legal ID and verification on-chain.”

Bril Wang, CEO of Cryptic Labs said in the announcement,

“This partnership with The Republic of Palau will revolutionize economic development both in Palau and around the world. The world is beginning to recognize the practicality, versatility, and truly transformative power of digital identity — this is a swift step towards that future.”

Applicants for digital residency can apply by creating an account and paying with their credit card or with cryptocurrency.

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The Digital Residency Program marks the second major foray in blockchain adoption that Palau has taken. In Nov. 2021, the West Pacific island nation announced a partnership with fintech firm Ripple (XRP) to develop an environmentally-friendly digital currency to assist in cross-border payments.