Three stories

1. Federal Reserve Chair Jerome Powell said the U.S. central bank will keep its policies loose. The Fed will maintain its current $120 billion per month bond-buying program until “substantial further progress” is made in terms of inflation and employment.

• “I’m much more worried about falling short of a complete recovery and losing people’s careers and lives that they built because they don’t get back to work in time,” Powell said. “I’m much more concerned about that than the possibility which exists of higher inflation. … Frankly, we’d welcome higher inflation.”

Bitcoin enthusiasts see long-term benefits for the cryptocurrency under this current regime, which is committed to letting inflation run hot. Bitcoin didn’t react to the Fed’s statements immediately, but is up 7% (at press time) after trading in the red Wednesday.

• Powell was asked about bitcoin, in a question about how cheap money could be creating bubbles. His response: “Financial stability vulnerabilities overall are moderate.”
• Separately, the chief banker at BIS, the bank for central banks, Agustín Carstens, cast doubt on bitcoin’s long-term viability Wednesday, saying bitcoin’s volatility would be its downfall.

2. The DeFi scene is heating up. Grayscale Investments, the world’s largest digital asset manager, has filed to register five new trusts for cryptocurrency assets, several being connected to the decentralized finance (DeFi) space. (Digital Currency Group owns Grayscale and CoinDesk.)

• Aave, cosmos, polkadot, monero and cardano were all listed in new filings, though none of this means there will absolutely be a Grayscale XLM trust anytime soon, or ever.
• Meanwhile, Uniswap’s native token uni (UNI) broke $15 per token on Coinbase Wednesday morning. It’s up more than 92% in one week and up 1,300% since the token debuted in September 2020.
• This makes UNI the highest-valued DeFi coin, in terms of market cap. As previously reported, DeFi’s “total value locked” crossed the $25 billion milestone.
• DeFi darling Curv partnered with Algorand, the proof-of-stake network launched by Turing Award winner Silvio Macali, to build new wallet technologies.

3. Long-time bitcoin skeptic Mark Cuban has apparently reversed course and gone bullish on nonfungible tokens (NFTs) and blockchain. Corresponding with CoinDesk’s Jeff Wilser, the billionaire owner of the Dallas Mavericks and “Shark Tank” celebrity said, “You can sell anything digital using NFT,” conceivably even merch for his basketball team.

• “The upside is truly unlimited,” Cuban said, talking about the entire crypto space. “It is a platform for any number of amazing applications that outperform their traditional finance counterparts.”

At stake

Game. Stop.
Yesterday, I was talking to a colleague about, what else, GameStop and the gamification of the stock market. We’ve covered here in the past how traditional markets are becoming more and more like crypto, especially as coronavirus precautions cause people to spend more time online.

Millennial-friendly brokerages like Robinhood allow just about anyone to buy, hold and trade, take out complicated derivatives positions and even fractionalize stocks – turning the S&P 500, though more often, penny stocks, into a casino.

That, coupled with the easy money of zero interest-rate macroeconomic policy (ZIRP) has caused some, say, distortions in the market. It’s with all this in mind that my colleague actually asked seriously, has crypto become more rational than stocks?

All of this starts with WallStreetBets, a subreddit dedicated to day trading, and what has become perhaps the biggest financial story since markets bottomed out in March, during the early days of the coronavirus crisis. A plan was hatched among the self-proclaimed “degenerate traders” on Reddit to pump the price of GameStock (GME), “squeezing” a hedge fund that had gone short on the video game retailer (which has seen better days).

What began out as a whimsical attempt to best a hedge fund has had real effects, with real money on the line. As CoinDesk’s Zack Voell notes, a similar playbook is being repeated across other stocks, including BlackBerry (BB), AMC Entertainment (AMC) and Kodak (KODK).

To try to prevent the meme-fueled contagion, WSB’s moderators briefly took the subreddit private last night while Discord banned the group’s server, ostensibly for hate speech. TD Ameritrade has halted GME trading and Nasdaq – the second-largest stock exchange in the world – said the platform has begun monitoring social media and will halt trading if another WallStreetBets-driven pump is flagged.

Even the U.S. Securities Exchange Commission (SEC) is watching, issuing a brief statement that it is “reviewing” the “ongoing market volatility.”

CoinDesk columnist Preston Byrne said the trend is likely to continue, in a recent op-ed: “The people who stand to lose the most from GameStop-style events are going to try to curtail freedom of speech and economic freedom by targeting the technology companies that enable the exercise of those freedoms.”

It’s crazy! It actually makes my head hurt! As Bloomberg Matt Levine columnist wrote, “A popular conclusion from the GameStop story is, ‘Well, I guess the stock market is nonsense now,’ and I’m not sure that conclusion is wrong. Seems like the sort of thing the SEC wouldn’t like. But what can they do about it?”

Crypto has its fair share of pump and dumps. In the long list of crypto assets (more than 8,000) any given token or coin could pump any given day for seemingly any given reason. But as market commentator Mati Greenspan told First Mover this morning, “You gotta take the bad with good. Overall, what we’re talking about is the democratization and freedom of financial markets.”

Reddit founder Alexis Ohanian has also picked up on the trend, telling CNBC’s “Squawk Box”: “We vote with two things in the USA: votes and dollars. The internet has obviously had a huge impact on our democratic process. Now we’re seeing the impact it’s having when the internet revolutionizes the dollar votes, too.”

As often said, many view bitcoin as a buy against the unprecedented amount of money printing. Ethereum is an increasingly attractive offer for institutional investors because a legitimate, though experimental, alternative financial system is being built on top of it.

So has crypto become saner than traditional markets? Well, maybe you should see what happened to doge.

CORRECTION (Jan. 28, 23:11 UTC): An original reference to BlackBerry called the stock “heavily shorted.” Approximately 7% of BlackBerry’s outstanding shares are currently sold short.

Market intel

Following a tweet from “WSB Chairman,” unaffiliated with the popular subreddit, inquiring about the meme cryptocurrency dogecoin prices went haywire. 

• Dogecoin (DOGE) surged over 250% Thursday morning to above $0.027, giving the meme-based cryptocurrency a total market value over $2.5 billion.
• DOGE is prone to random spikes and random "endorsements" coming from the likes of TikTok,  adult star Angela White and, of course, Elon Musk.

Scott Minerd, chief investment officer of the multi-billion dollar investment firm Guggenheim Partners, said bitcoin will have a hard time staying above $30,000.

• “Right now, the reality of the institutional demand that would support a $35,000 price or even a $30,000 price is just not there,” he said in an interview with Bloomberg Television on Wednesday.
• The comments come weeks after he publicly declared bitcoin’s price should be in the hundreds of thousands of dollars.

Bitcoin typically underperforms during tax time, new data shows. From 2014 to 2020, bitcoin was down in four out of seven Januarys and six out of the past seven Marchs. According to Delphi Digital, average losses for those months were 5.24% and 12.59%, respectively.

• “It’s difficult to pinpoint exactly how much selling pressure can be expected, and different jurisdictions treat capital gains more favorably than others,” Kevin Kelly, co-founder and head of global macro at Delphi Digital, said. “But bitcoin alone added more than $400 billion to its total market value last year. A decent portion of those returns accrued to speculators and traders who may have already realized some gains or rolled profits into other corners of the crypto market, thus triggering taxable events.”

Who won Crypto Twitter?