This Week in Coins: Bitcoin and Ethereum Stand Still After Fed Rate Hike
Illustration by Mitchell Preffer for Decrypt.
After posting small gains last weekend, the price growth of crypto market leaders Bitcoin (BTC) and Ethereum (ETH) slowed to effectively nothing this week.
Bitcoin remains at the level it was this time last weekend, hovering around $28.820, a decrease of about 5% from its April high of $30,979 set nearly three weeks ago but still about 77% up from the start of January when the price was $16,615.
Ethereum added 4.2% to its value over the seven days and currently changes hands at $1,885, a decline of about 7% from its 2023 high of $2,129 set in mid-April and 66% up from January 1, when the price was $1,197.
TRON experienced the most growth this week and was the only top thirty cryptocurrency to grow by 8% over the week to trade at $0.070261 at the start of the weekend.
All other leading cryptocurrencies remain virtually unmoved over the last seven days.
The market’s lack of growth this week is at least partly attributable to the Fed’s decision to hike interest rates by another 25 basis points to fight inflation, the tenth consecutive hike since March last year.
In macroeconomic terms, interest rate hikes tend to drive investors away from risk-on assets like stocks and crypto as the cost of borrowing rises, making money more expensive and thus discouraging more speculative investments.
On Tuesday the White House released a report reinforcing the idea of a Digital Asset Mining Energy tax (DAME). It would apply to miners of both proof-of-work and proof-of-stake cryptocurrencies, despite their different levels of energy consumption, and—beginning in 2024— assessing a tax that’s based on their electricity costs, starting at 10% and increasing each year until it reaches 30%.
The proposal has already received heavy pushback from the crypto industry, especially because it doesn’t take into account the energy sources of the mining companies. Critics argue that the U.S. government is making a value judgment on crypto mining as a bad (or consumptive) activity regardless of whether a miner uses renewably-sourced energy or not.
Presidential candidates and crypto
A 2024 Presidential hopeful for the Democrat party, Robert F. Kennedy Jr., on Tuesday tweeted that he believes there is a top-down “war on crypto” that had something to do with the recent collapses of Silicon Valley Bank, Silvergate and Signature.
Barely a month ago, Kennedy posted a long rant on Crypto Twitter railing against the idea of a dollar-pegged cryptocurrency being released by the Federal Reserve. However, Kennedy’s thread was based on a misreading of an article about The Fed’s new digital payments system “FedNow,” which has nothing to do with central bank digital currencies (CBDCs).
Meanwhile, in the red corner, Republican Florida governor Ron DeSantis—who is widely expected to run as a Presidential candidate next year—once more pushed back against CBDCs at a press conference on Tuesday titled «Government of Laws, Not Woke Politics.»
DeSantis aired a package of bills opposing «‘Environment, Social, and Governance» or ESG policies. ESG policies evaluate factors beyond fiscal performance in evaluating a company or organization, such as environmental and community impact. One example is the White House’s DAME tax mentioned above.
DeSantis criticized the ESG approach as “virtue signaling” and tied the concept of a CBDC to ESG’s «woke» practices by saying that CBDC advocates «will impose ESG and social credit scores onto that, and that’s going to be a huge reduction in freedom for people in this country.» His words echoed his earlier remarks that a U.S. CBDC would be “Big Brother’s Digital Dollar.»
Finally, in adoption news, famed auction house Sotheby’s on Monday launched an on-chain NFT marketplace for secondary NFT sales, enabling collectors to list and make offers on work from artists.
Argentine crypto fans fear they could be witnessing the start of a crypto crackdown, meanwhile. On Friday the country’s central bank banned payment platforms from offering crypto trading services to their customers.