On-Chain Commentary
- After a 25 bp rate hike last week, rate probabilities forecast cuts in ‘23 & ‘24
- Regulatory enforcement actions continue as CFTC files suit against Binance
- The Bitcoin network hash rate has reached a new ATH of over 400 EH/s
Last week, the Fed raised rates by 25 basis points, bringing the Fed funds rate above both the Truflation real-time inflation estimation and the Fed’s preferred inflation metric, PCE. Another PCE data release is expected to show a small decline on Friday. Markets remain concerned in regards to regional bank liquidity and potential issues with commercial real estate loans, as small banks handle almost 80% of these loans in the US. Since the banking crisis began earlier this month, the Fed has added $390B to its balance sheet.
Despite regulatory headlines, Bitcoin and Ethereum have remained relatively stable. Coinbase was issued a Wells notice by the SEC last week, and this week the CFTC announced a lawsuit against Binance and its CEO Changpeng Zhao over unregistered crypto derivatives products and evasion of compliance laws. Both the SEC and CFTC have brought charges against many in the ecosystem following the spectacular collapse of FTX in late 2022. US regulatory agencies continue to form rules and guidelines around digital assets, which will enable deeper integration within traditional finance platforms and provide secure accessibility to more investors diversifying their portfolios.
Bitcoin’s network hash rate has exploded higher thanks to further improvements in ASIC efficiency, continued infrastructure buildout in the US and a higher Bitcoin price. As price rises, previously unprofitable mining rigs become profitable once again and are economical to turn back on. Various US state legislatures have also recently passed safe harbor laws for Bitcoin miners. Many variables determine mining profitability, including Bitcoin price, network difficulty, block reward, and transaction fees.
