us federal reserve

Justin Sun's TRON to Receive $2 Million from US Government Aid Coronavirus Relief

Justin Sun’s Tron platform has reportedly obtained US government aid of more than $2 million in coronavirus relief. The ongoing coronavirus crisis has wreaked havoc in the US financial markets. Particularly small-sized businesses are suffering from the economic shutdown meant to slow down the spread of coronavirus. With hundreds of thousands of employees in danger of losing their jobs, the US government created the Paycheck Protection Program (PPP) to help small businesses stay afloat. The money does not need to be repaid.

Prominent figures question Justin Sun’s relief loan

But the small business loan program has had some serious issues to ensure that these funds are distributed properly. For example, many people seem to question the grounds for giving Tron government aid. Even key personalities in the crypto community have questioned the basis at which the controversial 28-year-old entrepreneur could get the aid.

Some blockchain startups have been denied grants. It was reported that ConsenSys, which was founded by one of the Ethereum co-founders also applied for the small business relief money, but could not get it. Zach Herring, program director at ConsenSys said that while several hard-working Americans are struggling with the complicated application process to get a loan and face rejection without a valid reason, Sun is walking away with a lot of money.

Furthermore, the US Federal Reserve has also been accused of engaging in dubious practices by allowing companies, which had used the widely-abused accounting techniques in the past, to get loans.

Critics argue that Justin Sun is a wealthy individual who does not appear like he needs the aid to survive the crisis, especially when putting into consideration of his multi-million-dollar acquisitions of crypto-related firms like Steemit, Poloniex, and BitTorrent. He recently had paid $4.5 million to have lunch with Warren Buffet.

Sun’s wealth is considered to be valued at $200 million. He shifted business operations of Tron to San Francisco after Beijing banned local cryptocurrency exchanges and all ICOs in 2017 to keep a tighter rein in the financial system.

Recently the US Attorney’s Office for The District of Rhode charged two men for attempting to take advantage of the Small Business Loan Program meant for the coronavirus relief. It remains to see whether Justin Sun will face such similar scrutiny.

Sun’s $4.57 million lunch with Warren Buffet

While Tron remains one of the leading blockchain platforms by user activity and market capitalization, its founder Justin Sun has continued attracting controversies. He has become one of the most controversial personalities in the blockchain space. More recently, he paid $4.57 million in a charity auction to have lunch with Warren Buffet, one of the most successful investors in modern history.

Before Sun revealed to his Twitter followers that he had won a lunch event with Warren, he created suspense by making many pre-announcements, saying that something big was about to take place. But just a few days before the lunch meeting, Sun posted on social media that he was suffering from sudden health complications. He, therefore, mentioned that he would not be able to attend the meeting with Buffet. Soon after he cancelled the meeting, many sources reported that Sun was accused of alleged money laundering and involvement in pornography. The reports also claimed that the Tron founder had been barred from leaving China because of his involvement in gambling and illegal fundraising activities.

While it could be difficult to confirm everything, which occurs in the crypto space, Sun has become famously known for his marketing and publicity stunts. In the past few years, Tron has attracted several controversies, mainly because of its CEO’s excessive hype and marketing. Tron has several vocal supporters who are adamant that the company is gaining market share, and active users are rising. Many people know Justin Sun for his controversial headlines and keen to follow his activities.

Image via Elevenews

Vitalik Buterin Sceptical About DeFi Yield Farming, Compares It to US Federal Reserve Money Printing

Vitalik Buterin has criticized the yield farming craze that has been ongoing in the decentralized finance (DeFi) sector, comparing it to the US Federal Reserve’s mass printing strategy.

Buterin thinks yield farming is unsustainable

The Ethereum co-founder has advised against the yield farming strategy that has gained increasing popularity among the DeFi community and that has partially enabled digital assets such as the Yield.finance (YFI) governance token to gain traction in the market. The DeFi token recently experienced a new record-high of $39,600 on coin exchange Binance, surging by 25%.

Buterin called out the craze of yield farming and said that it was a short-term thing, implying that it was not realistic in the long run. He addressed the sharp supply inflation of many governance tokens, indicating that coins would have to be constantly printed for the ecosystem to keep on running, which was far from ideal for sustainability issues. Taking to his Twitter, Buterin said:

“Seriously, the sheer volume of coins that needs to be printed nonstop to pay liquidity providers in these 50-100%/year yield farming regimes makes major national central banks look like they’re all run by Ron Paul.”

Ron Paul is a retired politician who criticized the establishment of the Federal Reserve and who ran for President of the United States on three separate occasions. Buterin, who is currently working on a multiclient testnet project “Medalla” to attain a full proof-of-stake protocol, is a solid advocate of staking – a software protocol that rewards you with more crypto when you use your digital assets to verify transactions and support the blockchain network.

Scalability issues with DeFi run on Ethereum?

As with yield farming, the DeFi platform awards governance tokens to users who generate liquidity, either through borrowing, lending, or token exchange. These tokens can be used to vote on proposals to update a blockchain network. Governance tokens offer a large monetary reward, as evidenced by DeFi tokens Yearn.finance (YFI) and Aave (LEND)’s digital yields. However, as more tokens have been locked into DeFi projects, their supply is limited.

As DeFi protocols operate mainly on the Ethereum blockchain and the DeFi industry is currently booming and increasingly leveraged by emerging economies, concerns about the Ethereum network’s scalability have once again resurfaced. Due to the complexity of smart contract protocols on Ethereum and most DeFi projects running on the open-source blockchain platform, transaction fees to unlock basic operations have hit triple-figures.

Buterin has announced that “sharding” will be tested out in Phase 1 of Medalla testnet, which is the final testnet set in place before a complete transition to proof-of-stake is adopted by Ethereum. Buterin hopes that bugs and scalability issues can be worked out with Medalla test chain, before Ethereum 2.0 mainnet’s anticipated launch, anticipated for the end of 2022 if all goes well.

USD is dropping, investors looking for hedges

As the US dollar keeps depreciating with the Federal Reserve’s mass money printing strategy to deliver COVID-19 stimulus relief, big-name investors such as Warren Buffett have sought out other hedges to secure their funds. Warren Buffett has recently announced that he was investing in the Japanese market and moving his assets out of USD. As for the Winklevoss twins, the Gemini co-founders have long touted Bitcoin’s horn and advised people to invest in the digital asset, as they assert that the cryptocurrency is only going to keep soaring in value. The Winklevoss brothers have repeatedly said that Bitcoin was the way to go, backing their belief by saying that the “digital gold” asset had a limited supply of 21 million, and its value will consequently rise.

Anthony ‘Pomp’ Pompliano Gives Investment Advice as Bitcoin to Break $12K

Bitcoin is nearing the $12K mark, but experts are saying that the level may not be beneficial for the mainstream cryptocurrency if market bulls fail to turn it into a support level.

Bitcoin is aiming sky-high

Yesterday, Bitcoin (BTC) pushed past the $12K mark for a bit, a critical hurdle that has not been overcome since the beginning of September. The mainstream cryptocurrency has been on an uptrend lately and surging ahead. From its momentary push past the 12K mark, BTC has fallen back slightly, trading north of $11,925.00 at the time of writing.

Currently, bulls are anticipating the digital asset’s surge above the psychological threshold of $12K and experts are hoping that it will turn into a support level. Market experts have been excited when studying BTC’s movements, as it seems as though the digital asset is finally slowly decoupling from traditional markets, surging while stocks have been bearish.

Pompliano’s advice for BTC’s next run

In addressing the Bitcoin bull run, Anthony Pompliano, the famous co-founder of Morgan Creek Digital, offered some advice to investors. He said:

“Important message as we enter the next Bitcoin bull market:
BTC is very volatile; you can lose all of your money; only invest what is ok to lose; Twitter is not investment advice; Don’t buy BTC with credit cards; Keep low time preference; Do your own research.”

The famous Bitcoin investor has also taken it upon himself to educate investors on crypto investments, usually discussing BTC and blockchain-relevant topics on his own podcast show “The Pomp.”

BTC bull Pompliano on the US’ plans for CBDC

Recently, he also commented on the US’ decision to develop central bank digital currencies (CBDC), saying that the American government was not speedy enough in deploying a digital currency. The comments from Pompliano refers to US Federal Reserve Chair Jerome Powell’s speech on CBDCs, where Powell said that the United States was looking to do it right, as opposed to issuing a digital currency speedily. On his YouTube show, Pompliano addressed the topic and said:

“This is a right-now thing, and if they don’t act, the U.S. is going to fall really far behind China because it all comes down to accessibility.”

Paul Tudor Jones Sends Inflation Warning to Feds, Touting Bitcoin as Way to "Hedge"

Paul Tudor Jones described Bitcoin as one of the best ways of protecting his wealth over the long run, and he uses it to hedge his portfolio, comparing it to gold.

In an interview with CNBC’s “Squawk Box” Monday, Jones discussed the inflation issue and stated how the U.S. Federal Reserve handles the current monetary situation.

Ahead of the Fed’s highly awaited policy decision this week, Jones stated that he is afraid of the central bank, which is not moving quickly enough to resolve the inflation problem.

The hedge fund manager warned the central bank about its insistence that recent price spikes are only temporary as something insincere. Jones, therefore, told investors to double down on defensive investments such as commodities, cash and even violative Bitcoin.

He said that “Things are absolute bat-sh*t crazy right now,” describing the Fed’s coming Wednesday meeting as the most significant of the past five years because of inflation data showing the biggest price spikes in 13 years for two months in a row.

Meanwhile, Jones revealed that he now wants an allocation to Bitcoin of 5% in his portfolio.

“The only thing I know for sure is I want to have 5% in gold, 5% in bitcoin, 5% in cash and 5% in commodities,” Tudor Jones said. Talking about the common inflation hedges, he said he would allocate the rest (other 80%) of his portfolio depending on how the Fed will shift its policy to help ease price gains.

Last year, Jones revealed that his firm invested between 1% and 2% of its assets in Bitcoin. With assets under management at $44.6 billion, Tudor Investment Corporation’s company secured custodial ties with institutional crypto powerhouses Bakkt and Coinbase.

Institutional Investments in Bitcoin

Bitcoin cryptocurrency is gaining momentum as an inflation hedge among institutional investors. In May 2020, legendary trader Paul Tudor Jones bought Bitcoin as an inflation hedge as central banks worldwide printed money to relieve economies adversely affected by the ongoing Covid-19 pandemic.

During that time, Jones said that Bitcoin reminded him of Gold in the 1970s, when he announced his latest strategy shift to investors. His firm, Tudor Investment Corporation, invested part of its capital in Bitcoin futures.

An increasing number of institutional investors continue to invest in Bitcoin as part of their capital allocation. The entry of big names like Tesla has led several conservative institutions to shed their inhibition of the cryptocurrency. Seeing the benefits that large institutional investors are reaping by investing in Bitcoin, retail investors are also entering the crypto space.

Galaxy Digital CEO Says Powell’s 2nd-Term at US Fed Reserve Could Hurt Crypto Market

Billionaire investor Mike Novogratz is concerned that Jerome Powell’s renomination for a second term as the Federal Reserve chairman could slow down the growth of the cryptocurrency market.

The founder and CEO of Galaxy Investment Partners’ revelations come as an overall investor and not as a Bitcoiner.

Speaking in an interview with CNBC’s “Crypto Night in America” on November 24, Novogratz said that after Powell’s reappointment, the “macro story has changed a little bit” and that “people are getting pretty bearish” on crypto assets.

Cryptocurrency prices are down following Powell’s nomination to lead the Fed next year and Novogratz believes that his appointment could disrupt crypto prices even further.

Novogratz explained that Powell recently got reappointed and that may allow him to act more like a central banker than a person who does not want to be reappointed.

The appointment could mean a significant change to the US monetary expansion policy, cryptocurrency regulation, and US digital currency agenda.

Novogratz sees that with the appointment, Powell is likely to move faster to raise interest rates and tighten policy than his previous leadership working as Fed chair.

“We have inflation showing up in pretty bad ways in the US. So, we can see the Fed is going to have to move a little faster … That would slow all assets down. It would slow the Nasdaq down. It would slow crypto down if we have to start raising rates much faster than we thought,” Novogratz elaborated.

But now the Fed is grappling with the highest inflation in 31 years. It has already trimmed the rate at which it is buying bonds. Minutes from its last monetary policy decision, released on Wednesday showed that officials are open to dealing down quantitative easing even faster.

According to CME group’s FedWatch tool, the financial markets show investors now think that the Federal Reserve could increase interest rates in the second half of the next year.

Bitcoin and other cryptocurrencies are among many assets that have been lifted by the flood of money from the Fed in the last year and a half.

In the past, Novogratz predicted that Bitcoin would hit $100,000 by the end of this year, but now he said that looks unlikely. According to CoinMarketCap, Bitcoin was down 2.26% on Thursday to $57,356.63.

What Does This Mean for Crypto Markets?

As reported by Blockchain.News on November 22, President Joe Biden reappointed Republican Federal Reserve chairman Jerome Powell for a second four-year term. The battled-tested centrist leader enjoys strong bipartisan support and has helped lift the US economy out of the Coronavirus recession.

Powell has overseen the biggest monetary stimulus in US history to assist the economy to cope with the Covid-19 pandemic.

Biden also appointed Democratic Fed Governor Lael Brainard as vice-chairperson for the Fed’s Board of Governors, succeeding republican Richard Clarida.

The decision closes a weeks-long race between Powell and Brainard for the country’s top economist post. Biden reportedly considered Brainard more seriously in recent days under pressure from progressive Democrats after Powel initially seemed assured of his position. Brainard has taken a tougher stance than Powell on banking regulations.

President Biden said that with massive uncertainty facing the US economy, the country needed stability at the Federal Reserve. The president stated that Powell has provided the stability that is valuable in the Fed chair.

Although investors value the stability Powell brings, chances are that he may raise interest rates more quickly than Brainard and that could hurt technology and communication stocks and even crypto markets

The impact of rising interest rates may reduce investments in speculative assets such as cryptocurrencies. Since Bitcoin does not provide investors with interest payments, rising interest rates could make a digital currency less appealing to market participants. Bitcoin’s supply changes very gradually, and therefore any reduction in demand could prove bearish for prices.

US Fed denies Custodia Bank membership over crypto concerns

In its 86-page report released on March 24, the US Federal Reserve denied Custodia Bank’s application for membership citing concerns over the bank’s involvement in the crypto industry. The Fed has raised “concerns about banks with business plans focused on a narrow sector of the economy”, with a high concentration of activities related to the crypto industry. The report states that “Those concerns are further elevated with respect to Custodia because it is an uninsured depository institution seeking to focus almost exclusively on offering products and services related to the crypto-asset sector, which presents heightened illicit finance and safety and soundness risks.”

The Fed also noted that Custodia Bank had not yet developed a sufficient risk-management framework for its proposed cryptoasset-related activities, nor had it addressed the highly correlated risks associated with its undiversified business model. The report stated that Fed’s members must align their risk management systems and controls with the activities described in their business plans.

If Custodia Bank were to be accepted as a member of the System, it would be further prohibited from running crypto-related services “given the speculative and volatile nature of the crypto-asset ecosystem” that is not consistent with the purposes of the Federal Reserve Act. The report stated that “Further, if the Board were to approve Custodia’s membership application, it would prohibit Custodia from engaging in a number of the novel and unprecedented activities it proposes to conduct—at least until such time as the activities conducted as principal are permissible for national banks.”

In response, Custodia Bank criticized the Fed’s decision as shortsighted and an inability to adapt to changing markets. The bank claimed that perhaps more attention to areas of real risk would have prevented the bank closures that Custodia was created to avoid. The bank has vowed to turn to the courts to vindicate its rights and compel the Fed to comply with the law.

The Fed’s report on Custodia Bank’s membership application is 14 times longer than its previous longest denial order, and 41% longer than the Fed’s longest order on any subject, according to the bank. In late January, the Fed denied a membership request from Custodia Bank, as well as a second application in February, claiming that its application “was inconsistent with the required factors under the law.”

In conclusion, the US Federal Reserve has denied Custodia Bank’s membership application due to concerns over the bank’s involvement in the crypto industry. The bank’s proposed cryptoasset-related activities were deemed to present heightened illicit finance and safety and soundness risks, and the bank had not developed a sufficient risk-management framework. While Custodia Bank has criticized the Fed’s decision, the bank is now prohibited from running crypto-related services if accepted as a member.