The Weekly Wrap: ECB rate decision and U.S. May CPI, U.S. bill to regulate cryptocurrencies, Ropsten merges

Jun 10, 2022

No interest in crypto out here. Amazing skepticism.

Jim Cramer, host of Mad Money on CNBC (via Twitter)


1. ECB inflation rate decision and U.S. May CPI

The Facts:

  • The U.S. CPI hits a new four decade high since December 1981 rising to 8.6% in May YoY while core inflation excluding food and energy rose 6%, both higher than estimated.
  • Similar to the trends from the past months, surging food, gas and energy prices contributed primarily to the new high as for instance, fuel oil is up 106.7% over the past year.
  • Facing similar challenges, ECB’s Governing Council announced its rate decision as they intend to raise key interest rates by 25 basis points at its July meeting after the CPI within the eurozone hit a fresh record high of 8.1% in May.

Why it’s important:

  • As the FED’s actions don’t show signs of curbing inflation convincingly, a fourth consecutive 50 basis point rate hike is likely warranted at their meeting this September following the already indicated further rate hikes by a 50 basis points at its meeting next week and in July.
  • The raging inflation now also impacts workers considerably as real wages declining 0.6% from April and 3% YoY.
  • With the new May CPI data revealed to be higher than estimated, U.S. stock markets opened significantly lower on Friday.
  • Both the ECB and FED now taking action to fight the ongoing inflation illustrates how challenging the balancing act of curbing inflation while avoiding economic slowdown is.
2. Ropsten merges successfully from PoW to PoS

The Facts:

  • On June 8, Ropsten, one of the most important and oldest testnets of Ethereum, successfully transitioned from PoW to PoS.
  • Ropsten hit Terminal Total Difficulty (TTD) at ~16:00 UTC, about 2 hours after initially estimated.
  • The chain hit ~99.2% participation rate with healthy proposals and sync committee performance.

Why it’s important:

  • Ropsten is the first testnet where every client team is running an equal part of the network, resulting in at least a dozen unique ways of setting up a node.
  • Danny Ryan, Ethereum 2.0 researcher at Ethereum Foundation, stated that the Ropsten merge was a ”major success” and “If this were mainnet, I’d be jumping for joy”.
  • However, the merge happened with some minor hiccups as there was a configuration issue for the Nimbus client and two other minor bugs affecting a minority of stakers that were easily patched.
  • After the fixes, participation and proposal rates went back up to >99%.
  • As Ropsten now runs on PoS consensus, Goerli and Sepolia will merge next before the actual mainnet merge.
  • Except Goerli and Sepolia, all other testnets such as Rinkeby and Ropsten will be shut down EOY.

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(Source: DefiLlama, Bitcoin Suisse Research)

9.01%

MakerDAO dominance in TVL among dApps


3. Long-awaited bipartisan crypto bill revealed

The Facts:

  • Senators Cynthia Lummis and Kirsten Gillibrand unveiled the full version of their long-awaited crypto bill on Tuesday.
  • The bill aims to create a regulatory framework for crypto markets and bring more clarity for investors and developers.
  • It is the result of months of discussions with Republicans such as Minority Leader Mitch McConnell and Pat Toomey, as well as Democrats like Ron Wyden.
  • The legislation, coined the Responsible Financial Innovation would empower the Commodity Futures Trading Commission (CFTC) to regulate most of the industry.

Why it’s important:

  • The bill will aims to give more clarity to the crypto industry and its participants yet comes with costs and obstacles as it requires DAOs, exchanges, and stablecoin providers to be registered entities in the U.S.
  • It also serves to classify digital assets into securities, regulated by the SEC, and commodities, regulated by the CFTC.
  • By its language, it would furthermore classify the vast majority of digital assets like commodities and therefore replace the SEC as crypto’s prime regulator.
  • This is perceived as a big relief as there were serious fears of a framework that classifies the majority of digital assets as securities.
  • Due to new disclosure requirements, compliance costs for exchanges will increase significantly and make anon-run projects almost impossible.
  • Moreover, it also lacks some clarity on NFTs and DeFi-related topics such as Automated Market Makers (AMMs).
  • Despite the bill seeming to have support among the crypto industry, it might regulate crypto as strictly as current financial infrastructure and service providers and might not leave a lot of room for DeFi, anon-run projects, and non-registered DAOs.
In other news
  • Osmosis exploited due to LP contract bug (via The Defiant)
  • PayPal opens up crypto transfers to external wallets (via Decrypt)
  • More Solana downtime and second-worst technical risk score (via BeInCrypto)
  • UK to test blockchain technology for traditional markets (via Reuters)
  • Luna 2.0 declines another 62% within a week (via Investing)
  • Chainlink’s new roadmap teases staking (via Chainlink)
  • Citadel, Charles Schwab, and Fidelity to build crypto trading platform (via Bitcoin.com)

Bitcoin Suisse