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Welcome to the age of interest rate hikes, Bitcoin

March 17, 2022, 11:00 AM UTC

It was exactly two years ago today that I was sitting in a suburban Chicago hospital, the newly anointed father of an eight-pound, five-ounce, 21-inch baby girl named Maeve.

Half asleep, overwhelmed, and anxious as ever, I had absolutely no idea what I was doing, nor of what was to come. Sure, the stories people tell you about being a new parent pretty much hold up. The sleepless nights. The endless giggles. Those first words. But even today, I’m still learning on the fly—both from my wife, a neonatal intensive care unit nurse who, I assure you, can safely be described as a baby expert, and my daughter, now a full-fledged human who just yelled at my wife, “Go away! Maeve’s working,” while sitting at my desk, clanking away on my mechanical keyboard that she so loves to play with.

So, why am I telling you this? Well—just as I was with being a new parent in March 2020, and I suppose all of us were with what was then a completely unknown disease bearing down on the world called COVID-19—Bitcoin is now nearing uncharted territory itself.

Launched in 2009, just weeks after the Federal Reserve cut rates to what were then record lows as the U.S. government tried to get its hands around the great financial crisis, Bitcoin has almost entirely existed in a near ultra-low interest rate environment. That could soon be changing, though.

The Fed—that monetary policy–controlling behemoth that you’ve been hearing about for the past two years as it fought off economic disaster brought on by the pandemic—raised interest rates on Wednesday for the first time since 2018. Looking to combat a new foe amid escalating inflation, the central bank’s quarter-point rate hike has been baked into Wall Street’s expectations for weeks now and is far from groundbreaking, as it essentially lifts the rate from near rock-bottom levels.

But the Fed’s not done yet. Far from it, in fact. Central bank officials are now forecasting as many as seven interest rate hikes in 2022 alone, with more to come afterward, which could lead cryptocurrencies toward a high–interest-rate environment for the first time in their 13 years of existence. And that is raising plenty of questions.

“Crypto, for all its positives, is an immature market,” Interactive Brokers chief strategist Steve Sosnick tells me. “We have a road map for what stocks and bonds typically do under a wide range of circumstances, because there’s a long history to them. [Bitcoin’s] childhood and adolescence have been spent during pretty abnormal times. We don’t know how it’s going to react.”

Wednesday’s news was met with welcome arms by crypto investors, or at least as of the late afternoon. Bitcoin had climbed more than 4% over the prior 24 hours. Ether was up well over 5%. And other altcoins like Cardano, Solana, and Avalanche were all jumping, too. Polkadot was even up 7%. Whether the gains hold is another matter.

There are signs of how Bitcoin may respond to rising rates from here, though, says Jodie Gunzberg, managing director of CoinDesk Indices.

Using data from November 2014 through December 2021, the former S&P Dow Jones Indices executive highlights that Bitcoin has tended to outperform other assets when rates are on the rise, doing best when rates are on a moderate incline. Another, and perhaps bigger, factor in Gunzberg’s eyes will be when the Fed opts to shrink its balance sheet. (On Wednesday, Fed chair Jerome Powell said the Fed may look to begin the process in May, according to the Wall Street Journal.) “The more pressure that’s put on stocks, bonds, real estate, or any other traditional asset class,” Gunzberg tells me, “the more the demand goes up for alternatives like Bitcoin.”

Of course, the crypto markets are not just driven by macroeconomics.

Inherently volatile, as witnessed in 2021, crypto markets can be moved by any number of factors. Sometimes, it’s the Fed raising rates as expected. Often, it’s a new development with the underlying blockchain. And there’s always the potential for random, unexpected tweets from you-know-who (cough Elon Musk cough) to move prices.

A key driver of late has been the ecosystem’s continued maturation, as seen by Wall Street institutions beginning to buy in, technologies advancing, and regulations starting to emerge—factors that together figure to play colossal roles in both the evolution of Bitcoin and the broader crypto universe.

I suppose we’ll just have to wait and see how it all grows up.

A programming note… Hope you enjoyed this special early morning edition of The Ledger, or at least in the U.S. Based on some of your feedback from our survey (now entering week three), we found that readers wanted more crypto news to wake up to in their inboxes, so we thought we’d give it a shot this week. Like it? Hate it? Feel free to give us a shout.

Declan Harty


Credits 🚀 

Yuga Labs, the company behind the Bored Ape Yacht Club and now CryptoPunks, projects it could reach $455 million in net revenue in 2022, thanks to its plans to sell virtual plots of land in the metaverse…Venture capital giant Andreessen Horowitz has added Michele Korver, a former federal prosecutor, to its crypto team…Former Democratic presidential candidate Andrew Yang is bringing the DAO structure to K Street in Washington, D.C., with Lobby3…A financial modeling company called Gauntlet has locked in a $1 billion valuation after a $23.8 million Series B funding that was led by Ribbit Capital... Binance has been approved for a virtual asset license in Dubai... FTX is working with AZA Finance to grow the world of Web3 in Africa…Digital Currency Group–owned Luno wants to inject up to $75 million a year into crypto and financial technology companies through a newly launched investment arm…Mark Zuckerberg wants to bring NFTs to Instagram.

Debits 🐻 

Hedge fund Fir Tree Capital Management is making a substantial short bet against TetherSolana has to “figure out a more sustainable business model,” says Ethereum cofounder Joseph LubinMore than $3 million worth of crypto was stolen from crypto derivatives platform Deus FinanceAgave and Hundred Finance, meanwhile, saw an attacker walk away with more than $11 million…Eyeball-scanning crypto startup Worldcoin has had to halt operations in more than half a dozen countries. 


“We deserve to be in the space just as much.” Old finance is a bit like an overstuffed Oreo in that it’s filled with a whole lot of white. In Wall Street’s case, it’s white men, not white creme like an Oreo, but the analogy remains. Unfortunately, crypto, despite all its intentions of decentralizing the financial system for everyone, is falling into the same pattern—especially as it relates to women, who currently account for less than a third of crypto exchanges’ users, according to the Wall Street Journal. But a group of female celebrities—including Reese Witherspoon, Mila Kunis, and Gwyneth Paltrow—want to develop “a sisterhood of crypto enthusiasts” to flip the dynamic, the Journal’s Ellen Gamerman reports. 

From the article:

Hollywood agents say they are talking about crypto with their clients. At WME, a top talent agency that represents A-list stars, agents have sought out or been approached by more than 100 clients in efforts to strategize about how to expand their brand in a future world built on a crypto economy. To make money, celebrities can put holdings in crypto, issue their own releases in the digital marketplace, or get paid for their endorsements.

“A lot of our talent really do believe that Web3 is the future—if you want to be involved in that space, you need a long-term strategy,” said Kate Lonczak, an agent in the company’s digital strategy group.

Paris Hilton, who said she has invested in crypto since 2016, described people in Hollywood and entertainment approaching her for guidance, calling her “Crypto Queen” and looking for tips on getting into the field. “They’re just asking for advice,” she said in an interview. “ ‘How do I get in this space? What is it?’ ”

Ms. Hilton, who sells her own NFTs and has investments in crypto projects, is not a paid representative for any crypto brand, a spokesman said.



On Tuesday, decentralized finance platforms Agave and Hundred Finance were both hacked. (See the Debits for the news.) The attacks netted the masterminds some $11 million or so. Of that, about a quarter million belonged to crypto investor and developer Shegenerates, who spoke with Fortune’s newest crypto reporter, Taylor Locke, about the experience, warning that “crypto is still the Wild West.


Ethereum just kicked off a critical test that will decide its future, with $26 billion at stake by Taylor Locke

Investors say a new crypto capital has suddenly emerged over Hong Kong and Silicon Valley by Declan Harty

HSBC joins JPMorgan in betting on a metaverse future that could be worth trillions by Marco Quiroz-Gutierrez

The future of finance rests on how America will regulate crypto by Nathan McCauley

El Salvador’s millennial president launching Bitcoin ‘volcano bond’ in major bet on cryptocurrency craze by Christiaan Hetzner

Dogecoin jumped 7% after Elon Musk said he is not selling his crypto holdings by Marco Quiroz-Gutierrez

As Austin aims to build a Southern Silicon Valley, it’s spending $20 billion on infrastructure by Jessica Mathews

How Canada’s crackdown made the case for Bitcoin self-custody by Nick Neuman

(Some of these stories require a subscription to access. Thank you for supporting our journalism.)


Popcorn, ticket stubs, and…gold? Take this as your weekly reminder of how strange meme stock companies can be. On Monday, AMC, the same company that owns the movie theater plunked outside your local mall, announced that it was buying a 22% stake in a Nevada precious metals mining company by the name of Hycroft Mining. Naturally, Hycroft, a penny stock, went on its own meme move soon after. 

This is the web version of The Ledger, Fortune’s weekly newsletter covering financial technology and cryptocurrency. Sign up here to receive future editions.