The Macro Battle That Will Shape Crypto Markets This Year

The Breakdown

Blockworks

Investing, Business

4.8 • 806 Ratings

🗓️ 11 January 2022

⏱️ 21 minutes

🔗️ Recording | iTunes | RSS

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Summary

This episode is sponsored by Nexo, Abra and FTX US. Last week, the December FOMC meeting minutes revealed that not only was the Fed expecting at least 3 rate hikes in 2022, they were actively considering “balance sheet normalization” (read: quantitative tightening). In today’s episode, NLW looks at how the markets are internalizing this new information, and why it’s setting up to be one of the most significant influences on markets this year. Enjoying this content? SUBSCRIBE to the Podcast Apple: https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M= Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW - Nexo is a powerful, all-in-one crypto platform where you can securely store your crypto. Invest, borrow, exchange and earn up to 17% APR on Bitcoin and 20+ other top coins. Insured for $375M. Audited in real-time by Armanino. Rated excellent on Trustpilot. Get started today at nexo.io. - Abra is proud to sponsor The Breakdown. Join 1M+ users and Conquer Crypto with Abra, a simple and secure app where you can trade 110+ cryptocurrencies, get 0% interest loans using crypto as collateral, and earn interest with up to 14% APY on stablecoins and 8.15% APY on Bitcoin. Visit Abra.com to get started. - FTX US is the safe, regulated way to buy Bitcoin, ETH, SOL and other digital assets. Trade crypto with up to 85% lower fees than top competitors and trade ETH and SOL NFTs with no gas fees and subsidized gas on withdrawals. Sign up at FTX.US today. - “The Breakdown '' is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell, Michele Musso, and Adrian Blust, research by Scott Hill and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Time” by OBOY. Image credit: DNY59/Getty Images, modified by CoinDesk. Join the discussion at discord.gg/VrKRrfKCz8.

Transcript

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0:00.0	Welcome back to The Breakdown with me, NLW.
0:09.2	It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world.
0:14.9	The breakdown is sponsored by nexo.io, Abra, and FTX, and produced and distributed by CoinDesk.
0:22.7	What's going on, guys? It is Monday, January 10th, and today we are talking about the macro
0:28.5	battle that will shape crypto markets for the rest of this year at least. Before then, however,
0:35.0	if you are enjoying the breakdown, please subscribe to it, rate it, review it,
0:40.6	or if you want to get deeper into conversation, join the breakers Discord.
0:45.4	The link is in the show notes, or you can find it at bit.ly slash breakdown pod.
0:51.6	And as always, a disclosure, in addition to them being a sponsor, I also work
0:55.9	with FTX. So, last week on the episode about why Bitcoin and crypto were crashing, I basically
1:03.6	said that it was the Fed. Now, specifically, it was the Fed FMC meeting minutes coming out
1:09.5	showing that not only was the Fed going to be hiking
1:13.1	rates this year, something that we found out about last month, but they were already talking
1:18.3	about balance sheet normalization, or to use a different word that they were clearly trying
1:23.2	to get away from, quantitative tightening. That is, if quantitative easing is putting liquidity into
1:29.7	the system, quantitative tightening is the opposite, removing liquidity from the system.
1:35.6	This has some folks out there feeling like we are in the midst of a fundamental shift
1:40.7	in the conditions that have driven markets for the last several years, extending back
1:45.0	even before all of the post-COVID policies. Those folks tend to believe that this means that
1:50.0	risk assets, which include crypto at this point from the lens of equity investors, are in for a
1:55.5	tough time as such a key underlying factor in the market shifts. Others disagree with that thesis and don't believe that
2:02.6	rate hikes and all these changes are a particularly large risk factor for crypto. However, on top of all
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