Dispatch #138: Banking Crisis? “No Problem!” Says Powell

In this patch of your weekly Dispatch:

• Fed raises rates despite bank failures 🏦
• SUI goes live on Mainnet 🆕
• Ordinals surging ⚛️

The Big Idea

First Republic Down; Interest Rates Up

Earlier this week beleaguered First Republic Bank finally had its fate sealed. After months of speculation, culminating in a significant amount of frantic jockeying and market turmoil last week, First Republic Bank was finally put into FDIC receivership with a pre-negotiated plan to be sold to JP Morgan Chase.

When all was said and done, First Republic nudged Silicon Valley Bank out for the title of “Second Biggest Bank Failure in US History.” Many folks on Twitter have been sharing this chart showing how big 2023’s failures have been compared to 2008…and it doesn’t look good.

Luckily we had an FOMC meeting this week, so Powell and the Fed could calm markets by ending the tightening cycle, right? Nah, they hiked another 25 bps in defiance of any concern about overall financial stability. “All bets are off for cryptos,” our co-founder Antoni told Barron’s.

At this point, the Fed is assuming they have the tools to deal with banks in their Bank Term Funding Program. But with the debt ceiling debate getting more contentious and the FDIC getting hammered with these failures, is that the case? WDYT?

The Latest In…

Layer 1 Battles

It’s been a minute since we had some good new chain hype… but boy did Sui deliver! The two biggest layer 1’s of this bear cycle in terms of hype (and funding) were Aptos and Sui – both built by former teams at Facebook’s Libra/Novi/Diem.

Aptos went live in October, followed by the launch of Sui’s Mainnet this week. Trading immediately surged on Wednesday, reaching a fully diluted valuation of $13B right out of the gate. Network security is looking strong as well with validators staking over 4.2b SUI tokens. Whether this is just hype (plus maybe market boredom) or a real vote of confidence in the SUI project remains to be seen, but we’re pretty excited to see the buzz returning.

The Latest In…

Decoupling, Again

BTC and ETH have decided to break up with traditional assets like the S&P 500 and the Dow Jones Industrial Average, again.

This indicates that investors are viewing the impact of monetary policy differently for digital assets than for stocks (for the moment), as visible by the reduced trading volumes for BTC and ETH. By contrast, perpetual funding rates for BTC and ETH remain positive, indicating bullishness, while the re-emergence of BTC as an alternative to fiat currency debasement and ETH's continued contracting supply may explain their separation from traditional assets.

Pro tip: If you trade on Nexo Pro (you can log in with your Nexo account) and want to know more about how BTC and ETH are dancing to their own tune, do check out our institutional-grade insights.

The Week’s Most Interesting Data Story

Ordinals Are Skyrocketing

NFTs on Bitcoin…probably a fad right? Inscribing JPEGs to sats couldn’t be something that the ever-so-serious Bitcoiners would be cool with, yeah? Well, you can stick your narrative priors in a jar and send ‘em downriver because Ordinals just keep growing. We’re now well over 3M aggregate inscriptions which in total represent more than $8M in fees to miners. Is it possible that just bringing a little fun back to BTC is a potential solution to the fee issue once the mining subsidy is over? We’re not sure. What we are sure of is that the rate of inscriptions just keeps going up.

Hot Topics

What the Community Is Discussing

Expect to hear a LOT more about BRC-20 in the weeks to come.

Connecting the crypto<>macro dots.

The hype…might not be real?

What to Watch for Next Week:

• Will Biden’s DAME mining tax get any momentum?
• Will Bitcoiners rebel at shitcoins on Bitcoin?
• Will the Sui-mentum continue?