The Federal Reserve is largely expected to raise its benchmark interest rate by three-quarters of a point on Wednesday, following two other similarly sized hikes this year. Whether the central bank follows through doesn’t matter much to some Americans.
That’s because no matter what the central bank does — hikes or no hikes — either outcome will likely still hurt Hispanic workers, Black workers, and the lowest earners.
These are the Americans who are feeling the brunt of inflation now and who will suffer the most from a rise in unemployment that’s expected after the Fed’s hikes.
Mitigating that financial pain may fall outside the Fed’s control, but it could partly come down to the American public at large.
Federal Reserve Board Chairman Jerome Powell attends a news conference following a two-day meeting of the Federal Open Market Committee (FOMC) in Washington, U.S., July 27, 2022. REUTERS/Elizabeth Frantz
Already inflation — which grew unexpectedly hotter in August — is hitting all Americans’ budgets, but it’s been especially bruising for more financially vulnerable households, with a larger share of their income going to higher-priced necessities, as Claudia Sahm, former Federal Reserve and White House economist, recently pointed out in a chart shared on Twitter.
This has not been lost on Fed Chair Jerome Powell.
“We understand how painful it is, particularly for people who are living paycheck to paycheck and spend most of that paycheck on necessities, such as food and gas. And heating their homes.
And clothing and things like that,” he said at the press conference following the Fed meeting in July. “We do understand that those people suffer the most.”
Many are turning to credit to bridge the inflation gap. According to data Experian provided to Yahoo Finance, 54% of Hispanics and 42% of Black Americans said that they used credit cards to cover essentials in the past three months, compared with 34% of whites.
That’s setting these households up for more pain because credit card interest rates move in lockstep with Fed increases. Some of these consumers are already feeling those higher rates.
Survey data provided by Nationwide found that 56% of Hispanic and half of Black respondents said rising interest rates had already negatively affected their personal finances moderately or extremely in the past six months, compared with 41% of whites.
Of course, more concerning is what happens in the job market.
“As I mentioned, there will be some, in all likelihood, some softening in labor market conditions,” Powell said in July when talking about what could result from the Fed’s search for price stability.
That softening, as Sahm pointed out, is about “workers losing their jobs, hours, and raises,” she wrote.
And we may be seeing some of that now. In August, the overall unemployment rate ticked higher to 3.7% from 3.5% as more workers entered the workforce — a positive trend during a labor shortage and underscoring workers’ confidence.
But the unemployment rate for Black workers rose at a sharper rate to 6.4% from 6% even as more Black workers left the labor force — a worrying development. The unemployment spike for Black workers fails to deliver on Powell’s promise last year to use the Fed’s levers to shrink the racial employment gap that widened during the pandemic.
The Hispanic unemployment also jumped higher — 3.9% to 4.5% — as did their participation rate. But Hispanics remain more worried about losing their jobs or having their hours cut than the average American, according to the Experian data, which found the same trend among those earning less than $50,000 of all races versus those who make more.
Does this mean these Americans are damned if the Fed raises rates and damned if it doesn’t? Maybe, but that’s not the end of the story.
“I’m looking toward what supports we can put in place no matter what happens in terms of inflation, in terms of unemployment,” Joanna Ain, associate director of Prosperity Now, said. “So, with rate hikes and everything connected to that, our most vulnerable families will be in the best place to deal with those challenges moving forward.”
Ain is talking about government supports that can help folks stay afloat similar to the ones enacted during the pandemic. That includes the expanded child tax credit, enhanced unemployment benefits, rental assistance, and increased food aid.
Those supports have largely gone away, but they can come back. It all depends not on the Fed, but on the actions of the Biden administration, Congress, and new lawmakers Americans elect in November.
Jay Powell might feel Americans’ pain, but the Fed’s actions will only keep hurting many of them.
The market is currently in a news-driven environment where the prices of cryptocurrencies have been determined by news agenda rather than fundamentals.
Bitfinex analysts have warned crypto investors to be cautious as bitcoin’s (BTC) recovery over the weekend is not a sign that its correction is over; the asset could witness more bloodshed in the near term.
In the latest Bitfinex Alpha report, experts deemed the market’s reaction this week critical, especially as supply alleviated over the weekend could return when traditional markets open.
“No Man’s Land”
Since Saturday, bitcoin has risen almost 10% from $57,600 to $63,000, closing last week in the green. The asset has surged above the 125-day range low of $60,200, which it broke through earlier this month after news of the German government’s massive BTC selling hit the market.
Market sentiment began to improve after reports that wallets linked to the German government were almost empty. However, the positive sentiment may not be sustained for long as the BTC the German authorities moved to trading desks and exchanges are yet to be sold.
While the supply from Germany appears to have been factored into bitcoin’s market price, Bitfinex analysts believe the end of selling pressure depends on how the involved trading desks execute their trades in the coming days.
Although the shift in sentiment underscores the market’s capacity to integrate new information and adjust expectations quickly, analysts think the market’s reaction over the first two trading days of the week cannot be overlooked for two reasons.
First, the low support level in the $60,200 range has now become a potential resistance line. Second, trading patterns over the past three months suggest that weekends are usually favorable for markets, especially on Saturdays when supply pressure seems to subside.
“We are now in no man’s land until we get clear resolution above or below this level,” the analysts said.
A News-Driven Environment
Besides the potential resistance level and three-month weekend trading pattern, the market is currently in a news-driven environment, where the prices of cryptocurrencies have been determined by news agendas rather than fundamentals.
Since selling pressure concerns are not yet completely obsolete due to upcoming Mt Gox creditor distributions, Bitfinex analysts expect such headlines to continue to have some impact on price movements. As such, the analysts urged investors to exercise caution in their trading strategies.
BlackRock’s IBIT led with $117.25 million in inflows on July 15, also being the most traded Bitcoin ETF.
The US spot Bitcoin ETFs recorded a daily net inflow of $301 million on July 15th. This extended their winning streak to seven consecutive days amidst a broader market recovery.
None of the ETFs recorded outflows for the day.
Bitcoin ETFs Rake in $16.11B in Net Inflows Since Jan
According to the data compiled by SoSoValue, BlackRock’s IBIT, the top spot Bitcoin ETF by net asset value, recorded the largest net inflows of the day at $117.25 million. IBIT was also the most actively traded Bitcoin ETF on Monday, with a volume of $1.24 billion. Ark Invest and 21Shares’ ARKB came in close behind with net inflows of $117.19 million.
Fidelity’s FBTC experienced net inflows of $36.15 million on Monday, while Bitwise’s BITB saw $15.24 million in inflows. VanEck’s HODL, Invesco and Galaxy Digital’s BTCO, and Franklin Templeton’s EZBC funds also recorded net inflows. Meanwhile, Grayscale’s GBTC and other ETFs, such as Valkyrie’s BRRR, WisdomTree’s BTCW, and Hashdex’s DEFI, registered no flows for the day.
A total of $2.26 billion was traded on Monday. The trading volume for these ETFs was less than in March when it exceeded $8 billion on some days. Meanwhile, these funds have collectively attracted $16.11 billion in net inflow since their January launch.
What’s Next For Bitcoin?
Earlier this month, bitcoin’s price decline was mainly due to fears of massive selling pressure from Mt. Gox and the German government’s BTC sales.
But the assassination attempt on pro-crypto former US President and presumptive Republican candidate Donald Trump at Saturday’s rally seemed to spark a recovery in the world’s largest digital asset, and experts are bullish on the asset’s price trajectory going forward. Bitcoin surged more than 9% over the past week and was currently trading slightly below $64,000.
Veteran trader Peter Brandt discussed bitcoin’s price outlook, suggesting a potential major rally. He referred to a pattern he terms “Hump->Slump->Bump->Dump->Pump” and highlighted that the July 5 double top attempt was a bear trap, confirmed by the July 13 close. He sees a likely continued upward trend but warned that a close below $56,000 would negate this bullish view.
“Bitcoin $BTC could be unfolding its often-repeated Hump…Slump…Bump…Dump…Pump chart construction. Jul 5 attempt at the double top was a bear trap, confirmed by Jul 13 close. Most likely scenario now is that bears are trapped. Close below $56k negates this interpretation”
PeckShield alert reveals LI.FI’s protocol vulnerability is similar to a March 2022 attack, with the same bug recurring.
The decentralized finance (DeFi) platform LI.FI protocol has suffered an exploit amounting to over $8 million.
Cyvers Alerts reported detecting suspicious transactions within the LI.FI cross-chain transaction aggregator.
LI.FI Issues Warning After $8 Million Exploit
LI.FI confirmed the breach in a statement on July 16 via X: “Please do not interact with any http://LI.FI powered applications for now! We’re investigating a potential exploit.” The team clarified that users who did not set infinite approval are not at risk, emphasizing that only those who manually set infinite approvals seem to be affected.
According to Cyvers Alerts, more than $8 million in user funds have been stolen, with the majority being stablecoins. According to on-chain data, the hacker’s wallet holds 1,715 Ether (ETH) valued at $5.8 million and USDC, USDT, and DAI stablecoins.
Cyvers Alerts advised users to revoke relevant authorizations immediately, noting that the attacker is actively converting USDC and USDT into ETH.
Crypto security firm Decurity provided insights into the exploit, stating that it involves the LI.FI bridge. “The root cause is a possibility of an arbitrary call with user-controlled data via depositToGasZipERC20() in GasZipFacet, which was deployed 5 days ago,” Decurity explained on X.
“In general, the risks behind routers, cross-chain swaps, etc. are about token approvals. Raw native assets like (unwrapped) ETH are safe from these kinds of hacks b/c they don’t have approvals as an option. Most users & wallets also no longer do “infinite approvals” which gives a smart contract total control on removing any amount of their tokens. It’s important to understand which tokens you’re approving to which contracts.
This dashboard looks for all transactions of a user that intersects Lifi. Not all of these transactions indicate risk- but you can see how, broadly, integrations & layers of tech (like how Metamask bridge uses Lifi on BSC) can complicate how users do or don’t put their assets at risk. Revoke Cash is the most well known approval manager app.
But it’s also good security practice to simply rotate your address. New addresses start with 0 approvals, so starting fresh by moving your tokens to a fresh address is another good security practice.” – commented Carlos Mercado, Data Scientist at Flipside Crypto.
Recent Exploit Mirrors March 2022 Attack
Further analysis by PeckShield alert revealed that the vulnerability is similar to a previous attack on LI.FI’s protocol that occurred on March 20, 2022. That incident saw a bad actor exploit LI.FI’s smart contract, specifically the swapping feature, before bridging.
The attacker manipulated the system to call token contracts directly within their contract’s context, making users who had given infinite approval vulnerable. This exploit resulted in the theft of approximately 205 ETH from 29 wallets, affecting tokens such as USDC, MATIC, RPL, GNO, USDT, MVI, AUDIO, AAVE, JRT, and DAI.
“The bug is basically the same. Are we learning anything from the past lesson(s)?” PeckShield Alert said in a July 16 X post.
Following the 2022 incident, LI.FI disabled all swap methods in its smart contract and worked on developing a fix to prevent future vulnerabilities. However, the recurrence of a similar exploit raises concerns about the platform’s security measures and whether adequate steps were taken to address the vulnerabilities identified in the previous breach.
LI.FI is a liquidity aggregation protocol that allows users to trade across various blockchains, venues, and bridges.
