🟣 25. Rate Hike or OP Token?

Fed raises rates by 25 bps while Optimism Bedrock hits the Governance Forums.

To the surprise of no one, Jerome Powell announced a rate hike of 25 bps yesterday. Not much has changed in the last few months; the labor market is as tight as ever, perhaps a bit too tight for everyone's liking. As the Fed tries to undo the damage inflicted on its balance sheet throughout COVID, one should continue to watch the balance sheet's downward trajectory along with repo withdrawals. The committee anticipates that ongoing increases in the target range will be appropriate to achieve the inflation target of 2%.   The Federal Reserve dot plot is predicting a range of 5.0%-5.25% heading into 2024. Wall Street, on the other hand, expects the Fed to start cutting rates before the end of the year and further into 2024. Pivot, pivot, pivot. Perhaps everyone is a bit too eager to resume "up only" and more pain is necessary for the market. If you'd like a great debate on this market disconnect, give the latest episode of On the Margin with Jim Bianco a listen.    At this point, everyone, including the cryptocurrency market, is calling Powell's bluff. BTC and ETH traded higher on the dovishness in Powell's speech. Perhaps the only thing that can get financial markets to stop thinking a pivot is near is either recessionary data that indicates we won't achieve a soft landing or inflation data coming in hot again.    On the note of recessionary data, Meta shares popped 20% in after-hours trading on the news of a revenue beat and a $40B stock buyback. Don't worry, their metaverse division is still bleeding cash with a $4.3B net loss in Q4 2022. Could this be the turning point for big tech after months of mass layoffs? Because crypto often trades at a high beta to tech, and with the most speculative and highest beta names rallying the most in equities, this could be a tailwind for crypto.    - purplepill   One should take note of BTC's historical performance in the month of February, with the asset closing positive in 8 of the prior 10 Februaries for an average monthly return of ~14.4%. Not depicted above, ETH has closed positive in 6 of the prior 7 Februaries for an average monthly return of ~14.9%. The only negative February for ETH was right after the 2018 crypto bubble popped.   With a month of major short squeezes from peak bearishness post-FTX collapse, we may be entering a period of FOMO from those sidelined waiting for a pullback to enter.  While we all think we are macro experts reading the tea leaves, the real alpha is Groundhog Day (today). If past performance is indicative of future results (it's not), I hear Punxsutawney Phil is predicting an early Spring and 4 more weeks of green candles. But in all seriousness, if you want to check what Phil actually said, it's here.    Optimism Bedrock has hit the governance forums. Bedrock is an upgrade to Optimism's tech stack that implements a modular architecture. While Optimism plans on leveraging this stack, it will be open sourced for any new L2 to use. Bedrock will split the OP stack into 3 components: consensus, execution, and settlement. This paves the way for a multi-client future for Ethereum and its L2s.    The Optimism devs believe that a group of highly integrated chains will form an emergent structure – the Superchain. This structure would feel like a single chain to the end user, but is actually a group of multiple chains with atomic cross-chain interactions leveraging a shared prover and sequencer. Bedrock is a preparatory step toward that future.    OP is up 26% in the last 24 hours ahead of this highly anticipated governance vote. If the vote passes, the Bedrock upgrade will be scheduled for execution 2 weeks after the vote passes on March 15. You may want to fade OP, but I wouldn't fade a multichain future and its building blocks.    Sushi Governance Update Sushi governance will vote on a tokenomics redesign and already passed a proposal that substantially impacts the token. Read More → ETH Liquid Staking Derivatives Primer The liquid staking derivative landscape is maturing as numerous solutions are now available for investors to choose from with various tradeoffs. Read More → MakerDAO Earmarks $5M For Legal Defense Governance vote creates defense fund intending to alleviate costs for Maker participants exposed to "novel legal risks" Read More → All Eyes on Liquid Staking Derivatives as Shanghai Upgrade Nears Following the Shanghai Upgrade, the Ethereum blockchain could potentially welcome a new cohort of stakers Read More →   The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm's Financial Disclosures. 133 W 19th St, New York, NY, 10011 Unsubscribe