Testing Bitcoin’s ‘Inflation Hedge’ Thesis | FTX’s New Crypto Megafund

BITCOIN, INFLATION AND THE IMF

After a rocky start to the year, the crypto market got a slight mid-week boost as the U.S. Labor Department’s Consumer Price Index, the widely followed inflation gauge, reported its highest reading in nearly four decades, with annualized inflation registering at 7% in December. And though bitcoin has been promoted as a hedge against inflation due to its limited supply and historically low correlation with traditional asset classes, including stocks and commodities like oil and gold, data suggests the leading cryptocurrency is increasingly acting as a risk asset. Several IMF economists this week rang the bell on the increasing correlation between stocks and bitcoin, noting a higher possibility of spillovers of investor sentiment between those asset classes. “This could soon pose risks to financial stability especially in countries with widespread crypto adoption,” they warn.

COINBASE WADES INTO CRYPTO DERIVATIVES

In a bid to catch up to foreign rivals, Coinbase said on Wednesday it would be purchasing FairX, a Chicago-based CFTC-regulated derivatives platform. The acquisition would allow Coinbase to leverage FairX’s infrastructure in offering crypto derivatives to retail and institutional customers in the U.S. Last year, trading platforms FTX.US and Crypto.com made acquisitions with a similar aim.

Though the move could help the U.S. exchange establish a formidable presence in a lucrative market, Coinbase’s shares fell 1.7% following the announcement.

Source: Messari. Prices as of 4:00 p.m. on January 14, 2022.

FTX SETS UP $2 BILLION VENTURE FUND

Fresh off a record year for crypto funding deals, the Bahamas-based crypto exchange FTX, run by billionaire Sam Bankman-Fried, on Friday announced the launch of its own Web 3-focused venture capital fund with $2 billion in assets under management. Dubbed FTX Ventures, it will invest in cryptocurrency startups across the world and in all stages, with a broad focus on social, gaming, fintech, software and healthcare industries. The fund will be led by Amy Wu, former general partner at Lightspeed Venture Partners, who will also head FTX’s mergers and acquisitions, partnerships and gaming initiatives.

The deal-making mania in the sector is showing no signs of fatigue. In November, crypto investment firm Paradigm announced it had raised $2.5 billion from investors to launch the biggest cryptocurrency venture fund ever, surpassing the $2.2 billion raised by Silicon Valley monolith Andreessen Horowitz just five months earlier.

ELSEWHERE

Visa Offers Test Platform For Central Bank Digital Currencies [Bloomberg]

Tesla Now Lets You Buy Some Merch In Dogecoin [The Verge]

Jack Dorsey's Block To Build An Open Bitcoin Mining System [Reuters]   

Steven Ehrlich
Editor 
Forbes CryptoAsset & Blockchain Advisor

Nina Bambysheva
Reporter
Forbes Money & Markets

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