Fed Failed - Chung's Weekly Digest  (6/12)

Fed Failed to Contain Inflation

The US’s annual inflation rate rose to 8.6%, the highest rate since December 1981, causing a market-wide sell-off as high energy costs continue to accelerate the rate of inflation. The Federal Reserve (Fed), despite taking numerous measures, was unable to contain inflation. 

The S&P 500 and Nasdaq dropped 2.9% and 3.5% respectively after the Bureau of Labor Statistics released the Consumer Price Index (CPI) on Friday. Bitcoin ($BTC) and the wider crypto market took a hit. Bitcoin is currently trading at $27,532. 

Ethereum ($ ETH ) has also suffered a heavy blow after falling to a 15-month low below the crucial $1,600 mark. This came just days after Ethereum completed a test merge on the Ropsten network. 

Selling momentum remains strong as the broader market retreats from risk assets until the US’s monetary policy stabilizes. 

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Weekly Recap

• CrowFi’s lead developer stole funds in $CROW tokens. 
• BNB Chain teased a roadmap for 2022. 
• Binance African Blockchain Tour kickstarts in Nigeria. 
• Cronos announces the launch of Cronos Accelerator Program.
• Binance.Us announces staking for customers. 
• Crypto.com and the Economist released Annual Crypto Report. 
• PancakeSwap receives strategic investment from Binance Labs. 
• CUBE joins the BAS ecosystem.
• Baby Doge Coin and CryptoBlades celebrate 1-year anniversary.  
• Binance makes Web3 headway into the Philippines. 
• Baby Doge opens its doors to community proposals. 
• BiSwap NFT Marketplace V2 goes live. 
• Ethereum successfully tested the Marge on Ropsten’s testnet.
• Gitcoin starts its grant campaign with massive backing. 
• CronosVerse IDO coming to Crodex. 

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Market Sentiment

Many investors are swapping their investments for risk-off assets. Bitcoin and other crypto-assets are deemed volatile assets. The bearish sentiment in the crypto market will likely continue unless the following takes place:

• The end of the Ukraine-Russia crisis
• The US’s monetary policy stabilizes 
• A comprehensive crypto regulatory framework is introduced

Unless Bitcoin’s price pushes past the 200-day moving average, there is no reversal in sight. This bearish phase will likely continue for the next few months until the Fed manages to reign in inflation. Inflation is a real threat to the US economy and the sanction on Russia is causing a deepening energy crisis. 

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Coins to Watch

• Optimism ($OP) - Optimism is one of the anticipated layer-2 solutions after Arbitrum. 
• $OP’s price tanked after its airdrop and the recent exploitation.
• Optimism will tap into the liquidity of Ethereum’s ecosystem. 

• Ethereum ($ETH) - Ethereum’s recent sharp dip could be a result of investors taking a backseat as Ethereum heads into the Merge. 
• This is the perfect opportunity to implement a dollar-cost averaging (DCA) strategy. 
• Ethereum will continue to dominate the smart contract platform because of its first mover’s advantage. 
• Solana ($SOL) continues to dip, bringing this crypto asset into oversold territory. 
• $SOL will likely recover in the coming months as the sheer size of its ecosystem will drive the demand for its native coin. 
• Solana’s backers have remained steadfast with the layer-1 platform even after the recent outages. 
• Solana has one of the best risk/reward ratios for the top-10 crypto asset by market cap.

Navigating the Bear Market

Most market participants that did not cash out will likely see a significant drop in their portfolio size. There is no indication that the market uncertainties will end soon. Therefore, a few steps can be taken to mitigate risks. 

• Avoid leverage trading 
• Implement a dollar-cost averaging (DCA) strategy
• Choose institution-backed projects with a sizeable market cap
• Avoid low-capped altcoins
• Choose projects with a healthy community engagement and a roadmap
• Identify value builders in the ecosystem
• Avoid putting all eggs in a single basket, diversify your portfolio.

There might be a further downside, but it would be impossible to catch the absolute bottom. Low capped altcoins that can give exponential gains should be a secondary priority. Risk management is the key to building a healthy portfolio. 

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