CFTC Sues Binance, Fed Balance Sheet Grows

The week opened up with some mean-reversion in asset prices, as The Fed revealed that it added $95B to its balance sheet last week - that’s on top of the $300B it had added since the banking crisis began. The brrr continues - even as The Fed raises interest rates. We run on the treadmill while we eat donuts.

Banks rose modestly on Monday, while risk assets from tech to crypto fell. Crypto was further hampered by the announcement of a CFTC lawsuit against Binance. While the accusations against Binance do paint a grim picture of Binance’s compliance history, the CTFC did refer to Bitcoin, Ether and Litecoin as “Commodities” - a much friendlier classification than the dreaded “Security” designation the SEC alleges.

Our view is that we’re in the eye of the banking storm, and that the fears will kick back up shortly. It remains to be seen if crypto continues to show strength in the face of bank weakness, but we HODL.

One stock that shows no quit in the face of broad uncertainty is Nvidia - a stock we own personally and for the newsletter’s portfolio. We’ve chosen to highlight an article that details their upside in the ongoing AI revolution today.

Here’s what we brrr’d today:

• CFTC Sues Binance For Allowing US Customers to Trade Futures

• Fed Adds $94B to its Balance Sheet

• NVIDIA Looks Like Sound Long Term Bet

CFTC Goes After Binance

• The US Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binance, the world's largest cryptocurrency exchange, and its CEO, Changpeng Zhao, for allegedly violating trading and derivatives rules and offering illegal off-exchange commodity options.

• The complaint alleges that Binance assisted US clients in evading compliance controls and instructed customers to obscure their location using virtual private networks (VPNs), directing important customers to set up shell companies in locations to avoid restrictions.

• The lawsuit is part of a coordinated crackdown by the US government and regulators against the crypto industry, and comes after Coinbase was served a Wells Notice from the SEC.

• The CFTC's stance on ETH as a commodity is not new, but the SEC's Gary Gensler recently caused a stir by commenting on staking coins and their potential classification as securities.

• Bitcoin and the entire crypto space tumbled to two-week lows

  Zerohedge

Fed Adds $94B To Balance Sheet

• The Federal Reserve has added over $94 billion to its balance sheet, and it has loaned banks nearly $400 billion in money created out of thin air in just two weeks, which has created inflation while pretending to fight inflation.

• The culprit? The new Bank Term Funding Program (BTFP) that offers loans of up to one year in length to banks pledging US Treasuries and mortgage-backed securities as collateral. Most of the balance sheet expansion came from new loans added to the Fed’s balance sheet.

• Banks can access capital based on their devalued bond holdings without selling their Treasuries at a big loss, providing stability for both the banks and the bond markets.

• The Fed is trying to maintain the illusion of an inflation fight as it simultaneously attempts to fix the banking system its inflation fight broke. However, even if they manage to thread this needle, something else will break in the economy or the financial system.

  SchiffGold

NVIDIA Looking Strong for AI Wave

• Chatbots like ChatGPT and Bard are generating excitement in the AI space, but investors should remember that the chips that power AI are primarily made by Nvidia.

• Nvidia's Q4 earnings beat analysts' estimates, indicating that the worst may be over for the company.

• Nvidia's data-center revenue, which includes cloud computing, data centers, and AI applications, grew 11%, while gaming revenue slumped 46%.

• The company announced a broad partnership with leading cloud service providers to offer AI-as-a-service, giving businesses direct access to Nvidia's AI platform.

• Regardless of which chatbot wins the battle for AI dominance, Nvidia will be the ultimate winner as the excitement around AI translates to increased demand for GPUs that make it possible.

  Motley Fool

AI ART OF THE DAY

Prepare your money bazookas

What We Own

$BTC, $ETH, $NVDA, $AAPL, $COIN, $XOM, $TSLA, $MSFT, $AMZN

Bitcoin and Nvidia have been the top two performers since we launched the newsletter this month.

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The BRRR is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.