TheBRRR’s Thoughts

GM. Jay Powell and the Federal Reserve all but declared victory over inflation on Wednesday and markets cautiously walked higher.

Merely 2 weeks ago Powell proclaimed it was too early to talk about rate cuts, but has since changed his tone, and the base case from the Fed has 3 interest rate cuts in 2024.

There’s a strong argument that the Fed has successfully pulled off a “soft landing” by reducing the rate of inflation without sending us into a deep recession.

Granted it was the Fed’s policies that created a bulk of the inflation that we’re still living with today, but from a risk asset and markets perspective, it doesn’t matter.

The massive spike in prices we witnessed over the last 2 years is here to stay and the dollar will continue to be devalued and the chase for inflation-beating returns is back as safe havens like bonds become less attractive.

We cover the reaction to Wednesday’s FOMC meeting in the lead story today, but are also covering another story from the Solana ecosystem.

The Solana Foundation, in an effort to go-around Apple and Android’s mobile app/software duopoly, built and launched their own smartphone and operating system.

While initially met with skepticism, the phone has seen a surge in sales thanks to free BONK tokens “airdropped” to every new phone sold.

BONK, a memecoin listed on Coinbase yesterday, has surged to nearly a $2B market cap from under $200M just a few weeks ago. The BONK coins on every phone are worth $900, while you can buy the phone for just $599.

Have a BONKing weekend.

Macro News

Jay Powell's Comments on US Interest Rates - A Brief for 'The BRRR' Newsletter

WHAT HAPPENED:

• Federal Reserve's Dovish Shift: Fed Chair Jay Powell signaled a more dovish stance, indicating a close to the central bank's monetary tightening campaign.

• Rate Cuts on the Horizon: Officials are now contemplating sharper cuts to borrowing costs in 2023, aiming for a soft landing for the economy.

• Market Reaction: Powell's comments sparked a rally in US stocks and government bonds. The yield on the 10-year Treasury dipped below 4% for the first time since August.

WHY IT MATTERS:

• Future Rate Projections: Traders are betting on the Fed starting rate cuts as early as March 2023, with rates potentially ending the year below 4%.

• Labor Market Considerations: The robust job market might keep inflation higher than expected, posing risks to the Fed's strategy.

• Fed's Communication: Powell acknowledged that it's "premature" to declare victory over inflation, but emphasized that the central bank is near the peak rate for this cycle because the effects of the rate hikes are often lagged.

This development reflects the Fed's delicate maneuvering in a still uncertain economic environment, balancing inflation control with economic growth and financial stability.

Financial Times

Crypto News

Solana Saga Phone and BONK Token

WHAT HAPPENED:

• Solana Saga Phone Sold Out: Solana’s crypto-focused smartphone, Saga, sold out in the US, with under 5,000 units remaining for Europe.

• Bonk Token’s Role: The surge in demand was driven by the airdrop of 30 million BONK tokens, a Solana-based meme coin, offered with each Saga phone.

• Price Spike: On December 13, Bonk’s price peaked following announcements of listings on top exchanges like Coinbase and Binance.

• Market Dynamics: The 30 million BONK tokens, at their peak, were worth nearly $900, surpassing the phone's $599 cost.

WHY IT MATTERS:

• Arbitrage Opportunity: Traders saw an opportunity in buying the Saga phone, essentially getting the phone for free due to the high value of the BONK airdrop.

• Market Frenzy: This led to a tenfold surge in Saga sales within 48 hours, a turnaround from previously dimming sales prospects.

• Impact of Meme Coins: Similar to Dogecoin, the rise of the BONK token shows the substantial impact meme coins can have on related markets and products.
  

  Blockonomi

Poll of the Day

The MSFT votes are piling in. Is this voting process secure?

Got feedback? Follow the writer on Twitter @frank_locascio and send a message.

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