Proprietary Data Insights
Financial Pros Top Cryptocurrency Searches This Week
Inflation Doesn’t Feel Like It’s ‘Stabilizing’
As every news site – financial and otherwise – rushed to report Wednesday morning’s inflation number, a handful used the word stabilizing to describe April’s 8.3% annual increase.
Let’s wrap the bigger picture around that number to illustrate how today’s economic environment looks, feels, and functions in our day-to-day lives.
In April, prices eased meaningfully in only one area – energy.
Specifically, gasoline decreased 6.1% after March’s massive 18.3% pop. However, as the chart shows, April’s dip was short-lived. If you live in California, you probably didn’t even notice lower prices at the pump.
For the record, a gallon of gas hit a record $4.40 on Wednesday.
It doesn’t take a math whiz to conclude if you take away April’s gas price mirage, the overall inflation number would have come in higher than 8.3%.
The Bigger Picture
Amid sky-high inflation, we also have:
Taken together, you’re paying more for just about everything and debt of all types continues to be more expensive to carry.
This doesn’t feel like stabilization. It feels like there’s no cover, as evidenced by the rush to ARMs.
This said, if you’re doing well financially all of this might amount to a rounding error. If you’re less than comfortable or struggling, it’s a big deal.
No matter your personal financial situation, here’s something that’s gotta sting. Scroll with us …
2 Things Scarier Than Inflation
Where to begin?
How about with our proprietary Trackstar data, particularly the top cryptocurrency searches financial advisors conducted over the last 7 days?
Starting with #3, Algorand (ALGO), we can piece together the scary story.
Along with crypto VC Hivemind, Algorand purchased the once popular music streamer Napster this week. Exactly what they’ll do with it remains to be seen. We’ll keep an eye on the situation.
More apropos to today’s chat, Algorand operates like the Visa or Mastercard ecosystems, except it functions on the blockchain and rapidly processes transactions using less energy than Ethereum. Via a recent partnership with Alchemy Pay, you can use Algorand to buy things in the non-blockchain economy.
Cryptocurrency’s Purchasing Power Continues To Crash
Last month in The Juice, we discussed AMC’s (AMC) move to accept more coins as payment. We asked, Will Buying Stuff With Crypto Ever Become A Thing?
Apparently, to some extent, it has.
At least according to AMC.
Consider this Benzinga headline:
Sweet, but here’s the reality.
For all of this talk about the Dollar’s purchasing power – or lack thereof – it’s way worse with crypto. Get a load of the three main coins AMC takes as payment.
Source: Google Finance
Focusing on the #4 from our Trackstar data, DOGE.
Let’s say you put $1,000 into DOGE on November 1st of last year when it traded for $0.2718. As of this chart, your $1,000 investment is worth about $325.
Stablecoin, My Ass
If you’ve dabbled in crypto, you’ve likely heard of stablecoins.
Here’s how Coinbase defines them:
A stablecoin is a digital currency that is pegged to a “stable” reserve asset like the U.S. dollar or gold. Stablecoins are designed to reduce volatility relative to unpegged cryptocurrencies like Bitcoin.
I have always used stablecoins, particularly USDC, as a place to park cash prior to making a trade or investment. I essentially treat USDC the way I do a short-term U.S. Treasury ETF. As a relatively safe place to be in cash. And USDC has worked, maintaining stability at $1.00, given that it is backed by dollar-denominated assets.
Here’s where the term stablecoin gets confusing and downright scary.
We’ll save the story behind TerraUSD’s crash for another day.
In any event, you would not be crazy to see stablecoin attached to TerraUSD and think of it the same way you do USDC or a treasury ETF. Of course, you should read the fine print, which Coinbase displays a short scroll away from the quote:
TerraUSD is a decentralized stablecoin running on Ethereum that attempts to maintain a value of US$1.00. Unlike centralized stablecoins, UST isn’t backed by US dollars in a bank account. Instead, in order to mint 1 TerraUSD, US$1.00 worth of TerraUSD’s reserve asset (LUNA) must be burned.
Simply put, TerraUSD isn’t backed by the US Dollar. Instead, it’s pegged to its underlying coin, LUNA, the #5 Trackstar crypto search over the last week. That steady line at $1.00 could have tricked you into thinking otherwise. If you parked cash in TerraUSD thinking it was stable, you’re in a world of hurt today, as the players behind the project attempt to manipulate the price of LUNA to get TerraUSD back to $1.00.
The Bottom Line: Sometime soon, the US will institute tight regulations around stablecoins. They’re working on it. Hopefully, this will help remove some of the aforementioned murkiness.
Until then – and even then – read the fine print.
As much as we like to think it has arrived, cryptocurrency wades in uncharted territory.
If you’re using it as consumer currency, you’re better off with the old-fashioned USD. If you’re looking for a place to park cash you want to invest in crypto, be careful. It’s easy to get fooled by terms the fledgling industry uses interchangeably across very different products.
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