A New Rally
The crypto market surged after the U.S. Federal Reserve slashed interest rates by 50 basis points on Wednesday. Bitcoin spiked 7% on Thursday and Friday morning, surpassing $64,000. Ether followed with a 9% rise, while Solana outpaced them both, soaring 12%.
There were fears that a 50 bps rate cut could lead to apprehension in the market, as it could suggest that the Fed was more worried about the state of the economy than previously thought. However, the positive reaction to the news across asset classes suggests optimism that the Fed can achieve its long-awaited soft landing without tipping the economy into recession.
Before the rate announcement at 2 p.m. EST on Wednesday, an interesting dichotomy appeared between trader expectations. The CME FedWatch tool, which gauges sentiment from Fed Fund Futures pricing data, indicated a 55% likelihood of a 50 bps cut, while Polymarket, a prediction betting website that has become crypto’s breakout hit in 2024, estimated the probability at just 38%. In this instance, CME FedWatch proved to be more accurate.
The Trumps Have Gone Full Crypto With World Liberty Financial
On Monday, Donald Trump unveiled World Liberty Financial (WLFI), a crypto venture spearheaded by his sons, Donald Jr. and Eric.
“We have to be at the top, no matter what we do. Crypto is one of those things we have to do, whether we like it or not,” declared Trump, streaming from Mar-a-Lago, his country club in Palm Beach, Florida. “If we don’t do it, China is going to do it. China is doing it anyway,” he added, apparently unaware that cryptocurrencies have been illegal in China since 2021.
While details were sparse, WLFI is reportedly built on DeFi lending giant Aave and involves stablecoins—tokens pegged to traditional currencies like the U.S. dollar. WLFI plans to launch a governance token, allowing holders voting rights akin to stockholders. The token allocation includes 63% for public sale, 17% for user rewards and 20% reserved for “team compensation,” covering advisors, hires and, of course, the Trump family.
Incumbents in the DeFi industry are cautiously optimistic about the prospect of the Trump family’s arrival; at once glad of the publicity and wary of the reputational damage World Liberty Financial could cause if it were to fall on its face, or if a technical snafu were to result in financial losses.
“I welcome any effort to bring DeFi into the mainstream,” says Brad Harrison, CEO of Venus Protocol. “But like the autopilot in a Tesla, DeFi may give the appearance of something that’s simple, but the inner workings are complex. Without a solid grasp of its nuances in the hands of seasoned technologists and financial engineers, a new platform risks being more of a branding exercise than a substantive and safe contribution to the space.”
Irrespective of the risk in placing trust in a crypto platform yet to be battle tested, industry enthusiasts are likely to patronize World Liberty Financial if only to signal support for Trump’s political endeavors. “We are definitely dealing with crypto as a right-wing Republican commodity now,” says Jacob Silverman, coauthor of Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud. “The industry is so aligned with the Republican party, and they are the biggest donors of any industry this cycle.”
In the spirit of various British politicians who have retired into crypto positions, World Liberty Financial could represent an attempt by Trump to hedge against a loss in the upcoming election—to set up for himself a fallback gig.
“Maybe the raucous reception at the crypto conference in Nashville has given him an impression this is the world he wants to be in, because they love him and he can make money,” says Silverman. “For all his faults, he does understand the crowd.”
Louisiana Breaks Ground On Crypto Payments
Louisiana has become the first U.S. state to accept cryptocurrency for government services. The state now allows payments in bitcoin, bitcoin lightning and USDC,with the first transaction processed on September 17 by the Department of Wildlife and Fisheries.
In partnership with Bead Pay, a crypto payment processor, Louisiana converts these digital payments into U.S. dollars before they hit state accounts. This move aligns with a broader wave of crypto policy initiatives sweeping the U.S., where 26 states introduced more than 80 crypto-related bills in January 2024 alone, following the SEC’s approval of several Bitcoin ETFs.
