All eyes turn to the Federal Reserve this week in the United States to see whether interest rates will get hiked or remain flat following fresh employment data and inflation numbers. Crypto markets reacted to a pair of significant lawsuits from the SEC that were leveled at the world's top two crypto exchanges, and altcoin prices appeared to be most severely impacted by the news.
The United States’ central bank may take a page from Canadian and Australian central banks in raising interest rates for another month. If the Federal Reserve does hike rates in its June meeting, the Fed would be taking another step in its yearlong quest of “quantitative tightening,” or using incremental hikes to the borrowing rate for U.S. lenders to help decrease inflation numbers.
To make things more interesting (or confusing, depending on whom you ask), there are still plenty of market watchers who remain confident that rate hikes will be paused at this week's meeting. Stronger-than-expected conditions in the labor market came out of the May jobs report while inflation has cooled off – but only slightly. Inflation is still well above the 2% target the Fed has set for its goal.
The fight against ‘flation
The altcoin world was left reeling in the aftermath of dual enforcement actions brought by the SEC to the world’s top two crypto exchanges. The lawsuits brought by the SEC against both Binance and Coinbase take aim at the selling of unregistered securities in the form of altcoins. What are altcoins? There isn't really a strict definition, but many in the crypto community might say an altcoin is anything that offers an alternative to the biggest cryptocurrencies like bitcoin.
The latest legal actions from the SEC didn’t deeply impact bitcoin (BTC) prices, as those remained flat after rebounding from the initial shockwave last Monday.
It’s too early to comment on how things will play out for the mega exchanges that are currently in the crosshairs of financial regulators, but it's never too early to champion the practice of self-custody when it comes to crypto. Exchanges come and go but being in control of your assets (remember: not your keys, not your crypto) is a way to remain one step ahead of murky regulatory conditions in the United States.
Crypto catch up: Coins vs. tokens
Besides labeling a handful of crypto tokens as securities, staking is a big focus of the recent lawsuits from the SEC. Staking pays a reward (typically in the form of more crypto) to those investors who put their own crypto assets up as proof that they are invested in the ecosystem. People who stake enough coins or tokens to prove their commitment to the blockchain’s potential can serve as validators on that network, and they essentially sign off on new data being added to the blockchain.
Proof of stake has made headway as the alternative to energy-intensive proof of work (think: supercomputers racing against each other to complete complex equations) that powers the world’s original cryptocurrency, aka bitcoin.
Proof of stake vs. proof of work, what’s the difference?
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