Consensus Mechanisms

Welcome back everybody. It’s been another exciting week in crypto and we’re pleased to bring you the next edition of The Blockchain Review. With the ongoing macroeconomic uncertainty Bitcoin has gotten closer to making new lows. Some crypto native companies are still swooping around and looking for bargain businesses to strengthen their positions going into the next cycle.

The US based FOMC met again this week to announce a 75bps rate rise and presented a continued hawkish outlook with forecasts that interest rates will continue to rise well into 2023. At the moment economists are predicting another 75bps rise in early November and then 50bps in mid-December. 

These forecasts can and do change though as new data comes in. The FED are particularly interested in inflation and unemployment figures. For inflation the CPI- Consumer Price Index- often grabs the headlines because it’s a basket of goods for personal consumption and the figure represents the changes in cost of living that an average person would experience. 

But then there’s the PPI- Producer Price Index- which is a more volatile figure representing the changes in the costs that producers have to deliver consumer goods and services. Supply side prices fluctuate more and therefore the PPI can be a more sensitive and sometimes more accurate index to base interest rate decisions on. This is because businesses will often absorb input price shocks for a while rather than immediately pass them onto consumers with regular or volatile price changes.

With unemployment data the FED looks at the percentage of people without work. At the moment they actually want this percentage to increase and more people to be unemployed. This would demonstrate business curtailing and an overall decrease in activity and spending in an economy.

During a bear market it’s ripe for acquisitions to take place and the crypto market is no different. There are major players who’ve been better placed to weather the storm and realize that now is an optimum time to acquire less fortunate companies. These could be distressed businesses, like some of the CeFi lenders, or they could just be undervalued businesses which the acquirer seeks to strengthen their core business going into the next cycle.

CNBC reported that FTX, a privately held company, is looking to raise an additional $1B as part of their ongoing acquisition drive. In July they made a deal for the first option to buy CeFi lender BlockFi and were interested in acquiring Bithumb the South Korean CEX. They also made an offer to purchase Voyager but this was so far refused for being too low.

Binance, another CEX behemoth, is also known to be interested in acquiring not only crypto business but also non-crypto business. Earlier in the year CZ announced he was looking at acquiring 1 or 2 businesses in several target sectors with a view to bringing them into the crypto realm. Owning an already established business brings industry expertise and could be a faster route than trying to build one from the ground up.

Let’s see, this is interesting because it could also bring new people to the crypto industry and help advance the next push for mass market adoption!

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