5 Things

Biden plays down inflation fears, Bitcoin believers out in full force and vaccine push intensifies.

I-word President Joe Biden waded into the inflation debate again last night, expressing confidence that rising prices are temporary and won't translate into “long-term inflation that’s going to get out of hand.” Republicans have criticized Biden following the biggest surge in consumer prices in more than 12 years, while blaming widespread labor shortages on unemployment benefits. Biden said at a CNN town hall event that workers in restaurants and the hospitality sector are seeking better wages and working conditions. Price pressures are also in focus in Europe, where the central bank will unveil its first policy decision since raising the inflation goal to 2% earlier this month.

Bitcoin love Bitcoin steadied at around the $32,000 mark after comments from Elon Musk, Jack Dorsey and Cathie Wood gave a boost to the beleaguered cryptocurrency. At “The B Word” event, Tesla Inc. CEO Musk revealed that his space exploration company SpaceX owns Bitcoin and that he personally has bought Ethereum and Dogecoin. Ark Investment Management LLC’s Wood and Dorsey also gave full-throated endorsements. The digital token has been mired in a slump lately, sliding below the closely-watched $30,000 level earlier this week. Some, like Scott Minerd of Guggenheim Investments, expect things to get worse.

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Virus Joe Biden urged more Americans to get vaccinated, saying that the coronavirus is only raging among those who have not received their shots and that those under 12 years old will be able to get inoculated “soon.” The president has previously lashed out at Facebook Inc. for helping spread disinformation, with the unvaccinated citing a litany of myths to explain their hesitance to get shots. The delta variant now accounts for more than 80% of U.S. cases. China, meanwhile, pushed back against the World Health Organization’s call for another probe into the pandemic's origins that includes examining whether it leaked from a lab, saying there’s no evidence for the theory. Researchers suggest India’s actual Covid death toll could exceed the official tally by millions.

Markets rise Global equities are set for the biggest three-day rally since April as strong earnings outweigh virus pessimism. Overnight, the MSCI Asia Pacific Index rose 0.9% while Japan’s Topix index closed 0.8% higher. In Europe the Stoxx 600 Index had climbed 0.8% by 5:40 a.m. Eastern Time, with travel and leisure shares leading gains. S&P 500 futures pointed to a modest rise at the open, the 10-year Treasury yield was at 1.28%, oil hovered near $70 a barrel and gold slipped.

Coming up... Weekly jobless data is due at 8:30 a.m., with economists predicting a slight drop in both initial and continuing claims. Existing home sales figures for June follow at 10:00 a.m. It's another big day for corporate earnings, with Twitter Inc., Intel Corp., AT&T Inc., American Airlines Group Inc., Snap Inc. and The Blackstone Group Inc. all reporting.

What we've been reading Here's what caught our eye over the last 24 hours.

Debt ceiling debacle threatens fireworks in money market. Tokyo Olympics fires ceremony director over 1998 Holocaust joke. New York now has better Indian food than London. This cult classic buy signal isn't to be trusted. Hamptons home prices surge to a record as pickings get slimmer. Work-from-home future fades in Asia. Western drought has lasted longer than the Dust Bowl. And finally, here’s what Justina's interested in this morning Bitcoin may have bounced back somewhat, but its decline over the months keeps reverberating across crypto markets.

Take decentralized finance. Users are motivated to stake their coins by the juicy yields, which are necessarily falling because of diminished token values and the fact fees are lower when sentiment is weak. For instance, volumes are in decline now, so decentralized exchanges are generating less revenue. Traders are less keen to lever up their crypto bets, so the yields on lending platforms are falling.

It makes sense then that the total value locked in DeFi has dropped to $57 billion from the $89 billion peak in May, shortly before the crash. (The number has already rebounded over the past few hours, possibly as crypto prices also recovered.)

Source: DeFi Pulse Source: DeFi Pulse Or consider some popular crypto trading strategies, like cash and carry, which goes short futures and long spot. That was nearly a no-brainer trade that buoyed many a crypto market-neutral fund. It’s no surprise that as this dried up, some funds have put more money back in cash or reported flat performance.

The lower volumes might also affect market-making strategies, another popular domain of these players.

This all points to an issue the regular writer of this newsletter, Joe Weisenthal, brings up a lot. What needs in the real world does crypto finance? Not a lot currently, which makes its ecosystem quite dependent on fundamentally unpredictable, self-reinforcing hype cycles.

Follow Bloomberg's Justina Lee on Twitter at @justinaknope

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