Week of Jan 25, 2022

What to Expect From The Fed’s FOMC Meeting

Market Lessons From A Bloody Monday. The Role Stablecoins Play in a Market Downturn.

💬 Market Commentary

Announcements 📣


Improved Ledn Loans Rates. We’re pleased to announce that starting on February 1st, annual interest on newly opened Ledn Loans will be decreasing to 8.9% from 9.5%.


You can take advantage of these improved terms today by accessing some dollar liquidity with a Dollar Loan, or you can increase your BTC holdings with a B2X Loan.


Ledn Savings Rates. As of February 1st, 2022, the Tier 1 interest rate for BTC Savings Accounts will remain 6.25% APY for balances up to 0.5 BTC, and the Tier 2 interest rate will remain at 2.25% APY for any balance over 0.5 BTC.


For USDC Savings Accounts, the interest rate will decrease to 9.25% APY on your full USDC balance (no tiers).


USDC Withdrawal Fees. Due to the steady increase in gas fees on the Ethereum network, we will be increasing our withdrawal fees of USDC from 10 USDC to 35 USDC. This change will take place on Feb 1, 2022 at 12 AM EST. Any withdrawal requests made prior to that time will be at the 10 USDC rate.


We will continue to update our withdrawal fees as needed to ensure they reflect the average cost of processing transactions on the network. 

BTC withdrawal fees remain unchanged.


It was another bloody Monday for markets - with Bitcoin reaching a new low for the year below $33,000 - and the broader markets seeing red across the board. 

Over the last 7 weeks Bitcoin has dropped by more than -35%, which has left many wondering how much lower we can go.

While no one has a crystal ball, including ourselves, we can try to find clues from market indicators. As bitcoin has often taught us, no trend lasts forever, and the current downtrend should be no different.

First up, we must recognize that all markets are down. No single asset lives in isolation, and when market conditions change suddenly, markets tend to get more correlated. 

Case in point - bitcoin’s 1-month correlation with the S&P 500 and with the Nasdaq 100 is near record levels. 

In the next section we’ll look at historical drawdowns on traditional equity markets, and how that could impact bitcoin in the future. But suffice to say that the S&P 500 could drop another 10% from where it currently stands if things got really bad. 

Looking at bitcoin market indicators, we see some interesting signals amongst all of the red. 

For one, we see that more than $2 Billion in futures open interest have been wiped out over the last week. While there is still $13.5 Billion in open interest, this is relatively close to the $10 Billion mark, where we dropped to in the middle of 2021. This could still introduce volatility going forward. 

Second, we continue to see lackluster volumes in bitcoin spot markets. For context, May of last year saw a much higher spot volume traded. This could be interpreted several ways. For one, most of the selling pressure is coming from smaller investors. The flip side of that is that we have not seen larger investors step in and absorb the selling pressure. While relatively small, spot volumes have been starting to grow over the last few days - a sign that larger investors could be starting to step in opportunistically. 

For clues as to where institutions might be willing to step in next, an interesting psychological indicator will be Microstrategy’s average purchase price. That currently stands at $29,861 as of December 1st, 2021. 

Coincidentally, the “Microstrategy” support line is very close to the previous lows that were reached during the summer of 2021. 

If pressure continues to mount on markets, we could see bitcoin try to test these levels. 

Short interest has also continued to build, but it has not even surpassed the highs made in November of 2021. 

There was a very interesting candle at 11:00 UTC on Monday at the Bitstamp exchange. 

As Bitcoin was approaching the lows of the session, there was a knee jerk market-buy transaction that elevated the price to $38,200 for a few minutes. This has all the makings of a short-covering rally that turned into a brief short-squeeze. 

The last 2 charts could be clues that short investors are happy taking profits at these levels and don’t seem to be doubling down on more downside.  

Looking at the options flow for Monday, we continue to see a defensive flow with more calls being bought than sold, and more puts being bought than sold. 

Bitcoin investors could be bracing themselves for more potential downside pressure - which could be coming from macro forces, especially if the Fed surprises with a more aggressive stance.

Markets staged a very impressive turnaround on Monday. However, it may be a bit premature to say we are out of the woods. 

While the Fed’s _current_ plans look to be priced in, a surprise could cause a continuation of the risk-off trend. 

As we covered above, even if fundamentals look great, when investors go into “risk-off” mode, the correlation between asset classes rises, and most risk assets come under pressure.

More on this in our next section.

S&P 500

U.S. equity markets have come under tremendous pressure over the last 2 weeks as markets continue to digest the Fed’s new posture.

The S&P 500 has dropped more than 12% over the last 14 days. 

To put it in perspective, the total market capitalization of S&P 500 companies represented over $40 Trillion dollars by the end of 2021. 

The recent 12% drop represents about $4 trillion dollars in value destroyed.

The Coronavirus Relief Act passed in March 2020 was for a total of $2.2 Trillion. Food for thought.

The markets are trying to send a message to the Fed as it goes into a meeting today to discuss how aggressive they should be when raising rates.

The Fed has already mentioned that they are prepared to raise interest rates 3 times this year - and are predicted to start doing so in March. 

If everything is going according to plan, the Fed should be almost done unwinding its bond purchase program, and getting ready to raise rates in their next meeting (March). What could spook investors further is:

  • If they have accelerated their plans to taper ahead of schedule
  • If they announce that they will actively try to reduce their balance sheet (go from purchasing bonds in the open market, to selling bonds in the open market)
  • If they accelerate the speed of rate hikes, or increase the number of rate hikes

There are a plethora of earnings this week, including Apple, Microsoft and Tesla, but those will all take second stage to the Fed.

To highlight how earnings are taking second stage - more than 74% of S&P 500 companies that have reported results so far have topped Wall Street’s earnings expectations, according to FactSet. 

The status quo will likely be for equity markets to remain under pressure until the Fed turns the tide.

An optimistic scenario for markets could be that they have “priced in” the Fed’s known plans. Barring any changes, unless the Fed gets even more aggressive, markets could find some relief from here. 

The ArkInvest Innovation fund, which has been the bellwether for the market turn back in November, saw its highest volume of traded units ever. As we see from the chart, when volume increases exponentially, it has often been followed by a short-to-medium term reversal of the trend.

More details on the Fed meeting and earnings for the week in our What’s Ahead section.


Compared to equities and crypto markets, gold came off strong during last week, closing up by ~1% at $1834/oz, while everything else sold off. The bullion is now looking to print a third consecutive week of gains. 

On the same note, SPDR Gold shares, the biggest gold-backed ETF, recorded its biggest inflow in dollar terms, worth $1.63 billion, since its listing in 2004. Another sign that the yellow metal managed to absorb some of the risk-off sentiment coming from other major asset classes.

As a result of the recent price moves, we saw the Gold-to-S&P 500 ratio breakout from a long term downtrend. 

The chart above, courtesy of Crescat Capital LLC shows how the trendline has been broken. It shows that gold has held its footing during the recent downturn. 

While some investors were poking fun at gold for being slow during “fast times”, many are finding comfort in its stability during times like these.


The DeFi index dropped a whopping -31% last week, with  Ether dropping over -24% as well. The entire sector has remained under pressure along with most markets. 

Looking at price performance since November, we see bitcoin has outperformed both Ethereum and the DeFi index. This makes sense if you visualize them on a risk spectrum. Further exaplmplying the risk-off posture from investors. 

Whether we like it or not, a large part of the fuel behind asset prices is “easy money” - whether it is by way of direct stimulus cheques, or access to cheap financing (like home refinancing at near 0% rates). As the markets turn and those rates trickle higher - the flow of new money to the markets could be constrained. This is, in fact, what the Fed wants to accomplish.

Having said all of the above, history has taught us that there is always a reason to keep the easy money party going. In democratic countries, this tends to be connected with electoral cycles. We just so happen to have an election in the U.S. in November of this year. 

So, although we have a hawkish Fed _now_ , that is not to say the Fed will remain hawkish come the summer, as politicians set out to campaign.

There is a side of crypto that shines brightest when most other crypto assets are in turmoil - stablecoins. 

According to data from The Block, the aggregate market capitalization of stablecoins has increased by a whopping $4.77 Billion since December 21st, 2021 - to over $155 Billion.

It makes sense, as investors that cash out from volatile tokens look to wait for the next opportunity while they earn a great rate.

Look for this trend to continue and accelerate into 2022. 


The mining industry continued adding to the positive momentum that’s been building since the start of 2022. Two well-known mining companies made headlines this week.

North America’s largest Bitcoin miner, Core Scientific Inc. started trading on the Nasdaq, with ticker $CORZ, through an estimated $4.3 billion merger with Power & Digital Infrastructure Acquisition Corp; ticket $XPDI.

The Texas-based company assured it is the largest in the USA in terms of processing power as its combined mining capacity of 6.6 exahash at the end of last year significantly surpassed that of its rivals. In comparison, Marathon Digital Holdings had a 3.5 exahash in December 2021, while Riot Blockchain was third with 3.1 exahash.

On another positive note, Hut8 Mining announced it acquired 5 new data centers across Canada totaling 4.1 MW in capacity.

With this acquisition, the company would be able to power ~1,135 additional Antminer S19s, adding around 102.2 PH/s to the network’s hashrate.

Although these numbers are shy, compared to the ~$900 million that Marathon Digital spent to acquire 78,000 new Antminer S19s, it is an overall development that adds up to the continuing trend of North-American Bitcoin-mining-industry expansion.

We also wanted to highlight that Bitcoin's mining difficulty reached an all-time high on January 21st, trailing up 9.1% during last’s adjustment. Bitcoin continues growing stronger under the hood.

Lastly, to sum up this week’s Mining section, we wanted to point out that based on the Bitcoin Mining Council's Q4 report, 58.5% of the energy consumed by the Bitcoin network worldwide comes from renewable energy.

Contrary to the “Bitcoin produces too much e-waste” idea, this means that no country or industry in the world has a better carbon footprint than Bitcoin. 

What's Ahead

We have a very busy week ahead of us with an FOMC meeting and a corporate slew of earnings including the biggest companies by market capitalization. 


9.00 AM EST -  S&P Case-Shiller national home price index (year-over-year change). December’s read was +19.1%. All signs point to a scorching hot housing market still. 

U.S. Federal Open Market Committee Meeting starts. 


9.00 AM EST - Intel & Tesla report earnings

10.00 AM EST - New Home sales in the U.S.

2.00 PM EST - FOMC Decision

2.30 PM EST - Fed Chairman Jerome Powell press conference


8.30 AM EST - U.S. Gross Domestic Product. Analyst predictions are for +5.8% growth in Q4 2021.

9.00 AM EST - Earnings reports from Apple, Visa, Mastercard and McDonalds.

10.00 AM EST - Pending Homes sales in the U.S.


8.30 AM EST - Personal Consumption Expenditures month-to-month change. Expectations are for an increase of +0.6% - which translates to an annualized rate of +7.2%. This is in line with headline inflation. This indicator is closely followed by Fed officials. The market could react to this number as it does to the CPI data.

It's a big week coming up, and as always, we'll keep you posted on any relevant news throughout the week right here and from our Twitter account.


This article is intended for general information and discussion purposes only, it is not an offer, inducement or solicitation of any kind, and is not to be relied upon as constituting legal, financial, investment, tax or other professional advice. This article is not directed to, and the information contained herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to law or regulation or prohibited by any reason whatsoever or that would subject Ledn and/or its affiliates to any registration or licensing requirement. This article is expressly not for distribution or dissemination in, and no services are being marketed or offered to residents of, the European Union, the United Kingdom or the United States of America. A professional advisor should be consulted regarding your specific situation. Digital assets are highly volatile and risky, are not legal tender, and are not backed by the government. The information contained in this publication has been obtained from sources that we believe to be reliable, however we do not represent or warrant that such information is accurate or complete. Past performance and forecasts are not a reliable indicator of future performance. Any opinions or estimates expressed herein are subject to change without notice. We expressly disclaim all liability and all warranties of accuracy, completeness, merchantability or fitness for a particular purpose with respect to this article/communication. For full legal terms and conditions visit https://ledn.io/legal

About the author

Mauricio Di Bartolomeo

Mauricio is the co-founder and Chief Strategy Officer of Ledn.io. He grew up in Venezuela where he and his family learned about Bitcoin. Now based in Canada, Mauricio holds HBA and MBA degrees from the Richard Ivey School of Business in London, Ontario in Canada.