Decentral Block Post

Bitcoin (BTC) has rebounded by 20% to almost $22,500 since Sep. 7. But bull trap risks are abound in the long run as Elon Musk and Cathie Wood sound an alarm over a potential deflation crisis.

Cathie Wood: "Deflation in the pipeline"

The Tesla CEO tweeted over the weekend that a major Federal Reserve interest rate hike could increase the possibility of deflation. In other words, Musk suggests that the demand for goods and services will fall in the United States against rising unemployment.

Rate hikes have been typically bad for Bitcoin this year. In context, the period of the Fed raising its benchmark rates from near zero in March 2022 to 2.25%-2.50% in August 2022 has coincided with BTC price declining over 50%.

To this point, the labor sector has been very resilient. Nonetheless, the latest Bureau of Labor Statistics report shows that the jobless rate has risen to 3.7% from 3.5% in August. Even Alphabet (Google) warned that they could turn to layoffs soon to stay 20% more efficient.

But Fed Chairman Jerome Powell has asserted that the central bank could hike rates further to bring inflation down to their preferred target of 2%.

Bitcoin (BTC) starts a pivotal week on a firm footing as bulls succeed in wiping out weeks of losses.

After closing the latest weekly candle at $21,800, its highest since mid-August, BTC/USD is back on the radar as a long bet.

The end to an extended period of downside interspersed with sideways price action now appears firmly at an end, with volatility expected to form a major theme in the coming days.

In fact, few weeks in Bitcoin’s history have been as hectic as this one is likely to be.

In addition to the Ethereum Merge on Sept. 15, the United States inflation trend will come under scrutiny on Sept. 13 with the release of August Consumer Price Index (CPI) data. The recipe for unpredictability is there.

Bitcoin (BTC) starts a pivotal week on a firm footing as bulls succeed in wiping out weeks of losses.

After closing the latest weekly candle at $21,800, its highest since mid-August, BTC/USD is back on the radar as a long bet.

The end to an extended period of downside interspersed with sideways price action now appears firmly at an end, with volatility expected to form a major theme in the coming days.

In fact, few weeks in Bitcoin’s history have been as hectic as this one is likely to be.

In addition to the Ethereum Merge on Sept. 15, the United States inflation trend will come under scrutiny on Sept. 13 with the release of August Consumer Price Index (CPI) data. The recipe for unpredictability is there.

As the upcoming Terra Classic (LUNC) burning mechanism gained more hype, some crypto exchanges thought it would be a good idea to express their support. However, the crypto community quickly responded, calling out the exchanges for what some believe to be public relations stunts. 

On Sept. 1, Terra community member Edward Kim submitted a proposal to implement a 1.2% tax burn for every on-chain LUNC transaction in an effort to revive the crypto. The transaction tax will be sent to a dead address, removing part of the circulating supply permanently. Following the proposal, the LUNC token soared by 250%, as the hype surrounding the project showed signs of life.

Because of this, crypto exchanges KuCoin, Gate.io and MEXC Global decided to express their support for the token-burning efforts of the Terra community. However, some were unhappy with the announcements, calling out the exchanges. 

After posting an announcement to express that the exchange is supporting the token burn, KuCoin was called out by the pseudonymous Terra researcher FatMan, asking what they are doing to support it, given that the tax burn is implemented on-chain. The researcher described the announcement as a “nothingburger PR post” and suggested taxing actual trades instead. 

In response to the criticism, Johnny Lyu, the CEO of KuCoin exchange, told Cointelegraph that their trading platform is neutral and people-focused. "We always respect the communities’ choice and are happy to help them in the way we can. The same on the tax proposal,” Lyu added. 

While on-chain insurance has been around since 2017, only a measly 1% of all crypto investments are actually covered by insurance, meaning the industry remains a “sleeping giant,” according to a crypto insurance executive.

Speaking to Cointelegraph, Dan Thomson, the CMO of decentralized cover protocol InsurAce said there is a massive disparity between the total value locked (TVL) in crypto and decentralized finance (DeFi) protocols and the percentage of that TVL with insurance coverage:

“DeFi insurance is a sleeping giant. With less than 1% of all crypto covered and less than 3% of DeFi, there’s a huge market opportunity still to be realized.”

Though plenty of investment has poured into smart contract security audits, on-chain insurance serves as a viable solution for digital asset protection — such as when a smart contract is exploited or the frontend of a Web3 protocol is compromised.

The collapse of Terra (LUNA) and the resulting depeg of Terra USD provides a textbook example of how on-chain insurance can protect investors, notes Thompson, adding that InsurAce “paid out $11.7 million to 155 affected UST victims.”