With the decline in cryptocurrency markets plateauing in the last few days, many are wondering if this is a brief respite or the start of a crypto turnaround. We've got this week top stories to help you understand what way the market trending.

Inflation Still Key to Crypto Markets

The acceleration of global inflation has silenced many explanations of a short, pandemic-related spike to inflation. The Reserve Bank of Australia (RBA) is having an important meeting on Tuesday, February 1 regarding monetary policy decisions, followed by RBA Governor, Philip Lowe, discussing their approach to inflation on Wednesday.

Australia inflation currently sits at 3.5%, which sits outside of the RBA medium-term target of 2-3%. In the United States, inflation rose to 7%, which is the highest since 1982.

While Australia numbers look comforting compared to the US, we live in a global market and the US narrative of out-of-control inflation will influence Australia and other countries.

The US Federal Reserve are scheduled to next meet in March. However, the outcome of that meeting is already known. Chair of the Federal Reserve, Jerome Powell, released a statement last week that the committee is minded to raise the federal funds rate at the March meeting.

It likely that much of this news on inflation is priced into the markets, which explains the heavy losses to equities and cryptocurrencies over the last few weeks. However, analysts are watching the upcoming meetings of these central banks carefully. Any unexpected announcements may cause another dive.

Government Issued CryptoMoving on to a longer-term news story, the Federal Reserve recently released a highly anticipated report on a government-issued digital currency. The report is a high-level exploration of the implications of, and options for, the US government issuing a Central Bank Digital Currency (CBDC). A CBDC would function using the same technology as a cryptocurrency but would be backed by the central bank.

The report found several benefits to a move to a government digital currency, including increased transferability of value across institutions and efficiency of payments. However, the report did note that any CBDC would need to be designed to combat crime and therefore require verification of users, a key differentiator with most current cryptocurrencies.

It's unlikely a coincidence that this week the US Treasury Department released its Semiannual Agenda of Regulations that proposes amendments to regulations to ensure cryptocurrency wallets require verified identities of its users.

The agenda does not prescribe regulatory changes, but merely signals priorities of the Treasury Department for the next six months. Nevertheless, the combination of the Treasury priorities and the Federal Reserve report illustrates a clear picture of what the future of cryptocurrencies may look like, and it looking a lot more regulated than the market today.

Analysts are unsure if the agenda and report have contributed to the recent downward trend of cryptocurrencies. The prospect of mainstream, government-backed digital currencies is a major hit to the potential use-case of today dominant cryptocurrencies.

While some countries, notoriously El Salvador, have chosen to make Bitcoin legal tender, many more countries like the US, China, and Sweden are considering adopting their own CBDCs in response. Each country maintains that their own CBDC offers all the benefits of control provided by current currencies, while also creating efficiencies by removing paper currency. If the US (and other countries) continue to trend in the direction of CBDCs then the market upside of a global economy run on decentralised crypto is unlikely to be realised.

Upcoming Initial Coin Offerings

An initial coin offering (ICO) is the cryptocurrency equivalent to an initial public offering (IPO). During an ICO, cryptocurrency projects will raise interest in their project and sell an initial allocation of coins to investors to raise funds.

Here a list of the latest ICOs that are about to drop:

CoinICO End DateCardashift1 Feb 2022Adadao2 Feb 2022Etna Metabolism9 Feb 2022Legion Network18 Feb 2022

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