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Bitcoin reacts to record inflation

Bitcoin reacts to record inflation

The next Gorillaz? Meet Kingship, Universal Music Group’s virtual NFT “band” featuring four Bored Apes. [Image via UMG]

There’s never a dull moment on the blockchain. Here’s what you need to know this week:

Bitcoin sees volatility amid historic inflation data. The crypto network also underwent a major upgrade called “Taproot.” We’ll break it all down.

NFT “virtual bands” are music’s next trend. The music world is having a non-fungible moment.

The week in numbers. The percentage of Americans trading crypto, the price of a U.S. Constitution “first printing”, and other key figures to know.

Bitcoin Update

Amid historic inflation, Bitcoin faces volatility and launches “Taproot” upgrade

Bitcoin is having a moody week. Yesterday, BTC stumbled below $60,000 — less than a week after it notched an all-time high near $69,000 after the U.S. reported its highest inflation numbers in over 30 years. In the days between these price fluctuations, we saw what felt like a month’s worth of headlines, including the SEC rejecting a BTC spot ETF (only futures-based ETFs have been approved so far), a major Bitcoin network upgrade launching, Russia considering mining legislation, and more. So how is all this impacting Bitcoin? Let’s dive in.

  • Crypto markets tend to be volatile — and it’s not always obvious what causes prices to temporarily tumble (or rise). Market watchers who spoke to The Wall Street Journal proposed a variety of theories for yesterday’s dip: some investors may have taken advantage of high prices to secure profits, and some may be seeking more certainty around crypto regulation.   

  • October saw a record 6.2% year-over-year jump in the consumer price index. Trillions of new dollars in federal aid during the pandemic helped Americans buy more goods than ever before, as global supply chains have suffered historic levels of stress and congestion. So what does this have to do with Bitcoin? Bitcoin was designed to resist inflation via a fixed supply — only 21 million BTC will ever exist. However, fears that the Federal Reserve might raise interest rates to stem inflation could have halted BTC’s recent momentum as an “inflation hedge.”

  • Taproot, Bitcoin’s biggest network upgrade since 2017, went live this weekend, adding support for more efficient and private transactions. The update can also potentially power new Bitcoin-based crypto apps and smart contracts, while providing smoother integration with the Lightning Network, which facilitates cheap and near-instant payments. This week the value of BTC locked in Lightning reached a record high above $200 million. 

  • Meanwhile, the Bitcoin network’s total mining power has recovered over 90% from July lows after China’s miner crackdown. North America has replaced China as the world’s leading mining destination, responsible for more than 25% of the world’s BTC mining activity. Meanwhile, Kazakhstan accounts for 18%, and Russia — which is considering legislation that would allow the government to capitalize on the country’s growing hashrate — accounts for 11%.

Why it matters… As inflation fears continue to rise, some analysts believe Bitcoin is supplanting gold as investors’ preferred hedge asset. Over the last year, Bitcoin's price has risen more than 250% while gold has actually lost more than 1%. But it’s important to remember that inflation doesn’t automatically signal “endless gains”  to every BTC trader — and the prospect of higher interest rates has the potential to spook markets of all kinds, including crypto. How will it all shake out? Only time will tell.

Yacht Rock

The rise of Bored Ape-themed “virtual bands”

In less than a year, NFTs have grown from an obscure corner of the crypto universe into a mainstream obsession, driven in no small way by the music biz. At first, the projects tended to be simple, like Kings of Leon’s most recent album being sold as an NFT in March or Shawn Mendes’ digital recreations of personal items like his guitar in May. This fall, more ambitious NFT strategies have emerged — including NFT communities like Bored Ape Yacht Club (BAYC) linking up with industry giant Universal Music Group and mainstream hitmaker Timbaland. Let’s get into it.

  • Universal signed four Bored Ape Yacht Club avatars as part of a Gorillaz-inspired NFT-based metaverse band. What does that even mean? Glad you asked! The world’s biggest record label has partnered with the owner of the four NFTs to launch a new “band” called Kingship. Plans for the group include performances at metaverse events and eventually releasing a line of digital collectibles. 

  • Timbaland, who has produced hits for Jay-Z, Justin Timberlake, and Missy Elliott, announced a separate partnership with Bored Ape owners via his new metaverse-themed production company Ape-In Productions, which is set to release a song by another virtual ape act called TheZoo. Timbaland also released a recent EP as a series of NFT collectibles, in which each element of the song (drum parts, basslines, vocals) is an NFT fans can mix and match to create their own remixes.

  • A key feature of BAYC is that NFT owners receive full commercial rights to their avatars, meaning they can sign their digital friends up for virtual bands, license them to appear in advertising, or rent them out for a range of other purposes — which likely wouldn’t fly with other major NFT projects. (Try licensing your NBA TopShop clip of that Derrick Rose layup to ESPN and see what happens!) The specific Bored Apes in Kingship belong to NFT whale Jimmy “j1mmy” McNelis, an early collector of hundreds of Apes. 

Why it matters... What’s the source of all these Ape-themed acts? BAYC creator Yuga Labs has some serious music-biz muscle in its corner. In October, the NFT project signed with U2 and Madonna manager Guy Oseary to pursue music, TV, film, and other projects. Oseary, who bought an Ape of his own prior to the deal, is arguably the biggest player in artist management — his firm boasts an artist roster that ranges from Britney Spears to the Weeknd. Many saw the move as a sign that NFT communities will be an important part of the music industry’s future. Or as Celine Joshua, founder of Kingship and UMG's Web3-focused record label puts it, “We’re literally inventing what’s possible in real time.”

Numbers to Know

$20 million

Estimated auction price at Sotheby’s for one of thirteen surviving “first printings” of the United States Constitution. A group of strangers quickly organized a DAO called ConstitutionDAO to raise funds (in ETH) to purchase the document with the goal of putting the “Constitution in the hands of The People” by loaning it to a museum. Other plans for the document, should they win? “We’ll NFT-ify, and meme-ify in the way that we do,” promised one ConstitutionDAO member. 

$131,000

Average NFT sale price on November 12, according to The Block — an all-time high. But the news wasn’t all good — the total number of art and collectible NFTs (not including gaming) recorded last week fell to 86,870 — around three times less than in October.

285

Number of S&P 500 companies that cited the term “inflation” during third-quarter earnings calls, well above the five-year average of 137, and the highest overall number since at least 2010.

60 to 120

Number of days until the AMC movie chain plans to accept SHIB as payment for online tickets and concessions, according to the company's CEO. 

16%

Percentage of U.S. adults who say they have “ever invested in, traded, or used” crypto, according to a new survey by the Pew Research Center. Meanwhile, 86% of Americans say they’ve heard at least “a little” about crypto.

TOKEN TRIVIA

Which company launched the first Bitcoin ETF in the U.S.?

A

VanEck

B

Grayscale

C

ProShares

D

Galaxy Digital

Find the answer below.

Trivia Answer

C

ProShares