Here’s what happened in crypto today
Today in crypto, hotter-than-expected US inflation raised concerns about a larger Federal Reserve interest rate hike in December, Coinbase and Kalshi joined four other firms backing the CFTC in a lawsuit over single-stock perpetual futures, and cybersecurity firm CertiK urged crypto exchanges to impose hard dollar limits on hot-wallet holdings.
Hot US inflation raises odds of half-point Fed hike in December
Crypto industry experts warned on Tuesday that higher-than-expected US inflation could lead to a another Federal Reserve interest rate hike, making borrowing more expensive and potentially discouraging investment in cryptocurrencies.
The US Consumer Price Index (CPI) rose 0.4% month over month in October, above economists’ forecast of 0.3%, according to the Bureau of Labor Statistics - a slower increase than September’s 0.6% rise. Core inflation, which excludes food and energy prices, rose 0.3%, above the expected 0.2%.
Currently, the Federal Reserve holds its benchmark interest rate at 3.75% to 4.00%, after raising it by a quarter-point in September and leaving it unchanged in October.
The report came just a few hours after Federal Reserve Governor Christopher Waller said in London that another core inflation reading of 0.3% or higher could prompt the Fed to consider a larger interest rate hike in December.
“In that case, I believe a 50-basis-point hike in the policy rate should be considered at the December meeting,” Waller said. “Hiking only 25-basis-points would put our credibility at risk, a risk I am not eager to take.”
Coinbase, Kalshi join lawsuit backing CFTC over US stock perp futures
Coinbase, Kalshi and four other companies asked a federal court Monday to accept a brief backing the United States Commodity Futures Trading Commission (CFTC) in a lawsuit over perpetual futures tied to individual US stocks.
According to a proposed amicus brief shared Monday by Coinbase legal representative Molly Abraham, the group also includes Kraken parent Payward, trading companies DRW Holdings and Jump Trading, and crypto investment company Paradigm Operations. The companies argue that stock perpetual futures fall under existing US futures laws.
The filing comes days after a federal judge found that the CFTC likely “exceeded its statutory authority” in allowing single-stock perpetuals to trade as security futures.
The case could determine whether US exchanges can offer retail traders contracts that track individual stocks without expiring.
On Nov. 3, the CFTC announced that single-stock perpetual futures, or stock perps, could begin trading on US-regulated exchanges for the first time.
The Capital Markets Alliance Association (CMAA), a newly formed trade and advocacy group representing traditional financial market participants and whose members include Cboe and Citadel Securities, sued the CFTC last week, challenging the CFTC’s authority to allow the contracts to trade.
Crypto exchanges need dollar caps on hot wallets, CertiK says
Crypto exchanges should impose hard dollar limits on their hot-wallet holdings rather than relying solely on cold-storage ratios to measure security, according to cybersecurity firm CertiK.
The recommendation came as several crypto exchanges recently disclosed how much they held in cold wallets, seeking to reassure customers after the record Binance hack that targeted its hot wallets. Crypto exchange Gate reported that 88.26% of its total assets were in cold storage, while Coinbase said it keeps more than 99% of customer assets offline.
“Cold storage is a useful measure of online exposure, but it is not a standalone security score,” CertiK’s research team told Cointelegraph.
CertiK said crypto exchanges should consider setting hot-wallet caps for each asset and blockchain according to the strictest of three limits: a percentage of customer liabilities, estimated withdrawal needs and an absolute loss ceiling based on the exchange’s financial resources and recovery capabilities.
“Flexibility should support operating liquidity, while hard dollar ceilings and circuit breakers limit potential loss,” they said.