The Week in Business: Crypto’s ‘Death Spiral’
What’s new? (8-14 May)
Shaken Confidence in Crypto Markets
In what some are calling a “death spiral”, the value of a number of digital currencies plunged in the past week, shaking investor confidence in the crypto markets. The implosion was particularly upsetting for TerraUSD, or UST, which is called a stablecoin, meaning it’s pegged to a stable asset and its price shouldn’t fluctuate. But it fluctuated: A big selloff in a sister cryptocurrency sent UST to a low of 11 cents on Friday as Luna, a token closely tied to UST, cratered to $0. Bitcoin fell along with the Nasdaq, a benchmark weighted by tech stocks, making an investment in cryptocurrency just as risky as any other tech stock. the The crash makes investors realize an unpleasant reality: an asset they hoped to transform has not delivered on its promises.
Musk halts his Twitter takeover
Elon Musk said he was putting his $44 billion bid to buy Twitter ‘on hold’ as he seeks more details on the share of spam and fake accounts on the platform, which Twitter estimated at around 5%. Mr Musk made the announcement in an early morning tweet on Friday, followed by another saying he was “still committed” to the deal. While trying to discern the mercurial billionaire’s motives may be futile, Mr. Musk may be deploying a tactic to drive down the price of the acquisition or considering scrapping the deal altogether. The latter would be costly: Mr. Musk’s deal with Twitter includes a $1 billion break fee as well as a clause that could force Mr. Musk to pay for the deal if he still has the funding. His tweets came a day after Twitter’s chief executive fired two top executives, froze most new hires and said he was cutting spending. Earlier in the week, Mr. Musk said he would allow former President Donald J. Trump to join the platform.
Prices continue to rise
Annual inflation slowed in April for the first time in months, but the consumer price index, which measures changes in the prices of consumer goods and services, still rose 8.3%. That number is uncomfortably high for households that have struggled for months with rising prices for basic necessities like food, fuel and shelter, and it’s bad news for the White House and the Federal Reserve, which trying to stabilize the economy. The Fed may have been particularly concerned that core inflation — which excludes the cost of groceries and fuel — rose 0.6%. Policymakers are watching this metric closely to determine the path inflation may take in the months ahead. Its acceleration has reignited fears that the Fed is taking a more aggressive approach to raising interest rates.
And after? (May 15-21)
Wall Street is approaching a bear market
After its sixth consecutive weekly decline, the S&P 500 is on the verge of a bear market, with Wall Street lingo meaning a decline of 20% or more from the index’s last peak. Although the S&P 500 rebounded on Friday, it was still only a few percentage points away from bear market territory. The Nasdaq Composite, which largely reflects the performance of tech stocks, has been well in that territory since early March. This steady decline in the markets shows how glum investors have become about the economy. Worries about inflation, interest rate hikes and the ongoing pandemic abound, and investors can find in each new data point – like last week’s Consumer Price Index report – another cause for concern and a new reason to sell.
An overview of expenses
Retail sales are expected to rise again for a fourth straight month as prices continue to climb across the country. Indeed, economists will likely attribute much of April’s spending increase to inflation, which is still moving at its fastest pace in decades. March’s retail sales report showed spending at gas stations rose 8.9%, and although prices fell in April, gas is still likely to make up a large share of consumer spending. Americans. Some companies have also passed on increased production costs to consumers, who they say are largely willing to pay the higher prices.
Bringing parents back to work
As employers continue to think about how to attract workers, a new survey provides some helpful — and, some would say, obvious — advice. According to research by McKinsey & Company, the consulting firm, and Marshall Plan for Moms, a campaign focused on the economic participation of mothers. Almost half of mothers with young children who left the workforce said they did so because of childcare issues.
Expand your cryptocurrency vocabulary
Jerome H. Powell has been confirmed for a second term as Chairman of the Federal Reserve. Instacart can go public. Disney said its streaming platform, Disney+, added subscribers, averting the meltdown Netflix experienced weeks ago.