Will the Fed’s rate cut and Uniswap’s SEC warning affect the crypto market?

Source: Liu Jiaolian

The wind whistles and the Yishui River is cold.

On the night of the 10th, the world was eagerly awaiting the release of the latest US inflation data. At 20:30 pm, the data was released. CPI inflation was 3.5%, 0.1 percentage point higher than the expected 3.4%. Core inflation was 3.8%, also 0.1 percentage point higher than the expected 3.7%.

The media hyped up the rise in inflation, the control path was not going smoothly, and the Fed's interest rate cut expectations were postponed again. Yes, the futures market did give up its bets on a June rate cut.

However, Jiaolian thinks this is probably another false alarm.

Let's take a look at the inflation chart:

Let's take a look at the core inflation chart:

It can be seen that although it is a little higher than expected, inflation has not rebounded significantly, and core inflation is still in a beautiful downward channel. Powell can say that everything is under control.

Data is one thing. How the market interprets it is another. How the Fed interprets it is another matter.

In fact, the reaction of the spot BTC (Bitcoin) market also confirms this judgment.

The above picture shows that before 8:30 pm on the 10th (UTC+8), BTC began to fall slowly from 69.5k (around 3 pm). When the unexpected inflation data came out at 8:30, the shorts concentrated on selling all their chips, and the price fell from 68.8k to a minimum of 67.5k. However, this decline was immediately large in volume, showing that the bulls were well prepared and fully accepted the shorts' selling with sufficient ammunition. After selling again at 21:00 and completely emptying the magazine, the shorts ran out of ammunition and were slaughtered by the bulls. It took the bulls only about an hour to completely recover the lost ground, and 8 hours later they counterattacked above 71k. The short-sellers' surprise attack ended in complete failure.

The frightened bird that speaks out confuses people's minds, and the real warriors with chips and ammunition are the ones who decide the direction of the battlefield.

The dark clouds press down on the city and the city is about to be destroyed, and the armor shines towards the sun and the golden scales open.

The horn sounds in the autumn sky, and the Yanzhi on the frontier is purple at night.

Here, BTC absorbed and resolved an external event shock. Over there, overnight on the 10th, Uniswap Labs, the developer of the decentralized token exchange protocol Uniswap and the operator of the uniswap.org portal, confirmed that it had received the "declaration of war" from the US securities regulator SEC - the Wells Notice.

The Wells Notice is named after John Wells. During his tenure at the SEC from 1972 to 1976, he designed the SEC's procedures for initiating enforcement actions against individuals or companies for financial violations. The Wells Notice is an informal document intended to provide advance warnings before formal action and to prompt the recipient to proactively communicate and negotiate with the SEC before formal litigation. According to the procedure, Uniswap Labs has 30 days to respond to the incident.

Affected by the negative impact of the notice, Uniswap's governance token UNI plunged more than 15% in a day, from $11 to around $9.

Speaking of which, it was reasonable and expected that Uniswap Labs received the Wells Notice from the SEC. Friends who have been following the investigation know that as early as September 2021, the SEC launched an investigation into Uniswap Labs. Wells' notice is just something that will happen naturally after the investigation has some preliminary results. After all, who in this world can withstand a careful investigation? As long as you investigate carefully, you can always find out some unclear problems. Since then, Uniswap Labs has also started a series of response preparations, such as hiring a former Obama spokesperson to be responsible for public relations, establishing the DEF Fund, and conducting political lobbying activities under the banner of education, etc. Of course, the SEC's current attitude towards the DeFi sector may not be too friendly. It was said in the internal reference of the teaching chain on June 17, 2023 that Gurbir Grewal, director of the SEC's enforcement department, said in an interview that "DeFi provides services that are neither decentralized nor financial, which is pure fraud."

Now, Uniswap Labs can only fight against the enemy and cover the water with soil. After all, Ripple, which accepted the SEC's letter of challenge and initiated the lawsuit, did not back down and won.

This is also a powerful test of the degree of decentralization of the Uniswap protocol. The Uniswap protocol is not Uniswap Labs. The latter controls the website uniswap.org, but does not control the Uniswap protocol.

If the strong pressure from the SEC can force Uniswap Labs, a centralized entity, to further weaken its control, disperse resources, and promote the further decentralization of the Uniswap protocol ecosystem, it is possible that bad things will turn into good things, and misfortunes may bring blessings.

True decentralization must be able to absorb external shocks and turn them into internal strength. Just like the Bitcoin computing network suffered an unprecedented big country-level attack in 2021, but it still successfully absorbed it, turned a disaster into a blessing, and achieved a gorgeous nirvana. The computing network is more decentralized and its value has been further improved.

It’s just that those who were attracted by the two waves of UNI in February and March, and had a speculative mentality of fantasizing about $50, $100, and $200, and rushed in to take over, may be panicked again, confused and at a loss.

Any pure speculation on prices, if you don’t really understand the target and strategy, will most likely be sold at a loss in the reshuffle. Even if the market finally reaches the original speculative price target, there will be no position in your hands.

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Appendix 1: Additional reading, Uniswap Labs' public defense against the SEC Wells Notice (English): https://blog.uniswap.org/fighting-for-defi

Appendix 2: Jiaolian reminds everyone to be careful of phishing and fraud activities at this time! It is best not to do anything. I have seen many fraudulent posts on Twitter that use the panic of the SEC and Uniswap Labs going to war to phish. Usually, they will disguise themselves as the name and avatar of Uniswap Labs or its founder Hayden Adams, claiming that you should click on the link as soon as possible to protect your funds in the uniswap protocol, or click on the link to sign the protest against the SEC, etc. It is very easy to be deceived. Once you click in, link to the Little Fox Wallet, and click on the authorization, it's all over, and your assets may be looted immediately!