Cryptocurrency Can’t Get No Respect – Swamponomics

In the immortal words of legendary comedian Rodney Dangerfield, cryptocurrency can’t get no respect. The federal government’s new edict is ostensibly to eradicate virtual tokens. Securities and Exchange Commission (SEC) chief Gary Gensler recently made this admission on CNBC, explaining that the US economy does not need any digital currency because it already has the dollar. Is this the beginning of the end? If the latest lawsuits are any indication, the war on crypto has begun.

SEC Targets Cryptocurrency Giants

Wall Street's top cop sued cryptocurrency exchange Binance and its billionaire founder Changpeng Zhao, alleging that the company attracted US clients to its unregulated international exchange, violated securities laws, and commingled depositor funds with their own. The SEC filed 13 charges against Binance. A day later, the SEC announced that it filed a federal lawsuit against Coinbase, claiming that the website was operating as an unregistered broker and exchange.

“These trading platforms, they call themselves exchanges, are commingling a number of functions," Gensler told CNBC. "We don’t see the New York Stock Exchange operating a hedge fund."

As a result of the regulatory blitzkrieg, some of the largest tokens in the cryptocurrency realm tanked in the last week. Bitcoin plummeted 5%, Ethereum slumped 8%, Cardano crashed 30%, Dogecoin slumped 15%, and Solana dropped 26%. Crypto prices had enjoyed a renewed bull market this year, with premier tokens recording double-digit gains in the first half of 2023, thanks to expectations that the Federal Reserve’s tightening cycle has peaked and could slash interest rates later this year.

Going Cold Turkey on the Lira

Since President Recep Tayyip Erdogan was re-elected to another term, the Turkish lira has been in freefall. On June 7, the lira cratered 7% to a record low against the US dollar, representing the sharpest selloff since the astounding 2021 plunge. The USD/TRY currency pair is now trading at 23.3995, down 25.2% year-to-date and 36.69% over the last 12 months. It might seem counterintuitive, but the lira's crash could be a sign of good news for Turkey's economy.

After several years of Erdoganomics – a blend of unorthodox policies that include slashing interest rates to fight inflation – the president is indicating that his new cabinet could normalize more mainstream policies. This could consist of the removal of currency stabilizing measures. For some market observers, investors were ebullient over Erdogan naming former deputy prime minister Mehmet Simsek as the new finance minister, who recently noted that the government needs to return to "rational" policymaking. Traders are also waiting for Erdogan to name a new central bank governor.

Still, experts say that it is going to take a long time to stabilize the lira and the broader economy after years of reckless mismanagement. The annual inflation rate is still close to 40%, producer prices are north of 40%, and economic conditions are slowing. In addition, the country's foreign exchange reserves have been on a downward trend since peaking in December as officials tried to resuscitate the lira.

Got Java?

Your morning cup of java could cost more later this year. Coffee has been one of the top-performing commodities in 2023 as futures have risen 15% year-to-date. This has been largely driven by supply fears and now that an El Nino pattern has formed in the Pacific Ocean and is set to wreak havoc on the Northern Hemisphere, coffee-producing countries are poised to endure the pain.

The Robusta bean has climbed to its highest level in 15 years, trading at $2,790 per ton on the ICE Futures exchange. The rally was caused by the US Climate Prediction Center announcing El Nino's return, which typically creates hot and dry conditions, particularly in key Robusta growing areas of Indonesia and Vietnam. Inventories have already been weak due to supplies failing to keep up with strengthening demand. What also makes this a challenging market for businesses, consumers, and growers is that fertilizer costs remain elevated. Moreover, drought has been more prevalent, leading to a sharp decline in crop yields.

Overall, the global coffee market is poised for a deficit for the third consecutive season in 2023-2024.