Inflation is at All-Time Highs While Cryptocurrencies and Stocks Slide

Inflation Soars to Record Highs

Several indicators show the U.S. economy may be headed toward an official recession. According to May's Consumer Price Index print, inflation reached 8.6%, its highest level in four decades. Economists struggle to see when this trend could change as energy and food costs continue to surge. The latest CPI report also marked the fastest rate of change since December 1981. The Atlanta Fed's GDPNow tracker, a widely followed Federal Reserve gauge of GDP, points to an annualized gain of just 0.9% for the second quarter, preceded by a 1.3% drop in the first quarter. However, an improving U.S. trade outlook resulted in a mild boost to the GDP estimate and suggested there may be some economic strength.

U.S. Markets Rattled over CPI Print

U.S. markets continued their downward trend; last week was the worst-performing week since January, as inflation shows no signs of slowing down. Coupled with expectations that the Fed's next rate hike will be 75bps, the high inflation rate is leading investors and economists alike to believe that aggressive monetary policy will continue. Internationally, European markets were shaken after the European Central Bank announced its plans for monetary tightening.

Crypto Bank Faces Illiquidity

Centralized cryptocurrency lender Celsius announced early Monday morning that they are halting all withdrawals and transactions due to "extreme market conditions." The company, known for paying out high yields to its depositors, says it has 1.7 million users and is believed to be holding about $8 billion in deposits, which are now frozen for investors. Celsius's liquidity crisis is a shock to many, who worry it poses a systemic risk to the entire crypto market. However, some market participants have already confirmed that their businesses will remain unaffected by Celsius. Stablecoin issuer Tether released a statement Monday stating that the events won't impact the stablecoin's reserves.

Bitcoin Lightning Network Growth Persists

Despite the market turmoil, Bitcoin's Lightning Network continues to grow consistently. The layer-2 micropayments technology surpassed 4,000 Bitcoin, which is an all-time high. Several developers working on Lightning suggested that natural adoption, such as what occurred in El Salvador, plays a significant role in the adoption of micropayments. Meanwhile, lawmakers in several states have responded to a bill that would temporarily halt new crypto-mining projects at fossil-fuel burning plants. Lawmakers in New York approved the bill when the State Legislature unexpectedly passed the bill last week, imposing a two-year ban on new cryptocurrency mining permits.