Inflation therefore finally appeared in the consumer price index this week. And it has been hot, with year-over-year inflation in the United States hitting 5.4%, well above the Federal Reserve's 2% target. It also marks a peak in 13 years (FYI, it was in 2008, not exactly a good economic year ). The kicker? Professional investors didn't seem to care.

The yield on 10-year Treasury bonds, which is the benchmark for setting borrowing costs, mortgage rates and debt.his business in America initially went down. Expectations of higher inflation and economic growth tend to stimulate, not dampen, yields on government bonds. As the 10 years eventually grew, the initial reaction was surprising.

With the markets in mind, I wanted to use this week's newsletter to talk about the alleged lack of interest in the target bitcoin these days. (Hint: Obviously there's no shortage of it.) I also wanted to explain why I think the industry is able to see another resurgence of institutional interest in cryptocurrencies following the upcoming listing. Circle's public in Q4 2021.

Institutions Supposedly, don't worry about crypto

Comments from BlackRock CEO Larry Fink on CNBC's "Squawk Box made the headlines last week after claiming that there was "very little demand " for crypto assets. “In the past you have asked me questions about crypto and bitcoin. Again, in my last two weeks of business travel, no questions were asked about this, ”Fink said.

Certainly , Fink was referring to retirement investing and how registered investment advisers, pension funds and insurance companies should build portfolios on behalf of their clients over the long term. He wasn't talking about the institutional investment strategies of hedge funds, venture capitalists, or venture capitalists.s big business.

So while I don't think Fink was suggesting institutional interest in crypto assets in general is low, I want to hang on to the flawed conclusions of his comments that institutions don't care about crypto. This is something people have asked me about ever since the price of bitcoin started to drop from its all-time high of $ 64,888.99, and since anecdotal evidence like claims by Fink began to suggest that smart money was no longer in the crypto space.

Crypto Direct Investments and Venture Capital Funds

We have not seen the glut of companies buying bitcoin to put on their balance sheets in Q2 as we have itdone in Q1 . What we saw instead was a huge amount of capital poured into crypto companies through venture capital funds or direct investments. There has been more activity for blockchain-focused companies in the first half of 2021 than there has been throughout the year 2020 . Global venture capital funding across all industries has reached record levels so far this year, but even so, the share of transactions in crypto and blockchain startups is also on the rise, going from 0.89% to 5.97% from H2 2020 to H1 2021.

 Crypto and Blockchain VC funding as a percentage of global VC funding

The timeline below describes some of the biggest deals and fundraisers over the past four months. Venture capital funds themselves have also amassed record amounts of capital in the past quarter. On June 24, Andreessen Horowitz (a16z) announced that he had created the largest crypto-related fund to date, raising $ 2.2 billion for its Crypto Fund III class.

Activity transaction transaction and fundraising for crypto and blockchain startups since March 2021

VC 's investment in cryptography does not indicate that all types of institutions are currently deeply interested in crypto. For some VC betting is 1- on 100 long plans looking for nextCoinbase (so goes the cynic). One upcoming event I think will spark broader institutional interest in crypto is the public list of the crypto financial services company Circle.

On July 8, Circle announced its intention to go public through a merger with a special purpose The acquisition company, Concord Acquisition Corp (NYSE : CND). This is trivial because in the grand scheme of capital markets, $ 4.5 billion is peanuts, but the butterfly effects of Circle's IPO can have far-reaching consequences for the markets. crypto by bringing greater regulatory clarity to the United States for stablecoins.

The advent of a regulatory compliant Stablecoin

A stablecoin is a cryptocurrency linked to the value of a fiat currency. In 2018, Circle, working with cryptocurrency exchange Coinbase, created a stable coin linked to the dollar called USDC . USDC is fully supported 1: 1 by an audited reserve and governed by Center , a member-based consortiumes which defines technical, political and financial standards for stablecoins. USDC is not the only stablecoin linked to the dollar, but it is one of the most important alongside attach (USDT) .

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Providing dollar-linked stablecoins

Stablecoins are important for the health of crypto markets because they solve the problem of high volatility and convertibility between fiat and crypto. When banking relationships were difficult for crypto exchanges, stablecoins were essential for market growth.

Circle's publication may be a critical step in gaining regulatory clarity and acceptance around stablecoins in the United States. Circle co-founder Jeremy Allaire said so when he underlined on TV that Circle intends to becomepublic was to bring "greater transparency of reserves" with auditors and the US Securities and Exchange Commission (SEC). Allaire also said he welcomed working with regulators to see "adjustments to

For the context, the transparency of the stablecoin reserve has been a burning issue for the dominant dollar linked stablecoin, tether, which only a few months ago settled legal battle with the New York attorney general's office for allegedly trying to cover loss of 850 millions of dollars in client and corporate funds.

USDT is a hot spot for institutional investorsels. Investors don't like to fall out of favor with lawmakers, and they don't like wasting money. The lack of transparency for the USDT represented the possibility of these two things happening; possibly to the same catalyst (imagine if the cable has gone to zero).

If the USDC continues to increase its market cap to outperform the tether while also becoming a regulatory compliant stablecoin, it may open the door to institutional investors who once feared the regulatory risk of cryptocurrencies, especially when it comes to crypto trading and exits.