Inflation was moderate in July coming in along expectations and markets basically shrugged it off. But behind the service, we have a few huge stories that are impacting crypto markets and of course, the rest of markets in general. We're going to unpack all of those right now. Let's go.

Happy Wednesday everybody and welcome to the Daily Wolf on Yahoo Finance. I am your host Scott Melker, also known as The Wolf of All Streets. You can find me at Scott Melker on X and on YouTube and anywhere else that you may have social media or want to watch my content.

I highly, highly, highly recommend that you do check out my 9:00 a.m. show each day on YouTube. Today, I had an incredible guest, Jordi Viser, one of my favorite conversations that I've had in a very long time and I guarantee it will make you quite bullish on the future of Bitcoin and crypto, especially in the context of AI and CapX growth.

So, listen, it's not a crypto story today, but as usual, we had a CPI inflation print, the most important CPI inflation print since the last one and until the next one.

I I don't think anybody really is paying attention to these anymore, but they do inform how prediction markets are viewing the likelihood of a fed interest rate hike or cut. I mean, here was the news, live updates, inflation was moderate in July, but energy prices remained elevated.

So headline CPI CPI rose .1% monthly and 3.4% annually. Core CPI rose .2% monthly and 2.5% annually. Importantly, all four numbers matched expectations. Remember, it doesn't matter if we have inflation or not. It just matters what Wall Street is betting inflation will be. Right? It just matters what we expect and what happens versus that.

Of course, energy declined slightly, but still 14.7% more expensive than one year ago. As I like to do just take a look at prediction markets, Kalshi, like I said, what does this mean for Kevin Warsh and what does this mean for the Fed?

I think that it's more confusion, but as you can see, people were kind of handicapping the idea that there would be a rate hike more seriously than they are now. Yesterday, a 41% chance of a hike, now down to 33% after the news came in. If you believe that Kevin Warsh is going to hike rates in September, which was as high as a 50 50 bet recently, I think that you are smoking crack.

I think that I would take the other side of that bet. Actually, I'm interested in doing it. Kevin Warsh has one job and one job only. He's the sock puppet. He's gonna do what Donald Trump, got fingers on this side, what Donald Trump tells him to do and Donald Trump wants this guy to cut rates.

There is I would say a 0.000% chance, as my friend Dave Weisberger alluded to the movie Animal House, you know, Bluto's uh GPA 0.000% chance that we are going to see a rate hike.

That would massively put us into a horrible situation, especially considering we're at almost 40 trillion dollars in debt and need to refinance that. It ain't happening. Let's move on because markets shrugged it off just like we should. CPI. Doesn't matter. Nobody cares.

What what people do seem to care about is prediction markets. And we have a big story right here. CFTC exercises emergency authority to ensure market stability. If you want to know how important prediction markets have become, or at least how important the battle for power over prediction markets between the federal government and the states has become, just look at that.

That is an official CFTC release invoking emergency authority to ensure market stability. So, a couple of weeks ago, New York uh went after Kalshi once again. Now we know that uh many states have been suing prediction markets, but they were seeking a nationwide order blocking Kalshi's event contracts and more than $35 billion in damages.

New York obviously continues to argue alongside many states that Kalshi markets are illegal gambling products. But the CFTC here invoking emergency authority and ordering Kalshi to continue operating under federal derivatives law. So the the federal government thinks these are derivatives contracts.

The state governments tend to think that these are gambling contracts. What do you do here if you're Kalshi? Right? You have the states like Minnesota and New York that I've told you about in the past, multiple other states telling you to cease operation, then you have the CFTC of one, Mike Seelig coming over the top rope and telling you that you have to continue offering these services to customers in those states, even though those states are telling you that you cannot do it.

So this order keeps Kalshi operating in New York, but it certainly does not resolve the underlying lawsuit or the underlying turf battle that we've been had constantly. No, this is not a crypto story, but I think it is a huge story about how the states and the federal government will behave when it comes to regulation, which informs what we may see in a world with no clarity act where the regulators are effectively in charge of what happens with crypto.

I mean, this is the just the states versus the federal government at a level we haven't seen in a long time. and it's about the control of an entire new category of financial markets. Now, moving on to the next story which man just makes me shake my head because the own goals in crypto are seemingly endless.

Harmony's ONE sinks 37% after attacker mints four billion tokens. Now, what might be interesting to you is that the entire market cap of this right now after the drop is probably, I'm guessing, fully diluted value. I don't know, market cap of one token is probably like $11 million. So 4 billion tokens, only a couple million bucks, 4 billion tokens.

But it equals roughly one quarter of the legitimate pre attack supply. So the token obviously dropped 35 to 40%. Now, independent investigators say that about 97% of those counterfeit tokens had already reached exchanges or been sold. So now, okay, so we're a clown show, we know that. Right?

This side of crypto is a joke. We know that AI as it continues to become more powerful, uh we're going to see hacks uh increasing and the amount of money from these hacks increasing and on these older blockchains where probably there's like one guy in a closet uh working, it's like the stapler guy from office space. There's nobody working here, nobody really protecting these, these things are going to continue to happen.

But now Harmony has the unenviable position of deciding what to do about it. Right? They they haven't disclosed what the technical cause is, but they've said they will either prepare a patch, uh last I checked a per patch would just uh mean they can't mint any more tokens, but the four billion that have already been minted will still remain out there and whatever, or rolling back the blockchain.

Nothing says decentralized immutable ledger like rolling back a blockchain and pretending that a thing didn't happen. So we go back in time like uh you know, Marty McFly with his sweet Delorean, uh and we could pretend that this never happened.

The problem is that doesn't actually uh change anything for the seven people on planet Earth who maybe used this blockchain uh for some legitimate purpose. Maybe they're real transactions. So those uh those people would be affected. All, okay, I'll, eight, eight of them. I'll be generous. But it also uh it does not going to roll back the sale of these four billion fake tokens.

So the damage there largely already done. I mean, this blockchain was supposed to be, as I said, an immutable decentralized ledger, but it basically just became like a Google doc with a version history. Like, go back to a few days ago and and and see what the document says.

This is like, man, it seems like every day. I mean, I think we had read or reported that, you know, there's a hack in crypto every two days this year basically. And the numbers are not necessarily huge. It's not billions of dollars a day, but it it just really like uh informs your investment decisions moving forward. I think that a lot of the old stuff is dead or dying or will be exploited and it's really time to just focus on quality and teams that are building and actually care about security.

There's like six of them. We're going to find them for you. All right. The next story right here, it's a continuation of yesterday. I told you how Riot Platforms yesterday did a $9 billion plus deal with Anthropic and how miners are all now effectively just becoming AI data center providers.

Well, one overlooked group has added 1.78 billion of selling pressure to Bitcoin market. Did I spoil it? It's Bitcoin miners. They've sold 28,000 Bitcoin already this year. That, you know, the value of that right now, about 1.78 billion at current prices, but obviously they sold a lot of that probably higher.

But this is the publicly traded miners that began the year holding 127,000 Bitcoin, now holding 99,000 Bitcoin. And there's a lot of reasons for this. So one is obviously the pivot to AI, which makes a lot of sense. You can make a lot more money there. There's less risk, you're not exposed to Bitcoin price, you're not exposed to the crashing hash rate.

I mean right now on average, apparently it costs about $74,300 to to uh produce one Bitcoin. And the price is not 74,300 last time I checked at 63, 64, 65, they're losing money every time they produce a Bitcoin.

So of course they're going to pivot to brighter pastures. But this is something that has happened in every bear market. I mean, they have to sell it. Right? This is forced selling because they need to be able to pay their bills. You know, like the electric bill comes and you're like, I would like to hold my Bitcoin, but also I need to pay my electric bill.

And the only way to do that for them is to sell Bitcoin. So maybe this is one of the less hyped and untold stories of why we've remained in a bare market because of this miner transition to AI and their forced selling directly into the market. Now, you know, we can call it forced selling, but as we look at what they're doing with AI and the money needed to build out that infrastructure, maybe it's actually just a pivot in their business model and this is going to become more permanent until they're no longer Bitcoin miners at all.

The next story that we have today, crypto.com rolls out tokenized stock derivatives of crypto exchanges push into equities. So the real story here is not that they're offering tokenized stocks. We know that that's coming everywhere and that all of these platforms are competing to be the everything app, right?

But what they launched here is round-the-clock exposure to approximately 1,500 American stocks, but they are derivatives available to people outside the United States because we hate fun here and aren't allowed to do anything that's cool. But uh this gives you exposure to the price of stocks, but no voting rights or rights that would come with actually owning one of these stocks.

So it's very important. We have this battle in tokenization for the way that uh people will be able to gain exposure to stocks. On the one side, you know, you actually tokenize the asset. It's held in custody by somebody and you have all the rights that come with actually owning a share. It's a tokenized version of that actual share.

On the other side, you just get the price exposure, kind of like we've seen with pre-IPO stocks where you can bet on it and trade it, but you don't actually own anything. That is what they are launching here. No legal ownership, beneficial ownership, voting rights, or direct claim against the underlying company.

So these are not tokenized stocks, they are stock price exposure wearing a fancy crypto costume. Still cool, but important to know what you own and what you're trading. Now, speaking of people wanting to offer everything, we have our friends over at Kraken now offering 20x Bitcoin margin.

So I'm old enough to remember when exchange in the United States could only offer 5X perpetual offerings. Now, I did not know, I didn't know and I looked this up that in May, Kraken announced 100x leverage on Bitcoin and Ethereum perpetuals. So on perps on Kraken, you can get 100x leverage, meaning that if Bitcoin moves 1%, you get liquidated, which is a good time because that happened probably since I started saying that sentence.

Right? Uh and it's even worse on ETH and all coins obviously. So I didn't know that they were able to actually do that. So this 20x on Kraken Pro is actually for spot Bitcoin USD exposure, meaning that you like you know margin on a stock account, you can get 20x leverage. So you know, if you got 5,000 bucks, you can now control a $100,000 position. But listen,

you know, this is that same thing. like that means at 20x a 5% move on Bitcoin gets you liquidated. You're gone. Your money is gone, right? An unlevered investor can survive a large decline. You can just wait until price comes back, but if you are using leverage 20x leverage specifically in this case, you could be liquidated during a normal intraday move even if you're right and Bitcoin ends up going the way of your bet.

Leverage is very, very dangerous. Now, there are reasons to use leverage because it reduces counterparty risk. You can basically, you know, gamble with 20x or invest or hedge or whatever you want to call it with more money, leaving less money on the actual exchange and then you don't have the counterparty risk of your money or these your coins being on exchanges, which is very important.

I would just say that these are instruments that should be solely used by professionals and that retail probably should not be using 100x leverage on perps and 20x leverage on their spot trading accounts. It's it's yeah. It's going to get ugly. I'm all here for it. People should have the freedom to do whatever they want. I love that Kraken is innovating and improving, but I just don't think the average person needs this.

So listen, the the market continues to shrug off any news that's coming from the Fed. Once again, I think that you might actually be on drugs if you think that we are going to raise rates, but uh maybe I'll be wrong and I'll be the one who's on drugs. Never know. Definitely possible. But meanwhile, the industry keeps chugging along with good news after good news and people building left and right. That's all I got for you today. I will see you tomorrow, next daily Wolf.

Deuces.