The Week in Business: Crypto’s ‘Death Spiral’

ByGeraldine R. Pleasant

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In what some are calling a “death spiral,” the value of a number of digital currencies plunged last week, rattling investors’ faith in crypto markets. The implosion was particularly shattering for TerraUSD, or UST, which is called a stablecoin, meaning that it is pegged to a stable asset and should not fluctuate in price. But fluctuate it did: A big sell-off in a sister cryptocurrency sent UST to a low of 11 cents on Friday as Luna, a token closely tied to UST, cratered to $0. Bitcoin has been falling along with the Nasdaq, a benchmark that’s weighted toward technology stocks, making an investment in cryptocurrency just as risky as any other tech stock. The crash drives home an unpleasant reality for investors — that an asset they hoped would be transformative has not fulfilled its promise.

Elon Musk said that he was putting his $44 billion bid to buy Twitter “temporarily on hold” as he sought out more details about the share of spam and fake accounts on the platform, which Twitter has estimated to be around 5 percent. Mr. Musk made the announcement in an early morning tweet on Friday, following it with another that said he was “still committed” to the deal. Though trying to discern the motivations of the mercurial billionaire can be futile, Mr. Musk may be deploying a tactic to drive down the price of the acquisition or thinking about backing out of the deal altogether. The latter would be costly: Mr. Musk’s deal with Twitter includes a $1 billion breakup fee as well as a clause that could force Mr. Musk to pay out the deal if he still has the financing. His tweets came a day after Twitter’s chief executive fired two top executives, froze most new hiring and said he was slashing spending. Earlier in the week, Mr. Musk said he would allow former President Donald J. Trump to rejoin the platform.

Annual inflation slowed in April for the first time in months, but the Consumer Price Index, which measures the changes in prices for consumer goods and services, still increased 8.3 percent. That number is uncomfortably high for households that have been struggling with rising prices for essentials like food, fuel and housing for months, and it’s unpleasant news for the White House and Federal Reserve, which have been trying to stabilize the economy. The Fed may have been especially concerned to see that core inflation — which strips out costs for groceries and fuel — picked up 0.6 percent. Policymakers closely watch this measure to determine the path that inflation may take in coming months. Its acceleration renewed concerns that the Fed would take a more aggressive approach to raising interest rates.

Coming off its sixth consecutive weekly decline, the S&P 500 is on the edge of a bear market, Wall Street jargon for a drop of 20 percent or more from the index’s last peak. Though the S&P 500 rebounded on Friday, it was still just a handful of percentage points from bear market territory. The Nasdaq Composite, which largely reflects the performance of tech stocks, has been well into that territory since early March. This steady slide in the markets shows just how gloomy investors have become about the economy. Concerns about inflation, interest rate increases and the ongoing pandemic abound, and investors can find in every new data point — like last week’s Consumer Price Index report — another cause for worry and a new reason to sell.

Retail sales are expected to grow again for a fourth consecutive month, as prices continue to climb across the country. Indeed, economists will probably attribute much of the increase in spending in April to inflation, which is still moving at its fastest pace in decades. March’s retail sales report showed that spending at gas stations increased 8.9 percent, and though prices fell in April, gas is still likely to account for a significant share of Americans’ spending. Some companies have also transferred increased costs of production to consumers, whom they have found are largely willing to pay the higher prices.

As employers continue to think about how to attract workers, a new survey provides some helpful — and, some would say, obvious — advice. Sixty-nine percent of women looking for a job said child care benefits could determine their decision on where to work, according to a study from McKinsey & Company, the consulting firm, and Marshall Plan for Moms, a campaign focused on the economic participation of mothers. Almost half of mothers with young children who left the work force said they did so because of problems with child care.

Jerome H. Powell was confirmed for a second term as Federal Reserve chair. Instacart may go public. Disney said its streaming platform, Disney+, added subscribers, avoiding the collapse that Netflix saw weeks ago.