The Block: Bitcoin and ether sink lower, Fed fights inflation with new rate hike: This week in markets

Bitcoin and ether were both down over the past week after another volatile week of trading in which macroeconomic sentiment continues to guide prices.

Bitcoin was down 5.75% at $18,949 over the past week, while ether shed more than 11.54% and was trading at $1,299, at the time of writing Coinbase data show.

Ether has continued to decline since The Merge, JP Morgan said in a research note on Wednesday.

"Reasons for the recent decline likely include a combination of buy-the-rumor, sell-the-news flows specific to Ethereum’s Merge event along with broader weakness in risk assets due to more hawkish central banks."

The U.S. Federal Reserve raised the U.S. federal funds rate by 75 basis points on Wednesday, marking a 15-year high. The decision to take the rate to 3% to 3.25% had been expected, with the market pricing in a rise of 75 basis points ahead of time; however, markets sold off sharply on the news.

PFOF a win for Wall Street? Robinhood shares soared at the open on Thursday following reports that the U.S. Securities and Exchange Commission (SEC) won't limit it in making payment-for-order-flow (PFOF) deals.

PFOF deals are a major part of the business models for firms like Robinhood and Charles Schwab. This system allows Robinhood to offer commission-free trading, but the system is not without its critics. This routes orders through a handful of large electronic trading firms that are paying the broker, and some argue that retail traders don't get the best price in this system.

There has been an ongoing argument over whether the U.S. business model for low-cost trading apps like Robinhood is ethical, Laura Hoy, equity analyst at Hargreaves Lansdown, told The Block on Thursday.

"The SEC’s latest decision to allow the payment for order flow model these platforms use is a major milestone in the argument, but it’s certainly not the end," she said.

Hoy went on to say this practice has been banned in many countries, and while the SEC has stopped short of doing that, the regulator still has space to make the practice a bit less lucrative.

“Over the next few months, we’re likely to hear just how the SEC will tackle the issue, which could add to the volatility that stocks like Robinhood have experienced of late," she said. "After a pandemic-fueled boom, the industry’s been in the hot seat as rising interest rates make trading stocks look less appealing, so any attack on the underlying business model could see the recent gains erased."

Robinhood shares spiked 9% after the open on Thursday, having surged throughout pre-market trading. However, the stock has since surrendered those gains, closing the week at $9.44, having peaked just below $12 on Thursday.

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