🤝 *Like a banking superapp… without the bank*

Decentralized finance, aka __DeFi__, describes peer-to-peer financial services done on the blockchain through smart contracts. Think: borrowing or lending crypto, earning interest, or trading digital assets like NFTs, all without the involvement of a third party like a bank or crypto exchange. This week, the __Euler Finance__ [DeFi protocol](https://www.bloomberg.com/news/articles/2023-03-13/defi-s-euler-finance-hit-by-197-million-hack-experts-say) lost $197M worth of crypto in a flash loan attack.

DEFI(NE)

Jessica Chubbs

Heard on the Block: "DeFi"

__J. Powell may need an energy drink…__ or some chamomile. It’s only Wednesday, but it already feels like *next* Wednesday. A lot’s happened in the past week that could influence the Fed’s rate-hike decision on March 22. Three banks [collapsed](https://snacks.robinhood.com/newsletters/5AtBujCpd8XgLHLBe7atvu/articles/7zPyo6DswDCVfx1kuMG7Ja/) (including the second-biggest bank failure in US history) and the February inflation report came out yesterday. 

- __Top line:__ The pace of inflation cooled for the eighth straight month (good), but it’s not slowing as fast as the Fed would like (not so good).

- __No surprises:__ US consumer prices were up 0.4% for the month and 6% for the year, as expected. Energy dropped, but housing costs soared.

- __Reaction:__ Stocks popped after the release, and traders priced in an 85% chance that the Fed will hike rates by 25 basis points (down from 50 last week).

__Seeing the vault half full…__ __[Silvergate](https://robinhood.com/stocks/SI/)__, __Silicon Valley Bank__, and __[Signature Bank](https://robinhood.com/stocks/SBNY/)__ all collapsed this month. US regulators swooped in with extraordinary measures to guarantee that depositors at SVB and Signature would have access to their funds. Three bank failures in one week may not seem amazing from an economic perspective, but some investors [think](https://markets.businessinsider.com/news/stocks/why-silicon-valley-bank-collapse-good-for-stock-market-rates-2023-3) it could actually be *bullish* for markets. 

- __Bull case:__ Some now expect that bank failures will pressure the Fed to cool on rate hikes. Some Wall Street firms are even predicting that Powell will *pause* hikes (#Pow-se). __[Goldman Sachs](https://robinhood.com/stocks/GS/)__ said it no longer expects any hike on March 22 “in light of recent stress in the banking system.”

Considering a Pow-se? (Liu Jie/Getty Images)

Hike

__Panic could force the Fed’s hand…__ to cool its hiking crusade. The Biden admin and US regulators seem willing to do just about anything to prevent a banking crisis. And while the Fed wants to temper sticky inflation and the hot labor market, it *really* wants to avoid a crisis. The aggressive interest-rate environment contributed to bank failures and has been one of the main causes of the stock market’s woes.

Bank failures and slowing inflation could lead the Fed to cool (or even pause) rate hikes

__The Prop 22 saga…__ could be reaching its finale. On Monday, a California court [ruled](https://www.cnbc.com/2023/03/13/uber-lyft-shares-rise-after-california-court-upholds-prop-22.html) that gig companies *can* continue to treat their drivers as independent contractors instead of employees under Prop 22. Refresher: in 2021, a CA judge ruled that Prop 22 was unconstitutional and unenforceable, even after CA voters [passed](https://snacks.robinhood.com/newsletters/16eEsik1Fk53zullntgMTm/articles/1p7Zbl78TlS0t7oJltTCT0/) the bill. This new decision reverses that.

- __[Uber](https://robinhood.com/stocks/UBER/)__, __[Lyft](https://robinhood.com/stocks/LYFT/)__, and __[DoorDash](https://robinhood.com/stocks/DASH/)__ shares jumped on the gig-friendly news yesterday, despite the court’s additional ruling that gig companies can’t prevent drivers from joining unions and bargaining for better conditions.

__Uber by day…__ __DoorDash__ by moonlight. Workers are increasingly joining the gig economy to earn extra $$. Estimates [vary](https://www.bloomberg.com/news/articles/2023-03-06/millions-more-us-workers-possibly-self-employed-than-thought), but at least a tenth of the US workforce is made up of gig workers, and analysts predict hundreds of thousands more will join as inflation continues. Meanwhile, Europe [expects](https://www.reuters.com/markets/europe/eu-lawmakers-agree-tougher-draft-gig-labour-rules-2022-12-12/) its 28M gig workers to nearly double by 2025.

- __The gig model__ lets people work flexible hours and drive for several companies, but doesn’t offer full-time benefits (think: healthcare and PTO).

- __As the most populous US state__, CA is a critical market for gig companies, and its latest ruling could influence gig law across the country and abroad.

Surge

__The big gig debate isn’t over…__ Critics still don’t think Prop 22 provides critical labor protections (like: minimum wage, overtime, and health insurance). Now, many expect that the Service Employees International Union will appeal the ruling to the California Supreme Court. Meanwhile, EU lawmakers are drafting strict new gig-labor laws, which could go into effect next year.

Uber and Lyft spike on California’s Prop 22 win, but the big gig debate isn’t over yet

Dow Jones

S&P 500

Nasdaq

Bitcoin

For the first time since 1987, more vinyl records were sold last year in the US than CDs

Heard on the Block: "DeFi"

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