Good morning. Here’s what’s happening:

Prices: Bitcoin started what has historically been a strong month about where it ended a dismal September, holding over $19K.

Insights: USDC’s stablecoin-fueled model of money, in which the dollar functions as an open “protocol,” could allow innovation to flourish. But healthy competition is a prerequisite.

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October Starts but Fails to Ignite Crypto Prices

The opening of the historically crypto boom month of October bore a stronger resemblance to the recent dreary days of September.

Bitcoin was recently trading slightly above $19,200, down 0.5% over the past 24 hours and roughly where it stood at the start of the weekend. The largest cryptocurrency by market capitalization rose briefly above $20,000 last week before descending to the ledge it’s occupied for much of the past month.

“Indecision and lack of buying above $20,000 are pushing Bitcoin to test its recent lows,” Joe DiPasquale, CEO of crypto asset manager BitBull Capital, wrote in an email, adding optimistically: “If we do drop sharply, the price may bottom soon and put up a nice rally. However, most bulls may be scared out of their longs before that happens.”

Ether was recently changing hands a little below $1,300, off approximately 1.5% from the previous day. The second largest cryptocurrency spent much of the past two weeks trading comfortably above this level. Most other major cryptos were recently off with XRP and ATOM falling more than 4% and 3%, respectively, as investors continued to process a range of largely deteriorating, economic indicators and the latest hawkish comments by U.S. central bank Vice Chair Lael Brainard in a speech Friday.

Cryptos tracked equities, which closed a dismal month with a final dismal trading day on Friday. The tech-focused Nasdaq, S&P 500, which has a strong technology component, and Dow Jones Industrial Average (DJIA) all finished down at least 1.5% amid ongoing fears that the struggle to end high inflation is leading inevitably to a harsh recession – a so-called hard, economic landing.

By the traditional definition of two, consecutive quarters of negative gross domestic product (GDP) growth, the U.S. has already entered a recession, although its severity and length remain uncertain. The Nasdaq and S&P have declined six of the last seven weeks, and the DJIA recently became the latest index to fall into bear market territory, meaning that it has dropped at least 20% from its last high.

A third consecutive monthly decline in pending home sales offered the latest evidence of the once hot housing market’s cooling and wider, economic slowing. Yet the core personal consumption expenditure (PCE), the Federal Reserve’s preferred measure of measuring U.S. inflation, was higher than expected in August, rising 4.9% on a year-over-year basis after increasing 4.7% in July. The reading indicated that inflation will continue to plague the U.S. economy and beyond.

Meanwhile, the cost of Hurricane Ian in structural damage and economic disruption to Florida presents a fresh wildcard, as First Republic Bank noted in a weekly review to investors. “The total cost of the hurricane is unknown, but given the scale of this natural disaster it’s possibly one of the most expensive in U.S. history,” the bank wrote. The overall economic effects depend on the breadth and duration of the disaster.”

Investors will be eyeing the release on Monday of September’s ISM Manufacturing index, which is expected to remain unchanged, and the September unemployment rate on Friday, which is expected to remain at its current 3.7% reading.

On Saturday, citing three unnamed sources, CoinDesk reported that Indian exchange WazirX had laid off about 40% of the company’s workforce. And U.S. crypto exchange giant Coinbase temporarily halted transactions from U.S. customers, according to a status update made by the crypto exchange at 7:57 a.m. ET Sunday morning. Later Sunday, the Financial Times reported that Alex Mashinsky, the embattled founder and former CEO of Celsius Network, removed $10 million from the now bankrupt crypto lender weeks before Celsius halted customer withdrawals in June.

“A terrible week, month, and quarter for stocks was not exactly mirrored by bitcoin,” wrote Oanda Senior Market Analyst Edward Moya in an email, adding that last week’s declines in bond yields had provided “some relief for crypto.”

“Bitcoin’s hodlers remain unfazed and if Wall Street avoids any major de-risking moments, the world’s largest crypto could continue to stabilize here,” he wrote.

The Dollar Can Be a Protocol for the Future of Money

This week in San Francisco I attended Circle Internet Financial’s star-studded Converge conference and was struck by the wide array of projects working with its USDC stablecoin.

Participants included Latin America-based payments company Ripio, which is seeing surging demand for USDC transfers in Brazil and Argentina, or the Web3 service provider Recur, which solely accepts the stablecoin from users of its various metaverse worlds, including Star Trek Continuum.

It seems USDC, the second most-traded stablecoin, is developing its own “ecosystem,” a word (perhaps overused) that open-source advocates apply to networks of third-party developers and providers that build on a tech platform. Below I’ll get to a lesson I see here for U.S. lawmakers contemplating what digital form the dollar should take. But let’s first reflect on these ecosystem ideas as they pertain to a stablecoin like USDC. It’s not an obvious concept, though its implications are profound.

This was excerpted from Money Reimagined, a weekly look at the technological, economic and social events and trends that are redefining our relationship with money and transforming the global financial system. Subscribe to get the full newsletter here.

Let’s compare Converge to NEARCon, the annual conference sponsored by the Near Foundation I attended two weeks ago in Lisbon. It’s easier to understand that event as an “ecosystem conference.” Like other such gatherings – Ethereum’s Devcon being a prime example – Near uses it to bring together and energize the far-flung community of developers and companies building dapps and other services with smart contracts that run on its protocol.

USDC isn’t a smart contract protocol for dapps. It’s primarily a payment vehicle, conceived of by most people as a “coin.” It is a tokenized expression of dollar-based value that happens to be more fluid than non-digital dollars, one that can be exchanged peer-to-peer over public blockchains. (Circle’s launch on Wednesday of a new cross-chain transfer protocol brings USDC a little closer to a more common definition of a crypto protocol, but it’s not why all those third-party, USDC-tied providers attended the event.) …

Historically, September was a bad month for bitcoin, with the crypto showing negative returns in each of the last five years. Is October’s record better? CoinDesk’s Christie Harkin and George Kaloudis discuss what is impacting the crypto markets and what to watch out for next week.