Facing mounting pressure to roll back rate hikes, including protests by farmers and car dealers along with bipartisan political intervention, the Federal Reserve yielded. As unemployment exceeded 7% in May, the Fed chose to substantially lower the federal funds rate, even though inflation had reached a staggering 14.7% in April. This move tarnished Volcker’s reputation as a champion against inflation, and throughout the remainder of 1980, inflation persisted at over 12%.
The depegging of USDC is significant because Circle, considered a highly regulated and secure business, was poised to go public as a separate entity. The incident provided a wakeup call to investors, demonstrating that “not your keys, not your coins” applies not only to banks but to all centralized entities, even those that run our stablecoins.