Weekly Market Update: Market Shrugs Off Latest Conflict

We are 200 days out from the next Bitcoin Halving! There are plenty of people pointing out how closely this cycle shares similarities with past cycles and according to them we are on track to follow the same course. 

In cryptoland, the SEC lost another skirmish with Ripple, there were plenty of institutional announcements and a lot of noise about the FTX / SBF court case. One area of noticeable growth is in the non-custodial credit card space. 

In the macro space, all the talk was about yields …until it wasn’t. The conflict in Israel then dominated. Oil, which was beginning to soften, has already started to rise, and not surprisingly, so are defence stocks. 

Markets had been closed Monday in the US, when they opened, they responded to the Gaza conflict fairly predictably with stocks down, Treasury yields and safer assets like commodities up. 

Then there was a quick reversal as two senior Federal Reserve officials spoke in openly dovish terms. In response the major indices all jumped upwards. 

It’s almost like the Fed read the room and decided they didn’t want to be responsible for a global financial meltdown. 

Whatever the reason, these Fed officials are now signalling that the rise cycle is done and markets are happy. As of today, markets are treating this like a contained regional conflict and appear to be closely watching for any escalation or geographic spread. 

The US is still a conundrum as their jobs market remains very healthy, however the dynamics are changing. 

There is also growing talk that the high cost of debt is acting as a dampener on the market, although the US government hasn’t gotten that memo and is adding staggering amounts of debt daily. Late this week the US will put out their latest CPI numbers. 

In Asia, India’s economy remains robust, China’s property sector is properly sick, and in New Zealand, dairy farmers are getting some relief as global dairy prices begin to rise. 

Incredibly, even with the radically different macro picture, the crypto market sentiment has remained steady in neutral territory.

Trend highlights this week: 

• Over the week, most of the top 30 assets have declined ~5%. 
• BTC was unchanged, while ETH was down 5%. 
• AVAX and Monero had good weeks, up 5%. Conversely Solana, Matic and Bitcoin Cash all got dumped, down 9%. 
• Trust Wallet (TWT) had a belter of a week, up 25% on the back of a new teaser campaign. 
• Gala (GALA) was our worst performing asset this week, down 16%.

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Highlights from the crypto space

NYDIG reports that despite a lacklustre Q3, Bitcoin is still the best performing asset year to date. 

Bitcoin has decoupled from Gold recently. This continues the trend from last month where its correlation with equities has diverged too. This might change with the escalating conflict in the Middle East. 

Bitcoin is approximately 200 days from its halving and according to many tracking almost identically to other cycles. 

Ripple got another significant win in their case against the SEC with the Judge denying both of the SEC’s application for an interlocutory appeal and stay. Keeping busy, the SEC has opposed a motion of dismissal by Coinbase dragging out old arguments again. 

In response Coinbase is adopting an international first mentality. Meanwhile, Binance has been hit with a class action lawsuit where it is alleged they used market power to deliberately harm FTX and take it down. 

CoinTelegraph reports that Binance’s global market share has halved in the last 7 months, dropping from 70% to 34%. 

Other notable highlights from the crypto space:

• At Israel’s request, Binance has suspended accounts soliciting donations for Hamas. 
• Honda will now accept payment in 46 cryptos when you purchase or rent one of their products. 
• Paypal’s foray into crypto is growing, they have now filed a patent for NFT purchases and transfers. 
• UBS is piloting an Ethereum based Money Market Fund product. 
• The Hong Kong stock exchange is using smart contracts for its settlement layer. 
• The Bank of International Settlements is proposing rules that banks disclose their crypto holdings. 
• Popular cross chain bridge Thorchain paused operations due to allegations that Lazurus group were using them to move illicit funds. 
• The volume performance of ETH futures over their first week was underwhelming. 
• There are suggestions that the SEC will approve all Spot Bitcoin ETFs at once so as to not give someone first mover advantage. 
• According to the co-founder of FTX, Gary Wang, FTX was not fine. No surprises there!
• The number of non-custodial credit crypto cards continues to grow. 
• We might be in the early stages of a bull market, but the winter chill is still evident with a few high profile companies making more people redundant.

And that sums up the major updates from around the crypto space. Moving on, we’ll take a closer look at other macroeconomic developments from around the globe.

Starting off with global news 

The newest conflict in the middle east has the potential to have wide ranging global impacts. 

Geopolitically it’s not hard to see the current fractures between the US (and its allies), Russia and China growing. 

Near term impacts are already starting to be felt with Oil pricing jumping 5% on the Monday (how quaint) opening.

Bonds and yields are still dominating markets. High yields affect all parts of the economy from government debt costs, to our mortgages, to company borrowing costs. 

This is growing concern that a bunch of marginal (zombie) companies across the globe will get hosed when they have to refinance their debt due to the spike in costs. Central banks are actively warning banks to not underestimate the risk. 

🌎 Macro news TLDR: … Markets on edge with latest conflict. 

U.S. economic news

US Manufacturing PMI improved in September, increasing 1.4% to 49. The August JOLTS data blew through expectations coming in at 9.6m openings, 700 000 above forecast. 

Analysts then got another shock when non-farm payrolls for September came in at 336k, double the 170k forecast. However, underlying the data is a more nuanced picture of declining full time employment and increasing part time, that is people are taking on more jobs to make ends meet.

 A FOMC participant has said what most are thinking; that the bond market pricing surge is, in fact, acting like another rate rise so things are evenly balanced. 

And in Europe….

In the UK, the IMF and the UK Treasury are having a bit of an argument over who’s growth forecast is the gloomiest. 

Russia has lifted its ban on most Diesel and gas exports which helped ease prices. Only this week OPEC+ decided to hold supply steady, so any new supply is good news. 

Ukraine has started talks to restructure its debt load and seek new investors via bonds.

And in Asia Pacific…

Chinese property giant, Country Garden cannot meet all its offshore debt repayments, it is one of many developers missing their payments now.

India’s resurgence continues, their Manufacturing PMI for September came in at a very healthy 57.5, although this was down slightly on Augusts 58.6. 

The central bank of India held rates at 6.5%. Japanese household spending declined 2.5% year on year, but rose significantly in August.

The RBA held rates at 4.1%, the new Governor trotting out old lines. More rate rises are possible and inflation is not tamed. 

New Zealand dairy farmers are getting some relief finally, Global Dairy Trade prices increased for the 3rd time since early September and are up ~10% since then. 

That’s a wrap for this week. Thanks for reading!

Stay tuned for the next update.

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