Who cares about Crypto?

Thoughts of the Day

Bitcoin is up over 160% this year. Lesser-known coins like Avax (+420%) and Solana (+370%) surged since Oct (just 2 months ago). Shitcoins (aka altcoins), are starting to pump like the crypto winter is a distant memory. Yet, most mainstream media are still oblivious to these crazy stories. The sun is shining yet again in the land of cryptos and the best time to join the rush is when no one is looking.

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Day Ahead

US GDP is expected to grow +5.2% QoQ in Q3, higher than +2.1% in Q2.

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What Happened Yesterday

Market Movements as of New York Close 20 Dec 2023
  • Fedspeak:
    Harker (retiring, known centrist):
    “It’s important that we start to move rates down. We don’t have to do it too fast, we’re not going to do it right away, it’s going to take some time.”
    Goolsbee (non-voter in 2024, known dove): “Market has gotten ahead of themselves on euphoria. What determines whether the Fed can be less restrictive is inflation.”
    (Harker has been in the dovish camp.)
  • UK Consumer Price Index showed that prices rose +3.9% YoY in November (vs +4.4% expected), down from +4.6% in October. The core inflation rate fell to 5.1% (vs +5.6% expected) from 5.7% in October. The GBP fell -0.39% against the USD in immediate reaction to the data release that showed inflation falling faster than expected.
  • US Conference Board Consumer Confidence came in higher than expected at 110.7 (vs 104 expected) in December, higher than 101 in November (revised from 102). Market reaction was muted.
  • The US Treasury Yield curve inversion remained at 0.48% as the US 2-year bond yield and the 10-year bond yield both fell -0.07% to 4.34 and 3.86%.
  • The US stock futures traded slightly higher through the Asian trading session with the S&P 500 futures rising to a high of +0.12%. It then started to wane when the London trading session began with the S&P 500 futures falling -0.29% from the highs just before the New York session began.
  • The US stock market opened slightly lower from Tuesday. The US stock market then tried to climb higher before making a turn for the worse towards the end of the New York session. The fall in risk assets may be attributed to large purchases of near-term put options on the S&P 500. Consequently, the S&P 500 closed -1.47% on the day (high: +0.20%, low: -1.48%), the Dow Jones fell -1.27% (high: +0.22%, low: +1.29%) while the Nasdaq dropped +1.53% (high: +0.29%, low: -1.55%). 
  • The late sell-off is a little puzzling given that US bond yields were lower on the day and there was no significant market moving news. However, it could just be position adjustment ahead of the long holiday weekend. The S&P500 came within 0.5% of hitting all-time highs before reversing course on the day and is now roughly 2% from it. 
  • The crypto market resumed its rally with Bitcoin up +3.35% and Ether up +1.12%.
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Headlines & Market Impact

Is the U.S. in a ‘silent depression?’ Economists weigh in on the viral TikTok theory

Notable Snippet: The U.S. economy has remained remarkably strong but affordability is worse than it has ever been, some social media users say, even when compared to The Great Depression.

One of TikTok’s latest trends, coined the “silent depression,” aims to explain how key expenses such as housing, transportation and food account for an increasing share of the average American’s take-home pay. It’s harder today to get by than it was during the worst economic period in this country’s history, according to some TikTokers.

But economists strongly disagree. “Any notion from TikTok that life was better in 1923 than it is now is divorced from reality,” said Columbia Business School economics professor Brett House.

But regardless of the country’s economic standing, many Americans are struggling in the face of sky-high prices for everyday items, and most have exhausted their savings and are now leaning on credit cards to make ends meet.

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Fed’s Harker open to lowering interest rates, but not imminently

Notable Snippet: Philadelphia Federal Reserve President Patrick Harker on Wednesday said he still opposes any further U.S. central bank interest rate hikes, while signalling openness to lowering short-term borrowing costs, albeit not imminently.

“I’ve been in the camp of, let’s hold rates where they are for a while, let’s see how this plays out, we don’t need to raise rates anymore,” Harker said in an appearance on WHYY, a Philadelphia-based radio station.

But looking ahead, “it’s important that we start to move rates down,” he said, adding that “we don’t have to do it too fast, we’re not going to do it right away, it’s going to take some time.”

In recent days, a number of Fed officials have fanned out and cautioned markets to not get too far ahead of themselves regarding the prospect of policy easing amid a still uncertain economic outlook. Harker was a voting member of the central bank’s policy-setting Federal Open Market Committee this year, but he won’t be again, as he faces mandatory retirement in 2025.

Harker was among the leading group of Fed officials who believed the central bank had done enough with its rate increases and needed time to see how those aggressive rises in borrowing costs were playing out in the economy. The central bank has raised its policy rate by 5.25 percentage points since March 2022.

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Optimism wanes among oil companies, Dallas Fed survey shows

Notable Snippet: Oil and gas activity remained essentially unchanged in the fourth quarter and optimism waned as uncertainty jumped, a survey of oil and gas executives by the Dallas Federal Reserve Bank showed.

Some of that uncertainty is centred around lower average oil prices and questions over OPEC’s ability to influence oil prices, said the Bank’s economist Kunal Patel.

“The company outlook for E&P (exploration and production) firms changed more drastically, as the company outlook index for these firms fell sharply from 46.8 to -9.0”, the survey showed.

Oil production increased in the US Lower 48 but at a slower pace, according to the survey. There is also an expectation of more large mergers and acquisitions.

“Executives at larger E&P firms are more likely to report their goal for 2024, their primary goal, is to acquire assets or reduce debt,” Patel said in a news conference on Wednesday.

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Best,
Phan Vee Leung
CIO & Founder, TrackRecord