Recession Fears Outweigh Soft Inflation Data

Weekly News Wrap Up

Softer-than-expected US Nov CPI (7.1% vs. 7.3% expected) triggered massive swings in global risk assets, but could not outweigh recession fees as the US Federal Reserve delivered another 50bps rate hike to 4.25% – 4.50%. Chair Jerome Powell said the Fed is not close to ending its anti-inflation campaign of interest-rate increases as policymakers projected rates would end next year at 5.1%, before being cut to 4.1% in 2024. In crypto, concerns about CEX continue to spread due to the FTX saga as Binance users rushed to withdraw their crypto on the exchange – 7d net withdrawals currently at $7.28 billion, data from DefiLlama shows (more on this below). 

SPX -2.15% and NASDAQ -2.76% as recession fears continue to weigh on markets as investors look toward the Fed’s commitment to raising rates above 5% in 2023. Similarly, BTC -2.02% and ETH -6.29%, receiving a post-CPI boost but sold off on Friday, retracing below $17,000 and $1,200 respectively. 

Looking ahead, data calendar remains light towards the end of the year – we have US Core PCE NOV (Fed’s preferred inflation indicator) on 23 Dec. Markets are expected to continue this trend of trading around the Fed and inflation/wage prints, and we will be watching US CPI DEC on 12 Jan, US PPI on 18 Jan, US Core PCE DEC on 27 Jan and FOMC on 01 Feb.

Cryptocurrency News

  • Sam Bankman-Fried (SBF) charged with wire fraud, money laundering and conspiracy by the U.S. Department of Justice. The former CEO and founder of FTX also faces separate charges from the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC). He was arrested in the Bahamas on 12 Dec. Bloomberg’s Matt Levine wrote an interesting opinion piece on how everything can be classified as “securities fraud” – do give it a read if you have some time.
  • Goldman Sachs experiments with blockchain-based bond issuance, reducing settlement from 5 days to 60 seconds. In a Wall Street Journal opinion piece, Chairman and CEO of Goldman Sachs, stated that the bank used their new tokenization platform to arrange a EUR 100 million 2Y digital bond for the European Investment Bank with 2 other banks based on a private blockchain.
    Our View: coming from traditional finance, it is exciting to see the value of blockchain technology being applied to an archaic industry that is long overdue for disruption. Innovation in the foundational area of the economy, while not “world-changing” (as others may see it), is still a valid application of the technology  
  • Binance withdrawals surge as concerns about its reserve report grows. Net outflows have hit $5.08 billion since 07 December when Mazar’s audit report was released, data from DefiLLama shows. Blockchain data shows that large crypto market makers, Jump Trading and Wintermute, were among those moving sizable funds from Binance. In an update, Mazars suspended all work with crypto clients regarding proof-of-reserves on concerns over public perception of these “audits”
    Our View: on the surface, it seems like the large withdrawals from market makers spurred a large flurry of withdrawals from the exchange after investors got spooked from their experience with FTX. Binance temporarily halted withdrawals of USDC given its reserves’ interaction with the traditional banking system – you can read more about this here.

Investment Consideration

Our best strategy for the moment is to take at least 1-3 years in Moderate Portfolio because it has a good defense with 50% Fixed Deposit , 30% In DCD and 20% in Staking because we still have potential return in DCD and Staking especially in BTC.

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