Market Commentary – September 23rd, 2022

Crypto Market

At the time of writing, Bitcoin is trading at $18,900 and Ethereum at $1,288. Crypto markets were under pressure this week after the Federal Reserve raised rates by 75 bps on Wednesday (more details under the Macro section). During the course of the week, there was a net outflow of over $200M worth of Bitcoin from centralized exchanges as its price held around its low set in June 2022. This level may have attracted buyers. Exchange netflows are the net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges. Crypto going into exchanges (inflow) may signal selling pressure, while withdrawals (outflow) potentially point to accumulation.

XRP was an outlier and performed well this week adding as much as 13% to its market cap. This is on the back of expectations by some that the SEC’s lawsuit against the token’s issuer, Ripple, may soon be concluded. In two separate motions filed by Ripple and the SEC, both sides called for a ‘summary judgment.’ Summary judgements typically involve expedited rulings in a case when a side believes enough evidence has been presented to make a decision. In the case of Ripple, both sides called on the judge to make a ruling regarding whether the firm violated securities laws when it sold XRP to investors. 

In the USA, The House Financial Services Committee (FSC) is drafting legislation to regulate stablecoins, which according to Bloomberg, would place a two-year ban on algorithmic stablecoins like TerraUSD and make the issuing or creating of new “endogenously collateralized stablecoins” illegal. The definition would apply to stablecoins that allow users to convert, redeem, or repurchase the stablecoin for a fixed amount of monetary value. It also applies to stablecoins backed by other digital assets from the same creator to maintain their fixed price.

Macro

After the Federal Reserve meeting on Wednesday, stocks sold off and short yields rose when the Fed raised its benchmark rate by 75 basis points and projected the median terminal rate above market expectations. The Fed’s median forecast is for the Fed funds rate to rise to 4.4% by the end of this year, then 4.6% in 2023. The previous estimates had been 3.8% and 3.4% in the June dot plot.

The Fed substantially revised down GDP forecasts, with the median estimate for growth this year at 0.2%, down from 1.7% forecast in June. Unemployment rate forecasts were up, with the median now at 4.4% for both 2023 and 2024 while the long-run rate is unchanged at 4%. Both headline and core Personal Consumption Expenditures (PCE)  forecasts were also up for this year and next. The Fed doesn’t see inflation returning to its 2% target until 2025.

Stocks were volatile during Federal Reserve Chairman Jerome Powell’s press conference where he largely ‘toed’ the same line from his Jackson Hole speech, reiterating there is still ‘a ways to go’ on rates and he would want to be very confident inflation is moving back down significantly before even thinking about lowering interest rates. 

On the global front,  Russian President Putin ordered 300,000 reservists to mobilize amid the war in Ukraine and issued a nuclear threat to the West. The USD strengthened on this news because it was viewed as risk off and investors sold some assets to USD.

Equities, Fixed Income, FX and Commodities

Equities

Stocks have been under pressure after the Federal Reserve meeting on wednesday. At the time of writing, The Dow Jones Industrial Average is down 2.56% for the week and the Nasdaq Composite dropped -2.93%. Growth-oriented stocks were the hardest hit, as bond yields continued to drift higher. 

Fixed Income, FX & Commodities 

The USD gained strength during the course of the week. EUR/USD is at 20-year lows as various European PMI readings highlighted deepening economic downturn in the region. GBP/USD hit below the 1.12 level for its lowest level since 1985. The USD’s strength is unlikely to subside anytime soon as long as the Fed is hiking further and faster than other countries. At the time of writing, The US10Y yield is 3.80% a new high for the year while Brent crude oil is trading around $85 USD.

News we’ve been reading

The Fine Print

Disclaimer

This confidential presentation has been prepared by Coinsquare Ltd. (the “Company”) solely for information and/or educational purposes. It shall not be construed as investment advice. Information contained herein does not purport to be complete and is subject to certain qualifications and assumptions and should not be exclusively relied upon for the purpose of making any investment or entering into any transaction in relation therewith. Neither the Company nor any of its representatives shall have any liability whatsoever, under contract, tort, trust or otherwise, to you or any person resulting from the use of the information in this presentation by you or any of your representatives or for omissions from the information in this presentation. The information and opinions contained in this document are provided as at the date hereof and are subject to change without notice and, in furnishing this document, the Company does not undertake or agree to any obligation to provide recipients with access to any additional information or to update or correct the document. This document has not been reviewed or approved by any securities administrator in any jurisdiction. This presentation or the information contained herein is not to be given to any person other than the person or group that was provided with the presentation directly by the Company or their advisors and is not to be reproduced in any manner whatsoever. Any further distribution or reproduction of this presentation in whole or in part, or the disclosure of any of its contents by the recipient, is unauthorized. Interested investors are not advised to rely solely on this document in forming investment decisions and are strongly advised to conduct further due diligence by requesting additional information from the company before making any such investment decisions. Unless otherwise noted, all figures expressed herein are in Canadian dollars. Coinsquare Wealth advisors cannot provide investment advice.

Forward-Looking Information 

Certain of the information contained in this confidential presentation may contain “forward-looking information”. Forward-looking information and statements may include, among others, statements regarding the future plans, costs, objectives or performance of the Company, or the assumptions underlying any of the foregoing. In this presentation, words such as “may”, “would”, “could”, “will”, “likely”, “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate” and similar words and the negative form thereof are used to identify forward-looking statements. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether, or the times at or by which, such future performance will be achieved. The actual results of the Company could vary from the forward-looking information contained herein, including as a result of such risks as a collapse in the market for cryptocurrencies, adverse regulatory developments and competition from other cryptocurrency custodians. Forward-looking statements and information are based on information available at the time and/or management’s good-faith belief with respect to future events and are subject to known or unknown risks, uncertainties, assumptions and other unpredictable factors, many of which are beyond the company’s control. The forward-looking information contained herein was developed based on assumptions related to, among other things, the continued growth of the cryptocurrency market, the company’s ability to obtain a license from the Alberta Treasury Board and Finance to operate a trust company or to receive a license from the applicable securities commissions as a clearing agent, grow its market share and the viability of the Company’s intended future product offerings. The Company does not intend, nor does it undertake any obligation, to update or revise any forward-looking information or statements contained in this presentation to reflect subsequent information, events or circumstances or otherwise, except if required by applicable laws. The Company is a new company with no operating history; and it may not actually achieve its plans, projections, or expectations. Important factors that could cause actual results to differ materially from the Company’s expectations include, consumer sentiment towards the Company’s products and blockchain technology generally, litigation, global economic climate, equipment failures, increase in operating costs, decrease in the price of cryptocurrency, security threats, government regulations, loss of key employees and consultants, additional funding requirements, changes in laws, technology failures, competition, and failure of counter-parties to perform their contractual obligations. Neither the Company nor any of our representatives make any representation or warranty, express or implied, as to the accuracy, sufficiency or completeness of the information in this presentation. Certain information contained herein is based on, or derived from, information provided by independent third-party sources. The Company believes that such information is accurate and that the sources from which it has been obtained are reliable. The Company cannot guarantee the accuracy of such information, however, and has not independently verified the assumptions on which such information is based. The Company does not assume any responsibility for the accuracy or completeness of such information.

Leave a Reply

Your email address will not be published.