Originally posted by Trovio on Mar 26, 2023.
Macro Overview:
· The FED, ECB and BOE all continued with rate hikes in the last 10 days. The USD implied rates surface is now pricing last week’s FED hike as the final hike of the cycle and 100bps of cuts by early 2024. The ECB and BOE still have 1 to 2 more hikes priced in before cuts in late 2024 are expected to begin.
· Central Bank (CB) commentary has been more cautious on the economic outlook and recession risks because of the banking crisis. CB’s stated after their rates decisions that the global economy and the banking sector were durable and sound enough to withstand the current instability. The hikes however could exacerbate the tightening too steeply policy error, overly tightening credit conditions and stressing the banking sector into a prolonged crisis.
· Equity market indices rose by almost 1.5% on the week and were led by mega-cap technology stocks. Implied volatility remains high across asset classes and worries persist about European investment banks and US regional banks. Acquisitions of the failed US banks' assets and no additional news on European banks should stabilise markets.
· Commodities, led by oil, have had steep falls this month and will help the moderating inflation narrative. US inflation and market sentiment data will be reported later this week and will be the first indications if we are indeed at peak rates.
Digital Asset Update:
· Bitcoin closed the week flat at $28K following the previous week’s ~26% move. Bitcoin has maintained its dominance amongst the broader digital asset market, sitting at 48% of the total crypto market cap as capital continues to flow to safe-haven assets.
· After trading below 90 cents following the shuttering of Silicon Valley Bank, Circle’s UDSC has continued to see outflows, with the stablecoins market cap falling from $45Bn to $34Bn throughout March. Bitcoin’s strong performance throughout the month suggests some of the capital previously held in stablecoins has moved to Bitcoin as participants utilise the leading digital asset as a store of value with no counterparty risk amidst the banking crisis and ensuing CB actions.
· XRP, the token native to Ripple’s network, surged ~16% last week as the Ripple v SEC case nears a decision. Ripple and the SEC submitted their final round of briefs seeking a summary judgment to the case, with many believing the case will land in favour of Ripple.
· Last week the SEC issued Coinbase a “Wells notice” regarding its staking and wallet services. You can view Coinbase’s initial response on the matter on its website. The Coinbase news came a few days after the SEC announced it was suing Tron network founder Justin Sun along with a number of celebrities found to be promoting tokens related to Sun without disclosing details of their compensation.
· Despite the recent SEC action and de-banking of the industry in the US, Nasdaq is continuing its push into the digital asset space and is currently waiting on approval from the New York Department of Financial Services, to begin offering custody to clients. Nasdaq’s Head of Strategy for Digital Assets also noted last week that the next step for the exchange is “… execution and liquidity services…”, potentially a catalyst for institutional adoption in the future.