GB Market Commentary 11/11/2022
by Marcus Sotiriou
Whilst the S&P 500 and the Nasdaq were up almost 5% and over 6% respectively yesterday, Bitcoin fails to overcome the $17,500 level, due to the failure of FTX.
Many investors have been waiting on the side-lines for inflation to show convincing signs of inflecting down before entering the crypto market. Yesterday was the first time we had some evidence to suggest inflation may have peaked, as CPI dropped from 8.2% in September to 7.7% in October and coming in lower than expectations by 0.2%.
We may not be at a turning point from a macroeconomic perspective yet, but the fact that nearly all price measures decreased from the previous month to now provides optimism for bulls. In fact, Core CPI, excluding the laggard of shelter inflation, is negative 0.1% - this is the first negative read since May 2020. This CPI report has led to the Fed funds futures have now pricing in the odds of a half-point increase at the next meeting to 80%.
Why is crypto being left behind the global markets with this positive economic news?
The downfall of one of the largest crypto exchanges, FTX, has created havoc. Misuse of customer funds has led FTX to become bankrupt, as they have announced the start of voluntary Chapter 11 Proceedings. FTX reportedly had $16 billion in customer assets and gave $10 billion was given Alameda trading. WSJ reports that nearly all was lost.
A headline has been shared declaring that, ‘Alameda Research LLC lists estimates assets and liabilities in the range of $10 billion - $50 billion’, which has alarmed people further. Even though this is true, it is just a range that had to be checked off in the court filing, and the true figure is likely much closer to $10 billion.
The knock-on effects for the rest of the industry remains to be seen, yet so far, we have seen BlockFi on the brink of bankruptcy. According to FTX, about 130 additional companies affiliated with FTX -- including FTX US and Alameda Research - have also begun the bankruptcy process.
So far, Bitcoin has not reacted too negatively to this news, as it stays around $17,000 - the market could enjoy the fact it now has more clarity than a week ago. However, the severity of the contagion to come could have damaging effects for the crypto ecosystem. The potential reversal of the direction of inflation in the coming months could save crypto prices from spiralling down further, though, meaning inflation data is still critical to watch out for.