November 2, 2022|Commentary

Commentary from the Desk: November 2, 2022


This week, all eyes on FOMC as October crypto pricing shines, while exchange volumes drop

The Macro Front

  • Wall Street is coming off a strong month of gains:
    • The Dow rallied nearly 14% in October, its biggest monthly advance since January 1976 as investors rotated out of technology and into sectors like banking;
    • The S&P 500 and Nasdaq Composite added about 8% and 3.9%, respectively.
  • The Federal Open Market Committee (FOMC) finished its two-day meeting today by announcing a 75bps rate hike to a target range of 3.75%-4%, the highest level since January 2008. This makes it the fourth consecutive hike of this size this year.
    • Still, bets on yet another jumbo hike in December are wavering and are about 10 basis points lower than they were in mid-October;
    • Another widely followed yield curve -- the gap between three-month and 10-year Treasuries -- inverted last week for the first time since March 2020.
  • While third-quarter corporate earnings have seen significant hits and misses overall, companies in the S&P 500 are set to grow 3% from the year before, according to FactSet data. With about 62% of index constituents having reported earnings, around 72% have posted results beating analyst estimates, compared with the five-year average of 77%.
  • Across the pond, the Bank of England (BoE) received positive demand from investors on this week at its first auction to sell government bonds from its 838 billion pound ($961 billion) quantitative easing stockpile.
    • The BoE aims to sell 6 billion GBP of gilts across eight auctions in November and December, as part of a plan to reduce its gilt holdings by 80 billion GBP over 12 months through a mix of sales and not reinvesting money from maturing gilts.
  • Over in the EU, ECB President Christine Lagarde commented recently that the peak of the current cycle of interest-rate increases must ensure that inflation returns to the 2% target over the medium term.
    • While she did not specify a level for the terminal rate, Lagarde suggested borrowing costs have further to rise following last week’s second straight 75 basis-point hike.
    • Inflation in the 19-member euro zone hit a record 10.7% in October, overshooting analyst estimates.

The Crypto Front

Overall, October was a solid month for crypto prices:

  • ETH is up 20% on the month as on-chain activity starts to slowly tick back up, while the supply-side effects of the Merge continue to become more prominent.
  • Additional prices moves include:
    • ETH/BTC: currently at .077 from .068 in the beginning of October;
    • MATIC: up 15% in the last 30 days, reaching as high as 0.93c;
    • AAVE: up 13.5% in the last 30 days (NB: GHO (i.e. Aave’s native stablecoin) and Ethereum v3 deployment are still in the works, but significant progress is being made);
    • dYdX: up 32.6% in the last 30 days (NB: dYdX recently announced a fiat on-ramp, with a move to Cosmos app-chain still in the works)
  • Other top performers in the last month:
    • DOGE: +128%
    • OSMO: +43.5%
  • However, exchange volumes remained quite depressed in October, with volumes hitting the lowest levels since December 2020:
    • Global volumes ticked down to $543 billion;
    • European volumes fell to October 2020 lows — registering around $17 billion;
    • North American volumes fell to $78 billion.
  • Crypto activity in Eastern Europe has spiked significantly due to the war in Ukraine, according to an interesting report by Chainalysis:
    • Eastern Europe is now the fifth-largest cryptocurrency market, with $630.9 billion in value received on-chain between July 2021 and June 2022 (i.e. just over 10% of global transaction activity during the time period);
    • However, 18.2% of all cryptocurrencies received by Eastern Europe comes from addresses associated with risky or illicit activity, more than any other region.


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