Has the cryptocurrency overhang disappeared due to Binance settlement? | Posted by Fractal_Monk | Coins | November 2023
The holiday-shortened week continued with a broad cross-asset rally, although momentum waned. SPX stayed at 4550 and bond yields fell slightly. Credit continued to rally, with both high yield and quality bonds rising. The DXY started the week lower to post its biggest monthly decline of the year, but recovered after the release of FOMC minutes and jobless claims data showing the U.S. labor market remains strong. Emerging market currencies continued to rise with the MSCI EM FX Index reaching its highest level of the year. This was a positive development for most economies across Asia. Central banks have fought hard throughout this hiking cycle to step in and support the currency to counter the dollar’s strength.
FOMC minutes released Tuesday showed Fed officials were slightly more hawkish, emphasizing the need to keep policy sufficiently restrictive for long enough until more evidence emerges that inflationary pressures continue to ease. The Fed’s rationale for skipping a final rate hike has centered around the tightening of financial conditions since July (it ‘participates’ in rate hikes), but much of that tightening was reversed in the cross-asset rally in November. Therefore, the committee wanted to leave open the possibility of further increases if future data supported it. Jerome Powell also hinted in his final public speech that the favorable November data was likely a ‘fake’ and stressed that the impulse to ease inflation must continue before the Federal Reserve can declare victory. The market has not reacted significantly and still expects future data to be cooler and effectively end the hiking cycle.
Unemployment claims data released Wednesday were lower than expected and show the U.S. economy is continuing to grow without a dramatic slowdown. This provides more confidence in the longer-term explanation that the Fed must ensure that inflation is sufficiently under control before easing policy conditions. The state and direction of the labor market will become clearer with the release of NFP data next week.
The biggest news this week is that Binance reached a settlement with the DoJ for $4.3 Bio USD over money laundering criminal charges. Under the terms, CEO Changpeng Zhao (CZ) will also plead guilty, pay a personal fine of $50 million, resign from his position and be barred from holding any role in the company for the next three years. There is also the possibility of incarceration for CZ (though more likely house arrest like Arthur Hayes) and possibly sentencing at a later date. The regulator will also appoint an observer to Binance for the next five years to ensure compliance with the law.
Users have withdrawn more than $1 Bio from exchanges as a hedging activity, but this is a small number compared to their total assets held (~$65 Bio). While this was received as positive news as it removed a large overhang in the industry, the regulator’s mention of DeFi in its press conference led to speculation that there may be further enforcement action against decentralized protocols in the future.
Meanwhile, BTC continued to trade in the 35-37,000 range as the end of the month approached. Monthly closes above 37,000 are clearly bullish, while below 35,000 are bearish in the near term where the price may retreat to 32,000.
Ethereum continued its sluggish performance and had difficulty exceeding 2100. ETHBTC also remained at 0.055. Until there are signs of a significant ETHBTC rally, meaningful circulation of capital into ETH will not be evident.
The Sol rally took a breather as the price consolidated around the $55 level. A pullback to the lower support area of 45 is healthy and will provide a strong base for the rally to continue on. The Solana ecosystem project continues to attract attention with the successful launch of the Pyth Network token ($5 Bio FDV) and significant interest in the upcoming Jupiter airdrop (along with other planned ecosystem airdrops).
