The Weekly Wrap: FOMC, NASDAQ Crypto Custody
Sep 23, 2022 - 3 min read
1. Inflation up, rates up, dollar up
The Facts:
- On Wednesday, the FED raised their benchmark interest rate by 75 basis points after their two-day Federal Open Market Committee (FOMC) meeting.
- With the recent hike, the rate is now ranging between 3%-3.25%.
- According to the Federal Reserve's median prediction given on Wednesday, the central bank will hike interest rates as high as 4.6% in 2023 before ceasing to combat the inflationary crisis.
- The jobless claims came in Thursday, increasing by 5’000 to 213’000 while continuing claims dropped by 22’000 to 1.379m.
- Interest rate hikes all over the world were due this week as the Norwegian national bank (2.25%), the Bank of England (2.25%), and Sweden’s Riksbank (1.75%) signaled aggressive tightening policy.
- Moreover, the Swiss National Bank is ending the negative rates era by raising 75 bps to 0.5%, not ruling out further hikes.
- As of the time of writing, the Euro slides to a new 20-year low ($0.98) while the pound drops to new lows not seen since 1985.
Why it’s important:
- With inflation running almost as hot as in the early 1980s, the FED is sticking to their tight monetary policy taking their benchmark interest rates as high as las seen in early 2008.
- As the dot plot indicates another 1.25% by EOY, a further 75 bps rate hiker might be ahead, with only two more policy meetings remaining in 2022.
- Fueled by the hawkish FED policy hiking rates aggressively, the relative strength of the U.S. economy and investors seeking a safe haven from heavy market conditions.
- As housing markets in China, the U.S. and the euro zone show first signs of weakness while inflation keeps surging globally, recession and even depression fears are growing stronger despite a resilient U.S. labor market.
- Russia’s announcement of mobilization and referendums in Luhansk, Donetsk, Kherson and Zaporizhzhia, provinces that are occupied by Russian troops, asking residents to vote for independence and then join Russia have raised fears even further.
2. Nasdaq pushes into digital assets amidst crypto winter
The Facts:
- Nasdaq announced Tuesday, that they plan to do their first major push into crypto by offering a crypto custody service.
- The firm has hired Ira Auerbach, former Global Head of Gemini Prime to run their new business unit Nasdaq Digital Assets.
- Moreover, they not only plan to offer crypto custody but also aim to expand to other services.
- Initially, their custody services for institutional investors will be limited to Bitcoin and Ether.
- The firm operating in the U.S. is not new to the cryptocurrency business as it has provided market surveillance technology to cryptocurrency exchange venues since 2018.
Why it’s important:
- Nasdaq’s move towards crypto is significant as the second-largest stock exchange is preparing to address growing interest from institutional investors in digital currencies.
- With this step, they are following the footsteps of financial giants such as Fidelity, which recently announced an offering for Bitcoin custody & retirement account access, Blackrock, recently announced offering for access to Bitcoin for institutions and HNWs and Citadel, recently announced the launch of a high-frequency crypto trading platform.
- Despite the crypto-wide market crash, Nasdaq and other big players remain undeterred and show clear confidence in the underlying technology as well as future market opportunity indicating mass institutional adoption.
- According to Tal Cohen, Head of North American markets at Nasdaq “Demand among institutional investors for engaging in digital assets has increased in recent years, and Nasdaq is well-positioned to accelerate broader adoption and drive sustainable growth”.
In other news
- SEC charges Ian Balina for promoting unregistered ICOs and claims that Ethereum transactions take place in U.S. jurisdiction (via Blockworks)
- Crypto market maker Wintermute suffers $160m hack (The Block)
- India’s largest exchanges WazirX to delist Circle’s USDC (BeInCrypto)
- Indonesia to tighten crypto regulation (via Reuters)
- Opensea announces support for Arbitrum NFTs (The Defiant)
- Github restores Tornado Cash repository (via The Block)
- Jesse Powell, CEO of Kraken steps down (via WSJ)
- CFTC pursues first case against a DAO (via CoinDesk)
$16t (10% of global GDP)
Estimated market size of tokenized global illiquid assets include IPOs, real estate, private debt, revenues from small and medium businesses, physical art, exotic beverages, private funds, wholesale bonds and many more by 2030
Source: (Data) Boston Consulting Group, (Chart) Bitcoin Suisse Research
If everything goes well with gas savings and we are lucky with the weather, we have a chance to get through winter well.
Robert Habeck, German Minister of Economy, on the looming energy crisis heading into the winter. (via MarketWatch)