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2023-01-27 01:20:40
Market situation
A day after the Fed announced a rate hike, the stock market continued to decline. The Dow Jones fell 0.46%, the S&P 500 fell 1.06% and the Nasdaq fell 1.73%. Stock futures are still trending down. Gold and oil did not change much in price and fluctuated around 1631 USD/ounce and 87.99 USD/barrel, respectively. And BTC is still holding above $20,000.
The Fed still added 0.75% as investors expected. However, the Fed’s acknowledgment that the economy has slowed and that they are still raising interest rates despite the possibility of a recession makes the market even more fearful. The time from when the Fed started raising interest rates from 0.25% to the current level of 3.75%-4% was the period when the Fed raised rates the fastest in history. Interest rates have risen to nearly 16 times their original levels, higher than the rate hikes led by former Fed chair Paul Volcker. Although Paul Volcker was able to push back inflation when he raised interest rates quickly from 10% to 20%, the US economy had to trade off with a recession.
For now, reports show that jobs are still good and people are still spending. This also makes inflation will not be able to go down. Therefore, in the immediate future, the Fed will continue to raise interest rates to control inflation.
The US stock market is in one of the worst periods in history. Investors continue to receive news that companies continue to join a wave of job cuts or halts in hiring amid a worsening economic outlook. Fintech company Chime is laying off 12% of its workforce, or about 160 employees.
Next, Amazon is also suspending new hires for its retail jobs. The company’s CEO Andy Jassy also said it was quick to cut costs by concluding some projects and reducing warehouse space.
Or Lyft said it will cut 13% of its workforce, affecting all teams in their company. In an email to employees, CEO Logan Green and Lyft President John Zimmer indicated that “a recession is likely at some point next year” and rising insurance costs. go up.
Online payments company Stripe is also laying off about 14% of its employees. Other companies such as Alphabet, Meta have all taken steps to control costs. Companies including Netflix, Spotify, Coinbase and Shopify have announced the layoffs. The majority of companies that announce tightening staffing costs are related to technology or indirectly to consumers. These are the early signs of unemployment rebalancing. Until the unemployment rate has noticeable numbers, maybe then the Fed will slow down the rate hike.
Companies and holdings of BTC
One of the crypto companies, Coinbase, also announced third-quarter results. Coinbase reported a higher-than-expected user count even as third-quarter revenue fell short of calculations and posted a larger-than-expected loss. Coinbase’s revenue fell as the crypto market went into winter, the general economy and the company also had a lot of other exchanges competing. The number of Coinbase cryptos remains similar to the previous quarter.
PayPal has better-than-expected third-quarter statistics. Earnings per share came in at $1.08 per share, well above the 96 cents expected. And revenue reached 6.85 billion USD, also higher than the estimated 6.82 billion USD. However, the stock fell more than 5% in after-hours trading as the company’s fourth-quarter revenue estimate fell short of analyst expectations.
Next, Block (formerly Square) reported third-quarter earnings that beat Wall Street’s expectations for a profit. Earnings per share came in at $0.42, well above expectations of $0.23. Revenue came in at $4.52 billion versus analysts’ expectations of $1.53 billion. Block says it made $37 million from Bitcoin sales during the quarter on total revenue of $1.76 billion. As for BTC, Block company continues to hold and does not buy or sell.
As for MicroStrategy, this is the first quarter of under the new chief executive, Phong Le, after Michael Saylor stepped down. MicroStrategy’s third-quarter revenue came in at $125.4 million, down 2.1% from a year earlier and below analyst expectations of $127.25 million, according to Bloomberg. Net loss was $27.1 million, lower than a deficit of $36.1 million a year earlier. Adjusted earnings per share used by Wall Street came in at 43.6 cents, 46.5 cents below estimates.
During a conference call to discuss the results, Phong Le confirmed that the company is building software based on the Lightning network, allowing for faster and cheaper payments on the bitcoin blockchain. The company is also in the early stages of exploring Lightning applications to help enterprise customers secure networks, monetize websites, and deploy wallets through Bitcoin.
Despite continuing to lose money as crypto goes down, the stock and popularity of MicroStrategy have grown enormously since the company announced its investment in BTC.
The UK is facing a prolonged recession
The Bank of England (BOE) yesterday warned that the UK is facing its longest recession since records began, with a recession expected to drag on. until 2024.
The Bank of England also described its economic outlook as “very challenging”, noting that unemployment is likely to double to 6.5% during the country’s two-year slump. The agency also said UK GDP is expected to shrink by around 0.75% in the second half of 2022, reflecting real income levels driven by higher prices for energy and tradable commodities.
Given the current situation, the BOE has raised interest rates by 75 basis points historically, the biggest increase in 33 years. This is the eighth consecutive rate hike marking the central bank’s continued efforts to rein in inflation that has hit a 40-year high. Inflation in the UK stood at 10.1% reported in September.
Another European country suffering from far worse inflation is Turkey. Inflation in Turkey increased by 85.5% year-on-year in October last year as food and energy prices continued to rise. According to the Turkish Statistical Institute, food prices are 99% higher than in the same period last year, housing has increased by 85% and means of transport have increased by 117%. Despite the high inflation situation, the president of this country still refused to raise interest rates and stressed that it would harm the economy.
Without exception, Russia’s economic decline deepened as Putin warned he could pull out of the grain deal again. Data released by the Russian Ministry of Economic Development showed that the country’s recession continued in September, with the decline becoming more pronounced. This withdrawal from exports greatly affects food exports in Russia when the economy is under embargo. So Russia is also considering a return to the Black Sea grain initiative.
Mining companies are struggling
Crypto companies are also suffering from general macroeconomic difficulties. Along with that is due to the current bearish trend of the cryptocurrency market. Mining companies are also struggling to cope with falling revenue and rising costs.
Several crypto companies seek to retain their staff and customers. Other companies are trying not to run out of money before the end of 2022. Last week, Core Scientific announced that it could not pay its bills and the future was worrisome. Ditto for Argo Blockchain just a few days later shared that they did not receive the capital they originally planned to receive.
Yesterday, Bitcoin company Iris Energy also announced that they are having serious liquidity concerns. Iris Energy has $103 million in mortgage debt. This company has to pay interest on loans to 7 million USD every month, but they only earn 2 million USD per month.
And major mining company Marathon Digital Holdings has announced they increase the mining speed when crypto goes down. The company mined 615 Bitcoins in October, the highest monthly total in its history. Large mining companies with capital and technology advantages can still withstand and overcome this difficult period.
According to CryptoQuant’s on-chain data, miners’ selling is also at a low level. Companies that want and need to sell seem to have sold in the past.
Statistics of bitcointreasuries.org show the amount of BTC in storage of some mining companies.
Large companies like Marathon continue to store BTC even though they are increasing the number of miners. Usually only small mining companies sell, so it is very unlikely that miners will sell out of BTC at the same time. If it does, it won’t have much of an effect on the price of BTC.
Other information:
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Crypto and stock trading platform Robinhood highlighted lagging crypto revenue in the third quarter of 2022. According to the report, monthly active users (MAUs) fell 12% QoQ and down 24% volume in the last quarter. This led to a 12% drop in Robinhood’s crypto revenue, reaching $51 million. Despite this, company executives say they will continue to invest their resources in crypto, including rolling out support for more cryptocurrencies, a wallet focused on international retail, and more. new economy and NFT-related features on its platform.
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Ark Invest has added $3.8 million to shares of Jack Dorsey’s Block. Cathie Wood’s company also purchased a similar amount of Robinhood stock through the two funds. The fund believes that the future of these two companies will be very bright.
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Goldman Sachs is set to announce a data service that seeks to categorize hundreds of cryptocurrencies and tokens so that institutional investors can understand the new asset class. This service will help with analysis and research, as well as performance benchmarking, portfolio management or creating investment products based on areas such as decentralized finance, metaverse, contract platforms smart or value transfer currency.
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Circle Internet Financial has begun transferring reserves for its USDC stablecoin into a dedicated fund set up by BlackRock and registered with the US Securities and Exchange Commission. In which, 80% of assets will be stored in the fund of BlackRock. The remaining 20% will still be held in Circle’s partner banks.
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