SignalPlus Macro Research Report (20230911): FTX Liquidation Imminent, Clouds Loom Over Cryptocurrency Market
Last week's transactions were relatively calm. The US dollar spot index rose for 8 consecutive weeks, the longest continuous upward trend since 2005. This was mainly due to the record weakness of offshore renminbi without significant intervention from the People's Bank of China, combined with the increase in US yield in the context of a surge in corporate bond supply and the soaring oil price to nearly $90 per barrel.
The stock market was also relatively quiet. Apple accounted for the majority of trading volume. After China announced its intention to expand the scope of banning the use of iPhones by the government and state-owned enterprises, its stock price fell by about 6%. In addition, the number of corporate defaults in the US this year is the highest in over 3 years. Although borrowing rates are at a 15-year high, default conditions are expected to peak around the middle of next year and then decline.
On the other hand, US household net worth increased by $5.5 trillion (+3.7%) in the second quarter of 2023, reaching $154.3 trillion, a historic high. The growth of net worth was mainly attributed to a $26 billion increase in stock value and a $25 billion increase in real estate value. The US real estate market has experienced a sharp recovery due to soaring development costs and a lack of supply. In addition, the remarks of Federal Reserve officials last week were actually more dovish than expected. Most of the discussions indicated that policy rates were already at a "restrictive level," but they would also "take further action" if necessary. New York Fed President Williams stated that monetary policy was "in a good place," while Chicago Fed President pointed out that the focus of the current discussion was shifting from how high policy rates should rise to how long they should be maintained at this level.
In addition, renowned Fed observer Nick Timiraos has written and released an article titled "Important Shift in Fed Officials' Interest Rate Stance," arguing that the recent slowdown in wage growth is enough to shift the Fed's stance towards a more balanced view. The possibility of a rate hike in September has fallen to 5%, and according to the pricing of interest rate futures, the market still has a 50/50 view on the November meeting.
In terms of cryptocurrencies, prices are still showing no signs of improvement, and from a technical perspective, a downward breakthrough is likely in the short term. In addition, FTX is reportedly approved to sell up to $200 million worth of cryptocurrency assets on a weekly basis starting from September 13, many of which are altcoins. This decision seems to stem from regulatory pressure to sell and recover the assets of this bankrupt entity as much as possible, enabling it to continue relying on its core competencies and potentially relaunch FTX 2.0 in the next 24 months. If this plan becomes a reality, it will cause significant supply-demand imbalances in the coming weeks, especially considering the current low trading volume of cryptocurrencies. However, the liquidator does not seem too concerned about the market structure at the moment.
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