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This episode was hosted by Noelle Acheson. “Markets Daily” is executive produced by Jared Schwartz and produced and edited by Eleanor Pahl. All original music by Doc Blust and Colin Mealey.
Audio Transcript: This transcript has not been edited and may contain errors.
It’s Thursday, November 9th, 2023 and this is Markets Daily from CoinDesk. My name is Noelle Acheson, CoinDesk collaborator and author of the Crypto is Macro Now newsletter on Substack. On today’s show we’re talking about a new big-name crypto exchange, bitcoin fees, GDP growth, and more. So you don’t miss an episode, be sure to follow the podcast on your platform of choice, and turn on notifications. And just a reminder, CoinDesk is a news source and does not provide investment advice.
Now, a markets roundup.
The crypto market is surging, with bitcoin at one point today almost reaching 38,000 dollars. According to CoinDesk Indices, at 10am Eastern time this morning the bitcoin price was up 6.8% over the past 24 hours, trading at 37,604 dollars. Ether is up a stunning 8 and a quarter percent, breaking through the symbolic 2000 level to trade at 2,036 dollars.
Other assets are doing even better. Chainlink is up 14%, Solana is up 10%, Cardano 9%, Polygon and Avalanche are up 8%.
What is behind this strong sentiment? ETF speculation seems to be doing its part. As of today, the public rebuttal period for most of the existing bitcoin spot ETF proposals has closed, which means a comment from the U.S. Securities and Exchange Commission could come at any time. And next Friday is the deadline for an SEC decision on the Hashdex strategy change proposal, to convert its bitcoin futures ETF into one based on the actual asset.
Also, there’s the reevaluation of bitcoin’s safe haven thesis, with the U.S. debt becoming an ever more pressing problem, and several renowned investors highlighting bitcoin’s provably hard cap on its supply and its immutable monetary policy.
This morning, CoinDesk’s Omkar Godbole reported on an options market metric that gives some insight into trader sentiment. It’s called the skew, and it shows the relative price of calls versus puts expiring in four weeks. Calls are options to buy at a higher price, and therefore represent bullish positions. Puts are options to sell at a lower price, and so are good vehicles for those who expect the price of the underlying asset to fall.
According to Omkar, the skew is at its highest since April 2021. This means that the premium of calls to puts, or bullish to bearish bets, is at its highest in more than two and a half years.
Sentiment does seem to have changed.
In macro indicators today, let’s look again at GDP. But not the actual growth, the expected growth. I’ve spoken before about the Atlanta Fed’s GDPNow model, which takes in economic data as it is released, and spits out a frequently updated growth estimate. They go to pains to specify this is not a forecast, it is an estimate based on actual data.
You may recall that for the third quarter U.S. GDP growth, the Atlanta Fed GDPNow model was aiming much higher than the consensus estimates from economists. It was signaling Q3 growth of 5.4%, vs 4.4% average forecast. Well, the figure came in at 4.9%, smack in between the two, so the Atlanta Fed figures are worth paying attention to.
It updated its Q4 estimate yesterday. According to the Atlanta Fed, Q4 growth in the U.S. will come in at 2.4%. This is much lower than in Q3, less than half, but it is not yet a recession. Or is it?
One misunderstood feature of recessions is that they do not depend on two consecutive quarters of negative growth. I’m not sure where that idea came from, but it doesn’t hold. If you look at the annual rate of quarterly GDP growth at the start of the last few recessions, they were 1.4%, 1%, 1.7%, 4.3% in 1981.
So, what determines whether or not a U.S. recession is upon us? The answer is the National Bureau of Economic Research, a private organization entrusted with this call. The reason this organization, known as the NBER, gets to make this call is to avoid dozens of different dates being declared, which would make it difficult to combine and compare analyses. So, the NBER gets to decide when we are in a recession, and this is especially important given there is no established definition of what a recession even is.
The NBER’s definition is the following, and I quote: “a significant decline in economic activity spread across the economy, lasting more than a few months.” End quote. If you’re wondering what the organization means by “decline in economic activity,” well, you’re not the only one. It’s not just declining GDP. Last year, real GDP declined for two consecutive quarters without the NBER declaring a recession — something that hadn’t occurred in the U.S. since 1947.
Anyway, given the strength of consumer spending and business activity – although this is declining – we are probably not in a recession yet? Growth is declining, however, according to a lot of data points I’ve discussed on this podcast, and according to the Atlanta Fed GDPNow model.
It’s starting to feel like we’re in a sort of twilight zone. Maybe we are, maybe we aren’t. The rear view mirror will tell us more.
Back to markets, where stocks seem to be taking a pause. Yesterday, the main U.S. indices closed more or less flat, and futures are pointing to a tentatively positive opening. This is despite government bond yields continuing to drop – yesterday, the U.S. 10-year yield dipped below 4.5%, although this morning it is back just above that level.
In Europe, the FTSE 100 closed flat yet again. The German DAX index rose by half a percent, back up to its highest level in just over a month. The Eurostoxx 600 was up three tenths of a percent. So far this morning, sentiment looks more positive, with the main indices up at least half a percent.
Sentiment was more positive in Asia today, with Japan’s Nikkei index up 1 and a half percent, the Hang Seng up a third, and the Shanghai Composite flat on the day.
In commodities, oil prices are still dropping. Yesterday, the Brent crude benchmark fell another 2%, dropping below $80 dollars a barrel for the first time since mid-July. Earlier today, it had recovered slightly, up 1.2% to trade at 81 dollars and 40 cents a barrel.
Gold also continued lower, most likely weighed down by a busy schedule this week of central bankers reminding us that there could be more rate hikes ahead. Yesterday the metal dropped almost three quarters of a percent. So far today, the decline seems more muted, with gold trading down two tenths of a percent, at 1946 dollars per ounce.
Stay with us – after the break we’re going to look at crypto trading going mainstream in Europe, and at bitcoin transactions.
In this section, we’re going to talk about a big development on the European crypto landscape, but first…
Bitcoin fees are surging. The cost of a transaction on the bitcoin network is now over $7, its highest level since May. Normally a bitcoin transaction costs less than $2, so this is an uncomfortable level for many wishing to make small transfers.
According to a report by CoinDesk’s Krisztian Sandor yesterday, this is due to the reemergence of interest in bitcoin ordinals. These are bitcoin-based non-fungible tokens, or NFTs, which is a controversial subject causing much debate between those who think bitcoin should not be used for this, and others who see the network as an evolving technology with evolving use cases.
Part of the surge in activity could be due to the listing on Binance this week of the ORDI token, which uses the ordinals template. And yesterday, the Gate and Kucoin exchanges announced that they were preparing the listing of the ordinals token Sats.
Next, in a presentation to investors on Tuesday, Deutsche Borse revealed that it is planning to launch a crypto asset trading platform in the first quarter of next year.
This is a pretty big deal. Deutsche Borse is one of the largest stock exchange operators in the world. While it’s now pretty common to hear of traditional finance firms planning digital asset services, they generally mean tokenized securities, which will be an important part of the evolution of markets but they are also the low-hanging fruit, they do not as yet promise the same level of innovation as crypto currencies and other types of tokens.
Not Deutsche Borse – it is launching a crypto exchange, which will handle tokenized securities of course, but also cryptocurrencies, stablecoins and other tokens.
This is part of the exchange operator’s Horizon 2026 digitization plans, and it brings together the various investments the firm has been making in the blockchain space over the years. It also gives a blue-chip brand to crypto asset services, a brand with significant reach and respect among investors of all types. What’s more, it’s a brand that will be able to leverage the crypto asset regulatory framework due to go live in Europe next year.
While many traditional finance digital asset announcements are either narrow in scope or just for PR purposes, this one is neither. It is a genuine part of the exchange operator’s strategy, one that could make a meaningful impact on European crypto market participation.