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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 Tuesday, November 21st, 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 Binance, Kraken, U.S. recessions 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.
In crypto, the market looks tentatively weak today as traders digest yesterday’s news about Kraken and Binance – I’ll have more to say on this later in the episode. According to CoinDesk Indices, as of 9 a.m. Eastern time this morning, bitcoin is trading down three tenths of a percent over the past 24 hours, to trade at 37,022 dollars. Ether is down seven tenths, trading at 2,005 dollars.
Elsewhere, the NEAR token is down almost 9%, Algorand and Fantom are down 8%, and Solana and Polygon are down 7%. It’s not all negative, however, Binance Coin and the Maker token are up over 4%.
In macro indicators, yesterday we got one that I personally find very interesting but that is often overlooked by analysts. It’s the Leading Economic Index calculated by the U.S. Conference Board, and the reason I like it is that it brings together 10 measures that indicate the strength of the economy, from the stock and bond markets through to jobless claims, housing data and manufacturing activity. Over time, it’s been a pretty reliable indicator of recessions, and has never dropped 12% from its local high without the U.S. being in one. Until now, that is.
The data out yesterday showed a 0.8% drop in October, lower than the consensus forecast of 0.7%. That makes last month the 19th consecutive drop, the longest losing streak since the Great Financial Crisis of 2008. The Conference Board itself has said that it expects the U.S. to enter a very short recession. It has not specified when.
Obviously, a recession would intensify calls for the Fed to cut interest rates, especially since inflation seems to finally be moving in the right direction. But Federal Reserve officials are continuing to insist that inflation is far from vanquished, and even what looks like the beginning of a recession may not be enough to deter them from their inflation goal.
In stocks, the main U.S. indices had a positive day yesterday, with all three reaching their highest points since early August. The S&P 500 rose seven tenths of a percent, the Dow Jones six tenths, and the Nasdaq index 1.1%. Futures are pointing to a soft open today.
In Europe, indices were largely flat yesterday, but so far today are mixed, with the FTSE 100 dropping six tenths of a percent this morning.
In Asia, the main indices were largely flat today, except for the Hang Seng which rose a quarter of a percent following reports from China of further measures to support the property sector.
In commodities, oil prices continued to climb yesterday, reaching a roughly 6% gain over the past two days on concerns that OPEC+ could choose to cut oil production further at their meeting this weekend. So far today, however, prices are pulling back, with the Brent Crude benchmark down four tenths of a percent to trade at 81 dollars and 97 cents.
Gold also continued its rise yesterday, and so far this morning is up a further 1% to trade at 1,998 dollars per ounce. This brings its gain over the past week to 2.7%.
Stay with us – after the break we look at the market reaction to the big news yesterday about Binance and Kraken.
Yesterday, we got not one but two bombshells concerning big crypto exchanges.
We heard that the U.S. Department of Justice was seeking a $4 billion dollar settlement from Binance over money laundering and other infractions, with Binance CEO and founder CZ possibly facing criminal charges.
We also saw the SEC drop a suit on Kraken, for operating an unregistered securities exchange and for commingling funds.
The most interesting takeaway from yesterday, however, is that the market largely shrugged this off. In theory, these moves could hurt the operations of two key components of crypto markets, and possibly cause even more liquidity to leave the ecosystem. This would be pretty bad for prices, as large investors in general need relatively high liquidity to justify an investment in volatile assets.
The fact that the market didn’t react strongly sends two very loud and positive messages.
One is that investors don’t expect either piece of news to impact market operations much. Binance can probably pay the $4 billion dollars, and CZ lives in the United Arab Emirates which does not have an extradition treaty with the U.S. He could choose to voluntarily show up to fight his case, but either way, Binance will most likely continue to operate without interruption in its key jurisdictions of Asia and Africa.
Meanwhile, Kraken has a strong case and could win against the SEC in court. Most of the SEC’s arguments are based on an impractical interpretation of securities laws, something the courts have not so far shown much sympathy with.
So, the first message is that markets don’t think the regulatory pressure on Binance or Kraken will stop them from doing what they do. The second message is that the market has matured. You may remember back in June, we got SEC suits dropped against Binance and Coinbase on two consecutive days.
The market dropped sharply on the Binance news, rose sharply on the Coinbase news, and the crypto community was somewhat agitated with comments raging from panic that the SEC had declared war on crypto to fear that Coinbase might not survive. Yesterday, the reaction was largely meh, here we go again. And in the case of Binance, some relief that we finally get a glimpse of what the Department of Justice was up to – waiting for that shoe to drop was an uncomfortable overhang.
This signals a market that is more aware of the limited ability of the SEC to inflict serious damage, and more aware that, whatever happens in the U.S., the crypto market will continue to grow. In sum, what happened yesterday must be really uncomfortable for those involved. But for the crypto market as a whole, it showed resilience, maturity, and a very different mood from just a few months ago.