07 Dec 2023
Week 49, 2023 - Weekly Market Outlook
The weekly market outlook article provides a brief analysis of the past week's market performance and an outlook for the upcoming week.
Introduction
In this weekly market outlook, we examine the most recent updates in the cryptocurrency ecosystem. With an emphasis on Bitcoin and the macro environment, we analyze recent price action. We evaluate the global cryptocurency market cap, DeFi stablecoin flow and do a short review of the crypto market's biggest gainers and losers. Finally, we evaluate the performance of the Flagship Portfolio Vault.
Macro
The recent macroeconomic data presents a complex picture for risk assets, reflecting both challenges and potential shifts in monetary policies.
Starting with the European Central Bank (ECB), a significant change is on the horizon. A majority of economists in a Reuters poll anticipate the ECB will cut interest rates in the second quarter of next year, earlier than previously expected. This shift is in response to a short and shallow winter recession forecasted for the euro zone. The ECB's decision comes after inflation in the region fell to 2.4% last month, leading to speculations of a dovish turn in monetary policy. Despite market expectations of more aggressive rate cuts, the survey suggests a more gradual approach, with a 25 basis point reduction each quarter starting from Q2. This cautious stance is likely influenced by the need to balance growth stimulation with inflation control.
In contrast, the U.S. Federal Reserve is expected to hold rates until at least July, indicating a divergence in monetary policies between the two major central banks. This difference could have implications for currency valuations and capital flows, potentially impacting risk assets differently in Europe and the U.S.
On the economic front, the euro zone is bracing for a mild recession, with a predicted contraction of 0.1% in the last two quarters of the year. However, this downturn is expected to be brief, with a recovery starting in the next quarter. The ECB's focus remains firmly on inflation, suggesting that even a mild recession won't deter its commitment to price stability.
In the U.S., the labor market shows signs of cooling. Announced job cuts in November, particularly in the retail and technology sectors, have increased, indicating a slackening labor market. This trend is a critical factor for the Federal Reserve, which aims to bring inflation back to its 2% target. The Fed's rate hikes over the past 20 months have started to show results, with inflation dropping and the labor market slowing. The tech sector, in particular, has seen significant job losses, highlighting sector-specific vulnerabilities.
For risk assets, these developments present a mixed bag. The ECB's anticipated rate cuts could boost investor sentiment in Europe, potentially benefiting European stocks and bonds. However, the looming recession and ongoing inflation concerns might temper this optimism. In the U.S., the cooling labor market and the Fed's cautious stance could lead to a more stable but less dynamic investment environment. Technology stocks, already facing headwinds from job cuts, might continue to experience volatility.
Bitcoin
Bitcoin's market movements this week were characterized by relative stability in its range, with the price exceeding $38,000. With the window for the ETF approvals still open, but the deadline closing in, excitement seems to continue to build up and be priced in.
The U.S. Securities and Exchange Commission (SEC) recently conducted meetings with Grayscale Investments and BlackRock regarding their respective applications for spot bitcoin ETF listings. Grayscale discussed the conversion of its Grayscale Bitcoin Trust into a spot bitcoin ETF, following a new registration statement and a court directive for the SEC to re-review their application. Simultaneously, the SEC held a separate meeting with BlackRock and Nasdaq employees, focusing on the proposed listing of the iShares Bitcoin Trust on the NASDAQ under specific trading rules. These discussions highlight the ongoing interest and developments in the field of cryptocurrency-based financial products.
Top Gainers and Losers
As top performer this week: Ordi with over a 158% gain. There has also been growing hype around ORDI’s unique value proposition of allowing developers to build NFTs directly on the Bitcoin network. This has attracted significant interest as more investors look to tap into the potential of Bitcoin-based NFTs.
The worst performing asset this week is DeFiChain, a blockchain dedicated to fast, intelligent and transparent decentralized financial services, accessible by everyone.
Global Market cap
The total market capitalization of the cryptocurrency ecosystem has seen a growth in the past week, growing from $1.48 trillion to $1.56 trillion in the past 7 days. Over the last 3 day, we saw the market cap increase with over 5%. This could indicate that new money is flowing into the cryptocurrency ecosystem, contributing to a bullish market sentiment.
Stablecoin Flows
The total market capitalization of stablecoins has remains around its level at $127 billion. The Total Value Locked (TVL) of stablecoins in DeFi has risen to $94 billion for the last 7 days.
Flagship Portfolio Vault Performance
Over the past 7 days, the share price of the Portfolio Vault went from 34.83 to 39.27, which is a 11.37% increase.
Due to the recent rally and the fact that the Bitcoin ETF is largely accounted for, along with a slowdown in DeFi TVL and market cap during the rally, we have decided to remain bullish
If you’d like to access Flagship’s portfolio Vault, click here.
Disclaimer: Nothing on this site should be construed as a financial investment recommendation. It’s important to understand that investing is a high-risk activity. Investments expose money to potential loss.
