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AUGUST 30, 2023

SURGE AFTER COURT

With a valuation of $17.4 billion, the Grayscale Bitcoin Trust experienced a substantial rally following a recent U.S. court ruling that potentially opens the door for its transformation into an exchange-traded fund (ETF). Grayscale’s shares, which represent the largest Bitcoin portfolio worldwide, surged by 17%, considerably narrowing the gap between their market value and the actual Bitcoin holdings of the fund, in contrast to the nearly 50% difference observed in December. This impressive increase in trading volume marks the trust’s most significant surge since July 2021, and clearly indicates a renewed interest from investors. Additionally, this positive development had a ripple effect on the overall cryptocurrency market, leading to price hikes and a widespread atmosphere of optimism.

JOB CREATION SLOWS

According to a recent report by ADP, a company specializing in employment data analysis, private job creation in the United States slowed down in August. This raises the possibility that the robust U.S. economy might be starting to show signs of weakening under the weight of higher interest rates. Specifically, private employers added only 177,000 jobs in August, a notable decline compared to the 371,000 jobs that were added in the previous month of July. This deceleration in job growth was accompanied by a noticeable easing in wage expansion for both job switchers and individuals who remained in their current positions. Nevertheless, it is worth noting that although the ADP report has historically provided valuable insights into the trends anticipated in the upcoming Department of Labor jobs report, the changes in ADP’s methodology over the past year have introduced uncertainty into the accuracy of its predictive capacity.

REVISED GROWTH

Based on an updated estimate for the second quarter of 2023, the economy’s Gross Domestic Product (GDP) experienced a 2.1 percent growth compared to the previous year, slightly surpassing the first quarter’s increase of 2.0 percent. This revised assessment, grounded in more precise data than the initial projection, reflects a combination of factors, including heightened consumer spending, increased business investments, and expanded government expenditures. These gains, however, were counterbalanced by decreased exports, diminished home construction investments, and reduced private inventories. The economy’s total value of activity in current dollars escalated by 4.1 percent annually, reaching $26.80 trillion, with a marginal decrease in price inflation. Moreover, personal income observed growth, leading to a 5.9 percent rise in disposable income and contributing to a 4.5 percent savings rate. Nonetheless, corporate profits displayed a mixed landscape, with financial corporations witnessing a decline, while non-financial corporations and foreign operations saw improvements.

STEADY YET PROMISING

As reported by the U.S Mortgage Bankers Association (MBA), the average rate for 30-year fixed-rate mortgages in the US remained unchanged at 7.31% in the week ending August 25, 2023, which is the highest rate since December 2000. However, this did not deter borrowers as there was an increase in mortgage applications during the same period. Applications to refinance a home loan rose by 2.5%, and applications to buy a home increased by 2%. In addition, the MBA also reported a significant rise in the MBA Mortgage Market Index, reaching 189 points. This surge in activity suggests that despite the high mortgage rate, the housing market is showing signs of potential growth.

INTERNATIONAL NEWS

According to Deutsche Bank, the Bank of England’s losses on bonds purchased to support the U.K. economy after the financial crisis will be higher than initially projected until the middle of this decade. The central bank estimated in July that it would need the U.K. Treasury to backstop £150 billion ($189 billion) of losses on its asset purchase facility (APF), which aimed to improve financing conditions for companies impacted by the 2008 crisis. The BOE has been steadily reducing its bond holdings since late last year, which has led to higher costs due to rising interest rates. The Treasury has already transferred £14.3 billion to the central bank to cover these losses, and experts expect this trend to continue.

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