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AUGUST 9, 2023

BTC RESILIENCE
Despite multiple attempts to drive Bitcoin’s price below $29,000, recent data reveals the cryptocurrency’s resilience as multiple daily candles accompanied by extended lower shadows signal brief periods of sub-$29,000 trading, followed by a notable 2% surge that propelled the price over $30,000. This upward movement has been attributed to insights from CryptoQuant’s CEO, Ki Young Ju, who points to an increased taker buy-sell ratio on low-volume exchanges like BitMEX, indicating significant buying by influential investors or “whales.” Moreover, Ju’s observation of “giga longs” being opened by these whales at the $29,000 level suggests their strategic interventions might have contributed to preventing the price from remaining below that threshold and triggering the subsequent price milestone.

SHARP INCREASE

According to the Mortgage Bankers Association’s seasonally adjusted index, mortgage interest rates increased last week, with the rate on the government’s low-down-payment option reaching its highest level in 21 years. This sharp increase had a significant impact on mortgage demand, resulting in a 3.1% drop in total application volume compared to the previous week. In addition, the average interest rate for 30-year fixed-rate mortgages with conforming loan balances also rose, going from 6.93% to 7.09%. Furthermore, the rate for jumbo loans reached 7.04%, while FHA loans, favored by first-time or lower-income borrowers, experienced a rate of 7.02% – the highest since 2002. These elevated mortgage rates not only make it more difficult to afford a home but also discourage current homeowners from moving. Moreover, the decline in applications for mortgage purchases by 3% and for refinancing by 4% further illustrate this trend. As we move forward this week, mortgage rates remain above 7% amid uncertainties.

CREDIT CARD RISE

As reported by the New York Federal Reserve, Americans’ reliance on credit cards to meet their financial needs has increased, resulting in a milestone where aggregate balances have exceeded $1 trillion for the first time. Between April and June, total credit card debt rose by more than $45 billion, reaching a historic peak of $1.03 trillion. This increase in credit card indebtedness is a cause for concern as delinquency rates also rose, with 7.2% of credit card debt being 30 or more days overdue in the second quarter. The Fed attributes the rise in credit card balances to inflationary pressures and increased consumption. Furthermore, the report also revealed that household income, adjusted for inflation and taxes, remains significantly below pre-pandemic levels, further straining consumers’ capacity to manage their debt.

INFLATION CONCERNS

According to recent data, a key bond-market indicator of expected U.S. inflation is trending upwards, approaching levels not seen in almost a decade. The indicator, known as the U.S. five-year inflation breakeven that starts in 2028, has reached about 2.5%, inching close to its peak in April 2022. Consequently, this suggests that despite speculation about the Federal Reserve’s efforts to curb inflation through interest rate hikes, inflation expectations remain elevated for the foreseeable future. Moreover, the upcoming consumer-price index report is expected to show a 3.3% annual increase in July, with the core measure expected to ease slightly to 4.7%. This surge in the measure signifies growing concerns that inflation might not ease as predicted, and if this trend persist, it could impact bond yields and challenge the Fed’s ability to control inflation.

TRAVEL SURGE CONTINUES

The ongoing surge in travel following the pandemic, coupled with persistently high ticket prices, is showing no signs of slowing down with high ticket prices expected to persist into next year despite economic uncertainty and diminishing household savings. A recent survey by Amadeus, a travel technology company that provides solutions for the travel industry, indicated that the desire for international travel will even strengthen in 2023 and 2024 as international travel has rebounded to nearly 90% of pre-pandemic levels – with a particular focus on Southern Europe. In addition, recent strong quarterly earnings reported by cruise operators and airlines further boost the optimism about future demand. Nevertheless, the issue of ticket prices remains complex, with certain fares experiencing double-digit percentage increases since the pandemic, driven by factors like high input costs and the balance between supply and demand. Moreover, as we look ahead, the sustainability of this travel trend remains uncertain, as the interplay between consumers’ desire for travel experiences and broader economic considerations, including inflation and savings, could influence future travel patterns.

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