REGULATORY UNCERTAINTY
The recent lawsuits against Coinbase and Binance have sparked a debate among industry players regarding the regulatory environment of the cryptocurrency industry. While some perceive the U.S. Securities and Exchange Commission’s (SEC) actions as vital to safeguarding investors, others consider them excessive and obstructive to innovation. The SEC maintains that most cryptocurrencies comply with the definition of securities and should adhere to its strict disclosure rules. However, some in the crypto industry argue that many cryptocurrencies are more similar to commodities and should be governed accordingly. This regulatory confusion has been a persistent obstacle for crypto firms working in the U.S., with some choosing to avoid the market entirely. Apart from Coinbase and Binance, other popular exchanges like KuCoin, Bitrue and Bitmax also allowed U.S. users to trade those tokens. Furthermore, as the SEC continues to exert its jurisdiction, further lawsuits could arise, potentially broadening the number of cryptocurrencies categorized as securities.
JOBLESS CLAIMS INCREASED
Recent data from the Labor Department reported that jobless claims in the U.S. rose to 261,000 for the week ending June 3, marking the highest level since October 2021. In addition, over four weeks, the average number of claims increased by just 7,500 to 237,250. Nevertheless, while this increase was significant, the overall labor market in the U.S. remains strong. The U.S. economy has continued to experience exceptional job growth since the onset of the pandemic, making the recent uptick in layoffs less concerning. Furthermore, despite inflation concerns Americans have enjoyed a stable job market with low unemployment rates.
TRADE DEFICIT SOARS
Recent reports indicated that the U.S. trade deficit increased in April due to increased imports and decreased exports of energy products, and this trend could slow economic growth in the second quarter. Economists expect that trade could reduce gross domestic product by 2.5% if imports do not reverse. This rise in the trade deficit is the biggest since April 2015 and is expected to bring second quarter GDP growth closer to 1%. Moreover, in adjusted figures for inflation, the goods trade deficit increased to $95.8 billion in April.
BOND MARKET VOLATILITY
Global bonds are struggling after two unexpected interest rate increases, which highlight that central banks are still fighting inflation. Consequently, investors are opting for shorter-maturity bonds instead of sovereign debt. Additionally, recent rate hikes have forced traders to reassess their assumptions about potential rate cuts by the Federal Reserve. The slow pace of economic disinflation has made it difficult for bond market to gain stability, and as the market volatility may continue to increase, traditionally “safe havens” could also be put at risk.
INTERNATIONAL NEWS
According to Eurostat, the Eurozone’s economy shrank by 0.1% in the first quarter of 2023. The data also showed that growth in the final quarter of 2022 was lower than previously estimated. Germany and Ireland were the hardest hit, with GDP declining quarter-on-quarter. These figures suggest the region is headed for recession, particularly given the impact of higher interest rates. While there was growth in employment, this was not enough to offset the decline in other areas of the economy. Economists predict a pick-up in the second quarter led by the service sector, but a subsequent slowdown and potential new recession in late 2023 or early 2024.
