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MAY 19, 2023


Bitcoin and other cryptocurrencies started the day with lower values as J.P. Morgan analysts expressed concern about the potential impact of a U.S. debt default on Treasury bonds, which are widely held by stablecoin issuers. This situation could significantly disrupt the entire crypto ecosystem, as stablecoins are heavily used for collateral and access to decentralized finance and trading. Nevertheless, there has been a positive shift as Ether reversed its falling trend and experienced gains in its value. Meanwhile, Bitcoin also experienced gains, but it is still trading below $27,000.


Speaker Kevin McCarthy stated that there needs to be a debt deal by this weekend to prevent a default by early June. However, passing a debt ceiling and budget deal can take up to one and a half week, which is very close to the June 1st deadline. While there are potential ways for both chambers to accelerate voting and push deadlines, lawmakers are uncertain about the actual deadline, and negotiations still have a long way to go to reach a resolution. Nevertheless, if an agreement cannot be reached, there are still options available to prevent a default.


Thanks to the growing optimism that the U.S. will lift its debt ceiling, oil prices are set to see their first weekly increase in over a month. As a result, West Texas Intermediate futures have risen above $72 per barrel, benefiting from a 3% gain this week. However, crude oil remains down by 10% this year due to factors like China’s slow recovery and the Federal Reserve’s tightening. Additionally, wildfires in Alberta – Canada’s leading energy producer, have disrupted oil output, contributing to tightness in the market. Nonetheless, experts believe that oil prices will rise by the second half of the year due to a supply deficit.


The interest rates for borrowing from the U.S. government have increased, signalling a positive outlook on the economy and inflation. While the rates are still lower than in March, they have surpassed the previous two-month trading range. Recent corporate bond sales and optimism about raising the U.S. debt ceiling have further increased the rates. In addition, factors such as the strong economy, low unemployment, and steady consumer spending have contributed to the possibility of the Federal Reserve raising short-term interest rates in June. Therefore, as there are lower chances that a recession may happen, the demand for government bonds has decreased.


The recent jobless week report has shown that the number of Americans filing for unemployment benefits decreased more than expected, especially in Massachusetts. This suggests that the labor market is still strong, despite the previous surge in jobless claims due to fraudulent applications for unemployment insurance. However, despite these signs of improvement, the labor market remains tight, with more job opportunities available than unemployed people.

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