SUDDEN SURGE

The cryptocurrency market experienced a sudden surge earlier today, as Bitcoin soared past $37,900 and Ethereum crossed the $2,100 mark.This spike in prices seems to have been driven by a phenomenon known as a “short squeeze,” wherein traders who had bet against the market were forced to buy back their positions at higher prices.Within the last 24 hours, around $78.44 million of Bitcoin shorts and $118.47 million in total Bitcoin positions were liquidated, while $52.54 million in shorts and $74.79 million in total positions were liquidated for Ethereum. The surge in prices was initially triggered by news of BlackRock registering an Ethereum exchange-traded fund (ETF) entity in Delaware, leading to speculation about the imminent approval of the first US Ethereum ETF. As a result of the resulting liquidations, Bitcoin surged from around $34,000 to over $37,900, stabilizing near $37,061.53 as of 8:00 AM CST, and Ethereum rallied from under $1,800 to above $2,100. Moreover, this event led to the most liquidations on OKX, totaling $164.39 million, with the largest single liquidation order valued at $14.76 million, followed by Binance at $153.91 million.

HIKES MIGHT NOT BE OVER

Although some investors believed that the Federal Reserve had finished raising rates due to recent alleviation of price and wage pressures, Fed Chair Jerome Powell’s comments during his latest speech contradicted this belief as he stated the central bank would not halt its historic interest-rate increases until there was substantial evidence of cooling inflation. Powell, highlighted that the Fed is more inclined to tighten policy than ease it if any change is deemed necessary, based on past incidences of inflation “head fakes”. In addition, Powell emphasized the need for closely monitoring economic conditions to avoid the risk of being misled by temporary data, as well as the risk of raising rates excessively. Consequently, Powell has left the possibility open for leaving rates unchanged next month and raising them in the upcoming year if expected economic and inflationary improvements do not materialize. Additionally, he mentioned that the labor market demand has slightly softened, as indicated by the unemployment rate ticking up to 3.9% in October from 3.8% in September. Core inflation, excluding volatile food and energy prices, has eased to a 2.8% annualized rate from its 5.6% peak last year. Furthermore, Powell acknowledged that while there has been progress, achieving a sustainable lowering of inflation to the 2% goal will be a challenging process due to potential supply bottlenecks and labor market changes.

INCREASED INFLOWS

U.S. investors poured a massive sum into bond funds in the seven days leading to Nov. 8 on hopes of a turnaround in Treasury bond prices following the Federal Reserve’s decision to keep interest rates unchanged. Additionally, a report from the U.S. Labor Department indicating a slowdown in job growth in October lifted bond prices last week. This resulted in the benchmark 10-year U.S. Treasury bonds seeing a five-week low in yields. According to LSEG data, U.S. bond funds amassed a net $3.61 billion worth of inflows during the week, the biggest amount since July 5. Furthermore, U.S. high yield bond funds saw a significant boost in demand as they received a net $6.29 billion, the biggest weekly inflow since mid-April 2020. Investors also poured about $867 million and $687 million, respectively into general domestic taxable fixed income and loan participation funds, while pulling a net $1.92 billion out of U.S. short/intermediate government & treasury funds. On the other hand, U.S. equity funds secured $1.9 billion, the first weekly inflow in eight weeks. Small-cap funds were notably in demand as they received $1.96 billion, the biggest inflow since June 14, while large-cap funds saw $930 million worth of net purchases. However, mid- and multi-cap funds had outflows of $661 million and $396 million. In the sector perspective, tech and financial sector funds attracted $1.25 billion and $594 million, respectively, while consumer staples had an outflow of $500 million. At the same time, U.S. money market received $6.47 billion, about a tenth of $56.1 billion worth of net purchase in the previous week.

PRECIOUS METALS STRUGGLE

Gold prices fell for the second consecutive week as a result of reduced safe-haven demand and hawkish cues from Federal Reserve Chair Powell, which led to gold being on track for its worst week since mid-2011. The reduced appetite for gold among investors was also attributed to easing fears over the Middle East tensions spreading to wider regions. Consequently, spot gold fell 0.3% to $1,951.89 per ounce after hitting its lowest level since October 18, while U.S. gold futures dropped 0.7% to $1,956.50. In addition, silver also saw a decrease, falling 0.5% to $22.52. The sentiment towards gold was also influenced by a strengthening U.S. dollar, with the dollar index heading for its largest weekly gain in over three months. Furthermore, geopolitical tensions provided another bullish catalyst, while any shift in monetary policy from the U.S. central bank, coupled with dovish remarks, had the potential to lift prices. Moreover, autocatalyst palladium also saw a decline due to excess stocks and the growing adoption of electric vehicles, resulting in its worst week in over 15 months. In addition, platinum fell 1.3% to $848.95, also heading for its worst week since mid-2021. These declines were mainly due to the wider adoption of electric vehicles, prompting automakers to switch to cheaper platinum. Also, palladium prices slipped 4.5% to $947.51 per ounce, as its use in reducing engine emissions continued to decline.

CONTINUOUS DECLINE

Oil prices are heading for a third consecutive weekly drop, as concerns about global demand and reduced tensions in key oil-producing regions weigh on the market. Saudi Arabia has pointed the finger at speculators for the decline, while others attribute it to increased oil supply. Brent crude oil prices have fallen by around 13% over the past three weeks, as worries about declining demand and other factors, such as higher interest rates and weakening fuel consumption, worsen the situation. As a result, the future outlook for oil prices is uncertain, with worries of further declines in the coming weeks. Additionally, the price of diesel, a vital fuel for economic activities, is also decreasing. The shift in the market has resulted in a bearish contango structure, indicating that shorter-term oil prices are lower than those of longer-term contracts, for the first time since July. This shift comes as U.S. oil production reaches record levels and stockpiles at the nation’s largest storage hub increase from critically low levels.