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NOVEMBER 21, 2023

DAILY FEES SURPASSED

Bitcoin (BTC) has recently outpaced Ethereum (ETH) in daily transaction fees, boasting an average of $10.34 compared to Ethereum’s $8.43 on November 20. The increase in Bitcoin transaction fees is credited to the surge in activity revolving around the Ordinals Protocol, which is a platform that facilitates the creation of NFT-like digital assets and BRC-20 tokens on the Bitcoin network. After a period of low activity, the creation of Ordinals-based assets experienced a significant uptick following October 24, with over 6 million assets generated and more than 800 BTC in fees (equivalent to $30 million) redistributed into the network. The momentum continued when ORDI, the second-largest BRC-20 token, was listed on Binance on November 7. This listing prompted heightened buying activity, resulting in a price surge of over 50% for the ORDI token. Additionally, on November 17, the Taproot Wizards project, which is built on the Ordinals protocol, secured $7.5 million in seed funding.

STABLE DEMAND

Moody’s Investors Service reported on Monday that despite recent Treasury market volatility, the demand for U.S. debt, which supports the global financial system based on the dollar, remains strong. The firm also noted that U.S. financial regulators have taken steps to improve the stability and efficiency of the Treasury market and anticipate ongoing changes in its structure. In addition, Moody’s expects that foreign central banks, pension funds, insurance companies, and households will play a stabilizing role as the Federal Reserve reduces its Treasury holdings. Nevertheless, let’s remember that earlier this month Moody’s downgraded its outlook on the U.S. credit rating to “negative,” citing concerns over large fiscal deficits and decreased debt affordability. Moreover, rising concerns over federal spending and political polarization have also contributed to a selloff in U.S. government bond prices, which dropped to their lowest level in 16 years in mid-October. This year, Treasury yields have risen due to expectations of sustained tight monetary policy by the Federal Reserve and ongoing worries about fiscal matters in the U.S.

THANKSGIVING GAS BONANZA

This Thanksgiving, U.S. drivers can anticipate the lowest gas prices since 2020 as the national average price for a gallon of regular gas was around $3.31, which is 25 cents less than a month ago, and a significant 36 cents lower compared to the same period last year. Gas prices have plunged below $3 a gallon in 11 Southern and Midwestern states, and prices have been steadily declining for nine consecutive weeks. In addition, more than 65,000 gas stations across the country are selling gas at $2.99 per gallon or less, and looking ahead gas prices could fall further and potentially dip below the $3.05 per gallon mark that was seen last winter. The drop in gas prices reflects a seasonal decline in demand and is also related to recent decreases in oil prices as West Texas Intermediate, the U.S. benchmark for oil, experienced a significant 22% drop from its September high last week, and factors such as declining gasoline demand and rising domestic crude oil inventories have contributed to the fall in gas prices. Nevertheless, it is worth noting that despite this downward trend, a significant number of Americans are finding it challenging to fit holiday travel into their budgets due to other areas of inflation, and experts warn that gas prices could be affected by the upcoming meeting of the Organization of Petroleum Exporting Countries (OPEC) on Nov. 26.

NEW TRADING RULES

U.S. regulators are considering new rules that would require a central clearing venue for more Treasury trading, sparking debate around the amount of collateral hedge funds and others should provide for these trades. With concerns about increasing trading costs and reducing market liquidity on one side and the need to guard against a market collapse on the other, industry practice shows that many hedge funds trading in repo markets are not currently putting up any collateral, raising worries about potential market stress. The U.S. Securities and Exchange Commission is expected to introduce a rule to expand the use of central clearing in the cash Treasury and repo market, aiming to push market participants to deposit margins. However, this move could potentially require an additional $12.4 billion in capital from funds, which might reduce their leverage levels and create barriers for some investors.

GLOBAL HOUSING CHALLENGES

The U.S., New Zealand, Canada, the UK, and South Korea are grappling with housing market challenges. In the U.S., homeowners are reluctant to sell due to low mortgage rates, while buyers are finding it difficult to afford homes. In New Zealand and Canada, property values have remained relatively stable, but those who purchased homes at peak prices are struggling with higher loan payments. The real estate market, which once brought wealth to many, has reached an impasse due to sharply higher borrowing costs and a shortage of homes, leading to elevated prices and decreased affordability. Economist Mark Zandi predicts that mortgage rates are likely to average around 5.5% over the next decade, in contrast to the low of 2.65% observed earlier in 2021. However, factors such as a deepening war in the Middle East and economic challenges in China could contribute to a broader global economic downturn, reducing housing demand and leading to substantial price declines, resulting in financial turmoil. As a result of these circumstances, there is uncertainty about the future of the global real estate market.

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