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NOVEMBER 28, 2023

STRONG BULLIST SENTIMENT

Investors are exhibiting a strong bullish sentiment toward Bitcoin and Ether futures at the Chicago Mercantile Exchange, as evidenced by a notable pattern in the futures market. A trend has emerged where the next-month contracts are trading at a premium over the front-month contracts, a phenomenon rarely observed since 2018. This suggests a heightened inclination to add long exposure, leading to significantly increased premiums. The market data reveals a distinct investor preference for leveraged bullish bets on the leading cryptocurrencies, with the lead analyst at K33 Research, Vetle Lunde, noting the surge in yield premiums as indicative of this optimistic sentiment. The rolling weekly difference between next and front-month BTC and ETH contracts has significantly widened, showing an annualized 1.5% spread, a pattern that previously occurred only four times to date. Furthermore, despite a slight narrowing, the continued bullish sentiment with a widening contango conveys that traditional market players have taken bullish positions, enhancing optimism in both markets. In addition, there is also potential for renewed interest in cash and carry arbitrage strategies due to the elevated futures premiums. Such strategies allow traders to capitalize on price volatility by buying the cryptocurrency in the spot market and concurrently selling futures, a strategy that was popular during the 2020-2021 bull run.

IMPRESSIVE CYBER MONDAY SALES

According to the latest data, during Cyber Monday, online shoppers in the U.S. broke records by spending a whopping $12.4 billion, a 9.6% increase from last year’s $11.3 billion, surpassing even initial projections of $12 billion. This surge in consumer spending was largely driven by substantial discounts across a range of product categories, like beauty products, toys, electronics, and apparel, with electronics hitting peak discounts of 31% and apparel at 23%. While in-demand items such as Hot Wheels toys, PlayStation 5, and smartwatches were among the top purchases, shoppers also indulged in categories like jewelry, personal care products, and furniture. Notably, retailers like Walmart and Macy’s had anticipated a lackluster shopping season, citing concerns over constrained budgets due to inflation. However, the allure of compelling deals throughout Thanksgiving and Cyber Monday ultimately drove consumer sentiment and spending. Additionally, shoppers are increasingly turning to flexible yet convenient payment options, with a staggering $940 million in sales made through Buy Now, Pay Later (BNPL) services on Cyber Monday, a 42.5% surge from last year. This trend underscores the growing appeal of payment solutions that help manage holiday budgets without incurring extra fees or interest.

BIDEN STANCE ON HIGH PRICES

President Joe Biden criticized big companies for keeping prices high on things that people need, even though the cost of shipping and overall prices have gone down. He pointed out that while the rate at which prices are going up has slowed down, it does not mean that things have become cheaper for people, and although some everyday things have become a bit more affordable, which is good news, the improvements are not being felt by everyone. Furthermore, despite the recent notable increase in online sales on Black Friday, convincing people that the economy is getting better because of the President’s actions is still a tough sell. In response to this, the White House revealed that it’s setting up a group called the Supply Chain Resilience Council, and has come up with 30 plans to help solve these supply chain problems and stop things from running out. Moreover, Biden stressed the importance of companies not overcharging for things, especially for things that add unnecessary costs to family budgets, as he understands that people are feeling taken advantage of and need some relief.

CONCERNS ON BANKING REGULATIONS

Goldman Sachs Group Inc. CEO David Solomon has voiced concerns over recent regulatory proposals that would compel banks to increase their capital reserves. He argues that these changes may not necessarily improve the safety of the financial system and could have broader implications. The proposed regulations, revealed by multiple U.S. regulatory agencies in July, would mandate larger banks to set aside additional capital for various business operations. Solomon believes that these rules could have a significant impact on areas such as uncollateralized derivatives, which are often used by airlines to manage jet fuel prices, potentially affecting flight costs. Furthermore, he cautioned that the regulations could also restrict pension managers’ abilities to lend out their securities. Furthermore, Solomon’s comments reflect skepticism about the necessity of these changes, questioning whether a thorough cost-benefit analysis has been conducted to assess their potential consequences. Consequently, Solomon urges for a comprehensive evaluation of the regulations’ implications, highlighting the need to weigh the potential advantages against the costs.

INTERNATIONAL NEWS

Bank of England Deputy Governor Dave Ramsden has highlighted concerns about the rising inflation in the UK, signaling that this inflation is originating from domestic factors and may present a significant challenge to control. Even though the Bank of England (BOE) has predicted a bleak economic future with a 50-50 chance of recession, Ramsden proposed that monetary policy would need to remain restrictive for an extended period to bring inflation back down from 4.6% to the target rate of 2%. He attributed the current headline consumer prices inflation, which has decreased by half compared to a year ago, to a sharp fall in energy costs but emphasized that the services sector, making up 45% of the consumer basket, is experiencing a persistently high inflation rate of 6.6%. Moreover, highlighting that UK inflation is becoming more internally driven, Ramsden remarked wage growth of above 7% and the labor-intensive nature of the service sector as major contributors to the stubbornly high inflation.

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