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NOVEMBER 8, 2023

BITCOIN NFT SOARED

The Ordinals platform, a protocol that enables the creation of NFT-like assets on the Bitcoin blockchain, has seen a significant uptick in trading volume following its listing on Binance as according to on-chain data researcher Domo’s Dune dashboard transactions involving Bitcoin-based assets on Ordinals reached a peak not seen since May, amounting to approximately $14.7 million in trading activities. While previously, the majority of daily Ordinals transactions were facilitated by the cryptocurrency exchange OKX, accounting for 60% of trading volume, Binance’s recent decision to add support for ORDI has spurred substantial momentum in trading. This move led to an 87% surge in the price of ORDI, reaching $13.72 on Binance, with a trading volume of $588 million. Additionally, the recent increase in the price of Bitcoin paired with Binance’s backing of ORDI has bolstered interest in Ordinals and its related tokens. This surge in trading volume highlights the growing appeal of Bitcoin-based assets and signals a renewed interest in the potential of the Ordinals platform to unlock new possibilities within the crypto domain. Moreover, as the platform gains traction, its developer Casey Rodarmor took to social media to acknowledge Binance’s support for ORDI and also clarified that ORDI is not directly affiliated with the Ordinals project.

LIMITED IMPACT

The role of the Federal Reserve in the decline of inflation has been questioned, with evidence suggesting that the Fed’s actions had minimal impact on the decrease in inflation. In fact, inflation fell primarily due to factors beyond the Fed’s control, such as the normalization of economic conditions after the pandemic.  The Fed’s tools, including interest rates, did not seem to have the anticipated impact on saving, borrowing, consumption, investment, or the broader economy. For instance, higher interest rates failed to significantly encourage saving and deter borrowing, while consumption and investment remained largely unaffected, and although higher rates did affect some borrowers, their overall effect on inflation has been limited. Furthermore, it is widely acknowledged among economists that the progress in lowering inflation can be attributed to improvements in the supply side, including enhanced supply chains and an increase in the availability of workers. Nevertheless, it is still important to remark that without the Fed’s rate increases, inflation would have been higher. Moreover, the Fed’s success in maintaining low inflation levels in previous decades is also recognized, however, it is debatable whether the Fed should deserve to be credited for addressing the situation it might have contributed to.

HOUSING REBOUND

Based on the latest statistics, it has been observed that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) has experienced a notable decrease, plummeting from 7.86% to 7.61%. This adverse shift in interest rates has garnered attention and has been attributed to a few key factors, primarily the U.S. Treasury’s issuance update and the Federal Reserve’s adoption of a dovish tone in the November FOMC statement. Notably, the data also indicates a slower job market, which has contributed to this decline in interest rates. This has consequently triggered an increase in mortgage demand, a shift that has been eagerly anticipated due to a recent lack of activity in the mortgage market. As per the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume soared by 2.5% last week compared to the previous week, outlining an upward trend in mortgage applications. Furthermore, the increase in demand for mortgage loans is especially notable for 30-year fixed-rate mortgages, with conforming loan balances decrease, now standing at 7.61% from 7.86% and points falling to 0.69 from 0.73, for loans requiring a 20% down payment. The recent drop in interest rates is also evident from the notable surge of 2% in applications to refinance home loans, demonstrating an increased interest in mortgage loan refinancing. On the other hand, applications for mortgages for new home purchases also experienced a 3% uptick during the week. However, a closer look reveals that despite the increase in demand for new home purchases, they remain significantly lower than the same period a year ago. Moreover, while mortgage rates are currently at levels akin to those observed last year, the housing market continues to grapple with soaring home prices, which have been on an upward trajectory due to the persistently low housing supply. Looking ahead, despite the slight increase that was observed last week, it is anticipated that rates will remain relatively unchanged in the next week as it is projected that there will be fewer economic events or reports that would significantly influence mortgage rates.

DEBT CRISIS

The U.S. government’s towering debt pile is set to soar to a staggering $54 trillion in the next ten years, alarming economists and raising concerns about the country’s financial well-being. This unsustainable growth is primarily fueled by the government’s excessive spending, which has resulted in a massive federal deficit. Despite the alarming debt figures, experts argue that continued borrowing is essential to sustain economic growth and maintain a healthy financial system. They point to the unique circumstances of the U.S. economy, with its low interest rates and strong economic fundamentals, which make the current debt situation less perilous than in the past. However, they also caution that the government must exercise fiscal discipline and curb its spending to avoid a future crisis. Moreover, they emphasize that addressing the debt issue requires a combination of responsible spending, economic growth, and strategic reforms to ensure long-term financial stability.

INTERNATIONAL NEWS

The International Monetary Fund (IMF) has suggested that rapid wage growth in the euro zone may lead to higher inflation, and to combat this, the European Central Bank (ECB) should maintain interest rates at or near record highs throughout the next year. The IMF recommends keeping the ECB’s deposit rate close to 4% in 2024 to ensure tight monetary policy as premature rate cuts could lead to more challenging policy adjustments later. Inflation, which reached over 10% a year ago, is gradually decreasing but may take two years to reach the 2% target. In addition, the tight labor market could delay the return to target inflation, and global energy costs pose additional price risks. Moreover, while current economic growth is slightly weaker than projected, a “soft landing” remains the IMF’s primary scenario.

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