Finance

No exit ramp for Fed’s Powell

Published

2 years ago

March 8, 2023

The U.S. Federal Reserve cannot disrupt its cycle of interest rate increases until the nation enters a recession, according to TS Lombard Chief U.S. Economist Steven Blitz.

“There is no exit from this until he [Fed Chair Jerome Powell] does create a recession, ’til unemployment goes up, and that is when the Fed rates will stop being hiked,” Blitz told CNBC’s “Squawk Box Europe” on Wednesday.

He stressed that the Fed lacks clarity on the ceiling of interest rate increases in the absence of such an economic slowdown.

“They have no idea where the top rate is, because they have no idea where inflation settles down without a recession.”

Powell told lawmakers on Tuesday that stronger-than-expected economic data in recent weeks suggests the “ultimate level of interest rates is likely to be higher than previously anticipated,” as the central bank looks to drag inflation back down to Earth.

The Federal Open Market Committee’s next monetary policy meeting on March 21 and 22 will be critical for global stock markets, with investors closely watching whether policymakers opt for an interest rate hike of 25 or 50 basis points.

Market expectations for the terminal Fed funds rate were around 5.1% in December, but have risen steadily. Goldman Sachs lifted its terminal rate target range forecast to 5.5-5.75% on Tuesday in light of Powell’s testimony, in line with current market pricing according to CME Group data.

Bond yields spiked, and U.S. stock markets sold off sharply on the back of Powell’s comments, with the Dow closing nearly 575 points lower and turning negative for 2023. The S&P 500 slid 1.53% to close below the key 4,000 threshold, and the Nasdaq Composite lost 1.25%

Fed funds rate to hit 6.5% without mid-year recession, economist says

“There’s going to be a recession, and the Fed is going to push the point and they’re gonna get the unemployment rate to at least 4.5%, in my guess it probably ends up getting up to as high as 5.5%,” Blitz said.

He noted that there are “rumblings” of an economic slowdown in the form of layoffs in the finance and tech sectors and a stalling housing market. Along with weakness in U.S. stock market, Blitz suggested an “asset crunch and the beginnings of the potential for a credit crunch,” in the form of banks pulling back on lending, could be underway.

“Either you get a recession mid-year and the top rate is 5.5% or there is enough momentum, the January numbers are right, and the Fed keeps going and if they do keep going, my guess is that the Fed’s going to get up to 6.5% on the funds rate before things really start to slow down and reverse,” he said.

“So in terms of risk assets, it’s not a question of whether, it’s really a question of when, and the longer this thing goes, the higher the rate has to get to.”

The January consumer price index rose 0.5% month-on-month as rising shelter, gas and fuel prices took their toll on consumers, indicating a potential reversal of the inflation slowdown seen in late 2022.

The labor market remained red hot to start the year, with 517,000 jobs added in January and the unemployment rate hitting a 53-year low.

The February jobs report is due from the Labor Department on Friday and the February CPI reading is slated for Tuesday.

Powell’s bearish commentary implies a 50 bps hike in March is possible, says Gradient’s Jeremy Bryan

In the research note announcing its increase to the terminal rate forecast, Goldman Sachs said that it expects the median dot in the March Summary of Economic Projections to rise by 50 basis points to 5.5-5.75% regardless of whether the FOMC opts for 25 or 50 basis points.

The Wall Street giant also expects the data ahead of the March meeting to be “mixed but firm on net,” with JOLTS job openings falling by 800,000 to provide reassurance that rate hikes are working, alongside an above-consensus forecast for a 250,000 payroll gain but a soft 0.3% rise in average hourly earnings.

Goldman also forecasts a firm 0.45% monthly increase in core CPI in February, and said that the combination of likely data creates “some risk that the FOMC could hike by 50bp in March instead of 25bp.”

“In recent months we have argued that the drag on GDP growth from last year’s fiscal and monetary policy tightening is fading, not growing, and that this means that the key risk for the economy is a premature reacceleration, not an imminent recession,” Goldman economists said.

“Last weekend we noted that consumer spending in particular poses upside risk to growth that, if realized, might lead the FOMC to hike by more than currently expected in order to tighten financial conditions and keep demand growth below potential so that labor market rebalancing stays on track.”

Reports /TrainViral/

Crypto

Bitcoin’s Recovery – the Downturn Is Over

Published

6 months ago

July 16, 2024

The market is currently in a news-driven environment where the prices of cryptocurrencies have been determined by news agenda rather than fundamentals.

Bitfinex analysts have warned crypto investors to be cautious as bitcoin’s (BTC) recovery over the weekend is not a sign that its correction is over; the asset could witness more bloodshed in the near term.

In the latest Bitfinex Alpha report, experts deemed the market’s reaction this week critical, especially as supply alleviated over the weekend could return when traditional markets open.

“No Man’s Land”

Since Saturday, bitcoin has risen almost 10% from $57,600 to $63,000, closing last week in the green. The asset has surged above the 125-day range low of $60,200, which it broke through earlier this month after news of the German government’s massive BTC selling hit the market.

Market sentiment began to improve after reports that wallets linked to the German government were almost empty. However, the positive sentiment may not be sustained for long as the BTC the German authorities moved to trading desks and exchanges are yet to be sold.

While the supply from Germany appears to have been factored into bitcoin’s market price, Bitfinex analysts believe the end of selling pressure depends on how the involved trading desks execute their trades in the coming days.

Although the shift in sentiment underscores the market’s capacity to integrate new information and adjust expectations quickly, analysts think the market’s reaction over the first two trading days of the week cannot be overlooked for two reasons.

First, the low support level in the $60,200 range has now become a potential resistance line. Second, trading patterns over the past three months suggest that weekends are usually favorable for markets, especially on Saturdays when supply pressure seems to subside.

“We are now in no man’s land until we get clear resolution above or below this level,” the analysts said.

A News-Driven Environment

Besides the potential resistance level and three-month weekend trading pattern, the market is currently in a news-driven environment, where the prices of cryptocurrencies have been determined by news agendas rather than fundamentals.

Since selling pressure concerns are not yet completely obsolete due to upcoming Mt Gox creditor distributions, Bitfinex analysts expect such headlines to continue to have some impact on price movements. As such, the analysts urged investors to exercise caution in their trading strategies.

Reports /Trainviral/

Crypto

Bitcoin ETFs Saw $300M in Daily Net Inflows

Published

6 months ago

July 16, 2024

BlackRock’s IBIT led with $117.25 million in inflows on July 15, also being the most traded Bitcoin ETF.

The US spot Bitcoin ETFs recorded a daily net inflow of $301 million on July 15th. This extended their winning streak to seven consecutive days amidst a broader market recovery.

None of the ETFs recorded outflows for the day.

Bitcoin ETFs Rake in $16.11B in Net Inflows Since Jan

According to the data compiled by SoSoValue, BlackRock’s IBIT, the top spot Bitcoin ETF by net asset value, recorded the largest net inflows of the day at $117.25 million. IBIT was also the most actively traded Bitcoin ETF on Monday, with a volume of $1.24 billion. Ark Invest and 21Shares’ ARKB came in close behind with net inflows of $117.19 million.

Fidelity’s FBTC experienced net inflows of $36.15 million on Monday, while Bitwise’s BITB saw $15.24 million in inflows. VanEck’s HODL, Invesco and Galaxy Digital’s BTCO, and Franklin Templeton’s EZBC funds also recorded net inflows. Meanwhile, Grayscale’s GBTC and other ETFs, such as Valkyrie’s BRRR, WisdomTree’s BTCW, and Hashdex’s DEFI, registered no flows for the day.

A total of $2.26 billion was traded on Monday. The trading volume for these ETFs was less than in March when it exceeded $8 billion on some days. Meanwhile, these funds have collectively attracted $16.11 billion in net inflow since their January launch.

What’s Next For Bitcoin?

Earlier this month, bitcoin’s price decline was mainly due to fears of massive selling pressure from Mt. Gox and the German government’s BTC sales.

But the assassination attempt on pro-crypto former US President and presumptive Republican candidate Donald Trump at Saturday’s rally seemed to spark a recovery in the world’s largest digital asset, and experts are bullish on the asset’s price trajectory going forward. Bitcoin surged more than 9% over the past week and was currently trading slightly below $64,000.

Veteran trader Peter Brandt discussed bitcoin’s price outlook, suggesting a potential major rally. He referred to a pattern he terms “Hump->Slump->Bump->Dump->Pump” and highlighted that the July 5 double top attempt was a bear trap, confirmed by the July 13 close. He sees a likely continued upward trend but warned that a close below $56,000 would negate this bullish view.

“Bitcoin $BTC could be unfolding its often-repeated Hump…Slump…Bump…Dump…Pump chart construction. Jul 5 attempt at the double top was a bear trap, confirmed by Jul 13 close. Most likely scenario now is that bears are trapped. Close below $56k negates this interpretation”

Reports /Trainviral/

Crypto

LI.FI DeFi Platform Exploited, Over $8M Lost

Published

6 months ago

July 16, 2024

PeckShield alert reveals LI.FI’s protocol vulnerability is similar to a March 2022 attack, with the same bug recurring.

The decentralized finance (DeFi) platform LI.FI protocol has suffered an exploit amounting to over $8 million.

Cyvers Alerts reported detecting suspicious transactions within the LI.FI cross-chain transaction aggregator.

LI.FI Issues Warning After $8 Million Exploit

LI.FI confirmed the breach in a statement on July 16 via X: “Please do not interact with any http://LI.FI powered applications for now! We’re investigating a potential exploit.” The team clarified that users who did not set infinite approval are not at risk, emphasizing that only those who manually set infinite approvals seem to be affected.

According to Cyvers Alerts, more than $8 million in user funds have been stolen, with the majority being stablecoins. According to on-chain data, the hacker’s wallet holds 1,715 Ether (ETH) valued at $5.8 million and USDC, USDT, and DAI stablecoins.

Cyvers Alerts advised users to revoke relevant authorizations immediately, noting that the attacker is actively converting USDC and USDT into ETH.

Crypto security firm Decurity provided insights into the exploit, stating that it involves the LI.FI bridge. “The root cause is a possibility of an arbitrary call with user-controlled data via depositToGasZipERC20() in GasZipFacet, which was deployed 5 days ago,” Decurity explained on X.

“In general, the risks behind routers, cross-chain swaps, etc. are about token approvals. Raw native assets like (unwrapped) ETH are safe from these kinds of hacks b/c they don’t have approvals as an option. Most users & wallets also no longer do “infinite approvals” which gives a smart contract total control on removing any amount of their tokens. It’s important to understand which tokens you’re approving to which contracts.

This dashboard looks for all transactions of a user that intersects Lifi. Not all of these transactions indicate risk- but you can see how, broadly, integrations & layers of tech (like how Metamask bridge uses Lifi on BSC) can complicate how users do or don’t put their assets at risk. Revoke Cash is the most well known approval manager app.

But it’s also good security practice to simply rotate your address. New addresses start with 0 approvals, so starting fresh by moving your tokens to a fresh address is another good security practice.” – commented Carlos Mercado, Data Scientist at Flipside Crypto.

Recent Exploit Mirrors March 2022 Attack

Further analysis by PeckShield alert revealed that the vulnerability is similar to a previous attack on LI.FI’s protocol that occurred on March 20, 2022. That incident saw a bad actor exploit LI.FI’s smart contract, specifically the swapping feature, before bridging.

The attacker manipulated the system to call token contracts directly within their contract’s context, making users who had given infinite approval vulnerable. This exploit resulted in the theft of approximately 205 ETH from 29 wallets, affecting tokens such as USDC, MATIC, RPL, GNO, USDT, MVI, AUDIO, AAVE, JRT, and DAI.

“The bug is basically the same. Are we learning anything from the past lesson(s)?” PeckShield Alert said in a July 16 X post.

Following the 2022 incident, LI.FI disabled all swap methods in its smart contract and worked on developing a fix to prevent future vulnerabilities. However, the recurrence of a similar exploit raises concerns about the platform’s security measures and whether adequate steps were taken to address the vulnerabilities identified in the previous breach.

LI.FI is a liquidity aggregation protocol that allows users to trade across various blockchains, venues, and bridges.

Reports /Trainviral/