Finance

Oil plunge, tech collapse and Fed cuts?

Published

2 years ago

December 7, 2022

After a tumultuous year for financial markets, Standard Chartered outlined a number of potential surprises for 2023 that it says are being “underpriced” by the market.

Eric Robertson, the bank’s head of research and chief strategist, said outsized market moves are likely to continue next year, even if risks decline and sentiment improves. He warned investors to prepare for “another year of shaken nerves and rattled brains.”

The biggest surprise of all, according to Robertson, would be a return to “more benign economic and financial-market conditions,” with consensus pointing to a global recession and further turbulence across asset classes next year.

As such, he named eight potential market surprises that have a “non-zero probability” of occurring in 2023, which fall “materially outside of the market consensus” or the bank’s own baseline views, but are “underpriced by the markets.”

Collapsing oil prices

Oil prices surged over the first half of 2022 as a result of persistent supply blockages and Russia’s invasion of Ukraine, and have remained volatile throughout the remainder of the year. They declined 35% between June 14 and Nov. 28, with output cuts from OPEC+ and hopes for an economic resurgence in China preventing the slide from accelerating further.

However, Robertson suggested that a deeper-than-expected global recession, including a delayed Chinese recovery on the back of an unexpected surge in Covid-19 cases, could lead to a “significant collapse in oil demand” across even previously resilient economies in 2023.

Should a resolution of the Russia-Ukraine conflict occur, this would remove the “war-related risk premia” — the additional rate of return investors can expect for taking more risk — from oil, causing prices to lose around 50% of their value in the first half of 2023, according to Robertson’s list of “potential surprises.”

Russian oil exports could fall by 2 million barrels a day: The Fitch Group

“With oil prices falling quickly, Russia is unable to fund its military activities beyond Q1-2023 and agrees to a ceasefire. Although peace negotiations are protracted, the end of the war causes the risk premium that had supported energy prices to disappear completely,” Robertson speculated.

“Risk related to military conflict had helped to keep front contract prices elevated relative to deferred contracts, but the decline in risk premia and the end of the war see the oil curve invert in Q1-2023.”

In this potential scenario, the collapse in oil prices would take international benchmark Brent crude from its current level of around $79 per barrel to just $40 per barrel, its lowest point since the peak of the pandemic.

Fed cuts by 200 basis points

The main central bank story of 2022 was the U.S. Federal Reserve’s underestimation of rising prices, and Chairman Jerome Powell’s mea culpa that inflation was not, in fact, “transitory.”

The Fed has subsequently hiked its short-term borrowing rate from a target range of 0.25%-0.5% at the start of the year to 3.75%-4% in November, with a further increase expected at its December meeting. The market is pricing an eventual peak of around 5%.

Robertson said a potential risk for next year is that the Federal Open Market Committee now underestimates the economic damage inflicted by 2023′s massive interest rate hikes.

Should the U.S. economy fall into a deep recession in the first half of the year, the central bank may be forced to cut rates by up to 200 basis points, according to Robertson’s list of “potential surprises.”

“The narrative in 2023 quickly shifts as the cracks in the foundation spread from the most highly leveraged sectors of the economy to even the most stable,” he added.

“The message from the FOMC also shifts rapidly from the need to keep monetary conditions restrictive for an extended period to the need to provide liquidity to avoid a major hard landing.”

Tech stocks fall even further

Growth-oriented technology stocks took a hammering over the course of 2022 as the steep rise in interest rates increased the cost of capital.

But Standard Chartered says the sector could have even further to fall in 2023.

The Nasdaq 100 closed Monday down more than 29% since the start of the year, though a 15% rally between Oct. 13 and Dec. 1 on the back of softening inflation prints helped cushion the annual losses.

On his list of potential surprises for 2023, Robertson said the index could slide another 50% to 6,000.

“The technology sector broadly continues to suffer in 2023, weighed down by plunging demand for hardware, software and semiconductors,” he speculated.

“Further, rising financing costs and shrinking liquidity lead to a collapse in funding for private companies, prompting further significant valuation cuts across the sector, as well as a wave of job losses.”

There’s ‘a lot of upside’ for tech, investment firm says

Next-generation tech companies could then see a surge in bankruptcies in 2023, shrinking the market cap share of these companies on the S&P 500 from 29.5% at its peak to 20% by the end of the year, according to Robertson.

“The dominance of the tech sector in the S&P 500 drags the broader equity index lower too,” he suggested, adding: “The tech sector leads a global equity collapse.”

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/