Finance

Powell changed everything on market’s view

Published

2 years ago

March 9, 2023

Federal Reserve Chairman Jerome Powell’s prepared speech this week to Congress took just a few minutes, but it changed everything.

In those remarks, the central bank leader set out a new paradigm for how the Fed views its policy path, one that apparently will see even higher interest rates for a longer period of time than previously thought.

The aftermath has forced the market, which long had been looking for the Fed to blink in its inflation fight, to recalibrate its own views to coincide more with policymakers who have been warning about a higher-for-longer approach to interest rates.

“We have clearly had a choreographed chorus of Fed speakers for two weeks that was getting us to that place,” said Art Hogan, chief market strategist at B. Riley Wealth Management. “It took Jay Powell, over the course of a very brief prepared statement and a Q&A, to get those expectations cemented into a higher place.”

As part of his mandated semiannual testimony on monetary policy, Powell spoke Tuesday before the Senate Banking Committee then the day after to the House Financial Services Committee.

Palfrey: The Fed is almost trying to be painfully clear in its messaging

Heading into the appearances, markets had been looking for the Fed to raise its benchmark interest rate by 0.25 percentage point at its meeting later this month, then perhaps two more moves before stopping, with the end point around 5.25%.

That changed after Powell’s appearance, during which he cautioned that if inflation data remains strong, he expects rates to go “higher than previously anticipated” and possibly at a faster pace than a quarter point at a time.

Markets now strongly expect a half-point increase in March and the peak, or terminal rate, to hit close to 5.75% before the Fed is finished.

When the facts change

So what changed?

Basically, it was the January inflation data plus signs that the labor market remains remarkably strong despite the Fed’s efforts to slow it down. That made Powell, who only weeks earlier had talked about “disinflationary” forces at play, switch gears and start talking tough again on monetary policy.

“He’s adjusting to data coming in, which the entire board should be doing,” Hogan said. “If the facts change again through the February and March data, he’ll likely become flexible on that side and not push this too far to the point where they need to break something.”

Indeed, Powell said he’ll be watching a pivotal array of upcoming data closely — Friday’s nonfarm payrolls report, followed by next week’s look at the consumer and producer price indexes.

Goldman Sachs economists are holding to their forecast for a quarter-point hike at the March 21-22 Federal Open Market Committee meeting, but concede that it’s a “close call” between that and a half point.

Should the Fed have to tilt in the more aggressive direction, Goldman warned in a client note that it could have market impacts, with stocks selling off “more sharply” and downward pressure on commodities, plus upward pressure on the dollar.

Worries over consequences

Powell faced some questioning this week over the Fed’s inflation-fighting strategies.

Some more progressive legislators such as Sen. Elizabeth Warren (D-Mass.) and Rep. Ayanna Pressley (D-Mass.) charged that the rate hikes will result in 2 million layoffs and hurt working-class families disproportionately. Powell countered that inflation also is hammering those at the bottom end of the income spectrum.

“This is what he is supposed to do,” Joseph Brusuelas, chief economist at advisory firm RSM, said of Powell’s evolving policy stances. “Jay Powell is a punching bag in Washington at this point. He’s going to take the blame for establishing price stability. If he does that well, in the years to come he’ll be venerated. People will speak very highly of him.”

Brusuelas is among those who think the Fed should accelerate its inflation battle with a half-point rate hike.

However, he said policymakers could be swayed by a potentially softer jobs report and inflation data next week that reverses course and shows price increases abating. Economists expect that payrolls grew by 225,000 in February, according to Dow Jones, and there’s widespread belief that January’s 517,000 surge will be revised down in this report, perhaps significantly.

Fed policy looks very misguided right now, says Wharton’s Jeremy Siegel

“The economy is just too resilient at this point,” Brusuelas said. “They need to generate sufficient labor slack to cool off the economy.”

Slack was not evident in this week’s Labor Department report of job openings in January, which outnumbered available workers by a 1.9 to 1 margin.

Data like that could push the Fed into even further tightening, according to economists at Nomura. The firm said future actions could include adjustments to the Fed’s program to slash its bond portfolio, with one option being to remove the $95 billion monthly reduction cap currently in place.

For the moment, markets are continuing to price in higher rates.

Though Powell made a special point Wednesday to emphasize that no decision has been made yet on the March rate move, markets essentially ignored him. Traders in the futures market were pricing in a terminal rate of 5.625% later this year, well above where it was before Powell spoke.

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/