Ben Strack and Casey Wagner are pleased to welcome you to the On the Margin Newsletter. You’ll discover the following in this edition:
- The Fed’s actions this week are well-known. What’s going on with the central banks of other countries?
- A new exchange is on the market, which aims to differentiate itself from its competitors.
- Here are the most important economic indicators for the past week (other than the FOMC’s decision).
The international scene
The Federal Reserve chose this week to make a big move and cut interest rates by more than 4 years for the very first time. However, other central banks have decided to stay the course.
Yesterday, the Bank of England kept its rates at 5%. The Bank of England said yesterday that it would cut interest rates once again in this year, as the inflation rate continues to fall to 2%. However, wage increases have caused them to delay this decision this month.
It has been made clear that the BoE will not follow the Fed in its more aggressive steps, and yesterday said it would take an alternative approach. “a gradual approach” Reduced rates
“The committee continues to monitor closely the risks of inflation persistence and will decide the appropriate degree of monetary policy restrictiveness at each meeting,” The BoE statement on Thursday reads:
Fed materials published Wednesday indicate that the majority (80%) of members believe interest rates will end the year in a range between 4% to 4.5%. Current levels after the 50-basis-point cut on Wednesday are 4.75% to 5%. Translation: Most expect at least one more cut — either in November, December or both.
Today, the federal funds futures market shows a 51% probability of a further 50bps reduction in November. Let’s wait to reveal my own expectations, until more economic data is available (sorry August PCE and Sept. jobs report).
While the Bank of Japan (at least in our time zone) announced on Thursday it had no intention of rushing any additional increases and that interest rates would remain at around 0.25 percent, they did not intend to do so.
BoJ wants to end its ultra-easy monetary policies (since 2008). BoJ governor Kazuo Ueda told reporters in August the central banks will increase interest rates slowly as long as inflation and economic growth do not slow down.
This week, the BoJ stated that it expected core inflation to continue rising through fiscal 2025 (excluding costs of fresh foods). The fiscal year in Japan runs from April 1 through March 31. Therefore, the fiscal year ending March 2026 is March 2025.
Following the BoJ announcement on Friday, the yen fell slightly and reached a low of 0.8%.
Analysts say that the carry trade in yen, which is largely responsible for the sudden, but brief, decline of US stocks in August, has not yet been unwound. Therefore, further tightening in Japanese monetary policies could cause the markets to panic again.
“The yen is still undervalued to the US dollar,” Francis Tan, CA Indosuez Wealth Management’s chief Asia strategist, spoke to CNBC last week. The unwinding “is not done,” Then he went on to say:
If the BoJ had raised rates last week, there would certainly have been a severe market reaction. We also appreciated the cautionary tone of Gov. Ueda helped to strengthen the dollar against yen. But it’s something to watch.
— Casey Wagner
7,420
MicroStrategy announced Friday how much Bitcoin it bought over the last seven days. The company announced that it had completed a convertible senior note offering of $1 billion in aggregate principal.
Michael Saylor’s business intelligence company paid $458,000,000 for its latest BTC stack (an average of $61,750 each bitcoin). MicroStrategy has acquired 252,220 BTC for $9.9 Billion ($39,266 each bitcoin).
MSTR stock was up more that 5% in the last five days, despite Friday’s price being flat.
The new crypto exchange uses a completely different business model
Coinbase Binance Bybit etc. are the biggest crypto exchanges.
TrueX is another product that aims to become agile. “strong alternative” These incumbents are the best candidates.
This newcomer tries to distinguish itself in two ways. It calls itself a stablecoin native and non-custodial.
TrueX’s appearance out of hiding earlier this week was not an accident. It came almost two years after a major player in the industry crashed.
“The collapse of FTX highlighted the need for a safer and more trustworthy market model,” TrueX’s co-founder Vishal gupta was interviewed by Blockworks. “This presented an opportunity to build a next-generation exchange from the ground up, one that fully separates trading from custody and integrates stablecoins for settlement.”
Gupta created Circle with Patrick McCreary who was a former Coinbase engineer and previously headed the USDC exchange.
TrueX is a settlement tool that helps clients to settle their assets. However, the client’s assets still remain under control. “qualified custodial partner,” Paxos.
“Whether driven by regulation or client demand, separating execution from custody is now essential for trust and security,” Gupta made a note.
According to a report by OKX published in November, the market for institutional digital assets custody is expected to grow with a rate of growth compounded annually of 23 percent through 2028.
There’s also a big opportunity for TrueX to capitalize on stablecoin strengths, Gupta argued — in this case to offer faster and more efficient trading. PayPal USD is used as the default settlement currency.
Stablecoins have a market cap of approximately $170 Billion, and tether USDT accounts for around 70%. In a recent report, Bernstein analysts stated that stablecoins have become increasingly popular. “systemically important.”
“Starting fresh allowed us to design a more secure and flexible platform, ensuring we can be nimble in adapting to the evolving needs of the crypto market,” Gupta claimed.
Craig Burel is the general partner of Reciprocal Ventures. He said TrueX in a recent statement. “poised to become a force in crypto markets and trading.”
It remains to be determined whether the exchange will one day become a household brand (or change the way that exchanges view their business models). Gupta is an experienced entrepreneur, and his background shows that he has the right skills.
Did you Notice?
Have a great Friday. Finally, we’ve reached the end of yet another exciting FOMC Week. But there were also some notable economic developments, so let’s get up-to-speed before (hopefully) you go! Disconnect for the Weekend:
- In the US retail report for August, released on Tuesday, there was a pleasant surprise. There were increases of 2.1% and 0.1% over the past year. There was also an upward revision for July’s figure — which is now 1.1% higher from June — helping to substantiate hopes that US consumers are feeling strong.
- Initial jobless claims on Thursday were below expectations, which was likely a huge relief for central bankers. This report was welcomed after Fed Chair Jerome Powell has repeatedly said that he hopes there are no further pressures placed on the labor markets. The number of first-time claimants for the week ending Sept. 14, which was 219,000 is a significant decrease from last week’s figure and an expected 230,000. Phew!
Bulletin Board
- Bitcoin’s price was relatively flat Friday. It had fallen less than 0.5% over the last 24 hours (2 pm ET) after its post-Fed interest rate reduction boost. BTC has risen 130% in the past year despite only being around 15% from its high of March.
- Digging into a couple other stats, bitcoin dominance — a measure of BTC’s market capitalization vs. crypto’s total market cap — hovered around 58% Friday. It’s up more than 15% from a year ago, TradingView data shows — recently hitting a multi-year high.
- The closing rally for the ” “America Loves Crypto Tour” In an interview conducted by CNBC on Thursday in Washington, DC, Coinbase CEO Brian Armstrong emphasized the crypto-focused voter bloc. “They want to elect candidates to represent their values, who want this technology to be built here in America, and frankly people who stand up for their right to use crypto,” “He said” “They felt like they’ve [been] treated like criminals in many cases in the last few years, and that’s just not acceptable in a free country like America.”
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