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This episode was hosted by Noelle Acheson. “Markets Daily” is executive produced by Jared Schwartz and produced and edited by Eleanor Pahl. All original music by Doc Blust and Colin Mealey.
Audio Transcript: This transcript has not been edited and may contain errors.
It’s Tuesday, November 28th, 2023 and this is Markets Daily from CoinDesk. My name is Noelle Acheson, CoinDesk collaborator and author of the Crypto is Macro Now newsletter on Substack. On today’s show we’re talking about market moves, inflation, the Binance settlement and more. So you don’t miss an episode, be sure to follow the podcast on your platform of choice, and turn on notifications. And just a reminder, CoinDesk is a news source and does not provide investment advice.
Now, a markets roundup.
Crypto markets were trading largely range-bound today until a spurt of energy as we head into record. According to CoinDesk Indices, at 9 a.m. Eastern time today, bitcoin was up 1 and a quarter percent over the past 24 hours, trading at 37,426 dollars. Ether was trading up half a percent, at 2035 dollars.
For a change, the large caps are outperforming most of the smaller caps, with a couple of exceptions. Solana is up 2.4% and the RUNE token is up over 6%.
CoinDesk’s Krisztian Sandor wrote yesterday about the impact of token unlocks on the prices of DYDX, Optimism, Sui, 1Inch and others – we’ll put a link in the shownotes if you want to learn more about that.
In macro matters, it’s time to talk once again about an inflation indicator known as the Personal Consumption Expenditure Index, or the PCE. This is the Federal Reserve’s preferred inflation metric as it measures goods and services bought by all U.S. households and non-profits, while the more commonly cited CPI index only accounts for all urban households. Also, the CPI uses data from surveys, while the PCE uses data directly from suppliers and from the GDP report.
The CPI is what people usually mean when they talk about inflation – but the PCE is more relevant, especially where the Federal Reserve is concerned, and so it’s also something that traders pay a lot of attention to.
On Thursday, we get the PCE data for October. For context, you may remember that the CPI data for October came in better than expected a couple of weeks ago – I talked about this on the November 14th episode, if you want to go and give that a listen. Headline CPI inflation dropped to 3.2% year-on-year, from 3.7%. Core CPI inflation, which strips out food and energy, fell slightly to 4% from 4.1%.
You’ll be pleased to hear that the PCE data is expected to show similar declines. The headline number is forecast to deliver an increase of 3.1%, vs 3.4% in September. The core index is expected to grow by 3.5%, down from September’s 3.7% increase. And it’s possible, as with the CPI data, that the results come in better than forecast.
This would be very good news, as it would further consolidate expectations that the battle against inflation is going well. But there’s a risk that markets might get too excited, and start to price in interest rate cuts even sooner than the current indications of June.
This overlooks that reaching the official inflation target could still be a ways off. The expected year-on-year growth rate for the core PCE index for October of 3.5% is still quite far from the target 2%.
And yesterday, Bloomberg published the results of a poll which showed that forecasters have on average raised their expectations of core PCE for the end of next year, to 2.5% up from 2.4%. That’s heading in the wrong direction.
Federal Reserve Chair Jerome Powell has often stressed that the central bank will not think of cutting rates until it is convinced there is no danger of inflation popping back up again. Given the resilience of economic indicators suggesting the services economy is still strong, and given climbing consumer expectations of inflation one year out, that could take some time.
In stocks, the main U.S. indices were flat to slightly down yesterday, as traders navigate the balance between likely rate cuts which would be good for the market, and a sharper economic downturn than expected, which would be bad. Futures are pointing to a flat open today.
Sentiment in Europe yesterday was weak for the second day in a row, with the FTSE 100, DAX and Eurostoxx 600 down around four tenths of a percent. So far today, the main indices are continuing to head down. The Eurostoxx 600 is leading the pack with a drop of just over half a percent.
Shares in Asia were mixed today. Japan’s Nikkei index was flat, the Hang Seng fell almost 1%, while China’s Shanghai Composite rose a quarter of a percent.
In commodities, oil seems to be breaking a three-day decline, as reports emerged yesterday that Saudi Arabia is asking other OPEC+ members to reduce their oil production quotas in a bid to support energy prices. It’s not a given they will agree, however. Earlier today, the Brent Crude benchmark was up three quarters of a percent, trading at 80 dollars and 92 cents a barrel.
Gold is digesting the gains of the past week, and today is trading flat at $2015 dollars per ounce. Over the past week, gold is now up almost 2%.
Stay with us – after the break we’re going to look at what the Binance settlement reveals about the establishment’s fear of crypto.
Welcome back!
In this section, I’m going to depart from our usual format of digging into intriguing markets-related headlines. Instead, I’m going to read out a tweet that I thought offered the most piercing take I’ve seen on the Binance settlement. I discussed the settlement in more detail in last Wednesday’s episode, in case you missed that.
Today, we’re going to hear from author and professor Omid Malekan who took to X, formerly known as Twitter, to highlight what he saw as some of the glaring hypocrisies in the whole spectacle.
It’s a well-written post that sketches out the special treatment crypto receives at the hands of regulators that don’t fully understand the technology. It also hints at the real message the U.S. Department of Justice and Treasury wanted to send. The action was not as much about stopping financial crime as it was about playing within the established system.
Again, these are not my words, they are Omid’s, and while you may not agree with him, it’s a point of view worth hearing. We’ll put a link to the post in the show notes if you want to give him a follow.
Here we go - I quote:
“Some thoughts on the Binance settlement, with the preamble that I think companies that don’t like certain laws should still comply with them while campaigning for change.
One interpretation of the government’s suit and the resulting mammoth settlement is that by refusing to implement compliance schemes like AML & CFT, Binance failed to stop money laundering and the financing of terrorism.
The problem with this interpretation is that vast sums of illicit flows still move through the companies who do comply. Banks, brokers and other types of (mostly non-crypto) intermediaries are the preferred route for tax and sanctions evaders, to the tune of over a trillion dollars a year.
A more accurate interpretation is that Binance refused to participate in the pretense of stopping illicit finance. They didn’t kick out the occasional bad actor or file endless suspicious activity reports. In other words, they didn’t play the game, didn’t pay their annual tithe to the AML-Industrial Complex (a cushy landing spot for ex officials) and didn’t kiss the ring, as it were.
You could see the Kabuki aspect of all this in the joint press conference held by various Important Government Officials yesterday. If you didn’t know the context and watched the whole thing on mute you’d think the Feds just brought down a major drug cartel or rounded up the remnants of ISIS, as opposed to finally extracting their pound of flesh from the preferred trading venue for Dogecoin.
This settlement was so important that it warranted an appearance by the Secretary of the Treasury, but not important enough for her to know how to pronounce the company’s name.
Also telling: most of the Tough Talk from the People in Suits was about the procedures Binance refused to follow, and notably NOT about the terrorism that Binance enabled.
The same goes for the unsealed settlement docs, full of shocking (not really) revelations like the time some dude in Washington traded $1400 worth of some coin with some dude in Iran. This from the same administration that released $10b to the Iranian government a week ago.
People who sincerely believe that crypto is some unique enabler of bad people doing bad things don’t understand how the rest of the financial system actually works.
One of the biggest banks in America still operates a division in Russia, and many of the world’s worst tyrants use America as their piggy bank. But that’s all considered OK because somebody did the paperwork.
Binance was wrong to lie to its customers and wrong for not being compliant. But that doesn’t mean it’s a bad company. Spend five minutes googling “banks facilitating money laundering” and you’ll find that financial firms with household names have been caught doing far worse things involving orders of magnitude more money, yet suffered much milder consequences.
If they’d been held to the Binance Standard there’d be hundreds of managing directors in jail and less money for shareholder buybacks (or lobbying). But the bankers were smart enough to never question the game.
Unlike FTX—a company whose psychopathic leader was beloved by half the people in that press conference not that long ago—Binance didn’t abscond with user money.
It did a reasonably decent job of onboarding tens of millions of poor, brown, and otherwise underprivileged people into the financial system, something the world’s compliant financial firms have chronically failed to do (which is OK—it’s not considered redlining when the AML department holds the pen).
Binance's net contribution to a more inclusive financial system is something to be commended. What remains to be seen is if firms like that can keep serving underserved populations now that they too have agreed to play the game, and do the paperwork.”
End quote.
I hope you found that as interesting as I did. Thanks for listening - that’s it for today’s show.
