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Today’s Stories:
Bitcoin's 4% Drop Cools Overheated Funding Rates, Data Show
Pudgy Penguins to Launch Webkinz-like Virtual World in 2024
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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 Monday, December 11th, 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 the sharp weekend correction in crypto markets, consumer expectations, NFTs 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.
In crypto markets, ouch. During Asian trading hours last night, crypto markets plunged, with bitcoin at one point dropping almost 6% in 15 minutes. Prices bounced, as they usually do after sharp moves, but they have yet to recover earlier levels. According to CoinDesk Indices, at 9 a.m. Eastern time this morning, bitcoin was trading down 4.3% over the past 24 hours, at 41,956 dollars. Ether was down 5%, trading at 2,230 dollars.
Elsewhere, Solana is down 7%, Cardano, Chainlink and Polkadot are down 8%. Not everything is down, though – Avalanche is up 8%, and Immutable X is up 11%.
So, what happened? It looks like this is a leverage adjustment, which is good news. Last week, signals from the crypto futures market were starting to suggest that leveraged speculation was getting heated. Funding rates are the cost traders pay to take long or short positions in crypto perpetual futures – as the name implies, these are futures that don’t expire, they automatically roll over, and funding rates are the adjustable cost that keeps the perpetual futures price linked to the spot price.
On Saturday, annualized 8-hour Bitcoin funding rates spiked to the highest since November 2021. That month, you may remember, marked the top of the last bull run, when bitcoin reached almost $69,000.
Saturday’s funding rate spike triggered some selling, which swiftly led to the unwinding of many leveraged long positions and even more selling. This happens often in crypto markets, and tends to be exacerbated by their global nature, and its 24/7 trading. Prices usually resume their previous trend, however, once the dislocation has been digested. And these drops can be seen as a healthy cleanse of excess leverage. Bitcoin funding rates are now back to more normal levels.
In macro matters today, I want to look at the latest consumer sentiment metrics out on Friday from the regular University of Michigan survey. This showed that U.S. consumer sentiment rebounded sharply in early December, much more than expected.
Also, inflation expectations were dialed back. In October, expectations for inflation one-year out were 4.5% - that was pretty worrying. For November, they have dropped to 3.1%, the sharpest monthly fall since October 2021.
Survey respondents are also expecting lower inflation over a longer time frame. Annual inflation for five years out is now expected to be 2.8%, the lowest since September 2022, and down from October’s 3.2%.
This is good news for the Federal Reserve, which does keep an eye on these figures. The U.S. central bank starts its final FOMC meeting of the year tomorrow. We get their rates decision on Wednesday, which is expected to be a pause.
Also on Wednesday we get updated official economic forecasts, and what is known as the dot plot, which indicates where Fed officials expect rates to end 2024. The spread of forecasts has been wide in recent editions – it will be interesting to see if there is perhaps more consensus now that inflation looks to be heading in the right direction.
On Friday, U.S. stocks more than recovered early losses as traders decided that the strong employment data meant a soft landing was more likely. All the main indices were up around four tenths of a percent. Futures are pointing to a soft opening this morning.
In Europe, the German DAX and the broader Eurostoxx 600 were up almost three quarters of a percent, while the FTSE 100 rose around six tenths. So far today, sentiment is mixed, with the DAX and the Eurostoxx 600 flat and the FTSE 100 down half a percent.
In Asia, sentiment was also mixed today. Japan’s Nikkei index jumped 1.5% and the Shanghai Composite rose three quarters of a percent, while the Hang Seng lost eight tenths.
In commodities, oil prices are maintaining their downward momentum following seven consecutive weeks of declines as concerns about global demand are offsetting any potential supply tension. Earlier today, the Brent crude benchmark was down four tenths of a percent, trading at 75 dollars and 75 cents a barrel.
Gold has slipped below 2,000 dollars an ounce to its lowest level in two weeks as investors brace for a week of central bank rate announcements. Earlier today, the metal was down eight tenths, trading at 1,988 dollars per ounce.
Stay with us – after the break I talk about signs that the NFT market is not dead.
Welcome back!
In today’s show, I’m going to do something I’ve not done before on this podcast: talk about non-fungible tokens, or NFTs. I’m not going to talk about individual series other than via data points and as examples. Rather, I want to suggest that the market is not nearly as dead as the current lack of hype would have you believe.
Before I do so, I have to disclose that I personally only own two NFTs. One is of a poem, gifted to me by a friend. The other is a drawing of me done for a series on women in crypto. I ended up purchasing that NFT as the proceeds were going to a good cause.
Back to why NFTs are not dead. First, sales are climbing again. According to data from cryptoslam.io, over the past 30 days sales of Pudgy Penguins, Bored Apes, Azukis and many others are up, some of them by a lot.
Some prices are also up. Floor prices refer to the lowest price for any NFT in a given collection. According to NFTPriceFloor.com, over the past 30 days, the floor prices of Pudgy Penguins, Azukis and others are up.
And even since March of 2022, before crypto sentiment turned, most floor prices have plummeted but some such as Pudgy Penguins and ON1 Force have managed to increase. This is according to an excellent report on web3 gaming by Brevan Howard’s Colleen Sullivan which you can download this from the Messari website – we’ll put a link in the show notes, it’s well worth a read.
Colleen’s report focuses on web3 gaming, but this often involves NFTs and she gives a comprehensive and data-packed overview of collaborations and the evolution of some key collections.
This is relevant to a story published on CoinDesk over the weekend about an upcoming Pudgy Penguins game. Pudgy Penguins, you may remember, are an NFT collection featuring, you guessed it, cute pudgy penguins, that are also now available as physical toys on sale in Walmart. As of April, they will also star in a game called "Pudgy World", which will be an interactive digital playground for Pudgy Penguins NFT holders and toy owners as well as the uninitiated.
The evolution of Pudgies is the main story here. They were born as NFTs but then became physical toys and now also a game. This highlights the potential of the concept – it’s not just about ownership of art. Like cryptocurrencies, NFTs are an evolving concept.
The underlying message here is: NFTs are not dead. They are speculative, for sure. But they are more than collectible one-off images. They are cultural statements combined with technological playfulness that are stretching how we interact with gaming and ownership as well as connection.
I’m certainly not recommending anyone rush out to buy NFTs – but I do recommend watching this space, because it is sending messages about how blockchains are increasingly integrating with not just finance but also culture. And they are a reminder that crypto can be fun, and it can be painful when prices drop - but, bigger picture, it’s about changing the way we understand ownership in the digital world.
