13 Feb Bitfinex Alpha | Bearish Sentiment Sweeps Market, but Tether Shines
Inflation concerns seem unable to beat the love this Valentines. Survey results suggest that Americans are expecting to spend significantly on Valentine’s Day despite the fact that prices are notoriously worse during this week. According to the National Retail Federation, Valentines Day sales in 2023 are expected to reach almost $26 billion, one of the largest ever. We will be closely watching spending patterns this week, and February 14 will act as an indicator of the resiliency of the US consumer as they navigate elevated prices, thinning out savings and higher credit card interest rates.
Indeed it appears that moderating inflation expectations has not only boosted consumers’ willingness to spend on special occasions, it has also led to an uptick in the RSM Financial Conditions Index, a comprehensive measure of the level of risk factored into the financial asset values across the money, bond and stock markets.
This market sentiment, though, is clearly at odds with those who are arguably more exposed to the real economy: corporate treasurers. Corporate debt issuance is declining, with corporate treasurers apparently scarred by last year’s series of jumbo rate hikes.
On the face of it, consumers seem to be in the positive camp with expectations of easing inflation and a strong labour market creating a feel-good factor, according to the University of Michigan consumer survey, which climbed to a 13-month high for January. But look deeper, and the level of positive sentiment is still far below pre-pandemic levels. The uncertain longer-term economic picture has many consumers still concerned about the future, and this is reflected in the decline in consumer expectations for the economy on both one-year and five-year time horizons.
And while the job market looks resilient, there is no escaping continued big headlines of job losses. Big tech firms that flourished during the bull market are now reining in their spending. Microsoft reported last week that it laid off its industrial metaverse team. The company said it would make changes that would lead to the reduction of 10,000 jobs in its workforce.
Meanwhile, Bitcoin saw realised on-chain losses for the first time in over two weeks, caused by profit-taking from early buyers and selling pressure from leveraged longs getting wiped out. However, despite the pullbacks, BTC net-weighted derivatives funding rates remain bullish.
Crypto companies are now navigating their way through the evolving regulatory landscape as some seek to rise again in the aftermath of the collapse in prices last year. Genesis and its parent company DCG finally reached an agreement with creditors. Meanwhile, Kraken agreed to pay $30 million in penalties to settle SEC charges.
Investors who saw their crypto assets drop in 2022 due to the FTX collapse are, however, still wary, and Binance’s announcement this week that it has temporarily suspended deposits and withdrawals in US dollars through bank accounts has dampened sentiment.
On a much more positive note on the industry, however, Tether revealed $700 million profits for the fourth quarter of 2022, despite the downturn. This news sets apart the bad actors of the industry and proves the resilience of those that have survived through the bear market and black swan events of 2022. As news emerges that the SEC may now be turning its attention to Paxos, who issues the BUSD stablecoin, and commencing legal action there, there have seen significant flows into Tether, as it further cements its status as the predominant stablecoin.