Thu, Dec 01, 2022 @ 20:51 GMT
HomeContributorsFundamental AnalysisAll I Want for Xmas is Lower Inflation, and Softer ChinesePolicies

All I Want for Xmas is Lower Inflation, and Softer ChinesePolicies

It has been an ugly weekend for cryptocurrencies, even though the selloff remained relatively contained in the sector giants like Bitcoin, compared to the size of the bad news that flew in last Friday.

On Friday, FTX filed for Chapter 11. Even FTX’s US leg – that many hoped could come unharmed went under. The FTX collapse pulled some 130 entities down with it.

For now, traders prefer cutting exposure to cryptocurrencies.

Who to blame?

For the latest crypto debacle, some blame the lack of regulation, others say that it’s just a financial fraud like any other. And some even compare it to Enron, which was one of the biggest accounting scandals in the history of modern finance.

FTX held $900 million in liquid assets the day before it went down, compared to $9 billion in liabilities. This is something that could’ve never happened in a traditional, regulated financial institute.

As such begins the hunt for crypto-exchange balance sheets.

What will probably happen from now is, people will do what regulators failed to do: controlling the balance sheets of the crypto exchanges.

And although they are not regulated, and they don’t have to reveal their balance sheets, many crypto exchanges will HAVE to give in, and become more transparent, if they don’t want their users.

So, we may not be done with the cryptocurrency exchanges accounting crisis, just yet.

But one thing is important, the fact that cryptocurrency exchanges haven’t proved to be solid doesn’t make the cryptocurrencies, and their blockchains less valuable.

And if regulators fail to do their jobs, and if people could do it for them, then we will enter a new phase in decentralized finance.

US inflation falls, China eases Covid, property measures. What can we ask more for Xmas?

Market mood outside crypto is extremely joyful after last week’s inflation data surprised investors to the downside and China announced to relax Covid measures, and boost its shattered property sector.

Although the US inflation remains relatively high to contain a perhaps premature bull run on dovish Fed expectations, news from China could help keeping the mood nice and sweet.

We will yet discover if the latest news will be enough to get international investors back on board of a Chinese dream that has been shot to the ground by the very Xi Jinping. Nasdaq’s Golden Dragon China index recovered 40% since its October dip, but is still more than 3.5 times below the levels it was trading in February 2021.

Joe Biden and Xi Jinping will talk today on the sidelines of the G20 summit in Bali. Talks could go either way; they could either boost, or hit risk appetite in Chinese, and global assets.

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