No Red Tsunami But Another Crypto Flash Flood

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Stocks faltered after the investor-backed “red tsunami” failed to materialize. Then the S&P 500 hit new lows on the effects of flash floods when Binance canceled its deal to buy rival FTX, triggering a wave of bitcoin selling below $16,000, decimating long investors.

You cannot deny the growing correlation between bitcoin and risky assets. FTX news has an outsized effect on asset prices. Once the second-largest crypto exchange in the world, FTX told investors that without more capital, bankruptcy is likely. Hence, all ships were sinking on the crypto tumult.

All of this unexpected noise is occurring ahead of the highly anticipated US CPI, which will be a sensitive marker for the FOMC as to how high interest rates will be.

The fallout from Bitcoin is not insignificant, and given the extent of holding crypto coins, this could mean more forced liquidation of other assets to cover margin calls as long investors were massively caught. against the grain.

Unfortunately, for crypto buyers, there is no lender of last resort. Therefore, the sell-off might have more legs to run as industry liquidation hunters remain on the hunt selling a variety of cryptos and native FTX coins to hedge their downside as the crypto contagion effect builds. unleashed. Indeed, this could be a tipping point for crypto after investors found themselves with a series of major insolvencies in the industry earlier this year.

As for the midterm elections, of course, that wasn’t a great performance for the Democrats either. A purple dilemma might be the best way to describe the red-blue tangle that emerged on Wednesday. It will be a dead end, that’s for sure. But perhaps not the friendliest kind for market participants, many of whom had hoped for a more resounding rebuke from Democrats given the realities of inflation.

Volumes outside of specific risk events this week have been a little light, this theme will likely continue today ahead of the US CPI print, with excessive risk taking likely to be reduced. With updated used car numbers a bit stronger than expected, economists are adjusting their overall and baseline forecasts upward.

OIL MARKETS

Crude oil prices fell overnight after the Energy Information Administration reported a bearish-to-consensus crude oil inventory rise of 3.9 million barrels for the week of Nov. 4. headlines put China in the headlights, or rather the taillights, as reopening optimism quickly fades as a spike in local covid cases hangs like an anvil over oil markets.

Adding to the oil spill, large-scale risk scaling and a strong US dollar ahead of the much-anticipated US CPI data doesn’t help matters for many oil investors caught long and badly after doing splurge last week and now suspect China of reopening speculation.

FOREX

The USD was choppy in the New York session, but the direction of travel took a higher turn ahead of tonight’s US CPI print as weaker Chinese data sent growth fears impacting the G-10 currency markets.

The THB traded at its highest level since Sept. 19 on strong inflows of foreign investment likely driven by optimism in the travel industry.

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