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QCP Market Update: Last CPI and FOMC meeting, China reopning and Deribit updates
QCP Capital
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Important dates

This week has been a choppy and directionless week as expected, as markets nervously await next week’s blockbuster CPI + FOMC to cap off the year.

CPI + FOMC CPI 13 Dec 9:30pm SGT FOMC 15 Dec 3:00am SGT

Tuesday’s CPI will yet again be ‘the most important CPI release ever’, this time because the market has set it up to be with its epic 2-month short squeeze rally.

At the FOMC, Fed members will release their updated projections of inflation and interest rates (Dots). Markets will focus on where they forecast inflation next year, as well as where they see rates in 2023 and 2024.

Both these events are the last remaining hurdles for the rally into year-end.

A higher-than-expected CPI print and more hawkish Fed have the potential to invalidate this rally, like we saw in the April and August reversals.

On the other hand, another disinflationary print could see many chase a continuation of the rally into year-end.

We will write a more in-depth preview of these events next week. However, markets are certainly taking the ‘positive/dovish until proven otherwise’ stance into it.

Inflation

Apart from this, we haven’t mentioned the China reopening story in any of our previous posts, as we always felt it was a bit of a red herring for markets looking for an excuse to rally.

Even if more supply chains in China fully come back online, globally, services not goods are the beta in the inflation problem - and this is mostly demand related.

Furthermore, any positive demand side boost from a hypothetical full reopening will only further worsen the global services inflation.

In any case, this is still some time away, as China will now first have to deal with a massive exit wave, as the rest of the world did last year and this year.

In any case, it is clear that global inflation has indeed peaked.

The question that remains for markets now is where will inflation bottom.

Even if 2% inflation is out of reach next year, will it fall low enough such that the Fed will have room to cut rates while keeping real rates positive?

Therefore, one key market theme for next year will be the shift from ‘peak inflation’ to ‘trough inflation’.

Our upcoming year-end Just Crypto piece at the end of the month will touch on this and other guiding themes for 2023.

Crypto Options and Deribit

Finally in crypto, while the pie is getting smaller, the slices are being split in more ways.

Deribit is one of only a handful of large centralized exchanges to come out of this with its reputation intact.

Users are also showing that trust is the most important commodity in crypto now - with Deribit registering record trading volumes last month amidst the worsening crypto bear market.

As we’ve been writing, crypto options are the one remaining sector of growth for the industry, and Deribit’s November numbers continue to show this.

Disclaimer

QCP Capital is an exempt payment services provider pending licensing by the Monetary Authority of Singapore as an MPI for Digital Payment Token Services under the Payment Services Act (2019).

This information contained in this document is intended as a general introduction to QCP Capital and its activities as a Digital Payment Token (DPT) service provider and is for informational purposes only. QCP Capital is not acting and does not purport to act in any way as an advisor or in a fiduciary capacity vis-a-vis any counterparty. Therefore, it is strongly suggested that any prospective counterparty obtain independent advice in relation to any trading investment, financial, legal, tax, accounting or regulatory issues discussed herein. This document is only directed at informed and qualified investors. By reading this material attests that you are fully aware that trading of DPTs is not suitable for the general public and that you are an informed and qualified investor, and are also fully cognisant of all technological and financial risk(s) associated with trading Digital Payment Tokens.

Before you engage us or any of our services, you should be aware of the following:

Please note that this does not mean you will be able to recover all the money or DPTs you paid to your DPT service provider if your DPT Service Provider’s business fails.

You should be aware that the value of DPTs may fluctuate greatly. You should buy DPTs only if you are prepared to accept the risk of losing all of the money you put into such tokens. your DPT service provider if your DPT service provider’s business fails.

You should not transact in the DPT if you are not familiar with this DPT. This includes how the DPT is created, and how the DPT you intend to transact is transferred or held by your DPT service provider.

You should be aware that your DPT service provider, as part of its licence to provide DPT services, may offer services related to DPTs which are promoted as having a stable value, commonly known as “stablecoin”.

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Disclosure: The authors of this content and members of Nansen may be participating or invested in some of the protocols or tokens mentioned herein. The foregoing statement acts as a disclosure of potential conflicts of interest and is not a recommendation to purchase or invest in any token or participate in any protocol. Nansen does not recommend any particular course of action in relation to any token or protocol. The content herein is meant purely for educational and informational purposes only and should not be relied upon as financial, investment, legal, tax or any other professional or other advice. None of the content and information herein is presented to induce or to attempt to induce any reader or other person to buy, sell or hold any token or participate in any protocol or enter into, or offer to enter into, any agreement for or with a view to buying or selling any token or participating in any protocol. Statements made herein (including statements of opinion, if any) are wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader or any other person. Readers are strongly urged to exercise caution and have regard to their own personal needs and circumstances before making any decision to buy or sell any token or participate in any protocol. Observations and views expressed herein may be changed by Nansen at any time without notice. Nansen accepts no liability whatsoever for any losses or liabilities arising from the use of or reliance on any of this content.