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Inflation Fears Continue to Plague the Market

“High inflation continued to wreak havoc on the stock market, with the S&P 500 suffering its worst week since January. Large firms lower guidance and announce hiring freezes. Boris Johnson survived a no-confidence vote.”

Stock Market Roundup

On Friday, the S&P 500 closed at 3900, down 2.91% for the day and 5.66% for the week. This marks the worst week for the premier US index since January. The tumble was largely caused by worse-than-expected inflation numbers, with CPI at 8.6%, compared to consensus of 8.1%. The week before had been a flat week for the S&P 500. 2-year treasury yields currently sit at 3.065%, pricing in some of the expected rate rises. Many large companies have come out with worrying guidance and actions. Microsoft has lowered its revenue and net income guidance, citing a strong dollar having a negative FX impact on its top and bottom line. Coinbase announced a hiring freeze due to the recent market downturn, even rescinding offers of employment. In a similar vein, a leaked email revealed Elon Musk’s plans to cut 10% of Tesla’s workforce, due to the impending recession. 

In the UK, the 1922 Committee received the necessary 54 letters to trigger a no-confidence vote regarding the Conservative party leadership. Boris Johnson survived the vote by 211 votes to 148. The Prime Minister stated “absolutely nothing and no-one” can inhibit Johnson from executing his agenda. The OECD has warned Britain will most likely have the worst GDP growth out of the G20 countries, excluding Russia. Rising taxes and high inflation are the key factors which will slow the UK’s growth. Additionally, the Bank of England pointed out “shortcomings” in key UK banks. HSBC, Standard Chartered and Lloyds Banking Group all had complications which would be hard to manage if the banks were to collapse. Overall, the report found that all banks are more financially stable than they were before the Great Financial Crisis. The FTSE100 is down just under 4% over the last two weeks, while the FTSE250 is down 4.4%. GBP/USD currently sits at 1.23, down 2.8% over the last fortnight.

Crypto Market Roundup

Bitcoin currently trades at just shy of $28k, down $2.5k or 8.2% from two weeks ago. Ethereum currently sits just above $1.5k, down 20% a coin. A large proportion of Ethereum’s fall occurred on Saturday 11th June, with Ethereum shedding 8.4% of its market cap in just a few hours. $230m of leveraged ETH positions were liquidated. The crypto market continues to demonstrate high correlation with the stock market, and as a risk-on asset class, the market remains rightfully worried about inflation and rising interest rates. The total crypto market cap is currently just $1.1 trillion, down from $1.2 trillion two weeks ago and far off the $2.9 trillion all time high seen in November 2021. 

FTX Token has experienced a strong last seven days, gaining over 11%, with a market cap of $4 billion. FTX Token was spurred by the news that FTX’s exchange overtook Coinbase to become the world’s second largest exchange by trading volume. Litecoin’s recent privacy upgrade has prompted the currency to be delisted from major South Korean exchanges, to meet the country’s regulations. Litecoin is down 16% in the last week. 

Despite poor price performance across the board, there has recently been strong adoption from large payment processors. Mastercard announced last week that it will allow direct NFT purchases through certain platforms, including Moonpay and The Sandbox. This will reduce fees paid by customers, as they no longer need to purchase crypto before acquiring NFTs. While PayPal has added a feature to withdraw cryptocurrencies purchased through its platform to external, personal wallets. The payments giant added crypto trading in October 2020, taking almost two years before facilitating withdrawals. Finally, American Express revealed a new credit card which offers rewards in 100+ cryptocurrencies.

In other news…

Luxury watch brand, Jacob & Co, released a crypto-themed watch entitled “Astronomia Solar Bitcoin”. Only 25 of the timepieces have been created and they are adorned with “a rotating Bitcoin currency logo”. Retail price is reportedly $348k. 

It’s Always Sunny in Philadelphia actor and creator, Rob McElhenney, launched a “Web3 Writers Room”. The project allows creators to share ideas for TV shows and movies, receiving royalties through NFTs when co-creators use their IP. 

Solana recently dedicated $100m towards South Korean crypto startups. The investments will be varied “across all Web3 verticals”. 

Chipotle now accepts cryptocurrency payments through Flexa. The fast food chain now accepts 98 cryptocurrencies across all of its 3000 restaurants. The accepted currencies include Bitcoin, Ethereum and USDC. 

Having reported earnings last week, Gamestop revealed $76.9m in revenue from sales of digital assets in Q1. This revenue was primarily from the sale of IMX token, received from its partnership with Immutable. The CEO also noted significant app downloads of its new wallet. 

Reuters accused Binance of having $2.5 billion laundered through its exchange over the last 5 years. Binance strongly refuted the claims, arguing crypto is a terrible way to launder money due to the public and traceable nature of blockchain technology. 

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