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What are the Indicators of the Next Crypto Bull Market? Are they at odds?

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What are the Indicators of the Next Crypto Bull Market? Are they at odds?

Recognizing if a crypto bull market is returning depends on which indicators we look at ultimately. Some indicators suggest that a bullish crypto market is just around the corner, while others suggest that the bear market will soon reoccur. This article examines these conflicting indicators, sheds light on what they signify in simple terms, and elucidates where the crypto market could be headed.

Price Action

First up is price action, as it’s everyone’s favorite indicator. Many crypto experts define a crypto bull market as a long period of positive price action. In other words, multiple months of higher highs and higher lows for the most significant cryptos. As the graph below indicates, BTC has had four consecutive months of positive price action, which began in January. BTC is, therefore, in a new bull market, according to Coinbureau’s basic definition. 


Screenshot: Coinmarketcap.com

However, there are a few caveats: First, this multi-month rally has yet to happen for most major altcoins apart from ETH.  Almost every major altcoin has been moving sideways over the last four months. In an actual crypto bull market, you see breadth in the positive price action meaning that most altcoins ride on BTCs’ coattails. 

The absence of this effect is evidence of a bear market rally, not a bull market. ETH's price action can provide additional proof of this being a bear market rally. ETH didn't have the same double top as BTC during the previous bull market. ETH’s price action looked more like what you'd see in a standard market cycle and could be due to institutional investment. 

Comparing ETH’s price action to the famous Wall Street cheat sheet suggests we're just past the anger stage. That said, ETH could easily be in the disbelief phase that comes before the beginning of a new bull market. 


Image credit: Newtraderu.com

This ties into the second caveat, and that's trading volume. Data from Coinmarketcap suggests that trading volume for BTC has continued to decline as prices have risen. This effect is even more pronounced for ETH. This divergence of increasing prices and falling volume is further evidence of a bear market rally and also suggests that a reversal could be imminent. 

However, this decline in trading volume could be due to institutional investors investing in crypto via centralized proxies like futures contracts that are settled in cash due to concerns around crypto regulation. It would explain why ETH's trading volume is so low relative to BTC. 


Screenshot: Coinmarketcap.com

Also, ETH has been looking extremely weak against BTC and has been in a long-term downtrend against BTC since around July of last year. The same trend can be seen in most major altcoins. Again for this to be an actual crypto bull market, there must be breadth and broad participation, at least among most major altcoins. 

To be fair, we could soon start to see more money rotate out of BTC into ETH and most major altcoins. If this happens, it will be additional evidence of a new bull market. For the time being, though, Bitcoin dominance continues to increase. For context, Bitcoin dominance measures how much of BTC’s total market cap comes from crypto. Bitcoin dominance is currently at around 46% and has been in a long-term uptrend since last September, showing no signs of slowing. 

Regulations 

If BTC doesn’t rotate into ETH and the most significant altcoins, it could be due to another factor previously mentioned: Crypto regulations. Like it or not, crypto regulations are required for institutions to invest their trillions into the crypto market. The largest institutional investors are based in the United States. US institutional investors were likely the most significant contributors to the previous crypto bull market. Unfortunately, the regulatory situation in the US has deteriorated significantly over the last few months.

In addition to the threats against specific crypto projects and companies by the SEC, the Fed and other banking regulators have been actively working to de-bank the crypto industry. Their primary targets have been 24/7 payment systems analogous to the Fed's upcoming Fed Now payment system. 

Stablecoin issuers are at the top of the Fed's hit list. It’s problematic because the crypto industry relies heavily on stablecoins to function. If anything were to happen to a stablecoin issuer in the United States, it could severely damage the crypto market and be a disaster for the entire DeFi niche. 

However, not all stablecoin issuers are based in the United States, and most crypto trading happens against offshore stablecoins, namely, Tether’s USDT. This means the crypto market would be mostly fine if a US-based stablecoin were taken down. A crackdown on a US stablecoin issuer may also not materialize. More importantly, other countries with many institutional investors are introducing sensible crypto regulations. 

This article about the countries that will drive the next crypto bull market discusses that the list includes the UAE, Saudi Arabia, Hong Kong, Singapore, and France. These jurisdictions will introduce these sensible crypto regulations very soon. France has technically done so already. The Markets in Crypto Assets (MiCa) regulation was passed by European politicians less than a month ago. Money is already flowing into EU crypto startups as a result.

Moreover, it looks like Hong Kong is next. Officials there recently announced that crypto licensing requirements would be revealed by the end of the month, with retail access to crypto coming on June 1st. Lots of money from the Chinese Mainland may enter the crypto market via Hong Kong. It's also likely that lots of crypto companies will relocate to the region. That's because Hong Kong requires banks to open accounts for crypto clients.

This is significant because crypto companies in crypto-friendly jurisdictions, like the UAE, are still reportedly struggling to open bank accounts. The caveat is that crypto investment from Hong Kong will reportedly be limited to the largest cryptocurrencies by market cap, and crypto niches like DeFi could be completely off-limits. Even so, there are many ways of accessing altcoins once you've acquired a crypto like BTC or ETH. 

Notwithstanding, the passing of favorable crypto regulations in these countries will likely be enough to increase the conviction in crypto’s recent price action and confirm that it's the beginning of a new bull market. However, this assumes that macro conditions encourage crypto investing in these regions. 

Interest Rates 

Interest rates are the primary macro factor moving the crypto market, specifically the interest rate decisions coming from the Federal Reserve. The fact that the Fed is near the end of its rate hiking cycle has contributed to the recent rally. Another contributor has been the expectation that the Fed will soon be forced to pivot, i.e., start lowering interest rates. Investors believe the Fed will do this in response to a crisis; an example could be the stress in the commercial real estate sector.

The irony to this expectation is that if the Fed is forced to pivot in response to a crisis, chances are the situation will also crash the markets. Case in point, sudden rate cuts have historically corresponded to stock market crashes, not rallies. A rate cut may have the same effect on the crypto market. However, in the absence of a crisis, only falling inflation will convince the Fed to pivot. As it happens, headline inflation has fallen fast over the last few months. The question is whether inflation will fall to the Fed’s 2% target, and the answer here is unclear. 


Image source: In2013dollars.com

Core inflation figures of all kinds suggest that services-related inflation isn't coming down nearly as quickly. If core inflation gets stuck at 4%, the Fed will likely keep interest rates slightly above that level. The longer the Fed keeps interest rates high, the higher the likelihood that markets will crash, that something in the financial system will break – or both. Risk assets like cryptocurrencies could be hit the hardest because they rely on lower interest rates for positive price action. 


Image source: Advisor Perspectives

For those who are wondering why this is, the answer is liquidity. Liquidity is the amount of money circulating in the market and the economy. As interest rates rise, liquidity gets drained out of the financial system as people rush to pay off more expensive debts and have difficulty accessing loans. As it happens, the supply of money in the US economy, as measured by M2, has been shrinking faster over the last few months than in decades.

This situation should have caused risk assets like crypto to crash, but they pumped instead. The simple explanation is that there is more to the world than the United States. Although the money supply has decreased in the US, countries like China and Japan have continued to stimulate, and this money has been slowly but surely finding its way into US assets. The caveat is that this stimulus may not continue for much longer, at least in China, where economic growth is returning. 

Another reason why risk assets have rallied is because of the Fed and the treasury. The Fed recently expanded its balance sheet in response to the banking crisis. Meanwhile, the treasury has been spending money from its de facto checking account due to the debt ceiling, which is increasing liquidity. However, the Fed's balance sheet recently started decreasing again, and the debt ceiling will soon be raised, allowing the treasury to reissue bonds. Both factors could further drain liquidity, further prolonging a crypto bear market. 

Geopolitics

As stated earlier, there is more to the world than the United States. Much of the world has been trying to escape the US dollar. This could positively affect the crypto market during the next bull cycle. Some countries, such as Iran, reportedly use crypto for trade, and others, such as Russia, may follow suit. This could change crypto's categorization from a risk asset to something analogous to a commodity, like gold, at least in these regions. 

Steady crypto demand from these regions could create a price floor for significant cryptos like BTC and ETH, the same way central banks created an apparent price floor for gold, and they accumulated record levels of gold last year. This was predominantly due to the sanctions against Russia, which caused many central banks to think twice about keeping large reserves in US dollar assets. 

In retrospect, sanctions could be the catalyst that killed the dollar. While these central banks haven't begun accumulating crypto yet, the Bank for International Settlements announced last December that central banks will be allowed to hold up to 2% of their balance sheets in crypto starting in 2025. By then, the crypto bull market should be in full swing, and if it's not, that will likely be the catalyst that kicks it off. Some central banks may have begun secretly accumulating crypto already. 

Additionally, trust in the financial system is deteriorating at a rapid rate, and the crypto market will continue to grow as trust in the traditional financial system continues to decline. This is evidenced by how much the crypto market pumped in response to the banking crisis. If the banking crisis continues in some form, you can expect to see more of the same positive price action for most cryptocurrencies.

Even if the banking crisis doesn't continue, central bank digital currencies (CBDCs) are coming, and they could have the same effect on the crypto market. The reason is that CBDCs will allow governments and central banks to control how you spend and save. As with the banking crisis, the average person will quickly realize that government money is not a safe place to store their wealth and will seek alternative stores of value.

The average person will likely allocate a small percentage of their portfolio to assets outside the financial system, including crypto. This percentage will become more extensive as these alternatives become easier to use. It's already happening worldwide; individuals and institutions are turning to crypto because their currencies are collapsing, their banking systems are struggling, or because CBDCs are being rolled out. This combined buying could set a price floor for many cryptocurrencies; this price floor will likely rise as the appeal of traditional currencies continues to decline. 

As such, we could be at the beginning of a crypto super cycle, or at least a crypto market cycle unlike any other. The caveat to this is that the incumbents will not go quietly. This potential supercycle will likely be accompanied by unprecedented price volatility as entities in the existing financial system try to crush or control crypto. Some would say this has already started, and the recent price action is proof.

The Crypto Market Cycle

As you may be aware, crypto tends to follow a four-year cycle and is believed to be because of the Bitcoin halving, which occurs roughly every four years. The last Bitcoin halving happened in May 2020, and what followed was an almost two-year-long crypto bull market. However, many argue that the crypto bull market began before the previous halving. BTC had already been in a strong uptrend for months, hitting $14k in May 2019. That early 2019 rally looks eerily similar to the one we're seeing now, four months of green; all be it with much more volume. 

This begs the question of whether history will repeat itself, specifically whether BTC will experience a flash crash that retests its bear market lows of around $15K. In theory, this is unlikely because the previous flash crash, when we saw BTC sink to about $3K, was caused by the beginning of the pandemic in March 2020. 

In practice, however, this is still possible, and that's because there are so many similar catalysts to choose from. 

  • A 2008-style financial crisis caused by commercial real estate, 
  • a war between China and the US over Taiwan, 
  • civil wars due to inflation and political polarization, 
  • or that global cyber attack predicted by the World Economic Forum. 

Even if history repeats, a retest of the crypto bear market lows will likely be short-lived. The fact remains that we're in the same time frame when the previous crypto bull market arguably began – one year before the next Bitcoin halving, which is scheduled for April 2024. However, this analysis only applies to BTC. 

As shown in the graph below, the historical price action of most major altcoins flatlined between May 2018 and the Bitcoin Halving in May 2020. You'll also see that most of them only hit their bottoms during the pandemic flash crash. This means that even if the crypto bull market has begun, you still have at least a year to accumulate your favorite altcoins, and you may still manage to catch the bottom of some of them. 


Screenshot: Coinmarket.com

The caveat is that some of these altcoins will never recover, especially if interest rates stay higher for longer. However, the effects of high-interest rates on the crypto market are not evident because the crypto market has never experienced a period of sustained high rates. Some argue that most cryptocurrencies, possibly even prominent altcoins like ETH, will not fare well under such conditions.

For established Proof of Stake cryptos, like ETH, the yield on staking rewards needs to be higher than the yields on traditional financial investments to capture the interest of institutions. In some cases, the rewards must be much higher to compensate for the additional risk of investing in crypto, e.g., Crypto vs. Bonds. 

For most other altcoins, there needs to be lots of speculation to receive heavy inflows, and these levels of speculation and inflows require lower interest rates. Some say the most speculative cryptos are all the Ethereum competitors, as they stand to capture the most value if they succeed. 


Image credit: Markethive.com

Speculation

As shared by Delphi Digital, “Crypto has primarily been a speculator’s market, and that’s still true today. But speculation isn’t inherently evil. The term “speculation” tends to carry a negative connotation. But, like most things, it sits on a spectrum. Hype and excitement drive interest, which attracts capital and gives entrepreneurs the resources to build innovative products leveraging new technologies.” 

Without speculation, capital wouldn’t flow to such risky ventures, and society would still be stuck in the stone age or the throes of tyranny due to escalating adverse events of today. Arguably, speculation is more than beneficial; it’s imperative at this stage. The crypto industry has gone through multiple hype cycles, each fueled by speculation on the back of emerging innovation triggers. Each hype cycle brought more attention, users, and capital to the crypto ecosystem and built upon the advances made by those previously.

This article explains why experts say a bear market is a good thing. There’s much truth in the mantra “bear markets are where you build” – many of today’s prominent protocols and applications were built in the depths of prior downturns. In the early stages of any emergent technology, much attention must be focused on the technical aspects of what’s being built.

The building is on one side of the equation; demand is on the other. It’s what’s needed to maximize the value of all the sweat equity that goes into bear market building. Demand leads to more usage, leading to faster feedback cycles, and better products, leading to more demand and use.

The visionaries and entrepreneurs see the need for innovation as the increasing pressure from the centralized totalitarian regime orchestrated by globalists tightens. To shift the balance of power, decentralization with an alternative financial system to the one currently failing us is a solution. 

A primary example of this is Markethive – The Ecosystem for Entrepreneurs. It is a community-funded pioneer in the blockchain and cryptocurrency space's social media, marketing, and broadcasting sector. 

Markethive is consistently delivering new integrations and updates to its platform in preparation for its launch into the crypto industry, and the timing couldn’t be better. It’s an entirely different animal and one of the most promising projects in the entire social media and marketing niche, with varied use cases and real-world applications that have the potential to change the media landscape. 

This next-generation platform perfectly exemplifies how this technology can benefit more people beyond just leveraged speculation. Markethive provides valuable utility for its community that understands the potential of applications in this new world.

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

 

 

Editor and Chief Markethive: Deb Williams. (Australia) I thrive on progress and champion freedom of speech. I embrace "Change" with a passion, and my purpose in life is to enlighten people to accept and move forward with enthusiasm. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.

 

 

 

 

 

Tim Moseley

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Commercial Funding: The Role of a Commercial Mortgage Broker

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Commercial Funding: The Role of a Commercial Mortgage Broker

Commercial funding is an essential aspect of business growth and expansion, as it enables businesses to acquire the necessary capital to invest in real estate and other assets. A commercial mortgage broker plays a pivotal role in helping businesses secure the right commercial financing for their needs. In this article, we’ll look at the responsibilities and duties of a commercial mortgage broker and later, delve into the differences between commercial and residential mortgage brokers, as well as the various commercial funding options available to businesses.

What Does a Commercial Mortgage Broker Do?

A commercial mortgage broker serves as an intermediary between businesses seeking commercial financing and lending institutions offering various commercial mortgage products. Their primary responsibility is to provide expert advice and guidance to businesses, helping them identify the most suitable commercial mortgage product for their real estate investment or asset acquisition needs.

Responsibilities and Duties

Some of the key duties and responsibilities of a commercial mortgage broker include:

  1. Assessing a buyer's needs: A commercial mortgage broker works closely with businesses to understand their financial objectives and requirements, enabling them to recommend the most appropriate commercial funding solution.
  2. Ensuring eligibility for funding: The commercial mortgage broker ensures that the business meets the necessary requirements for securing commercial financing, such as creditworthiness, financial stability, and sufficient collateral.
  3. Collecting documentation: The broker is responsible for gathering all the necessary documentation required for the application process, such as financial statements, tax returns, and property appraisals.
  4. Building relationships: A significant aspect of a commercial mortgage broker's role involves cultivating strong relationships with commercial clients, as this can lead to repeat business and referrals.
  5. Negotiating terms: The broker plays a crucial role in negotiating the terms and conditions of the commercial mortgage, ensuring that the business secures the most favorable deal possible.

A commercial mortgage broker plays a vital role in guiding businesses through the complex process of securing commercial funding. By choosing the right broker and considering factors such as experience, expertise, industry connections, and communication, businesses can increase their chances of securing the most competitive commercial mortgage terms and foster long-term financial success.

Tim Moseley

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Gold and silver prices look vulnerable as seasonal summer weakness kicks in – DeCarley Trading’s Carley Garner

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Gold and silver prices look vulnerable as seasonal summer weakness kicks in – DeCarley Trading's Carley Garner

The gold market has shown resilience with prices holding critical support around $1,950 an ounce even as the Federal Reserve is expected to maintain a tight grip on its monetary policy; however, despite the relative buoyancy in the marketplace, one strategist said that now is not the time.

In an interview with Kitco News, Carley Garner, co-founder of the brokerage firm DeCarley Trading, said that while she remains bullish on gold in the long term, now is not the time to buy.

She explained that gold is entering a traditionally weak seasonal period that could weigh on prices, and she expects that gold will have one more correction before it starts its rally to all-time highs.

"If we break below support at $1,950, we could see prices fall significantly lower," she said. "There is not much holding up the market before $1,880. It's a big air gap lower. If you are bullish and you want to start building a position now, you should only nibble at the market, not load up."

She added that gold's 200-day moving average of $1,880 represents a significant support level.

Garner said that investors looking to play the market might want to buy weekly options. However, she said that she wouldn't look to buy gold until at least late July or even early September, depending on where prices are.

Although Garner expects to see gold fall lower in the short term, she added that she is not actively shorting the market. She said that elevated levels of market uncertainty continue to provide some support for the precious metal.

"I would rather be a little bit late to the gold rally than be caught short," she said.

As to what would shift her near-term sentiment in gold, Garner said that she would need to see a clear break above $2,000 an ounce.

"Unless we get a break above that resistance level, gravity will take hold of the price," she said.

Garner is also short-term bearish on silver. She said she expects one more selloff before a long-term rally.

"I think we need to see some weak longs shaken out of silver before we see a sustainable move higher. I think prices could fall to $20 an ounce before they move back to $30," she said.

Along with seasonal factors, Garner said that the Federal Reserve's monetary policy stance continues to keep investors out of the gold market. Although markets are priced in for the central bank to hold interest rates unchanged next week, there are still expectations that rates will go higher before the summer is done.

 Plenty of value in gold as WisdomTree forecasts $2,285 by Q1 2024

However, a growing chorus of analysts and economists have said that further economic weakness will keep the Federal Reserve on the sidelines in July as well.

"I hope that the Fed is done raising interest rates," she said. "They have a habit of becoming fixated on one idea. They want to see inflation down to 2%, but I think that is going to get them in trouble. They should look at a target of 3% for now and go from there."

Despite her growing concerns, Garner said that if the Federal Reserve can pull back on the monetary policy reins, it would support sluggish economic growth through the rest of the year, avoiding a recession. She said that in this environment, the asset she is watching is copper.

Along with fears of a U.S. recession, copper has also been held back this year by volatile economic activity in China; however, Garner said that she expects the base metal to have priced in that weakness.

"I like copper on the upside. The price is holding $3.50, which is a critical trend line. There is potential for copper prices to push to $4.50," she said.

By

Neils Christensen

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

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What is Happening in the Global Economy: Latest Updates and Trends

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What is Happening in the Global Economy: Latest Updates and Trends

The global economy is a complex and ever-changing system that affects the lives of people all around the world. Understanding what is happening in the global economy can be challenging, as there are many different factors that contribute to its overall health and performance. From changes in trade policies to shifts in consumer spending habits, there are many different forces at play that can impact the global economy in both positive and negative ways.

One of the biggest challenges facing the global economy today is the ongoing COVID-19 pandemic. The pandemic has had a significant impact on the global economy, causing widespread disruptions to supply chains, trade, and consumer spending. As countries around the world work to contain the spread of the virus and roll out vaccination programs, there is hope that the global economy will begin to recover from the pandemic in the coming months.

Despite the challenges facing the global economy, there are also many opportunities for growth and development. Advances in technology, changes in consumer preferences, and new trade agreements are just a few of the factors that could help to drive economic growth and prosperity in the years to come. By staying informed about what is happening in the global economy, individuals and businesses can position themselves for success and navigate the challenges and opportunities that lie ahead.

Global Economic Outlook

The global economy has been significantly impacted by the COVID-19 pandemic, which has led to a sharp contraction in economic activity. However, there have been signs of recovery and growth in recent months, although vulnerable economies are still at risk.

Impact of COVID-19

The pandemic has had a profound impact on the global economy, leading to a sharp contraction in economic activity, job losses, and a decline in investment. The manufacturing sector has been hit particularly hard, with supply chains disrupted and factories shut down. The labor market has also been severely impacted, with many people losing their jobs or being furloughed.

Recovery and Growth

Despite the challenges posed by the pandemic, there have been signs of recovery and growth in recent months. The United States and Asia have seen strong economic growth, while the Eurozone has also shown signs of improvement. The World Economic Forum has predicted that global growth will reach 5.5% in 2021, up from 3.5% in 2020.

Vulnerable Economies

While there have been signs of recovery and growth, vulnerable economies are still at risk. The Federal Reserve and the European Central Bank have both indicated that they will keep interest rates low to support economic growth. However, there are concerns that this could lead to a balance of financial risks, particularly if inflation rises.

The World Bank has also warned that the global economy is likely to slow sharply this year, hobbled by high interest rates, the repercussions of Russia's invasion of Ukraine, and the lingering effects of the coronavirus pandemic. It estimates that the international economy will expand just 2.1% in 2023 after growing 3.1% in 2022.

In conclusion, the global economic outlook is mixed, with signs of recovery and growth in some areas but vulnerable economies still at risk. The impact of the pandemic continues to be felt, and governments and central banks will need to continue to provide support to ensure a sustained recovery.

Inflation and Output

Inflation is one of the most important economic indicators that affects the global economy. It is the rate at which the general level of prices for goods and services is rising, resulting in a decrease in the purchasing power of money. Inflation has a direct impact on the output of an economy. When inflation is high, it can lead to a decrease in output, as consumers are less likely to spend their money due to rising prices.

US Inflation

US inflation has been a major concern for the global economy in recent years. According to The World Economic Forum, US inflation has stayed at a 40-year high. This has been driven by food and energy costs in the wake of the COVID-19 pandemic, and has been exacerbated by the Russian invasion of Ukraine. The US Federal Reserve has been taking measures to control inflation by raising interest rates, but this has had a limited effect so far.

Annual Inflation

Annual inflation is another important measure of inflation that is closely watched by economists and policymakers. According to McKinsey, annual inflation refers to the broad rise in the prices of goods and services across the economy over time, eroding purchasing power for both consumers and businesses. Inflation has been rising across the world, with April 2023 seeing a CPI (consumer price index) increase of 8.3%, according to The World Economic Forum.

Impact on Manufacturing

Inflation has a direct impact on the manufacturing sector, which is a key driver of economic growth. According to The Economist, surging consumer prices and rising interest rates have made it difficult for manufacturers to keep up with demand. The rising cost of raw materials and energy has also put pressure on manufacturers to increase prices, which in turn has led to a decrease in demand for their products. This has resulted in a decrease in output and a slowdown in economic growth.

In conclusion, inflation is a critical economic indicator that affects the global economy in numerous ways. It has a direct impact on the output of an economy, and can lead to a decrease in economic growth if left unchecked. Policymakers and economists must work together to find ways to control inflation and ensure that the global economy remains stable and prosperous.

Regional Economic Updates

China's Economic Policies

China's economy continues to grow at a steady pace, with the country's GDP projected to increase by 6.1% in 2023, according to the World Bank's Spring 2023 Regional Economic Updates. The Chinese government has implemented a series of measures aimed at stabilizing the economy and promoting sustainable growth, including tax cuts, infrastructure spending, and monetary easing.

One of the most significant economic policies in China is the Belt and Road Initiative, which aims to increase regional connectivity and promote economic development across Asia, Europe, and Africa. The initiative has already seen significant investment in infrastructure projects, including railways, ports, and highways, and is expected to continue driving economic growth in the region.

Eurozone's Economic Performance

The Eurozone's economic performance has been mixed, with growth slowing sharply in 2022 due to a surge in inflation, the Russian invasion of Ukraine, and the tightening of monetary policy. However, the region's economy is expected to rebound in 2023, with the World Bank projecting GDP growth of 4.2%.

To support economic growth, the European Central Bank has maintained a loose monetary policy, keeping interest rates low and purchasing government bonds. However, the region continues to face significant challenges, including high levels of youth unemployment and a slowdown in manufacturing activity.

Asia's Economic Growth

Asia remains a key driver of global economic growth, with the region's economy projected to expand by 6.5% in 2023, according to the World Bank. The growth is driven by strong domestic demand, particularly in China and India, and robust export growth.

However, the region also faces significant challenges, including rising inflation, geopolitical tensions, and the ongoing COVID-19 pandemic. To support economic growth, many countries in the region have implemented monetary easing policies and increased infrastructure spending.

Overall, the global economy is facing a challenging and uncertain environment, with many countries struggling to balance economic growth with social and environmental concerns. However, with the right policies and investments, there is potential for sustained and inclusive growth in the years ahead.

Investments and Wealth

Investments and wealth play a crucial role in the global economy. The rise in global wealth has been significant over the past few decades, with asset price inflation creating about $160 trillion in "paper wealth" between 2000 and 2021 [McKinsey]. However, this growth has been accompanied by a rise in debt, with each $1.00 in net investment generating $1.90 in net new debt [McKinsey].

Impact of Interest Rates

Interest rates play a significant role in the investment and wealth landscape. Changes in interest rates can impact the value of investments and the cost of borrowing, which can, in turn, impact the economy. For example, when interest rates are low, it can encourage borrowing and spending, which can stimulate economic growth. Conversely, when interest rates are high, it can discourage borrowing and spending, which can slow economic growth.

Personalized Content Collection

Personalized content collection is becoming increasingly important in the investment and wealth management space. With the rise of digital technologies, investors can access a wealth of information and data about their investments. This information can be used to create personalized investment strategies that take into account an investor's goals, risk tolerance, and investment preferences.

Overall, investments and wealth have a significant impact on the global economy. The rise in global wealth has been significant, but it has also been accompanied by a rise in debt. Interest rates play a crucial role in the investment and wealth landscape, and personalized content collection is becoming increasingly important in the investment and wealth management space.

Global Economic Governance

Global economic governance refers to the management of global economic affairs by international organizations and governments. This section will explore the role of the World Bank and IMF, Federal Reserve and ECB, and World Economic Forum's Global Agenda.

World Bank and IMF

The World Bank and International Monetary Fund (IMF) are two of the most important international organizations involved in global economic governance. The World Bank provides loans and technical assistance to developing countries, while the IMF provides emergency loans to countries experiencing financial crises. Both organizations work to promote economic growth and reduce poverty around the world.

The World Bank and IMF also play a key role in setting global economic policies. They work with governments and other international organizations to develop policies that promote economic stability and growth. They also monitor economic developments around the world and provide advice on how to address economic challenges.

Federal Reserve and ECB

The Federal Reserve and European Central Bank (ECB) are two of the most important central banks in the world. The Federal Reserve is responsible for monetary policy in the United States, while the ECB is responsible for monetary policy in the eurozone.

Both central banks play a key role in global economic governance. They work to maintain price stability and promote economic growth in their respective regions. They also work with other central banks around the world to coordinate monetary policy and address global economic challenges.

World Economic Forum's Global Agenda

The World Economic Forum's Global Agenda is a platform for leaders from around the world to come together and discuss global economic issues. The agenda covers a wide range of topics, including economic growth, job creation, and sustainable development.

The Global Agenda is an important forum for discussing global economic challenges and developing solutions. It brings together leaders from government, business, and civil society to share ideas and best practices. The agenda also provides a platform for developing partnerships and collaborations to address global economic challenges.

In conclusion, global economic governance is an important aspect of the global economy. The World Bank and IMF, Federal Reserve and ECB, and World Economic Forum's Global Agenda are just a few examples of the many organizations involved in global economic governance. These organizations work to promote economic stability and growth, reduce poverty, and address global economic challenges.

Terms of Use

When accessing information about the global economy, it is important to understand the terms of use for any website or platform. These terms outline the rules and regulations that govern how users can interact with the site and its content. It is important to read and understand these terms before using any website or platform, as they can have legal implications.

One common aspect of terms of use is the use of cookies. Cookies are small files that are stored on a user's device when they visit a website. They are used to track user behavior and preferences, and can be used to personalize the user experience. However, cookies can also be used to collect sensitive information about users, such as their browsing history or location. As such, it is important to understand how cookies are used on a website and to adjust browser settings accordingly.

Another important aspect of terms of use is the licensing of content. Many websites and platforms use Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, which allows users to share and use content for non-commercial purposes, as long as they give attribution to the original creator and do not make any changes to the content. It is important to understand the licensing of content on a website, as it can impact how users can share and use information.

In summary, understanding the terms of use for any website or platform is important when accessing information about the global economy. This includes understanding how cookies are used and adjusting browser settings accordingly, as well as understanding the licensing of content and how it impacts sharing and use of information.

Conclusion

In conclusion, the global economy is facing a mix of challenges and opportunities. While developed countries such as the United States and China are expected to grow robustly, developing countries are facing a slow recovery. The COVID-19 pandemic has had a devastating impact on the global economy, with trade patterns and GDP being significantly affected.

The policies of governments and central banks play a crucial role in shaping the economic landscape. Policies such as vaccination drives, education, and climate change mitigation measures are crucial for sustainable economic growth.

Comments from experts and reliable sources suggest that the global economy is facing a recession, with no official, globally recognized definition. However, the US has opted to use a more open definition. It is essential to keep an eye on the economic indicators to stay updated on the state of the global economy.

Ads and marketing campaigns can also influence the economy by boosting consumer confidence and spending. However, it is crucial to ensure that such campaigns are ethical and do not mislead consumers.

In conclusion, the global economy is a complex and dynamic system that is influenced by various factors. It is essential to stay informed and aware of the latest economic developments to make informed decisions.

Frequently Asked Questions

What is the current state of the global economy?

As of June 07, 2023, the global economy is showing signs of recovery. According to the World Economic Forum, the global economy is expected to grow by 4.4% in 2023. The United States and China are expected to lead the economic recovery, while developing countries may experience a slower recovery.

What are the economic forecasts for the next 5 years?

The International Monetary Fund (IMF) predicts that the global economy will grow by 3.5% in 2024 and 3.6% in 2025. The IMF also predicts that the United States and China will continue to lead the global economic growth, while other developed countries will experience slower growth.

Are there any current economic issues in 2023?

As of 2023, there are several economic issues that are affecting the global economy. The ongoing trade tensions between the United States and China, as well as other countries, are causing uncertainty and volatility in the global economy. Additionally, rising inflation rates in some countries are posing a threat to economic stability.

Why is the world economy falling?

As of June 07, 2023, the world economy is not falling. In fact, it is showing signs of recovery. However, in the past, the world economy has experienced downturns due to various factors such as financial crises, recessions, and global conflicts.

Is a recession expected in 2023?

As of June 07, 2023, there is no indication of an impending recession. However, economic forecasts are subject to change based on various factors such as global events, government policies, and market conditions.

Is the global economy weakening?

As of June 07, 2023, the global economy is not weakening. In fact, it is showing signs of recovery. However, economic growth rates may vary across different countries and regions based on various factors such as government policies, market conditions, and geopolitical tensions.

Tim Moseley

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The Federal Reserve will hold its 11th FOMC meeting since they began rate-hikes

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The Federal Reserve will hold its 11th FOMC meeting since they began rate-hikes

The Federal Reserve will begin its Federal Open Market Committee (FOMC) meeting exactly one week from today on Tuesday, June 13th. On the morning of the 13th, the government will release its latest report on inflationary pressures vis-à-vis the CPI (Consumer Price Index). This will be the last important piece of data that Fed officials will use to make their final decisions regarding monetary policy.

While their preferred inflation index is the PCE, the CPI will contain the most recent assessment of inflationary pressures. Inflation was above 9% just one month after the Federal Reserve initiated its first rate hike back in March 2022. In just over a year inflationary pressure has had a strong contraction.

Although the extremely hawkish and restrictive monetary policy of 10 consecutive rate hikes that took the Fed’s benchmark rate to between 5 and 5 ¼% has dramatically lowered inflation but it is still well above the Federal Reserve’s target. Fed members have been waiting for the data to indicate if inflationary pressures are headed toward their goal. However, while headline inflation has had a significant decline the core inflation index which omits food, energy, and housing has remained persistent and sticky between 5% and 6% since December 2022. Housing costs make up a large portion (about one-third) of the Consumer Price Index, and if you strip out food and energy costs housing costs are about 40% of the total CPI index.

Currently, there is an 81.1% probability that the Federal Reserve will initiate its first interest rate hike pause with under a 5 to 1 probability that the Fed will raise rates next week.

The Federal Reserve Bank of Cleveland “Nowcast” provides real-time daily estimates of the PCE and CPI levels. It uses daily oil prices, and weekly gasoline retail prices and combines them with monthly consumer prices to offer a time-sensitive forecast of inflation providing real-time insight.

According to Forbes, “Nowcasts of U.S. inflation for May suggest that headline inflation will slow, but that core inflation will remain well above the Fed’s target. On June 13, the U.S. Bureau of Labor Statistics will release the Consumer Price Index report for May. Headline inflation has decelerated sharply since last summer, but core inflation has remained in a narrower range. The latest nowcasts don’t imply that this will change much.”

The current assessment by the Cleveland Fed’s Nowcast is predicting that inflation will rise 0.19% month over month and core inflation will also rise by 0.45%. If these predictions are correct the annualized rate of inflation would be 4.1% and 5.3% respectively.

Although this would confirm that headline inflation is dropping below core inflation it is clear that components remain persistent, a dilemma for the Federal Reserve. Persistent inflation has also been highly supportive of gold. As of 6 PM EDT, gold futures basis the most active August contract is down $1.60 from the New York close and fixed at $1979.70.

Gary S. Wagner

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Tim Moseley

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PayPal and Venmo Bank Warning: What You Need to Know

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PayPal and Venmo Bank Warning: What You Need to Know

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Consumers who use PayPal, Venmo, or Square's Cash App to store their cash have been warned by the Consumer Financial Protection Bureau (CFPB) to avoid doing so. These mobile wallets are increasingly being used as substitutes for traditional banks, but the CFPB has warned that they are not as safe as banks during a financial crisis. The warning has come amid growing concerns about the security of funds stored in these apps, particularly as they are not subject to the same federal deposit insurance as banks.

The CFPB's warning is significant as more and more people are turning to mobile payment apps to manage their finances. PayPal, Venmo, and Cash App are all popular payment apps that allow users to send and receive money, as well as store funds. However, the CFPB has warned that these apps should not be used as substitutes for traditional banks, as they do not offer the same level of protection for consumers' funds. The warning has caused concern among users of these apps, many of whom may not have been aware of the risks associated with storing their cash in them.

The CFPB's warning is a timely reminder of the importance of being aware of the risks associated with mobile payment apps. While these apps can be convenient and easy to use, they are not without their risks. Consumers should be aware of the limitations of these apps and take steps to protect their funds, such as only storing small amounts of cash and transferring larger amounts to a traditional bank account. By taking these steps, consumers can ensure that their funds are safe and secure, even in the event of a financial crisis.

PayPal and Venmo Bank Warning Overview

What is the PayPal and Venmo Bank Warning?

The Consumer Financial Protection Bureau (CFPB) has issued a warning to consumers who use payment apps like Venmo, Cash App, and PayPal to store their funds. The warning states that these payment tools are not bank accounts and the funds stored in them are not insured by the Federal Deposit Insurance Corporation (FDIC).

Why is the Warning Important?

The warning is important because it highlights the risks associated with storing funds in payment apps. In the event of a bank run or a crisis, the funds stored in these apps may not be safe. The warning also emphasizes the importance of understanding the difference between bank deposits and stored funds in payment apps.

Who is Affected by the Warning?

Consumers who use payment apps like Venmo and PayPal to store their funds are affected by the warning. The warning is particularly relevant to those who use these apps as a substitute for a traditional bank or credit union account. The warning is also relevant to those who store their long-term savings in payment apps, as their funds may not be covered by deposit insurance.

In summary, the PayPal and Venmo Bank Warning highlights the importance of understanding the risks associated with storing funds in payment apps. Consumers should be aware that the funds stored in these apps are not insured by the FDIC and may not be safe in the event of a bank run or a crisis. It is important to differentiate between bank deposits and stored funds in payment apps and to use these apps only for their intended purpose.

The Risks of Using Payment Apps

Payment apps like Venmo and PayPal have become increasingly popular in recent years as a convenient way to send and receive money. However, the Consumer Financial Protection Bureau (CFPB) has warned that using these apps as a substitute for a traditional bank account can be risky.

How Do Payment Apps Work?

Payment apps work by linking to a user's bank account or credit card and allowing them to transfer money to other users through the app. These peer-to-peer payment apps are often used for splitting bills, paying rent, or sending money to friends and family.

What Are the Risks of Using Payment Apps?

One of the main risks of using payment apps is that they are not FDIC-insured like traditional banks. This means that if the app were to go out of business or suffer a data breach, users could lose their money. Additionally, payment apps are not subject to the same regulations as banks, which means that they may not have the same level of security or privacy protections in place.

Another risk of using payment apps is that they may not offer the same fraud protections as credit or debit cards. If a user's account is compromised, they may not be able to recover their funds. Payment apps may also be vulnerable to scams, such as phishing attacks or fake payment requests.

What Are the Safeguards in Place?

While payment apps may not be FDIC-insured, they do have some safeguards in place to protect users. For example, many payment apps use encryption and other security measures to protect user data. They may also offer two-factor authentication and other fraud prevention tools.

Additionally, payment apps may have dispute resolution processes in place to help users recover lost funds or resolve payment disputes. Some apps may also offer purchase protection or other insurance policies.

However, it is important for users to understand the risks associated with using payment apps and to take steps to protect themselves. This may include using strong passwords, enabling two-factor authentication, and only sending money to trusted individuals. Users should also be wary of phishing scams and other fraudulent activity.

Overall, while payment apps can be a convenient way to send and receive money, users should be aware of the risks and take steps to protect themselves.

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The Importance of FDIC Insurance

What is FDIC Insurance?

FDIC stands for Federal Deposit Insurance Corporation, an independent U.S. government agency that provides deposit insurance to protect depositors in case a bank or savings institution fails. FDIC insurance covers deposits in FDIC-member banks and federally insured financial institutions, which include insured bank deposits, such as checking and savings accounts, money market deposit accounts, and certificates of deposit (CDs).

How Does FDIC Insurance Protect Consumers?

FDIC insurance protects consumers by providing insurance coverage in case a bank or savings institution fails. If a bank or savings institution fails, the FDIC will step in and pay depositors up to the insurance limit of $250,000 per depositor, per insured bank. This means that if a depositor has more than $250,000 in one bank, the excess amount may not be covered by FDIC insurance.

What Are the Limits of FDIC Insurance?

FDIC insurance has limits that depositors should be aware of. First, FDIC insurance only covers deposits in FDIC-member banks and federally insured financial institutions. Deposits in non-FDIC-insured financial institutions are not covered by FDIC insurance. Second, FDIC insurance only covers up to $250,000 per depositor, per insured bank. If a depositor has more than $250,000 in one bank, the excess amount may not be covered by FDIC insurance.

It is important for consumers to understand the limits of FDIC insurance and to make sure that their deposits are covered by FDIC insurance. Consumers should also be aware of the different types of accounts that are covered by FDIC insurance, such as checking and savings accounts, money market deposit accounts, and certificates of deposit (CDs), and should make sure that their deposits are spread out among different FDIC-insured financial institutions to maximize their FDIC insurance coverage.

In light of recent warnings from the Consumer Financial Protection Bureau (CFPB) about the risks of keeping money in payment apps like PayPal and Venmo, it is important for consumers to understand the importance of FDIC insurance and to make sure that their deposits are covered by FDIC insurance. Consumers should also be aware of the risks associated with non-FDIC-insured financial institutions and should take steps to protect their deposits by spreading them out among different FDIC-insured financial institutions to maximize their FDIC insurance coverage.

The Consumer Financial Protection Bureau's Role

What is the CFPB?

The Consumer Financial Protection Bureau (CFPB) is a government agency responsible for consumer protection in the financial sector. The agency was established in 2010 under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

What is the CFPB's Role in Protecting Consumers?

The CFPB's primary role is to oversee financial institutions and ensure that they comply with federal consumer financial laws. The agency also provides consumers with information and resources to help them make informed financial decisions.

The CFPB has the power to investigate and take enforcement action against financial institutions that violate consumer protection laws. The agency also works with other government agencies to coordinate oversight of the financial industry.

What is the CFPB Doing About the PayPal and Venmo Bank Warning?

CFPB Director Rohit Chopra recently issued a warning about the risks of storing funds in payment apps like PayPal, Venmo, and Cash App. The agency found that billions of dollars are stored on these apps, which may lack federal insurance coverage in the event of financial distress.

The CFPB is urging consumers to use payment apps as a convenience, but not as a substitute for a traditional bank account. The agency is also working with payment app providers to ensure that consumers are aware of the risks of storing funds in these apps.

As the federal financial services watchdog, the CFPB plays a crucial role in protecting consumers from financial harm. By providing oversight and enforcing consumer protection laws, the agency helps to ensure that consumers have access to fair and transparent financial services.

Alternative Options for Keeping Your Money Safe

What Are Some Alternative Options for Keeping Your Money Safe?

If you are concerned about the risks associated with keeping your money in payment apps like PayPal and Venmo, there are several alternative options available. Some of the most popular options include traditional banks, credit unions, and online banks like Synchrony Bank, Green Dot Bank, and First Republic Bank.

What Are the Pros and Cons of These Options?

Traditional banks and credit unions are often considered to be the safest options for keeping your money, as they are insured by the FDIC and NCUA, respectively. This means that your deposits are protected up to $250,000 per account in case of bank failure. Additionally, these institutions typically offer a wide range of products and services, including savings accounts, checking accounts, and investment opportunities.

Online banks, on the other hand, often offer higher interest rates and lower fees than traditional banks. They may also offer additional features like mobile banking and direct deposit. However, they may not offer the same level of customer service and may be less well-known and established than traditional banks.

How Do These Options Compare to PayPal and Venmo?

Compared to payment apps like PayPal and Venmo, traditional banks and credit unions offer much greater protections for your money. While payment apps are not insured by the FDIC or NCUA, these institutions are. Additionally, traditional banks and credit unions typically offer a wider range of products and services, including savings accounts, credit union accounts, and traditional bank accounts.

Online banks like Synchrony Bank, Green Dot Bank, and First Republic Bank offer many of the same benefits as traditional banks, but with higher interest rates and lower fees. However, they may not offer the same level of customer service and may be less well-established than traditional banks.

Ultimately, the best option for keeping your money safe will depend on your individual needs and preferences. It is important to do your research and compare the pros and cons of each option before making a decision.

Conclusion

The recent warning by the Consumer Financial Protection Bureau has highlighted the potential risks associated with storing money on payment apps like PayPal and Venmo. While these apps provide convenience and ease of use, they are not a substitute for a traditional bank account.

Users should be aware that funds held in these apps may not be insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration, leaving them vulnerable to financial uncertainty in times of crisis.

It is important for users to understand the limitations of payment apps and to use them only for their intended purpose – quick and easy transactions. Users should consider transferring funds to a traditional bank account for long-term storage and protection.

In addition, users should take steps to secure their accounts, such as using strong passwords and enabling two-factor authentication. It is also advisable to regularly monitor account activity and report any suspicious transactions.

Overall, while payment apps like PayPal and Venmo offer convenience and flexibility, users should be aware of the potential risks and take steps to protect their funds. By understanding the limitations of these apps and using them responsibly, users can enjoy the benefits of digital payments without putting their money at risk.

Frequently Asked Questions

Is it safe to link my bank account to PayPal or Venmo?

Linking your bank account to PayPal or Venmo can be safe as long as you take the necessary precautions. Both platforms use encryption to protect your financial information. However, it is important to use a strong and unique password for your account and enable two-factor authentication for added security.

Are there any risks associated with storing money on Venmo or PayPal?

According to the Consumer Financial Protection Bureau, storing money on Venmo, PayPal, or CashApp for the long term might not be safe during a crisis. These platforms are not FDIC-insured, which means that your funds are not protected in the event of a bank failure. It is recommended that you transfer your funds to your bank account as soon as possible.

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Can Venmo or PayPal freeze my account?

Yes, Venmo and PayPal have the right to freeze your account if they suspect fraudulent activity or a violation of their terms of service. If your account is frozen, you will not be able to access your funds until the issue is resolved. It is important to read and understand the terms of service before using these platforms.

What measures can I take to protect my Venmo or PayPal account?

To protect your Venmo or PayPal account, you should use a strong and unique password, enable two-factor authentication, and regularly monitor your account for any suspicious activity. You should also avoid sharing your account information with anyone and only use trusted devices to access your account.

Are there any alternatives to Venmo and PayPal?

Yes, there are several alternatives to Venmo and PayPal, such as Zelle, Google Pay, and Apple Pay. It is important to research and compare the features and security measures of each platform before choosing one.

What should I do if I suspect fraudulent activity on my Venmo or PayPal account?

If you suspect fraudulent activity on your Venmo or PayPal account, you should immediately contact customer support and report the issue. You should also change your password and enable two-factor authentication to prevent further unauthorized access to your account.

Tim Moseley

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Gold gains as USDX slips crude oil rallies

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Gold gains as USDX slips, crude oil rallies

Gold prices are modestly up and silver a bit weaker in midday U.S. trading Monday. Both markets pushed well off their early session lows when the U.S. dollar index lost its good early gains and as crude oil prices rallied. August gold was last up $6.00 at $1,975.50 and July silver was down $0.092 at $23.655.

Asian and European stock markets were mixed today. U.S. stock indexes are mixed near midday. Gains in the metals were limited today in the aftermath of a stronger U.S. non-farm payrolls jobs rise in last Friday’s May employment report. That data reminded the marketplace that the Federal Reserve is likely to remain hawkish on its monetary policy for longer—even if it does do a pause in the rate-hike cycle at the June FOMC meeting.

In weekend news, Saudi Arabia decided to unilaterally cut its crude oil production by around 1 million barrels per day, starting in July. Meantime, the OPEC-plus cartel at its meeting decided to leave its collective crude oil output unchanged.

The key outside markets today see the U.S. dollar index near steady. Nymex crude oil prices are higher and are trading around $72.75 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 3.887%.

Technically, August gold futures bulls have the overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $2,000.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the May low of $1,949.60. First resistance is seen at $1,985.00 and then at $2,000.00. First support is seen at today’s low of $1,953.80 and then at $1,949.60. Wyckoff's Market Rating: 6.5.

July silver futures bulls and bears are on a level overall near-term technical playing field. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at the May low of $22.785. First resistance is seen at $24.00 and then at last week’s high of $24.12. Next support is seen at today’s low of $23.32 and then at $23.00. Wyckoff's Market Rating: 5.0.

July N.Y. copper closed up 450 points at 377.25 cents today. Prices closed nearer the session high. Short covering was featured. The copper bears still have the overall near-term technical advantage. However, a six-week-old downtrend on the daily bar chart has been negated. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 400.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the May low of 354.50 cents. First resistance is seen at last week’s high of 378.90 cents and then at 385.00 cents. First support is seen at 370.00 cents and then at 365.00 cents. Wyckoff's Market Rating: 4.0.

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Jim Wyckoff

For Kitco News

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Tim Moseley

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US Dollar Depreciation: Causes and Implications for the Global Economy

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US Dollar Depreciation: Causes and Implications for the Global Economy

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The US Dollar has been losing value in the global economy, and this has been a cause for concern for many people. The dollar has been the dominant currency in the world for decades, but recent events have led to its decline. Many factors have contributed to this decline, including the COVID-19 pandemic, the US-China trade war, and the Federal Reserve's monetary policy.

The dollar's decline has had significant implications for the global economy. As the dollar loses value, other currencies, such as the euro and the yen, have gained in value. This has made it more expensive for countries that rely on the dollar to import goods and services. In addition, the decline in the dollar's value has led to inflation in the United States, as the cost of imported goods has increased. This has put pressure on the Federal Reserve to raise interest rates, which could further slow down the economy.

Despite the challenges posed by the dollar's decline, there are also opportunities. For example, a weaker dollar could make US exports more competitive in the global market. It could also encourage foreign investment in the United States, as assets become cheaper for foreign investors. However, these benefits may be short-lived, as a weak dollar could also lead to higher inflation and a slower economy. It remains to be seen how the dollar's decline will play out in the coming years, but it is clear that it will have far-reaching implications for the global economy.

The US Dollar in the Global Economy

The Basics

The US dollar is the world's reserve currency, which means that it is widely accepted and used in international transactions. It is also the most traded currency in the world, with a share of around 88% of all foreign exchange trades. The US dollar's dominance in the global economy is due to several factors, including the size and strength of the US economy, the stability of the US political system, and the liquidity of US financial markets.

The value of the US dollar is measured by the US Dollar Index (USDX), which tracks the value of the dollar against a basket of currencies, including the euro, yen, pound sterling, Canadian dollar, Swedish krona, and Swiss franc. The USDX is used by investors and traders to monitor the dollar's performance in relation to other major currencies.

Factors Affecting the US Dollar's Value

Several factors can affect the value of the US dollar in the global economy. One of the most important factors is the strength of the US economy. When the US economy is growing and expanding, the value of the dollar tends to rise, as investors and traders flock to US financial markets in search of higher yields and returns.

Another factor that can affect the value of the US dollar is the actions of the US Federal Reserve. The Federal Reserve can influence the value of the dollar by adjusting interest rates and implementing monetary policy measures. When the Federal Reserve raises interest rates, it can make the dollar more attractive to foreign investors, which can drive up its value.

The value of the US dollar can also be affected by global economic events and trends. For example, when emerging markets experience economic growth and stability, they may become less reliant on the US dollar, which can lead to a depreciation of the dollar's value. Similarly, when the eurozone or European Central Bank takes actions that affect the euro, it can impact the value of the dollar relative to the euro.

In conclusion, the US dollar's value in the global economy is influenced by a complex set of factors, including the strength of the US economy, the actions of the US Federal Reserve, and global economic trends and events. Understanding these factors can help investors and traders make more informed decisions about how to invest in the US dollar and other currencies.

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The Role of the Federal Reserve

The Federal Reserve, also known as the Fed, is the central bank of the United States. It plays a crucial role in the country's economy by implementing monetary policies that influence interest rates, inflation, and employment. The Fed has a significant impact on the value of the US dollar in the global economy.

Monetary Policy

The Fed's monetary policy involves controlling the supply of money in circulation. By increasing or decreasing the money supply, the Fed can influence inflation and economic growth. When the Fed increases the money supply, it can lead to inflation, which can decrease the value of the US dollar. Conversely, when the Fed decreases the money supply, it can lead to deflation, which can increase the value of the US dollar.

Interest Rates

The Fed also has the power to set interest rates, which can affect the value of the US dollar. When the Fed raises interest rates, it can make the US dollar more attractive to foreign investors, which can increase its value. Conversely, when the Fed lowers interest rates, it can make the US dollar less attractive to foreign investors, which can decrease its value.

Quantitative Easing

Quantitative easing is a monetary policy tool used by the Fed to stimulate the economy by increasing the money supply. The Fed does this by purchasing government bonds and other securities from banks, which increases the banks' reserves and allows them to lend more money. This can lead to inflation, which can decrease the value of the US dollar.

Overall, the Fed plays a critical role in the value of the US dollar in the global economy through its monetary policy, interest rate decisions, and quantitative easing programs. Investors and other countries closely monitor the Fed's actions and decisions, as they can have a significant impact on the value of the US dollar.

Impact on the US Economy

The weakening of the US dollar has both positive and negative effects on the US economy. This section will discuss the impact of the US dollar losing value on inflation and deflation, exports and imports, and investments and profits.

Inflation and Deflation

A weak US dollar can lead to higher inflation in the United States. This is because a weak dollar makes imports more expensive, which in turn increases the cost of goods and services. On the other hand, a stronger dollar can lead to deflation, which is a decrease in the general price level of goods and services. This is because a stronger dollar makes imports cheaper, which in turn lowers the cost of goods and services.

Exports and Imports

A weak US dollar can make US exports more competitive in foreign markets, as they become cheaper for foreign buyers. However, a weak dollar can also make imports more expensive, which can hurt US consumers and businesses that rely on imports. A strong US dollar can have the opposite effect, making US exports more expensive and less competitive in foreign markets, but making imports cheaper for US consumers and businesses.

Investments and Profits

A weak US dollar can make US investments more attractive to foreign investors, as they can buy more US assets for less money. However, a weak dollar can also hurt the profits of US multinational companies that operate abroad, as their foreign earnings are worth less when converted back into US dollars. A strong US dollar can have the opposite effect, making US investments less attractive to foreign investors, but increasing the profits of US multinational companies that operate abroad.

Overall, the impact of the US dollar losing value on the US economy is complex and depends on a variety of factors, including inflation, exports and imports, and investments and profits. While a weak US dollar can have some positive effects, it can also have negative effects on the US economy.

Frequently Asked Questions

Why is the US dollar losing value?

The US dollar has been losing value due to a variety of factors, including the increasing national debt, the ongoing trade deficit, and the Federal Reserve's monetary policy. The US government has been borrowing more money than it can pay back, which has led to an increase in the money supply and a decrease in the value of the dollar. Additionally, the US has been importing more goods than it exports, which has also contributed to the weakening of the dollar.

What happens if the US dollar loses reserve status?

If the US dollar loses its status as the global reserve currency, it could have significant consequences for the US economy and the global financial system. The US would lose its ability to borrow money at low interest rates, and the demand for US dollars would decrease, leading to a further decline in the value of the currency. Other countries would also be less likely to hold US dollars as a reserve currency, which could lead to a shift towards other currencies such as the euro or the yuan.

What happens when the US dollar loses value?

When the US dollar loses value, it becomes more expensive to purchase goods and services from other countries, as the exchange rate decreases. This can lead to inflation in the US economy, as the prices of imported goods increase. Additionally, US exports become more competitive, as they are cheaper for foreign buyers, which can help to boost the US economy.

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Will the US dollar lose its status as the global reserve currency?

While it is possible that the US dollar could lose its status as the global reserve currency, it is not a foregone conclusion. The US dollar has held this position since the end of World War II, and it remains the most widely used currency for international transactions. However, the rise of other currencies such as the euro and the yuan, as well as the ongoing economic challenges facing the US, means that the dollar's position as the global reserve currency is not guaranteed.

How much value has the dollar lost since 1971?

Since the US abandoned the gold standard in 1971, the value of the dollar has declined significantly. In 1971, one US dollar was worth 1/35th of an ounce of gold. Today, one US dollar is worth around 1/1800th of an ounce of gold. This represents a significant decline in the value of the dollar over the past 50 years.

Are banks preparing for a major devaluation of the US dollar?

While there is no evidence to suggest that banks are actively preparing for a major devaluation of the US dollar, many financial institutions are diversifying their holdings to reduce their exposure to any potential risks. This includes investing in other currencies, commodities, and assets that are not denominated in US dollars. Additionally, some central banks are exploring the possibility of creating their own digital currencies, which could potentially challenge the dominance of the US dollar in the global financial system.

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Rapid growth in DeFi-focused Ethereum liquid staking derivatives platforms raises eyebrows

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Rapid growth in DeFi-focused Ethereum liquid staking derivatives platforms raises eyebrows

Ether’s (ETH) decentralized finance (DeFi) activity has declined in the bear market, and the sector faces further competition from Ethereum’s annual staking reward of 4%, according to Glassnode analysts. However, a DeFi narrative is building around liquid staking derivative (LSD) tokens, which could revive Ethereum’s network activity. The percentage of gas consumed by DeFi protocols has dropped from 34% in 2020 to between 8% and 16% presently, with nonfungible tokens (NFTs) commanding the maximum share of 25–30%, according to a recent report from Glassnode.

Ethereum gas usage by transaction type. Source: Glassnode

Glassnode’s supply-weighted price index for DeFi, priced in United States dollars and ETH, recorded a 90% loss since early 2021. The so-called DeFi “blue chips,” which represent a basket of governance tokens from well-known DeFi protocols like Uniswap (UNI), MakerDAO (MKR), Aave (AAVE), Compound (COMP), Balancer (BAL) and SushiSwap (SUSHI), have lost 88% of their market capitalization from all-time highs of $45 billion in May 2021.

ETH vs. DeFi tokens price performance. Source: Glassnode

DeFi blue chip tokens have underperformed against ETH during bullish market rallies and experienced a more severe drop than ETH “on the downside during the bear.” The analysts predict that since the staking of ETH now yields 4%, it will act as a “new hurdle rate over which token returns must jump.” This yield represents the benchmark rate for Ether investors. Leading lending protocols like Aave and Compound offer between 2–3% yields on lending stablecoins and Ether. Moreover, DeFi protocols also come with smart contract risk, which is eliminated with proof-of-stake validators. Staking has become popular among Ethereum investors, especially after the Shapella upgrade in April 2023, which enabled redemptions from the staking contract. By the end of May, Ethereum users staked 21.63 million ETH worth $40.021 billion, representing 18% of Ethereum’s total supply. LSD platforms like Lido and Rocket Pool account for one-third of this massive market. These applications offer a tokenized representation of staked ETH, allowing investors access to the staking yields without compromising liquidity. A growing trend among Ethereum investors is interacting with LSD financialization (LSDfi), which aims to put the liquidity offered by the LSD tokens to use in DeFi applications. Related: LSD for DeFi: Tenet, LayerZero partner to drive cross-chain liquid staking adoption

Is LSDfi the solution?

LSDfi leverages the liquidity of LSD tokens into DeFi-like lending protocols and liquidity on exchanges for higher yields. Given that a considerable amount of ETH is staked with the LSD platforms, LSDfi has the potential to revive DeFi activity. A Dune analytics dashboard by data analyst Defimochi shows the total value locked (TVL) in LSDfi protocols has touched $411 million, rising exponentially since mid-May. Some of the popular names in the sector are Pendle Finance, Lybra Finance, Curve Finance and Alchemix l.

LSDfi total value locked. Source: Dune

The liquidity of LSD tokens on Curve Finance — the largest stablecoin exchange in the market — has surpassed $1.5 billion. Curve also enabled the minting of its overcollateralized stablecoin crvUSD (CRVUSD) using Frax Protocol’s staked Frax Ether (SFRXETH) as collateral. New protocols like Lybra Finance and Pendle Finance, which are looking to leverage the liquidity provided by LSD tokens, have also become popular. As has happened before with DeFi, newer applications will likely tap the liquidity of LSD tokens by facilitating liquidity mining of their governance tokens for early depositors. While these can bring decent gains for some users, these protocols could carry smart contract risks and the chance of getting rug pulled, introducing the risks that come with the higher gains that LSDfi provides.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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Central banks’ gold holdings drop for the first time in over a year in April says World Gold Council

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Central banks' gold holdings drop for the first time in over a year in April, says World Gold Council

Global central bank gold holdings fell for the first time in more than a year in April, as Turkey sold over 80 tonnes of gold, the World Gold Council (WGC) said in a report.

Total central bank gold reserves dropped by 71 tonnes in April. The last time central bank gold holdings declined was in March 2022, and the net drop was one tonne, the report pointed out.

The monthly decrease is not representative of a trend reversal, said WGC's senior analyst Krishan Gopaul. "Country-level data reveals that, far from a sudden wave of central bank selling, the drop in reserves was primarily due to Türkiye," Gopaul said Friday.

The Central Bank of Turkey sold 81 tonnes of gold in April, reducing its gold holdings to 491 tonnes. This was after the central bank already sold 15 tonnes in March.

Last year, Turkey bought the most gold out of all central banks, purchasing 148 tonnes and increasing its gold reserves to 542 tonnes — the highest level on record.

The report explained that country-specific circumstances led Turkey to offload some of its gold.

"This was a specific response to local dynamics rather than a change to their long-term gold policy: the gold was sold into Türkiye's domestic market to satisfy very strong bar, coin and jewelry demand following a temporary partial ban on gold bullion imports," the report noted. "It remains to be seen if this selling will continue and, if so, at what pace."

Other sales in April were significantly smaller tonnage-wise. The National Bank of Kazakhstan sold 13 tonnes, the Central Bank of Uzbekistan offloaded two tonnes, and the National Bank of the Kyrgyz Republic sold 0.6 tonnes.

While massive gold selling is not likely to become the new trend, central bank gold purchases are slowing down.

Only four central banks bought gold in April, with Poland reporting additional 15 tonnes, the People's Bank of China buying eight tonnes (its sixth monthly purchase in a row), the Czech National Bank adding two tonnes, and the Central Bank of Mongolia purchasing an additional tonne.

The WGC is looking past April's drop in central bank gold holdings and projects more buying throughout 2023.

"Our view is also supported by findings from our latest Central Bank Gold Reserves survey, which shows reserves managers remain broadly positive towards gold," Gopaul said. "It's also worth noting that the Central Bank of Iraq recently announced a 2.5t purchase in May and signaled more to come."

Turkey's case is unique

Turkey has seen a surge in gold demand in the past year as citizens embraced the precious metal as a hedge against inflation, political and economic uncertainty, and local currency devaluation.

"Local demand for gold in Turkey is simply a desire to protect their purchasing power from a declining Lira," William Stack, financial advisor at Stack Financial Services LLC, told Kitco News. "Gold is a great asset to own when you are in a financial pinch because it can be sold when necessary."

Rising gold demand led to a jump in gold imports, which weighed on Turkey's widening current-account deficit. In response, Turkey introduced steps to curb gold imports in February and began selling its gold reserves to meet domestic demand.

But the move to offload some of its gold is not necessarily a losing scenario for the Turkish central bank, Stack pointed out.

"One reason Turkey is selling is that gold has risen 10% from a year ago, in dollar terms. In Lira-terms, the gain is more dramatic — 70-85%," he explained. "If Turkey sold gold internationally, it would weaken the Lira further. But when they sell gold to Turkish residents for Lira, it reduces the amount of Lira in the marketplace, thereby helping to strengthen the currency."

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Anna Golubova

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