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Gold prices can fall 4 in the near term but its long-term outlook remains bullish – Natixis

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Gold prices can fall 4% in the near term, but its long-term outlook remains bullish – Natixis

Weak inflation pressures have pushed gold prices solidly back above $1,950 an ounce; however, despite Tuesday’s gains, one international bank is looking for lower prices through the end of the year as the fear trade continues to fade.

In his latest gold analysis, Bernard Dahdah, precious metals analyst at Natixis, said that gold prices could fall another 4%, pushing prices back below $1,900 an ounce as geopolitical tensions in the Middle East stabilize and Israel’s war with Hamas remains confined with Gaza’s borders.

However, despite his near-term bearish outlook, Dahdah said he sees long-term potential for the precious metal through 2024 and 2025.

Our view is that even if a correction takes place, gold prices are expected to find support as the Fed starts cutting rates, which we think will be as soon as May,” he said in the report. “Although we see gold prices retreating in the near term, the back of a long-term cease-fire that will eventually come, prices will still average $1,883/oz in 2024 and rise to an average of $1,918/oz in 2025.”

December gold futures last traded at $1,968.10 an ounce, up nearly 1% on the day as investors continued to digest the latest Consumer Price Index report.

Tuesday’s inflation data continues to support expectations that the Federal Reserve is done raising interest rates in this tightening cycle. October’s CPI showed inflation rose 3.2% in the last 12 months. This was the weakest increase since December 2021.

According to the CME FedWach Tool, markets see a nearly 100% chance that the Federal Reserve will leave interest rates unchanged next month. Markets see the first rate cut coming in May, with a total of three rate cuts through next year.

Although the Federal Reserve is done tightening interest rates, it has signaled that it will continue to maintain restrictive rates for the foreseeable future to make sure inflation is on track to fall back to its 2% target.

In comments made at an event hosted by the International Monetary Fund, Fed Chair Jerome Powell said that the committee is “not confident” it has done enough to bring inflation down.

“If it becomes appropriate to tighten policy further, we will not hesitate to do so,” he said during the event. “We will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data and the risk of overtightening.”

  Gold is still undervalued at $2,000, will hit $2,400 next year – IG Wealth Management's Petursson

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Neils Christensen

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

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Gold gains on short covering bargain hunting

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Gold gains on short covering, bargain hunting

Gold prices are moderately higher near midday Monday, on some short covering by the shorter-term futures traders and some perceived bargain hunting after recent selling pressure. Gold and silver prices overnight hit four-week lows. December gold was last up $7.00 at $1,944.70. December silver was last down $0.061 at $22.215.

U.S. stock indexes are slightly lower so far today. Risk appetite has been slowly creeping back into the general marketplace recently, as there has been no major military escalation in the Israel-Hamas war, at least from the markets’ point of view. That’s been a bearish weight on the safe-haven gold and silver markets for the past couple weeks.

It was a quiet economic data day to start the U.S. trading week Monday. However, the pace picks up rapidly Tuesday with the release of the consumer price index report for October, which is forecast at up 3.3%, year-on-year, versus a gain of 3.7% in the September report. The core CPI rate is seen up 4.1% versus 4.1% seen in the September report.

Also on tap this week, U.S. President Biden and Chinese leader Xi Jinping will meet Wednesday during the Asia-Pacific Economic Cooperation summit in San Francisco. The White House cited a resumption of U.S./China military communications as a priority. Iran is also on the agenda, including the question of Iran’s nuclear program.

U.S. lawmakers are once again scrambling to pass a measure to fund the federal government. This time the deadline is midnight Friday.

The key outside markets today see the U.S. dollar index weaker. Nymex crude oil prices are higher and trading around $70.00 a barrel. The yield on the benchmark U.S. Treasury 10-year note is presently fetching around 4.64%.

Technically, December gold futures prices hit a four-week low early on today. The bulls and bears are on a level overall near-term technical playing field, but prices are starting to trend down. 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 $1,900.00. First resistance is seen at $1,950.00 and then at $1,965.00. First support is seen at today’s low of $1,935.60 and then at $1,925.00. Wyckoff's Market Rating: 5.0.

December silver futures prices hit a four-week low today. The silver bears have the overall near-term technical advantage. Prices are trending lower on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at the October high of $23.88. The next downside price objective for the bears is closing prices below solid support at the October low of $20.85. First resistance is seen at $22.50 and then at $22.80. Next support is seen at today’s low of $21.925 and then at $21.50. Wyckoff's Market Rating: 3.5.

December N.Y. copper closed up 670 points at 365.40 cents today. Prices closed near the session high today and hit a three-week low early on. Prices also scored a bullish “outside day” up on the daily bar chart today. The copper bears still have the overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 380.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the October low of 351.95 cents. First resistance is seen at 370.00 cents and then at the November high of 372.55 cents. First support is seen at 360.00 cents and ten at today’s low of 358.00 cents. Wyckoff's Market Rating: 3.0.

Try out my “Markets Front Burner” email report. My next one is due out today and is going to be entitled, “When China sneezes…” Front Burner is my best writing and analysis, I think, because I get to look ahead at the marketplace and do some market price forecasting. And it’s free! Sign up to my new, free weekly Markets Front Burner newsletter, at https://www.kitco.com/services/markets-front-burner.html .

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Jim Wyckoff

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Tim Moseley

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Gold prices open Sunday in positive territory as markets react to Moody’s negative outlook on US debt

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Gold prices open Sunday in positive territory as markets react to Moody's negative outlook on U.S. debt

Gold prices remain below $1,950 an ounce but are seeing a positive start to the week as investors react to Moody's negative outlook on U.S. debt.

Late Friday, after North American markets closed, the rating agency affirmed  America's AAA rating; however, the firm's outlook on the credit rating of the United States was changed to "negative" from "stable."

At the start of the Asian trading session Sunday, December gold last traded at $1,945.90 an ounce, up 0.42% on the day.

Moody's said that domestic political instability is one factor behind its downgrade. Congress has been unable to pass legislation to fund the government past Nov. 17. Another potential government shutdown has put renewed focus on the nation's growing debt as interest rates remain elevated.

"In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody's expects that the U.S.' fiscal deficits will remain very large, significantly weakening debt affordability," Moody's said in a statement. "Continued political polarization within U.S. Congress raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability."

The downgrade also comes after the U.S. Treasury sold $24 billion in 30-year bonds in a disappointing auction.

Analysts noted that as a result of the lousy auction, primary dealers, who buy up supply not taken by investors, had to accept 24.7% of the debt on offer, more than double the 12% average for the past year.

This is the second debt outlook this year. In August, Fitch lowered its U.S. long-term rating to AA+ from its top mark of AAA. Fitch announced its downgrade two months after the United States narrowly avoided defaulting on its debt.

Commodity analysts have been bullish on gold in part because of U.S. debt issues. In a recent interview with Kitco News, Ryan McIntyre, managing partner at Sprott Inc., said the potential for a credit risk event because of sovereign debt concerns could help propel prices well above $2,000 an ounce.

Jesse Felder, founder of the Felder Report, said the U.S. fiscal problems are only getting worse and will be a significant factor for gold's push higher through 2024.

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Neils Christensen

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Time to Buy Gold and Silver

Tim Moseley

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Gold prices need to see weak inflation as prices drop nearly 3 this week

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Gold prices need to see weak inflation as prices drop nearly 3% this week

Gold prices could continue to struggle next week as Federal Reserve Chair Jerome Powell has "closed the door" to stop any potential dovish bias from creeping into the marketplace.

Thursday, at an event hosted by the International Monetary Fund, Powell said that the central bank is not "confident" that monetary policy is restrictive enough to bring inflation down to the 2% target.

Powell also said that the central bank would not hesitate to raise interest rates again if inflation pressures continued to rise.

Lukman Otunuga, manager of market analysis at FXTM, noted that gold prices are seeing their worst week in six as Powell maintains his tightening bias. December gold futures last traded at $1,939.90 an ounce, down nearly 3% from last week.

"Powell stated that the Fed remained cautious but was willing to raise rates if needed," he said. "Although traders are still pricing in a 10% probability of a rate hike in December, the timings of the Fed's first-rate cut have been pushed to July from June next year. After failing to conquer the $2000 psychological level, gold has the potential to extend losses. A solid breakdown and daily close below $1945 may open the doors towards the 200-day SMA at $1934."

Bart Melek, head of commodity strategy at TD Securities, said that Powell's comments continue to support U.S. dollar strength and elevated bond yields, two significant headwinds for gold.

"Because of the Federal Reserve's tightening bias, there is no big impetus to buy gold right now," he said.

Gold investors have again turned their focus back toward U.S. monetary policy as the geopolitical uncertainty that drove prices to $2,000 continues to weaken. Although Israel continues its ground assault in Gaza in its new war with Hamas, the conflict remains contained for now.

Although gold could see lower prices next week, it is holding up much better than oil, which is also suffering as the geopolitical fear trade continues to unwind. West Texas Intermediate (WTI) crude oil is seeing its third week of losses, its worst losing streak since late April.

At the same time, some analysts have noted that lower oil prices could work in gold's favor as it helps to cool inflation fears, giving the Federal Reserve room to ease back on its hawkish rhetoric.

However, Melek said a renewed focus on U.S. economic data, with particular attention being paid to next week's Consumer Price Index, means inflation pressures still have a significant way to drop. According to consensus estimates, economists are looking for 12-month inflation to rise 3.3%, compared to September's annual increase of 3.7%.

"The Fed has clearly said that it needs to get inflation under control, so if gold is going to find any support next week, inflation needs to be much closer to 3%," said Melek.

Barbara Lambrecht, commodity analyst at Commerzbank, said that although hotter-than-expected inflation could weigh on gold next week, any significant drop could be seen as a buying opportunity.

Capital Economics sees gold prices rising to $2,100 by year-end 2024

"If US inflation figures were to surprise to the upside, the gold price could fall further in the short term. In principle, however, we are convinced that the US rate cycle has peaked and that the mid-term outlook is positive for gold," Lambrecht said in a note Friday.

Along with inflation data, some analysts have said that gold could catch a safe-haven bid if retail sales numbers come in weaker than expected, signaling to markets that consumers are starting to stumble and unable to support current economic activity.

U.S. government debt will also be on the radar next week as the U.S. faces another potential government shutdown if Congress doesn't pass funding legislation by Nov. 17.

There are signs that global financial markets have become saturated with U.S. sovereign debt. Not only has the Federal Reserve's aggressive monetary policy tightening driven bond yields to 16-year highs, but the supply of government bonds hitting the market is starting to overwhelm demand.

Thursday, the U.S. government auctioned off $24 billion in 30-year notes and it was a significant disappointment as higher yields were needed to entice investors to buy U.S. government debt.

Some commodity analysts have said that any potential turmoil in the bond market could be positive for gold in the near term.

"If we look at the past month or so, it was the flying of yields that seemed to help gold in a sell-treasuries,-buy-gold type of trade," said James Stanley, senior strategist at StoneX Group. "A deeper inversion in 2/10 could be a positive for gold, but normalization of the curve could remain a bearish factor."

Stanley added that he sees gold prices continuing to consolidate in its broader range between $2,000 and $1,800 an ounce.

Economic data to watch next week

Tuesday: U.S. CPI

Wednesday: U.S. PPI, Retail Sales, Empire State Manufacturing Survey

Thursday: Weekly jobless claims, Philly Fed Survey

Friday: U.S. housing starts and building permits

By

Neils Christensen

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Contact nchristensen@kitco.com

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Tim Moseley

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Bitcoin holds its ground while altcoins surge higher

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Bitcoin holds its ground while altcoins surge higher

Cryptos closed out the work week strong as Bitcoin (BTC) bulls managed to fend off an attempt by bears to push the top crypto into a deeper correction, while the altcoin market continued to trend higher as traders entered the market in full force.

Stocks also climbed higher to finish the week on a positive note despite the latest round of economic data showing that the American consumer is less confident about the state of the U.S. economy and expects inflation to continue to rise.

At the closing bell, the S&P, Dow, and Nasdaq were all in the green, up 1.56%, 1.16%, and 2.05%, respectively. The benchmark 10-year yield moved down to trade near 4.63%, which also helped put a bid under risk assets.

Data provided by TradingView shows that after a brief dip to $36,430 in the early hours on Friday, Bitcoin’s price climbed its way to a daily high of $37,485 near midday, and has since pulled back to support at $37,300.

BTC/USD Chart by TradingView

“November Bitcoin futures prices [were] higher in early U.S. trading Friday, after hitting a contract high Thursday,” said Kitco senior technical analyst Jim Wyckoff.

Bitcoin futures 1-day chart. Source: Kitco

“The BTC bulls have the solid overall near-term technical advantage,” Wyckoff said. “A price uptrend on the daily bar chart is firmly in place. The trend is indeed the bull’s friend. Look for more price upside in the near term.”

While many analysts also see a possible extension of the uptrend, Crypto trader Ali Martinez has warned that Bitcoin will likely soon undergo a short-lived market correction.

“Bitcoin is nearing $40,000, and the crowd couldn't be more excited. But one important rule in trading is that you cannot follow the herd,” Martinez wrote on X (formerly Twitter). “Although I'm not touching my spot BTC position until some time in 2025, I'm inclined to enter a short in the futures market.”

As for why he sees a correction imminent, Martinez said, “The TD Sequential presents a sell signal on the weekly chart as BTC approaches an important area of resistance between $38,500 and $42,000.”

BTC/USD 1-week chart. Source: X

“I believe this resistance wall could trigger a correction toward $33,000, where I plan to buy the dip before the uptrend resumes,” he said. “Invalidation would be a weekly candlestick close above $42,500.”

MN Trading founder Michaël van de Poppe said that if a correction does occur, “$31,000 is crucial and needs to hold in order to prevent further downward momentum (if any). In that aspect, the $31,000 area is comparable to what the markets have been eyeing in the 2017-2021 cycle at $6,000.”

BTC/USD 1-day chart. Source: MN Trading

That being said, Poppe thinks that BTC would “Most likely dip towards $32,000-33,000,” which is “where [long] bids should be placed as strong sentiment usually doesn't give the obvious retests.”

In the event of a push higher, Poppe identified “a clear monthly and weekly resistance [zone] between $38,000-40,000.”

“This level will break at some point, but currently, Bitcoin's price has been providing the first test at this level,” he said. “These first tests don't break [through resistance] at first sight, hence the correction the markets [saw] yesterday. Overall, the outlook is positive.”

He added that there is the potential for a new range to form where “Bitcoin's price goes sideways, and that's a strong indication of further upward momentum on altcoins.”

BTC/USD 1-week chart. Source: MN Trading

“During late November and December, most likely we'll see more hype into the markets as the odds of a potential approval of the spot Bitcoin ETF is going to provide more momentum towards the markets, hence why the expectations are that we are likely going to see $45,000-50,000,” Poppe concluded.

Altseason kicks off with triple-digit gains for FTT

Altcoin prices surged higher, with only a dozen tokens in the top 200 trading in the red on Friday.

Daily cryptocurrency market performance. Source: Coin360

FTT, the token for the FTX cryptocurrency exchange, saw its price catapult 146% higher on news that the SEC may allow it to reopen its trading desk. JasmyCoin (JASMY) recorded an increase of 32.6%, and Celestia (TIA) gained 30.2%.

The overall cryptocurrency market cap now stands at $1.41 trillion, and Bitcoin’s dominance rate is 51.4%.

By

Jordan Finneseth

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

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Gold silver rebound as USDX dips crude gains

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Gold, silver rebound as USDX dips, crude gains

Gold and silver prices are moderately higher in midday U.S. trading Thursday. The precious metals bulls stepped in to buy the dip in prices following some technical selling pressure recently. The key outside markets were mostly friendly for gold and silver today. The U.S. dollar index was a bit weaker and crude oil prices rallied modestly. However, U.S. Treasury yields did up-tick today, to help cap gains in gold and silver. December gold was last up $9.30 at $1,967.00. December silver was last up $0.272 at $23.005.

The marketplace will be monitoring Fed Chairman Jerome Powell's speech at 2:00 p.m. EST, at a forum of the International Monetary Fund. It is not known if Powell will dig into the specifics of U.S. monetary policy. He spoke on Wednesday but made no significant, market-sensitive remarks.

U.S. stock indexes are slightly up near midday. Risk appetite has slowly crept back into the general marketplace amid no recent major escalation of violence in the Israel-Hamas war. However, my bias is still that this Middle East situation will deteriorate again to the point of roiling markets—and probably sooner rather than later.

In overnight news, China's consumer and producer inflation slipped into deflationary territory last month, heightening expectations the world's second-largest economy needs more government stimulus. China's October consumer price index fell 0.2%, year-on-year, while the producer price index was down 2.6% in the same period. Food prices fell 4.0% in October, led by a 30% drop in pork prices. Pork is a main consumer staple in China. This latest China data is a bearish element for the metals markets, as China is a major metals consumer.

Watch out for one more rate hike, recession 'freight train' hurtling towards us – Adrian Day

The key outside markets today see the U.S. dollar index just a bit weaker. Nymex crude oil prices are higher and trading around $76.00 a barrel. The yield on the benchmark U.S. Treasury 10-year note is presently fetching 4.549%.

Technically, December gold futures prices hit a three-week low early on today. The bulls have the slight overall near-term technical advantage but need to show more power soon to keep it. 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 $1,900.00. First resistance is seen at Wednesday's high of $1,977.50 and then at $1,985.20. First support is seen at today's low of $1,948.20 and then at $1,935.00. Wyckoff's Market Rating: 5.5

December silver futures bears have the slight overall near-term technical advantage. Prices are starting to trend lower on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at the October high of $23.88. The next downside price objective for the bears is closing prices below solid support at the October low of $20.85. First resistance is seen at $23.25 and then at $23.50. Next support is seen at this week's low of $22.375 and then at $22.00. Wyckoff's Market Rating: 4.5.

December N.Y. copper closed up 135 points at 365.15 cents today. Prices closed nearer the session high today and hit a two-week low early on. The copper bears have the overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 380.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the October low of 351.95 cents. First resistance is seen at this week's high of 372.55 cents and then at 375.00 cents. First support is seen at today's low of 361.35 cents and then at 358.00 cents. Wyckoff's Market Rating: 3.0.

Try out my "Markets Front Burner" email report. My next one is due out today and is going to be entitled, "When China sneezes…" Front Burner is my best writing and analysis, I think, because I get to look ahead at the marketplace and do some market price forecasting. And it's free! Sign up to my new, free weekly Markets Front Burner newsletter, at https://www.kitco.com/services/markets-front-burner.html .

By

Jim Wyckoff

For Kitco News

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Tim Moseley

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How Do Crypto Exchanges Generate Revenue Even In A Turbulent Market?

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How Do Crypto Exchanges Generate Revenue Even In A Turbulent Market?

Cryptocurrency exchanges have demonstrated remarkable resilience during market downturns, unlike institutional investors and individual traders. This is attributed to their role as market makers, fostering trader and institutional activity, and charging fees for their services. This article will outline the financial performance of crypto exchanges, exploring their primary revenue streams and the intricacies involved in generating profits through these means.

According to a financial services consultancy Opimas report, cryptocurrency exchanges made $24.3 billion in global trading revenue in 2021. This is the first time that the revenue generated by cryptocurrency exchanges has exceeded that of traditional stock exchanges such as the New York Stock Exchange and the Nasdaq.

The revenue generated by cryptocurrency exchanges was estimated to have increased by 7X compared to the $3.4 billion in sales reported in 2020. Moreover, it was found that the revenue from these exchanges surpassed that of traditional securities exchanges by approximately 60%, which totaled around $15.2 billion.

In just one year, there has been a significant change in the revenue dynamics between traditional exchanges and cryptocurrency exchanges. Previously, well-established and respected entities such as the New York Stock Exchange, Nasdaq, Deutsche Borse, and CME were generating 4X more revenue compared to their crypto counterparts. However, the tables have turned, as Binance has left these traditional exchanges far behind in performance and growth.


Source: Marketwatch

What Is A Crypto Exchange?

A cryptocurrency exchange is an online platform where individuals can trade different digital currencies, either for other cryptos or traditional fiat currencies. These exchanges provide an alternative method for obtaining cryptocurrencies, aside from methods such as mining or receiving them through airdrops. Some well-known examples of cryptocurrency exchanges include Binance, Kraken, Coinbase, HTX (formerly Huobi Global), and OKX (formerly OKEx). 

Cryptocurrency exchanges have become lucrative businesses, with some valued in the billions of dollars. The surge in interest in digital currencies has resulted in a significant increase in their valuations and revenues. Coinbase and Binance are two examples of crypto exchanges that have benefited from this trend. But have you ever wondered how these exchanges generate their substantial income? Below are some overt ways in which a crypto exchange creates revenue. 

Trading Commission and Withdrawal Fees  

Crypto exchanges generate profits by calculating the difference between their income and operating expenses, such as maintenance, promotion, support for liquidity levels, and taxes. The primary source of income for these exchanges comes from trading commissions charged to users (traders) for every transaction. When a trade occurs, which involves closing two opposing orders (one selling, the other buying), the exchange collects a commission from both the seller's and the buyer's orders. 

For example, the exchange takes a commission from both sides with a trading commission rate of 0.1% of the order value. However, if an order is executed externally, the exchange only charges a commission from one side of the transaction.

An Active User Base is Crucial

It’s important to note for an exchange to generate revenue through trading commissions and profits, it must cultivate a thriving trading environment, which hinges on having a substantial number of active users. While tools like market makers and trading bots can help stimulate activity, they cannot replace the value of genuine traders who facilitate the exchange of assets and generate commissions.

The number of active users (AU) is a vital metric in assessing a cryptocurrency exchange's revenue-generating capabilities. Although financial information in the cryptocurrency exchange domain is limited, examining available data points, such as the number of active users, can provide valuable insights.

Over recent years, cryptocurrency exchanges have been raking in substantial profits, with Binance being a prime example. According to publicly available data, Binance has generated over $1.8 billion in trading revenue since the beginning of 2021, thanks to its 28.6 million active users. The exchange's peak trading volume for the year reached an impressive $76 billion, with commissions ranging from 0% to 0.50% depending on the volume of transactions.

It’s worth noting the figures and the time when the cryptocurrency market reached its lowest point in 2018. During that period, only 313,000 users were engaging in trading on Binance. Despite being deemed relatively low activity, the popular exchanges still managed to generate substantial profits, with Binance making $446 million. While this number may not be as impressive as the most recent data, it effectively illustrates the ability of exchanges to survive even during challenging periods.

Additionally, a crucial factor to consider is the typical trading volume of a single active user. It's reasonable to assume that the higher this amount, the greater the commission the exchange earns. However, what truly matters is the volume of trades conducted by genuine active users rather than the total trading volume, which automated trading bots can inflate to the tune of 70% or more.

Withdrawal fees are also a source of revenue for crypto exchanges. The withdrawal fee amount is influenced by several factors, such as the type of asset being withdrawn, the amount of funds being transferred, and the transfer method. Some trading platforms charge a fixed withdrawal fee, while others, usually lesser-known and newer crypto exchanges, do not charge this fee to attract new users. However, it's worth noting that charging a deposit fee is not recommended, even for well-established platforms, as it can discourage users from using the platform.

Listing Fees for New Cryptos

Fees for listing a new cryptocurrency on major exchanges range from $2 million to $5 million, with some exchanges charging as high as $10 million to 15 million. The listing price varies depending on the specific project, considering factors such as the desired service package, which could include marketing support or technical assistance. There is no standard fee for listing as it is determined on a case-by-case basis.

For cryptocurrency projects looking to expand their reach, being listed on a well-established platform can increase visibility and access to a broader pool of investors. This often leads to accelerated growth for these coins. Interestingly, some prominent cryptocurrency exchanges choose to either hide or openly express their hesitation to list lower-quality coins, often referred to as "shitcoins," on their platform.

Market Making

The Market Making (MM) function ensures that traders can execute their orders seamlessly and at competitive prices, even when there may be a lack of liquidity. This is achieved by providing additional liquidity and maintaining a stable price range, thereby preventing price gaps and ensuring that buy and sell orders can be matched without delay. For instance, if a trader wants to sell an altcoin on an exchange with low trading volume, the MM function will instantly purchase the asset, executing the sale without any issues.

Customers may have the misconception that regular traders swiftly complete transactions. However, the reality is that market makers are the ones who acquire orders for subsequent resale. These market makers are accessible on every platform and provide assurance of liquidity. Conversely, if traders were to find themselves in the opposite situation, they would have to wait weeks before encountering a buyer.

Margin Trading 

Trading on margin, also known as leverage, allows traders to borrow funds from the exchange in order to amplify their buying ability. This strategy offers the potential for greater profits, but it also comes with increased risks. However, it is important to note that if a trader's prediction fails, they are not necessarily left in debt.

The leverage provided by the exchange allows traders to increase their order size. Traders are protected from losing more than they have, and the exchange is not at risk of failure. For instance, if a trader has $10,000 in their account and decides to purchase bitcoin with 5X leverage, they can buy bitcoin worth $50,000. Suppose the Bitcoin price drops and becomes more affordable. In that case, the exchange typically stops at the trader's initial $10,000 investment and alerts them with a margin call, or the opposite can also happen.

Earning Services

Cryptocurrency exchanges can profit by offering services that enable users to earn money. These services include staking, lending, and a crypto marketplace. Staking involves users locking their cryptocurrencies in a wallet to help sustain the operations of a blockchain network. Through this process, they become part of the network's consensus mechanism and receive rewards in exchange. The exchange generates income by charging a fee or taking rewards earned from staking the delegated coins.

Cryptocurrency lending allows users to loan their digital assets to other individuals or organizations, earning interest on their investments. Exchanges play a crucial role in facilitating these transactions, connecting lenders with borrowers, and overseeing the process to ensure its success. In return for their services, exchanges collect fees or take a portion of the interest lenders earn, generating revenue for their platform.

Cryptocurrency exchanges can also offer a platform for users to buy and sell assets, known as a crypto marketplace. This marketplace allows users to trade digital assets such as NFTs, cryptocurrencies, and more traditional products like Bitrefill gift cards and phone refills. The exchanges generate revenue by charging trading fees, a percentage of the transaction volume, or a fixed amount per trade.

Token Launchpad

Exchanges generate revenue from token launchpads through listing fees, which projects must pay to launch their tokens on the exchange's platform. This fee covers costs such as due diligence, legal compliance, technical integration, and marketing efforts to promote the token sale. The listing fee structure can vary between exchanges and depends on the project's size or requirements, with some exchanges offering tiered pricing.

Exchanges may also secure supplementary revenue-sharing arrangements with projects besides listing fees. This can include receiving a portion of the tokens allocated to the exchange as part of the token distribution or obtaining a percentage of the project's future revenues. These agreements can generate recurring revenue streams for exchanges, particularly if the project becomes successful and generates significant income.

In addition, token launchpads provided by exchanges can offer extra benefits to projects, such as marketing assistance, consulting, managing the token sale, and technical support. By charging fees for these additional services, exchanges can generate extra revenue and offer a complete package to aid projects in successfully navigating the token launch procedure.

It is essential to mention that token launch platforms also have advantages for exchanges by drawing in new users and boosting trading activity. When token launches are successful, trading volume often rises as investors trade newly listed tokens. This increased trading activity generates fees from transactions.

Additional Services that Complement Each Other

Crypto exchanges can also generate revenue through complementary services such as connected games or decentralized applications (DApps). By partnering with game developers, exchanges can offer the necessary infrastructure, liquidity, and access to their user base. In return, they can earn a percentage of the transactions or fees generated within these games. This mutually beneficial revenue-sharing model encourages user engagement and promotes growth within the ecosystem.

Cryptocurrency exchanges can team up with prepaid card issuers to provide users with debit cards or prepaid cards connected to their exchange accounts, enabling them to use cryptocurrencies for real-world transactions. This collaboration can generate revenue for exchanges through card issuance fees, transaction fees, or revenue sharing with the prepaid card provider. By incorporating cryptocurrencies into everyday spending, this integration promotes the broader use of cryptocurrencies and contributes to its increased adoption.

Premium Services and Referral Programs 

Certain crypto exchanges provide premium subscription options to expand their income sources, granting users exclusive access to distinct features and advantages. These exchanges offer different paid monthly subscription levels, with benefits such as lower trading fees, higher interest rates on cryptocurrency lending, and increased limits for buying and withdrawing funds.

An instance of this is Coinbase's offering, Coinbase One, which requires a monthly payment of $29.99 in exchange for no trading fees, access to advanced trading tools, increased staking rewards, and priority support. These subscription options are aimed at experienced users, traders, and institutions who engage in frequent transactions and wish to optimize the advantages available to their accounts.

Additionally, numerous crypto exchanges also pay existing users commissions for referring new customers. These referral programs are created to incentivize users to recommend the platform to colleagues and followers on social media or other channels. For instance, Binance provides a beneficial referral program with multiple levels, granting up to 40% in ongoing commissions based on the trading fees of referred users. Coinbase has its own referral program, rewarding $10 in Bitcoin for every new user referred.

Although referral programs may diminish potential revenue, the advantages of acquiring new customers through such programs outweigh the costs for exchanges. Attracting fresh, engaged traders is pivotal in boosting transaction volume and associated fees.


Key Players in Crypto. Source: Statista Market Insights

Important Insights

The key takeaway is that an exchange needs active users who generate a steady income through trading activities. The more users a platform has, the higher the volume of trading commissions, resulting in a more stable financial situation. It’s also advantageous that many exchanges have weathered the market downturns with style, grace, and dignity.  

The popularity of cryptocurrency trading platforms has skyrocketed in recent years, with millions globally utilizing these exchanges to buy, sell, and trade digital assets. According to recent studies, the global revenue in the crypto market was valued at $18.5 billion in 2022 and is projected to reach $64.9 billion by 2027, with an impressive compound annual growth rate (CAGR) of 14.40% between 2023 and 2027.

The cryptocurrency market is primarily controlled by centralized exchanges (CEX) that enable users to buy and sell cryptocurrencies quickly, efficiently, and securely. Nevertheless, decentralized exchanges (DEX) are gaining traction as they give users more autonomy over their assets and eliminate the need for intermediaries, offering a more secure and independent trading experience.

The success of cryptocurrency trading platforms will hinge on their versatility in response to shifting market dynamics. As the global crypto user base has grown to 673.90 million in 2023 and is projected to increase to 994.30 million by 2027, exchanges must demonstrate agility in the face of unpredictable market fluctuations and embrace new trends as they emerge. 

In the upcoming article, we'll take a closer look at the leading crypto exchanges, their revenue streams, and their respective peaks and valleys. Additionally, we'll explore the realm of decentralized exchanges and how various cryptocurrency businesses demonstrate their ability to transform limited resources into thriving ventures at an impressive pace.

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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Gold pressured on technical selling drop in crude oil

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Gold pressured on technical selling, drop in crude oil

Gold prices are lower in midday U.S. trading Wednesday. The sellers are in control today as crude oil prices have slumped to a 3.5-month low and as the near-term technical posture for the yellow metal has deteriorated this week—prompting some chart-based selling from the speculators. Silver is trading higher on some perceived bargain hunting. December gold was last down $13.30 at $1,960.20. December silver was last up $0.246 at $22.83.

U.S. stock indexes are weaker at midday. Risk appetite is creeping back into the general marketplace amid no recent major escalation in the Israel-Hamas war. That's also a negative for the safe-haven metals bulls.

  U.S. government shutdown next week? Markets are underpricing this risk – Danielle DiMartino Booth

The key outside markets today see the U.S. dollar index near steady. Nymex crude oil prices are lower and trading around $75.50 a barrel. The yield on the benchmark U.S. Treasury 10-year note is presently fetching around 4.5%.

Technically, December gold futures prices hit a three-week low today. The bulls have the slight overall near-term technical advantage but need to show fresh power very soon to keep it. A four-week-old uptrend on the daily bar chart has been negated. Bulls' next upside price objective is to produce a close above solid resistance at the October high of $2,019.70. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,900.00. First resistance is seen at today's high of $1,977.50 and then at $1,985.20. First support is seen at today's low of $1,956.80 and then at $1,950.00. Wyckoff's Market Rating: 5.5

December silver futures prices hit a three-week low today. The silver bears have the overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at the October high of $23.88. The next downside price objective for the bears is closing prices below solid support at the October low of $20.85. First resistance is seen at $23.00 and then at $23.50. Next support is seen at today's low of $22.375 and then at $22.00. Wyckoff's Market Rating: 4.0.

December N.Y. copper closed down 425 points at 363.65 cents today. Prices closed near the session low today. The copper bears have the overall near-term technical advantage. A fledgling price uptrend on the daily bar chart was negated today. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 380.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the October low of 351.95 cents. First resistance is seen at 367.50 cents and then at this week's high of 372.55 cents. First support is seen at 360.00 cents and then at 355.00 cents. Wyckoff's Market Rating: 3.0.

Try out my "Markets Front Burner" email report. My next one is due out today and is going to be entitled, "When China sneezes…" Front Burner is my best writing and analysis, I think, because I get to look ahead at the marketplace and do some market price forecasting. And it's free! Sign up to my new, free weekly Markets Front Burner newsletter .

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Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

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Tracking and analyzing conversion rates as a content performance metric involves several steps

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Tracking and analyzing conversion rates as a content performance metric involves several steps:

  1. Define Conversion Goals: First, you need to define what a ‘conversion’ means for your specific content. It could be a product purchase, a newsletter sign-up, a download of a white paper, or any other action that you want your audience to take1.

  2. Set Up Tracking: You can set up a system for tracking conversion rates with the help of tools like Google Analytics and AdWords2. These tools collect large amounts of raw data, so it’s important to set filters so you can focus on specific data sets related to your goals2.

  3. Analyze Individual Content Pieces: Some of your articles are better at converting visitors than others. Calculate the conversion rate from visitor to subscriber for each of your articles to know exactly which posts to promote1.

  4. Track Social Media Performance: Digital marketers can also use conversion metrics to track content performance on social media. You can add social sharing buttons on your web pages and check their counters, or check your social media analytics pages for insights3.

  5. Measure and Adjust: Regularly measure your conversion rates and adjust your content strategy accordingly. If a piece of content is not leading to conversions, it may need to be tweaked or replaced1.

Remember, improving your lead conversion rate is no simple task, but your content can help get you there1.

Tim Moseley

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The gold market needs another catalyst to drive ETF inflows for stainable higher prices

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The gold market needs another catalyst to drive ETF inflows for stainable higher prices

While October was a historic month for the gold market as the precious metal saw a record-high closing price for the month, more is needed to create a sustainable bid in the marketplace, according to analysts at the World Gold Council.

In October, gold prices rallied nearly 7%, closing out the month at $1,997 an ounce. Since then, the precious metal has struggled to hold its ground at around $2,000 an ounce. December gold futures last traded at $1,974 an ounce, down 0.73% on the day.

In their latest monthly commentary, analysts at the World Gold Council noted that while geopolitical uncertainty due to the conflict between Israel and Hamas drove speculative safe-haven demand higher, long-term investors are still reluctant to jump into the market according to weak price action in gold-backed exchange-traded products (ETFs).

“A sustained rally in gold will, in our view, require either continued or worsening political risk, a peak in bond yields and the US dollar, or an equity bear market combined with revived recession risks,” the analysts said.

Although the gold market needs another catalyst for a sustainable rally above $2,000 an ounce, October’s price action does show how much potential the gold market has as sentiment continues to shift.

“COMEX net shorts reversals are a historically reliable positive signal for gold prices and have tended to lead ETF flows,” the analysts said. “It is possible that with a full house of investment behind it, including ETFs and futures, gold could break out of the broad range in which it has traded since the middle of 2020.”

The weakest pillar in the gold market remains investment demand in gold-backed ETFs; however, the WGC said that October flows could signal a bottom in the market.

Although the gold market saw its fifth consecutive month of outflows, the pace was a lot slower compared to September. The WGC said 37 tonnes of gold, valued at $2 billion, flowed out of global gold-backed ETFs last month.

However, the WGC noted that assets under management increased by 6% due to gold’s rally last month.

Year to date, holdings in gold-backed ETFs have dropped by 225 tonnes, valued at $13 billion.

According to analysts at the WGC, the Federal Reserve’s restrictive monetary policy remains a critical factor for gold as outflows in North American markets led the broader trend.

According to the WGC, North American-listed funds saw outflows of 27.5 tonnes, valued at $1.5 billion.

“Surging Treasury yields, the opportunity cost of holding gold, early October overshadowed safe-haven demand from geopolitical risk and equity volatility later in the month. With the economy performing surprisingly well and inflation remaining sticky, the 10-year US Treasury yield touched 5% during the month –the first time since July 2007,” the analysts said.

Across the Atlantic, the WGC said that European-listed funds saw outflows of 11 tonnes, valued at $622 million.

“We believe stabilizing yields, as the European Central Bank (ECB) paused its ten-month rate hiking spree and the region’s inflationary pressure continued to slide, geopolitical risks and the rising gold price helped limit losses,” the analysts said.

Asian markets, which have been a pillar of strength in global ETFs, saw inflows of 1 tonne, valued at $81 million.

“Between January and October, Asia funds attracted US$1bn (+15t), the only region experiencing positive flows, mainly driven by China and Japan,” the analysts said.

Finally, other markets, led by Turkey, also saw inflows of 1 tonne.

As to what turns the tide for gold, the WGC said that investors might need to see lower equity markets to spur renewed interest in the precious metal.

“Earnings projections remain quite rosy, but prices, particularly the Nasdaq, are rolling over. The index is down more than 10% already from its mid-year peak during what is supposedly the seasonally strongest period. A greater than 20% drop from the peak – a ‘bear market’ – could spur additional interest in gold from investors, concerned perhaps that equity dips are no longer worth buying,” the analysts said.

  China continues to dominate the gold market with a 12-month buying spree, adding 23 tonnes in October

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Neils Christensen

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

The Artist that came out of the Winter