Stock Market Soars While WLFI Stumbles—Proving Decentralization is Key in Crypto
Digital Asset Market: The website for the Trump family-backed crypto project, World Liberty Financial, crashed and experienced numerous outages during its public token sale. As of 15:41 UTC, only 1.7% of the 20 billion tokens allocated to the public sale were sold. The website attributed the outages to high traffic, with 72 million unique visits in the first hour. The project is led by Donald Trump as "chief crypto advocate" and his sons, and the token will be used for governance of the platform for borrowing, lending, and DeFi activities. Only accredited investors were able to participate in the sale, which offered a fixed price of $0.015 per token.
Meanwhile, BTC rose to a three-month high of $67,800 before pulling back to $65K and is now back up to $67K. This price optimism is attributed to the US Presidential elections and continued momentum for crypto-friendly President Trump.
Macro Economics: China plans to raise an additional 6 trillion yuan ($850 billion) in special treasury bonds over the next three years to stimulate its struggling economy. This comes after Finance Minister Lan Foan's statement over the weekend that China will "significantly increase" its debt. These measures are expected to ease the burden on local governments, which have been hit hard by the downturn in the property market. However, the reported amount did not excite investors, with Chinese stocks dipping by 0.3%. Some analysts believe that this fiscal stimulus package may be enough to stabilize growth in the near term and increase the chances of reaching a 5% growth target in 2024-2025. However, there are concerns about China's long-term growth potential and its overreliance on government-led, debt-driven investment. The remaining details of the fiscal measures are expected to be announced at a meeting of the top legislative body in the coming weeks.
Equities: Markets declined on Tuesday as downbeat earnings from ASML Holding (ASML) sent chipmaker stocks lower and weighed on the tech-heavy Nasdaq Composite. Additionally, Bloomberg reported that Biden administration officials are considering capping US chip exports to certain countries, exacerbating the drop. Shares of Nvidia (NVDA) and AMD (AMD) dropped around 5% in response to the news. The Dow Jones Industrial Average also closed lower, led by UnitedHealth Group (UNH), while the S&P 500 fell from Monday's all-time high. Bank earnings were also focused, with Goldman Sachs (GS) reporting a 45% profit surge. Energy was another significant area of focus, with oil prices tumbling amid reports of Israel's intentions for Iran. Apple stock climbed to a new intraday record, adding $70 billion to its market cap, showcasing its sustainability as the world's most valuable company. The tech giant also saw strong demand for iPhones, with shipments rising 3.5% in the third quarter. Apple is set to report earnings on Oct. 31, with analysts expecting a 9% increase per share.
The Fed and US Treasury: Wall Street banks, including Goldman Sachs, Bank of America, and Citigroup, have seen a broad rebound in the third quarter thanks to increased dealmaking and trading activity. Executives are optimistic about a potential "soft landing" in the economy and the impact of the recent interest rate cuts by the Federal Reserve. However, uncertainties, such as geopolitical issues and the upcoming US election, could affect these results. Goldman Sachs has seen a significant improvement in its financial performance compared to a year ago when it faced multiple challenges. Despite some weaknesses in fixed-income trading, the bank's overall revenues have increased since last year.
Inflation data from last week indicates that the Federal Reserve is moving closer to its goal of 2% following its recent interest rate cut. The latest consumer and producer price indexes show that inflation is gradually decreasing. A projection from Goldman Sachs suggests that the Fed may already have reached its 2% target. However, some hurdles remain to overcome, such as high core inflation rates. Lower inflation levels could allow the Fed to continue cutting rates, but there are concerns about moving too aggressively. Futures markets imply a 90% and 82.5% probability for a rate cut in November and December, respectively.
Geopolitical: Oil prices fell sharply on Tuesday, with West Texas Intermediate dropping to around $70 per barrel and Brent falling below $74, following a report that Israel will avoid targeting Iran's nuclear and oil facilities in any potential retaliation. The International Energy Agency's prediction of a supply glut also contributed to the decline. Overall, the outlook for oil is currently bearish due to China's economic situation and easing tensions in the Middle East.
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Economic indicators, including inflation, continue improving, driving the markets to all-time highs. The Federal Reserve is expected to extend its 25 basis point cuts in November and December, achieving 100 basis points for FY 2024. With this trajectory, the federal funds rate will likely reach 3.5% by mid-summer next year, at which point the Fed may pause further adjustments. Until then, the stock market's bullish trend seems poised to continue, potentially sustained until the upcoming elections.
The initial sale of the World Liberty Financial (WLFI) token, tied to the Trump family, faced a lukewarm reception, compounded by technical issues that limited transactions. Only 1.7% of the expected allocation was sold, reaching just 3,000 unique wallets. Despite the rapid sale of 220 million tokens, concerns over governance—where 70% of the supply is controlled by founders and insiders—fueled skepticism about centralization. This concentration of control undermines the decentralized ideals of crypto, contrasting with Ethereum’s more balanced 16.6% allocation in its Genesis block.
Bitcoin is expected to maintain positive momentum, likely tied to optimism surrounding the upcoming U.S. presidential election. A Trump victory could further fuel this trend, making it an election bet that may still be worth considering for those looking to capitalize on the political climate.
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