Crypto Winter Continues: Senate's Stopgap Funding, Job Market Strength, Mortgage Rates, and More

The Senate in the U.S. approved a stopgap funding measure that will fund the Federal Government's operations until November 17th. While this serves as a short-term relief, it is only a matter of 45 days or less before another impasse occurs, so hardly anything will change the sentiment on the heavy spending and debt burden the U.S. is facing.

Labor Market Still Resilient

Meanwhile, the labor market continues to display remarkable strength, as evidenced by the latest release of the August Job Openings and Labor Turnover Survey (JOLTS) report. In August, job openings surged by 690,000, bringing the total to 9.61 million.

Rates: “Higher for Longer”

With this resilience, it should be very unlikely that the Fed will derail from its “higher rates for longer” policy. Market futures currently indicate we are unlikely to see any rate cuts until at least June 2024.

Mortgage Rates Approach 8%

The average interest rate on a 30-year mortgage in the U.S. is at a high of 7.88%; this rate has tripled over the past three years from 2.6% at the height of the COVID-19 pandemic.

Ramifications of that surge can be hard to grasp, but imagine a household used to pay around 1300 USD in mortgage per month on an 800.000 USD house. This same household will now need to be more than 5,000 USD per month, assuming they are not locked in on lower rates.

Interestingly, despite these high rates, mortgage delinquency rates remain at historic lows. This is largely because many current mortgages were secured at the previously lower rates.

VC Funding in Crypto at Multi-Year Lows

The crypto market is reeling from the effects of the bear market, with the total market capitalization hovering around $1 trillion, which is only a third of what it was when the market peaked in November 2021.

At the same time, investors are shying away from allocating funds toward Web3 projects. A recent report by Messari revealed that Q3 2022 marked a 36% quarter-over-quarter decline in funding and the number of deals closed, with only $2.1 billion invested in 297 deals.

However, on the brighter side, when looking at a longer-term horizon, the crypto market has grown significantly over the past five years.

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Industry Shakers

• Founder of FTX, SBF’s trial has started

  The much-awaited criminal trial for Sam Bankman-Fried, the former CEO of the now-defunct cryptocurrency exchange FTX, commenced on Tuesday. The trial aims to ascertain his culpability in relation to seven counts of fraud and conspiracy. In January, Bankman-Fried formally pleaded not guilty to all of these charges, which encompass wire fraud, conspiracy to commit money laundering, and conspiracy to misappropriate customer funds. In the event of a conviction on all counts, he potentially faces a maximum prison sentence of 115 years.

• Ethereum Futures ETFs Start Trading in the US

  Several Ethereum futures exchange-traded funds (ETFs) have recently launched in the United States. Investment firms ProShares, VanEck, Bitwise, Valkyrie, Kelly, and Volshares collectively introduced nine ETFs on the Chicago Board Options Exchange (CBOE) on Monday. However, these ETFs had a slow start, trading under $2 million in total as of 11:25 a.m. ET October 2nd. In contrast, when the first Bitcoin futures ETF debuted on the New York Stock Exchange in 2021, the ProShares Bitcoin Strategy ETF saw almost $1 billion in shares traded on its first day.

• UBS launches tokenized money market fund

  Leading Swiss bank UBS has initiated a live pilot of a tokenized Variable Capital Company (VCC) fund as part of Project Guardian, an effort led by Singapore's central bank. UBS Asset Management introduced this fund within a broader VCC framework designed to digitize various real-world assets on the blockchain. The pilot carried out via UBS Tokenize, the bank's in-house tokenization service, leverages Ethereum smart contracts for activities like redemptions and fund subscriptions.

Also published here.