Tuesday, Dec 5, 2023

crypto liquidity, SEC troubles, COP hedges

‘A lie will go round the world while truth is pulling its boots on.’ – Old proverb ||

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IN THIS NEWSLETTER:

• Crypto “liquidity” is climbing

• The SEC is in legal trouble

• COP28 and the global balance

WHAT I’M WATCHING:

Crypto “liquidity” is climbing

Monetary liquidity is not the only type of funds flow that matters for the crypto market. A related but separate and arguably equally as important metric is the total amount of money in stablecoins.

This matters because dollar-backed stablecoins are still the main trading pair for crypto assets, with almost half based in Tether’s USDT stablecoin.

(chart via CryptoCompare)

So, an increase in the amount of USDT in circulation could be interpreted as an increase in demand for crypto assets. And, whaddyaknow:

(chart via TradingView)

The overall increase is not as steep as it may seem from the above chart, because inflows into USDT have been partially offset by outflows from Circle’s USDC stablecoin – this tends to be more sensitive to interest rates as its user pool is more interested in yield and returns than in access to dollars.

(chart via TradingView)

But the net impact is positive.

(chart via TradingView)

Nevertheless, the moves need to be put into context – the trend seems to be up, which should be bullish for crypto assets as it signals growing investor interest. But, it’s still early as the total stablecoin market cap is still well below levels from earlier this year, when the outlook was arguably much worse than it is today.

(chart via The Block Data)

The SEC is in legal trouble

The SEC could be about to get its knuckles rapped by the Supreme Court of the United States.