Macro Commentary
- After last week’s 25bp hike, the Fed is unlikely to continue raising rates
- Regional banks remain under duress, as deposit outflows slowly continue
- NFT minting on Bitcoin increased dramatically over the weekend
As expected, rates were lifted another 25bp at last week’s FOMC meeting. Chairman Powell’s leading statement touched on the banking system being sound and resilient, which was then followed mere hours later with severe volatility in several regional banks. The whisper of a short selling ban on regional stocks later in the week set the market soaring higher. Despite floating the idea, no serious discussion regarding a short selling ban has been publicly revealed.
The continuing concern for regional banks is what is being dubbed a “bank walk” from low yield savings accounts to higher yielding money market accounts or CDs. Based on the weekly H8 report from the Fed, deposits have continued to slowly decline week over week in both large and small commercial banks. As this crisis seems to have abated in the near term, this week’s focus will be CPI on Wednesday and bipartisan negotiations regarding the debt ceiling.
Over the weekend, transaction experimentation on the Bitcoin network surged as NFT minting became more popular. Despite being in the early stages, there is a possibility that primordial versions of objectively non-speculative use cases may emerge. The deluge of on-chain activity is reflected in the significant increase in average transaction fees from $2 in late April to nearly $20 today. This weekend also saw fees exceeding the block reward, which helps assuage future concerns for Bitcoin’s security budget when the block reward ends by 2140. Although NFTs have effectively added clip art to the blockchain so far, users seem to believe these NFTs have speculative value, enough so to pay for the minting and transaction fees. While these transactions and NFTs are allowable within the protocol, there is a split within the die-hard community on whether Ordinals should be on layer 1 of the Bitcoin blockchain.
