Market Research & Arbitrum airdrop, December 1 - 2022

Mortgage application data indicates fewer people are applying for mortgages, even though "mortgage rates" have fallen recently.

That should serve as a warning to the Federal Reserve that its program of lowering interest rates to stimulate the economy may not work as well as it has in the past.

When rates are lowered, it usually results in more people refinancing their mortgages, which frees up cash that they can then use to spend on other things.

In the years after the 2008 financial crisis, this factor has proved crucial to economic expansion.

Refinancing is unlikely to play the same role in the next economic downturn if interest rates don't fall to fresh all-time lows, making it harder for the Fed to combat a recession.

If you're only interested in the Arbitrum airdrops, scroll down to the bottom of this artice.

Impact of Refinancing

Refinancing has a dual effect on economic growth. First, it enables borrowing money against one's home's equity to finance one's personal needs.

Second, it reduces people's monthly mortgage payments, freeing up cash that may be used for other purposes.

These combined effects have been a major factor in the recovery of the global economy following the 2008 financial crisis.

In the event of the next economic crisis, refinancing is unlikely to play the same role until interest rates drop to historic lows.

If you want to know more about interest rates, I recommend you to read my medium articles: https://romanornr.medium.com/interest-rates-fca9bcd2ed0

That's because people already in good standing in their mortgages are less likely to refinance when rates are only marginally lower than they're currently.  

As a result, the stimulative effect of refinancing on the economy would be reduced, making it more difficult for the Federal Reserve to combat a recession.

US Auto Sales

The US auto sales data release on December 1 is the biggest event on the economic calendar for the coming week.

We should pay attention to this data release in light of the recent weak performance of the US automotive sector for any signs of weakness.

Autosales are an important leading indicator for the economy as a whole. A decline in auto sales often indicates that consumers feel less confident and are cutting back on their spending. That can be a sign that a recession may be on the horizon. (Or whatever the official definition of a recession is these days....)

In this case, around 14.5 million auto sales are well below the historical average.

Recent deaths of crypto millionaires?

Three prominent cryptocurrency community members have died in a few weeks, with many speculating whether these deaths are connected.

The first death was that of Vyacheslav Taran, the co-founder of Libertex, who died when his helicopter mysteriously crashed.

The second death was that of Tiantian Kullander, co-founder of Amber Group, who died in his sleep.

The third death was Nikolai Mushegian, who was found dead on a Puerto Rico beach after tweeting that he would be killed.

The circumstances surrounding each death are still unclear, but many speculate that foul play may be involved.

However, on CryptoTwitter, there's speculation that the COVID vaccines are the cause.

To respect the family and loved ones, I advise not to ask about the cause of death until family, friends, and loved ones speak out.

The dollar is down, equities, commodities & bitcoin rally

October has been relatively volatile in the financial markets, with stocks, bonds, commodities, and rate-hike probabilities all experiencing highs and lows in response to different events. Today's market movements are fascinating.

In the futures market, gains may be attributed to the relatively optimistic commentary after the announcement that China would relax its COVID-19 restrictions. However, stocks sputtered openly due to dismal housing data and PMI (purchasing managers' index) numbers. Then, the markets crashed after hearing Amazon CEO Andy Jassy's comments on the company's plans to enter the health insurance market. Still, they quickly recovered when Congress decided not to authorize a rail strike.

Finally, when Federal Reserve Chair Jerome Powell indicated that the Fed would slow the pace of its rate hikes, the stock market went into overdrive (ignoring the fact that Powell also said that terminal rates could be higher and that restrictive policy needs to stay in place for longer, noting that history cautions against prematurely loosening policy).

• The Nasdaq +4%
• Dow +2%
• S&P500 +3%
• Bitcoin $17k again

The market reaction to Powell's speech today was interesting. Initially, it appeared that traders were pricing in a more hawkish Fed as bond yields spiked and the dollar strengthened.

However, after Powell's actual remarks, the market shifted gears and started pricing in a more dovish Fed, with bond yields dropping and the dollar plunging. This is likely due to Powell's comments on wage growth, which suggested that the Fed may need more aggressive action to cool the economy.

That leaves rate-trajectory expectations basically unchanged, with the market now pricing in a 50bps rate hike in December and a 45% chance of a 50bps hike in February.

After a sharp increase in value overnight, the dollar started falling now.

Is it time for a bull market?! .... Well, let's look at FINRA

Lack of access to margin funds prevents the next rally

This chart depicts the S&P 500 and the level of margin debt (money borrowed to buy stocks) measured by the Financial Industry Regulatory Authority (FINRA).

The top panel shows the actual level of the S&P 500, and the bottom panel shows the 12-month rate-of-change (ROC) of margin debt.

Notably, while the S&P 500 had a sudden surge in October 2020 (likely due to the "short squeeze" in certain stocks), margin debt fell to a new low.

This bearish divergence (where the market is moving in one direction and the indicator is moving in the opposite direction) suggests that the rally in October was not driven by new money coming into the market.

The other important takeaway from this chart is that the 12-month ROC of margin debt is deeply oversold.

That means that the level of borrowing is well below the average level over the past 12 months. The risk is that this indicator stays oversold for a while, which could presage a longer-term decline in the stock market.

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JPMorgan: Why You Should Stay Long

JPMorgan investment bank outlines 4 main bullets for why they remain long the USD:

A Fed pause is not a sufficient condition for the USD to weaken

US recession probabilities are very high. That should make you more cautious on high beta FX

EU and China growth is weak...they see the euro average around 0.95 in 2023

USD carry is higher than 56% of global currencies...and Fed isn't even done...

The first bullet point explains that even though the Fed may pause interest rate hikes, this doesn't mean that the USD will necessarily weaken. History shows that the USD has actually strengthened in the months before the last Fed hike in 3 out of the last 4 hiking cycles.

The second bullet point explains that recession probabilities in the US are very high at the moment. This should make investors more cautious about investing in high-beta currencies, which tend to be more volatile and prone to larger swings in value.

The third bullet point explains that growth in both the EU and China is relatively weak at the moment. As a result, the investment bank expects the euro to average around 0.95 against the USD in 2023.

The fourth bullet point explains that USD carry is higher than 56% of global currencies. This means there is still potential for the Fed to raise interest rates further, which would likely lead to further appreciation in the USD.

FTX

There are the observations and key takeaways, once again courtesy of Bloomberg, from one of the most anticipated "grilling" of a CEO in recent history, who will defend his decision to use client money to fund his hedge fund, an act which, if committed by anyone else would risk decades in jail.

Bankman-Fried said he didn’t know that customer funds from his exchange were being used to fund Alameda Research.

Sam Bankman-Fried is trying to save his penis foreskin by throwing his girlfriend and former business partner Caroline Ellison under the bus for what it looks; she was, after all, the CEO of Alameda Research.

SBF frames the whole debacle as a risk management problem that got out of hand in what he calls a "run on the bank," He was unaware of any actions taken by Alameda.

OPEC

The following week is crucial for the oil market as several events and factors could determine the price trend by the end of this year and beyond. The key uncertainties are the OPEC+ meeting on December 4 and the beginning of the EU embargo on Russian seaborne crude oil imports the next day. With so many uncertainties, oil prices are seesawing and jumping up or down on every rumor or report.

The OPEC+ meeting could significantly impact oil prices, as it will determine whether or not OPEC+ countries continue to restrain production. If they do, prices could rise as global oil inventories fall. However, if they fail to reach an agreement, or if they agree to increase production, prices could fall.

The EU embargo on Russian oil could also significantly impact prices. If the embargo is fully enforced, it could reduce Russian crude oil exports by up to 1 million barrels per day (BPD), which would put upward pressure on prices. However, if the embargo is not fully enforced or Russia finds ways to circumvent it, the impact could be much less.

The other key factor to watch is developments in China, the world's largest oil importer. If Chinese demand weakens further, it could reduce oil prices in the short term. However, if China's economy shows signs of stabilizing, oil prices could rebound.

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Still a Year-end rally?

The Bank Of America (BofA) Quant report says that the week after Thanksgiving is generally a boring week for stocks, with no actual performance.

However, the period from Thanksgiving into year-end is strong and favors a year-end rally. From the closing price of the day before Thanksgiving through the last day of the year, the SPX is up 71% of the time with an average return of 1.49% (1.70% median).

This is generally good news for investors, as it suggests that the stock market is more likely to rise during this period than to fall.

However, it's important to note that there is no guarantee that the market will rally and that investors should be prepared for the possibility of a downturn.

Disclaimer: Past performance does not guarantee future results, which may vary.

Arbitrum Airdrops

Arbitrum is a popular Ethereum Layer 2 solution used by many different applications. The main reason for its popularity is that it is anticipated to have an airdrop soon.

This airdrop is a highly anticipated event in the cryptocurrency world, and as a result, many people are looking to get their hands on the Arbitrum chain airdrops.

We can improve our chances of getting the airdrop is to using the "Arbitrum Nova chain." This chain is specifically designed for social applications and gaming and has already been adopted by Reddit for their $MOON token.

Instead of "Metamask," I'm using "Blockwallet" throughout this airdrop guide.

Main reasons

• Works better with my Trezor and Ledger hardware wallet
• BlockWallet's privacy proxies prevent IP leaks
• Easier to bridge between several networks inside the wallet itself for lower gas
• Built-in defense against front-running bots
• keep track of gas prices across several chains straight in your wallet
• I deleted Metamask

You can download Blockwallet here:

Technically, you can still use your own Metamask wallet, steps will be slightly different but doable if you're a little bit tech savvy

Now let's start with the airdrop guide

To move your tokens to the Arbitrum Nova chain, you first need to visit Chainlist and connect your wallet.

ChainList: https://chainlist.org/chain/42170

Now after clicking "connect wallet," we can continue and click on "Add to wallet"

Then these popups will show from the wallet

Then, use the Arbitrum bridge to transfer your ETH.

However, there's an easier way with Blockwallet

Visit: https://bridge.arbitrum.io/?l2ChainId=42161&l2chainId=42170

The next step is bridging. Have some Ethereum in your wallet on the Ethereum chain, and we can bridge it to Arbitrum Nova.

You can also buy some NFTs on Stratos. Stratos is integrated with Arbitrum, and purchasing NFTs on them will also increase your chances of getting the airdrop.

I bought these NFT: https://stratosnft.io/collection/arbitrum-odyssey

You can connect your wallet.

If you're using Blockwallet just like me, you can easily connect by using the "Metamask" option, and it will automatically connect to your Blockwallet

Another way to improve your chances of receiving the airdrop is to complete missions on community development platforms like Layer 3.

These missions will increase your transaction count and volume on the Arbitrum One chain, making you a more active user and, therefore more likely to receive the airdrop.

You can join the guild: https://guild.xyz/arbitrum

Connect your wallet and Discord, and complete a few tasks, like buying tokens. The fees on Arbitrum are very low, and usually, you can spend less than $1 to complete a task.

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