SVET Reports
Friday's Markets Update (October 6, 2023)
On Friday, the Nasdaq rebounded sharply on Wall Street trying to harvest bears' stop-losses, with megacap stocks leading the way after a mixed jobs report. Microsoft, Nvidia, and Apple were among the top gainers, while Tesla lost ground after cutting prices. Meanwhile, BTC and ETH gains were much less pronounced with most traders just mimicking tech stock moves. Other news: Binance's spot and derivatives market share has been declining drastically; Taiwan's bureaucrats introduced new crypto regulations.
Details
The unemployment rate remained unchanged at 3.8% in September, suggesting a tight labor market. This gives the Fed leeway to keep interest rates high. The number of unemployed people and the labor force participation rate were also unchanged. At the same time, U-6 unemployment rate fell to 7% in September, from 7.1% in August. This includes people who want to work but have given up searching, or are working part-time because they can't find full-time work.
Comment
In a nutshell, what is the relationship between the unemployment rate and the recession?
The relationship between unemployment rate spikes and recessions can be complex and varies from one economic cycle to another.
Historically, spikes in the unemployment rate have often been considered a leading indicator of an impending recession. When businesses start laying off workers due to economic challenges, it can signal a broader downturn in economic activity. For example, the recession of 2007-2009 saw a significant rise in unemployment as the housing market collapsed and financial institutions faced severe turmoil.
However, unemployment rate spikes can also be a lagging indicator. In some cases, the economy may have already entered a recession, and unemployment rates continue to rise as a consequence. There have been instances where unemployment remained low during recessions or depressions due to various factors, such as government intervention, unique industry dynamics, or a strong labor market in specific regions. For example, during World War II, the United States experienced a period of low unemployment despite the global economic turmoil.
Overall, the relationship between unemployment and recessions is not straightforward, which keeps traders confused nowadays.
Crypto
Binance's spot and derivatives market share has been declining in recent months. In September 2023, its spot market share dropped to 34.3% from 38.5% in August, and its derivatives market share fell to 51.5% from 53.5%. For comparison, in January 2023 Binance held 55.2% of the spot market. This sharp drop is likely due to a combination of factors, including regulatory challenges in the US and Binance's decision to stop its zero-fee trading promotion for several major trading pairs.
The European Securities and Markets Authority (ESMA) has published proposed rules under the Markets in Crypto-Assets Regulation (MiCA) framework, covering sustainability indicators, inside information disclosures, white paper requirements, trade transparency measures, and record-keeping and business continuity requirements for crypto-asset service providers.
Taiwan's lawmakers are proposing a new law to regulate the cryptocurrency industry. The law would require exchanges to segregate customer assets and establish listing and delisting mechanisms. Foreign crypto-asset service providers would need approval from local regulators to operate in Taiwan.
Comment
It is a well-known fact that the most developed countries have an aging bureaucracy, with many officials and politicians who have been in their positions for decades. It means that these individuals are highly resistant to change and new technologies. This is particularly evident in the current debate over the role of blockchain /crypto in finance, where most aging bureaucrats are fighting against its adoption.
On the other hand, younger bureaucrats are more open to the use of new technologies and are more likely to understand their potential benefits. In fact, many younger bureaucrats are embracing technologies such as artificial intelligence and blockchain, which can help to streamline processes, improve efficiency, and increase transparency.
According to data from the U.S. Census Bureau, the median age of members of the 116th Congress (2019-2021) was 59.3 years old. The median age of members of the 117th Congress (2021-present) is 60.5 years old.
In Taiwan, the median age of politicians in the Legislative Yuan, the country's unicameral legislature, is typically in the early to mid-50s. According to data from the Legislative Yuan's website, the median age of members of the 10th Legislative Yuan (2020-2024) was 54.3 years old.