- Stagflation fears are slowing the market to start the week.
- The S&P / ASX 200 is down by almost 1.5% on Tuesday.
- Fittingly, tech is taking the final few blows to 2022; on the positive side, crypto is displaying some solid foundations.
In what is anticipated to be a slow week as businesses and staff commence their final preparations for the holidays and the new year, the stock market started on a dour note.
Selling in last week’s markets carried over to Tuesday, and the S&P / ASX 200 sold off by almost 1.5%.
A reflection of the sombre tone of the year and with little else to guide the last few trading days, the direction is flat and downward, with the interest rate-sensitive technology stocks bearing the brunt of the selling.
Following Fed Chairman Jerome Powell’s comments last week, the Australian tech sector has recalibrated to accommodate the new US interest rate paradigm and the broader global technology outlook.
Software designer Altium Ltd ASX:ALU (ALU) retreated over 4% on Tuesday, joining the likes of the Australian financial software program creator Xero Ltd ASX:XRO (XRO), which fell by over 6%.
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NEXTDC Limited ASX:NXT (NXT) was victim to selling pressure to start the week, losing nearly 6% of its value by the close of trading on Monday.
As FTX’s Sam Bankman-Fried awaits extradition to the US and a lengthy trial, the rest of the crypto world has been nervously looking for similar centralised exchange failure points.
FTX contagion having already claimed the victims of Genesis and BlockFi, there was speculation that Binance would struggle to survive this winter. There is still some way to go, but in retrospect, Binance CEO Changpeng Zhao has done a remarkable job navigating some highly treacherous waters.
The Binance coin (BNB) reflects the value of the equity in the Binance centralised exchange as profits are used to reduce the supply.
After selling off sharply to start the year, then another 33% more recently under the duress of the FTX collapse, BNB has found a footing in recent days.
The stabilisation of the BNB price is reflective of a cryptocurrency ecosystem still straining heavily under the FTX collapse washout but revealing some solid foundations under the retreating tide.
Ethereum has been clinging to the 1,200 USD handle despite the tumult, with Bitcoin hovering between 16,500 and 17,000. Undoubtedly, the decision by the US legal system and representative bodies to press charges against Mr Bankman-Fried has gone a long way to stabilise the crypto market.
Yes, the US has pursued charges against corporate misconduct in the crypto space before, but nothing of this scale. The precedent will most probably drive through new legislation to protect investors like the Enron collapse created Sarbanne-Oxley.
Broader and deeper protections for the US and international consumers and holders of cryptocurrencies will almost certainly return many investors to its shores.
The perverse impact of the perpetuated FTX alleged fraud is that it will likely do more for the growth and continuance of cryptocurrency adoption than it could have dreamed of under its stated business model.
2022 has been a challenging year for bondholders, and tech investors alike, those dipping a toe in the cryptocurrency waters have had an equally bad time.
Now, as we turn the corner on the worst of the surge in inflation, it is worth noting that despite some of the more apocalyptic predictions, crypto looks to be finding a footing at the current price handles.
As the US pursues a complex and lengthy trial against the FTX founders, the outcome will likely be a broader and safer crypto ecosystem. It would open the door to wider adoption and deeper legitimate penetration to everyday payments that were being sought before the collapse.