The current macro backdrop continues to focus and assess on the relative impact on inflation from rising real yield (10 year at 1.7%) or aggressiveness of interest rates hikes while Fed’s QT has been shrinking its balance sheet by about 3.2% from $8.9t to $8.6 in the last seven months. However we are yet to see significant systematic risk as VIX sitting at 26 with futures term structure of contango and high yield junk bond ETF (HYG) has not crashed trading 2.2% above recent low $70.40 as well as credit spread is also off 100bps below from the recent high 600bps. When I checked on, FTX - on the verge of potential bankruptcy - was the fourth biggest cryptocurrency spot exchange based on traffic, liquidity & volume, hence the risk-off sentiment has well and truly arrived as some of the notable crypto related stocks got hammered – COIN -10%, MSTR -20%, GLXY -16% while safehaven US dollar bid up broadly heading into October US CPI release tonight at 9:30pm. Also to put this price action into perspective, Bitcoin/gold ratio has declined to just over 9 times compared to 35 times last year. Last time Bitcoin (BTCUSD) dipped below $16,000 was 2 years ago and now it has fallen 77% from all time high $69,000 that was traded 1 year ago. First headline squawk highlighted in red that I saw this morning on my Bloomberg terminal was “BITCOIN DROPS BELOW $16,000…”.
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