The past week is all about central banks. There have been US Nov CPI (below the expectation), FOMC decisions as increasing 50bps (as expected before), ECB and BOE added 50bps (as expected as well) and retail sales and manufacturing data of Nov. Most of the asset classes performed much the same, but cryptos, on basis of positively correlated with US stock market, encompassed a roller-coaster week and exacerbated decline for industry internal risk. Let’s go through it.

In US, Nov’s CPI climbed 7.1% from a year ago, down sharply from 7.7% in Oct. The pace built on a trend of moderating price increases since June’s 9.1% peak. After that, US stock indexes climbed. The market believe that the trend of inflation is consistent with Fed’s target, which amplified dovish expectation. The the following FOMC decision on Wed, as expected, increases 50bp to 4.25-4.5%, smaller increments than before, and will see more traditional 25bps hike in future. However, Chairman Powell’s hawkish speech shows Fed is trying to determine how high to raise rates and no projected rates cuts until inflation down to 2%, which make markets retreated after it. Then comes Thursday’s retail sales and manufacturing, signals slowing economy. Retail spending decreased 0.6% compared to prior month; Manufacturing output declined 0.6%, the first drop since June. The recession and higher rates hikes result in more pessimistic.  Given the last quarter moving forward and tax loss trading, the US stock market went down to the level of Nov.

In Europe and England, following with Fed’s FOMC decision on Dec. 14th, ECB and BOE decided to add 50bps, matching the federal reserve in slowing the pace of increase as inflation edges lower. Inflation remains far too high and is projected to stay above the target for too long. ECB warned rates will need to “rise significantly” given a dramatic worsening in the inflation outlook and reduce its multitrillion-dollar bondholdings starting in March, by 15 billion euros, equivalent to $16 billion, a month on average at first. BOE decided to rise 50bps to 3.5%, caution about raising rates much higher while UK economy already in a recession. However, central banks are very willing to create a recession to beat inflation.

Back to crypto market, Binance with the largest trading volume appears to be suffering from a decline in liquidity. Market rumours circulated on December 12th that the US Department of Justice was considering prosecuting its executives for financial crimes, although Binance officials denied this, it triggered Binance users’ withdraw for FUD. According to Nansen, all the public addresses disclosed by Binance showed 69.5 billion a month ago, decreased to 54.7 billion on Dec. 15th. The crypto market continued to fall in the second half of the week, underperforming as U.S. stocks continued to fall and the industry raised concerns about whether top exchanges would be subject to legal compliance risks. As previously expected, the cryptocurrency market will remain in the bottom range when the macro liquidity is restricted to improve and risks are still exposed in the industry.