In recent weeks, a slew of interesting developments has occurred in the global financial sector. This includes the agreement reached over the U.S debt ceiling and the subsequent avoidance of a U.S default, an event that has resulted in $30 billion exiting the U.S banking system in one week due to deposit flight. In the midst of this, Los Angeles-based Pac West has also been in the limelight, as it is now selling $2.6 billion in real estate construction loans to improve its balance sheet.
According to a Federal Reserve report, over 700 American banks are now facing significant safety and soundness risk due to unrealized losses exceeding 50% of their capital. The Fed has attributed its own interest rate hikes as the primary cause of these banks’ precarious positions. The Federal Reserve has also been accused of orchestrating the consolidation and centralization of the U.S banking system by design, where a few banks, such as JP Morgan, will be left standing.
Simultaneously, there are increasing concerns regarding the imminent wave of bank failures resulting from the collapse of commercial real estate. This is a direct effect of decreased demand since the onset of the Covid-19 pandemic and the Federal Reserve’s numerous interest rate hikes. As a result, smaller and regional banks holding many of these assets will face substantial problems with their balance sheets.
Concurrently, the Federal Reserve has been preparing for the introduction of a central bank digital currency (CBDC). As the usage of such digital currencies increases, it is imperative for investors to understand the serious implications of the implementation and enforcement of a CBDC.
Inflation has also been a major point of concern, as it shows no signs of cooling down. The jobs report, contrary to expectations, was not as bad as the Fed would have liked. This indicates that come mid-June, the Fed will most likely raise interest rates again. The Fed plans to continue raising interest rates until one of two things happens: either we reach their two percent inflation target or something significant breaks.
In the midst of these financial upheavals, the focus for crypto investors should be on understanding the global news stories and the state of the current macro environment. Crypto investors must stay alert to the trends, such as the recent spikes in AI and meme coins, and be wary of the new coins being pumped by influencers. Recent regulations in Hong Kong and China’s crypto-positive stance have led to a surge in Chinese-related cryptocurrencies, an interesting trend to monitor.
Looking ahead, the next wave of cryptos likely to pump in the short term might be those related to gaming, AR/VR, or metaverse, due to upcoming events like Apple’s WWDC, which could potentially reveal an AR/VR headset.
In conclusion, the global financial landscape is dynamic and evolving rapidly, with a multitude of factors at play. Crypto investors, in particular, must keep a keen eye on the shifting trends and global news stories to navigate these turbulent times effectively. It’s also crucial to use tools like Wallet Guard to protect crypto assets and to stay informed about new developments in the cryptocurrency market.