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Inflation, deflation, and inflation again

Weekly Market Highlights
2022-12-09 08:07
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Happy Friday! The Weekly Market Highlights is an initiative from the Binance Research team to round up the week, summarizing key market events and views from the team.
🔎 Macro / TradFi
  • Good news is bad news…? The U.S. ISM non-manufacturing PMI came out stronger than expected, at 56.5 compared to expectations of 53.3. While stronger PMI numbers may be good news for the growth outlook, it has reignited concerns of a potentially more restrictive Fed policy. The release of the U.S. PPI data later today will be a key event to watch. U.S. stocks are on pace for a losing week, and the U.S. treasury curve continues to flash red as the 2-10 treasury spread fell to multi-decade low at -0.84%.
🔎 Crypto
L1:
  • Inflation, deflation, and inflation again. Ether turned inflationary again after weeks of being deflationary. Network activity has slowed down in recent weeks, and there are now more ETH issued than burned since the Merge. Nonetheless, the current inflation rate of +0.009% is still well below the pre-Merge inflation rate (estimated ~+3.58% per year). Separately, Ethereum core developers have set a tentative target of March 2023 for the Shanghai upgrade which would allow the withdrawal of staked ether.
  • Upcoming Layer 1, Sui, announced the successful completion of their Wave 1 testnet. Wave 2 is expected to launch in early 2023 and brings the network yet another step closer to the mainnet launch.
DeFi:
  • SushiSwap has a significant deficit in the Treasury which threatens the DEX’s operational viability. To extend the runway of the DEX which is currently estimated to be ~1.5 years, SushiSwap CEO, Jared Grey, proposed to divert 100% of the DEX’s trading fee to the treasury multisig for one year, or until new tokenomics are implemented. This proposal has been met with mixed reactions and is currently being discussed by the community.
  • Separately, the Uniswap community will get to vote on the long-awaited “fee switch” proposal in the next week or so (pending technical diligence). If passed, a 10% fee will be set for the ETH-USDT, DAI-ETH, and USDC-ETH pools. While the fee switch does not directly impact users, it reduces the amount of incentives received by liquidity providers. As such, this will serve as a pilot program to evaluate the impact of turning on the fee switch and whether it affects trade execution (e.g. trading volume, market depth).
Stablecoins:
  • Tether announced the launch of its offshore Chinese Yuan (CNH₮) to the Tron blockchain. Initially available only on Ethereum, CNH₮’s launch on Tron makes it the second blockchain on which CNH₮ can be obtained, traded, and held. Tether supports four different stablecoins CNH₮, USD₮, EUR₮, and MXN₮.
NFTs:
  • Web2 meets Web3. Starbucks launched the beta version of its Web3 “Odyssey” loyalty program, allowing members to earn and purchase digital stamps (NFTs) that will unlock access to new benefits. This represents a big step by a prominent brand to leverage Web3 technology to provide users with new benefits and experiences both physically and digitally.
Others:
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About Binance Research: Binance Research is the research arm of Binance, the world's leading cryptocurrency exchange. The team is committed to delivering objective, independent, and comprehensive analysis and aims to be the thought leader in the crypto space. Our analysts publish insightful thought pieces regularly on topics related but not limited to, the crypto ecosystem, blockchain technologies, and the latest market themes.
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