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What we will cover this week:
Macroeconomic Outlook: Risk-Off Sentiment Prevails Ahead of Nvidia and Jobs Data; Institutional Bitcoin Buying Persists
Narrative Updates
Narratives to Watch
Notable projects to watch
Weekly ecosystem updates
Macro Economic Outlook: Headwinds for Risk Assets
Global financial markets, including stocks, Bitcoin (crypto), and precious metals, are facing significant downward pressure driven by a confluence of macroeconomic and geopolitical factors. High-level uncertainty regarding central bank policy, global liquidity, and geopolitical flashpoints is driving a pervasive "risk-off" sentiment.
Trouble in Japan and the Yen Carry Trade Unwind: Link
Japan's financial landscape is a major source of global market fragility. The Bank of Japan's ultra-loose monetary policy, which has kept interest rates near zero for decades, is unwinding. This shift is leading to a surge in Japanese Government Bond (JGB) yields, as the market begins to question the country's massive debt load and anticipates higher interest rates.
Yen Carry Trade: Investors historically borrowed the low-cost Japanese Yen (JPY) to invest in higher-yielding global assets (like U.S. stocks, emerging market bonds, and possibly Bitcoin). This is known as the Yen Carry Trade .
Unwinding Impact: As JGB yields rise, the cost of borrowing the Yen increases, and the Yen itself may strengthen. This makes the carry trade unprofitable, forcing leveraged investors to unwind their positions by selling off foreign, higher-yielding assets to repay their Yen loans.
Effect on Assets: The massive global sell-off required to unwind these trades drains liquidity and increases volatility, acting as a direct headwind for risk assets like stocks and Bitcoin. Precious metals like gold are also feeling pressure from the broader liquidity drain.
Liquidity Stress: The Repo Market Signal: Link
The Repurchase Agreement (Repo) market - where banks and financial institutions borrow and lend money overnight using securities as collateral - is showing signs of stress. This market is the plumbing of the financial system, and liquidity scarcity here signals broader financial fragility.
Repo Rate Spike: Overnight funding costs in the U.S. repo market have been elevated, in some cases rising above the Federal Reserve's target rate. This signifies a scarcity of short-term cash.
Causation: Factors contributing to this stress include a heavy issuance of Treasury bills by the U.S. Treasury, which drains reserves from the banking system, and the lingering effects of a government shutdown that disrupted key data releases.
Effect on Assets: Tightening liquidity in the repo market pushes up borrowing costs across the financial system. This can trigger the liquidation of leveraged trades in risk assets like stocks and Bitcoin, exacerbating the downward pressure seen in those markets. The Federal Reserve's decision to halt Quantitative Tightening (QT) in December - which stops shrinking its balance sheet - is a form of monetary easing meant to alleviate this liquidity stress, but the interest rate debate remains the dominant market driver.
Economic Problem in Europe: A Warning Signal for the US: Link
Europe's economy is showing signs of deep-seated structural weakness, serving as a cautionary tale for the US.
Structural Vulnerabilities: The President of the European Central Bank (ECB) has warned that Europe’s economy is vulnerable due to a reliance on international trade, a lack of progress in digital and AI sectors within its internal market, and a "vicious circle" of capital flowing into U.S. stocks.
Geopolitical/Trade Risk: Europe's dependence on third countries for critical raw materials and its exposure to a global turn toward protectionism (e.g., from US tariffs) increase its economic risk.
Market Implication: While the US economy has generally outperformed, Europe’s underlying slowdown is a warning sign that the global growth engine is sputtering. A sustained downturn in a major economic bloc like the EU will inevitably dampen demand and export prospects for the US, putting future pressure on US stocks and overall global economic health.
Elevated geopolitical risks are contributing to uncertainty and risk aversion in global markets.
China-Taiwan-Japan: Tensions in the Taiwan Strait are high following the election of a pro-sovereignty president in Taiwan and increased military pressure from China. Japan has intertwined its security with Taiwan's, which has angered Beijing. This instability in a major global trade hub threatens supply chains and could lead to significant global economic disruption, increasing the safe-haven demand for gold while creating volatility for risk-sensitive assets like stocks and Bitcoin.
US-Mexico-Venezuela: The US has focused on drug cartels and escalated rhetoric against the Venezuelan regime, adding friction to trade and political relations in the Americas. The US imposition of higher tariffs on over 90 countries, including high rates for key partners like India and Brazil, highlights a broader trend of escalating trade protectionism that fragments globalization and is a clear drag on global growth and trade-dependent corporate earnings.
Federal Reserve Uncertainty: The Main Driver: Rate Cut Possibility
The Federal Reserve policy outlook remains the most critical short-term driver of market volatility. The Fed is navigating its dual mandate - controlling inflation while maximizing employment - with conflicting data.
Rate Cut Uncertainty: Market expectation for a December rate cut has fallen dramatically, leading to disappointment and acting as a major headwind for stocks, crypto, and precious metals.
Conflicting Data: The Fed is divided:
Doves: Point to a weakening labor market (rising unemployment rate, sharp spike in job cuts) as justification for a rate cut to support employment.
Hawks: Argue that inflation remains stubbornly above the 2% target, making an immediate cut premature.
Policy Impact: This sharp, public division makes the Fed's next move unclear, leading to heightened market volatility as investors scramble to react to every new piece of economic data. The uncertainty is generally negative for risk assets.
Quantitative Tightening (QT) End: The unanimous decision to end the balance sheet reduction (QT) in December is a form of monetary easing that should inject some liquidity, which is generally positive for stocks and Bitcoin. However, the ambiguity around the main lever of interest rates currently overshadows this development.
Concluding Outlook
The prevailing macroeconomic environment is characterized by heightened uncertainty and liquidity challenges, creating a significant "risk-off" scenario. The simultaneous unwinding of the Yen Carry Trade, acute liquidity stress signaled by the repo market, and escalating geopolitical tensions are all draining cash from the financial system and suppressing risk asset valuations.
Ultimately, the immediate direction for stocks, Bitcoin, and precious metals is largely dependent on the Federal Reserve's immediate policy path. The clear division among policymakers regarding a December interest rate cut means that volatility is likely to persist until there is definitive clarity. While the end of Quantitative Tightening offers a minor liquidity boost, the market remains fixated on the interest rate decision, where even a delay in cuts is being priced as a major disappointment, maintaining strong headwinds across global investment portfolios.
Narrative Updates
I/ Overall
Top Narrative Gainers In The Last 7 Days:
Binance Alpha Coins
Top Gainers: $BEAT (+125%), $PEPEONTRON (+65.2%), $TRUST (+53%), $GRASS (+35.3%), $PIPPIN (+37.1%), $FOLKS (+27.8%)
Catalyst: The key reason for the surge in Binance Alpha coins right now is aggressive new listings, airdrops, and hype cycles on the platform, attracting retail traders amid broader altcoin momentum
II/ Narratives to Watch
AI Agents
Why Does It Matter?
Nvidia's Q3 earnings report on Wednesday (November 26) is a massive macro event that serves as a "risk barometer" for the broader AI and tech sector, potentially triggering volatility or a rally in AI-related tokens if results beat expectations (e.g., continued enterprise demand for AI compute).
Next week's events, including potential mainnet launches (e.g., Mira Network's AI verification layer) and upgrades (e.g., Cysic's ZK infra), align with this, creating short-term alpha opportunities in low-cap AI plays.
Key Projects
1/ AI Agent I’m watching right now:
$VIRTUAL (Virtuals Protocol): Top AI Agent launchpad on Base - expecting Base to have a big wave soon
$KITE: Outstanding infrastructure for AI Agents, backed by top-tier VCs and partners
$NOICE: Noice is an innovative AI Agent platform built on Base, focusing on seamless social-driven token interactions and automated trading
IV/ Weekly ecosystem updates
Our radar expanding on these ecosystems:
Ethereum and notable L2s
BNB Chain
Solana
Bitcoin ecosystems
Base
HyperLiquid
Monad
Full news roundups for the week from November 17th - November 23rd: Here
V/ Notable projects to watch
This week’s watchlist highlights notable projects we believe are worth monitoring, chosen for their strong fundamentals and key upcoming catalysts.
And that’s all for this week. See you next week!
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Disclaimer: We are NOT financial advisors. This content is provided for informational and educational purposes only. Crypto involves high risk and speculation - always do your own research before making investment decisions.
