Coinbase launches International Exchange
Fintech Headlines for May 2, 2023: Coinbase launches International Exchange, shares of PacWest and Western Alliance experience a double-digit plunge, and Federal Reserve is expected to raise fed funds rates today
Welcome to the “Popular Fintech” newsletter! Regional banks (and Coinbase) continued to dominate the news yesterday:
Coinbase launched an International Exchange, offering perpetual futures to institutional clients from “jurisdictions outside of the US”,
The regional banking crisis is not over, as shares of PacWest and Western Alliance experience a double-digit plunge, and
The Federal Reserve is expected to announce another 25 basis points fed funds hike, after the Federal Open Market Committee meeting
Coinbase Launches International Exchange
Coinbase (NASDAQ: COIN) announced the launch of its Coinbase International Exchange, which will allow institutional users “in eligible jurisdictions outside of the US” to trade Bitcoin and Ethereum perpetual futures. A perpetual futures contract is a type of cryptocurrency derivative product that allows traders to speculate on the future price of a particular cryptocurrency asset. Unlike traditional futures contracts, perpetual futures do not have a predetermined expiry date and operate on a rolling basis, with each contract renewing automatically at regular intervals. This perpetual nature allows traders to hold positions for as long as they wish, without being required to roll over or close out their positions.
According to Coinbase, in 2021, perpetual futures accounted for almost 75% of the total cryptocurrency trading volume worldwide, resulting in exceptionally liquid markets and providing traders with greater flexibility in their trading tactics. Coinbase has not yet received regulatory approval to offer futures in the United States, so the exchange will operate under a license from the Bermuda Monetary Authority, which Coinbase received just two weeks ago. The company will not engage in proprietary trading, and the liquidity on the exchange will be provided by external market markets. The exchange will initially offer up to 5x leverage, and all trades will be settled in USDC. Coinbase shares were up 2.35% for the day despite a 1.08% drawdown in Nasdaq.
Image source: Coinbase
✔️ Introducing Coinbase International Exchange
✔️ Coinbase Launches International Exchange as Tensions With US Regulators Grow
✔️ Coinbase launches international perps exchange
✔️ Gemini Foundation - a Non-US Derivatives Platform - Is Now Live!
Regional Banking Crisis Is Not Over
Regional bank stocks experienced a sharp decline yesterday, led by the PacWest (NASDAQ: PACW) and Western Alliance (NYSE: WAL), which fell 28% and 15% respectively. The two banks lost more than $5 billion in market value since the beginning of the year, according to Bloomberg. The KBW Nasdaq Regional Banking Index, which seeks to reflect the performance of U.S. regional banks and thrifts, dropped 5.5% yesterday, the biggest single-day decline since the collapse of Silicon Valley Bank in March. This turbulence happened just a day after the Federal Deposit Insurance Corporation took over troubled First Republic Bank and sold it to JPMorgan.
After the acquisition of First Republic Bank, Jamie Dimon, chairman and CEO of JPMorgan, thought that “this part of the crisis is over”, referring to the recent troubles in the regional banking sector. However, investors seem to be either questioning the long-term profitability potential of regional banks or keep wondering if more banks are headed toward FDIC receivership. Earlier in the year, the Federal Deposit Insurance Corporation had to take over Silicon Valley Bank and Signature Bank. Assets of Silicon Valley Bank were later sold to First Citizens Bank, and non-crypto assets of Signature Bank were sold to New York Community Bank.
Graph source: Google Finance
✔️ Regional Bank Shares Plunge on Fear of More Rescues to Come
✔️ PacWest falls more than 20% as regional bank stocks slide to new lows
✔️ Regional Bank Stocks Close at Lowest Level Since 2020
Federal Reserve to Announce Another Hike
The Federal Open Market Committee (FOMC) is wrapping up its meeting today and, according to CEM FedWatch Tool, is expected to announce a 25 basis points raise of the federal funds rate to 5.00-5.25%. Inflation is on the decline, but it is still far away from the Federal Reserve’s target of 2%, hence, investors expect more hikes. The Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred measure of inflation, increased 0.1% MoM and 4.2% YoY in March (0.3% MoM and 4.6% YoY excluding food and energy). This compares to the 0.3% MoM and 5.1% YoY increase in February, and 0.6% MoM and 5.4% YoY increase in January.
Investors debate if this increase will be the last in this cycle, as the rising rates have already introduced turbulence into the banking sector, and started to meaningfully impact the U.S. economy. Last week, the Department of Commerce reported that in the first quarter of 2023, U.S. Real Gross Domestic Product increased at an annual rate of 1.1%, well below the expected 2% in a sign that the economy is slowing fast. In the fourth quarter of 2022, GDP increased at an annual rate of 2.6%. On Friday, the Department of Labor will report unemployment data for April 2023. The Federal Reserve can maintain its rate hikes as long as the job market remains robust; however, indications of fragility could compel it to pause.
Image source: Wikimedia Commons
✔️ What to Watch as Fed Readies to Pause With One Last Hike
✔️ Fed Set to Raise Interest Rates to 16-Year High and Debate a Pause
✔️ Will the Fed or Inflation Pivot First? The Market Has Placed Its Bet
MercadoLibre (NASDAQ: MELI), the LatAm e-commerce giant, will report its Q1 2023 results today after market close, and I am super excited about this report! MercadoLibre is primarily known for its e-commerce operations, but its Fintech arm, MercadoPago, is growing at a much faster pace and should become the biggest revenue driver soon. Maybe not this quarter, but soon!
Chief Compliance Officer (CCO) and Money Laundering Reporting Officer (MLRO), Bermuda
Trade Surveillance, Senior Associate
Remote, United States
New York, NY, United States
That’s it for today! Thank you for reading and see you tomorrow!
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Disclaimer: Information contained in this newsletter is intended for educational and informational purposes only and should not be considered financial advice. You should do your own research or seek professional advice before making any investment decisions.