US Pricing In A Recession

Welcome to BRC’s Breakdown.

This week’s newsletter comes after two action-packed weeks. First, was Diwali, the festival of lights. Then was the lead-up to the World Cup finals, which was disappointing from the Indian perspective.

First, let’s see how the markets fared this week:

Here’s a preview of what we’ll cover:

• Macro: US Markets’ Pricing In A Recession

• Around The World: RBI Closes Week With A Dampener

• Crypto: Institutions Hold Over $32 Billion in Bitcoin

• AI: GPT-5 In Dev Amid Altman Fiasco

Macro: US Markets’ Pricing In A Recession

A potential soft landing for the US economy was the key theme driving global markets last week. Inflation reports continue to be on a downtrend with US Core CPI hitting 4% with momentum indicating further declines.

As a result, market expectations are that the US Federal Reserve could cut interest rates twice in 2024. So, the November 21ST release of the minutes of the last US FOMC meeting will be significant.

US small caps have underperformed large caps by the highest level in over 20 years - with some viewing it as the market pricing in a recession.

Around The World: RBI Closes Week With A Dampener

Indian stock prices also increased during the week. However, the Reserve Bank of India put a dampener on Friday by increasing risk weights on consumer loans to cool down the sharp increase in lending.

In India, state elections continue to be watched closely. Results are due only early next month but exit poll results will be out on the evening of November 30.

Asset prices have increased across the board led by crypto.

• Both Bitcoin & Ethereum are up over 10% for November and many others like Solana & Matic up even more.

• The S&P 500 has increased 7.5% for the month, putting it on track to be one of the strongest months over the last few decades (top 5 of last 50 years). Bond yields have also decreased - in India and the US.

Institutions Hold Over $32 Billion In Bitcoin

Around this time last year, one of the largest crypto exchanges was imploding. A month into the FTX collapse, Bitcoin fell below $17,000 and the collective crypto market was worth less than $800 billion. A year later, Bitcoin is soaring over $37,000, and the crypto market is worth over $1.4 trillion. And institutions are rushing back.

The number of Bitcoin directly held by investment funds soared to 863,434 BTC last week, surpassing the previous high of 860,000 BTC. This is a strong 2.3% gain in BTC held by institutions in the past month. Institutions collectively hold over $32 billion in BTC as of writing.

This rapid rush to invest in crypto has reached a fever in 2023. So far this year, digital assets funds have seen inflows of more than $1 billion.

Just last week, a CoinShares report stated over $226 million in capital flowed into crypto funds. This is the highest weekly net inflow into digital assets funds since April 2022. The highest inflows were in the following assets:

• Bitcoin – $194 million

• Ethereum – $30 million

• Solana – $10.5 million

The only two funds that saw net negative inflows this past week were – the short BTC fund and the XRP fund.

This marks a strong increase in institutional interest in digital assets which waned since June 2022 when several crypto companies collapsed. The main catalyst for this increase is the – likelihood of a Bitcoin ETF approval in 2024 and the imminent halving.

GPT-5 In Dev Amid Altman Fiasco

It’s unclear what position Sam Altman, the poster child of the AI revolution, will have in OpenAI. Altman was fired as CEO due to his communication misalignment with the board. Then rumored to be reinstated.

This messy affiar however, is not mulling OpenAI’s ambitions with the next version of its conversational chatbot, GPT-5. Currently, GPT-4 is live and has been since March 2023 costing users $20 a month.

GPT-5’s main goal is to bring in artificial general intelligence or AGI to chatbots. This will allow the AI bot to have general intelligence similar to performing menial tasks humans or animals can perform.

OpenAI and Altman were looking to raise more money for GPT-5 from Microsoft. That is, until things went sour between the board and the former CEO.

Regardless of the conflict, GPT-5 will be the first time AI will bring human intelligence to a chatbot. Not simply a database scraper with conversational context, but one that can perform intelligent task. Like a human would.

Top Headlines Of The Week

• Fidelity Digital Assets is in line to draw up an application for an Ether ETF

• Coinbase Q3 results signal its future as a crypto super app

• FTX’s creditors’ claims increase by nearly 30% in one month to $0.6-0.65 cents on the dollar