Tightening monetary policy drove rising 10-year Treasury bond yields and pressured equity valuations in 2022. While impossible to predict what 2023 has in store—especially because interest-rate changes can have a lagged effect on corporate earnings—we asked our U.S. equity teams to weigh in.
Interest rates will drive the market environment, to some extent, according to our U.S. growth and core equity and U.S. value equity teams.
“We imagine 2023 will look very different from the turbulence experienced in 2022,” says Greg Czarnecki, a portfolio specialist on our U.S. value equity team. “At a high level, we began 2022 with high valuation multiples, rising inflation, and moderate growth coming out of the global pandemic. We envision 2023 starting with competing forces: reasonable valuation multiples, falling inflation, and slowing growth due to a higher rate environment.”
Investors expect interest rates to continue to rise, albeit at a slower pace than 2022, assuming inflation continues to moderate, says our U.S. growth and core equity team. “We believe the majority of multiple compression from rising interest rates should already be largely embedded in stocks,” says Rob Lanphier, partner, a portfolio specialist on our U.S. growth and core equity team.
But according to Czarnecki, the stock market could stabilize when it becomes clear that the U.S. Federal Reserve is near the end of its current rate-hiking regime. “Our best estimate is that we are closer to the end of this rate-hiking cycle than the beginning. Investors are now focused on whether the Fed will be forced to hold rates higher for longer than the bond market is predicting” he says.
The Effects of Rate Increases
Given the lagged impact, the effects of interest rate increases will likely have a more meaningful impact on the U.S. economy in 2023, according to our U.S. growth and core equity team.
We believe there are indications that higher-quality investments should fare better in the coming year.
“A slowing economy and generally weaker demand relative to this past year may necessitate costs come into equilibrium with slower revenue growth,” says Lanphier. “This implies risk to corporate earnings. Moreover, as an era of near-zero rates ends, capital sources for more speculative equities are likely to diminish, focusing more on near-term fundamentals.”
A Quality Focus Is Key
Given this cautionary outlook, we believe market performance in 2023 will likely be tied more closely to fundamentals than valuation difference. Looking forward to 2023, both teams believe there are indications that higher-quality investments should fare better in the coming year.
According to Lanphier, quality companies, which have the financial independence to continue to invest in their operations and the business model flexibility to quickly adjust in a dynamic environment, have become increasingly attractive investment opportunities against this backdrop. “Pricing flexibility, for example, will be critical if inflationary pressures from labor and materials persist and overall demand weakens,” he says. “This scenario would likely cause pressure on margins and earnings disappointments for the average company.”
Lanphier and his team believe companies with strong management teams, superior business models, and solid financials would be in a better position to navigate such headwinds. “In addition, higher-quality investments did not materially outperform during the sell-off in 2022, resulting in compelling valuations for these businesses as we look ahead.”
As for our U.S. value equity team, Czarnecki stated that “our approach to navigating the uncertain markets of 2023 remains consistent with our time-tested philosophy and process that we have leveraged for the last three decades in managing small- to mid-cap value strategies: employing an acute focus on the intersection of value and quality.”
Valuations Remain Important
Valuations continue to remain in focus. “Over the course of 2022, we have used the market’s weakness to upgrade the quality of the U.S. value equity portfolios’ holdings, whose future earnings either may be more resilient than the market expects or are already pricing in a moderate to severe recession,” says Czarnecki. “In particular, our team has increasingly focused on balance sheet strength and avoiding significant leverage. During this period of economic uncertainty, we are comforted by the historically low valuation of our strategies’ holdings, which trade below long-term historical averages.”
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recession pandemic equities stocks monetary policy fed federal reserve interest rates
From Cyberspace To Outer Space: Will Fiat Imperialism Push Mining Off-Planet?
From Cyberspace To Outer Space: Will Fiat Imperialism Push Mining Off-Planet?
Authored by William Stebbins Jr. via Bitcoin Magazine,
Tension is building in the mines.
As the 4th Halving nears and the block reward trims to 3.125 bitcoin per block, miners must not only adapt to a significantly diminished reward, but contend with an increasingly profit-hostile future which might have surprised even the prescient Nakamoto. Indeed, despite widespread hope that fiat states will come to accept peaceful coexistence with bitcoin—I, too, would prefer this outcome—and despite some modest grounds for optimism, history would remind us that kings and emperors do not willingly relinquish power. This is no less true of modern fiat empires, as Lyn Alden’s survey of U.S. fiat interventionism explains.1 History, coupled with ongoing observation of federal actions—foreign and domestic—will be sufficient to calibrate our expectations and help guard us against understandable, yet self-deceptive naivete.
Accordingly, of all the imminent mining challenges, the most formidable might well be increasing state opposition. If accurate, then conditions may rapidly deteriorate such that off-planet mining might merit serious consideration.
THE MINERS’ EARTHLY DILEMMA
As the Halvings inexorably march on, the mining equation keeps changing. For example, in 14 short years mining has evolved from enthusiasts on personal computers to mammoth structures housing thousands of water-cooled Antminer S19s with 5nm chips pulling over 750 MW of electricity.
Each stage of mining evolution has faced unique challenges. Those anticipated with the 4th Halving this April will include, among others: assured access to cheaper energy, acquisition of more efficient ASIC chips despite a global shortage and shipment delays (exacerbated by U.S.-China-Taiwan animus), the possibility of 3nm chip miners, hashrate increase, hashprice decline, the impact of AI, environmental propaganda attacks, and maddeningly-inscrutable bitcoin value projections made no less easier by the advent of large investment firms in the bitcoin ecosystem—all within the context of a frangible, debt-bloated, de-dollarizing economy.
Were these the only issues to resolve they’d be sufficiently daunting. However, a more problematic attack vector, as I’ve presented previously,2 is the possibility of the fiat-empowered superpower and its retinue of dollar-subservient vassals hindering free market bitcoin activities.
Logically, the character and magnitude of state friction would be correlated and proportionate to bitcoin popularity over fiat's existing sphere of influence and control. If the U.S. monetary system, reaping the ill effects of decades of manipulation and recent global de-dollarization, begins imploding while bitcoin strengthens, federal response will be strong. It will be unlikely to accept contraction of its fiat power and be open to a bitcoin standard. Rather, it will cling to the legacy system from which it so easily accumulated its power and attack the emergence. In so doing, upon realizing that it can’t kill bitcoin, it will first seek to isolate it from its owners in cyberspace.3 A complementary line of attack would then be to neutralize mining. With bitcoin isolated and mining disrupted, in their view, public trust in bitcoin would dissolve; the threat would be neutralized.
Elements of a mining attack might include two elements: First, a propaganda operation: facts notwithstanding, miners would be slandered as shadowy crypto profiteers irresponsibly increasing CO2 emissions and consuming vast stores of finite energy while driving prices up and diverting energy from socially-beneficial uses. Second, a bureaucratic operation: miners would face a torrent of regulation, from licensing and zoning requirements, environmental restrictions, energy and CO2 quotas, to unreasonable reporting requirements replete with unprecedented KYC intrusions, and punitive taxation. In short, the combined economic, regulatory, and propaganda challenges of such an attack would be near insurmountable.
In recent years, when a jurisdiction became inhospitable—one is reminded of China’s mining ban still in effect since mid 20214—the conventional playbook offered but two options: attempt to go underground (risky), or relocate to a bitcoin-hospitable jurisdiction (disruptive and costly).
THE SEARCH FOR NEW SANCTUARY
Analyzing this potential quandary militarily, we might turn to a concept from the field of counterinsurgent warfare: sanctuary. U.S. Army doctrine recognizes the historic principle that insurgents require areas of sanctuary within which to rest, reconsolidate, and sustain operations:
Access to external . . . sanctuaries [have] always influenced the effectiveness of insurgencies . . . provid[ing] insurgents places to rebuild and reorganize without fear of counterinsurgent interference. . . Sanctuaries traditionally were physical safe havens, such as base areas, and this form of safe haven still exists . . . [But,] modern target acquisition and intelligence-gathering technology make insurgents in isolation, even in neighboring states, more vulnerable.5
How might this apply to bitcoin mining? If we posit the State inevitably regarding bitcoin as a monetary insurgent against which it must act to preserve its fiat power, miners will scramble to find inviolable sanctuaries in order to continue operations.
Currently, miners possess adequate jurisdictions within which to mine. In fact, hope yet flickers as we see a few bitcoin-friendly jurisdictions emerging, such as Oman,6—usually within what the West calls the “third world,” but which might be accurately labelled the neo-colonial, fiat-wrecked world. Additionally, even despite the 2021 mining ban the hashrate in China quickly recovered and exceeded its previous rate.7 This situation, however, can change with astonishing speed. Accommodating jurisdictions today can quickly turn inhospitable tomorrow.
Viewed differently: Bitcoin already has existential sanctuary— anchored securely in the blockchain, it is existentially permissionless and will continue existing untouchable in cyberspace. Its existence may be said to be inviolate. However, it currently lacks reproductive sanctuary. Mining occurs not in cyberspace, but in geographic space, within nations where market hospitality, regulation, and energy access is unpredictable. Further, mining now largely occurs within extensive, immobile structures which cannot easily “go underground” or quickly relocate.
But even the above simplification is inaccurate in that bitcoin’s existence is not fully secure in cyberspace without mining. As Andreas Antonopoulos explains,
Mining secures the bitcoin system and enables the emergence of network-wide consensus without a central authority. . . The purpose of mining is not the creation of new bitcoin. That’s the incentive system. Mining is the mechanism by which bitcoin’s security is decentralized.8
Thus, mining is necessary to secure the bitcoin ecosystem as well as to forge new coin. As such, if earthly mining sanctuaries start dwindling under persecution of an ailing fiat geriatric, in light of recent commercial space success, miners might do well to look starward, to the ungoverned frontier of space. Space offers the ultimate physical sanctuary, freed from the hostile overreaches of earthbound authorities. It might provide the physical sanctuary elegantly complementing bitcoin’s cyber sanctuary.
Inspired by Elon Musk’s Space-X and Starlink ventures which provide conceptual proof-of-principle for considering the feasibility of off-planet solar mining, what form might such an endeavor take?
One could visualize mining rigs nestled in modular, expandable mining satellites, minesats, outfitted with wings of ultra-light solar cells and inflatable mirrors placed into high, sun-synchronous orbits (SSO) (~ 600-1000 km above the Earth) perpetually facing the sun for uninterrupted energy harvesting. Incidentally, a number of nations including the U.S, China, Japan, and the UK, also see incredible potential in off-planet solar energy and are already pursuing Space-Based Solar Power (SBSP) for use on Earth.9
Ever the earthbound miner’s challenge, heat dissipation remains a problem even in frigid space as it cannot be dissipated through conduction or convection. Instead, satellites and other structures usually rely on radiation to offload heat. For example, the International Space Station (ISS) employs a system called the External Active Thermal Control System (EATCS) employing heat radiators positioned in the shade side.10 Minesats would likely use a similar system for cooling.
Again, borrowing from Musk’s Starlink example, these higher orbit, SSO minesats would either network to a constellation of lower orbit smallsats (small satellites) which provide broadband internet connectivity to the planet, or connect directly to the bitcoin nodal network themselves.
Operating from the frontier of space, ungoverned by nation states, mining would be freed of licensing and zoning requirements, as well as CO2 and energy propaganda smear campaigns.
To take our thought experiment further, one could imagine this fleet of solar-powered minesats transported to their orbits from launchpads in forward-thinking, bitcoin-embracing nations, such as El Salvador, and potentially Argentina (should the pro-bitcoin presidential candidate Javier Milei win his upcoming election). In the case of El Salvador, it could provide not only physical sanctuary for politically-attacked firms like Space-X11 but, located over a thousand miles nearer the equator than any U.S. launch location, would provide a geographically superior planetary location enabling spacecraft to achieve escape velocity more efficiently. One could even postulate the migration of bitcoin-specific mining chip research and manufacturing to such a visionary nation, symbiotically co-locating the essential elements and activities of bitcoin.
Not long ago the idea of a private company outperforming NASA by employing reusable, upright-landing spacecraft and deploying a constellation of satellites providing global internet access would have been considered quixotic and naïve. Equally outlandish: that a nation would declare bitcoin legal tender. Perhaps the idea of extraterrestrial, satellite-based bitcoin mining facilitated by a visionary company that is repeatedly taking NASA to school, and partnering with a bitcoin-embracing nation of the Global South is not such a long shot. Indeed, it might well be the bright orange path.
Bitcoin signals potential range expansion— Will SOL, LDO, ICP and VET follow?
Bitcoin is holding above $26,500 and the price stability could lead traders to take a second look at SOL, LDO, ICP and VET.
Bitcoin is holding above $26,500 and the price stability could lead traders to take a second look at SOL, LDO, ICP and VET.
The S&P 500 Index nudged higher by 0.45% to record its second positive week. While the United States equities markets were a slow mover, gold witnessed a massive run-up of more than 5% this week. Its rally of 3.11% on Oct. 13 was its best one-day performance since Dec. 1 of last year. However, the Bitcoin (BTC) bulls did not have any such luck as Bitcoin is on track to end the week down more than 3%.
Bitcoin’s weakness and the regulatory overhang have kept crypto investors away from altcoins. That has kept Bitcoin’s market dominance hovering near the 50% mark for the past few days.
Market observers are likely to keep their focus on Bitcoin for the next few days. The longer the bulls sustain the price above $25,000, the greater the possibility that the next move is likely to be higher. A bullish move in Bitcoin is likely to spur buying in select altcoins as crypto investors will then sense a bull market.
Select cryptocurrencies are showing signs of forming a base. If they breakout to the upside, a new up-move may start. Let’s study the charts of the top-5 cryptocurrencies that could outperform in the near term.
Bitcoin price analysis
Bitcoin has been trading between the moving averages for the past few days, indicating indecision between the bulls and the bears about the next directional move.
Usually, a tight consolidation is followed by a range expansion. In this case, if buyers kick the price above the 20-day exponential moving average ($27,110), the BTC/USDT pair could rise to $28,143. The bears are expected to mount a strong defense at this level.
Alternatively, if the price turns down and dives below the 50-day simple moving average ($26,671), it will signal that bears have asserted their supremacy. The pair may first drop to $25,990 and thereafter to the pivotal support at $24,800. This level is likely to attract aggressive buying by the bulls.
The pair’s recovery is facing selling at the 20-EMA on the 4-hour chart but a positive sign is that the bulls have not given up much ground. This suggests that the buyers are not rushing to the exit and are keeping up the pressure.
If the 20-EMA is taken out, the pair could first rise to the 50-SMA. This level may act as a minor barrier but if overcome, the pair could climb to $27,750 and then to $28,143.
On the contrary, if the bulls fail to pierce the 20-EMA, the sellers will sense an opportunity to pull the price lower. A dump below $26,500 could sink the pair to $26,000 and then to $24,800.
Solana price analysis
Solana (SOL) has been witnessing a tough battle between the bulls and the bears near the 20-day EMA ($21.77). This suggests that the bulls are trying to flip this level into support.
There is a minor resistance at $22.50 but if this level is crossed, the SOL/USDT pair could rise to the neckline of the inverse head and shoulders pattern. A break and close above this resistance will complete the bullish setup. Buyers may face a stiff resistance at $27.12 but if this hurdle is cleared, the pair could surge to the target objective at $32.81.
This positive view will be negated in the near term if the price turns down and plunges below the 50-day SMA ($20.50). That could start a descent toward $18.58 and then to $15.33.
After trading between the moving averages for some time, the price resolved to the downside with a break below the 20-EMA. This indicates that the bears may remain in control. The pair could first fall to $20.93 and if this level also cracks, the pair may collapse to $20.
Conversely, if the price fails to sustain below the 20-EMA, it will suggest solid buying at lower levels. The first sign of strength will be a break and close above the 50-SMA. That could open the doors for a rally to $23.50 and then to the neckline of the inverse H&S pattern.
Lido DAO price analysis
Lido DAO (LDO) has been trading near the moving averages for the past few days, indicating that the bears may be losing their grip.
The moving averages have flattened out and the RSI has jumped into the positive territory, indicating that the bulls are attempting a comeback. The immediate resistance on the upside is $1.73. If this level is scaled, the LDO/USDT pair could climb to the downtrend line. This level is again likely to witness a tough battle between the bulls and the bears.
Contrarily, if the price turns down and skids below the moving averages, it will suggest that the bears are in command and are selling on every minor rally. The pair may then retest the vital support at $1.38.
The 20-EMA has started to turn up on the 4-hour chart and the RSI is in the positive area, indicating that bulls have the upper hand. There is a minor resistance at $1.63 but it is likely to be crossed. The pair could then rise to $1.73.
If bears want to weaken the bullish momentum, they will have to quickly drag the price back below the moving averages. The pair could then slump to the $1.45 to $1.50 support zone.
Internet Computer price analysis
Internet Computer (ICP) has been consolidating in a tight range between $2.86 and $3.35 for the past several days.
The RSI has formed a positive divergence, indicating that the selling pressure is reducing. The ICP/USDT pair could next reach the overhead resistance at $3.35. A break and close above this level will signal a potential trend change. The first target on the upside is $4 and then $4.50.
Contrary to this assumption, if the price turns down from $3.35, it will suggest that the pair may extend its stay inside the range for some more time. A slide below $2.86 will indicate the resumption of the downtrend.
The moving averages have completed a bullish crossover and the RSI is in the overbought zone on the 4-hour chart. This indicates that the buyers have the upper hand. The pair is likely to reach the overhead resistance at $3.35 where the bears may to pose a strong challenge.
If the price turns down from $3.35, the consolidation may continue for a while longer. On the other hand, if buyers kick the price above $3.35, it will indicate that the bulls are in charge. The pair may then soar to $3.74 and later to the pattern target of $3.84.
VeChain price analysis
VeChain (VET) has been trading inside a descending triangle for the past few days. Although this is a negative pattern, the price has been clinging to the downtrend line for the past few days, which is a positive sign.
The moving averages have flattened out and the RSI is near the midpoint, indicating that the bearish pressure may be reducing. Buyers will try to propel the price above the downtrend line. If they succeed, it will invalidate the negative setup. That could start a new up-move toward $0.021.
Instead, if the price turns down from the current level, it will suggest that bears continue to defend the downtrend line with vigor. The bears will then again try to pull the price to the critical support at $0.014.
The 4-hour chart shows that the price has been trading inside the falling wedge pattern. Buyers are trying to push and sustain the price above the 50-SMA. If they do that, the VET/USDT pair could reach the downtrend line of the wedge. A break and close above the wedge could start a new up-move.
The bears are unlikely to give up easily. They will aggressively defend the zone between the 50-SMA and the downtrend line. If the price turns down sharply and slides below the 20-EMA, it will indicate that the pair may remain inside the wedge for some more time.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.sp 500 equities bitcoin crypto btc crypto gold
KYC hook for Uniswap v4 stirs community controversy
A hook that enables Know Your Customer (KYC) verification on Uniswap V4 pools is fueling debates about DeFi’s future.
A new hook available…
A hook that enables Know Your Customer (KYC) verification on Uniswap V4 pools is fueling debates about DeFi's future.
A new hook available on an open-source directory for Uniswap V4 hooks is sparking controversy within the crypto community. The hook enables users to be checked for Know Your Customer (KYC) before they can trade on a pool.
Criticizing the hook, a user at X (formerly Twitter) noted that the hook opens up the possibility of decentralized finance protocols being whitelisted by regulators:
"As I explained in all my posts for the past year: It starts with “kyc option” for LPs. And then eventually it moves into a “regulator whitelist approved” database hosted offchain. And then non-kyc gets labeled as illegal terrorist money laundering. Stop simping for soyboys."
Essentially, a hook is a tool that allows developers to customize a code without altering the main structure of the program. In Uniswap V4, this hook will permit developers to use KYC verification within the decentralized finance protocol.
Financial institutions use KYC procedures to authenticate customer identities and assess associated risks. A primary goal of KYC is to detect money laundering and terrorist financing activities.
The KYC hook was rolled out by a community developer on Uniswap V4's directory as an opt-in functionality. The KYC verification is carried out by a nonfungible token (NFT). According to another X user, the hook is specific for liquidity providers and may be useful for projects that must comply with regulatory requirements in certain jurisdictions:
"Seems like you don't understand how this works. #1 it's lp specific. Some projects may want to operate within the legal confines of jurisdiction. #2 hooks can be made by community devs. You're trashing something that has done more than anyone else for "real defi"."
Governments around the world are taking a closer look at DeFi protocols and transactions. Recently, the group of twenty worlds' largest economies, G20, accepted a crypto regulatory roadmap proposed by the International Monetary Fund (IMF) and the Financial Stability Board (FSB) tightening crypto regulations.
Uniswap V4 introduces customizable hooks and is expected to be available in early 2024, with access limited to governance-approved entities.bitcoin crypto btc crypto
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