Market Commentary | 11.22.

"Market Commentary" reviews major events that occurred each week and provides DeSpread Research's perspectives and analysis. The November 22 edition of "Market Commentary" will explore the possibility of a Federal Reserve rate cut and the narrative surrounding DeSci.

1. Powell Hints at Pausing Rate Hikes: Will the Market Be Affected?

Jerome Powell speaking during a lecture in Dallas; Source:

On November 15, Federal Reserve Chairman Jerome Powell spoke at a lecture hosted by the Dallas Regional Chamber (DRC), bringing uncertainty to the direction of the federal funds rate decision at the December FOMC meeting. On that day, Powell discussed several topics, including the U.S. economy, the Fed's role, and fiscal policy, but his comments on inflation and interest rate policy drew the most market attention.

Powell stated:

"The economy is not giving us signals that we need to rush to cut rates. The current economic strength we are seeing allows us to make decisions cautiously. Ultimately, the direction of interest rate policy will depend on data and the development of the economic outlook."

Source:

Powell's remarks have greatly increased the likelihood of maintaining the status quo when deciding whether to cut rates at the December 18 FOMC meeting. According to CME FedWatch* data, the probability of a 25 basis point rate cut in December once surged to about 82.5% on November 13, but dropped sharply after Powell's speech, standing at about 59.1% as of November 20. This suggests that market participants now believe it is more likely that rates will remain unchanged at the December FOMC meeting.

* The chart above shows data provided by CME FedWatch, which is based on federal funds futures and reflects investors' expectations for Federal Reserve monetary policy decisions.

In addition, Powell also stated:

"We know that reducing policy restrictions too quickly could hinder progress on inflation. At the same time, reducing policy constraints too slowly could inappropriately weaken economic activity and employment."

This shows that the Federal Reserve will continue to take a cautious approach to future interest rate decisions.

1.1. DeSpread Commentary

Source:

In September, the U.S. Federal Reserve ended the long-term rate hike cycle that began in 2022 and entered a rate-cutting cycle. Contrary to market expectations, the Fed implemented a "large rate cut" of 50 basis points, marking the first rate cut since 2020.

Target Rate Dot Plot; Source:

This decision is part of the so-called "rate-cutting cycle," a longer-term monetary easing plan. According to the Fed's dot plot, the federal funds rate is expected to fall to a median of 437.5 basis points (425-450 basis point range) in 2024, and further to 312.5 basis points (300-325 basis point range) in 2025.

Even if the December FOMC meeting decides to keep rates steady, it is unlikely to disrupt the broader trend of monetary easing. However, since a 25 basis point rate cut has become the general expectation, a decision to maintain rates will inevitably cause short-term market volatility.

Source:

Meanwhile, the market seems to maintain a positive outlook on bitcoin and the cryptocurrency industry. According to Bloomberg ETF analyst Eric Balchunas on Twitter, there was a large volume of call options—bets on higher prices—on the bitcoin ETF "IBIT," which began trading on November 19, with strike prices above IBIT's current level.*

* Although the tweet did not explicitly label these as call options, "basically the right side is betting BTC will go higher in the future, the left side is betting it will go lower" implies call option trading. In addition, it was confirmed that most trades involved call options.

In summary, Powell's relatively hawkish remarks and the possibility of maintaining rates at the December FOMC meeting are expected to have only a temporary impact. Powell's recognition of economic growth and labor market indicators reflects his intention to maintain the current favorable economic trajectory without causing market turmoil.

With macroeconomic stability and growing market optimism, where should we focus our attention? Participants are likely to pay attention to numbers or assets that represent market trends, whose influence will gradually increase.

Institutional interest in cryptocurrencies is also growing, especially after MicroStrategy (MSTR) announced a significant purchase of $4.6 billion worth of bitcoin on November 18.

Michael Saylor X; Source:

2. After AI, Is DeSci on the Rise?

Recently, the narrative of DeSci (Decentralized Science) has swept through the cryptocurrency market, focusing on using blockchain technology to build public infrastructure for scientific research. On November 8, Bio Protocol, which decentralizes fundraising, commercialization, and incentive distribution for bioscience research via blockchain, received investment from Binance Labs, sparking this trend. On November 13, Binance Labs held "DESCI DAY" at the Web3 event "BUIDLer House" in Bangkok, Thailand, where key figures from the DeSci field gathered to give speeches and network, bringing even more market attention to the DeSci narrative.

Former Binance CEO CZ Zhao took a photo with Vitalik Buterin at DESCI DAY;

As the core of DeSci projects, the most notable project is "Pump Science," a meme coin launch platform combined with scientific experiments, released by the Bio Protocol team at Solana Breakpoint in September. The project conducts life extension experiments by injecting compounds into organisms such as worms, flies, and mice, and transmits experimental results in real time. Participants can evaluate the efficacy of compounds through these data streams and hold tokens representing shares of these compounds. Currently, Pump Science is conducting test experiments on two compounds: Rifampicin and Urolithin A.

Pump Science Interface; Source:

Notably, the $RIF token representing Rifampicin on Pump Science surged about 260 times in price within five days after DESCI DAY on November 13, following its listing on Bybit futures trading, with a market cap reaching $270 million.

During the same period, ResearchHub's $RSC (co-founded by Coinbase CEO Brian Armstrong) and DeepWorm's $WORM (promoted by Maelstrom Fund founder Arthur Hayes) also received significant attention. Projects born from bio protocols, such as Vita DAO, which focuses on human longevity research, and Hair DAO, which conducts hair loss prevention research, also attracted attention, with their token prices recording substantial increases.

2.1. DeSpread Commentary

Over the past week, DeSci narrative tokens have received a lot of attention. Although DeSci ($1.1 billion) and DeFi ($90 billion) have a huge gap in market cap on Coingecko, Kaito AI's mindshare analysis shows that as of November 17, DeSci narrative mindshare soared to 5.3%, approaching the level of DeFi narratives.

Kaito AI Narrative Mindshare; Source:

We believe that the reason DeSci's story has received widespread market attention is because there are no new stories following the AI agent trend, and the emergence of Pump Science and Binance's DeSci-friendly initiatives naturally attracted traders seeking high-volatility, low-market-cap trading opportunities. In addition, with the current rapid rotation of market narratives, as of November 20, TikTok meme coin narratives, including $CHILLGUY, are also gradually emerging, while tokens based on the DeSci narrative have entered a correction phase.

The essence of the DeSci narrative lies in using blockchain technology to solve problems in the traditional scientific community, including inefficient funding mechanisms, limited access to research results, and complex administrative procedures. The recently popular "Pump Science" also aims to use blockchain technology to address the significant time and cost required to translate basic science into clinical science in the scientific community.

However, investors' attention currently seems to be more focused on short-term profits rather than the problem-solving aspects and vision proposed by DeSci projects. In addition, with bitcoin prices and dominance continuing to rise, we expect more frequent narrative and liquidity rotations among low-market-cap meme coins. In an environment where investor attention shifts rapidly, we believe it is necessary to study the feasibility of new ideas proposed by projects and their specific solutions, and to monitor their implementation process.

<References>

• CNBC Television, Federal Reserve Chair Powell speaks at the Federal Reserve Bank of Dallas in Texas — 11/14/24
• CME Group FedWatch
• Eric Balchunas tweet
• 연합인포맥스, 비트코인 현물 ETF 옵션 첫 거래 '쏠쏠'…"콜 옵션이 85%