Crypto markets face resistance after weeks of positive gains

Hola folks!

Happy Monday! Hope you guys had a great festive season. It is back-to-business for all of us. We are back with an informative newsletter that offers you much to chew on: investments, lifestyle-induced financial ailments, crypto market movements, and a book to read and digest! 

Read on to learn more about mutual fund investments, how to manage lifestyle inflation so that it doesn't impact your financial goals, and what is driving the crypto markets to rally.

Mutual fund SIP inflows saw a 41.63% month-on-month increase in October as investors flocked to equity mutual funds to park their savings. But, before you start investing in a mutual fund, it is important to understand what a mutual fund is and the different categories of mutual funds. Understanding how mutual funds work will help you make informed investment decisions. 

Click on the link below to learn more about mutual fund investments.

Last week, we discussed lifestyle inflation and how it has the potential to destroy your savings even as your income increases. We also asked you to complete a task of comparing your expenses for the same time frame for two years to help you identify if you have been a victim of lifestyle inflation. If you spotted inflated lifestyle spending or feel that you have fallen prey to it, read to learn ways of combating lifestyle inflation. 

Increasing income is one of the best ways to help you reach your financial goals, be it paying off your student loans, investing, saving for your retirement, etc. 

But, at times, higher income leads to increased spending where you end up spending the extra income instead of saving or investing it. This is known as lifestyle inflation or lifestyle creep. This is a silent savings killer that has the potential to impact your financial health. 

Here is how you can combat lifestyle inflation in a way that will help you maintain your living standard while staying on track with your long-term financial goals. 

• Do your math

Do not be clueless about your income and expenditure. Do your math, and know how much you are earning from all your sources of income. Once you know your income, calculate how much you can afford to spend and how much you should save to meet your financial goals. 

Once you have figured out the spending-to-savings ratio, prepare a budget or use a budget app to link all your accounts and set up a category-specific budget and financial goals. 

Once you know how much you need for essentials and the amount of room you have for frills and luxury, you can start setting up guardrails for debt management and savings. 

• Prioritize your expenses

Tackling lifestyle inflation doesn't mean you have to live your life like a miser. You can prioritize your frills once your essentials are taken care of. Deciding which luxury and frill expenses are more important to you and your family would be a good start. 

For example, you and your family may love to travel, dine at gourmet restaurants, and visit pubs. You can prioritize a combination of these three in your budget and allocate a fixed amount of money to it. However, rationalize these expenses. Don’t plan all the expensive stuff in the same month. Spread it out over time so it doesn't hurt your savings plan. 

• Avoid impulse purchases 

Random purchases are one way to lose track of your spending. Instead, set up a budget for unplanned expenses to curb your impulse purchases. 

• Cut your recurring expenses 

Lifestyle inflation builds up gradually. Each small expense is affordable by itself but can quickly turn into a hefty amount over time. 

Look for ways to reduce spending in your daily routine. Substitute your pricey activities with free or discounted alternatives. Recurring expenses are an excellent place to start with. 

Check your auto payments and your subscriptions. Cancel the ones you aren't using. Find alternatives for pricey gym memberships. Take a close look at all your lifestyle expenses and try to eliminate the ones that are irrelevant or are no longer needed. 

• Save for larger purchases 

Large purchases can throw your monthly budget off track. A common practice is to take out a short-term loan or buy on an EMI and pay interest on the borrowed amount. 

Instead of paying interest, you can plan your larger-ticket-size purchases and save up for them. 

• Automate your savings

You are less likely to forget the authorization of your mutual fund SIP if you have automated it for a fixed date every month. Doing this will help you save and will also put a break on your expenses. 

• Invest your pay or income raises

While automating your investments, opt for step-up SIPs. This will help you invest a portion of your pay or income raises so that you don't end up spending all the extra rupees that you are earning. 

Look at your income and your spending diligently. Evaluate your lifestyle choices. Compare your present choices with the choices of your past to see if your expenses have ballooned owing to your preference for extravaganza. If this is the case, follow the points stated above to outline a budget and strive to stick to it.

But, like all disciplines, you will need time and dedication to cultivate financial discipline. Don’t get discouraged if you cannot follow the budget in the first month. Rather, tweak the budget and strive to stick to it for months so that you can bring discipline to your spending and savings. 

Crypto markets saw increased price volatility in the last week as the frenzy associated with BTC Spot ETF approval continued amidst profit booking from the recent run-up in prices! The overall crypto market cap continued to hover above $1.45trn, but there was a lot of token-specific price action. 

Overall, BTC remained flat over the week after an initial surge in prices to $38k levels, on the back of the Spot ETF approval window, which later saw the decision on several applications being delayed by the SEC, and resulted in BTC returning to its $36k anchor levels. But over the weekend, the election of Bitcoin supporter Milei as Argentina's new President sent BTC prices higher again. 

The surge and subsequent fall in prices of ETH were much more dramatic and after last week's frenzied rally on the back of Blackrock's spot ETH ETF filing, prices corrected sharply to come back around the $2k levels. ETH/BTC price ratio remains eagerly watched by investors to predict the next leg of the bull phase and subsequent rotation of capital into AltCoins!

Institutional interest in the space has been peaking off late, with last week being dominated by a couple of big announcements by TradFi Giants. First, JPMorgan and Apollo successfully worked with LayerZero, Avalanche, and Oasis to demonstrate a POC for how asset managers could tokenize funds on the blockchain of their choice. Then later in the week, Singapore's central bank MAS started testing tokenization use cases alongside JPM, DBS, and BNY Mellon!

For the broader crypto markets, there was a lot of token-specific price action and there were lots of outliers in either direction! 

Continuing its positive price momentum was Solana's SOL, which broke past resistance levels of $50 with strong buying interest and reduced FUD around FTX estate selling pressure. 

Avalnche's AVAX was the other major gainer from the Layer 1 contenders, as the token price jumped by >20% on the back of institutional adoption of its Subnets solution by JPM, Apollo and Citi. 

The price correction in ETH had a similar impact on related tokens like ETC and liquid staking tokens LDO and RPL sending their prices lower! 

• BTC $37,220 ⏫ 0.58%

• SOL $60.52 ⏫2.97%

• AVAX $22.48 ⏫ 23.40%

• LDO $2.52 ⏫ 6.46%

• ETH $2,038  ⏬ 0.87%

(All data here is as of 3.30 p.m., 20 November, 2023)

Before we conclude, here’s a quick look at some important news from around the crypto world.

• The International Organization of Securities Commissions, the global standards setter for securities markets regulation, denied crypto industry requests for a bespoke regime for stablecoins while agreeing to demands for greater accountability from so-called financial influencers. Read more here. 

• OKX, the sixth-largest cryptocurrency exchange, said it is coming out with a layer 2 network called “X1” using Polygon’s Chain Development Kit (CDK). X1, expected to go live in the first quarter of 2024, will make use of Polygon’s zero-knowledge, a type of cryptography that’s become one of 2023’s hottest trends in blockchain. Read more here. 

Today we are recommending a special book that stands out as it doesn’t talk about why one should invest or how. Rather, it offers a peek into the mind of one of the greatest investors of our time: Warren Buffet. 

Buffett: The Making of an American Capitalist

By: Roger Lowenstein

Warren Buffet has amassed unfathomable wealth by picking the right stocks and companies for investment. His investment record has made him a cult figure that every investor would like to emulate one day. 

Lowenstein draws on three years of unrestrained access to Buffett's family, friends, and colleagues to provide the first definitive, inside account of the life and career of the man often referred to as the Sage of Omaha. The book dwells at length on Buffett's investment strategy—a long-term philosophy grounded in buying stocks of undervalued companies and hanging on until their worth invariably surfaces—and sometimes forever—and shows how his business style is a reflection of his inner self. 

Read this educative book to understand the making of a great investor.

Before you get on with your day, don’t forget to flex those brain muscles with our weekly crypto crossword.

That’s it for now. Thanks for sticking around.

See you later, folks! 👋

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