Crypto markets surge higher, even as macro uncertainties continue to rise

Hola folks!
Hope you all enjoyed the long weekend! We are back again with a knowledge-packed newsletter that will help you make informed investment decisions. In today’s newsletter, we will talk more about fixed deposit investments, learn how compound interest can destroy your wealth (a bold statement, read on to know how compound interest is the villain when you borrow money), and throw some light on what shook the crypto market. As usual, we recommend a good book about mutual fund investment and end the day with a fun crypto crossword.

Read the newsletter and make the most of your savings and investments.

Fixed deposits as investment vehicles have been around for a long time. But this doesn’t mean that we understand FDs in detail. We bring you the second episode from our FD series to help you understand the implications of investing in a fixed deposit by simplifying its features for you. Watch the video to learn more about FDs so that you can make an informed investment decision.

Moving on, we will understand the flip side of compound interest and how it can act against you when it comes to the repayment of debt.

Compound interest is magical. But just like two sides of a coin, compound interest can work both for you and against you. We know that compound interest can work wonders for your investment, but can it ever act against you? The answer is, YES!

Compound interest will work against you when you borrow money. Compound interest is the villain in any debt you avail. When you borrow money, you accrue interest on any money you don’t pay back. If you don’t pay the interest charges within the period stated in your loan, they’re “capitalized,” or added to your initial loan balance. After that, future interest accrues on the new, larger loan balance.

Unfortunately, the same math applies to credit card debt.

The average credit card interest rate is a whopping 40% per annum. If you owe ₹5,000 in credit card debt and make only the 5% minimum payment due i.e. ₹ 250, you would have ₹158.33 of

interest added to your balance so you would now owe the card company ₹4,908.

If you didn’t use that card at all and continued to pay the 5% minimum every month, it will take 2 years and 10 months to pay off the balance. The total interest paid will be ₹3,376.17. Therefore, you will end up paying an interest of ₹3,376.17 for a debt of ₹5,000. 

These numbers underline the importance of staying clear of credit card debt. If you are using a credit card, make sure that you spend the amount that you can pay off at the end of the credit card monthly cycle. Because, if you pay the minimum amount and carry forward the rest, your credit card debt will start piling up. And, you will pay a whopping 40% per annum interest on your credit card debt.

Keep an eye out for this section next week to learn more about the dropping Indian household savings rate, how the younger generation might fall into the debt trap, and how you can save more.

Crypto markets continued to trade rangebound, albeit with a noticeable upward bias even as "risky assets" continued to face resistance due to increasing interest rates. Overall, the total crypto market cap is back above the $1.1 trillion mark, as BTC outperformed ETH over the week, trading just below the $28k level, while the latter has also crept up to trade just below $1.7k. There was a surge in ETH prices as the approval came through for an ETH Futures ETF.

On the crypto regulations front, there was a US Congressional hearing against SEC Chairman Gary Gensler's "anti-crypto" stance, where lawmakers grilled him for over-reach and enforcement actions, while also building the case for an immediate approval of the Bitcoin Spot ETF.

Meanwhile, Coinbase had a memorable week from a regulatory perspective, getting approval in Bermuda to offer crypto derivatives (Perps) to non-US retail clients globally, along with Central Bank-issued licenses in Spain and Singapore.

The positive developments continued to pour in from traditional finance giants as UBS launched its first live pilot of a tokenized VCC fund on Ethereum, while global payments platform MoneyGram announced that it is launching a non-custodial wallet to help its users move funds between fiat currency and USDC.

For the broader crypto markets, after a long time, mid-tier altcoins outperformed the "blue-chips", with a lot of token-specific events causing outsized price movements.

There were several tokens with positive price movements, the pack led by Chainlink's LINK token which has been on a steady rise since the launch of CCIP and integration plans with SWIFT, as well as several other legacy institutions.

The other DeFi "blue chip" token that has continued to soar in the recent past has been Maker's MKR, as US Treasury bills continue to be tokenized on the platform to offer higher "real-world" yields.

Another theme to highlight has been whale accumulation amid low volume and volatility, which resulted in a surge in prices of Curve's CRV token, which later retraced those gains.

Among the major price drops last week were Immutable's IMX which saw selling pressure due to profit booking after a surge in prices over the last month.

• LINK $7.65 ⏫ 2.66%

• MKR $1,460.84 ⏫ 9.04%

• CRV $0.4915 ⏬ 5.03%

• IMX $0.5725 ⏬ 2.98%

(All data here is as of 3.00 pm, 3 October, 2023.)

As a crypto enthusiast, you should understand what’s causing all the price action. So here’s some news to help you digest the market’s ups and downs.

• Pudgy Penguins, one of the most popular and valuable NFT collections, on 26 September debuted its Pudgy Toys collection across 2,000 Walmart stores in the US. These toys have been available online since May. Read more here.

• The crypto fund management business could have assets of as much as $650 billion within five years as the expected launch of spot-based bitcoin exchange-traded funds (ETFs) in the US is likely to bring more capital to the market, broker Bernstein said in a research report. The current “cottage” industry has about $50 billion of assets under management, equivalent to about 4% of the present size of the crypto market, the report said. Read more here.

Let's Talk Mutual Funds

By: Monika Halan 

Mutual funds have emerged as the most preferred investment option in India in the last two decades. This is because they offer liquidity, easy entry-and-exit options, and the potential to earn higher returns. However, a mutual fund portfolio also needs to be reviewed and rebalanced at regular intervals to gain optimal returns.

However, while the popularity of mutual funds has increased in India, the ability to use them to our advantage has not. Investors are frozen by the choices they face with thousands of mutual fund options.

Bestselling author and one of India’s most respected financial writers Monika Halan demystifies mutual fund investments in her second book of the Let’s Talk series. She discusses everything mutual funds starting from managing your cash flow to planning children’s education to getting your own house and preparing for retirement.

Read Let’s Talk Mutual Funds as it will set you on the path to achieving your financial goals.

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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