30% Tax on Crypto Mining Blocked in U.S. Debt Ceiling Negotiations
30% Tax on Crypto Mining Blocked in U.S. Debt Ceiling Negotiations
Macro Economics: China's economic recovery is reportedly slowing due to rising debt, weak consumer spending, and strained Western relations. As WSJ reports, a slowdown could disrupt global supply chains and trade balances, particularly affecting countries heavily reliant on Chinese trade. Investors are advised to monitor these developments and adjust their strategies accordingly, considering diversification to mitigate potential risks. The effectiveness of China's policy responses to these challenges will be crucial in shaping its economic trajectory and its broader global impact. Meanwhile, the Federal Reserve is positioning itself for another rate hike at home, as revealed by recent meeting minutes. This is after Fed President Bullard and Kashkari’s comments last week pointing to a more hawkish ‘tighter for longer’ stance.
Digital Asset Market: Representative Warren Davidson has stated that the proposed legislation to address the U.S. debt ceiling includes provisions that block "proposed taxes," including a 30% tax on electricity used by crypto miners. This development could have significant implications for the U.S. crypto mining industry, potentially influencing the trajectory of crypto adoption and innovation in the country.
Forex Market: With Erdogan winning re-election, the Turkish Lira remains under severe pressure due to high inflation, unemployment, and controversial central bank decisions. External factors, such as the strengthening US dollar, are also contributing to its instability. Morgan Stanley warns of a potential collapse, predicting the USD/TRY could reach 28 by year-end. However, this depends on Turkey's policy direction. Successful measures to curb inflation and stabilize the economy could restore investor confidence.
Equities: The S&P 500 has moved slightly, largely attributed to a surge in names tied to AI technology's advancement. This trend is being led by Nvidia and its pioneering work in graphics processing units (GPUs) and AI applications. Nvidia recently made headlines last week with its 52% earning announcement beat and now reaching the $1 trillion MC milestone.
Geopolitical: Taiwan's Foreign Minister, Joseph Wu, recently revealed that discussions are underway between the US and Taiwan about the possibility of including Taiwan under the US's nuclear umbrella. This move would mean that the US could potentially use nuclear weapons in the event of a Chinese invasion of Taiwan or if a war breaks out through other means. This kind of guarantee, which is currently extended to US allies like Japan, South Korea, and all NATO members, would significantly increase the likelihood of a catastrophic war between the US and China. While such a change in policy is unlikely in the near term, the fact that these discussions are taking place could be seen as a major provocation by Beijing. It's important to note that while China has a no-first-use policy for its nuclear arsenal, the US policy does not rule out the use of nuclear weapons in response to a conventional attack.
View from our desk
As the banking concerns ease, the probability of another rate hike has increased. It is now likely that we will witness a hike in June, followed by another in the near future. Our view aligns with the notion that any cuts will occur later than previously indicated by the futures market. Regarding the debt ceiling, we believe it will not pose a significant issue. Taking these factors into account, the dollar is expected to remain strong and exhibit an upward trend in the coming period.
In the digital assets market, we anticipate Bitcoin (BTC) to maintain stability within a range and gradually trend upwards. We do not see prominent buyers or sellers exerting significant influence in the spot market. The primary risk remains of potential disruption caused by adverse policy or regulatory news. Barring such events, we can expect a slow and steady recovery.
On a separate note, Elon Musk's recent visit to China, where he expressed Tesla's opposition to 'decoupling,' suggests his determination to secure a larger share of the Chinese EV market. It is worth noting that such desperation is generally viewed unfavorably by investors.
Across our trading desk, we have observed a persistent trend of strong demand for Bitcoin, primarily concentrated on the buy side. Concurrently, the demand for stablecoins has predominantly leaned towards the sell side, with one noteworthy exception: foreign counterparties have begun to increase their purchases of USDT as we approach the end of the month. This dynamic highlights the ongoing interest in Bitcoin as a sought-after asset. It also underscores the significance of stablecoins for specific market participants seeking liquidity and stability in their transactions.
Happy Trading!
The 1Konto Team
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