Bitcoin Clings to $111,600 as Fed Relief Fizzles, Wall Street’s AI Boom Drives World’s Priciest Market
Digital Asset Market: Morgan Stanley announced that it will enable cryptocurrency trading on its ETrade platform starting in the first half of 2026 through a partnership with Zerohash, a digital assets infrastructure provider. At launch, ETrade clients will be able to trade Bitcoin, Ether, and Solana, joining the growing trend of major Wall Street institutions expanding their crypto offerings. This move comes as the digital assets market has surged to about $3.9 trillion in value, with bitcoin alone accounting for $2.25 trillion. The partnership highlights the increasing mainstream acceptance of cryptocurrencies, paralleling similar moves by competitors like Robinhood and Charles Schwab. Separately, Zerohash has achieved unicorn status after raising $104 million in a funding round that included Morgan Stanley and other notable investors.
Macro Economics: In the second quarter, the U.S. current account deficit shrank by a record $188.5 billion, or nearly 43 percent, to $251.3 billion, as imports of goods sharply declined following earlier volatility triggered by President Donald Trump's tariffs. The deficit, now 3.3 percent of GDP, is at its lowest share since late 2023. Imports of goods fell by a record amount, particularly in nonmonetary gold, consumer goods, and industrial materials, while imports of services rose modestly. On the export side, both goods and services increased, especially in nonmonetary gold and financial services, although exports of some industrial materials and government services declined. Despite increased payments on primary income, the goods trade deficit narrowed significantly, and secondary income receipts and payments both decreased. The data highlight strong swings in trade flows and ongoing concerns about the stability of U.S. economic and monetary policy.
Equities: The S&P 500 opened at fresh record highs for a fourth consecutive day, with the Dow Jones Industrial Average also hitting a new all-time high thanks partly to gains in Boeing following major international deals and praise from President Trump. While the Nasdaq slipped slightly, investor sentiment was buoyed by Nvidia’s announcement of a $100 billion investment in OpenAI for data center expansion, highlighting the ongoing influence of AI stocks on the market rally. However, experts such as Vanguard’s Joe Davis caution that market valuations are high and sustained gains may depend on further economic growth or progress on inflation. Investors are also keeping an eye on the upcoming release of the Federal Reserve’s preferred inflation measure and the increasing risk of a U.S. government shutdown, which could impact the market given the current economic weakness.
The Fed and US Treasury: Chicago Fed President Austan Goolsbee signaled caution on the Federal Reserve’s path for future rate cuts, emphasizing that while rates are likely to move lower over time, aggressive easing could risk undermining efforts to control inflation, which has remained above the Fed’s 2 percent target for more than four years. Following last week’s decision to lower the federal funds rate to 4 to 4.25 percent, the first cut of the year, Goolsbee noted that the neutral rate likely sits near 3.1 percent, suggesting more room for gradual cuts if inflation continues to moderate. Fed projections currently point to two additional cuts in 2024 and further reductions in 2025 and 2026, but policymakers remain highly data dependent amid concerns over tariffs, persistently elevated prices, and recent signs of labor market softening, with unemployment at 4.3 percent. Goolsbee stressed that both inflation and employment trends will guide the pace of future decisions.
Geopolitical: In a high-profile address to the United Nations General Assembly marking the UN's 80th anniversary, President Trump laid out his global vision by emphasizing the strength of the US economy and contrasting it with what he described as the failures of the previous administration, including high inflation and economic decline. He highlighted his administration's achievements in reducing energy costs, defeating inflation, and ending multiple global conflicts, while criticizing the UN for not living up to its potential and for creating new problems such as uncontrolled migration, which he labeled the top political issue of the era. Trump also addressed the Russia-Ukraine war, threatening strong tariffs against Russia if the conflict continues, and urged European nations to halt energy purchases from Russia. His speech included criticism of European and US allies for their positions on Palestine, and he called for a global effort to end the development of biological weapons.
View from our desk
Bitcoin struggles to keep gains
Bitcoin continues to wrestle with downside pressure after dipping to $112,000, leaving traders focused on whether support at $111,600 will hold. Market participants warn that failure to defend this level could accelerate losses toward $106,000 to $108,000, a zone widely seen as a buying opportunity. Technical traders are paying close attention to the 100-day exponential moving average, a signal that has historically separated recoveries from capitulation. Breaking below this threshold has often triggered sharp sell-offs, amplifying volatility across crypto markets. Despite dovish commentary from the Federal Reserve, Bitcoin has seen little relief, suggesting the asset remains tethered to risk sentiment rather than monetary policy alone. With the Nasdaq’s relative strength index stretched into overbought territory, there is growing concern that broader equity weakness could spill into crypto, making it harder for Bitcoin to mount a sustainable recovery.
Correlations weigh on sentiment
The crypto market’s fate is increasingly tied to equity performance, and recent trading reinforces that dependency. As US indices push into record territory, Bitcoin has failed to decouple, instead tracking equities in both direction and sentiment. Institutional inflows, which gave crypto a boost earlier in the summer, have slowed materially, leaving the market without the steady demand needed to absorb volatility. Altcoins are faring worse, with weaker liquidity and sharper price swings amplifying the risks if equity markets retreat. This dynamic underscores how crypto remains a high-beta extension of broader risk markets rather than an independent asset class. Until there is a meaningful catalyst such as renewed corporate treasury accumulation, sovereign adoption, or clearer regulatory signals, crypto will likely continue trading as an appendage of equity risk. Investors are increasingly cautious, recognizing that without a fresh source of demand, rallies risk fading quickly.
World’s most expensive stock market
US equities have once again claimed the crown as the world’s most expensive, with valuations stretching well beyond historical averages. Fueled by investor enthusiasm around artificial intelligence, the S&P 500 and Nasdaq have surged to record highs, supported by corporate giants like Nvidia pouring billions into AI infrastructure. Optimism is further bolstered by expectations of Federal Reserve rate cuts, creating a potent combination of policy easing and innovation-driven growth. Yet these gains come with heightened vulnerability. Valuation multiples now sit at a premium relative to global peers, making US markets reliant on near-perfect earnings execution to sustain momentum. Inflationary pressures remain an undercurrent, with rising input costs threatening margins and leaving investors wary of surprises. While robust corporate balance sheets and strong cash generation provide a cushion, the “most expensive” label highlights the fine line between justified optimism and speculative excess. Should growth stumble or the Fed’s easing cycle slow, stretched valuations could quickly become a liability, with ripple effects across global risk assets, including crypto.
Happy Trading!
The 1Konto Team
About 1Konto
1Konto powers institutional finance with a unified platform for trading, settlement, and credit across stablecoins, fiat, and digital assets. Through 1KPrime, clients gain access to deep liquidity, real-time cross-border settlement, and integrated Bitcoin-backed credit facilities, all supported by trusted custody infrastructure. From treasury management to automated capital deployment, 1Konto enables the next generation of global financial operations with the security, efficiency, and transparency institutions require.
Contact us today to learn how we can support your trading, settlement, and capital needs.
Not Financial Advice Disclaimer