Bitcoin Could See Bullish July: Will Powell’s Inflation Insights Drive Market Momentum?
Bitcoin Could See Bullish July: Will Powell’s Inflation Insights Drive Market Momentum?
Digital Asset Market: Bitcoin traders are gearing up for a potentially bullish July as historical seasonal patterns suggest a possible increase in prices. BTC has been trading within a range since April due to various factors, but the first day of July saw a significant inflow of $130 million into U.S.-listed ETFs. This is seen as a bullish sign, especially after a negative June. The recent dip towards the end of June is attributed to USD liquidity changes, and some analysts say it is likely to stabilize at around $72K. In the last decade, bitcoin has shown a median return of 9.6% in July, with most months displaying positive returns. Possible reasons for this seasonality could be profit-taking around tax season in April and May, and increased demand leading to a "Santa Claus" rally in December. The Bollinger Bands also predict price breakouts, another reason why traders expect a significant gain in the BTC market in coming months.
Macro Economics: Despite predictions of a cooling labor market, data from the Bureau of Labor Statistics showed a surprise increase in job openings in May. The report revealed an uptick in open jobs, hires, and the hiring rate, while the quits rate and ratio of job openings to unemployed workers remained steady. This suggests that the labor market is normalizing rather than rapidly cooling. However, the surge in government job openings may be masking potential weaknesses in the private sector, as the number of job openings is still lower than the number of unemployed workers. The overall accuracy of these figures is also questionable due to a low response rate for the JOLTS report. While the labor market may be stabilizing, the high number of government job openings may be artificially inflating the perception of a strong labor market, concealing potential struggles in the rest of the economy.
Equities: S&P opened in the green today. Tesla surged 9% after reporting stronger-than-expected second-quarter deliveries, while Polestar tumbled 7% after its quarterly loss widened. Paramount Global rose 3% on news of potential merger talks for its streaming service, while data storage company Pure Storage fell 5.4% after a downgrade. Drugmakers Eli Lilly and Novo Nordisk both dropped about 2% after President Biden and Sen. Sanders criticized their high drug prices. Homebuilder Lennar fell 2.5% after downgrades from Citi and Raymond James, and cybersecurity company CrowdStrike Holdings dropped 2% on a downgrade from Piper Sandler. Pet retailer Chewy continued its volatile week, losing another 4% after a disclosure from a meme stock trader and stock sales from its largest shareholder. PayPal rose 1.8% after an upgrade from Susquehanna.
Tesla's stock rose by over 9% on Tuesday after the company announced better-than-expected vehicle deliveries for the second quarter. Analysts were expecting 439,000 deliveries, which was a 4.8% decrease from the previous year, but represented a 14.8% increase from the first quarter. Tesla's lineup includes Model Y, Model 3, Cybertruck, Model X, and Model S. The company had reported lower sales in the first quarter due to temporary factory shutdowns and shipping delays. In order to boost sales, Tesla has been offering discounts and incentives, including a zero-interest loan in China. However, some analysts are predicting declining delivery growth and lower demand, causing them to recommend selling Tesla shares. Investor focus will now shift to the company's earnings report later this month and a marketing event in August for its upcoming robotaxi.The Fed and US Treasury: Jerome Powell says the Fed has made progress on inflation, but needs more confidence before cutting interest rates. He spoke at a central banking forum in Portugal hosted by the ECB, along with Christine Lagarde and Roberto Campos Neto. Powell is satisfied with the progress on inflation but emphasized that the Fed will need more evidence before considering cutting interest rates. he Fed does not want to move too soon and risk undoing their work, but also does not want to move too late and hurt the recovery. Powell did not give a specific date for any rate cuts and said he is not worried about the political climate affecting their decisions.
Geopolitical: The Prime Minister of Hungary, Viktor Orban, has urged Ukrainian President Zelensky to consider a quick ceasefire in a private meeting during Orban's first visit to Kiev since the start of the war. Orban also called for a broad bilateral agreement and expressed a desire to participate in modernizing Ukraine's economy. There are differing opinions on the best course of action to end the conflict, with Orban proposing an immediate ceasefire while Zelensky may be seeking support for Ukraine's position. It remains unclear how Zelensky will respond to Orban's proposals.
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View from our desk
We are very bullish for the crypto majors in July. The market appears to have no sellers left, with short-term profit-takers having exited and the Mt. Gox liquidation panic subsiding for now. We anticipate Bitcoin reaching $70K again this month, driven by increasing inflows and renewed investor confidence. As these inflows increase, we also expect USDT to trade back to parity, having been trading 10-20 basis points below parity for several days, reflecting a stabilization in the stablecoin market.
Financial markets are eagerly awaiting the upcoming earnings season, which is expected to provide further insights into the economic recovery. Federal Reserve Chairman Powell's statement about progress in the inflation situation was anticipated, along with the usual call for more data to make informed decisions. With financial markets at an all-time high, the Fed is in no rush to act, taking a wait-and-see approach. However, it is widely understood that real inflation is much higher than reported and unlikely to return to 2% anytime soon, unless significant geopolitical issues such as the Ukraine war and trade normalization with China are resolved, which could take considerable time.
The current market dynamics suggest a period of cautious optimism, with investors balancing potential gains in the crypto market against broader economic uncertainties. As geopolitical tensions and inflation concerns persist, investors are positioning themselves strategically to capitalize on opportunities while mitigating risks. Staying well-informed and adaptable will be key to navigating the opportunities and challenges in the coming months, as the global economic landscape continues to evolve.
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The 1Konto Team
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