Bitcoin Takes the Political Stage: Candidates Court Crypto Voters at Bitcoin 2024!
Digital Asset Market: Republican presidential nominee Donald Trump pledged to make the U.S. a global leader in bitcoin and digital currencies if elected, speaking at the Bitcoin Conference in Nashville. He promised to turn America into the "crypto capital of the planet" and received loud applause for vowing to fire SEC Chair Gary Gensler, surprising Trump with the crowd's strong dislike for Gensler. Endorsed by figures like Elon Musk and the Winklevoss twins, Trump also proposed a national Bitcoin reserve. Senator Cynthia Lummis announced a bill requiring the U.S. government to acquire 1 million bitcoins over the next five years. The conference also saw Democratic Representative Ro Khanna advocating for greater bi-partisan support for crypto. Bitcoin initially traded down upon Trump taking the stage, with a strong move up on his Gensler statement. Since the speech, Bitcoin has traded sideways.
Macro Economics: The euro zone's economy grew slightly more than expected in the second quarter of 2023, with a 0.3% increase in GDP driven by higher real incomes and public spending. However, mixed economic indicators and pessimistic surveys cloud the outlook. France and Spain outperformed expectations, while Italy's economy held steady. In contrast, Germany's output contracted by 0.1%, raising concerns about its long-term competitiveness. Consumer confidence remained negative, and Germany's inflation unexpectedly rose to 2.6% in July. Despite these issues, traders anticipate two more interest rate cuts by the European Central Bank by year-end.
Equities: The S&P 500 fell 0.8% on Tuesday, driven by declines in megacap tech stocks as investors awaited quarterly reports and the Federal Reserve’s policy meeting. The Nasdaq Composite dropped 1.5%, while the Dow Jones Industrial Average rose 0.3%. Nvidia, Microsoft, Amazon, Netflix, and Apple saw declines. Despite a strong earnings season, tech stocks faced pressure. Investors anticipate signals on rate cuts from the Fed, with a September reduction expected. CrowdStrike shares fell 11.5% due to legal issues, while Merck and Procter & Gamble dropped on weaker guidance and revenue. Wall Street CEOs expect the Fed to start cutting rates soon.
The Fed and US Treasury: U.S. Treasury yields fell on Monday as investors awaited key economic data releases and the Federal Reserve’s two-day policy meeting. The 10-year Treasury yield dropped by 3 basis points to 4.168%, while the 2-year Treasury yield slightly decreased to 4.385%. Investors focus on labor market reports, including JOLTs job openings on Tuesday, ADP’s private payrolls on Wednesday, and the July jobs report on Friday. The Fed meeting, beginning Tuesday, is expected to keep the benchmark fed funds rate unchanged at 5.25% to 5.50%, but investors hope for hints on future rate cuts and inflation outlook. Fed officials need more evidence of inflation returning to their 2% target before cutting rates. Recent data showed the personal consumption expenditures price index rose 0.1% in June and 2.5% year-over-year. The labor market data will provide insights into the economy’s health and potential monetary policy changes.
In other news, U.S. Treasury Secretary Janet Yellen highlighted the need for $3 trillion annually through 2050 to achieve a low-carbon economy, calling it the greatest economic opportunity of the 21st century. In Belem, Brazil, she reiterated the Biden-Harris administration’s commitment to net-zero emissions and emphasized that ignoring climate change is economically harmful. In 2022, wealthy nations mobilized a record $116 billion for climate finance in developing countries, with 40% from multilateral development banks (MDBs). Yellen urged MDBs to set new targets and stressed the importance of private investment for sustainable growth. She reaffirmed U.S. support for the IDB's Amazonia Forever platform, promoting sustainable development in the Amazon, and launched an initiative with Amazon basin countries to combat nature crimes threatening biodiversity.Geopolitical: Protests have erupted across Venezuela following President Nicolas Maduro's re-election, which opposition groups claim was marred by electoral fraud. Maduro alleges that the US is orchestrating a "color revolution" to destabilize his government, a claim reflecting historical US interventions and sanctions. Clashes between protesters and security forces have turned violent, with reports of arson and gunfire in Caracas. Opposition candidate Edmundo Gonzalez maintains he has proof of a rigged election, intensifying the unrest. The situation remains volatile as both sides accuse each other of exacerbating the crisis. This is a situation we will watch closely as it continues to unfold.
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The Bitcoin Conference officially marks the digital asset space making its entry onto the political stage. Multiple candidates from various parties, including sitting members of Congress, attended to court the Bitcoin community for their support. While many cynically view this as pandering, we see it as an earnest effort to show the digital asset community is officially a viable voting block. Many on stage recognized the regulatory stranglehold currently affecting the industry and advocated for removing government-constructed roadblocks in our industry, primarily those from Gary Gensler and Operation Chokepoint 2.0. Both have limited adoption in the United States and increased foreign entities' concerns when working within our borders. This is especially visible within the banking system, as large swaths of the industry have stepped away from digital asset-facing companies and money service businesses over the past 18 months.
We still anticipate an initial Fed Funds rate cut occurring in September, even though the 2% inflation target will not be met. The reasoning behind this expectation is the softening labor market, currently at a 177k per month pace compared to the 275k monthly pace twelve months ago. Additionally, the current interest on the national debt consumes over 70% of income tax receipts. A lower rate should provide some relief to the US Treasury, which is struggling with the high cost of servicing the debt. In our estimation, spending cuts are required to bring the US fiscal situation to more reasonable levels, but historically, politicians and the public have shown little appetite for making these decisions.
As always, Bitcoin continues to look promising, especially now that ETF demand has proven durable. Trump's 'Strategic Stockpile' commitment, whether knowingly or not, initiated nation-state adoption game theory. This move has further solidified Bitcoin's position as a key player in the financial landscape, enhancing its potential for widespread adoption and stability.
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The 1Konto Team
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