Bitcoin to $200K? SCB Thinks So, While Market Forecast Signals No Fed Rate Hikes This Election Season
Bitcoin to $200K? SCB Thinks So, While Market Forecast Signals No Fed Rate Hikes This Election Season
Digital Asset Market: Standard Chartered has said that a Trump election victory could be positive for digital assets like Bitcoin as the risk of U.S. fiscal dominance and monetization of government debt grows. The bank believes that investors may turn to alternative assets like crypto in this scenario. A second Trump administration could also push for a more supportive regulatory environment for crypto and boost digital assets through looser regulation and the approval of U.S. spot ETFs. Standard Chartered maintains its bitcoin price targets of $150,000 by the end of this year and $200,000 by the end of 2025. Currently, Bitcoin is showing signs of consolidation as it fluctuates between $63,000-$64,000 during the Asian and European trading sessions on Tuesday. This follows a recovery from last week's crash below $57,000. While it has retreated from Monday's high of $65,500, further indicating BTC may have settled into a range above $60,000.
Macro Economics: The Japanese yen has been experiencing considerable fluctuations, hitting a 34-year low of 160 to the dollar before quickly strengthening again to around 155. Speculation suggests that the Bank of Japan (BOJ) may have intervened by spending over $30 billion to boost the exchange rate. The yen has recently seen another sudden surge, causing speculation among currency traders.
In the UK, the government's policies, including minimum wage increases, higher taxes, and decreased number of work visas, have caused a significant increase in inflation in the hospitality sector. This has made it harder for the Bank of England to bring inflation down to the government's target of 2%. As a result, businesses in the hospitality sector are struggling and may face insolvency. The BOE is expected to keep interest rates high to combat inflation but may consider cutting them once inflation is under control. The main factors driving inflation in the hospitality sector are higher wages and decreased available workers due to Brexit and the pandemic.
Equities: US stocks opened positive after the S&P 500 and Nasdaq 100 both closed 1% higher on Monday, buoyed by growing confidence among investors that the economy is finally showing signs of slowing down, making way for potential rate cuts by the Fed. Disney's stock fell as the company reported that its streaming business turned a profit for the first time but is expected to have weaker results in the current quarter. The company also reported strong earnings and raised its guidance for the year. However, it faced challenges merging its Star India business and a potential slowdown in its theme parks due to global travel moderation and rising costs. Apple shares are trading flat while the company announced new versions of its iPad Air and iPad Pro tablets. How long they can keep selling slight revisions of the same products remains an open question.
The Fed and US Treasury: Minneapolis Federal Reserve President Neel Kashkari predicts that interest rates will remain unchanged for a longer period until the Fed is certain that inflation will steadily rise. He also stated that if inflation starts to decline or there is a significant dip in the job market, the possibility of cutting interest rates might arise. He highlighted that housing inflation is a major indicator of neutral interest rates in the short term, and this could mean the Fed has more work to do to curb inflation. Kashkari also raised his longer-term neutral rate forecast to 2.5% and stated that the uncertainty surrounding it makes it challenging for monetary policy decisions. He further mentioned that one of the main drivers of inflation at the moment is the shortage of housing supply, keeping prices high. Kashkari last published an essay in February, stating that given the changing economic recovery post-pandemic, neutral interest rates might have increased.
Geopolitical: TikTok and its Chinese parent company ByteDance have filed a lawsuit against the new US law that would ban social media apps in the country. The company claims that the law violates users' First Amendment rights and would force a shutdown of TikTok by 2025. TikTok argues that divestiture is impossible within the given timeline, and selling its US operations would be commercially, technologically, and legally unfeasible. The company also argues that national security concerns are speculative and that its global nature and international content make it difficult to justify violating free speech rights. TikTok has filed the suit in the U.S. Court of Appeals for the District of Columbia Circuit and is seeking a declaratory judgment and order to stop the Attorney General from enforcing the law. Legal experts expect the case to go to the Supreme Court.
View from our desk
Bitcoin's recent price fluctuations around the $63K mark indicate a period of uncertainty as the cryptocurrency searches for direction. With the U.S. elections still a distance away in November, the market is anticipated to experience minor rallies and pullbacks. The focal point of investor attention has shifted from the recent ETF speculation to the potential impact of the upcoming Trump election. Analysts at Standard Chartered have even projected an ambitious year-end target for Bitcoin between $150K to $200K, citing the election as a likely positive catalyst that could resolve many of the regulatory uncertainties plaguing the crypto market. It seems timely for investors to consider strategic positions anticipating these events, especially in light of the recent market dip.
In contrast, the broader financial markets remain robust, with the S&P 500 Index nearing all-time highs and the 10-year Treasury yield at 4.44%. Despite these strong indicators, the specter of stagflation continues to loom, prompting the Federal Reserve to maintain a 2% long-term inflation target at their recent FOMC meeting. This stance has led to a growing consensus among economists that rate cuts are becoming increasingly improbable later this year. Our analysis had previously anticipated this outcome, and we continue to advise that no rate cuts are expected for the remainder of the year despite the added pressures of an election cycle that the Federal Reserve is likely equipped to withstand.
The interplay between political events and market dynamics creates a complex investment landscape. As the election approaches, its influence on market sentiment and regulatory frameworks will be critical. Investors should monitor these developments closely, considering the potential for significant market movements based on the outcomes of these events and the Fed's strategic decisions in response to economic pressures. This period requires a nuanced understanding of political and economic indicators to navigate the investment opportunities and risks effectively.
Happy Trading!
The 1Konto Team
About 1Konto
1Konto is a leading institutional on/off ramp for digital assets and FX markets, dedicated to servicing banks, broker-dealers, asset managers, and corporate FX platforms. We provide streamlined access to global markets, ensuring seamless transactions and optimal liquidity management for our clients.
Our 1KPrime Lending services offer innovative Bitcoin-backed loans with secured custody tailored to enhance capital efficiency and strategic flexibility for institutions.
Reach out today for a consultation on our tailored solutions for best price liquidity and services in digital and FX.
Not Financial Advice Disclaimer