Bitcoin's Rollercoaster Ride: Is the FTX Crisis Capping the Upside?
Bitcoin's Rollercoaster Ride: Is the FTX Crisis Capping the Upside?
Digital Asset Market: Franklin Templeton has filed for a spot bitcoin exchange-traded fund (ETF), joining the ranks of traditional asset management firms seeking approval from the U.S. Securities and Exchange Commission to launch such a product. The proposed Coinbase-custody ETF would give everyday investors an easy way to gain exposure to Bitcoin in their brokerage accounts. Franklin is also venturing into additional blockchain technologies, including tokenized treasury bonds.
Macro Economics: While the IEA just gave their view statement of ‘beginning of end of fossil fuel era’, the biggest issue is still the very high oil prices with no immediate reason to believe that they are coming down anytime soon. Taking energy out of core CPI does not make it go out of real inflation concern. Renewables are gaining ground but coal is still king. In 2022, coal was the leading electricity source at 35.4%, followed by natural gas and hydroelectric. Renewables, such as wind, solar, and geothermal, had a 14.7% growth for the year and now account for 14.4% of total electricity generation. In France, nuclear energy usage dropped 22% due to disruptions and the country went from exporting electricity to becoming an importer.
Equities: Stocks fell on Tuesday as oil prices rose to their highest level in 2023, raising concerns about the global economy’s slowing growth. Oracle was the worst performing stock in the S&P 500, sliding 13% after posting weaker-than-expected revenue and guidance. Apple shares were lower as they anticipated the reveal of a new iPhone model. Key inflation reports due later in the week are being closely watched by analysts.
The Fed and the Banks: The consumer price index is expected to show that monthly inflation rose by 0.6% in August, which would bring the annual rate to 3.6%. Core CPI, excluding energy and food costs, is expected to remain unchanged and its yearly rate will decrease to 4.3%. The big issue is the rising energy prices and its direct and indirect impacts on Inflation. The Federal Reserve does not use the CPI to determine policy, but instead pays more attention to core inflation minus housing prices, which are showing improvement. Producer prices are also expected to slow, with an overall annual level of 1.3%. The CPI release will be a key economic statistic this week and will have implications for the Fed's battle against inflation and the political landscape for the 2024 election.
Geopolitical: The upcoming meetings between Russian President Vladimir Putin and North Korean leader Kim Jong Un could have significant implications for North Korea's relationships with their partners in Moscow and Beijing, as well as with the U.S. and South Korea. China may view Kim's decision to visit Russia first as a slight, and there is distrust among the three countries. However, the meetings could lead to increased military ties, discussions on Russian aid to the North, and a more equal alliance between North Korea and Russia.
View from our desk
Bitcoin experienced a sharp uptick in prices on Tuesday morning, driven by positive shifts in open interest and funding rates, which led traders to speculate that a textbook short squeeze was underway. However, this surge was short-lived, as prices began to revert downward later in the morning, indicating that the squeeze was both limited and weak. We anticipate that any significant upward movement will be constrained until the potential selling pressure from the financially troubled FTX exchange is alleviated. On the flip side, the $25,000 level serves as a robust support, effectively limiting downside risk.
In the broader economic landscape, we are of the opinion that the Federal Reserve has concluded its cycle of interest rate hikes and is likely to commence rate cuts starting in the second quarter of next year. Remarkably, the Fed has managed to achieve a soft landing thus far, avoiding any abrupt shocks to the economy.
However, this should not be an invitation for the Federal Reserve to push the envelope further. There are substantial long-term sustainability concerns that warrant caution. The Fed's next moves should be carefully calibrated to maintain this delicate balance, especially given the volatility and uncertainty in both the cryptocurrency and traditional financial markets.
Happy Trading!
The 1Konto Team
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