Bitcoin Stabilizes as Fed Pause Creates Stronger Dollar

1. Macro Economics: The US Federal Reserve has signaled a pause in its rate-hiking cycle due to concerns over inflation and the potential for an economic slowdown. This decision is expected to significantly impact global markets, with potential implications for currency values and international trade.

2. Digital Asset Market: Bitcoin's current trading price hovers around $27,000, marking a considerable retreat from its April position of $33,500. This pullback can be attributed to a range of factors, including regulatory uncertainties and a period of correction following a significant runup. Despite this downturn, the overall market capitalization of digital assets remains robust, suggesting a resurgence of investor interest in this space, particularly following developments with FTX.

3. Forex Market: The US Dollar is strong against a basket of major currencies, buoyed by the Fed's recent policy decisions. However, the Euro has been under pressure due to concerns over economic growth in the Eurozone.

4. Equities: The stock market is experiencing some volatility, with tech stocks showing resilience despite broader market fluctuations. Notably, Apple's market capitalization has once again surpassed the entire market for small-cap stocks, highlighting the tech giant's continued dominance.

5. Geopolitical: Tensions remain high in Eastern Europe, with Ukraine reporting that it has shot down six Russian hypersonic missiles. This situation could affect global markets, particularly if it leads to increased military conflict or disrupts energy supplies.

View from our desk

Given their recent track record, we expect the Fed to hold the 5.00-5.25 target for longer than they should. Don’t be surprised if they do nothing till past Labor Day or till Fall. Just as they held on to zero for too long and raised more than they should have, we expect they will be late in admitting to the damage done to banks and the economy. They sure know how to time rate changes, don’t they?

The drama in Washington on the debt ceiling continues with no solution until June 1. We are confident that it will be resolved by July 1 and Treasury will avert America’s 5th default :), allowing our beloved politicians to keep piling up debt like they always do. We stopped tracking the # of trillions after it crossed 90% of GDP in 2012.

Finally, some good news. The recent pressure on BTC seems to be coming off. Expect range-bound trading and a mild recovery in the near future

Happy Trading!

The 1Konto Team

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