Port Strike Puts Pressure on Inflation – Can Bitcoin Hold Its Ground?
Port Strike Puts Pressure on Inflation – Can Bitcoin Hold Its Ground?
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Digital Asset Market: The average bitcoin price and network hashrate increased slightly in September, while daily mining revenue and gross profit declined for the third month in a row. The network hash rate rose by 2%, but the daily block reward gross profit hit a low point. Transaction fees were also low. The market cap of listed US miners showed a 4% increase.
Meanwhile, a new poll conducted by the cryptocurrency exchange Coinbase has found that American cryptocurrency owners are split between supporting Kamala Harris and Donald Trump in the upcoming presidential election. This is a significant shift from previous years when both major parties were skeptical about the future of cryptocurrency. The poll also revealed that there has been a significant increase in the number of cryptocurrency owners in the United States, with 52 million Americans now owning some form of cryptocurrency. Additionally, the poll found that crypto owners are more diverse than the general population and prioritize issues such as financial freedom and updated financial systems. Finally, the poll highlights that the common perception of crypto owners being primarily Republican or libertarian is incorrect, as they are a bipartisan group in terms of political identification and electoral intention.
Macro Economics: China's economic stimulus package led to a surge in the STAR 50 index (Shanghai Stock Exchange (SSE) Science and Technology Innovation Board 50 Index). However, its reflationary impact may not align with the Fed's plans for future rate hikes. It will also likely cause inflation in Japan, resulting in higher interest rates, a stronger yen, and lower stock markets. The Nikkei index also saw a drop on Friday, signaling possible volatility in the future. China has pledged to further stimulate its economy by injecting $142 billion of capital into top banks and issuing government bonds. State media reports said the government would take all necessary measures to save the private economy, stabilize the property sector, boost stock markets, and increase fiscal expenditures, highlighting an “increased sense of urgency” about growing deflationary pressures. The government also discussed the importance of job creation and social welfare. These measures come after the central bank announced the biggest monetary stimulus since the pandemic earlier this week. As a result, global markets went sharply higher, with China’s CSI 300 stock benchmark entirely erasing its losses for the year and Europe and US futures also climbing. The markets’ respective automotive and luxury sectors are expected to benefit heavily from China’s economic boost.
Equities: Stocks fell on Tuesday as reports of rising tensions in the Middle East sparked concerns among investors, overshadowing positive momentum from the previous month and quarter. The Dow fell 340 points or 0.8%, the S&P 500 dropped 1.4%, and the Nasdaq lost 2%. A jump in the CBOE Volatility Index (VIX) and a spike in crude oil prices added to the fears among traders. Tech stocks were hit hard, but energy stocks bucked the trend. September, typically the worst month for stocks, ended with gains, and investors are now focusing on the upcoming nonfarm payrolls report on Friday. The ongoing strike by the International Longshoremen's Association on the East and Gulf Coasts is also being closely monitored as it could significantly impact the US economy.
Beginning at midnight on October 1st, up to 50,000 members of the International Longshoremen's Association, the largest maritime union in North America, went on strike at East and Gulf coast ports from New England to Texas. This was the first strike by the union since 1977, and it came after negotiations with port ownership over a new contract failed. The strike is expected to cause significant harm to the U.S. economy, with trade worth billions of dollars impacted. The port management group, USMX, offered a nearly 50% wage hike over six years in a last-minute effort to avoid the strike, but the ILA rejected it. The rhetoric from ILA leadership has been aggressive and suggests a potentially long and impactful strike. The strike's timing is particularly bad given the recent devastation caused by Hurricane Helene and the congestion it has created at ports. The strike's impact will depend on its duration, but a prolonged strike could lead to shortages, price pressures, and potential implications for the overall economy.The Fed and US Treasury: Federal Reserve Chair Jerome Powell said in a speech on Monday that the economic outlook is solid. He pointed out that labor market conditions are still strong, and inflation is not a significant concern. However, the Fed is still considering potential interest rate cuts, but Powell emphasized that they will not be rushing to make these cuts. The September Labor Department's Job Openings and Labor Turnover report showed an unexpected jump of 329K job openings, reaching a record high of 8.040 million. This increase was primarily due to a surge in construction job openings, the biggest on record. The data also showed a decline in hires and a decrease in the number of people quitting their jobs. However, it should be noted that a significant portion of the data is estimated due to a low response rate of only 33% for this survey.
Geopolitical: The US has received information that Iran is planning to launch a ballistic missile attack on Israel and is actively supporting preparations to defend against it. This comes after Israel moved troops into southern Lebanon. Israel and Hezbollah have been engaged in crossfire, with Israeli forces carrying out airstrikes and ground raids and Hezbollah responding with rocket attacks. The conflict has escalated following the assassination of Hezbollah's leader and the suspected Israeli killing of a Hamas leader in Tehran. Israel's defense minister announced that the army is widening its operations to dismantle the elite Radwan Force of Hezbollah. Meanwhile, US equity markets are tanking while shares of defense contractors are rising.
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On Tuesday, cryptocurrencies, including Bitcoin, experienced a sharp decline as escalating tensions in the Middle East prompted investors to shift away from riskier assets. The broader digital asset market also saw losses, with some assets faring better than others. This movement was mirrored in US stock indexes, which were down, while traditional safe havens like gold and oil gained in value. Bitcoin's correlation with risk-on assets was emphasized, as its price echoed previous reactions to geopolitical instability in the region.
Gold has emerged as the asset of choice amid global uncertainty, reaching approximately $2,685, a 24% increase over the past month. Analysts suggest that if the current geopolitical climate worsens, gold could see even higher prices. The U.S. appears to have limited influence over its allies in the Middle East, adding to the situation's unpredictability and further driving the appeal of gold as a hedge against instability.
Meanwhile, the ongoing port strike in the U.S. has not garnered much attention but could have significant consequences for inflation if it continues. Prolonged disruptions could challenge the Federal Reserve’s inflation targets, although many believe that port authorities will ultimately reach a deal to avoid further economic damage. However, the longer the strike persists, the more it risks exacerbating inflationary pressures.
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