Safe Haven or Digital Frontier? Gold Hits $2.1K as Bitcoin Skyrockets to $69K Amid Market Fears
Safe Haven or Digital Frontier? Gold Hits $2.1K as Bitcoin Skyrockets to $69K Amid Market Fears
Digital Asset Market: The price of bitcoin has reached a record high of over $69,000 on Coinbase due to buying from new US-based spot bitcoin ETFs. The ETFs opened in January and the price quickly rose from $45,000 to $50,000, then surged again in February. Early bitcoin adopter and CEO of Galaxy Digital, Mike Novogratz, believes it is hard to predict where the price will stop as Bitcoin is in a phase of discovering its true value as a mainstream asset. In other interesting news, an anonymous Bitcoin address, dubbed “Mr. 100,” has been steadily accumulating BTC since November 2022 and now holds over 54,164 BTC, worth around $3.2 billion. It is unclear who is behind the wallet, but it is unlikely to be the US Government or someone preparing for the Bitcoin halving in April. Instead, it may be a fund of some kind or a Hong Kong-based entity. The steady accumulation of 100 BTC per transaction suggests a limitation of their funding source, but the whale's actions are contributing to the current bullish sentiment.
Macro Economics: The US is continuing to limit China's access to advanced semiconductor technology, creating difficulties for Chinese and American companies. AMD has been informed by US officials that its AI chips are too advanced to sell in China without a license from the Commerce Department. AMD designed the chip to comply with export regulations, but it was still deemed too advanced for sale. A license from the Bureau of Industry and Security is required for the chip's sale in China.
In other news, Gold hit a record high of $2,100 per ounce on Tuesday, driven by expectations of a U.S. interest rate cut in June and safe haven demand due to the ongoing war in the Middle East. The Fed Chair's upcoming congressional testimony and Friday's employment report will provide more clarity on interest rate changes. Gold has risen by over $300 since the start of the Israel-Hamas war. Platinum and palladium prices fell, while silver rose.
Equities: US stocks slid again on Tuesday, pulling back from record highs as uncertainty over interest rate cuts and the strength of tech stocks caused some caution in the market. S&P 500 and Dow Jones both fell about 0.4%. The tech-heavy Nasdaq was down even further, losing around 0.8% due to continued pressure from major tech stocks like Apple and Tesla. Investors are uncertain about the potential for interest rate cuts and the health of the tech sector, which has been driving the recent market rally. Comments from a Federal Reserve policymaker that indicated only one rate cut this year also contributed to the market's caution, with investors eagerly awaiting Fed Chairman Jerome Powell's testimony on Wednesday for any potential changes in the Fed's stance.
There are growing concerns about waning demand for iPhones in China, as new data shows a 24% decline in sales in the first six weeks of the year. Is this canary in a coal mine for China or for Apple. We believe it is a bit of both, but more so for Apple than China. The decline has been attributed mostly to the popularity of Huawei's Mate Pro 60 and aggressive promotions for the device. Experts warn that Apple may need to adjust its pricing strategy to boost demand. Ultimately, this news has caused Apple's stock to drop today, pulling the entire tech sector and the broader market in the US.
The Fed and US Treasury: Inflation met expectations in January, with the personal consumption expenditures price index excluding food and energy rising 0.4% for the month and 2.8% from the year before. This was in line with forecasted estimates. Headline PCE, including food and energy, increased 0.3% monthly and 2.4% on a 12-month basis, also matching expectations. This was due to a rise in services prices and a decrease in goods prices. Personal income saw an unexpected increase of 1%, while spending fell 0.1% from the previous month. Inflation remains above the Fed's 2% target, with the core measure being the lowest in almost a year. At this point, investors are focused on Fed Chair Jerome Powell's testimony to Congress on Wednesday. His words will be closely watched for any change in the mantra that policymakers need to be convinced inflation is conquered before any move.
This week is also significant because it marks the one-week countdown to the end of the Fed's BTFP program, which was put in place during last year's banking crisis. The Fed has been providing liquidity to banks by accepting collateral and paying out the full value of securities in cash. However, concerns have been raised about the potential impact on US regional banks that hold a significant amount of commercial real estate loans on their balance sheets, especially as many of these loans are due for refinancing soon. Questions remain about what will happen to these loans once the Fed stops issuing new loans under the BTFP program.
Geopolitical: Super Tuesday is here, and millions are heading to vote. The primary elections are expected to result in former President Trump and current President Biden securing their respective party nominations. Despite voters expressing a desire for different options, the night is likely to end with a rematch between the two candidates. Republican candidate Nikki Haley won her first primary in the District of Columbia but is not expected to do well in the 15 contests on Tuesday. Analysts suggest she should stay in the race in case Trump is forced to drop out, but she may have financial difficulties. In the Democratic primary races, Biden's opposition is not expected to pose a threat, but he may face some votes for "uncommitted" delegates.
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Bitcoin's momentum is showing no signs of slowing down, with its price briefly reaching $69,000 earlier today. This surge is attributed to just 5% of Bitcoin being held by ETF wallets, hinting at the potential for even greater increases should ETF ownership continue to rise. The speculation around Bitcoin reaching the $100,000 mark, previously anticipated for later this year, now seems achievable much sooner. Adding to the intrigue is the mysterious entity dubbed "Mr. 100," who has amassed 54,000 BTC. The identity of this significant accumulator remains unknown, with speculation pointing towards a nonstate actor, underscoring the diverse and unpredictable nature of Bitcoin's investor base.
The financial markets are currently navigating through a period of uncertainty, despite last week's inflation data (Consumption Expenditures Index) aligning with expectations. The spotlight is now on Federal Reserve Chair Jerome Powell's upcoming testimony to Congress on Wednesday, which is eagerly awaited for insights into the Fed's perspective on the economy. Futures markets are pricing in a more than 60% chance of a rate cut in June, yet there's a prevailing sentiment that the Fed will adopt a cautious approach, awaiting further data before making any decisions. Additionally, the fate of the Bank Term Funding Program (BTFP) is another critical area to watch, especially given the ongoing concerns about commercial real estate loans on banks' balance sheets. The outcome of these developments could significantly influence market dynamics.
Amidst this backdrop of economic uncertainty, both Gold and Bitcoin are reaching record highs, serving as indicators of the market's search for stability and value. The anticipation around the Federal Reserve's actions, combined with the intrigue of significant Bitcoin acquisitions and the potential adjustments to financial support programs, is creating a fertile ground for both traditional and digital assets to thrive. As investors and market observers look to the Fed for direction, the interplay between policy decisions, market sentiment, and asset valuations will be crucial in shaping the financial landscape in the coming months.
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