Trump's Survival and Fed's Rate Cuts: The Double Boost Propelling Bitcoin to $65K
Trump's Survival and Fed's Rate Cuts: The Double Boost Propelling Bitcoin to $65K
Digital Asset Market: After reaching $65,000 on the news of the failed assassination attempt of President Trump, Bitcoin's value dropped this morning below $64,000 after it was revealed that defunct exchange Mt. Gox had started moving coins for potential creditor repayments. $2.8B worth of Bitcoin was moved to Internal Wallets. The exchange, which went bankrupt in 2014 after losing hundreds of thousands of bitcoins in a hack, has reportedly already begun repaying its debt. This news sparked fears of a potential sell-off by creditors, causing a slight drop in the overall cryptocurrency market. However, this fear is expedited to be short-lived. The positive momentum continues.
Macro Economics: Oil prices fell more than 1% on Tuesday due to disappointing growth data from China, with West Texas Intermediate trading near $80 per barrel and Brent trading above $80 per barrel. This decline comes despite expectations for rate cuts by the Federal Reserve in September. Additionally, the US dollar has strengthened, making crude futures more expensive. Analysts predict that oil could reach $90 per barrel this year due to ongoing tensions in the Middle East, particularly involving Iran. However, year to date, both WTI and Brent have experienced gains.
Equities: The Dow Jones Industrial Average set new records on Tuesday as the bull market expanded beyond technology stocks. The S&P 500 and Russell 2000 also saw gains as small-cap and cyclical stocks outperformed. This rotation from technology stocks began last week after the release of the consumer price index, leading traders to predict a rate cut in September. This shift is seen as boosting industries that are more reliant on borrowing costs than cash-rich technology companies. Despite losses in the tech sector, such as those of Nvidia and Microsoft, the overall market has seen significant gains. Retail sales data further supported investors' belief in a "soft landing" for the economy, making them more optimistic about the start of a Fed easing cycle.
The Fed and US Treasury: Markets are now pricing a September Federal Reserve rate cut at nearly 100%. This comes after better-than-expected inflation data and signs of cooling in the labor market. The recent developments have led economists to project a rate cut in September. Fed Chair Jerome Powell has acknowledged the improving inflation data but declined to give a specific timeline for rate cuts. Some on Wall Street advocate for the Fed to cut rates at its next meeting in July, citing the clear rationale and potential risks of waiting until September. Starting in July would also avoid speculation about political motives behind the decisions. Overall, markets and economists see a strong case for a rate cut and are betting on it happening in September. Federal Reserve Chairman Jerome Powell's recent hints have also strengthened traders' belief that a rate cut will happen by September
Geopolitical: The demand for truth is increasing as the usage of social media platform X has hit an all-time high following the assassination attempt on former President Donald Trump. CNN and other mainstream media outlets have been criticized for biased coverage, while X and other social media platforms provided unbiased reporting from citizen journalists. According to CEO Elon Musk, the platform had 417 billion user-seconds globally on Sunday, with a record-high in the US. Legacy media outlets have been attacking X for hosting conspiracy theories, but this backlash highlights the growing trend of people seeking alternative sources of news and information. This shows a shift in how Americans consume news. The veil has been lifted. The demand for truth is on fire.
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View from our desk
The BTC move from $57K to $65K following the failed assassination attempt on Mr. Trump was unstoppable. Any distribution of Mt. Gox assets is not expected to have a significant impact on BTC and crypto markets, as much of this distribution is expected to be held and not sold. We had advised our readers to put on their 'Trump Presidency Bet' a month ago during the dips, and recent events have accelerated this prediction.
We joined the September rate cut camp last week after Powell's statement, which we posted in our last news brief. However, we anticipate only a limited number of cuts at this point. The most likely scenario is 3-4 cuts of 25 basis points each before the Fed takes another pause that will likely last through the middle of next year. This cautious approach reflects the ongoing balancing act between managing inflation and supporting economic growth.
The positive momentum fueled by rate-cut optimism and the Trump presidency is currently unstoppable. Bears in the market have been trampled repeatedly. While we can debate whether it is too late to join this momentum, it would be unwise to stand in its way. Investors should consider positioning themselves to benefit from the ongoing trends rather than opposing them, as the market shows no signs of slowing down.
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The 1Konto Team
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