Bitcoin and crypto brace for FOMC, while BTC price action delivers a refreshingly calm weekend.
Rep. Tom Emmer reintroduces anti-CBDC bill to Congress
The bill would limit the Fed from issuing a CBDC which Tom Emmer called a surveillance tool that would “undermine the American way of life.”
Fed Vice Chair Barr gives update on CBDC research, plugs stablecoin legislation
Michael Barr expressed “strong concern” about stablecoins and appreciation of legislative efforts to address them at the Philadelphia Fed’s fintech event.
The Fed could lose $100B — Does this spell catastrophe for Bitcoin?
On the latest episode of “Macro Markets,” Marcel Pechman explains the potential implications for crypto of the Federal Reserve losing $100 billion.
U.S. Interest Rates High Enough to Tame Inflation, Avoid Recession: Chicago Fed
Federal Reserve Bank of Chicago economists predict low inflation and a resilient economy, a potential goldilocks scenario for risk assets, including cryptocurrencies.
US Treasury, IRS propose cryptocurrency regulations for brokers
Brokers — referred to as “digital asset middlemen” in the regulatory proposal — will be required to provide information on gains and losses incurred during the sale of crypto assets.
US Senate confirms Philip Jefferson as Federal Reserve vice chair
Philip Jefferson, who has been serving as a Fed governor since 2022, will take on the No. 2 role under chair Jerome Powell at the central bank until 2036.
BTC bull market began in March, more will realize in a year — Arthur Hayes
The BitMEX co-founder says Bitcoin has been on a bull run since the Fed’s $25 billion dollar program aimed at stabilizing the U.S. banking system.
How Bitcoin And Crypto Are Impacted By The Fed’s Growing War Chest: Report
In a recent report by Capriole Investments’ Charles Edwards explored the Federal Reserve’s ever-expanding war chest and its potential implications for the Bitcoin and crypto market. As Bitcoin gears up for its halving in April 2024, a pivotal event that will make it scarcer than gold, understanding the macroeconomic environment becomes crucial.
Why Macro Matters For Bitcoin And Crypto
Edwards underscores the inherent interconnectedness of global markets, asserting, “Bigger markets drive smaller markets.” This symbiotic relationship is evident in the crypto realm, where altcoins’ performance is closely tethered to Bitcoin’s movements. Drawing a parallel with traditional markets, Edwards elucidates, “Bonds drive equities, equities drive Bitcoin and Bitcoin drives altcoins.”
Contrary to the prevailing sentiment of an impending recession in 2023, the equities market defied expectations with a robust rally. This surge was not arbitrary but was propelled by the groundbreaking integration of usable AI, which has the potential to significantly augment GDP. Edwards directs attention to the NAAIM Exposure Index, a barometer of NAAIM managers’ equities exposure. The current readings of this index are reminiscent of those in June and October 2022, both of which signaled local bottoms for the S&P 500.
Furthermore, the AAII sentiment survey results, which are currently moderate, could provide a more convincing buy signal if they align with the NAAIM Exposure Index. Another metric that Edwards holds in high regard is the Put/Call ratio. This ratio offers insights into the relative bullishness or bearishness of market participants in the options market. A recent spike in this ratio suggests that the traditional finance market might be on the cusp of a near-term upward movement, Bitcoin and crypto could follow.
However, Edwards tempers this optimism with a note of caution. For a more definitive bullish signal, the S&P 500 would need to breach and sustain above the pivotal monthly resistance level at 4600. A consistent performance above this threshold would dispel any notions of a transient “dead-cat-bounce.”
Macro Fundamentals: A Mixed Bag
The broader macroeconomic picture presents a mosaic of varying hues. The aggressive tightening cycle, a hallmark of the Fed’s recent monetary policy, is still being assimilated by the markets. With the reservoir of household savings accumulated during the Corona stimulus years now running dry, a consequential contraction in consumer spending is on the horizon.
Edwards shines a spotlight on a couple of particularly disconcerting metrics: a marked decline in manufacturing, a sector whose downturns have historically been harbingers of recessions and consumer spending, which has not only dipped below its 20-year average growth rate but has done so at an alarming velocity.
Other red flags in the US economic landscape include a relative rise in the cost of living as income growth, at a meager 1% annually, lags behind inflation; an unprecedented credit card debt mountain of $1 trillion; escalating delinquency rates; and a squeeze on net worth as housing prices wane in the face of dwindling demand.
Yet, despite these ominous signs, the robust employment rates render any immediate proclamations of a recession premature. Edwards emphasizes the significance of the “initial claims” metric as a bellwether for unemployment trends.
However, the integration of AI into the workforce is not just a technological marvel but a potential economic game-changer. Edwards, drawing from personal experience, notes a 50% surge in productivity with AI’s aid. He references a statement by Sam Altman, CEO of OpenAI, which projects that in the near future, a single programmer, with tools like ChatGPT and Copilot, could rival the productivity of 20-30 of today’s programmers.
The Fed’s War Chest
Aware of the looming economic uncertainties, the Federal Reserve has been bolstering its defenses. The unprecedented rate hikes, catapulting interest rates from zero to 5% in a mere year, coupled with a contraction in the money supply rate, have engendered the most stringent economic conditions ever recorded that has been weighing heavy on tradfi, Bitcoin and crypto.
The Fed’s dual strategy of high interest rates, which provide leeway to slash rates during crises, and its recent success in paring down its balance sheet by a whopping $1trillion, are central to its defensive posture. Edwards speculates on the timing of the next QE round, suggesting that given the impending election year, the Fed might be compelled to deploy its liquidity arsenal sooner than anticipated.
Given the current macroeconomic tableau and the 90% of rate hikes already factored into the market as per the CME FedWatch, Edwards posits that the Fed might be compelled to infuse liquidity in the imminent future, especially if indicators like rising unemployment or plummeting consumer spending manifest. What will happen then should be clear to everyone: risk assets like Bitcoin and crypto will rally, aligning perfectly with the BTC halving.
At press time, BTC traded at $26,015.
When will it be too late to invest in Bitcoin?
This week’s episode of Market Talks discusses whether it will ever be “too late” to buy Bitcoin and why BTC could take over the financial world.
September ‘crash’ to $22K? — 5 things to know in Bitcoin this week
The BTC price looks frail as August comes to an end, and with Bitcoin bulls out of ammo, traders are preparing for more pain.
Jackson Hole: Where Fed Policy Is Decided on the Fly
Bitcoin Dips Below $26K, Smaller Cryptos Head Lower on Fed’s Powell’s Hawkish Remarks
Federal Reserve chair Powell speaking at Jackson Hole doubled down on keeping financial conditions tight, including hiking interest rates further if needed.
Fed’s Powell at Jackson Hole: Prepared to Raise Rates Further if Appropriate
Market participants were looking to Friday morning’s speech to gauge the future direction of the U.S. central bank’s monetary policy.
Why is the crypto market down this week?
Rising interest rates, delayed Bitcoin ETFs, global financial turmoil and other regulatory pressures are contributing to the crypto market’s underperformance.
‘We’ve Seen Enough’: Battered Bitcoin at $26K Can’t Stay Down Much Longer, Pantera’s Morehead Says
By one measure, bitcoin’s price performance this cycle is the worst in the asset’s history.
Bitcoin Bulls Mull the Meaning of New Fed Messaging on Inflation and Interest Rates
Instruments tied to interest rates compete with Bitcoin for investor dollars.
China facing deflation may be bad news for Bitcoin
Cointelegraph analyst and writer Marcel Pechman breaks down the Federal Reserve balance sheet and explains why China’s deflation can negatively impact Bitcoin.
First Mover Americas: Bitcoin Tumbles Below $26.5K
The latest price moves in bitcoin (BTC) and crypto markets in context for August 18, 2023. First Mover is CoinDesk’s daily newsletter that contextualizes the latest actions in the crypto markets.
Federal Reserve issues enforcement action against FTX-linked US bank
Moonstone Bank, which renamed itself Farmington State Bank, received roughly $11.5 million from FTX’s sister firm, Alameda Research, through its holding company in 2022.