Market Commentary - Sept. 15th, 2023

Crypto MarketAmidst the current state of the cryptocurrency market, Bitcoin is currently trading at $26,350, while ETH is at $1,620, reflecting a slow summer transition into the early weeks of September in terms of price action. The Bitcoin market is currently abuzz with anticipation surrounding the potential introduction of a Bitcoin spot ETF in the United States. Notably, analysts from Bloomberg, Eric Balchunas and James Seyffart, have assigned a 75% probability to a spot Bitcoin ETF launching this year, with expectations of a 95% likelihood by the end of 2024, garnering significant industry attention. Decision dates for Bitcoin spot ETF applications by BlackRock, Galaxy, and WisdomTree are approaching in mid-October, and until then, the overall sentiment suggests limited potential for upward market movement. Historically, September has posed challenges for Bitcoin, while October and November are stronger months. The conference audience at TOKEN2049 strongly believes in the eventual approval of a Bitcoin spot ETF, which is expected to trigger short-term trading volatility, characterized by initial enthusiasm followed by profit-taking by hedge funds. The longer-term takeaway is the anticipated and growing demand for Bitcoin.Over the past six months, Bitcoin has oscillated between the $25,000 to $32,000 range, a pattern that originated during the Regional Banking crises in mid-March. Throughout this period, market sentiment has been notably volatile, sentiment on X can be described as Bipolar, and rightfully so. One minute we're going to new highs with an ETF, the next we're afraid Binance will rug-pull the entire market. Presently, the market is apprehensive about FTX selling coins during its bankruptcy proceedings. Amidst these debates, it's easy to overlook where Bitcoin stands in its four-year halving cycle.Looking back at historical cycles leading up to the 2016 and 2020 halvings provides valuable insights, suggesting that similarities might arise again. In 2015, Bitcoin exhibited a six-month ranging behavior from December 2015 to May 2016. Similarly, in 2019, except for the COVID-induced crash, Bitcoin ranged for 13 months, spanning from June 2019 to July 2020. This raises the possibility that the current market situation may not be so different, and Bitcoin's performance may not be as influenced by the ETF or Black Swan events as some may speculate. In theory, both events could contribute to Bitcoin's maturity as an asset.In light of these considerations, a bullish perspective becomes increasingly compelling. While some X so-called "Pro traders" predict new lows, even if they are correct, the probability of a recovery remains a distinct possibility. The cryptocurrency market's resilience throughout its history suggests that Bitcoin has a unique capacity to weather storms and continue its long-term growth trajectory, making it a notable asset for investors to monitor and consider in their portfolios.MacroInvestors worldwide are closely monitoring the global economy, and are becoming increasingly anxious about the persistent rise in interest rates that fuels concerns of an impending global recession. The specter of a worldwide economic downturn grows more tangible each day, yet the exact where, when, and how remain shrouded in uncertainty.In this climate, both the financial markets and the Federal Reserve remain singularly focused on inflation and the nuanced interpretation of recent crucial data releases. Both the Consumer Price Index (CPI) and the Producer Price Index (PPI) numbers for this week have aligned with expectations, lending stability to the equity markets over the past two days. Notably, the September CPI data reveals a notable uptick in headline inflation, surging to 3.7% in August from 3.2% in July. This inflationary surge can be attributed to the upward trajectory of oil prices, compounded by base effects from the previous year, and the month-over-month energy price increases are poised to exacerbate the inflation rate further.Elsewhere, the European Central Bank (ECB) has raised interest rates to unprecedented heights, underscoring their persistent concern regarding high inflation. In contrast, China's central bank has opted for a different approach by announcing a 25 basis point cut in the reserve requirement ratio as a means to stimulate their economy without an outright cash injection. These global economic dynamics leave investors on edge, as they navigate the intricate interplay of inflation, recessionary threats, and central bank policies.Equities, Fixed Income, FX and CommoditiesEquitiesThe S&P is currently trading at $4,473, up approximately 0.8% in the last month, while the Dow Jones is down 0.74% at $34,688. In the wake of Nvidia's earnings last time we wrote, yesterday witnessed what many consider the year's first significant and successful IPO. Arm Holdings, a chip design company controlled by SoftBank, surged 25% on its debut. The success may signal renewed interest in upcoming IPOs. Next week, Instacart with a valuation of around $10 billion and the ad-tech company Klayvio are set to launch in the market.Fixed Income, FX & CommoditiesTreasury yields edged slightly higher in the past week, with the benchmark 10-year note reaching 4.32%. USD/CAD rates are hovering around 1.3525, driven by increasing crude oil prices but remaining relatively flat over the past month. Crude oil prices, on the other hand, have continued to rise for the third consecutive week, fueled by Saudi production cuts and expectations of a turnaround in the Chinese economy, currently trading at $90.30 USD per barrel. In the precious metals market, Gold has experienced a nearly 1% spike today, trading at $1,927 USD per ounce at the time of writing, while Silver has surged by over 2.5% on the day, trading at $23.20 USD per ounce.News we've been readingRecession risk 'coin flip' over the next year, PIMCO says: Better economic data is putting into question as to if we will get a recession over the next year - link - @ReutersHow Sam Bankman-Fried's Elite Parents Enabled His Crypto Empire: SBF's family connections gave him the credibility he needed to build a massive empire - link - @BloombergJudge Allows Bankrupt FTX to Sell Its Crypto Holdings, Including BTC and SOL: FTX will begin liquidating assets to pay back creditors -link - @CoindeskJP Morgan analyst says Fed willing to sacrifice economy to kill inflation, "like the ECB": “They're telling us that they're prioritizing inflation over growth. And that means like the ECB, you're willing to make the economy a casualty.” - link - @forexliveInvestment-Grade Corporate Giants Suddenly Sell Huge Amounts of Debt to Front-Run even Higher Long-Term Yields: “Corporate issuance further pressures longer-term Treasury yields, amid expectations of bad inflation “surprises.” Share buybacks getting a lot more expensive, but no problem either.” -link -@WolfStreetThe fine printClickherefor the fine print.