Jay Ruins The Vibe

The news from Planet Ruby—Friday, June 14, 2024

• Signal: Macro trend
• Noise: FOMC

Last week, the dollar rose significantly following unexpectedly strong labor market figures, heading back over 105. While that was an unwelcome headwind, the S&P still made a new high early this week, though other risk assets struggled. Gold took a downturn, and may be painting a bearish head-and-shoulders pattern.

But the big news came on Wednesday, which saw both the US CPI print and FOMC decision on interest rates. These are almost always occasions for volatility as the market receives and then digests new information.

In the event, CPI came in slightly below expectations, sending the DXY down by almost a full point and giving risk assets a boost.

A few hours later, Jay Powell announced a hold in interest rates. This was expected with almost 100% confidence. However, he also dampened expectations by explaining that there would likely only be one cut this year, vs forecasts of 2 or 3. The DXY promptly recovered and is now back over 105.5.

In the UK, the odds of an interest rate cut before the General Election on July 4 have also been reduced by official figures showing that wage growth remains uncomfortably high. Pay is rising at an annual rate of 6%. Meanwhile, the economy remains flat.

Bitcoin Punished

Bitcoin broke lower in the early hours of Tuesday, rejecting firmly from $70k once again.

After putting in a low of $66k, BTC recovered somewhat. The soft CPI print and then almost immediately less positive Fed speech sent it on a $2,000 round trip to $70k and back. It's now trading back below $67,000.

To the upside, $70k represents resistance, and of course the old ATH of $69k. To the downside, support lies at $65k, which is the 50% level from the latest ATH to the pullback to $56,500.

The Bitcoin ETFs broke a 19-day streak of inflows with a $200 million outflow on Tuesday (and another $200m on Thursday). GBTC is down to 281,000 BTC, from 620,000 before converting to an ETF. Blackrock has almost 306,000.

One of the reasons for the falling price, aside from the stronger dollar, is likely to be unprofitable miners capitulating and going offline after the Halving reduced their revenues. Estimates vary, but hashrate dropped between 15 and 30% from the peak in May, though is now recovering.

Overall, this cycle has seen very uneven returns, with bitcoin and memecoins showing strong gains, but many alts (including ETH) underperforming.

In other news, Donald Trump continues to position as the pro-Bitcoin option, seeking to win over the large bloc of crypto-holding voters. Following a meeting with major players in the mining industry at Mar-A-Lago, Trump promised to support miners if he became President.

On the back foot, Biden has made a concession and is discussing accepting crypto donations for his campaign via Coinbase Commerce.

What's New In The SKALEVERSE?

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