The Stage Is Set

The news from Planet Ruby—Friday, March 22, 2024

• Signal: Inflation
• Noise: Interest rates

Rates Stabilize; Inflation Is A Given

As expected, the FOMC held US interest rates at their current level at their Wednesday meeting, but markets reacted positively to the commentary. The Fed expects three quarter-point cuts this year, despite sticky inflation, confirming traders' hopes.

Markets burst upwards as a result, as the dollar settled lower, making a longer-term downtrend in the DXY more likely. The Dow Jones hit 40,000, the S&P 500 traded at 5,300, and gold touched a new all-time high at 2,223.

Meanwhile, other central banks are making their moves, or preparing to. The Bank of Japan increased interest rates above zero for the first time in eight years. Interest rates are now in a range between zero and 0.1%. Rates were previously at -0.1%, and the last interest rate rise was in 2007.

Japan is an outlier. The Swiss central bank cut rates this week to 1.5%, after inflation figures came in at just 1.2%. The Bank of England held theirs steady at 5.25%, but a cut is on the cards soon, as figures show UK inflation fell more than expected to 3.4%, down from 4%, against the expected 3.5%.

It's clear that rate cuts are incoming for many major economies, and the days of tightening are close to an end. It's equally clear that for most of them, inflation won't be hitting that 2% target for a while yet.

Bitcoin Corrects, Bounces

Towards the end of last week, bitcoin peaked at almost $74,000 before putting in a sharp correction with a low, so far, of $60,800: An 18% drop. Corrections of 30-40% are not unusual in bitcoin's bull markets, but this has been one of the worst in this cycle.

However, the market was overheated, and overdue a pullback. This may be the start of a longer consolidation (potentially a Wave 4 correction for those who follow Elliott Wave theory). The crash coincided with memecoin mania, which has previously been a peak signal. An intermediate top here, lasting a few weeks, would be no bad thing for a healthy, sustainable resumption of the bull market. Following a rapid bounce from the low on the FOMC's update, that may or may not happen.

An interesting data point is that ETF inflows have declined this week. Monday saw the largest ever GBTC outflow in USD terms, which was not quite offset by IBIT's buying. The other ETFs saw very low inflows. Tuesday brought record aggregate outflows of $326 million, again driven by GBTC. Wednesday and Thursday also both saw aggregate outflows, making four consecutive negative days, even as bitcoin bounced from its low on the FOMC's news of a rate hold. It's worth noting that the outflows have been driven solely by GBTC (most holders of which are well in profit, having bought months or years ago).

As of time of publication, bitcoin is trading at $66,000. Confirmation that the correction is over may come with consolidation above $69,000, the old all-time high.

Fighting The Law

Craig Wright believers are leaving the sinking ship, though a handful of die-hards are clinging to hope that the judge will provide something in his written report that completely contradicts what he said at the end of the trial.

Away from BSV and back to actual Bitcoin, Saylor has thrown in another $600 million. Microstrategy now owns more than 1% of total bitcoin supply, at a cost basis of $35,000 per BTC.

The SEC has been called out on its shenanigans, with a Utah court finding it had engaged in bad faith conduct and abuse of the judicial process in a case against a crypto company.

It hasn't slowed them down. The Ethereum Foundation is under investigation by an unnamed US authority, though there's little doubt who is behind it. Sources say that the SEC wants to classify ETH as a security, and hopes are fading for the spot ETH ETF that is in the pipeline. Even BlackRock may not be able to push it over the line this time.

What's New In The SKALEVERSE?

SKALE is rolling out the red carpet for game developers, with a $2 million incentives package for builders who want to take advantage of the network's fast, gas-free transactions. What's not to love?

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