The Wolf Den #669 - Is The Fed Still Relevant?
The Fed's Five Minutes Of Fame Is Over
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In This Issue:
Is The Fed Still Relevant?
Bitcoin Thoughts And Analysis
Legacy Markets
What Is Nostr?
Bitcoin Died Four Times In January
We Are Going To Find Out Who Bailed Out SBF
Is The Fed Still Relevant?
The Federal Reserve's decision to normalize monetary policy in March 2022 through a series of interest rate hikes sent shockwaves throughout the investment world. The focus of global markets shifted to the monthly Consumer Price Index and Fed Funds rate reports, leading to an influx of amateur analysts attempting to decipher the Fed's words and intentions.
One year on from the initial interest rate hike, the reaction to yesterday's 25 basis point increase was surprisingly subdued compared to previous hikes. This can be attributed to the Fed's increased transparency and efforts to communicate with the public, which has resulted in the market fully pricing in their behavior in real-time, rather than just reacting to announcements. It can also be attributed to an increasing indifference from investors towards Fed jawboning, who have quietly decided that the time has come to “fight the Fed.”
In 2019, Fed Chair Jerome Powell stated, "we have an obligation to explain ourselves," signaling a shift in the Fed's approach towards greater communication with the public. This change was reflected in the remarks of a Wharton professor who compared Powell's statement to The Wizard of Oz inviting visitors behind the curtain, suggesting that the Fed's once secretive and mystical reputation was being shed in favor of increased transparency.
“It wasn’t so long ago that the idea of a Fed trying to ‘explain’ itself was blasphemy. The Fed’s communication is a tortured history. I think of The Wizard of Oz. I think of the Fed trying to be the wizard to the citizens of Emerald City, but now trying to say, well, we should invite the visitors from Kansas behind the curtain.”
Powell's recent comment that "the disinflationary process is in its early stages" highlights the ongoing uncertainty in the economy and suggests that the market's focus is shifting away from the Fed's decisions. The cracks in the facade of Fed hawkishness are beginning to show, and markets are reacting positively.
In the realm of cryptocurrency, Bitcoin's resilience through the recent instability in the financial system only strengthens its use case. As the market begins to stabilize, Bitcoin has a unique opportunity to distance itself from macro events and establish itself as a standalone asset. Bitcoin has been the best performing asset in 2023, and always shows markedly higher upset when things start to rage.
With the Fed's "charade" ending, it is time to direct our attention towards other, potentially more promising investment prospects.
It's worth noting that the current state of the economy and financial markets is constantly evolving and subject to change. As such, it's important to continually reassess one's investment strategy and remain vigilant in the face of new information and developments. However, with the Fed's transparency increasing and the market's focus shifting away from their actions, the stage is set for new opportunities and potential growth in the financial world.
It’s going to be difficult for Bitcoin to decouple, but the seeds are being planted for it to do so. The Fed’s power is diminishing, so let’s focus our attention on brighter, oranger things.
Bitcoin Thoughts And Analysis
What a candle. Bitcoin just printed the second largest January move ever, only behind 2013. Notably, this candle effectively erased 6 previous months of price action and fully bullishly engulfed the past 4.
This looks incredibly promising.
$25,212. That’s the line for Bitcoin. A break above would be the first higher high since $69,000 and would technically invalidate the bear thesis.
Legacy Markets
European stocks have increased as a result of positive comments from Federal Reserve Chair Jerome Powell about the central bank's progress in combating inflation. Technology stocks led the way, boosted by a positive outlook from German chipmaker Infineon Technologies. US equity futures also rose, with the S&P 500 and Nasdaq 100 futures suggesting Wall Street will continue its gains from the previous day. The dollar continued to decline for the third day in a row against both Group-of-10 and emerging-market currencies. Treasury yields also dropped about 10 basis points across the 2-year to 10-year zone. The US swaps market also indicates that the Fed is getting closer to cutting rates, as traders expect economic conditions to prevent additional rate increases. European bonds followed the closing moves in Treasuries, with Germany's 10-year yield down four basis points. The Adani Group crisis continued, with its stocks losing $104 billion in market value since fraud allegations were made against the conglomerate by short seller Hindenburg Research.
Key events this week:
Eurozone ECB rate decision, President Christine Lagarde press conference, Thursday
UK BOE rate decision, Thursday
US factory orders, initial jobless claims, US durable goods, Thursday
Earnings Thursday include: Alphabet, Apple, Amazon, Qualcomm
Eurozone S&P Global Eurozone Services PMI, PPI, Friday
US unemployment, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.6% as of 8:19 a.m. London time
S&P 500 futures rose 0.4%
Nasdaq 100 futures rose 1%
Futures on the Dow Jones Industrial Average fell 0.1%
The MSCI Asia Pacific Index rose 0.4%
The MSCI Emerging Markets Index rose 0.4%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.2% to $1.1009
The Japanese yen rose 0.3% to 128.57 per dollar
The offshore yuan was little changed at 6.7235 per dollar
The British pound rose 0.1% to $1.2390
Cryptocurrencies
Bitcoin rose 0.6% to $23,824.33
Ether rose 2% to $1,668.67
Bonds
The yield on 10-year Treasuries declined two basis points to 3.40%
Germany’s 10-year yield declined five basis points to 2.24%
Britain’s 10-year yield declined eight basis points to 3.23%
Commodities
Brent crude rose 0.4% to $83.21 a barrel
Spot gold rose 0.5% to $1,959.38 an ounce
What Is Nostr?
Yesterday, I tweeted, "I still have no idea what Nostr is," but today I decided to delve deeper into the buzz surrounding it. Nostr, an acronym for "notes and other stuff transmitted by relays," is a protocol that facilitates the transmission of cryptographically signed messages. It is the technology powering the Damus app, which provides a decentralized messaging network with end-to-end encryption and integrated payments. The ultimate goal of Damus is to replace Twitter as a social media platform by filling in the gaps that Twitter lacks.
Jack Dorsey, one of the most prominent figures behind Nostr, has invested $250,000 in Bitcoin to help develop the idea. This shows the level of confidence and commitment he has in the potential of Nostr to revolutionize the social media landscape. The decentralized nature of Nostr and Damus offers numerous advantages, including greater privacy and security for users and a more robust infrastructure that is less susceptible to censorship or outages.
With Nostr and Damus, the future of social media is uncertain. It remains to be seen whether Damus will be able to displace Twitter as the dominant social media platform, but the technology behind Nostr holds great promise. The decentralized messaging network, combined with the integration of payments, has the potential to change the way we interact online and provide a new level of privacy and security for users. In a world where data privacy is becoming increasingly important, Nostr and Damus may be the solution we have been looking for.
Bitcoin Died Four Times In January
Have you ever wished there was a tracker for how many times someone notable declared Bitcoin dead? Well, that’s what the Bitcoin Obituary does and it’s free to use. For an obituary to qualify, it has to follow these two rules:
The content itself (not just the headline) must be explicit about the fact that Bitcoin is or will be worthless (no “maybe” or “could”).
The content was produced by a person with a notable following or a site with substantial traffic.
In the month of January, there were a total of 4 Bitcoin deaths. The most recent was an article by Cincinnati.com titled, ‘Crypto – The Greatest Ponzi Of All Time.’ The deaths this year have been entertaining, to say the least. The lineup includes Jamie Dimon, Peter Zeihan, and Jim Cramer, along with the story above.
The clown show commences, and the clown car is getting full.
We Are Going To Find Out Who Bailed Out SBF
Upon SBF's release from incarceration, it was revealed that four individuals had co-signed his $250 million bail. While two of the signatories were identified as SBF's parents, the remaining two remained anonymous. SBF's legal team argued that disclosure of the co-signers' names would place them in danger, but after intense public pressure, a judge has ruled that the names must be made public. It is known that the two anonymous co-signers each signed bonds for amounts of $500,000 and $200,000 respectively. Although these amounts are relatively small, their disclosure will provide greater insight into SBF's connections. The revelation of these names is expected to lead to further investigation.Thanks for reading The Wolf Den! Subscribe for free to receive new posts and support my work.
The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.