The Wolf Den #698 - All "Fed" Up
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In This Issue:
All “Fed” Up
Bitcoin Thoughts And Analysis
Legacy Markets
Coinbase To Sue The SEC?
The White House Doesn’t Get It
Justin Sun Sued By SEC
Hackers Gonna Hack
All “Fed” Up
Leading up to the Fed's interest rate decision yesterday, there were effectively two choices for them to pick from - does the committee decide to shoot its left foot or its right foot? If we continue with the metaphor, we can think of its left foot as runaway inflation and its right foot as the banking sector.
There were a number of outcomes that could have unfolded for markets in relation to the final hike decision, the rationale, and the tone, but no matter how you slice it up, the system is toast. With the Fed in charge, we live in a lose-lose financial world.
The Fed is backed into a corner. They are reacting to lagging data, when every forward looking metric shows inflation already collapsing. They should have likely paused or pivoted months ago.
Even if you believe that inflation is still rising, then doing nothing would have only accelerated inflation in your view. A raise in rates (which happened - 25bps) could further asphyxiate weak banks and cause more things to break.
So the end result? We can no longer walk on our right foot.
The issue here is that the Fed only seems to care about inflation and the labor market, and every other crack in the system is not their concern, problem, or fault. To be fair, those two items are their explicit mandate, but they cannot operate in a vacuum.
Here's a play-by-play.
To kick off the press conference, Powell acknowledged the banking crisis.
"Serious difficulties at a small number of banks have emerged and if left unaddressed, can undermine confidence in healthy banks and threaten the ability of the banking system as a whole to play its vital role in supporting the savings and credit needs of households and businesses."
This opening is promising, but once the Q&A began, and the right questions were asked, we learned just how blind the Fed is to its actions.
"Let me say what I think happened, at a basic level, SVB management failed badly, they grew the bank very quickly and exposed the bank to significant liquidity risk and interest rate risk and didn't hedge that risk. Supervisors saw these risks and intervened and the public saw all of this too. SVB experienced an unprecedented and rapid bank run, faster than the historical record would suggest. We need to strengthen supervision regulation."
This late point in the meeting was the turning point that mattered the most. The Fed had no idea the monster it would create when it turned on the money printer in 2020 and now it has no idea its actions are destroying the banking system. To describe the banking system, Powell said, "our banking system is sound and resilient, with strong capital and liquidity." If you ask me, the Fed is doing nothing more than trying to calm our nerves, while they turn around and rip apart the financial system.
Not good.
I could go further into what the 25bps decision means, the tone, the vocabulary used, and even Powell's hand gestures, but it would be a waste of time. These meetings are nothing more than a charade that screams - Buy More Bitcoin. It's as simple as that. As expected, bank stocks further deteriorated after the meeting, and we probably will see more pain there to come in the following weeks.
As always, Bitcoin is the answer, so opt out of the circus while you can, before you lose an arm, a leg, or both feet.
Bitcoin Thoughts And Analysis
As expected, we saw volatility around the FOMC rate hike, only see price start to float back towards $28,000.
$28,600 remains the key level, which price traded slightly above very briefly before the FOMC temporarily ruined the party.
If you had ignored all of the news and focus on the chart, you would have seen some bearish divergence on every time frame from the daily down… and now you would see potential hidden bullish divergence printing.
Still nothing to do here between $25,212 and $26,800.
Legacy Markets
European stocks fell, primarily due to banking sector losses, as investors evaluated key rate decisions in the region. Meanwhile, US equity futures rose, indicating recovery after Wall Street's significant losses on Wednesday. The Stoxx Europe 600 Index dropped 0.6% ahead of the Bank of England's policy announcement. Swiss and Norwegian central banks raised rates as predicted and signaled further hikes. Treasury Secretary Janet Yellen stated that the US government isn't considering "blanket" deposit insurance to stabilize the banking system, leading to a rapid drop in banking stocks. The dollar experienced its longest losing streak since April 2021, and Asian markets saw a 1% increase in share index as Hong Kong and mainland China rallied.
Key events this week:
Eurozone consumer confidence, Thursday
BOE interest rate decision, Thursday
Swiss National Bank rate decision and press conference, Thursday
US new home sales, initial jobless claims, Thursday
US Treasury Secretary Janet Yellen testifies to a House Appropriations subcommittee, Thursday
Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
US durable goods, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 fell 0.5% as of 9:13 a.m. London time
S&P 500 futures rose 0.6%
Nasdaq 100 futures rose 1%
Futures on the Dow Jones Industrial Average rose 0.4%
The MSCI Asia Pacific Index rose 1.3%
The MSCI Emerging Markets Index rose 1.6%
Currencies
The Bloomberg Dollar Spot Index fell 0.4%
The euro rose 0.4% to $1.0899
The Japanese yen rose 0.3% to 131.11 per dollar
The offshore yuan rose 0.5% to 6.8236 per dollar
The British pound rose 0.5% to $1.2332
Cryptocurrencies
Bitcoin rose 1.1% to $27,704.88
Ether rose 1.1% to $1,756.07
Bonds
The yield on 10-year Treasuries advanced four basis points to 3.48%
Germany’s 10-year yield declined four basis points to 2.28%
Britain’s 10-year yield was little changed at 3.45%
Commodities
Brent crude fell 0.3% to $76.46 a barrel
Spot gold rose 0.4% to $1,977.39 an ounce
Coinbase To Sue The SEC?
Here we go.
Coinbase received a Wells notice from the SEC focusing on their staking and asset listings. I could summarize the situation, but Armstrong’s thread above covers it all - read it.
Let’s hope Coinbase goes after the SEC with everything they have. They will bury the SEC in court. They have the war chest and facts on their side. The judicial system has been dunking on the SEC in every available situation. Let’s go.
The White House Doesn’t Get It
I mentioned this yesterday, but want to make sure you were able to see it.
The White House has just released the annual Economic Report of the President, a comprehensive document authored by the Chair of the Council of Economic Advisers. The report outlines the administration's views on a range of subjects, including cryptocurrency, which is met with skepticism.
Spanning 513 pages, the report contains nine chapters, one of which is solely dedicated to crypto. Though the administration's stance is critical, it devotes considerable attention to the topic. The 50-page section delves into the complexities of cryptocurrencies, and we will share some key insights about the administration's perspective.
“It has been argued that crypto assets may provide other benefits, such as improving payment systems, increasing financial inclusion, and creating mechanisms for the distribution of intellectual property and financial value that bypass intermediaries that extract value from both the provider and recipient. Looking under the hood at these arguments, however, shows a more complicated picture. So far, crypto assets have brought none of these benefits.”
“Indeed, crypto assets to date do not appear to offer investments with any fundamental value, nor do they act as an effective alternative to fiat money, improve financial inclusion, or make payments more efficient; instead, their innovation has been mostly about creating artificial scarcity in order to support crypto assets’ prices—and many of them have no fundamental value.”
What a crock of sh*t.
Justin Sun Sued By SEC
Yesterday, the SEC announced civil charges against Justin Sun and several celebrities for their involvement in the sale and promotion of unregulated securities. Unfortunately for Sun, the SEC is not an entity he can buy, but given his penchant for spending money, it is likely that he will prolong the legal process as much as possible.
The allegations state that Sun participated in market manipulation and the unregistered offer and sale of TRX and BTT securities. This misled the public into thinking that the promoting celebrities had unbiased interests, when in fact they were all paid spokespeople.
Celebrities implicated in this case include Lindsay Lohan, Jake Paul, Soulja Boy, Austin Mahone, Michele Mason, Lil Yachty, Ne-Yo, and Akon. The SEC reports that all the celebrities involved, with the exception of Mahone and Soulja Boy, have settled the charges, amounting to over $400,000 in total. They have neither admitted nor denied the SEC's findings.
Hackers Gonna Hack
Yesterday afternoon, Dante Disparte's Twitter account was hacked, and a fraudulent airdrop announcement was posted. The tweet targeted users affected by the de-peg, stating, "We are pleased to announce that we will be distributing a one-time bonus of USDC to all existing holders. This bonus is our way of thanking you for your continued support and trust in USDC." Typically, hacks like these lead directly to wallet draining, which is why it is crucial to verify any major news announcement before taking action. Remember, there is no such thing as "free money."
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.
Thank you Mr. Melker for another great issue! Really informative. Wishing you all the best, William