Roundup on #crypto2023 and #macro

✅ 2023 > 2022 on liquidity
✅ 5% terminal rate
✅ China de-risk for global econ
🤔 War de-escalates
🤔 Q1 earnings, recession?

Crypto
✅ Similar to 2015 cycle
✅ Deleveraged
🚩@DCGco GBTC
🚩Imminent regulation
🤔 #ETH vs #BTC

I’m long here🐂

Voice From Authority Supports Bond Price👍
Just as fixed income were staring at the abyss again, a flurry of tweets from Bill Ackman and Bill Gross (OG Bond King) abruptly put a floor on bond prices, as they explicitly turned supportive (or at least no longer bearish) on fixed income, citing an incoming economic slowdown and recession as early as Q4.
#macro #BillAckman #FixedIncome #Recession #Q4

Crypto sector experiences reduced fundraising⚠️
Unsurprisingly, the pressure on private capital has spilled over to crypto, where the industry saw the lowest amount of fund raising since late 2020. Furthermore, valuation and exit concerns have returned to the forefront, with ~90% of fund raised deals being in Seed stage or earlier, with projects predominantly based out of the US despite the regulatory headwinds.
#PrivateCapital #Crypto #ExitConcerns #SeedStage #macro

Has Powell Shifted to A Dovish Stance?🤝
Treasury bonds continued their struggle for another day, as weakness across global fixed income and decent US economic data (Initial Claims -13k to 198k, lowest since January) pushed 10y bonds above 5% and 30y above 5.10% in the early session. However, markets definitely saw some short-covering and tactical buying of duration heading into Powell's speech, with expectations leaning towards a dovish pivot in-line with the rest of the FOMC members.
However, Chairman Powell's prepared statement and discussion didn't appear to carry too much substance and was relatively neutral, choosing to stick very close to home and towards the data-dependent / wait-and-see narrative. On one hand, he noted that "short-term measures of core inflation over 3 and 6 months are running below 3%, and "indicators of wage growth show a gradual decline towards levels that would be consistent with 2% inflation over time", which were obviously taken as dovish. On the hawkish side, he noted that persistently above trend growth and a lack of easing in the tight labour market "could put further progress on inflation at risk and could warrant further tightening". Furthermore, he dropped a line that he is not aware of any fundamental changes in how monetary policy is currently affecting the economy, and that "it may be that rates haven't been high enough for long enough". Lastly, what Powell did not do was to push back on the idea that the November meeting is 'dead' in terms of a possible rate hike, pretty much cementing expectations that the Fed will stay put for November as geopolitical tensions continue to playout.
#macro #FOMC #USEconomicData #DovishExpectations #RateHike

US PPI rises above consensus, triggering market reactions🤝
US PPI jumped 0.5% in September with a 0.3% bump in core, both above consensus expectations but a small amount. The YOY rate jumped to 2.7% for the highest print since April, with pressures coming from good prices which jumped 0.9%, energy prices jumping 3.3%, and food prices also showing 0.9% gains. Markets saw knee-jerk selling in both fixed income and equities on the print, sending the treasury yield curve 2.5bp flatter and SPX down -0.3% for its highs.
#macro #EnergyPrices #FoodPrices #TreasuryYield #EquityReactions

Geopolitical Tensions Worsen, Markets Being Affected🔴
Markets saw another classic move yesterday, starting with worsening geopolitical headlines on potential oil embargoes and sanctions, as a number of countries have cancelled their planned reception of President Biden as the tension in the region continues to escalate.
US treasuries traded heavy all morning in anticipation of the 20yr auction, fresh from the scars of last week's poor auctions which spiked yields higher across the curve. Upside beats in UK CPI hurt had already hurt European fixed income in the early session, before strong US housing building permits data (965k, 8th consecutive gain in a row) took 30y year yields to above 5% again.
#geopolitical #tension #USTreasuries #CPI #macro

Excess savings are running out, and the outlook for consumption is worrisome📢
All of this is happening against a backdrop where the pandemic-fueled excess savings have finally been run-out, with the bottom 80% of US holdeholds beginning to draw down against their savings piles. With loan delinquency starting to rise, student loan repayments due to start on October 1st, a 'higher for longer' Fed are causing a lot of discomfort over spending expectations, hence the significant underperformance of consumption related stocks along with the weakness in interest rate sensitive names.
#pandemic #excessSavings #loanDelinquency #Fed #macro

Blackrock's ETF Move and Growing SEC Confidence☕
In crypto, after working through the faux-Blackrock ETF approval news the past week, prices have finally spiked higher with a corresponding jump in volatility as traders appear to be growing more confident of a 'when, not if' spot BTC approval from the SEC.
Furthermore, a peek through the latest Blackrock iShares S-1 amendments shows that they have managed to obtain a CUSIP (registration identifier for security clearing), a requisite preparatory step for an imminent launch, as well as the creation of a "Seed Creation Basket" (similar to initial project liquidity in an AMM pool) as early as October 2023.
Media analysts have also meaningfully raised their odds for a successful ETF approval, as the SEC has now reportedly responded to applications with their comments, instead of the 'ignore and delay' approach. In addition, the US District Court of Appeals effectively ended the SEC vs Grayscale dispute with its final mandate yesterday (without a SEC appeal), putting the pressure solely back on the agency to move on with the next steps of the ETF approval as a big legal win for the crypto industry.
#macro #SeedCreationBasket #SEC #ETF #analysts

Oil futures surge, equities face multiple challenges🤔
Markets couldn't catch a break as reports of falling crude stock piles spiked oil futures to over $94, up a sizzling +7.3% over 48 hours despite the overall weakness across other asset classes. Over the past month, we have pretty much witnessed a cacophony of concerns against equities with a jump in real yields, USD strength, widening credit spreads, and a downgrade in growth forecasts. While the move in rates was no doubt the worst trigger, it has been a bit of a perfect storm for risk sentiment, and the one-sided (long) sentiment has only exacerbated the painful move lower.
#Markets #oil #equities #USDstrength #macro

Yields and S&P futures fluctuated dramatically📈
Yields spiked initially with 30yr rates touching the highest levels since 2007 shortly after the data release, with yields jumping +16bp on the initial pop with SPX futures dropping by -1.3%. However, just as risk assets were looking for another rough session, sentiment flipped on a dime by the late NY morning as yields staged a 14bp peak to trough turnaround, and S&P staging a >3-sigma intraday move with an astonishing +2.8% recovery. The USD index broke a 12-week winning streak, implied volatility fell, gasoline and industrial commodities eased to the weakest levels in a month, and Nov Fed hiking odds remained steady at just over 20% despite the solid NFP release. All-in-all, a relatively strong 'goldilocks' squeeze to close out the week.
#30yrRates #SPXFutures #USDIndex #Commodities #macro

Rate hike expectations diminish🤝
Despite the stronger labour and price data, rates traders have pretty much taken out all rate hikes for the rest of the year, with November hike odds at just 8% and December odds at under 25%. Furthermore, U-Mich consumer sentiment plunged -5.1 points to 63 in October, significantly worse than expected registering the largest decline in over 15 months. Current conditions fell to 66.7 vs 71.4 last month, while the 1yr and long-term inflation expectations echoed the bounce in CPI to trade at 4 month highs (3.8% and 3.0% respectively).
#RateHike #ConsumerSentiment #CurrentConditions #InflationExpectations #macro

Bond rallies persist while interest rate hikes may be postponed👀
However, the higher yield move would not be sustained. A continued short-squeeze in global fixed income saw a 15bp rally in UK bonds and decently well received auctions in the UK and Germany. Furthermore, dovish comments from Fed Governor Waller noted that they are "finally getting very good inflation [data]", and that the Fed is now in a position to "watch and see" on rate hikes. Following up on his dovish WSJ piece from Tuesday, Timiraos tweeted Waller's statement to suggest that the current rate move is similar to the pre-SVB yield run-off, and doing much of the financial conditions tightening work for the Fed already.
#macro #YieldMove #ShortSqueeze #FinancialConditions #WSJ

People continue to have a #bearmarket mindset, waiting for a lower low.

But the #macro has shifted.

Don't be fooled.

The CPI release led to unexpected fixed income activity📉
While the magnitude of the beat was not particularly shocking, but the wave of fixed income and risk short-squeeze this week had setup relatively lop-sided positioning heading into the number. Although equity markets held strong for much of the morning session, US treasuries clearly traded on their backfoot all-day in preparation for the 30yr auction.
Bond markets already went into the 1pm supply with a massive 13bp concession post-CPI, but a terrible auction crushed whatever risk-buying support we had left in the day. The 30yr issue tailed +3.7bp for the largest tail in 2 years, with a feeble 2.35x bid-to-cover (weakest since march) and user-demand dumping to just 81.8% for the weakest showing since Dec 2021. Bonds sold off further into the close as the yield-curve spiked between 9-16bp higher across the curve in a bear steepening manner, with the risk-off sentiment spilling over to FX (DXY +0.7%) and equities (SPX -1%).
#treasury #bondmarket #auction #marketvolatility #macro

Fixed Income Markets Rallies as NFP Signals No More Hikes🌍
Fixed income received the 'all-clear' to rally with reckless abandon post NFP, with rates cratering 15bp in the front-end without looking back, and <1yr rates dropping by ~20bp (nearly a full cut) over the past week. Markets are now pricing effectively no more hikes for the rest of the cycle, and the first cut back to be in the Mar-Jun 2024 period. Consensus expectations are for the Fed to achieve a soft-landing with waning economic activity and ever so softening pricing pressures.
#NFP #FixedIncome #PricingPressures #FedSoftLanding #macro

FOMC minutes reveal dovish tones☕
While markets were looking like it's due for a quiet day, a supposedly stale FOMC minutes showed surprisingly dovish language suggesting that policy rates have become "sufficiently restrictive" and economic risks to be two sided. Several mentions of 'policy rate peak' had surfaced, and that "the focus of policy decisions and communications should shift from how high to how long to hold the policy rate at restrictive levels". Furthermore, 'many' officials saw downsie risks to growth, despite the current resilience, and agreed that tighter credit is likely to dampen economic activity. Finally, Fed officials commented and addressed the higher 'term-premium' for the first time in their written commentary, suggesting their growing sensitivity to the subject just as the yield curve has steepened around 60bp from their July lows.
All-in-all, the comments further cemented the apparent dovish tilt we saw from Fed officials after the weekend, pushing 30 yields down by 9bp on the day and SPX jumping 1% from their intraday lows.
#macro #FOMCMinutes #PolicyRate #EconomicRisks #YieldCurve

Bond Market Reacts to Rate Decisions and Strong Data🤔
On the rates side, while Thursday provided nearly the same backdrop as Wednesday's sell-off (ECB hawkish-hold vs BoC hawkisk hold, strong GDP print vs German IFO and new home sales beats), rate markets decided to react in exactly the opposite direction because... markets exist to create the maximum pain for traders, most of the time. Off-side positioning and a short-covering squeeze likely contributed to the bond rally, with yields falling around 10bp in the belly and reversing the majority of yesterday's moves.
The ECB meeting left a hawkish impression for the most part, with President Lagarde acknowledging that long term interest rates have risen "markedly", but added no further push back that the governing council was unhappy with the move. On the US side, a decently received 7yr auction (no tail) saw a strong 2.7x bid-to-cover, the strongest since March 2020, with only 11% left to dealers and well below average and helping bond yields close back at the day's lows.
#BondMarke #Auction #YieldChanges #macro #bondyield

📌 Looking at the history, the period of August is usually not very good guys

📌 Only in Uptrend years like 2013, 2017, 2021, $BTC has a high profit.

➡️ I just asked #ChatGPT. to calculate the probability, August this year the volatility of $btc will be in the range of "+- 4.8%". This range is also reasonable as the period from late August to September will be a sensitive period for the #macro .

➡️ The next #Fed interest rate announcement in September will be a turning point, when economists expect the FED will decide to "stop raising interest rates" + the "Jackson Hole Economic" event will take place at the end of the month.

I think there is a high probability that $Btc will continue to "mortify #altcoins. " in the August period, you should still protect your wallet right now!
#Binance $ETH $BNB

Crypto markets see stability☕
Unfortunately, the excitement in macro asset classes has not translated to crypto, with BTC and ETH prices stuck in familiar ranges over the past 1.5 months, though with BTC outperforming ETH handily as Ethereum gas fees and network stats continue to soften. Outside of majors, other well known altcoins sold off by around 7% on investor indifference as daily active addresses on DeFi continued to fall, with Optimism and Avalanche seeing a 30% MoM drop over the past month.
One area that has seen a macro pass-through is in DeFi lending yields, which has been rising steadily throughout the year as higher fiat rates have slowly permeated through to crypto via the growth in RWAs.
#BTC #ETH #Altcoins #macro #DeFi

Dovish turn at the Fed with supply-demand imbalances🌍
Taking it all together, geopolitical concerns, signs of a dovish turn at the Fed, and expectations of a slowing consumer have fully emboldened the 'peak rate' narrative. While front-end yields might be capped along that line of thinking, longer-end yields will likely continue to fluctuate given supply-demand imbalance, with Treasury funding needs spiking against the backdrop of QT and stubborn inflation pressures.
#Geopolitical #FederalReserve #PeakRate #Yields #macro