Market update

There are mixed signs on the health of the US economy, with Morgan Stanley CIO Mike Wilson stating that a “credit crunch has started” due to a very sharp decline in lending related to the collapse of Silicon Valley Bank. Balancing that out, BlackRock CEO Larry Fink said that the large amount of stimulus flowing into the economy will prevent “a big recession” (though a small one will probably happen). We’ll get a better view of what’s happening soon, with Morgan Stanley, Netflix, and Tesla all set to report first-quarter results this week. Bitcoin threatened the US$31K mark (A$46K) but finished the week close to where it began at A$44K (US$29.5K). Ethereum surged to an 11-month high following its latest upgrade topping US$2,100 (A$3,130). It remains up 9.2% on last week at A$3,100 (US$2,080). XRP finished the week flat, Cardano gained 10.1%, Dogecoin (8.5%) and Polygon (3.3%). The Crypto Fear and Greed index is at 69 or Greed.

After trading around the US$28K (A$42K) mark for three weeks, Bitcoin surged overnight and has broken the US$30K barrier. US nonfarm payroll employment figures suggest unemployment is rising more slowly than predicted, which raised market expectations the Fed may hike rates again. However, the CPI figures due this week are expected to show inflation falling to 5.1% and, complicating matters even further, earning season is kicking off which could highlight weakness in the economy. Edward Moya, the senior market analyst at Oanda, told clients this week could be pivotal. “This is the week that could tell us that the US consumer is no longer showing resilience and in fact is rather weak,” Moya wrote. Michael Saylor’s Microstrategy bought another 1,045 BTC and now owns 1 in every 150 Bitcoin ever created. Bitcoin is up 8% on a week ago to trade at A$45k ($30.1K) while Ethereum was up 6.2% to trade at $2,895 (US$1,920). XRP gained 4.1%, Cardano (2%), Dogecoin lost 12.6% after the latest Elon Musk/Twitter pump subsided and Polygon gained 2.1%. The Crypto Fear and Greed Index is at 62, or Greed.

Signs suggesting that inflation is coming down and interest rate hikes will pause are gathering, with the February US Personal Consumption Expenditures (PCE) index modestly beating expectations in some areas. The White House claimed inflation: “Was down by nearly 30 percent from this summer, against a backdrop of low unemployment and steady growth.” Closer to home, inflation has fallen to 6.8%, which is the best reading in eight months. Analysts are now looking ahead to a potential “Fed pivot” when rates start to decrease. The average one-year return for the S&P 500 following a pivot since 1984 was 18.9% (although the data is more mixed further back.) Bitcoin finishes the week up 2.8% to trade around A$41,170 (US$27.9K), and Ethereum gained 5.7% to trade around A$2670 (US$1810). Ripple gained $5.3%, Cardano was up 13.2%, Dogecoin gained 30.2% thanks to Elon Musk (again), and Polygon was up 5.6%. The Crypto Fear and Greed Index is at 63, or Greed. Historically speaking, April is a good month for crypto prices, with monthly gains in six of the last 10 years averaging 17%, according to Matrixport.

Bitcoin sank below US$27K (A$40.5K) today as news emerged the war on crypto has expanded to Binance, but it has since recovered slightly. It finishes the week down 3.3% to trade at A$40,790 (US$27.1K), while Ethereum is down 2.5% to A$2570 (US$1710). MicroStrategy is still a believer, though, buying another 6455 BTC for US$150 million (A$225M). It was a mixed picture on markets at the time of writing, with Ripple up 26.3% for the week, Cardano up 2.5% and Dogecoin (1.2%). Polygon fell 6.7%, Solana lost 11.8%, and Polkadot was down 4.8%. US interest rates have risen to 5%, with markets evenly divided between those expecting a 25bps increase at the next meeting and those expecting a pause. Bitcoin’s hashrate briefly spiked to almost 400 exahash and is currently at 335 EH/s. The Crypto Fear and Greed Index is at 64 or Greed.

A long-held fantasy of Bitcoiners appears to be coming true (at least in a small way), with Bitcoin surging in the midst of fears over the collapse of the banking sector. Bitcoin is up 40% since the crisis began and reclaimed the US$28K (A$41.7K) mark this week for the first time since June 2022. The Crypto Fear and Greed Index has topped 66 (Greed), the highest level since November 2021 (Bitcoin’s ATH). The crisis has lessened the chances of further steep interest rate rises in the US, with the market tipping a 25-basis point rise this week. What some characterise as backdoor money printing from the Fed’s Bank Term Funding Program (BTFP) may also be having an impact. The overall crypto market cap is A$1.74T (US$1.17 trillion). Bitcoin surged 16.3% this week and is currently trading at A$41,760 (US$27,980), while Ethereum was up 4.3% to US$2,620 (US$1,755). Bitcoin is leaving the other coins in the dust, with Ripple flat, Cardano down 3.5%, Polygon (-6.3%) and Dogecoin (-1.9%). Solana increased by 10%.

You might have assumed three crypto-linked banks collapsing and the government taking aim at crypto mining would put downward pressure on markets, but you’d be wrong. So is it really ‘long Bitcoin, short the bankers’ as economist Alex Kruger tweeted today, alongside a graph of bank stock prices plunging by double digits and Bitcoin surging? As usual, nobody is 100% sure, and there are a lot of moving parts: traditional markets now expect interest rate hikes to be lower to avoid putting more pressure on the banking system. USDC’s wobbles this week have woken Bitcoiners up to the fact it might not be a safe place to park money and some investors have been converting to BTC.