Cryptic ball: roaring inflation.
This was quite the interesting Thursday in the markets. US stocks kept dumping and are practically at the yearly lows, a level which will surely be tested this Friday. Yet, bitcoin pumped and is back hovering around $30k! Why was this?
- Firstly, we can't really say the decoupling is here, as such a correlation is typically studied over longer intervals. However, it's a sign of resilience which shouldn't be overlooked, especially with the weekend ahead.
- Overall, I feel equities will remain in the red this week, but with bitcoin bears failing to take advantage of the opportunity, it may be the case we're seeing the original cryptoasset leading the way for the markets in the last week of May.
- In other words, provided that this weekend is relatively peaceful, I'm expecting a BTC-led bounce next week across all markets. That would time nicely with the June FOMC meeting FUD which should start surfacing in two weeks.
- What's that about? By June 15th, the Fed's Open Market Committee will announce the next interest rate hike, which heavily influences the markets as higher rates imply lower profits and therefore lower stock valuations.
- Even if such a hike is priced in, the current state of inflation around the world will force policy makers to urge economic caution in the weeks before that meeting, which could be aligned with an eventual stock market bottom.
After all, it's time for the Northern hemisphere to start enjoying summer, hence my expectation that the bottom isn't in yet, as it's more likely it occurs as volatility rises right before the vacations period begins or right after it ends. Let's see.
Chart art: roaring volatility.
Three things: roaring hubris.
- Paul Veradittakit discusses investing while in a bear market.
- Cole South explains why he sold the last of his BTC for ETH.
- Haseeb Qureshi perfectly summarises the rise and fall of UST.