Will the FED emulate the ECB in suggesting a slowdown in rate hikes? Could this be an opportunity for Bitcoin to break out of its range?
Meeting with the FED on Wednesday
The US central bank has never hiked rates so aggressively in its 109-year history. And it doesn’t happen smoothly.
Yields in the US government debt market ($24 trillion) experience powerful swings. The total bond value is down 23%. Unheard of since 1786! We are entering a new world…
the wall street journal reports that “the big banks and the big investment funds, which have long been important buyers, are in retreat”.
Andrew Kreicher, director at Wells Fargo, said that “Liquidity in US debt securities is about the worst he’s seen in such an extended period.”
For Jim Caron, from Morgan Stanley, “If the US Treasury market doesn’t work, nothing works”. Investment funds “rely on the ease of selling US Treasuries for quick cash so they can quickly pay margin calls”did he declare.
Why so much tension on the US debt?
One of the many reasons is the freezing of 300 billions of dollars that the Russian central bank had placed in US debt.
What if Uncle Sam was planning on not reimbursing anyone? Something to think about the foreign central banks who own 7,000 billion dollars of American debt…
That said, the main reason is inflation, which is forcing the Federal Reserve to raise its rates. Not to mention the fact that the Fed has begun the process of reducing its balance sheet by $9 trillion.
The FED does not sell the debts it holds. But it has stopped reinvesting the money from its maturing debt securities. The FED is currently reducing its balance sheet by $95 billion a month. That is a decrease of about 1% per month.
The ECB could wait until 2024. More information HERE. The BoE, which was to be the first central bank to sell bonds, triggered a mini-crisis last month.
But the old lady will do it again this week, ending 13 years of QE (£838 billion of purchased debt). A mere six billion pounds should be sold by the end of the year. Wait and see…
FED’s Pivot?
While waiting to see how the London market will react, the spotlight turns to the FED. It is rumored that Jerome Powell might suggest that future rate hikes will be less severe. The famous “pivot”.
Given the intensity of inflationary pressures, little is likely to dissuade the Fed from continuing to tighten its monetary policy. However, certain scenarios exist.
For example, a serious break in the exchanges of US debt securities. Which is far from unthinkable. Aggravation of geopolitical tensions combined with energy scarcity could easily force the FED to pull out its money printing press.
Either way, this is the first time the S&P 500 and the US 10-year Treasury bond have both fallen more than 10% in one year. We are entering uncharted waters.
Are we coming to the end of a system? Will the physical limits of growth encourage investors to leave the debt market to take refuge in the safe haven called bitcoin? That’s a lot, a lot of money…
BTC could appreciate if Jerome Powell suggests that rates will soon stop rising despite inflation continuing to climb.
Bitcoin miners in turmoil
According to Morgan Stanley, 78% of all BTC has not moved for more than six months. A record. Bitcoins are here for the long haul.
Bitcoin miners too, but unfortunately some are being taken by the throat. The rise in the price of electricity, the fall in the value of bitcoin and the arrival of new, ever more efficient machines on the market are wreaking havoc.
The largest miner in the world, Core Scientific, paid the price. The firm is on the verge of bankruptcy. Despite its economies of scale linked to its power of 22.5 million TH per second (the equivalent of 200,000 S19 Pro antminers, or even 7% of the total hashrate), Core cannot make ends meet. .
On October 27, the firm showed a debt of one billion dollars. The firm has already sold off its BTC reserves and could file for bankruptcy as early as this month.
Miner Argo also saw its stock market value plummet by more than 70% last Friday. The London miner, based in Texas as well as in Canada (Hydroelectricity), has also sold off much more BTC than its competitors in recent months.
In short, the bear market is starting to take a long time for miners who haven’t made the effort to get the cheapest electricity.
But the misfortune of some is the happiness of others. After Fidelity, BNY Melon, and many others, it is the turn of the Apollo fund to take advantage of the weakness of bitcoin to offer it to its customers. Knowing that this sulphurous $500 billion fund initially managed the pensions of CIA employees…
Glassnode Weekly On-Chain Review Summary
From graphics of the report, the following is very interesting. It allows you to visualize on which price levels all the BTCs have been obtained.
We can observe that 20% of BTC (in red) changed hands between $16,000 and $22,000. For Glassnode, this graph “certainly indicates that a resilient hodler base is actively accumulating in this area” :
GN also notes that 56% of BTC shows a latent profit and that BTC/USD “regains $21,700 to possibly signal a resumption of the upside.”
In conclusion, GN notes that “the request is not yet back” and that it will probably take the current bottom to last a little longer before discovering the next bull run.
Unless the FED takes care of it more quickly than expected.
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