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July 24 REX Wire Market Outlook
A mixed picture emerges, but optimism about the economy is increasing as a "soft landing" becomes a real possibility.
It's been a mixed picture for the global economy over the past week. As ever, we focus on the US—not only as the world's largest economy but the one that matters the most for crypto—but take other major developments into account.
Likelihood Of Recession Falls
Concerns around the feared hard landing are subsiding. Research by Goldman Sachs puts the probability of a recession in the next 12 months at 20%, down from earlier estimates of 25%, as the bank believes that the Fed will succeed in its goal of reducing inflation without causing serious damage. It's worth noting, though, that other forecasters are not as optimistic.
"That’s still slightly above the unconditional average post-war probability of 15% — a recession has occurred approximately every seven years — but far below the 54% median among forecasters in the latest Wall Street Journal survey (which is down from 61% three months ago)."
Traders as a whole are also betting on calm. The VIX (CBOE's Volatility Index, which measures the implied volatility of S&P 500 stock options for the next 30 days) is at its lowest since the start of 2020, before the COVID crash. The "Fear Index" is registering down at the "chilled" end of the spectrum (though hopefully not complacency).
It hasn't all been good news. The first set of Big Tech firms to report Q2 results have undershot their estimates, pushing the NASDAQ down. Squeezed consumers are reducing their discretionary spending on things like Netflix and new electronics. On the other hand, AI is still driving the narrative; Microsoft hit all-time highs as it unveiled its new Copilot project, which comes with a $30 monthly charge per user.
Elsewhere, UK stocks rallied as inflation came in merely hot, rather than scorching. Chinese equities fell significantly, as weak economic growth and deflation were confirmed as serious concerns.
Bitcoin Clings To Support
Having spent weeks in the $30-31k range, BTC dipped towards the end of last week and looked to be in danger of falling further. As often happens, though, the last few hours of Sunday saw a recovery, and bitcoin closed the week just above $30k.
It immediately dropped again, to around its current level of $29,800, but that weekly close—arbitrary though it seems—is important for bots and the indicators traders use to make decisions.
All eyes will be on the FOMC meeting this Wednesday. Bitcoin usually reacts fairly strongly to these events, but on this occasion the market is expecting a 25 bps rise (to 525-550) with 99.8% confidence. If it comes in as expected, there will be few traders left to reposition. (Anything different would, of course, be a huge surprise, but that seems unlikely at this point.)
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Bitcoin clings to 30k and dumps