June 26 REX Wire Market Outlook
Bitcoin closes above $30k, but in the TradFi markets, the picture is mixed as central banks come under fire.
Bitcoin put in a spectacular performance last week, on news of multiple spot ETF filings and a number of TradFi giants entering the space in various capacities. Whatever you believe about decentralization and the ideal of blockchain as a grassroots technology, there's no question the market interpreted this as bullish.
Bitcoin closed the week at $30,500, an impressive 16% move and over $4,000 higher than where it started. BTC put in a new local high above the April top and closed at a crucial support-resistance level. Consolidation above the $30k mark would be positive.
A Lack Of Fedability
Things are quiet in the US, but all is not well. Use of the Fed's Bank Term Funding Program (BTFP) has risen to over $100 billion. This facility essentially allows banks that are underwater on their loan books to swap distressed assets for cash at their maturity value, rather than mark-to-market—meaning banks can avoid their paper losses with no penalty.
BTFP was supposed to be a limited commitment. On March 12, the Fed stated in a press release: "With approval of the Treasury Secretary, the Department of the Treasury will make available up to $25 billion from the Exchange Stabilization Fund as a backstop for the BTFP. The Federal Reserve does not anticipate that it will be necessary to draw on these backstop funds."
It's only fair that the Fed should help, given that their assurance that interest rates would stay low for the foreseeable future gave banks the confidence to invest trillions of dollars in long-dated bonds. The Fed's poor record in forecasting interest rates is why so many banks are in trouble.
In the UK, the Bank of England is also coming under fire for its failure to curb inflation, which came in hot last week, prompting a rise to 5% interest rates. Mortgage holders who are coming to the end of deals that fixed rates when interest was low are seeing their payments triple. However, pain is being inflicted on a small subset of the market, while the rest is not impacted badly enough to curb inflation. The BoE has also seen criticism for requesting that employees do not ask for pay rises, on the grounds that this could feed through to inflation—but at the time of the worst cost of living crisis in a generation, and from failing "experts" who enjoy mid-six-figure salaries, this comes across as tone deaf.
Here Be Bears
In Russia, the Ruble hit a 15-month low (down a third in the last year) as concerns of instability following Wagner leader Yevgeny Prigozhin's aborted march towards Moscow filtered through to the market.
The German DAX is also cooling off after a double top. The German economy—consistently Europe's largest—will likely slow more than expected this year due to sticky inflation.
Overall, then, it's a mixed picture, but eyes are back on crypto properly for the first time in over a year.
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