Dispatch #210: Navigating North - Bitcoin and the Rate Cut
Sep 20, 2024โข4 min read
In this patch of your weekly Dispatch:
- Assets Touch All-time Highs โฐ๏ธ
- A New Solana Phone ๐ฑ
- A Huge BTC Stash ๐ฐ
The Big Ideaย
A Dance of Digital Gold and Dovish Dollars
The tension was almost palpable as Bitcoin crept up towards $60,000, peaking just above $62,000 โ just as most of our savvy readers predicted in our regular poll! It was another volatile week as the Federal Reserve announced its highly anticipated 50 basis point rate cut, its first in four years. This marks a shift away from the restrictive policies aimed at battling inflation. Here are the viewpoints that matter:
The Market Mover: Fed Chair Jerome Powell explained that inflation is moving toward the Fedโs 2% target, which has allowed for this policy pivot. He also noted that the Committee now views inflation and employment risks as โroughly in balance,โ signaling a more optimistic outlook from the central bank on both fronts.
Future Projections: Traders are betting this cut wonโt be the last. On Polymarket, bettors are pricing in a 65% chance of a 25 basis point cut in November, with a 26% chance of a larger 50 bps cut. Looking further ahead, thereโs strong consensus for additional easing in December, with a 50% chance of another 25 bps cut and a 33% chance of a 50 bps one.
In the Charts: Technically, Bitcoinโs rally from $57,675 to $61,330 has yet to spark full bullish sentiment. The futures premium remains at 6%, only slightly above neutral, while the 25% delta skew in options markets shows a balanced demand between puts and calls. This neutral tone indicates traders are cautious, waiting to see if $61,000 can hold as a support level.
So, where does that leave Bitcoin amidst these macroeconomic moves and market shifts? According to Decrypt, where a Nexo expert tuned in, itโs all about liquidity and volatility. And BlackRockโs latest memo paints a glowing picture too: despite occasional market hiccups, Bitcoinโs resilience stands out.ย
Bitcoin has outpaced major asset classes in seven of the last ten years. No Big Ideas this time for the HODLers on Nexo โ just a smooth operation from Bitcoin.
The Latest Inโฆ
Stocks and Gold Rise
That tension in the Bitcoin charts meant a full-on price surge in other markets. On Tuesday, the S&P 500 hit a record high of 5,670.81, surpassing its July peak as investor worries about the U.S. economy eased. The index rose 0.7% on the back of a robust retail sales report and anticipation of the Fedโs rate cut. The S&P is now up more than 10% from its August low, reflecting renewed optimism.
Gold also made headlines, initially climbing to a record $2,600.11 per ounce following the Fed's aggressive 50 basis point cut. However, it retraced later in the day, settling at $2,559.15 per ounce.
The Latest Inโฆ
Ethereum: โThe Microsoft of Blockchainsโ
Ethereum has faced a tough year in 2024, with its ETH/BTC ratio hitting three-year lows, recently dropping below 0.04. Yet, media reports that itโd be foolish to dismiss it, as Ethereum might be a contrarian investment opportunity. Bitwiseโs words, not ours.
Bitwise CIO Matt Hougan notes that while Ethereum is currently out of favor, its foundational strengths make it a heavyweight in the crypto space. โPeople might end up looking silly if they dismiss Ethereum now,โ he warns, likening it to the โMicrosoft of blockchains.โ Hougan argues that Ethereum's dominance in stablecoins, DeFi, and dev activity positions it well for a comeback.
The Latest Inโฆ
Seeking Your New Phone?
Solana Mobileโs new โSeekerโ phone has already seen over 140,000 presales ahead of its 2025 launch. Priced at $450 for early birds, this web3-focused device features a Seed Vault Wallet for secure transactions, an updated Solana dApp Store, and the Seeker Genesis Token, offering exclusive perks within the Solana ecosystem. The only thing missing is a special "HODL" button that locks your phone for a year to prevent panic selling. ๐คท
The Latest Inโฆ
Bhutan on the Bitcoin Map
The Royal Government of Bhutan holds a hefty 13,029 BTC, valued at $755ะ, making it the fourth-largest government Bitcoin holder globally. Bhutan also holds 656 ETH, worth around $1.5ะ. This impressive accumulation comes not from seizures but from the Himalayan kingdomโs active Bitcoin mining, led by state-owned Druk Holding & Investments.
Since starting its mining operations in February 2021, Bhutan has expanded its efforts significantly, utilizing hydroelectric power. The countryโs mining capacity is set to increase sixfold by mid-2025, thanks to a recent partnership with Bitdeer Technologies. Bhutan's Bitcoin holdings surpass El Salvador's 5,800 BTC but fall short of the UK's 61,000 BTC.
The Weekโs Most Interesting Data Story
Bitcoinโs Equilibrium
The Sell-Side Risk Ratio, which tracks realized profit and loss against Bitcoin's Realized Cap, is currently at a low level, suggesting equilibrium in the market. This indicates that few coins are being sold for profit or loss, pointing to a low-volatility environment. With Bitcoinโs price oscillating in a narrow range for months (similar to a coiling spring) heightened volatility is expected. Only two instances since 2016 have shown a tighter 180-day price range, signaling that the market may be primed for a breakout.ย
Now, what could be the catalyst?
Hot Topics
What the Community is Discussing:
Donโt believe every caption you read.
Remember when they started hiking rates?
A long answer to a short question. Tweet /13 is the TL;DR.
What to Watch for Next Week:
A higher range for Bitcoin?
Could tokenization boost Ethereum?
The first signs of a new economic cycle?