BTC poised to make new highs

Thoughts of the Day

When short-term speculators buy Bitcoin futures, they pay a fee known as the futures funding rate. When funding rates are high, corrections are expected as it becomes costly to long the futures. With rates now lower, it means that speculators are not as long BTC as before. As such, BTC is likely to rise as more money flows into US BTC ETFs.

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Day Ahead

Nothing noteworthy on the horizon today.

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What Happened Yesterday

Market Movements as of New York Close 8 Apr 24

Fedspeak:
Kashkari (2026 voter, slight hawk):
“The bank cannot stop short on the inflation fight.” (Kashkari continues to run his mouth against rate cuts in 2024, previously saying that it’s possible that there may not be a cut this year.)

The US Treasury Yield curve inversion widened to 0.36% as the US 2-year bond yield rose +0.05% to 4.78% while the 10-year yield rose +0.03% to 4.42%.

The US stock futures was subdued during the Asian and London trading sessions yesterday. The US stock market opened almost unchanged from Friday. The range trading continued through the New York session as well. The S&P 500 closed almost unchanged at -0.04% (high: +0.29%, low: -0.13%), the Dow Jones edged -0.03% lower (high: +0.28%, low: -0.12%) while the Nasdaq was down -0.05% (high: +0.39%, low: -0.32%).

The crypto market rallied strongly with Bitcoin rising +2.98% and Ether up +7.21% as funding rates for BTC futures have dropped to normal levels (a good indication that leveraged long positions have mostly been liquidated).
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Headlines & Market Impact

TSMC wins $6.6 bln US subsidy for Arizona chip production

Notable Snippet: The U.S. Commerce Department said on Monday it would award Taiwan Semiconductor Manufacturing Co’s (TSMC) (2330.TW) U.S. unit a $6.6 billion subsidy for advanced semiconductor production in Phoenix, Arizona and up to $5 billion in low-cost government loans.

TSMC agreed to expand its planned investment by $25 billion to $65 billion and to add a third Arizona fab by 2030, Commerce said in announcing the preliminary award. The Taiwanese company will produce the world’s most advanced 2 nanometer technology at its second Arizona fab expected to begin production in 2028, the department said.

“These are the chips that underpin all artificial intelligence, and they are the chips that are necessary components for the technologies that we need to underpin our economy, but frankly, a 21st century military and national security apparatus,” Commerce Secretary Gina Raimondo said in a statement.

TSMC, the world’s largest contract chipmaker and a major supplier to Apple (AAPL.O) and Nvidia (NVDA.O) had previously announced plans to invest $40 billion in Arizona. TSMC expects to begin high-volume production in its first U.S. fab there by the first half of 2025, Commerce said.Also: The Biden administration plans to announce it is awarding more than $6 billion to South Korea’s Samsung next week to expand its chip output in Taylor, Texas, as it seeks to ramp up chipmaking in the U.S., two people familiar with the matter said.

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Hamas says Gaza truce talks still deadlocked despite reports of progress

Notable Snippet: A Hamas official said on Monday no progress was made at a new round of Gaza ceasefire talks in Cairo also attended by delegations from Israel, Qatar and the U.S., shortly after Egyptian sources said headway had been achieved on the agenda.

Western powers have voiced outrage over what they see as an unacceptably high Palestinian civilian death toll and humanitarian crisis in Gaza arising from Israel’s military onslaught to destroy Hamas in tiny, densely populated Gaza.

Israel and Hamas sent teams to Egypt on Sunday after the arrival on Saturday of CIA Director William Burns, whose presence underlined rising U.S. pressure for a deal that would free hostages held in Gaza and get aid to stricken civilians.

“There is no change in the position of the occupation and therefore, there is nothing new in the Cairo talks,” the Hamas official, who asked not to be named, told Reuters. “There is no progress yet.”

The security sources said both sides had made concessions that could help pave the way for a deal for a truce which – as proposed during previous talks – would be staggered over three stages, with the release of any remaining Israeli hostages and a long-term ceasefire addressed in the second stage.

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Fed rate cut expectations for 2024 fall to lowest since October

Notable Snippet: Futures traders have reduced bets on how much the Federal Reserve will cut rates this year to the lowest level since October, LSEG data showed on Monday, amid evidence of continued strength in the U.S. economy.

Fed funds futures contracts for December on Monday reflected expectations of around 60 basis points in rate cuts this year, compared to some 150 basis points that had been priced at the start of 2024. The prospect of a first 25 basis point cut in June stood at 49%, down from 57% a week ago, CME Group data showed on Monday.

Expectations for how deeply and how soon the Fed will cut rates have shifted rapidly over the last few months, as investors grow increasingly doubtful that policymakers will be able to lower borrowing costs without sparking an inflationary rebound in a strong economy. The Fed has projected it will cut rates by 75 basis points this year.

Treasury yields, which are swayed by interest rate expectations, have moved higher as a result. The benchmark 10-year yield, which moves inversely to bond prices, hit its highest level since November on Monday. Data on Friday showed unexpected strength in the labour market, the latest in a series of reports reflecting stronger-than-expected growth.

In January, policymakers introduced language saying they would keep the policy rate in its current 5.25%-5.5% range until they have “greater confidence” that inflation is headed to the Fed’s 2% goal.

The combination of strong data and limited progress on inflation in the last couple of months has amplified the calls among top officials – including Chair Jerome Powell – to be “patient” as they approach the decision on when to cut rates.

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Best,
Phan Vee Leung
CIO & Founder, TrackRecord