Is the worst over for BTC?

Thoughts of the Day

After breaking below 59,000 in late NY hours on Monday, Bitcoin is now hovering around 62,000. The rebound was slow but steady, giving anyone who wanted to exit their longs a chance to sell the bounce. 

Short term punters would have stopped out below 60,000 down to 59,000. As such, short term positioning should be much lighter now. 

If BTC doesn’t break lower again today, it is likely that the worst is over for the short term bulls in the near term.

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Tradertainment

Rep. Matt Gaetz introduces bill requiring the IRS to accept bitcoin as payment for federal income taxes
Florida Republican Matt Gaetz introduced a bill on Tuesday that would allow people to use bitcoin to pay their federal income taxes.

The bill would require the U.S. Secretary of the Treasury to put in place a program to allow for federal income taxes to be paid via bitcoin, Gaetz said in a statement.

“My groundbreaking legislation will modernise our tax system by allowing federal income tax to be paid with Bitcoin,” Gaetz said. “By enabling taxpayers to use Bitcoin for federal tax payments, we can promote innovation, increase efficiency, and offer more flexibility to American citizens. This is a bold step toward a future where digital currencies play a vital role in our financial system, ensuring that the U.S. remains at the forefront of technological advancement.”

On the state level, only Colorado has allowed the use of crypto to pay for taxes. Colorado’s Department of Revenue said it would accept crypto as a form of payment for business income tax and individual tax, among others, which began in September 2022.

Day Ahead

Nothing noteworthy.

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What Happened Yesterday

Market Movements as of New York Close 25 Jun 24
  • [Fedspeak]
    Cook (current voter, slight dove): “With significant progress on inflation and the labour market cooling gradually, at some point it will be appropriate to reduce the level of policy restriction to maintain a healthy balance in the economy. The timing of any such adjustment will depend on how economic data evolve and what they imply for the economic outlook and balance of risks.”
    Bowman (current voter, known hawk): “Inflation in the U.S. remains elevated, and I still see a number of upside inflation risks that affect my outlook. I have not written in further rate cuts in my statement of economic projections for the bulk of this year.”
    [Cook is tilting towards cutting rates from being apprehensive about it earlier. Bowman is as hawkish as ever.]
  • Canada’s annual inflation rate rose to +2.9% (vs +2.6% expected) from the three-year low of +2.7% in the previous month. The core inflation rate also increased to +1.8% from April’s three-year low of 1.6%. Although these figures align with the Bank of Canada’s forecast that inflation would hover around 3% in the first half of the year, the halt in the disinflation trend challenges earlier expectations that the central bank would continue easing monetary policy. The USDCAD fell -0.42% from 1.3674 t0 1.3617 in immediate reaction. 
  • The Australian Monthly CPI Indicator showed that prices rose +4.0% (vs +3.8% expected) in May, up from +3.6% in April. This increase marks the highest CPI since last November, primarily driven by a quicker rise in transport prices (4.9% compared to 4.2% in April) and housing costs (5.2% compared to 4.9%), with electricity prices notably jumping to 6.5% from 4.2% in April. The AUDUSD rose +0.43% from 0.6645 to 0.6673 in immediate reaction.
  • The US stock market opened higher from Monday.  It remained range bound for the early half of the session before drifting slightly higher in the latter half. The S&P 500 was up +0.39% on the day (high: +0.46%, low: -0.02%), the Dow Jones slipped -0.76% (high: +0.03%, low: -1.05%) while the Nasdaq gained +1.16% (high: +1.22%, low: +0.25%).
  • The crypto market recovered on the day as well with Bitcoin up +2.52% (after reaching a low of 58,456 in early Asian hours/ late New York hours a day prior) and Ether up +1.30% (after reaching a low of 3,240 in the mid New York hours a day prior). 
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Headlines & Market Impact

The yuan’s status as a global currency might be gaining ground. But top CEOs see more hurdles to clear

Notable Snippet:  For China’s yuan to be used more globally, the currency needs more “applications” such as for stocks and bonds, Bonnie Chan, CEO of Hong Kong Exchanges and Clearing Limited, said on a panel Tuesday.

Beijing has long touted its ambitions for increasing global use of the Chinese yuan — also known as the “renminbi” or “RMB” — in an international financial market where the U.S. dollar

 is the dominant currency. U.S. sanctions on Russia have also increased the pressure on some countries to have alternatives to the greenback.

“We’re not just going to hold on to a bunch of RMB and put it into this bank account,” she said. “You want to have bonds, you want to have equities, etc.”

“One of our strategic imperatives [has] been changed to make sure that we continue to produce more RMB-denominated security products,” Chan said, “so that investors around the world can actually see more applications of the RMB and be able to use those as the medium to store wealth in the form of the RMB.”

Chinese companies have long sought to tap U.S. financial markets for the prestige and greater market liquidity they offer, but increased regulatory scrutiny by both Beijing and Washington, D.C., has drastically slowed such listings in the last three years.

Chan said so far this year the Hong Kong exchange has received 73 new listing applications — a 50% increase versus the second half of last year, she said. “The pipeline is building up nicely,” she said, noting about 110 IPOs in total are in line. “All we need is a set of good market conditions so these things get to launch and price nicely,” she added.

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US consumer confidence retreats slightly; house prices remain elevated

Notable Snippet:  U.S. consumer confidence eased in June amid worries about the economic outlook, but households remained upbeat about the labour market and expected inflation to moderate over the next year.

The mixed survey from the Conference Board on Tuesday also showed consumers’ perceived likelihood of a recession over the next 12 months retreated this month after rising in April and May.

Though fewer consumers planned to buy vehicles and household appliances over the next six months, more planned to go on vacation. Labour-market resilience is driving consumer spending, underpinning the economy despite the Federal Reserve’s hefty interest-rate hikes in 2022 and 2023 to quell inflation.

“The mild decrease in confidence isn’t consequential and we think there are sufficient tailwinds to keep consumers spending,” said Oren Klachkin, financial market economist at Nationwide. “The economy is on a glide path to normalised conditions.”

The Conference Board’s consumer confidence index dipped to 100.4 this month from a downwardly revised 101.3 in May. Economists polled by Reuters had forecast the index slipping to 100.0 from the previously reported 102.0.

Higher mortgage rates and house prices are stifling demand. A report from the Federal Housing Finance Agency on Tuesday showed single-family house prices rose 0.2% month-on-month in April after being unchanged in March. In the 12 months through April, house prices increased 6.3% after advancing 6.7% in March.

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Bank of Japan opens door for a hawkish double surprise

Notable Snippet: The Bank of Japan is dropping signals its quantitative tightening (QT) plan in July could be bigger than markets think, and may even be accompanied by an interest rate hike, as it steps up a steady retreat from its still-huge monetary stimulus.

Hawkish hints delivered over the past week highlight the pressure the central bank faces in the wake of renewed yen falls, which could push inflation well above its 2% target by raising import costs.

Notwithstanding a market shock or severe economic downturn, a rate hike would be on the table at each policy meeting, including July’s, said three sources familiar with its thinking.

“Given what’s happening with inflation, interest rates are clearly too low,” said one of the sources. “Much depends on upcoming data, but a July rate hike is a possibility,” another source said, a view echoed by a third source.

Hiking rates at the July 30-31 meeting could have a huge impact on markets, as the BOJ also intends to announce a detailed plan on how it would trim its massive bond buying and reduce the size of its $5 trillion balance sheet.

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Best,
Phan Vee Leung
CIO & Founder, TrackRecord