Why is Crypto so weak?

Thoughts of the Day

Despite recent BTC struggles, it remains above February highs and is just about 12% from all-time highs. What has been driving the market is the sudden explosion of interest in random memecoins (which serve no purpose and are usually animal-themed). Grayscale BTC Trust saw record daily outflows yesterday of $642.5 mil. The short-term picture may look challenging, but the overall trend of new inflows into this asset class remains intact.

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Day Ahead

The Bank of Japan is expected to end its negative interest rates policy by hiking the policy rate from -0.1% to 0%.

The Reserve Bank of Australia is expected to keep interest rates unchanged at 4.35%.

The Canadian Consumer Price Index is expected to show that prices rose +3.1% Year-on-Year, up from +2.9% in Jan. 

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What Happened Yesterday

Market Movements as of New York Close 18 Mar 24

The RBA kept interest rates unchanged at 4.35% as expected. The RBA cited high inflation as a reason to keep interest rates at this level. However, it also noted that the economic outlook remains uncertain as household consumption growth remains particularly weak. The AUDUSD rose more than +0.2% on the policy decision.

The Bank of Japan ended its eight years of negative interest rates during its March meeting as expected as the negative rate policy has fulfilled its purpose. The BoJ expects inflation to remain above 2% through 2024. However, the BoJ will continue its purchase of JGBs unchanged. The USDJPY rose more than +0.2% on the policy decision.

The Euro Area consumer price index showed that prices rose +2.6% on an annual basis as expected, marking the lowest point in three months, yet still surpassing the European Central Bank’s +2% objective. The core inflation rate, excluding volatile items, decreased for the seventh consecutive month to +3.1% in February 2024 as expected, reaching its lowest level since March 2022, down from +3.3% in January. Month-over-month, consumer prices saw a rise of +0.6% in February as expected, after experiencing a -0.4% decline in January. Reaction in the EURUSD was muted.

The US Treasury Yield curve inversion narrowed to 0.39% as the US 2-year bond yield rose +0.01% to 4.73% while the 10-year yield increased +0.03% higher to 4.34%. 

The US stock futures rose steadily through the Asian and London trading hours possibly due to news of possible collaboration between tech giants, Google and Apple.. Google (+4.60%) rose premarket following reports that Apple may use Gemini to power iPhone features. The S&P 500 futures were up +0.77% when the New York session began.

The US stock market opened higher from Friday. It then continued higher during the early New York session but markets started dipping slightly in the latter half. As a result, the S&P 500 rose +0.63% (high: +1.14%, low: +0.55%), the Dow Jones edged +0.20% (high: +0.47%, low: +0.12%) while the Nasdaq climbed +0.99% (high: +1.77%, low: +0.93%).
Nasdaq futures came off -0.25% after Nvidia CEO Jensen Huang’s keynote address at its AI conference did not unveil details that were impressive to the general public. 

The crypto market continues to trade on the backfoot with BTC dropping -1.2% and ETH falling -3.4%, despite strong inflows into the US BTC ETFs last week. The Asian session started off weaker (BTC [-3.0%] and ETH [-3.5%]) on news that Grayscale BTC Trust had record outflows of $642.5 million yesterday. It remains to be seen if this outflow will be offset by inflows into Blackrock’s IBIT as the data gets published later in the day.
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Headlines & Market Impact

Nvidia unveils flagship AI chip, the B200, aiming to extend dominance

Notable Snippet: On a hockey arena stage in the heart of Silicon Valley, Huang introduced Nvidia’s latest chip, which is 30 times speedier at some tasks than its predecessor.

He also detailed a new set of software tools to help developers sell AI models more easily to companies that use technology from Nvidia, whose customers include most of the world’s biggest technology firms.

Nvidia’s chip and software announcements at GTC 2024 will help determine whether the company can maintain its 80% share of the market for AI chips.

“I hope you realise this is not a concert,” Huang said, wearing his signature leather jacket and joking that the day’s keynote would be full of dense maths and science.

It was a nod to how Nvidia, once mostly known among computer gaming enthusiasts, has earned recognition on par with tech giants like Microsoft (MSFT.O) and has become a Wall Street standout, with sales that more than doubled in its most recent fiscal year to surpass $60 billion.

Nvidia’s new flagship chip, called the B200, takes two squares of silicon the size of the company’s previous offering and binds them together into a single component.

While the B200 “Blackwell” chip is 30 times speedier at tasks like serving up answers from chatbots, Huang did not give specific details about how well it performs when chewing through huge amounts data to train those chatbots – which is the kind of work that has powered most of Nvidia’s soaring sales. He also gave no price details.

Nvidia also is shifting from selling single chips to selling total systems. Its latest iteration houses 72 of its AI chips and 36 central processors. It contains 600,000 parts in total and weighs 3,000 pounds (1,361 kg).

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Big Oil executives push back against calls for fast energy transition

Notable Snippet: Big oil companies including BP and Equinor have written down renewable energy projects and others have been forced to push back their greenhouse gas reduction targets due to greater uncertainties with the transition to clean fuels.

That and unexpected strong demand for oil has stiffened the industry’s opposition to government and activist demands to phase out fossil fuel development. Policymakers also have shifted their focus to energy supply security and affordability since Russia invaded Ukraine and during the latest conflict in the Middle East.

“We should abandon the fantasy of phasing out oil and gas, and instead invest in them adequately” to reflect demand, Amin Nasser, CEO of Saudi Aramco, the world’s largest oil producer, said to applause.

Despite the growth of electric vehicles, solar and wind power, oil demand this year will reach a new record of 104 million barrels per day this year, Nasser said.

Alternative energy has yet to show it can displace hydrocarbons at current requirements or prices, Nasser added. He rejected the International Energy Agency forecast of peak oil demand in 2030.

Other oil CEOs echoed his view, with Shell’s Wael Sawan pointing to government bureaucracy in Europe as slowing needed development. Petrobras CEO Jean Paul Prates said caution should overrule haste. Exxon Mobil CEO Darren Woods also said regulations governing clean fuels have still not been resolved.

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China kicks off the year on strong note as retail, industrial data tops expectations

Notable Snippet: China’s economic data for the first two months of the year beat analysts’ expectations across the board on Monday.

Retail sales rose 5.5%, better than the 5.2% increase forecast in a Reuters poll, while industrial production climbed 7%, compared with estimates of 5% growth.

Fixed asset investment rose by 4.2%, more than the 3.2% estimated by analysts.

The unemployment rate in February for cities came in at 5.3%.

Online retail sales of physical goods rose 14.4% from a year earlier during the first two months of the year.

Investment into real estate fell 9% in the first two months of the year from a year ago. Investment in infrastructure rose by 6.3% while those in manufacturing increased by 9.4% during that time.

Despite the upbeat results, National Bureau of Statistics Spokesperson Liu Aihua cautioned that domestic demand remains insufficient.

She told reporters that real estate remains in a period of “adjustment,” and that the overall economy is “in a critical period of recovery, transformation and upgrading,” according to a CNBC translation of her comments in Mandarin.

When asked about the unemployment rate for people aged 16 to 24, Liu said the figures would be released a few days after the monthly press conference on economic data.

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Phan Vee Leung
CIO & Founder, TrackRecord