In a recent report by Charles Edwards, by Capriole Investments, the growing Federal Reserve War Fund and its possible implications for the Bitcoin market and cryptocurrencies were explored. While Bitcoin prepares for its reduction in half in April 2024, a Basic event that will make it more scarce than gold, understanding the macroeconomic environment becomes essential.
Why the Macro is Important for Bitcoin and Cryptocurrencies
Edwards underlines the inherent interconnection of global markets and states: “The largest markets drive smaller markets.” This symbiotic relationship is evident in the scope of cryptocurrencies, where the performance of the Altcoins is closely linked to Bitcoin’s movements. Drawing a parallel with traditional markets, Edwards clarifies: “Bonds drive actions, actions drive Bitcoin and Bitcoin drives the Altcoins.”
Contrary to the predominant feeling of an imminent recession in 2023, the stock market challenged expectations with a strong rebound. This increase was not arbitrary but was driven by the innovative integration of the usable, which has the potential to significantly increase GDP. Edwards directs attention to the Naaim exhibition index, a barometer of exposure to the actions of Naaim administrators. The current readings of this index remind those of June and October 2022, which indicated local minimums for the S&P 500.
In addition, the results of the AAII feeling survey, which are currently moderate, could provide a more convincing purchase signal if they are aligned with the Naaim exhibition index. Another metric that Edwards has in high esteem is the SET/Connect with relationship. This relationship offers information on the relative bullish or bassist character of options in the options market. A recent increase in this proportion suggests that the traditional financial market could be on the cusp of a short-term bullish movement, which Bitcoin and cryptocurrencies could follow.
However, Edwards moderates this optimism with a cautious note. To obtain a more definitive bullish signal, the S&P 500 would need to break and stay above the monthly level of resistance elementary in 4600. A consistent performance above this threshold would dissipate any notion of a transitory dead cat rebound. “
Macroeconomic Foundations: A Mixture of Things
The broader macroeconomic panorama presents a mosaic of different nuances. The markets are still assimilating the aggressive adjustment cycle, a distinctive seal of the recent monetary policy of the Federal Reserve. Now that the accumulated household savings reserve during the crown stimulus years is being exhausted, a consequent contraction of consumer spending is glimpsed on the horizon.
Edwards highlights a particularly disconcerting pair of metrics: a marked fall in manufacturing, a sector whose falls have historically been omens of recessions and consumer expense, which has not only fallen below its average growth rate of 20 years, It has done it at an alarming speed.
Other alert signals in the US economic scene include a relative increase in the cost of living as income growth, a 1% annual lean, goes behind inflation a mountain of debt of unprecedented credit cards of 1 billion increasing delinquency rates, and a contraction of net assets as housing prices decrease due to the decrease in demand.
However, despite these ominous signs, solid employment rates make any immediate proclamation of a recession premature. Edwards emphasizes the importance of the metric of “initial requests” as an indicator of unemployment trends.
However, the integration of AI in the workforce is not only a technological wonder but a potential economic change. Edwards, based on your private experience, observes a 50% increase in productivity with the help of AI. It refers to a statement by Sam Altman, executive director of OpenAI, who projects that in the near future, a single programmer, with tools such as Chatgpt and Co -Co -Noring, could rival the productivity of 20 to 30 of the current programmers.
The Federal Reserve War Fund
Aware of the economic uncertainties that are coming, the Federal Reserve has been reinforcing its defenses. The unprecedented rate increases, which catapulted the interest rates of 5% in just one year, along with a contraction in the money supply rate, have generated the most strict economic conditions ever registered and have been weighing a lot about the Commerce, bitcoin, and cryptocurrencies.
The dual strategy of the Federal Reserve of High-Interest Rates, which provides a margin to cut the rates during crises, and their recent success in reducing their stability to 1 billion dollars a whopping, are fundamental for their defensive posture. Edwards speculates on the moment of the next round of QE and suggests that, given the imminent electoral year, the Federal Reserve could be forced to deploy its liquidity arsenal before planned.
Given the required macroeconomic picture and 90% of rate increases already included in the market according to the Fedwatch of CME, Edwards postulates that the Federal Reserve could be forced to instill liquidity in the imminent future, especially if indicators such as the increase are manifested of unemployment or falling consumer spending. What will happen then should be clear to all: risk assets such as bitcoin and cryptocurrencies will recover, aligning perfectly with the reduction to half BTC.
At the time of this publication, BTC quoted at $ 26,015.
By Leonardo Pérez
