The global rate-cutting cycle kicked off with the Bank of Canada and the European Central Bank leading the charge. The Bank of Canada slashed the overnight rate by 25 basis points, suggesting more cuts could follow if inflation continues to fall. The next day, the ECB also cut rates by 25 bps but took a more hawkish stance on future cuts due to persistent high inflation. The timing of the rate cuts is intriguing, as higher inflation forecasts typically lead to more hawkish policies. However, keeping interest rates low can reduce debt-to-GDP ratios and allow the economy to deleverage without severe economic pain, although it may lead to currency devaluation.
Bitcoin ETFs have been attracting significant inflows, with US spot bitcoin ETFs recording net inflows for 19 consecutive trading days before the streak ended. The largest bitcoin ETF, BlackRock’s iShares Bitcoin Trust, has seen net inflows on 91 days out of 104, totaling $21.2 billion in assets. More companies are buying bitcoin for their treasuries, following in the footsteps of MicroStrategy, which started hoarding bitcoin in 2020. Tesla and other firms have also added bitcoin to their balance sheets, with the new FASB accounting rules making it easier for corporations to hold bitcoin. This strategy is becoming popular amid inflation concerns and the search for inflation-proof assets.
As the market awaits the FOMC meeting and CPI report, investors are focused on the historical impact of FOMC weeks on equity prices. The S&P 500’s total yearly return used to come in the three days surrounding FOMC meetings, but this trend has shifted in recent years. Analysts are expecting May’s CPI report to show a slight increase in prices, which should have minimal impact on markets. Regardless of the CPI report, investors are eagerly awaiting what Jerome Powell and the Fed will announce in terms of interest rates and future projections.
Regulatory hurdles have not dampened the resilience of crypto companies, as Consensys legal chief Bill Hughes noted. Fidelity International joined JPMorgan’s Tokenized Collateral Network, tokenizing shares of its money market fund through the network built on JPMorgan’s private blockchain network. In other news, a new book on the WallStreetBets subreddit is available just in time for Roaring Kitty’s latest market-moving comments.
Considering the ongoing global rate-cutting cycle, growing interest in bitcoin ETFs, and the anticipation surrounding the FOMC meeting and CPI report, the financial markets are experiencing a period of heightened activity and uncertainty. As central banks navigate high inflation rates and economic challenges, investors are seeking safe-haven assets like bitcoin and closely monitoring regulatory developments in the crypto space. With the potential for interest rate adjustments, the outcome of the FOMC meeting and CPI report will provide crucial insights into the market’s direction in the near future.
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