Bitcoin
Bitcoin stands to gain from US fiscal dominance, Trump victory: StanChart
da-kuk/E+ via Getty Images
There is a growing risk of fiscal dominance in the US, with ever-increasing debt and deficits likely on an unsustainable path, and that should be good news for bitcoin (BTC-USD), according to Geoff Kendrick of Standard Chartered. Donald Trump’s victory in the presidential election would also be a boon for digital assets, he added.
Fiscal dominance is an economic condition that occurs when governments’ fiscal actions overshadow the independence of monetary policy. This, in turn, potentially harms the ability of central banks to control inflation, as they would be forced to accommodate government spending.
Such a scenario would likely have several implications for the Treasury yield curve:
- The yield spread between the 2 years (USA2A) account and the 10-year invoice (US10A) the grade increases, in a movement that accentuates the difference in performance;
- A greater increase in inflation break-even points (a market-based measure of expected inflation derived from the spread between the yield on a nominal bond and an inflation-indexed bond with the same maturity) than inflation-adjusted yields; It is
- A higher-term premium, the extra return that investors require for holding longer-term bonds rather than shorter-term bonds.
The price of bitcoin (BTC-USD) has a strong relationship with each of these three effects, Kenrick wrote in a recent note to clients.
“In a scenario of US fiscal dominance, we believe BTC would provide a good hedge against de-dollarization and declining confidence in the UST market,” he added.
JPMorgan Chase (JPM) CEO Jamie Dimon, a longtime bitcoiner (BTC-USD), critic, appears to agree with Kendrick’s assessment of fiscal dominance. He said in a chat last month that the The US economy is “booming” but this is largely driven by outsized government spending. The tradeoff with a debt-fueled economy is inflation, he added.
In addition to the prospect of the US dollar losing its dominance as a global reserve currency, bitcoin (BTC-USD) typically performs well relative to traditional financial assets when the banking system is under pressure, or when central banks monetize public debt through quantitative easing, the StanChart note noted. Increasing geopolitical risk, however, does not bode well for the token.
Furthermore, many people argue that bitcoin (BTC-USD) is a good hedge against inflation. The token’s overall bullish trend may support this popular notion, but there have been some recent cases where the price actually fell, or barely reacted, following a hot inflation reading.
A Trump election victory should also be positive for bitcoin (BTC-USD), Kendrick argued, through “more flexible regulation and approval of U.S. spot ETFs.”
While the Biden administration has taken a more stringent approach to encryption, Trump has said that he wouldn’t repress about the use of bitcoin (BTC-USD) or other digital tokens if elected president again.
In all, Kendrick reiterated his price targets for bitcoin (BTC-USD): US$ 150 thousand by the end of 2024 and US$ 200 thousand by the end of 2025. average SA analyst thinks BTC is a buy (1 strong buy, 9 buys, 3 holds, 1 sell).
In Saturday afternoon trading, bitcoin (BTC-USD) changed hands for US$61.3 thousand, down 13% M/M, an increase of 45% year-to-date and 122% compared to the previous year. BTC reached an all-time high of more than $73,000 in March but has since retreated as market participants lowered their rate cut expectations in the face of tough inflation data.
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Bitcoin
Bitcoin (BTC), Stocks Bleed as China’s Surprise Rate Cut Signals Panic, Treasury Yield Curve Steepens
Risk assets fell on Thursday as China’s second rate cut in a week raised concerns of instability in the world’s second-largest economy.
Bitcoin (BTC)the leading cryptocurrency by market cap, is down nearly 2% since midnight UTC to around $64,000 and ether (ETH) fell more than 5%, dragging the broader altcoin market lower. The CoinDesk 20 Index (CD20), a measure of the broader cryptocurrency market, lost 4.6% in 24 hours.
In equity markets, Germany’s DAX, France’s CAC and the euro zone’s Euro Stoxx 50 all fell more than 1.5%, and futures linked to the tech-heavy Nasdaq 100 were down slightly after the index’s 3% drop on Wednesday, according to the data source. Investing.com.
On Thursday morning, the People’s Bank of China (PBoC) announced a surprise, cut outside the schedule in its one-year medium-term lending rate to 2.3% from 2.5%, injecting 200 billion yuan ($27.5 billion) of liquidity into the market. That is the biggest reduction since 2020.
The movement, together with similar reductions in other lending rates earlier this week shows the urgency among policymakers to sustain growth after their recent third plenary offered little hope of a boost. Data released earlier this month showed China’s economy expanded 4.7% in the second quarter at an annualized pace, much weaker than the 5.1% estimated and slower than the 5.3% in the first quarter.
“Equity futures are flat after yesterday’s bloody session that shook sentiment across asset classes,” Ilan Solot, senior global strategist at Marex Solutions, said in a note shared with CoinDesk. “The PBoC’s decision to cut rates in a surprise move has only added to the sense of panic.” Marex Solutions, a division of global financial platform Marex, specializes in creating and distributing custom derivatives products and issuing structured products tied to cryptocurrencies.
Solot noted the continued “steepening of the US Treasury yield curve” as a threat to risk assets including cryptocurrencies, echoing CoinDesk Reports since the beginning of this month.
The yield curve steepens when the difference between longer-duration and shorter-duration bond yields widens. This month, the spread between 10-year and two-year Treasury yields widened by 20 basis points to -0.12 basis points (bps), mainly due to stickier 10-year yields.
“For me, the biggest concern is the shape of the US yield curve, which continues to steepen. The 2- and 10-year curve is not only -12 bps inverted, compared to -50 bps last month. The recent moves have been led by the rise in back-end [10y] yields and lower-than-expected decline in yields,” Solot said.
That’s a sign that markets expect the Fed to cut rates but see tighter inflation and expansionary fiscal policy as growing risks, Solot said.
Bitcoin
How systematic approaches reduce investor risk
Low liquidity, regulatory uncertainty and speculative behavior contribute to inefficiency in crypto markets. But systematic approaches, including momentum indices, can reduce risks for investors, says Gregory Mall, head of investment solutions at AMINA Bank.
Low liquidity, regulatory uncertainty and speculative behavior contribute to inefficiency in crypto markets. But systematic approaches, including momentum indices, can reduce risks for investors, says Gregory Mall, head of investment solutions at AMINA Bank.
Low liquidity, regulatory uncertainty and speculative behavior contribute to inefficiency in crypto markets. But systematic approaches, including momentum indices, can reduce risks for investors, says Gregory Mall, head of investment solutions at AMINA Bank.
July 24, 2024, 5:30 p.m.
Updated July 24, 2024, 5:35 p.m.
(Benjamin Cheng/Unsplash)
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Bitcoin
India to Release Crypto Policy Position by September After Consultations with Stakeholders: Report
“The policy position is how one consults with relevant stakeholders, so it’s to go out in public and say here’s a discussion paper, these are the issues and then stakeholders will give their views,” said Seth, who is the Secretary for Economic Affairs. “A cross-ministerial group is currently looking at a broader policy on cryptocurrencies. We hope to release the discussion paper before September.”
Bitcoin
Bitcoin (BTC), Ether (ETH) slide as risk aversion spreads to crypto markets
Ether, the second-largest token, fueled a slide in digital assets after a stock rout spread unease across global markets.
Ether fell about 6%, the most in three weeks, and was trading at $3,188 as of 6:45 a.m. Thursday in London. Market leader Bitcoin fell about 3% to $64,260.
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