Market Analysis 06/30/22

Bitcoin is still trading within the $18-22K trading range and at the time of writing the price of the main cryptocurrency is around $19200.

Market capitalization $870 billion, BTC index dominance 43%.

Since Monday, stock indexes have exhibited an erratic trend, wiping out much of last week's gains.

The dollar index is back off its highs at 105 points and SP 500 futures are negative.

The speeches by Lagarde (ECB) and Powell (FED) highlighted how the macro scenario of the past decades characterized by low inflation no longer exists.

And this is normal, given the amount of money injected into the financial system in recent years, while supply chains are in crisis.

So attempts to present inflation as unexpected sound rather out of tune.

U.S. GDP data are worse than expected, while WHO continues to exacerbate the rising incidence of world covid.

Perhaps by fall this will be one of the reasons to shift from "fighting inflation relentlessly" to "supporting the economy at all costs."

The macro scenario is dramatic.

The ECB has announced its intention to reduce its bond-buying program with an accompanying rate hike in July and has also said it is ready to act more aggressively if necessary (but unlikely to do so given the debt problems of countries such as Italy and Greece).

There is no chance of containing inflation and indeed, given the outlook for the energy and food sectors, reasonably we will have further price increases.

Overseas, the U.S. current account balance is negative, plus it seems that the latter have decided to "put out the fire" with gasoline.

In fact, many Democrat-controlled states (California, Colorado, etc.) are implementing anti-inflation measures involving the distribution of economic benefits to millions of residents, who will receive an average of $1,000.

And by a "strange coincidence," the benefits will be disbursed in late October, two weeks before midterms on Nov. 8.

Undoubtedly this will give some oxygen to the markets.

More and more countries around the world are getting rid of U.S. government bonds, in fact in one month China dumped $36 billion of them and even pro-U.S. Taiwan sold $10 billion worth of U.S. treasury bonds.

Two important summits took place in the last week: BRICS and G7.

The latter banned the import of gold from Russia, saying that this will cause damage of $19 billion a year.

I do not see how Russia can think of selling gold to the G7 countries after the freeze on dollar and euro reserves, thus risking that the proceeds of sales will suffer the same fate (mystery of faith).

At the same time, the G7 decided to set a ceiling price for Russian oil in an attempt to calm prices.

Again, I believe that this is merely a cosmetic measure, since Russian oil sales volumes to India and China have risen exponentially since April. What is stopping the Russian federation from continuing to export to those countries at higher prices?

Nothing, and in fact the G7 initiatives have not affected oil and gold prices in any way.

The BRICS summit, on the contrary, saw important news.

Iran and Argentina submitted formal applications for membership and soon the name "BRICS" will have to be changed (BRICS+?).

The geopolitical scenario will undergo profound upheavals.

The union of China, Russia, India and others is economically self-sufficient.

All that remains is to build an efficient infrastructure for cross-border payments (they are already at work du this front) and increase the number of memberships so as to greatly mitigate the impact of Western sanctions.

The decline of the G7 countries will continue slow but inexorable.

On the crypto front, there is still a lot of negativity in the market.

In addition to the well-known vicissitudes of Celsius and 3AC, yesterday the SEC rejected applications to release a spot ETF on bitcoin by Grayscale and Bitwise (Grayscale has decided to appeal the decision and sue the SEC).

There are increasingly persistent rumors of other platform failures in the industry (the latest to speak out on this was the CEO of FTX), and should the rumors find confirmation, the pressure on the market will increase significantly.

The latest glassnode analysis showed that about 1.43 million BTC changed hands in the $17600-21600 range.

Who sold?

First, those who were forced (margin positions, liquidations, forced sales of collateral to deal with insolvencies).
Second, the weak hands who have not yet understood the essence of BTC and are succumbing to fear.

Current price levels are very advantageous in the long-term perspective, despite the short-term turbulence.

I do not expect there to be a break of the June lows in the next few days, but the situation could get very complicated in July with updated US inflation data and the subsequent Fed meeting, which will react aggressively if inflation rises further.

Worst case scenario in July: rising US YoY inflation and Fed hike of 0.75%.

Another factor against a consolidation on the bottom is the still too low dominance of bitcoin, indicating that many degens continue to bet big on altcoin (and shitcoin) during any rally.

In this context, there is no single asset class that offers shelter and guarantees in the current marco scenario.

In fact, even the real estate sector is beginning to feel the effects of the central banks' restrictive policies, which are dramatically affecting mortgage and loan interest rates, and when even the real estate market begins to suffer, it means the situation is damn serious.

Posted Using LeoFinance ^Beta