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This Week's Top Stories

“Stocks Hit Record High a Day After Fed’s Big Interest Rate Cut” – Thursday, 19.9

• The S&P 500 rose 1.7 percent on Thursday and reached a new all-time high a day after the Federal Reserve cut interest rates by half a percentage point for the first time since 2020. Jerome Powell said in his press conference after the interest rate decision on Wednesday, that “The U.S. economy is in a good place, and our decision today is designed to keep it there,”.
• As we have mentioned in last week’s Wrap, there was a lot of uncertainty regarding the size of the interest rate cut by the Fed, hence the 50-bps cut likely took some market participants by surprise. Not only U.S. stocks rallied after the decision, major stock indices in Europe and Asia rose on Thursday as well, showing that the Fed’s cut was perceived well across the global markets.

“CZ Set to Be Released From Prison on September 29” – Monday, 16.9

• According to the official website of the U.S. Federal Bureau of Prisons, Binance founder CZ (Inmate number 88087-510) will be released from prison on Sunday, September 29.
• CZ was sentenced to four months in prison in April, five months after he pleaded guilty to violating the Bank Secrecy Act by failing to set up an adequate know-your-customer (KYC) program at Binance.

“BlackRock Reveals It’s Quietly Preparing For A $35 Trillion Federal Reserve Dollar Crisis With Bitcoin” – Thursday, 19.9

• The bitcoin price has climbed to over $63’000 after the Fed surprised traders with a 50-basis point cut, kicking off what's expected to be a fresh liquidity cycle that could put the bitcoin and crypto market on the "cusp" of a major move. The world's largest asset manager, BlackRock, has warned of "growing concerns" around the spiraling $35 trillion U.S. debt pile that's predicted to drive "institutional interest in bitcoin."
• As we have outlined many times, Bitcoin and cryptocurrencies could be among the asset classes profiting most from the rising global liquidity, which is set to increase in the coming months, after the Fed has started its rate-cutting cycle this week.

“The Kingdom of Bhutan now has the fourth-largest government holdings of Bitcoin, with a stash of over 13,000 BTC - valued at $750 million” – Tuesday, 17.9

• According to Arkham, the small South Asian country of Bhutan is the fourth-largest government in terms of Bitcoin holdings on its platform. The Kingdom of Bhutan has acquired its Bitcoin holdings through mining and holds ETH, BNB, MATIC, and USDT. While Bhutan’s involvement in cryptocurrency mining has been known for some time, new data from Arkham Intelligence sheds new light on the true scale of its operations.
• Have you read our fundamental “Who owns all the bitcoin?”? The list of countries that own bitcoin now has one new confirmed member with the kingdom of Bhutan overtaking El Salvador. In the article we not only highlight the countries that own bitcoin, but also the largest corporations, individuals and institutions.

A Quick Crypto Overview

Bitcoin is currently trading above $63’000, at prices last seen at the end of August, right before BTC traded to the downside to bottom at the beginning of September at around $53’000. Bitcoin is now up more than 20 percent from its last low, 191 days after its current all-time high above $73’000.

Ethereum is trading above $2’500 at the time of writing and is currently up almost 3% against Bitcoin, days after reaching a new multi-year low vs. BTC below 0.04. The Bitcoin dominance has been on a run lately but is currently slightly down on the week, something to keep track of.

The total market capitalization is back above $2 trillion and also up almost 20 percent from its early September low.

Outperformers among altcoins this week are SUI (+46 percent), TIA (+45 percent), FTM (+35 percent), and others such as POPCAT or TAO, both up more than 40 percent on the week as well.

Chart of the Week

As the Federal Reserve has started a new rate-cutting cycle for the first time since 2020, to bring down borrowing costs from their highest levels in more than two decades, let us take a look at previous starts of such rate-cutting cycles.

The S&P 500 has historically corrected an average of 4 percent to the downside in the first six months after the first reduction of a rate-cutting cycle, if the economy was in a recession. That compares to a 14 percent gain for the S&P 500 when the Fed cut in a non-recessionary period. Recessions are typically called in hindsight by the National Bureau of Economic Research, and for now, economists see little evidence that the U.S. is currently experiencing one. Even though there are some signals indicating that a recession could be around the corner for the U.S. economy, there are arguments for and against a looming recession, but economists seem to agree that we are currently not in a recession. Time will tell whether this view will change in hindsight.

The chart below provides us with some more detailed insights into rate cuts as they differentiate between ‘normalization’, ‘panic’, and ‘recession’ cuts. As mentioned above, cuts during a recession are followed by lower stock market prices, as the price action in 2001 or 2007 shows. For ‘normalization’ or ‘panic’ cuts, history paints a better picture, as the stock markets tended to rise after such cuts.

What’s Happening On-Chain?

In July, the owner of the late Kabosu, the Shiba Inu dog that inspired the original Doge meme, has announced that she had adopted Neiro, a Shiba Inu. Following the announcement various new Neiro tokens were launched, all with the same NEIRO ticker, on multiple blockchains and all of crypto twitter was arguing on which one was the ‘real’ Neiro token.

Now this week, one of said Neiro tokens has arrived in the top 15 meme coins by market capitalization, after a huge rise from $15 million to over $400 million in a matter of three days following its listing for spot trading on Binance. Yes, you read that correctly, Binance listed a $15 million meme coin this week, which left many confused. As there already existed another Neiro token with a higher market capitalization, which was already available for futures trading on Binance. According to Yi Hi, co-founder of Binance, the other Neiro tokens failed a compliance review.

Digital Asset Fund Flows

Digital asset investment products saw a reversal, with inflows reaching $436 million after a period of outflows amounting to $1.2 billion. Trading volumes in ETFs were flat at $8 billion for the week, much lower than the average $14.2 billion this year so far. Bitcoin amounted to most of these inflows, with $436 million flowing into Bitcoin products, while Ethereum saw outflows of $19 million, compared to multi-asset products with inflows of $22.8 million last week.

This week is currently looking good when it comes to the Bitcoin spot ETFs, with roughly $300 million of net inflows so far. Ethereum spot ETFs are looking at a total of $35 million of net outflows so far this week.

When looking at the Bitcoin spot ETF volumes, we can observe that the current volumes are still well below the March volumes, where the daily volume in USD was above $5 billion on a regular basis. The only day with a $5 billion volume since March was on August 5, when Bitcoin bottomed out at around $50’000.

Market Sentiment

Sentiment follows price action, and with the recent increase in price, it is no surprise that the crypto market sentiment moved out of the recent ‘Fear’ levels and is currently in ‘Neutral’ territory (54), which is currently still below the levels seen at the end of August, when Bitcoin was trading at these price levels before correcting to the downside. The stock market, on the other hand, is already back in ‘Greed’ territory, which makes sense, as it was ‘Neutral’ last week, when crypto was still fearful. The chart below shows the development of the CNN fear and greed index over the past year. The sentiment seems to have started a new uptrend over the last two months. It is also visible that the market can stay in ‘Greed’ or ‘Extreme Greed’ territory for multiple months, as has been the case from November to April, for example.

Other Relevant News

• The Trump family-related crypto project World Liberty Financial plans to provide cryptocurrency lending services on the Ethereum. – Link
• Coinbase and Goldman Sachs alum launch TrueX, a new crypto exchange built on stablecoins. – Link
• Fintech Giant Revolut Said to Be Planning Stablecoin. – Link
• Former FTX CEO Sam Bankman-Fried has filed an appeal for a new trial. – Link
• SIX explores launching a crypto exchange. – Link
• England’s High Court ruled Tether's USDT as property. – Link

Looking Ahead

An interesting and very important week has come to an end. While Donald Trump’s announcement of the new Trump project did not bring any positive momentum into the markets, the interest rate decision by the Fed on Wednesday has certainly done so. With this out of the way, market participants are now likely shifting towards the U.S. election in November and the upcoming economic data releases over the coming months, as these will be of importance, especially for those who are concerned about a potential U.S. recession looming on the horizon.

Looking at the status quo, many market participants are quite positive when it comes to the outlook for the markets. The Fed has started its cutting cycle, and we are currently not in a recession, which has historically been a good indicator for the markets. It remains to be seen how economic data evolves in the coming months. When it comes to crypto, CZ is set to be released from prison next week, and the month of September is coming to an end. As the time period from October to the end of the year has historically been a rather positive one for Bitcoin and crypto, market participants are showing some excitement for the coming months. It will be interesting to see how Bitcoin performs during the time period when a U.S. election is held. Maybe you remember how Bitcoin performed during the two U.S. elections in 2020 and 2016.

Below, you can find some of the key data releases and events to watch out for next week.

Tuesday, 24 September 2024

• U.S. – House Price Index

Wednesday, 25 September 2024

• U.S. – New Home Sales

Thursday, 26 September 2024

• Switzerland – SNB Interest Rate Decision
• Switzerland – SNB Press Conference
• U.S. – Initial Jobless Claims
• U.S. – Core PCE Prices
• U.S. – GDP
• U.S. – Fed Chair Powell Speaks

Friday, 27 September 2024

• U.S. – Core PCE Price Index, PCE Price Index
• U.S. – Atlanta Fed GDPNow (Q3)
• U.S. – Michigan Consumer Sentiment