By Omkar Godbole (All times ET unless indicated otherwise)
Keeping an eye on the Far East has been our mantra lately, and the latest news from the Chinese bond market shows why. Just today, China’s one-year government bond yield dropped below 1% for the first time since the Great Financial Crisis, adding to the year-to-date downturn.
The benchmark 10-year yield slipped to 1.7%. How does that play out for risk assets like bitcoin, which slumped overnight? Well, there are two key reasons to feel optimistic. For a start, the continued decline in yields suggests Beijing will have to roll out more aggressive stimulus measures than we saw earlier this year.
Jeroen Blokland, the founder and manager of the Blokland Smart Multi-Asset Fund, put it succinctly: “This indicates that China’s economic troubles are far from over, and the government will do what aging economies often do: ramp up government spending, allow for larger deficits and higher debt levels, and drive interest rates down toward zero.”
And there’s more to consider.
This situation in China also raises questions about Fed Chairman Jerome Powell’s recent alarm over interest rates, which sent bitcoin tumbling to $95,000 from $105,000. China, the world’s factory, is facing worsening deflation having already experienced the longest stretch of falling prices since the late 1990s.
That could cap PPI and CPI readings worldwide, including in the U.S., a major trading partner. BNP Paribas noted this phenomenon earlier this year, with analysts saying that China has already contributed to lower-core inflation in the eurozone and the U.S. by about 0.1 percentage point and core goods inflation by roughly 0.5 percentage point.
What this means is that Powell’s concerns about fed rate hikes may be unfounded and begs the question whether he will really stick to just two rate cuts for 2025 as he implied on Wednesday? Many experts think there might be more. “Fed concerns on inflation are misguided. Interest rates are still too high in the U.S., and liquidity is about to increase, driving Bitcoin higher,” said Dan Tapiero, CEO and CIO of 10T Holdings, on CNBC.
For now, markets aren’t considering this bullish angle. BTC has dropped below $95,000 and ETH has slipped to $3,200. All the 100 biggest coins are flashing red. Futures tied to the S&P 500 are down 0.5%, indicating a negative open and continuation of the post-Fed risk-off. Sentiment may worsen if the core PCE, the Fed’s preferred inflation gauge, comes in hotter than expected later today.
That might see markets price out another rate cut, leaving just one on the table for 2025. Stay alert! What to Watch: Crypto: – Dec. 23: MicroStrategy (MSTR) stock will be added to the Nasdaq-100 Index before the market opens, making it part of funds like the Invesco QQQ Trust ETF that track the index.
– Dec. 25, 10:00 p.m.: Binance plans to delist the WazirX (WRX) token. Two other tokens being delisted at the same time are Kaon (AKRO) and Bluzelle (BLZ). – Dec. 30: The European Union’s Markets in Crypto-Assets (MiCA) Regulation becomes fully effective. The stablecoin provisions came into effect on June 30.
– Dec. 31: Crypto exchange Gemini is shutting its operations in Canada. In an email sent out on September… Ern. A UTC close below the support line could entice more chart-driven sellers to the market, potentially leading to a deeper drop to $80,000, a level widely watched after the U.S. election.
Crypto Equities: – MSTR: closed on Thursday at $326.46 (-6.63%), down 5.35% at $309.00 in pre-market. – COIN: closed at $273.92 (-2.12%), down 5.65% at $258.43 in pre-market. – GLXY: closed at C$24.75 (-5.93%), down 4.52% at C$23.43 in pre-market. – MARA: closed at $20.37 (-5.74%), down 4.22% at $19.41 in pre-market.
– RIOT: closed at $11.19 (-6.36%), down 4.2% at $10.72 in pre-market. – CORZ: closed at $14.48 (+0.21%), down 4.42% at $13.84 in pre-market. – CLSK: closed at $10.91 (-3.62%), down 3.94% at $10.48 in pre-market. – WGMI: closed at $24.45 (-5.56%), down 2.66% at $23.80 in pre-market. ETF Flows: – Spot BTC ETFs: Daily net flow: -$671.9 million Cumulative net flows: $36.310 billion Total BTC holdings ~ 1.142 million.
– Spot ETH ETFs: Daily net flow: -$60.5 million Cumulative net flows: $2.406 billion Total ETH holdings ~ 3.565 million. Source: Farside Investors
Overnight Flows: – Chart of the Day: Annualized perpetual funding rates for major cryptocurrencies (Velo Data) The chart shows annualized perpetual funding rates for major cryptocurrencies have been reset to healthier levels below 10%.
The market swoon has cleared out over-leveraged bets. While You Were Sleeping: – Dogecoin’s 11% Drop Leads Losses in Crypto Majors as Bitcoin Sours Festive Mood (CoinDesk): Bitcoin fell early Friday, extending its three-day post-FOMC slump as hawkish Fed signals and overbought conditions triggered a sell-off.
DOGE led declines among the 10 biggest cryptocurrencies. – Dozens of House Republicans Defy Trump in Test of His Grip on GOP (The New York Times): President-elect Donald Trump’s influence over his country
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