The crypto market is going through turbulent times. Nine days ago, Bitcoin price was below 25k USD, and permanent bears were waiting for a new bottom. Nowadays, Bitcoin's price surpassed 30k. The crypto market is mixed; I believe traditional financial circles deliberately created this.
Crypto is one of many markets where the direction is uncertain. Technology stocks, which have been steadily increasing since the beginning of the year, are also expected to decline. It is possible to defend various scenarios, as the picture of the FED's rate hike path is unclear. The Fed did not raise interest rates in June. On the other hand, Fed Chairman Powell stated that there could be two more increases by the end of the year. Why this over-cautiousness when inflation is falling steadily in the US? It seems that Powell wants to move forward with zero risk on inflation.
On the other hand, China, the world's second-largest economy, is facing the threat of disinflation, unlike Europe and the USA. Annual inflation in China was 0.2% in May. Chinese authorities began implementing an expansionary monetary policy to increase inflation and stimulate the economy. The Chinese central bank recently cut the 7-day interest rate from 2% to 1.9%. Chinese officials gave the message that the expansionary steps would continue.
Will the USA have to fight disinflation in 2024? The graph below shows that this is entirely possible.
Powell does not allow rigidity in inflation through actual rate hikes and verbal guidance. The last official consumer inflation in the USA was 4%. We can see the official inflation data decrease to around 3% next month. In this case, the end of the rate hike cycle will be inevitable.
Price movements in crypto have become heavily dependent on the actions of the SEC in recent weeks. It has become difficult to explain the SEC's activities with the aim of protecting consumers. The SEC appears to be the executor of the scenario created by major financial institutions. SEC officials dealt a significant blow to the crypto market with lawsuits against Binance and Coinbase. Then, BlackRock, the world's largest fund manager, applied to the SEC on the spot Bitcoin EFT. And BlackRock was followed by two other organizations. Thus, we have seen that the interest of traditional finance players in crypto continues.
The SEC and big financial institutions have only embraced Bitcoin for now. It is not difficult to guess that this situation is temporary. Traditional actors want to have significant crypto networks cost-effectively. Bitcoins owned in the 16k-20k price range have now gained about twice the value. After a while, it can be accepted that Ethereum is also a decentralized network. The same scenario can be used for smaller networks.
We know that the economy and politics are closely related. Another interesting development last week was the SEC stabilization act by US lawmakers. The file presented to the House of Representatives by Warren Davidson was aimed at Gary Gensdler. The bill included issues such as changing the SEC's structure and limiting the president's powers. Could this move from the Republican side be linked to BlackRock's spot ETF application?
In 2018, Gary Gensler stated that Bitcoin, Ethereum, Litecoin, and Bitcoin Cash are not securities. Recently, the discourse adopted by the SEC has changed that all cryptocurrencies except Bitcoin are securities. In the lawsuit against Binance, we saw that this view came to life. The lack of clarity of regulations in the crypto space makes the ground slippery, and definitions become arbitrary.
TL;DR
There is a mixed trend in both the traditional and crypto markets. Indecision in traditional markets is linked to the Fed's stance on interest rates. The Fed is tight on inflation, and we may see the inflation problem primarily resolved by the fall. In fact, in 2024, the USA may face the disinflation problem. The actions of the FED negatively affect the crypto market. Nevertheless, we see that the policy of the FED is internally consistent.
The mixed trend in the crypto market is due to another US institution, the SEC. The SEC's actions, unlike the Fed's, appear inconsistent. SEC policies seem more conjectural than principled. It is out of the question to prevent any technology that creates value. So the SEC's actions will not produce long-term results.
The real issue is who will own the leading crypto networks and at what cost. The financial power of startups and individual investors is limited. Therefore, we have been witnessing the efforts of big players to set up the game as they wish. The Wyckoff method reappears in a different guise each time. Unfortunately, the SEC seems to be serving the interests of big investors by causing panic in the crypto market.
I'm not particularly eager to develop explanations based on conspiracy theories. Still, I like the saying, "Being paranoid doesn't mean you're not being followed." We often witness manipulations as well as speculation in the crypto market.
On the other hand, we know that after every winter comes spring. Making long-term investments in reliable digital assets will protect us from manipulation.
Thank you for reading.
Cover Image Source: Midjourney App