PMIs Show Slowing Economic Growth There was a significant amount of economic data released this week, with particular attention given to the PMI data, which is considered a reliable indicator of economic activity. In May, the manufacturing sector in the US experienced its seventh consecutive month of contraction, as indicated by the Manufacturing ISM Report. The Manufacturing PMI for May …

AI Skewing the Picture Previous observations highlighted how the decline in crypto prices signaled a temporary liquidity peak, potentially tied to the impending debt ceiling deal. Correlations between BTC, gold, and equities illustrated BTC’s sensitivity to liquidity changes. As anticipated, BTC/Gold and BTC/equities (excluding AI-related names) correlations are now strengthening, with gold and equities tracking BTC’s lead. Over the past …

A Nosedive in Volatility Equities are not the only asset class undergoing a noticeable decline in volatility. Both Bitcoin and Ethereum are following a similar path. Over the past two months, there has been a significant decrease in the implied volatilities of these blue chip cryptoassets, especially following the fallout from the Silicon Valley Bank (SVB) crisis and the subsequent …

Bitcoin Reflecting a Local Top in Market Liquidity During the majority of Q1 and early Q2, the financial market observed a strong correlation between Bitcoin (BTC), equities, and gold, with an even more pronounced link between BTC and gold. This close relationship was a result of global market liquidity reaching its lowest point in Q4 of 2022, which coincided with …

Looks Like a Pause The Federal Reserve approved its 10th interest rate increase in just over a year, raising the Fed funds rate by 0.25 percentage points to a target range of 5%-5.25%. Many interpreted the Fed’s comments as signaling a potential pause in the tightening cycle, mainly due to the removal of a sentence in the post-meeting statement. The …

ETH Moving Shanghigher As we mentioned last week, the market was overly pessimistic regarding the supply-side effects of the upcoming Ethereum staking withdrawals. Factors such as existing liquidity for most stakers, withdrawal queue limitations, and a market that de-risked in anticipation of the Shapella upgrade all helped to reduce the likelihood of a sudden supply overhang. With this in mind, …

Shapella Arrives We are now less than a week away from staking withdrawals being enabled on the Ethereum network. We have been discussing this topic frequently throughout our research, but to reiterate, we maintain that the market is overly pessimistic about the supply-side effects of this event. To reiterate the key points behind our rationale: Liquidity Access for Most Stakers: …

Bond Volatility Moving Lower is Good for Liquidity Over the past few weeks, we have discussed how the ongoing banking crisis, the Fed’s language shift and easing monetary policies from major central banks have led to increased net liquidity in the U.S. and higher global USD liquidity.  One risk that these absolute liquidity levels face is a negation by the …

Dovish Fed Statement On Wednesday, the Federal Reserve raised the target Fed Funds rate range by 25 basis points (BPS), marking the ninth increase in just over a year. The FOMC statement hinted at a nearing end to rate hikes by removing the reference to “ongoing increases.” According to the FOMC’s updated forecast, there will be one more rate increase …

It might not “technically” be QE, but QT is Over A common refrain among Bitcoin advocates has been “short the banks, long BTC.” Over the past couple of weeks, we have seen the closest manifestation of this trade since the inception of the Bitcoin network. There remain apparent concerns about the health of the US banking system, specifically related to …