Monday, April 22, 2024

rates vs geopolitical risk, Bitcoin tx fees, NYSE 24/7? and more

“In all affairs it's a healthy thing now and then to hang a question mark on the things you have long taken for granted.” – Bertrand Russell ||

Hi everyone! I hope you had a great weekend, and Chag Sameach to all those celebrating Passover tonight.

No audio again, today, sorry! Have to make some tweaks to my tech setup.

If you find this newsletter useful, would you mind sharing it with your friends and colleagues? ❤

IN THIS NEWSLETTER:

• Is it rates and inflation concerns? Or geopolitical risk?

• Whoa, those BTC fees

• NYSE 24/7??

• The Four Narratives of Passover

If you’re not a subscriber to the premium daily, I hope you’ll consider becoming one! You’ll get ~daily insight into the growing overlap between the crypto and macro landscapes, as well as some useful links, and (usually!) access to an audio read of the content. And there’s a free trial!

WHAT I’M WATCHING:

Is it rates and inflation concerns? Or geopolitical risk?

On Friday, the Federal Reserve published its Financial Stability Report, a semiannual assessment of the US financial system. Overall, the report concluded that the system was sound, with ample liquidity and solid balance sheets. However, the risk of “persistent” inflationary pressures and higher-than-expected interest rates remained the most-cited concern among surveyed researchers and market contacts. And the number mentioning policy uncertainty was significantly higher than in the October publication.

These finding coincided with Chicago Fed President Austan Goolsbee delivering the harsh assessment (for a Fed official) on Friday that progress on inflation has stalled.

And then there’s the below chart from a Bloomberg article yesterday showing that the market-priced probability of three or more rate cuts in the US – which was 100% just a few months ago – is now below the probability of zero cuts or even a hike. This is a drastic shift.

(chart via Bloomberg)

It looks like the no-cut scenario is rapidly becoming consensus, which has to – if valuation theory still holds – imply an adjustment in asset prices.

But, it looks like we have had that… the prices of US bonds have been dropping.

(chart via TradingView)

US stock indices have also been correcting for the past few weeks, which many have attributed to growing geopolitical concern. It’s more likely that it’s due to adjusting rate expectations.