Crossroads. Markets are trading in no-man’s land going into the weekend after BTC prices slumped, TradFi markets pumped and uncertainty kicked into full steam. What happened in markets this week?
Bitcoin started the week off strong, gaining nearly 3% on Monday, but struggled to find its footing and proceeded to slide throughout the remainder of the week.
Ether, which has underperformed BTC since March amid growing speculation that the spot ETH ETF applications will be denied next month, remains just below the June 2022 3AC liquidation lows and the critical support-turned-resistance level at 0.05 on the ETH/BTC ratio.
Surprisingly, the Ratio is green on the week despite news that proposed issuers had “discouraging meetings” with the Securities and Exchange Commission that indicate an ETH ETF will only be approved after litigation in court, potentially signaling that the market has already largely priced in the denial scenario.
Crypto may be down slightly on the week, but TradFi assets pumped, with the broad market S&P 500 gaining 2.5% off its Monday open and retracing much of the downside price action from the week prior.
Unfortunately, a deteriorating global economic situation is once again coming into focus as a major risk that could derail the rally. Data released this week showed disappointing economic growth during Q1 2024 combined with increasing inflation; despite hopes that the loosening of rates would stimulate the economy and prove a boon for risk assets, the presence of increasing inflation makes such cuts untenable.
Should economic growth continue to slide, it is likely that inflation will plummet as demand declines, but there is no guarantee that lower interest rates will be enough to stabilize the economy, given that their arrival historically coincides with deepening recession.
For those who do not understand what just happened:
— The Kobeissi Letter (@KobeissiLetter) April 25, 2024
First, Q1 2024 GDP growth slowed to just 1.6% which is less than HALF of the 3.4% Q4 2023 number.
This reading is roughly 50% BELOW Goldman Sach's expectations.
But it gets even worse.
At the same time, the US Core PCE Price… pic.twitter.com/5Rct3i9TGh
While economic problems are on the verge of boiling to the surface in America, moves in foreign currency markets are suggesting that the catalyst for a globally synchronized downturn is most likely to emerge from Asia.
Major Asian currencies have been under massive stress throughout 2024, and the relative value of the Japanese yen already declined by over 4% against the US dollar during the month of April, ontrack to post its largest decline since just prior to the March 2023 banking crisis.