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APRIL 22, 2024

HALVING AFTERMATH

Following the lasted halving event which went ahead last Friday, Bitcoin’s price has remained steady, trading above $65,800, but there was a noticeable drop in transaction fees. On-chain data shows medium-priority transactions costing $8.48 and high-priority transactions at $9.32, significantly lower than the initial spike post-halving. Moreover, despite expectations that miner revenue would drop, the hashprice index decreased from $182.98 to $81 per hash/day. The Runes protocol, which launched during the halving to boost on-chain activity, on the other side, it has seen a drop in floor prices for the runestone NFT collection by nearly 50% in the past 24 hours. Thus, transactions fees from these collections do not seem to be the revenue source many had hoped for. However, collections like Bitcoin Pullets and NodeMonkes have seen price increases.

INFLATION EXPECTATIONS

This week, Federal Reserve officials are anticipated to receive confirmation that progress against inflation has stalled, potentially leading to a shift in keeping interest rates higher for an extended period. Expectations suggest that the personal consumption expenditures price index, a key measure of inflation, will likely rise to 2.6% annually in March due to increasing energy costs. Additionally, the core PCE, which excludes volatile items, is expected to go up by 0.3% from the previous month. Even though this measure does not show as big of an increase as the consumer price index, Fed Chair Jerome Powell and other policymakers are being cautious about lowering rates until they see inflation start to go down consistently. Furthermore, economic projections suggest healthy household spending and income growth but predict a slight deceleration in economic expansion from the prior quarter while remaining above sustainable levels.

CHALLENGING AUCTIONS

Investors are getting ready for a tough week ahead as Treasuries are having their worst month of the year. There are big auctions of $183 billion coming up, which will test how much investors are willing to pay for government bonds. Yields on these bonds have gone up due to signs of a strong economy, with the two-year rate briefly going over 5%. Now, investors are wondering if the auctions will be able to handle this demand and if the two-year bond will have a 5% interest rate for the first time since last year, and money market funds and regular investors might find it tempting to lock in these interest rates until 2026, hoping that the value of the new two- and five-year bonds will go up.

DROP DESPITE PRICE REDUCTION

Tesla shares have decreased by 3% as the company slashed prices of its Model 3 in China by 14,000 yuan, reducing the starting price to 231,900 yuan. Althiugh this move aimed at staying competitive in the electric vehicle market, it resulted in a significant impact on Tesla’s stock. This was because, concurrently, other Chinese electric vehicle manufacturers also made price cuts, reflecting the intense competition in the industry. Analysts suggest that this competitive market has prompted companies to adopt various strategies to challenge Tesla’s dominance. Moreover, the price adjustments made by Tesla and the subsequent market reactions highlight the fierce competition between local Chinese automakers and the U.S. giant in the rapidly expanding electric vehicle sector.

KEY EVENTS HAPPENING THIS WEEK

Tuesday: New home sales report for March, S&P flash U.S. services and manufacturing PMI reports for April, and earnings reports from General Motors, UPS, PepsiCo, GE Aerospace, RTX Corporation, JetBlue (before market opens), Tesla, Mattel, and Enphase Energy (after market closes).

Wednesday: Durable-goods orders and durable-goods minus transportation reports for March, and earnings reports from Boeing, Biogen, Hasbro, Humana (before market opens), Meta Platforms, Ford, IBM and Chipotle Mexican Grill (after market closes).

Thursday: GDP report for first quarter, advanced U.S. trade balance in goods, retail inventories, wholesale inventories and pending home sales reports for March, initial jobless claims for week ending on April 20, and earnings reports from Comcast, Merck, Bristol-Myers Squibb, Southwest Air, American Airlines, IMAX (before market opens), Microsoft, Alphabet, Intel, Atlassian, Snap, Capital One and Roku (after market closes).

Friday: Nominal personal income, spending, and PCE index reports for March, final consumer sentiment report for April, and earnings reports from Chevron, and Exxon Mobil (before market opens).

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