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FEBRUARY 23, 2024

SMALL INVESTORS GROWTH

Following a January slowdown, small investors are re-entering the cryptocurrency markets, driving up the value of popular digital currencies like Bitcoin and Ether, according to JPMorgan Chase & Co. These mom-and-pop investors are behind the recent rally, with on-chain Bitcoin transactions from small wallets surpassing those from institutional investors, especially after adjusting for the inflows into new Bitcoin exchange funds. In addition to a general increase in retail investments in cryptocurrencies, recent reports indicate that more people are buying Bitcoin, which is reflected in the highest quarterly Bitcoin trading volume in two years for Coinbase Global Inc. Also, trendy assets like AI and meme tokens have seen notable investments in recent weeks, capturing a larger share of the total cryptocurrency market capitalization, suggesting a broader trend towards increasing retail investments in cryptocurrencies. Moreover, the surge in February investments seems to be linked to the anticipation of key developments in the cryptocurrency world over the next months, including Bitcoin’s halving event, the next major upgrade of the Ethereum network, and the potential approval of new investment funds.

NVIDIA RALLY

Investor confidence in Nvidia’s earnings has unequivocally paid off, as the chipmaker delivered outstanding returns for those who invested in exchange-traded funds (ETFs). The VanEck Semiconductor ETF (SMH) surged by nearly 7%, resulting in substantial gains for investors. In leveraged ETFs such as GraniteShares 2x Long NVDA Daily ETF (NVDL) and T-Rex 2x Long NVIDIA Daily Target ETF (NVDX) also had significant gains, as both funds increased to up to 31%; and this surge led to substantial investments, with NVDL and NVDX attracting investment interest totaling over $100 million. Moreover, the company’s solid revenue forecast also fueled optimism in the artificial intelligence sector, positively impacting stock indexes and chipmakers as funds like the Direxion Daily Semiconductors Bull 3x Shares (SOXL), which triples the daily performance of the PHLX Semiconductor Sector Index, witnessed inflows surpassing $150 million.

PRUDENT APPROACH ADVISED

Federal Reserve Governor Christopher Waller has emphasized the need to wait a few more months before considering interest rate cuts. Waller stated that the recent uptick in inflation demands further analysis to ascertain if the progress in inflation is substantial. Also, Waller underlined the significance of closely monitoring indicators such as wage growth and employment to ensure they align with the progress toward the 2% inflation target. Stressing the potential risks of acting prematurely, he advocated for exercising caution to avoid reversing the progress already made. Waller’s cautious stance echoes the concerns of many central bankers. Consequently, based on traders’ futures contracts tied to the Fed’s policy rate, the market anticipates that interest rate cuts will not occur until the June 11-12 meeting.

PRICES STRUGGLE BUT DEMAND GROWS

Oil prices experienced a decline driven by the anticipation of potential delays in interest rate reductions, which could subsequently impact economic growth and oil demand. However, despite this concern, some analysts believe that demand has remained healthy. Notably, JPMorgan’s data reveals a significant increase in oil demand, with a rise of 1.7 million barrels per day. This rise is attributed to heightened travel demand in China and Europe. Moreover, although there are worries about conflicts in the Red Sea and the chance of peace talks by Israeli Prime Minister Benjamin Netanyahu’s war cabinet, some people are still positive about the oil market. Nonetheless, as of now, the oil market remains uncertain and could be bumpy for a while.

INTERNATIONAL NEWS

Euro zone government bond yields paused after rising to multi-month highs, following the latest minutes from the European Central Bank’s (ECB) meeting which revealed that there should be a cautious approach to easing monetary policy. This was due to the euro zone’s economic outlook, which revealed that the purchasing managers’ index data was mixed, as Germany experienced a deepening downturn while French business activity saw improvement. As a result, Germany’s 10-year government bond yield, the euro area’s benchmark, fell to its lowest since November, while Italy’s 10-year government bond yield also dropped after reaching its highest level since December. In addition, the gap between Italian and German 10-year yields, a measure of risk premium, reduced to a 23-month low. Moreover, just as the sentiment regarding the Federal Reserve’s next move, there is also a growing chance that the ECB will delay rate cuts until later in the year, with money markets expecting 25 basis points in June.

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