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MARCH 19, 2024

FADING DEMAND

Bitcoin prices have fallen over 7% this morning as investors digested news of a record daily outflow from the biggest exchange-traded fund for the cryptocurrency and reduced expectations for Federal Reserve interest rate cuts. The Grayscale Bitcoin Trust experienced a $643 million outflow, the largest since becoming an ETF in January, while new spot Bitcoin ETFs attracted strong demand. However, interest in these products, including those from big players like Fidelity and BlackRock, has started to decline, with a net outflow of $154 million seen in the group of 10 ETFs on March 18. Furthermore, concerns about potential bubbles in some assets have also impacted Bitcoin’s price, which hit an all-time high last week but has since decreased due to fading demand for the new ETFs. Moreover, Altcoins have been hit particularly hard, with a 25% drop from their recent peak erasing more than half of their gains this year.

LIMITED SOLUTIONS

The U.S. housing market is grappling with a significant challenge: housing is becoming increasingly unaffordable. Federal Reserve Chair Jerome Powell, along with his colleagues, prioritizes achieving maximum employment and stable prices but does not directly address the soaring housing costs. This lack of intervention results in high interest rates, primarily driven by expensive housing, particularly rent, leading to elevated inflation levels. Housing affordability remains a pressing issue, with prices hitting record highs, and uncertainty prevails regarding whether the market can meet the demand. Powell recognizes the problem but admits that the Fed lacks effective tools to address it, signaling that quick solutions are improbable. Powell suggests that adjusting interest rates could influence the housing market’s stability, emphasizing the sector’s sensitivity to interest rate changes. While lawmakers have raised concerns about housing costs, Powell acknowledges that broader changes are necessary beyond the Fed’s scope to tackle the current housing market challenges effectively.

DECLINE BUT STILL HOPEFUL

Gold prices have dropped due to the strengthening U.S. dollar, making it pricier for those utilizing different currencies to purchase gold. This decline occurred as investors awaited Federal Reserve Chair Jerome Powell’s statements following the policy meeting. Spot gold fell to $2,153.60 per ounce, and U.S. gold futures settled at $2,157.30. Analysts expressed caution, fearing that a lack of indication from the Fed about potential interest rate cuts could negatively impact gold prices. Currently, traders perceive a 55% likelihood of rate cuts in June. Moreover, recent drops in gold prices were influenced by robust U.S. consumer and producer price data, dampening optimism for imminent rate cuts. Nevertheless, it is worth remarking that despite the recent declines, industry experts project gold prices could reach $2,250 per ounce by year-end, supported by ETF and central bank demand. Additionally, the prices of silver, platinum, and palladium experienced slight declines as a result of these market shifts.

SUPER MICRO STOCK SALE

Super Micro Computer recently announced its plan to sell 2 million shares valued at around $2 billion to raise capital for expansion and operational needs. This move caused a 10% drop in the company’s stock price prior to the market opening. The decision to sell shares comes as the company has witnessed a significant increase in its stock value this year, prompting the need for additional funds to support growth initiatives. The raised capital will be utilized for inventory acquisitions, expanding manufacturing capacities, research and development endeavors, and overall working capital requirements. Following the offering, Super Micro Computer’s total outstanding shares will rise to 58.6 million, with the underwriter, Goldman Sachs, potentially acquiring 300,000 additional shares within a specific timeframe. However, the exact offering price for the stock sale has not been disclosed as yet. Moreover, it is worth noting that despite the company’s robust performance in the stock market, including outshining Nvidia during the AI market boom, there has been a recent downtrend, with a 16% decline observed over three trading sessions.

INTERNATIONAL NEWS

As anticipated, the Bank of Japan has discontinued its negative interest rate policy to maintain favorable financial conditions for the economy. Consequently, the Japanese yen declined beyond 150 per dollar, while both bonds and stocks observed growth. Government bonds performed well, causing the 10-year yield to decrease by 3 basis points, and the Topix index increased by 1.1%, with the Nikkei 225 reaching above 40,000 for the first time in two weeks. Moreover, there are suggestions from experts that the yen may continue to weaken against the dollar, affecting Japan’s bond yields and currency value. Despite these changes, the Bank of Japan plans to sustain a supportive approach and be ready for any sudden shifts in yields, with Governor Kazuo Ueda highlighting the importance of maintaining accommodating conditions. This outlook signals a positive development for the Japanese economy.

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