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MARCH 21, 2024

RECORD OUTFLOWS

Over the last three days, a group of 10 spot-Bitcoin exchange-traded funds (ETFs) experienced their largest outflow since their January debut, losing $742 million. This turnaround follows the recent period of high demand that pushed Bitcoin to a record high. Nonetheless, despite the  recent outflow, it is important to remark that notable ETFs like Grayscale Bitcoin Trust, BlackRock Inc., and Fidelity Investments have still attracted a total of $11.4 billion in net inflows, reflecting a successful launch for this investment category. Moreover, Bitcoin’s price recovered gains of over 5% following the announcement of the Federal Reserve’s decision in regards of keeping rate unchanged, as well as the hints for potential rate cuts. Consequently, although Bitcoin remains below its peak reached on March 14, as of 8:00 AM CST, it remains on a postive momentum, and its price is above $67,000.

FED SPARKS HOPE

Investors were expecting Federal Reserve Chair Jerome Powell to resist calls for interest-rate cuts, but his decision to maintain rates and hint at future decreases led to a surge in optimism on Wall Street. The Fed’s announcement, coupled with the Swiss National Bank’s rate reduction, boosted market confidence globally, resulting in positive reactions in both stock and bond markets. Powell’s cautious approach towards monetary policy reassured investors of the Fed’s readiness to act if necessary, and while he did not provide a specific timeline for rate cuts, Powell indicated that they could be implemented later in the year based on economic data. Following Powell’s latest speech, one thing Wall Street can be sure is that the Fed is indeed ensuring a stable economic trajectory, and this is contributing to the overall positive market sentiment despite the concerns still in the air in regards of future rate cuts.

RISE IN GOLD PRICES

As a result of the U.S. Federal Reserve’s announcement of anticipated rate cuts in 2024, gold prices soared to new record highs, with the spot gold price increasing to an unprecedented $2,222.39 per ounce, and U.S. gold futures also jumping to $2,212.40. Nonetheless, U.S. Treasury yields did not respond in the same manner as they experienced decreases. The yield on the 10-year Treasury fell by over 4 basis points to 4.229%, while the 2-year Treasury yield was approximately 4 basis points lower at 4.566%. Moreover, it is worth noting that lower interest rates are typically associated with decreased bond yields, making non-yielding assets like gold more attractive. This shift in investor preferences towards gold as a safe-haven asset is driven by the anticipation of reduced returns on traditional investments. Furthermore, looking ahead, market experts predict a 74% likelihood of rate cuts beginning in June, and due to this optimistic sentiment, experts suggest that gold prices may further rise, potentially breaking through the $2,222.

BOOM IN TECH ETFs

Several asset management companies are capitalizing on the surging demand for investment opportunities in the lucrative U.S. mega-cap technology market by launching new exchange-traded funds (ETFs). GraniteShares and ProShares have recently introduced leveraged ETFs based on tech giants like Microsoft, Amazon, and AMD, providing investors with avenues to amplify potential returns. Additionally, Roundhill Investments and Direxion have released ETFs connected to the Nasdaq 100 and the dominant tech stocks, known as the Magnificent Seven, offering investors diverse strategies to leverage daily stock movements. The aim of these funds is to allow investors to increase exposure and potentially profit from the fluctuations in these high-performing stocks, and as interest in technology stocks continues to grow, asset managers are exploring new possibilities, including the potential launch of leveraged funds linked to other sectors beyond tech, such as airlines and energy companies.

INTERNATIONAL NEWS

Along with the Federal Reserve, the Bank of England (BOE) has also decided to keep interest rates unchaged, at 5.25%, and suggested that cuts may be on the way due to the lastet faster-than-expected decline in inflation, which dropped to 3.4% – its lowest level since September. BOE’s decision comes after the Monetary Policy Committee (MPC) voted 8-1 to maintain rates, with one member advocating for a cut to 5%. The MPC stated that while monetary policy is weighing on economic activity and inflation, it will need to remain restrictive to achieve sustained 2% inflation in the medium term. Moreover, it is worth noting that although the UK economy entered a technical recession in the final quarter of 2023, the country is currently doing well in regards to achieve its goal of a 2% inflation, and the BOE has stated that it expects to reach such target in the next second quarter, aided by a reduction in the household energy price cap in April.

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