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MARCH 28, 2024

RISE DESPITE VOLATILITY

Despite Bitcoin’s value decreasing recently, investment in Bitcoin exchange-traded funds (ETFs) has surged once more this week. The nine ETFs, which were launched in January, drew in nearly $1 billion in assets within the first two days of this week. Notably, the Fidelity Wise Origin Bitcoin Fund has overtaken BlackRock’s iShares Bitcoin Trust in asset acquisition, attracting $540.9 million in assets during Monday and Tuesday. Nonetheless, this trend was not mirrored by Grayscale Bitcoin Trust, as the restructured Bitcoin ETF has continued to witnessed outflows. Moreover, it is worth noting that although these movements constitute a small fraction of bitcoin’s total market cap, they appear to be shaping bitcoin’s current price direction as following the release of this data, Bitcoin’s value rose back to over the $70,000 mark, and as of 8:00 AM CST, it continues in an upward momentum.

SHIFT IN FOCUS

Bonds traders are shifting their focus to higher inflation rates due to Federal Reserve Chair Jerome Powell’s recent emphasis on supporting job market growth. Powell’s signaling of a potential interest rate cut in response to unexpected increases in unemployment has prompted Bank of America to recommend investments in heightened inflation compensation. This shift is reflected in the current five-year breakeven rate of 2.43%, indicating rising inflation expectations. Consequently, traders’ confidence in a June rate cut has waned, leading to uncertainty in the market. Moreover, both consumer and Fed projections foresee a trajectory of increasing inflation rates, with Powell vigilantly monitoring data to ensure sustained inflation growth towards the Fed’s 2% target, and as anticipation builds for the upcoming release of the PCE price report tomorrow morning, discussions surrounding inflation levels and the Federal Reserve’s potential responses are fueled by expectations of a core monthly increase of 0.3%.

UNCERTAINTY ADDED

Adding to the overall uncertain feeling in regards of what will happen with U.S. interest rates, Federal Reserve Governor Christopher Waller has suggested caution for lowering interest rates. Waller’s hesitancy is due to disappointing inflation figures, and highlighted the need for sustained improvement before making any decisions. As a result, he suggests to await for clearer economic data before considering any adjustments. Waller states that he believes it is best to approach the situation in a prudent way, holding the current rate to help maintain inflation at a sustainable level. Following Waller’s remarks, Treasury futures dropped slightly, and the uncertainty sentiment grew further, with more investors considering the possibility of Fed rate cuts being pushed back. as he has recently stated that he prefers to await clearer economic data before considering any adjustments. Waller’s hesitancy is due to disappointing inflation figures, and highlighted the need for sustained improvement before making any decisions. In addition, although some the Federal Reserve has suggested multiple, at least three, rate reductions happening this year, Waller believes it is prudent to hold the current rate to help maintain inflation at a sustainable level. Moreover, following Waller’s remarks, Treasury futures dropped slightly.

MIXED RESULTS IN JOB MARKET

According to the U.S. Labor Department, initial jobless claims decreased by 2,000 to 210,000 in the week ending March 23, surpassing analyst predictions. Additionally, the four-week moving average declined by 750 to 211,000 compared to the previous week. Meanwhile, the advance seasonally adjusted insured unemployment rate stood steady at 1.2% for the week ending March 16, with 1,819,000 individuals claiming unemployment benefits, marking a 24,000 increase from the prior week. The four-week moving average for insured unemployment was 1,802,750, showing a rise of 3,500 from the revised average of the preceding week. These data points suggest a mixed scenario for the job market with a decline in initial claims but a rise in the number of individuals receiving unemployment benefits, indicating potential fluctuations in the employment landscape.

POSSIBLE CHALLENGES AHEAD

Tesla Inc. has recently shown signs of improvement in its share performance after facing a significant decline earlier in the year. However, investor confidence remains shaky as the company gears up to reveal its first-quarter delivery numbers amidst concerns over decreasing estimates and weakening demand. Tesla is currently facing tough competition with traditional carmakers and Chinese companies entering the scene, and while a good earnings report could temporarily boost Tesla’s stock, people are unsure about long-term success in its core electric vehicle business. Consequently, analysts are lowering their expectations for Tesla, causing uncertainty about where the company is headed.

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