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MAY 9, 2024

RALLY FIZZLING OUT

Bitcoin and other digital assets have declined by $500 billion, raising concerns that the crypto market rebound may be slowing down. Bitcoin has fallen for five consecutive days, the longest losing streak since last October, while the overall crypto market has dropped by 17% to $2.4 trillion from Bitcoin’s record high in mid-March. Factors contributing to the decline include weakening inflows into U.S. Bitcoin exchange-traded funds and the possibility of higher Federal Reserve interest rates. In addition, the recent launch of crypto ETFs in Hong Kong did not improve the situation. As a result, speculators anticipating strong ETF inflows are now leaving the market. Moreover, in the derivatives market, there are indications that investors anticipate less volatility in Bitcoin compared to the period following the introduction of U.S. ETFs, and indexes measuring expected 30-day price swings for Bitcoin and Ether are currently at two-month lows. Nevertheless, despite this, it is worth highlighting that many believe the bull market is not over, and there is still hope for Bitcoin to reach new highs by the end of the year.

RECORD PROFITS

Following the release of its latest earnings report, which displayed a strong performance, Robinhood Markets saw a rise in shares. The company exceeded expectations with a 40% revenue increase and earnings of 18 cents per share, compared to a loss last year. Its cryptocurrency revenue tripled, and equities revenue jumped significantly. The record revenue and profit were fueled by small investors returning to its platform to trade cryptocurrencies without fees. Moreover, the approval of the first spot bitcoin ETFs in the U.S. also helped restore confidence in the cryptocurrency industry. Nonetheless, despite these positive results, it is important to highlight that Robinhood is still facing scrutiny from the Securities and Exchange Commission (SEC) over tokens traded on its platform, which may potentially impact its future trading activities.

DISAPPOINTING FORECASTS

Airbnb shares slumped by more than 8% as although it exceeded first-quarter expectations, it fell short of more bullish second-quarter projections, causing its stock to face downward pressure. The company attributes the subpar outlook to the first-quarter occurrence of the Easter holiday, currency-exchange disruptions, and an anticipated stagnation in the growth rate of room nights booked. Moreover, the tapering demand for leisure travel in the U.S. has added to investor apprehensions. Analysts believe Airbnb needed to surpass expectations in the number of nights booked to alleviate worries about decelerating growth and the potential risk of failing to meet consensus estimates for accelerated growth in late 2024 and 2025. Currently, Airbnb is trading at $144.49 per share, and its valuation is notably higher compared to that of Booking Holdings, indicating lingering uncertainties about the company’s future performance.

UNEMPLOYMENT RISED

Last week, the number of Americans filing for unemployment benefits rose to 231,000, surpassing economist forecasts of 215,000. Additionally, the number of individuals receiving unemployment benefits beyond the initial week increased to 1.785 million, indicating ongoing challenges in hiring and the broader job market. This increase, likely influenced by seasonal factors such as the conclusion of spring breaks, reflects a labor market that is adjusting following a series of interest rate hikes by the Federal Reserve. Let’s remember that the economy added fewer jobs in April, and job openings hit a three-year low in March, signaling a slowdown in the job market. This deceleration has reignited discussions about potential rate cuts from the Fed later this year, however, the Fed still opted to maintain its benchmark interest rate at 5.25%-5.50% last week.  As the economy grapples with these shifts, the labor market remains in a state of flux, with uncertainties about future trends and potential policy responses.

INTERNATIONAL NEWS

The Bank of England (BOE) decided to keep interest rates at 5.25% for the sixth time in a row, with expectations for a possible cut in the summer. The decision was not unanimous, with seven members voting to hold rates and two voting for a cut to 5%. Governor Andrew Bailey is optimistic about inflation falling in the coming months, potentially leading to a reduction in borrowing costs. The UK economy is expected to have returned to growth in the first quarter of 2024, following a period of contraction in the previous quarters. Market forecasts vary on the timing of a rate cut, with some speculating it could happen in June or September. The OECD and Deutsche Bank do not anticipate a rate cut before the third quarter, while Capital Economics predicts rates could drop to 4% by year-end. The European Central Bank is likely to cut rates in June, while the Federal Reserve is not expected to make a move until later in the year.

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