EMBRACING VOLATILITY
Bitcoin has recently experienced a resurgence in volatility, prompting investors to make tough decisions about whether to navigate through these fluctuations or stay out of the market. Despite the current cycle being relatively calm compared to previous instances, a recent dip in Bitcoin value from $100,000 to around $90,000, resulting in a 10% correction, has rattled investor confidence. Short-term holders of Bitcoin, owning the cryptocurrency for less than 155 days, have been observed moving significant amounts of Bitcoin – worth $7.8 billion or 83,000 BTC – to exchanges at a loss, marking a record high in this behavior. Interestingly, when this particular group historically sends $2 billion or more of tokens to exchanges at a loss, it often serves as an indicator of a temporary market bottom. As Bitcoin trades 7% below its peak, recent buyers are experiencing losses, with Glassnode data revealing around 678,000 bitcoins currently held at a loss after a period of profit-taking near the $100,000 mark.
SEIZING OPPORTUNITY
Last week, mortgage rates decreased, sparking increased demand among homebuyers who had been waiting for the right opportunity to buy. The 30-year fixed-rate mortgage interest rate also dropped slightly, making homeownership more affordable for many. As a result, applications for home purchases surged, with a significant increase compared to the same time last year. Additionally, the inventory of homes available for sale has improved, providing buyers with more options. Furthermore, it is worth noting that although refinancing applications experienced a slight decline, they remained substantially higher than they were a year ago, with drops mainly attributed to fewer FHA and VA refinances. Thus, although there has been an increase in interest rates, buyers have continued to show strong interest in the market, with increased activity in conventional purchase applications.
TREASURY YIELDS DROPPED
U.S. Treasury yields fell as investors awaited an important inflation data and considered statements from the Federal Reserve’s November meeting. The 10-year Treasury yield dropped more than 4 basis points to 4.254%, while the 2-year Treasury yield slipped more than 4 basis points to 4.207%. Moreover, economic data is expected later this morning, with a focus on the October personal spending and income release, which includes the PCE, considered the Federal Reserve’s preferred inflation measure. Economists predict a 2.8% year-over-year increase for the core reading, which excludes food and energy prices. Furthermore, there is also a 66% chance of a quarter-point rate cut in the December meeting, according to the CME Group.
TRADE DISPUTE
As previously informed, President-elect Donald Trump has threatened to impose a 25% tariff on imports from Canada and Mexico starting on day one of his presidency, and according to Goldman Sachs, this move could potentially lead to higher fuel prices, as well as negative consequences for U.S. refiners, consumers, and Canadian producers. The tariffs may disrupt trade flows, particularly in the energy sector, as Canada is a significant exporter of crude oil to the U.S. However, there are doubts about whether these tariffs will actually be implemented, with some experts suggesting they are negotiation tactics rather than concrete plans. Moreover, Canadian trade bodies have expressed concerns about the potential impact on their exports, urging for a resolution to border security issues to avoid unnecessary tariffs on Canadian goods. Furthermore, the Trump administration’s focus on reducing energy costs and concerns about inflation getting out of control may also play a role in determining the fate of these proposed tariffs.
HOLDING STEADY
The recent data on jobless claims has shown a consistent trend, with first-time claims remaining stable at 213,000 and continuing claims increasing to 1.9 million for the week ending November 23. The 13-week moving average for initial claims has dropped to 226,200, indicating a positive outlook for the labor market. This showed that employers are navigating their workforce effectively, reflecting an economy operating at full employment levels. However, those who are unemployed may find it challenging to secure jobs as labor dynamics evolve slowly. Moreover, it is worth highlighting that the upcoming weeks are likely to experience distortions in the data due to the holiday season, making the current report the last clear data point for the year. Thus, it is recommended that investors wait until mid-January to assess the employment trends more accurately.
