Uweb famous teacher's cutting-edge course 82 macro market and Web3 trend analysis , the following is the highlights of the interaction between Uweb President Yu Jianing and Deshui Dazibao boss Qiu :
1. CME's observation tool FED Watch has a high accuracy rate in predicting interest rate cuts, and is expected to cut interest rates once in September, November and December
There are two monitoring tools for interest rate cuts: one is the Fed's dot plot , which is a forecast of future federal funds targets by Fed officials, and its accuracy is controversial; the other is the Chicago Mercantile Exchange (CME)'s FED Watch , which is calculated through the prices of futures contracts in the existing market, and has a higher accuracy rate near the time point. If the tool predicts that the probability of a rate cut reaches 80%, it can basically be said that the rate cut is a foregone conclusion. The June inflation data was released on July 11, and then the FED Watch tool showed that the probability of a rate cut in September reached 100%, which has now dropped to around 90%. Unless a black swan event occurs, it is basically certain that there will be a rate cut in September. Currently, the CME tool shows that the Fed expects to cut interest rates once in September, November and December .
The Fed's monetary policy targets are mainly inflation and employment. Currently, the US CPI has not yet reached the 2% target, but the unemployment rate is rising. The unemployment rate reached 4.1% in June, breaking the psychological barrier of 4%. According to the Sam's rule, when the unemployment rate rises by 0.5 percentage points from the three-month average to the lowest value in the past 12 months, a recession is inevitable. Since 1950, this indicator has a 100% hit rate. At present, the US Sam's rule index has risen from 0.2 to 0.43, just one step away from the warning value of 0.5.
At present, it is impossible to cut interest rates in July according to CME tools. When it is close to November and December, we can use CME tools to observe the value, and the error will not be too large. Unless the probability of interest rate cut is in the middle value (such as 50%-60%), there will be greater uncertainty.
2. The Federal Reserve regulates liquidity through two methods: "faucet" and "reservoir". Currently, the US stock market is in the stage of trading interest rate cut expectations. Trump's recent election activities and participation in the Bitcoin Conference have brought macro benefits.
The Fed mainly controls liquidity through two means, namely the "faucet" and the "reservoir". The "faucet" refers to the regulation of the federal funds rate, which is achieved by setting an interest rate corridor (such as 5.25% to 5.5%), using the reserve rate as the upper limit and the reverse repurchase market rate as the lower limit to control the market interest rate. The "reservoir" refers to the Fed's balance sheet, including banks' reserve deposits, which currently has a water storage capacity of about 3.5 trillion. The Fed can increase the water volume in the reservoir through quantitative easing (QE) or reduce the water volume through quantitative tightening (QT). Currently, the Fed has suspended QT operations and no longer draws funds from the reservoir.
Lowering interest rates means turning on the tap, but if there is not enough water in the reservoir, liquidity cannot be effectively increased . The Fed is currently expected to cut interest rates once in September, lowering the federal funds rate to between 5.0% and 5.25%. This will lower the reserve interest rate, prompting banks to put more funds into the market instead of depositing them at the Fed, thereby increasing market liquidity.
Although rate cuts can increase liquidity, a recession is still possible. Sam's rule shows that a recession is inevitable when the unemployment rate rises by 0.5 percentage points from the three-month average. The current Sam's rule index in the United States is close to this critical point. The Federal Reserve needs to balance economic growth and inflation risks in its decisions on liquidity easing and rate cuts. Although rate cuts can boost the economy, they may trigger inflation, requiring the Federal Reserve to be cautious in its operations. Although a rate cut in September is almost a foregone conclusion, the risk of a recession still exists . At present, the U.S. stock market is in the stage of trading the expectation of rate cuts, and the market has been digesting this expectation since the end of 2023. In addition, the recent rebound in the market is due to the macro-positive impact of Trump's participation in the BTC conference this time .
3. The correlation between Bitcoin and technology stocks is complex, and is affected by both macro expectations and internal logic
The relationship between Bitcoin and US technology stocks will show different correlations under two conditions: when macro expectations are not strong and uncertain, the probability of the two being in sync is higher. For example, in the recent special case in March, the market was uncertain about whether to raise interest rates, which led to a relatively synchronized trend of technology stocks and Bitcoin; when the consensus of macro expectations is clear, they will operate according to their own logic, and when the logic is close, they will also be in sync . Take November 2023 as an example. At that time, the market expected a rate cut in March 2024. The trends of the Nasdaq and Bitcoin were the same and very good. The actual technology stocks were driven by the AI narrative, and Bitcoin was affected by the logic of the spot ETF. The internal logic was different, but the macro trend was trading the expectation of rate cuts, which led to the synchronization of the two. However, by March and April 2024, due to the rebound in CPI and the panic of rate hikes, the rise of Bitcoin stagnated, while AI-related technology stocks continued to rise. In June, the CPI data fell and the unemployment rate rose, and the market expected a rate cut again. At this time, technology stocks rose, but Bitcoin fell due to the expectation of selling pressure from the German government and Mentougou. As of the live broadcast, technology stocks began to fall, while Bitcoin rose due to Trump's transactions and reduced selling pressure. The reason for the decline in technology stocks is that they are at a high point, and the market has turned to small and medium-sized stocks that are most sensitive to interest rate cuts, such as the Russell 2000 Index. In general , Bitcoin and technology stocks actually have their own internal and external logic. Its external logic will affect whether they are in sync, but it is not a completely decisive factor. It also depends on whether the internal factors are relatively consistent.
4. The German government's sell-off reflects that the market is dominated by market sentiment and narratives, which may be used by short sellers to create market fluctuations under certain market conditions.
The recent sale of Bitcoin by the German government began before 2018, when the German government confiscated about 50,000 Bitcoins accumulated by a pirated movie website. These Bitcoins have been sold off one after another recently, causing market fluctuations: starting on June 19, the German government sold about 6,500 Bitcoins at a price of $65,000 at the time. Then from July 8 to 10, a large number of Bitcoins were sold in a concentrated manner: more than 10,000 Bitcoins were sold on the 8th, more than 3,000 Bitcoins on the 9th, and more than 5,000 Bitcoins on the 10th. The price was between $53,000 and $59,000 at the time, and the overall concentrated selling was at a low point. The German government explained that according to Article 111 of the Criminal Procedure Law, if there is a significant risk of loss of 10% or more, the assets must be sold before the end of the criminal proceedings; the time of the sell order is highly consistent with the German working hours, which further confirms the operation of government officials. These sales are mainly completed through 10% of pending orders and 90% of over-the-counter transactions. Although over-the-counter transactions have less direct impact on the market, concentrated sales still have a certain impact on the market.
However, the direct correlation between the selling action and the price of Bitcoin is not strong . For example, the price was around $65,000 when it was sold on June 19, but it was around $62,000 when it was sold again on the 25th. In other words, the selling action itself has little to do with the rise and fall of the day. The market decline is more driven by market sentiment and narrative .
Since February, the rebound in US inflation and the decline in macro consensus have driven overall asset risk volatility. Bitcoin has risen from $30,000 in October last year to $73,000 in March this year, an increase of 143%. Short-term holders tend to sell when they are profitable, which provides an opportunity for short sellers to create market sentiment . Government selling does not necessarily lead to a market decline: On April 2 this year, the US government sold $2 billion worth of Bitcoin, but the market reaction was flat, and the price of Bitcoin even rebounded to $71,632 on April 9.
5. The Mentougou incident will not trigger a large-scale sell-off, and the possibility of market panic is low
Mt. Gox suffered multiple hacker attacks between 2011 and 2014, losing about 950,000 bitcoins. Although most of the bitcoins were stolen, the platform still retains about 140,000 bitcoins and some BCH.
The hacking incident triggered a lengthy legal battle to compensate the victimized customers. A plan to formally return Bitcoin was proposed in 2021, which was originally scheduled to be completed by the end of October 2023, but was postponed to the end of October 2024. The compensation work has already begun, and Bitcoin repayments to 20,000 creditors began on July 5. The market is worried that a large-scale sell-off may cause prices to fall, and the actual sell-off may not be too large. First, the compensation process is long, and many creditors have transferred their claims, and it is estimated that about 70% have been transferred. Those who are willing to take over these claims are mostly Bitcoin believers and veterans, who are unlikely to sell at the market low. In addition, Bitcoinica and MGIF, two large creditors, hold about 1/5 of the compensation and are unlikely to sell immediately. A poll on the Reddit forum showed that 55% of the 467 participants said they would not sell Bitcoin, and only 18% said they would sell it all. Most people choose to sell at an opportune time rather than sell immediately. The German government's sell-off narrative is basically over, and the possibility of the Mentougou incident causing market panic again is small. The global Bitcoin market has a daily trading volume between $10 billion and $30 billion, and without a strong narrative, the market is difficult to shake.
6. The current ETH market is limited, but ETH is still optimistic in the future; ETH futures positions are high, and bulls are waiting for opportunities
There are several factors that limit the development of ETH's market: the overall market trend of Bitcoin is not good, and the positive impact of ETH is difficult to sustain; the approval process of Ethereum ETF is cumbersome and time-consuming; Grayscale holds a large amount of Ethereum assets and has high transaction fees, so even if there is no market crash, position changes are inevitable.
But Ethereum is still promising in the future. Both shorts and longs are waiting for favorable opportunities to operate, and major institutions are particularly good at taking advantage of the situation. Ethereum futures positions have been high, and it is obvious that there is a huge amount of money waiting for opportunities. Once there is a big fluctuation in the spot market, the longs will react quickly. Ethereum's future market will not end quietly. As long as the market situation improves and the longs seize the opportunity, the impact of ETFs will be apparent.
7. If the interest rate cut in September is likely to be a precautionary cut, it will not trigger a particularly severe market decline, but will result in a soft landing.
There are three situations in the history of the Fed's interest rate cuts. The first is to cut interest rates in response to economic depression , such as the financial crises in 1973, 1980, 1981, 1989, 2001 and 2007. The second is to cut interest rates in response to global risks or sudden market collapses , which has occurred three times in history, the most obvious of which is the black swan of the epidemic in 2020, and once in 1987 and 1998. The third is a precautionary interest rate cut in a relatively stable macroeconomic environment , such as in 1989, 1995 and 2019.
The first type of interest rate cut to deal with depression is usually accompanied by a severe decline in macroeconomic fundamentals and asset prices. The second type of global risk interest rate cut generally rebounds quickly after a short-term shock, such as the 312 situation in 2020. The third type of preventive interest rate cut usually leads to a soft landing of the market, that is, a slow decline and gradual recovery, with risky assets performing better and commodities likely to fall more significantly.
The overall economic environment in the United States is relatively stable at present. Although the unemployment rate has risen, if interest rates are cut in September, it may be a precautionary cut. A precautionary cut will not lead to a sharp drop in the market, but a soft landing. Some sectors may fall to a certain extent, and then gradually recover, and the market will not fluctuate too sharply.
8. Commercial real estate, government bonds, and Eurodollars are the main risk points, but the current situation in the United States is controllable and the probability of a black swan event is not high
Black swan events are difficult to predict, but there are several risk points worth noting: the bad debt rate of commercial real estate in the United States is relatively high, and commercial real estate is closely related to banks, which may trigger a banking crisis; the second is the issue of national debt. The United States will bail out national debt, and may not purchase national debt to ensure liquidity without the Federal Reserve. The third is the European dollar. The external dollar has added high leverage to financial derivatives, which may explode. Overall, the current situation in the United States is controllable, and the probability of a black swan event is not high.
*This article is for learning and sharing purposes only and does not constitute any investment advice.
