Digital Asset Market: Bitcoin surged above $72,000, adding 5% in the past 24 hours and breaking out of a key resistance level. This led to a spike in trading volumes and the liquidation of over $143 million in short positions. The market is being driven by upcoming U.S. elections, the active ‘whales’ on Binance, and inflows into Bitcoin ETFs. Other major coins, including dogecoin and ether, also saw significant gains. Traders are betting on bullish market conditions regardless of the election outcome, with many believing that BTC will set new highs after the elections. Options traders are increasing their bitcoin bets, reaching $75,000 by the end of November.
Macro Economics: China is planning to embark on an aggressive fiscal stimulus initiative, with the country's top legislative body considering the issuance of over 10 trillion yuan in extra debt in the next few years, including 6 trillion yuan in special sovereign bonds and up to 4 trillion yuan in special-purpose bonds for idle land and property purchases. This move aims to revive the country's fragile economy, which has been hit hard by a protracted property sector crisis and ballooning local government debt. The planned stimulus package, which equates to over 8% of China's GDP, will be further bolstered if Donald Trump wins the U.S. election. However, this may still not be enough to kickstart the economy as China's peak credit impulse has dwindled, and the country may eventually have to implement an even more significant stimulus to spur a reflationary tidal wave across the globe.
Equities: Stocks traded mixed on Tuesday amid a fresh wave of earnings reports and data release for new job openings. The Dow Jones fell while the S&P 500 and Nasdaq rose, with investors keeping a close eye on the labor market ahead of the Federal Reserve's next meeting. The Bureau of Labor Statistics reported a decrease in job openings for September, which was revised lower from numbers initially reported for August. Due to the bell, Alphabet's results are highly anticipated as a barometer for the success of Big Tech's AI investments. As the busiest week of earnings season ramps up, McDonald's posted better-than-expected earnings, while PayPal, Pfizer, AMD, Chipotle, and Visa are set to report later in the day. Traders are also factoring in the uncertainty of the US presidential election, with Trump Media & Technology Group's stock rising after a brief trading halt following Trump's weekend rally in New York.
The Fed and US Treasury: Blackrock CEO Larry Fink, who oversees $10 trillion in assets, believes the Federal Reserve won't cut interest rates as much as the markets expect this year. Fink sees one more rate reduction before the end of 2024 than the two trims that others have forecasted. He cited "embedded inflation" as a significant factor, stating that government policies such as onshoring and immigration drive up the cost of goods. A panel of CEOs echoed Fink's statement at a conference in Saudi Arabia, who did not raise their hands when asked if they thought the Fed would implement two additional rate cuts this year. Recent reports from J.P. Morgan and Fitch Ratings predict two more interest rate cuts by the end of 2024. However, the US Bureau of Labor Statistics shows that inflation growth slowed in September, with the most minor annual reading since February 2021.
Geopolitical: During the recent BRICS summit in Kazan, Russia, much attention was placed on the potential of a new multi-currency system to replace the US dollar as the world reserve and petrocurrency. For decades, the dollar has reigned supreme in international trade, giving the Federal Reserve Bank the power to print cash without immediate inflationary consequences. However, this reliance on the dollar also makes the US vulnerable, as shown by the discussions at the summit and Vladimir Putin's unveiling of a symbolic BRICS bank note. The summit also highlighted efforts to develop an alternative to the US-controlled SWIFT payment system, which has become a crucial mechanism for transferring large sums of money among governments and international banks. The BRICS countries, particularly Russia, have been driven closer together by the impact of NATO sanctions, creating a united front against the dollar. The development of central bank digital currencies, which will allow peer-to-peer transactions, is also expected to negatively impact the dollar, which is used as a conduit currency for global money flow. Several digital currencies are being discussed and tested globally, including those from Australia and India.
View from our desk
Bitcoin recently surged past $71,000 and $72,000 with minimal resistance, buoyed by strong USDT flows and improved market sentiment after a brief dip to 0.9975 on USDT following unfounded sanction rumors. A key driver for this momentum is the increasing probability of a Trump win in the upcoming elections, now priced at 64% against 36% for Harris, according to Kalshi exchange data. With noticeable activity in BTC Call options at the $75K and $100K strikes, there's an expectation for Bitcoin to breach the $75K level in the near term.
Meanwhile, the broader financial markets are closely watching the Federal Reserve for guidance. While recent labor and consumer confidence data generated interest, it is the Fed’s upcoming decisions on inflation management and housing sector revival that hold greater weight. The Fed faces the delicate task of balancing inflation control with stimulating new home construction—a sector that's seen significant underinvestment due to the pandemic and subsequent high rates.
The housing market remains challenging, with home prices stubbornly high and an insufficient supply of new builds over the past four years. Revitalizing the housing sector would likely require strong policy measures and substantial industry investment, a shift that could stimulate both economic growth and housing availability if the Fed opts for supportive strategies.'
The 1Konto Team
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