As Crypto Week Comes to a Close…
It has been a dizzying week in the world of digital assets. Policymakers in the world’s largest economy approved three laws that could be considered ‘milestones.’ There is also talk that President Trump will seek regulations that would allow pension funds to invest in various instruments, including cryptocurrencies. All these developments align with our expectations of a ‘long-term upward trend’ in digital asset prices and are laying the groundwork for a new era in which the sector is embraced by a broader audience, including traditional investors.
Geopolitical developments, trade wars and the US Federal Reserve’s monetary policy have long been and will continue to be the determining factors for all markets, without exception. However, the world of digital capital markets has seen a significant divergence in the last two weeks as the process that began with Donald Trump’s new vision has begun to bear fruit. Institutional investor interest has signaled that some traditional taboos have been overcome, and the level of adoption has increased. In this parallel, we have seen an increase in demand not only for Bitcoin but also for other major assets. We think that the positive reflections of this dynamic will continue in the new week, albeit relatively less enthusiastic. However, we do not ignore that expectations are priced in to a certain extent in the short term. In this context, considering the weak macro agenda next week, we anticipate that some attention may shift to the news flow on trade wars.
Apart from this agenda, we will summarize some headlines that may be important for global markets in a new trading week. The first one seems to be the upper house elections to be held on Sunday in Japan, the world’s third largest economy. Judging by the pricing in the bond market, it will not be a smooth election. The possibility of Prime Minister Shigeru Ishiba’s coalition losing its majority is not ruled out and this could lead to a resignation. Uncertainty, changes in the Japanese Yen and its repercussions on risk appetite could lead to a new and problematic topic on the agenda of global markets.
In addition to the ECB’s interest rate decision and macro indicators on the health of the US economy (apart from the PMI data, which we believe are not of high importance), Fed Chairman Powell’s speech on Tuesday will be another important topic. However, we do not think that the Chairman’s comments will have a profound impact on pricing behavior. Last week, Powell also had to defend the spending on the renovation of the FED building, while Trump’s pressure for a rate cut continues. However, we assume that this will not change the Fed’s stance for now. Since it seems unlikely that the Chairman, who will deliver a keynote speech at the FED’s Conference on the Integrated Review of the Capital Framework for Large Banks in Washington, will give a new message on the interest rate cut path, we position this as a development to follow, but of medium importance.
In summary, we think that this climate will be maintained after an environment in which digital assets are differentiated by the positive developments specific to the ecosystem itself, but we think that the natural functioning of the market will be reflected in investor behavior and that we are waiting for a period in which we think that interim corrections and news flows will be followed.
Macro Indicators to be announced this week
Flash Manufacturing PMI is a leading indicator of economic health. Businesses react quickly to market conditions and purchasing managers have perhaps the most up-to-date and relevant estimate of the company’s outlook for the economy. The Purchasing Managers’ Index (PMI) is a survey of nearly 800 purchasing managers that asks respondents to assess the relative level of business conditions, including employment, production, new orders, prices, supplier deliveries and inventories. Above 50.0 indicates that the sector is expanding, while below 50.0 indicates contraction. There are two versions of this report, Flash and Final, published about a week apart. The Flash version is released on a preliminary and monthly basis, approximately 3 weeks into the current month. A below-forecast reading is expected to produce a positive result for crypto assets.
US Durable Goods Orders shows the change in the total value of new purchase orders placed with manufacturers for durable goods. This data is usually revised with the Factory Orders report released about a week later and “Durable Goods” are defined as products that last longer than 3 years, such as automobiles, computers, appliances and airplanes. It is a leading indicator of production and gives a preliminary indication of the vitality of the economy. Core Durable Goods Orders shows the change in the total value of new purchase orders placed with manufacturers for durable goods, excluding transportation items. This dataset has been shown to have complex effects on the value of digital assets.
Important Economic Calendar Data
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