The market, projects, currencies, and other information, viewpoints, and judgments mentioned in this report are for reference only and do not constitute any investment advice.
After the COVID-19 crisis, the United States appears to be turning the “story” of using its position as the world’s largest reserve currency, the US dollar, to harvest other economies through a “tidal wave of dollars” into reality. Economies worldwide are under pressure, with the yen-to-dollar exchange rate dropping to its lowest level since 1986.
On June 5, Canada cut interest rates, followed by the Eurozone on June 6. Why hasn’t the Fed cut rates yet?
Because only when the yen exchange rate collapses will it have had its fill.
Europe and Canada can’t hold on, only the United States can. The dollar index continues to rise, putting immense pressure on equity markets.
Under the enormous pressure of macro finance, the cryptocurrency market closed June down 7.12% after rebounding in May, with Bitcoin continuing a deep consolidation phase following its historic highs. This consolidation has lasted nearly 4 months. Few sectors within the cryptocurrency market have shown independent trends.
Despite a slight recovery compared to May, stablecoin inflows remained low at $856 million. ETF channel funds totaled $641 million, far below last month’s $1.9 billion.
There is a split in on-chain activities. While Bitcoin data continues to deteriorate, public chains like Ethereum and Solana remain active. These data points suggest the bull market persists, and enthusiasm remains high.
Macroeconomics
On June 12, the US released May CPI data, dropping another percentage point to 3.3% from April’s 3.4%, below expectations. This marks two consecutive months of decline in US CPI in a high-interest-rate environment. Meanwhile, PMI data for businesses dropped from 49.2% to 48.7%, accelerating contraction, supporting the downward trend in CPI.
The unexpected strength in employment data released on June 7 (182,000 jobs added, exceeding forecasts by 272,000) raised suspicions about statistical methodologies suppressing expectations of rate cuts.
Market players are choosing to believe in rate cuts. Interest rate swap markets still bet on two rate cuts in 2024. UBS claims the market underestimates the magnitude of this round of rate cuts, even predicting the “first cut” could still happen in September. With the US dollar index breaking 106, the Nasdaq continues to set new highs as these long positions bet on their own judgments.
Statements from US government and Federal Reserve officials in June, notably hawkish, may represent the largest dose of the year. Treasury Secretary Yellen sees no signs of a US recession imminent, while Fed Governor Bowman emphasizes inflation risks persist, with zero rate cuts possible in 2024.
Although CPI has declined for two consecutive months, robust employment data allows the Fed to maintain high rates longer, aiming for inflation to approach 2%.
The high-interest-rate environment of the US dollar is pressuring global capital markets, including the cryptocurrency market.
EMC Labs believes that alongside Bitcoin’s historic high, some investors continue to sell to lock in profits. However, the high US dollar interest rates have significantly reduced capital inflows into the cryptocurrency market, leading to selling pressure that cannot be absorbed sufficiently. This inability to break out effectively is fundamental to the current cryptocurrency market’s challenges, even challenging the lower bounds of the adjustment range.
Cryptocurrency Market
In June, Bitcoin opened at $67,473.07 and closed at $62,668.26, marking a 7.12% decline for the month, with a volatility of 20.10%. Trading volume has shrunk for three consecutive months.
In June, Bitcoin’s performance diverged from the Nasdaq, dropping 7.12% for the month despite the Nasdaq’s strong 5.69% rise to new highs.
Technically, influenced by Mt.Gox’s Bitcoin distribution and news of Germany’s Bitcoin sales, BTC prices retraced on June 24 to the uptrend line since October last year, rebounding thereafter above $63,000. However, the medium-term outlook remains uncertain.
Influence by the expected approval of ETFs, ETH trends slightly outperformed BTC. The ETH/BTC pair has largely retained May’s rebound gains, indicating continued industry capital betting on ETH ETF trading.
ETH ETF is likely to be approved for trading in July. However, given the current severe funding constraints, once the positive news is realized, ETH may face significant selling pressure short-term. Whether ETH ETF can bring substantial net inflows similar to BTC ETF remains uncertain.
Capital Flow
A bull market is primarily a capital phenomenon.
Based on funding sources, we can divide BTC’s trends since last year into four phases—
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