Bitcoin Chills Around $40k as USD Slides After Fed Says It Has A Ways to Go Before Tapering Ends; GDP Rises Slightly, Better than Q1
The US central bank has made no decision regarding the timing of the tapering; as such, the market has now shifted its focus on the Jackson Hole conference of central bankers in late August.
After eight straight days of green candles, the longest winning streak in 2021, Bitcoin is comfortably trading around and above $40,000.
The price of BTC is up more than 24% in the past 7-days, 38% YTD, and 268.5% in the past year, the leading cryptocurrency is still green as ever.
The second-largest crypto Ether is also enjoying a $2,300 level, which is up 218% YTD and 632% in the last year. The total crypto market cap is back above $1.6 trillion, as per CoinGecko. ETH 0.00% Ethereum / USD ETHUSD $ 1,224.72
$0.000.00% Volume 13.84 b Change $0.00 Open $1,224.72 Circulating 121.33 m Market Cap 148.6 b 5 mon Coinbase Predicts Substantial Growth of Newer L1 Chains & Institutionalization of Regulated DeFi 5 mon A Possible Crypto Recovery Moving Into New Year, Risk-on Sentiments Send The Stock Market to Another Record High 5 mon The Sandbox Game Is Migrating to Ethereum Sidechain Polygon and Launching A DAO in 2022
Spot gold rose 0.8% today to $1,821 an ounce but is still down 4.5% YTD, while the dollar index has been going down since last week, now under the 92 level last seen late last month.
The yield on 10-year Treasuries advanced three basis points to 1.26%, while little was changed with Germany’s 10-year yield at -0.44% with Britain’s 10-year yield advancing one basis point to 0.59%.
Today's further drop in US 10-year real yields is attracting attention
Four most-cited reasons involving the Fed are:
More dovish-than-expected remarks post FOMC;
Fed not concerned enough about the Delta Variant;
Fed will be forced to slam on the brakes;
Distorted levels pic.twitter.com/1S9LQXV5VJ
— Mohamed A. El-Erian (@elerianm) July 29, 2021
This positive action in the risk-on assets has been on the optimism that the Federal Reserve won’t start taping stimulus anytime soon. In Wednesday's policy meeting, the Fed kept the interest rates in a range near zero while meaning its asset purchase at $120 billion a month.
While the officials have started to discuss how to go about scaling back the bond-buying when the time comes, Fed Chair Jerome Powell has yet again given the market reassurance that there's still some way to go. It is simply, as expected, boosting sentiment.
“We haven’t made any decisions about the timing,” said Powell, adding they made their first real “deep dive” into discussions about the timing, pace, and composition of future asset purchases during this meeting.
While some US central bank policymakers said they want to end their monthly $40 billion of MBS purchases faster than the $80 billion in Treasuries because of the hot US housing market, Powell doesn’t think so.
“There really is little support for the idea of tapering MBS earlier than Treasuries. I think we will taper them at the same time,” Powell said at a press conference following the central bank’s latest two-day policy meeting.
BlackRock CIO Rick Rieder sees the Fed beginning to outline tapering at Jackson Hole late next month but says more specificity will be given at its September policy-setting meeting.
Powell also said that he is in the process of writing a speech to be delivered at the annual Jackson Hole conference of central bankers on Aug. 26-28.
As for why yields are still falling, Powell attributed that to the technical factor that “you can’t quite explain,” inflation expectation moderating, and decline in real yields as investors get concerned about a slowdown in growth due to the spread of coronavirus’ delta variant.
“We’ve seen long-term yields come down significantly.”
“I don’t think that there’s a real consensus on what explains the moves between the last meeting and this meeting.”
On Thursday, meanwhile, the Commerce Department reported that the US economy rose at a disappointing rate in Q2, with GDP reporting an increase of 6.5% on an annualized basis during the April-to-June period, slightly better than the 6.3% gain in Q1 but well below economists’ forecasts of 8.4%.
Initial claims for unemployment insurance also missed the mark with 400k total above the 380k expectation.
Meanwhile, the US Senate has voted to move ahead with a broad infrastructure package of roughly $1 trillion. This bill includes new tax reporting obligations for crypto to fund a portion of their investment into transportation and power systems.
“Despite the popularity and the need for it, Washington hasn’t been able to get it done. This time, we’re going to get it done,” said Sen. Rob Portman (R., Ohio).