"The cryptocurrency boom is unstoppable; this week after the surge, altcoins are entering the market."
First of all, congratulations $BTC for hitting new highs again 🎉🥂. I've really been too busy lately to update, but there are plenty of market developments worth noting. While continuously BUIDLing, I'm also waiting for the bearish friends to admit their mistakes. However, JPMorgan has already reversed its previous belief that the market would decline (Figure 1). I believe that the short-term impact of the trade war on the market will become smaller (more of an impact on the fundamentals of specific assets, while cryptocurrencies are unrelated to taxes, you know?). Additionally, the AAI Retail Investor Sentiment Index still shows a higher level of retail pessimism (see Figure 2), just like in May when I didn't see many people optimistic about the market. There is still upward space in the market.
Last week, Moody's downgrade of the U.S. rating sparked much discussion. I believe this is just another proof of the shaking dollar hegemony, mainly affecting the rebalancing of funds in investment portfolios, thereby accelerating the rise of alternative reserve assets. The asset reserve regulations at the national level will gradually shift to the cryptocurrency system. In recent days, U.S. long-term Treasury yields have continued to rise, consequently driving up yields on Japanese and German bonds as institutional investors grow weary of the government's massive debt. Currently, in the U.S., by 2027, the fiscal deficit is expected to increase by about 34% (as shown in Figure 3). Trump is pushing for massive tax cuts and the construction of a golden dome... When the government spends lavishly, money will no longer be money.
The fluctuations in the bond market are worth continuous attention. U.S. Treasury Secretary Yellen recently mentioned that it is time to relax bank regulations, particularly mentioning the relaxation of restrictions on SLR (Supplementary Leverage Ratio) and possibly modifying rules to allow more institutions to continue investing in non-AAA-rated U.S. Treasuries (otherwise, funds may flow to other bond markets, as seen in Figure 4, with multiple Asian sovereign bonds benefiting). The relaxation of regulations will take time, and many favorable factors are still ahead. The stablecoin bill passed a procedural vote yesterday; perhaps the structural challenges of the dollar system can be addressed through stablecoins? It is clear that Bitcoin and Ethereum are the ultimate winners. As regulations become clearer -> more stablecoin adoption + more traditional assets on-chain -> more cryptocurrency service innovations and adoption -> Everything is on-chain -> the best reserve assets BTC and decentralized application network ETH = Win 👑.
Bitcoin and Ethereum are the successors of the new financial order. The upcoming development of DeFi will be fascinating, such as hybrid credit protocols, stock and unconventional on-chain applications. Recently, the emergence of credit fund tokens and leveraged yield strategies launched in collaboration by Securitize and Kamino (Figure 5) is a signal of the surging tide of new financial innovations. Within three years, we might witness the momentum in DeFi similar to the explosion of financial derivatives in the early 2000s.
Returning to economic data, according to the Michigan Statistical Report, the public's inflation expectations for this year have risen (see Figure 6). Although last week's inflation data showed signs of decline, corporate capital expenditure costs are under upward pressure. The Federal Reserve seems to be more concerned about inflation issues rather than growth issues. The market's expectation for the Fed to cut interest rates this year has again decreased. The performance of inflation is like a snake that turns in the year of the snake; we may see inflation rise again and the topic of economic recession during the summer (July to September). Summer will be a good season for taking profits from the first half of the year to travel 😆⛱️.
Next, let's look at liquidity (Figure 7), which is still quite healthy. SOFR, RRP, and TGA have all started to decline. BTC hitting new highs is riding on the narrative and improving liquidity. $ETH also has the chance to regain some ground, but it requires the U.S. to shift dovish. At the beginning of April, I mentioned that Ethereum was only protecting a huge amount of on-chain assets (Native + RWA) at about 1.4x multiples. Can you believe it?! Let's do a further analysis next time!
————————————————————
Like to help with attention, share more, grateful! 😛
#Market_Update
