Overview
Last week, markets couldn’t stop talking about the yield curve inversion and what it signals for Fed policy. Will the Fed be able to engineer a “soft landing” of the economy or will the monetary tightening lead to a new recession? As we mentioned in this past Friday’s Crypto Weekend Watch, “even if no recession ends up occurring, the truth is the direction always matters more than the destination.”
That being said, equities and crypto have been on a roll since mid March. And April has history on its side - it is normally the best performing month for the S&P 500 and has historically been the second best performing month for Bitcoin. Even if crypto doesn’t decouple from equities this month, there’s a strong case for gains to be made by April 30th.
Crypto
Altcoins have been all the rage in the short-term while Bitcoin couldn’t keep up the pace and stay above $48K. Nevertheless, helping its bullish case is the news that overall BTC stocks on exchanges are now at their lowest point since August 2018 according to CryptoQuant. Lower floating supply never hurts.
Investors should also keep an eye out for any new info from Terraform Labs’ Do Kwon concerning the timing and amount of new Bitcoin purchases for the Luna Foundation Guard (the non-profit focused on the Terra blockchain protocol) with the purpose of using BTC as a reserve for Terra’s stablecoin.
Luna Foundation Guard has already purchased around $1.4B worth of BTC in $125M lots since January. We know that they have raised $2.5B for this purpose, so there’s at least $1B more to spend. But we’ve also recently learned from Do Kwon that they plan on being the largest single holder of Bitcoin in the world, after Satoshi. This means they expect to eventually own $10B or more of Bitcoin.
Lastly on the Bitcoin front, the largest Bitcoin-focused conference will be taking place this week in Miami. The Bitcoin 2022 Conference will be held from April 6th-9th with speakers including Salvadoran President Nayin Bukele, Cathie Wood, and Jordan Peterson. Who knows what surprising announcements await?
As of this writing, BTC has been moving in a small range around the key $46K level.
Will "altcoin king" Ethereum continue its solid performance?
Last week, searches for “Ethereum merge” hit a new all-time high according to Google Trends. The market has certainly been chirping away in the past few weeks about the upcoming move to Proof-of-Stake. But it does appear strange that so much attention has been shifted to the upcoming merge when the current consensus is that it will actually happen sometime in June - two months away.
Furthermore, according to Polygon-based betting platform Polymarket, bettors are giving only a 21% chance that the merge will take place by July 1st and only a 50% chance that it will happen by August 1st. Something for crypto investors to keep in mind as “buy the rumor sell the news” dynamics often coincide with major cryptocurrency upgrades.
As of this post, ETH is trading around the critical $3,500 level.
This is expected to be an exciting week for Cardano. The smart contract leader has rallied 50% from mid-March, but positive news has often failed to move ADA’s needle in the past. Will it be different this time?
A bump this week could come from the April 5th launch of rapper Snoop Dogg’s new NFT “Claymations” collection on the Cardano blockchain. It will give holders access to rare pieces and unreleased music. The Claymation collaboration even includes renowned NFT artist Champ Medici.
Additionally, on April 5th, Charles Hoshkinson will have a conversation with Snoop Dogg focusing on the Cardano ecosystem at Cardano360, Cardano’s monthly talk.
Is it possible that ADA could become one of the "cool cryptos?"
Traders should also keep Metadium (META) and TitanSwap (TITAN) on their radars as they’ve both been generating A LOT of positive social chatter as measured by Crowdsense’s Social Sentiment Score as seen below.
META just today, April 4th, became a top 5 rising coin in daily positive social sentiment while TITAN has scored in the top 5 since April 3rd.
Macro
From the macro angle, investors should pay attention to the FOMC’s March minutes release on Wednesday April 6th at 2pm ET. The market will be scouring the minutes for any hints on how the Fed will approach policy in the coming months.
Remember, risk-on assets generally get pulled down from a rising-rate environment, but inflation creates many losers too. The Fed has a tough task ahead of it as it has to perfectly manage the pace and scale of its rate hikes without causing a recession.
Geopolitics
Will Russia’s threat to stop supplying Europe with gas unless they pay in Rubles cause more market disorder?
Russia already stated this past Friday that they wouldn't immediately stop the flow of gas to Europe. They do however, want foreign buyers of Russian gas to open Rouble accounts in the non-sanctioned state-run Gazprombank.
The question being asked now is not whether Europe will give in or not, but when will they give in. The hard truth is Europe is super dependent on Russian gas for its energy needs and there’s just no quick fix. And European politicians realize that an energy shortage is a quick path to a recession. Still, if Russia actually does stop the flow of cause - expect MAJOR market dislocation.
It’s also important to note that most Russian gas deliveries up until April 15th have already been paid for. Consequently, when new gas deliveries need to be paid for in the latter half of April leading up to May 1st is when more market drama could arise. The weather is on Europe’s side though as it's getting warmer and gas demand is nowhere near where it was in the winter months.
Concerning the military situation, it appears markets have slightly less to worry about as Russia has significantly pulled back its forces to Ukraine’s Donbas region in the east. Chernoybl is now back in Ukrainian hands. This might partially be a result of the weather since the terrain becomes more difficult to transverse in the spring months. This pull back also gives Russia time to regroup with many experts speculating that Russia will be back on the offensive in May as the weather will be more favorable then.
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