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GM. This is Milk Road, the crypto newsletter that drops in with more flair than Tom Cruise landing at the Olympic closing ceremony. |
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RATES DOWN → PORTFOLIOS UP 🤞 |
Central banks are cutting rates faster than a groom tryna cut the weight needed to squeeze into his tux (last minute, and at a rapid pace). ⏩️ |
They've conducted a total of 35 cuts over the last 3 months – exceeding Q1 '24 levels. |
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50% of countries globally are now cutting – Switzerland, Canada, Sweden, The EU, UK – they've all joined the party. 🥳 |
Here's what this means for you and your portfolio: |
In an ideal economy, central banks carefully raise rates to protect against runaway inflation, and lower them to protect against recessions. |
But the global economy isn't in an 'ideal' situation right now – it's still reeling from the COVID lockdowns and money printing. |
This printing has consequences. 🖨️ |
…and consequences rarely show up lubed. |
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These rapid cuts tell us that central banks are quickly switching from: |
"Mama mia! We're under threat of runaway inflation, we need to increase rates fast!" |
To… |
"Oops, we might have overdone it. Jobs/manufacturing are down, the system is under stress – time to pump the system with extra cash!" |
(Or however central bankers talk). |
Either way, the party won't officially start until the guest of honor (the US Fed) arrives – with an ETA of Sep 18th and a cut of 0.25% - 0.5%. (with more to follow in Nov / Dec) 👇 |
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Here're the 3 scenarios in which this can affect your portfolio: |
Too late: The economy is already too far gone, and these cuts just soften the fall into a recession (aka short-term bad for markets). Just right: Rate cuts and printing help bolster weakening economies, without letting inflation get out of hand, leading to a healthy final leg of the bull run (over ~12 months). Too much: The global economy isn't as bad as we'd believed, and panicked cuts + printing lead to an accelerated blow off top.
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🥛 Milk Road take: Call us Goldilocks, cause we want our bull run to be juuust right. |
(And bear-free). |
We expect the Fed's September cut to confirm a risk-on environment and push the crypto market into the final leg of its bull run. |
"Ok, but why not aim for an accelerated blow off top?"
— You, probably. |
We hear you – and sure, blow off tops look great on a chart – e.g. after a steady 7 month rise back in 2017, $BTC ran from ~$9.5k to ~$19.8k (a +82% gain) from Dec 1-17th. 👇 |
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…but those moves are quick and famously hard to navigate. |
The smaller the window of time you have to analyze/decide to sell → the higher the likelihood you hold on too long, waiting for "one last pump" that never comes. |
Whatever happens, it's clear the rate cutting cycle has begun and loosening financial conditions are in our future. |
Which means lowered loan/credit repayments and more milk money for all market players. 🤑 |
That's something we can get behind. |
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WHAT TO WATCH FOR THIS WEEK 📅 |
Welcome to another exciting week in the crypto world! |
We've stirred the milk and let the cream rise to the top – here's what floated to the surface: |
1/ Macro events 📊 |
A series of important economic reports and events are on the agenda this week: |
PPI Inflation - Tuesday: Tracks the cost of production at a wholesale level (how much are manufacturers forking out to make goods). CPI Inflation - Wednesday: Gauges the increase in cost of 'stuff' – the things we pay for in our day-to-day lives – the lower the CPI, the more money we (consumers) have to spend. Jobless Claims - Thursday: The lower the jobless claims, the healthier the economy is. Retail Sales - Thursday: Provides insights into consumer spending trends, reflecting economic health. NY/Philly Fed Manufacturing Index - Thursday: Gauges manufacturing sector strength for New York & Pennsylvania, signaling momentum for the broader US economy. Housing Starts - Friday: A measure of new residential construction (the more housing starts, the healthier the economic outlook). Consumer Sentiment - Friday: A vibe check with consumers, "Sure, the economic data may be good/bad – but how does it make you feel?"
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Why it matters: As we covered earlier, the rate cutting cycle is upon us…but it comes with a catch. |
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What we want to see is slowly weakening economic data (e.g. PPI coming in at 0.1, down from 0.2 last month) so the Fed has an excuse to cut rates while the economy is still healthy. |
But if we see inflation A) falling too fast, or B) not fast enough, that could spook the markets into selling off in anticipation of A) a recession, or B) further rate holds/hikes. |
2/ Earnings Season 💣 |
Q3 is here – and with that comes a slew of Q2 earnings reports! Let's see what the reports from major companies can tell us… |
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We've got heavy hitters like Cisco, Walmart, and Home Depot opening their books. |
What do hardware, groceries, and telecom network companies have to do with crypto? Nothing directly, but these are big companies! |
Blowout reports across the board could send stocks soaring and drag crypto along for the ride. |
A miss? |
Well, that'd be less fun – think panic selling and a race to the bottom. Either way, it's going to be one helluva show. 👀 |
3/ Token unlocks 🔓 |
We'll see a milk-curdling $177.08M worth of tokens unlocked this week. |
The culprits are: |
$ARB: $54.48M (2.8% of circulating supply) unlocks on Friday. $STRK: $25.57M (4.0% of circulating supply) unlocks on Thursday. $SAND: $54.46M (9.0% of circulating supply) unlocks on Wednesday.
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Will we see a sell-off or a surge? Stay tuned. 👀
There you have it! Another big week full of macro data releases, earnings reports and those tricky token unlocks 🔐 |
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BITE-SIZED COOKIES FOR THE ROAD 🍪 |
SEC subpoenas three crypto VCs in expanding crackdown. The agency issued subpoenas to the VC firms as part of its investigation into violations. The probe is checking if these VCs acted as statutory underwriters by distributing unregistered tokens. — DL News |
Coincall is a standout centralized crypto exchange specializing in options contracts. Founded by a team of seasoned experts from prestigious institutions like JPMorgan and leading crypto exchanges, it brings a wealth of experience to the table. Discover more in our review. |
Marathon Digital is planning to raise $250M through a private note sale to increase its Bitcoin holdings. The notes are set to mature on September 1st 2031, with interest paid semiannually. |
Symbiotic, a competitor to EigenLayer, has launched its devnet on the Ethereum Holesky test network. The platform aims to provide a shared security model by allowing various ERC-20 tokens to be used as restaked collateral. A full mainnet release is expected later in Q3, pending security audits. |
Ethereum ICO whale has been steadily transferring ETH to OKX, with a total of $154M deposited over the last month. Despite these significant transfers, the whale still holds 15,600 ether, valued at approximately $41.8M. |
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MILKY MEMES 🤣 |
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RATE TODAY'S EDITION |
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ROADIE REVIEW OF THE DAY 🥛 |
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VITALIK PIC OF THE DAY |
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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research. |
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