The flipside of that reality is that crypto, or at least BTC, is likely to become increasingly co-opted into existing financials structures, a far cry from its initial dreams of a decentralized world.
Overview
US equity markets are staring down the reality of a global recession while crypto markets jump from a collection of positive catalysts. US PMI readings suggest the global manufacturing slowdown has finally reached American shores. Globally, central banks continue to suggest tighter regimes for the foreseeable future. Analysts are in turn suggesting the pain will be greater than markets have priced in.
In breaking news, Russian PMC Wagner has staged an armed uprising, advancing rapidly towards Moscow, seizing the headquarters of the Southern Military District, responsible for supplying and directing much of the war in Ukraine, and shooting down multiple Russian aircraft along the way. Putin announced that Prigozhin, head of Wagner, is to be persecuted, before backing down a few hours later. Subsequent developments and their impact on the markets remain to be seen, but responses thus far outside of Russia have been muted, a consequence of how divorced Russia is from global markets since the beginning of the invasion of Ukraine.
Equities
With so many apparent headwinds, it’s a wonder US equities have done so well in the year so far, AI hype or not. That the most recent PMI readings were a surprise compared to forecasts suggest a degree of disconnect between US investors and those abroad, reminiscent of when COVID first became a global concern. Asian and EU markets swooned while US markets seemed to remain in its own bubble until cases reached American shores, producing the sharpest selloff since 2008. It is possible we are seeing a repeat of the pattern amongst American-centric investors, where they fail to price in relevant external information well. In such a case, we are likely looking at the end of an extended bear–market rally. The alternative is one where the US economy is indeed heavily decoupled from the fortunes of the rest of the world, able to perform well while the rest of the world struggles. In that case, we may be looking at a new, at least in living memory, paradigm of an effectively deglobalized world.
Crypto
Last week can be seen as a landmark week in crypto history. While there has been a long-standing division between trad-fi and crypto, the launch of Wall Street backed EDX, Blackrock’s BTC spot ETF filing and Crypto.com’s license from Spain and Singapore are strong steps towards making crypto mainstream in trad-fi circles as well. This represents a massive new pool of cash that can easily access crypto markets, in ways that are both technically familiar and legally compliant. The flipside of that reality is that crypto, or at least BTC, is likely to become increasingly co-opted into existing financials structures, a far cry from its initial dreams of a decentralized world. In response to these announcements, BTC rose sharply, breaking the 30000 USD mark once again.
Upcoming Calendar Events
- US new home sales (27 Jun)
- German CPI (28 Jun)
- China Manufacturing PMI (29 Jun)
- US PCE, consumer sentiment data (30 Jun)
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