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The Bitcoin Economic Calendar:
Week of Monday September 6th to Sunday September 12th.
Market Commentary:
Bitcoin: Bitcoin closed an impressive week with a last-minute rally on Sunday evening and finishing at $51,809 - up +6.15%.
While bitcoin is up +63.20% over the last 6 weeks, both ethereum and the FTX DeFi index are up ~110% in the same period. More on this in our DeFi section.
The eyes of the finance world (and the bitcoin industry) will be focused on El Salvador this week, as the Bitcoin Law comes into effect.
Many industry participants such as Alex Gladstein, Peter McCormack and others are in El Salvador to document this historic event.
While there has been a big focus on how small merchants are using bitcoin to accept payments from foreigners, there’s another - very interesting - shift happening. Large companies like Coca Cola, Pepsi and McDonalds now have to officially accept bitcoin - in El Salvador. This may prompt some of them to discuss whether to leave some bitcoin on their balance sheet - fascinating times ahead.
Despite the clear optimism in some camps, a segment of the population of El Salvador still believes that there will be challenges around the implementation.
How this plays out, of course, remains to be seen. We - as many others, believe that the law has the potential to change people’s lives for the better. We wish the best of luck to the people of El Salvador in this historic week.
Price-wise, the media attention around the event will likely drive buying pressure and - based on the macro backdrop, the bias this week could be to the upside.
In the institutional world, another large investment firm announced it is getting exposure to bitcoin this week.
The announcement came from U.S. Global, a renowned gold investment firm with over $4.6 Billion in assets under management. The firm invested just over $500k, or ~0.20% of the Fund’s assets in GBTC.
Willy Woo, a respected on-chain analyst, shared an insightful indicator last week modeling bitcoin’s price behaviour by looking at the bitcoin supply on exchanges vs. long-term holding.
As the model shows, the dotted line is the price modelling based on illiquid/liquid coins, and it shows that price tends to follow illiquid coin accumulation. As you can see, illiquid holders have continued to accumulate, which signals that price could be heading higher in the near term.
S&P 500: Equity markets continue to ride high with both the S&P and the Nasdaq reaching fresh new all-time highs last week.
The S&P reached 4,535 points, up +0.53% for the week. The Nasdaq reached 15,562, up +1.42%. It was the third highest weekly close ever for the Dow even though it closed down -0.32% at 35,362.
The big surprise number came on Friday with the non-farm payrolls number for July. The reading was a disappointing +235,000 vs. an expectation of +765,000. There were some very interesting nuggets in the report:
For one, hiring in the services sector has essentially come to a halt - they added no new jobs in August. We’ll come back to this shortly.
Manufacturing jobs came in better than expected, many of them going to the automotive industry. This makes sense given the slew of shortages we have seen in that sector.
Additionally, average hourly earnings increased by 0.6% month-over-month, which equates to 7.2% annualized - that’s higher than the inflation rate! As you can see from the Walmart headline above, Walmart alone is raising its average wages by ~6% annualized. A sign of the times and a very good thing for the American economy.
This week we get a look at job openings in the U.S. - expectation is for 10.1 million jobs. Remember we have only about 8.6 million people in the U.S. considered to be “out of work”.
This brings us back to jobs in the service industry. There’s a thesis that these jobs aren’t growing because employers and prospective employees are at a standstill. The end result is that employers will have to pay higher wages - this should eventually drive restaurant food inflation prices higher in the coming months.
We’ll look at the bitcoin futures and options markets in our What’s Ahead section.
Gold: Gold had a good week, up +0.53% and closing at $1,826/oz. Not surprisingly, all of the gains for the week came on Friday after the non-farm payrolls report, pushing gold +0.93% higher for the day and helping it close the week in the green.
There’s a few factors playing in gold’s favour. For one, the macro back-drop is looking like inflation will continue to run higher.
From a technical point of view, the resistance lines and the downtrend from August have now turned into support lines.
And lastly, historically speaking, September tends to be the best-performing month for gold due to seasonality.
While this should not be seen as a signal that gold “always goes up” in September, if we understand what may be driving this behaviour, we can see how it could play out this year.
Historically speaking, September has not been a great month for stocks - this could have to do with the fact that many investors return home from summer to act on their portfolios. If the year has been good, investors may look to take profits and roll into gold or bonds. If the year has been bad, investors may start to think about tax harvesting their losses and setting up in the new year. Either way, they look at their portfolios and act.
Both Bitcoin and equity markets have had incredible runs so far this year - keep that in mind as the month progresses. Both may face some profit-taking headwinds.
DeFi: It was an absolute monster week for the DeFi index, finishing higher by +20.41%. Ethereum also had an impressive week, finishing higher by 22.51% at $3,951.
Ethereum continues to gain momentum from a narrative perspective - with popular names getting behind it. This week it was Hollywood celebrity, Reese Witherspoon.
Obviously mainstream endorsements, like Witherspoon’s, increase the exposure of digital assets to a much broader audience.
Another narrative that’s picking up steam is Solana vs. Ethereum. Staying within celebrity endorsements, Jason Derulo tweeted in favour of Solana.
Could these be top signals? We don’t know. It’s important to keep in mind that the U.S. consumer has a great balance sheet and a lot of pent up firepower.
Let’s spend a minute comparing Ethereum and Solana - purely from an asset price and market capitalization perspective - we’ll leave the tech for a later time.
Over the last 12 months, ethereum prices are up a whopping +956%. This means that an investment in ethereum has returned almost 10X over the course of a year. Solana has returned a whopping +4,655% in the same time frame - meaning an investment in solana would have returned more than 46X!
In terms of market capitalization, ethereum is currently sitting at ~456 Billion. Solana’s market capitalization is ~40 Billion. Meaning that Solana is approximately 1/10th of ethereum.
Based on the speed at which it is gaining mindshare around developers and investors, it would not be surprising to see this trend continue for solana.
Another big development from last week was the news that the SEC is currently probing decentralized exchange Uniswap.
Uniswap is the largest decentralized exchange in the world and an industry darling. It also has the backing of some world-class investors with deep connections. Despite that, the SEC has made it clear that it considers many activities in DeFi to be deemed securities. Any action towards Uniswap would likely be a landmark motion with many ramifications across DeFi.
Difficulty Commentary: Not much has changed on this front. The next difficulty adjustment should kick in around Wednesday morning and should bring difficulty higher by ~3% to 18 TH.
The mempool remains eerily quiet - with next block confirmation fees in the single-satoshi mark most of the time.
Elsewhere, the narrative around bitcoin miners moving from China to the U.S. continues to strengthen.
Headlines like the above from BBC are highlighting the opportunities to a mainstream audience. Little by little, the image of bitcoin miners is getting a makeover in mainstream media.
What's ahead for the week:
It seems as though the stars continue to align for equity markets and bitcoin:
The Fed tapering continues to be punted away due to bad economic data. Inflation is increasing moderately, with salaries seemingly keeping up. Unemployment is on the way down - with more job openings than people looking for work. Companies are churning profits. A fair question could be - what could possibly go wrong?
During good times, it is wise to understand what could trigger a change in direction in the markets. While things can feel great now, everything could turn on a dime.
So, what could go wrong?
Many things could derail the current market conditions. However, investors should be particularly aware of 2 main risks:
One is, good news: If economic data - particularly around unemployment in the U.S. continues to improve, this could lead to the Fed accelerating its tapering plans and therefore spooking markets.
The other growing concern around markets is the giant Chinese conglomerate China Evergrande.
At $89 Billion in debt, Evergrande is the most indebted property developer in the world. Some articles suggest that the total debt surpasses $300 billion.
The company, with projects in more than 200 cities, is under pressure from Beijing and regulators to reduce its debt.
It is currently looking to sell assets, including its stake in an electric vehicle company that has not yet shipped a commercial product.
If Evergrande goes under, it could cause contagion around other Chinese lenders.
The Evergrande situation is being monitored closely by bond market observers. We’ll continue to provide updates in the weeks to come.
As always, we wrap up with a summary of the upcoming economic data and earnings reports for the week:
Monday:
Labour day holiday in the U.S. and Canada.
Wednesday:
10 AM EST - Job Openings in the U.S.
Meme-stock GameStop (GME) reports earnings after the bell.
Thursday:
8.30 AM EST - Initial and Continuing Jobless Claims
10.30 AM EST - SEC Investor Advisory Committee panel discussion on: “Reimagining Investor Protection in a Digital World: the Behavioral Design of Online Trading Platforms”.
Friday:
8.30 AM EST - Producer Price Index - expectation is for +1% increase.
10 AM EST - Wholesales Inventories - expectation is for +0.6% buildup.
It's a big week coming up, and as always, we'll keep you posted on any relevant news throughout the week right here and from our Twitter account @hodlwithLedn
Canadian Central Banking Updates:
Current Target Interest Rate: 0.00 - 0.25%
Current Overnight Money Market Rate: 0.23%
Source: https://www.bankofcanada.ca/rates/
U.S. Central Banking Updates:
Current Fed Interest Target Rate: 0.00 - 0.25%
Current Effective Federal Funds Rate: 0.09%
Source: https://apps.newyorkfed.org/markets/autorates/fed%20funds
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