🤔 Will this week’s FEDs meeting break the market bounce?

Higher interest rates in the horizon, how will the market react?

July 24, 2022

Contents (3 min read):

  • 🤔 Will this week’s FEDs meeting break the market bounce?

  • 👎 Tesla cashes out $936 million in Bitcoin.

  • 👍 Coinbase shares jumped 14%

  • 👨‍👩‍👧‍👧 Startupy - Community-curated search engine

  • 👮 Ex-Coinbase employee charged…

  • 🏖️ IRAs, tax-sheltered accounts

  • 📰 ICYMI

  • 🙏🏻 Grateful for…

🤔 Will this week’s FEDs meeting break the market bounce?

This past week saw a strong bounce on most risk assets, including equities, Bitcoin, and high-yield fixed-income securities, but also Treasury notes.

There are many reasons for this uptick, including the declining US Dollar index which means U.S. goods are less expensive in foreign markets. Imports are more expensive, tourists have more purchasing power when traveling to countries where the dollar is the official currency and vice versa; for those who earn in US dollars, traveling to other nations where the US Dollar is not the official fiat, becomes more pricey.

On Wednesday, July 27th, the FEDs will meet again to raise interest rates. We are expecting a 50 base points increase, but the recent increase in asset prices may motivate an even higher rate than expected. It will be very interesting to see how the market behaves the 2 days prior to the FEDs meeting and compare them with the rest of the week.

Markets are very irrational and humans trade with their emotions. FOMO may kick in if we continue to see appreciation in risky assets valuations, especially in the global crypto space, but a more than 50 points rate increase may send investors to throw capital into more stable and less volatile investments.

Consumer confidence is another metric to keep track of as consumers have continued to steadily spend even though we are experiencing 40-year-high inflation numbers. This can change very quickly as summer is coming to an end, schools will be back in session soon, vacations are almost over, and we continue to hear about lay-offs, hiring freezes, and postponed or scratched company investments.

The investor’s response to this coming week's interest rate hike as well as how the market behaves prior to the FEDs Wednesday meeting will dictate if asset prices can push this rally any further or if we test new bottoms.

The above graph from MarketWatch states that the S&P500 and the interest rates are directly correlated, but the correlation has not been as strong in the past few months. There are always many different variables that influence markets; technology, its rapid advances as well as how fast information travels these days, and how fast we can trade have many implications on market valuations as well as investment decision-making.

👎 Tesla cashes out $936 million in Bitcoin.

Tesla jettisoned $936 million worth of the cryptocurrency in the second quarter of 2022, trimming its Bitcoin holdings by 75%, the company said in new investor filings.

Tesla aggressively embraced Bitcoin in 2021, investing $1.5 billion in the currency as CEO Elon Musk touted Bitcoin's advantages over standard fiat currency. For part of the year, Tesla customers could buy cars using Bitcoin.

But in recent months, Tesla's profitability was affected by "Bitcoin impairment," it said in its financial summary of the second quarter.

Michael Saylor has lashed out at Tesla for selling 75% of its Bitcoin. The MicroStrategy CEO has long been one of the most bullish voices in the crypto space. Indicating he's pretty exasperated about Elon Musk's decision to unlock liquidity for Tesla by offloading its crypto investment, Saylor wrote: "If you sell 75% of your Bitcoin, you will only have 25% of your Bitcoin left."

👍 Coinbase shares jumped 14%

Coinbase said it had no counterparty exposure to several collapsed crypto firms, seeking to allay fears about the impact of a liquidity crisis in the industry on its business.

Coinbase “had no financing exposure” to Celsius, Three Arrows Capital, and Voyager Digital, the company said in a blog post Wednesday. Each firm filed for bankruptcy protection after a plunge in digital token prices set off a cascade of liquidations in highly leveraged positions.

Shares of the company closed up more than 14% on Wednesday.

“Many of these firms were overleveraged with short-term liabilities mismatched against longer duration illiquid assets,” the company said.

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A former Coinbase employee has been charged with insider trading of cryptocurrencies. It's alleged Ishan Wahi was involved in the "highly confidential process" of deciding which coins would be listed on the exchange — and when. Prosecutors claim he shared secret information with his brother and a business associate, who ended up making $1.5 million in gains by trading 25 cryptocurrencies. All three men could face 20 years behind bars if convicted. U.S. Attorney General Damian Williams said this is the first insider trading case involving the crypto markets, adding: "Today's charges are a further reminder that Web3 is not a law-free zone."

Cryptocurrency is one of those things that everyone is talking about these days. There are all kinds of different exchanges to trade crypto on...but what many people don’t realize is how much they’re losing in taxes and fees.

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📰 ICYMI

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