"News Updates May 31, 2023"
1. Bitcoin Set to Lock in First Loss of 2023 as Fed, Debt Drama Pushes Crypto Red<\/p>\n
A series of Fed governor speeches Wednesday and increased pressure to reach an agreement on the debt ceiling has assets in the red Wednesday.<\/p>\n
Crypto and equity markets dipped into the red Wednesday as investors evaluated hawkish comments from Federal Reserve governors and kept an eye on Washington for signs of a debt deal. <\/p>\n
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Bitcoin (BTC) lost as much as 3.2% over the past 24 hours, while ether (ETH) dropped 2.8%. Bitcoin is poised to post its first negative monthly return of the year, losing close to 8% during May. Ether, on the other hand, has lost around 0.2% over the month at the time of publication. <\/p>\n
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Stocks fared better but still ended Wednesday’s trading session lower, with the S&P 500 and Nasdaq Composite Indexes losing about 0.4% each. <\/p>\n
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The tech-heavy Nasdaq has outperformed in recent days as lawmakers continue to spar ahead of the extended but quickly-approaching debt ceiling deadline. The Nasdaq has posted close to 4% returns in the last five trading days, dwarfing the S&P 500’s 1.5% five-day return. <\/p>\n
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But the rally for risk assets wasn’t built to last, Noelle Acheson, author of Crypto is Macro Now and former head of market insights at Genesis, said in her newsletter Wednesday.<\/p>\n
“Avoiding a default is a relief, for sure, but the incoming wave of issuance will withdraw liquidity from the market and push yields up,” Acheson wrote. “In theory, this should be the equivalent of another rate hike at least — but the CME swaps market is pricing in another rate hike in June on top of the liquidity impact, with expectations of a cut pushed out to November at the earliest.”<\/p>\n
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Fed Governors Philip Jefferson, Michelle Bowman and Susan Collins delivered remarks Wednesday to reiterate the central bank’s commitment to reducing inflation. Jefferson, currently in the running to become the next vice chair, said there could be a rate hike “skip” in June, but markets should not rule out the possibility of further rate hikes to come. <\/p>\n
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“Skipping a rate hike at a coming meeting would allow the committee to see more data before making decisions about the extent of additional policy firming,” Jefferson said during an appearance at a Fed conference Wednesday. <\/p>\n
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Markets are still confident the central bank will opt to pause rate hikes at its next meeting in about two weeks. Data from CME Group shows a 72.5% likelihood that committee members keep interest rates the same in June. <\/p>\n
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The uncertain marco environment and discouraging price action in crypto markets has traders moving out of the asset. Daily crypto trading volume is now at its lowest level since early 2020, data from Kaiko shows.<\/p>\n
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2. How Will Bitcoin Perform in June? Here Is What History Tells Us.<\/p>\n
Bitcoin is on course to close May down a little over 7%, marking the first negative month for the world’s largest cryptocurrency since last December.<\/p>\n
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The drop would also mark BTC’s worst month since the collapse of cryptocurrency exchange FTX triggered a 16% price drop last November.<\/p>\n
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But a 7% drop in May is an improvement on its May 2021 and 2022 performances, when Bitcoin lost 35.38% and 15.56% respectively.<\/p>\n
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Bitcoin was last trading down around 2.0% on Wednesday, weighed by a combination of macro headwinds as the US dollar rises on stronger-than-expected US job openings data and hawkish Fed speak, as well as technical selling.<\/p>\n
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Bitcoin recent rejected a test of its 50-Day Moving Average and confirmed a downtrend from the April\/early May highs, with technicians subsequently calling for a retest of recent sub-$26,000 lows.<\/p>\n
How Will Bitcoin Perform in June?<\/p>\n
History tells us that June is, on average, June is Bitcoin’s worst month for price appreciation throughout the year.<\/p>\n
Since 2011, Bitcoin has “only” appreciated at a rate of around 7% in June, with only September and August seeing a weaker average appreciation.<\/p>\n
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More concerning is the fact that, in the last three years, Bitcoin has experienced an average price drop in June of 15.6%.<\/p>\n
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While expecting a more than 15% price drop in June might be a bit excessive, chart analysis suggests that price risks remain tilted to the downside in the upcoming month.<\/p>\n
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The above chart analysis suggests that Bitcoin is in a medium-term downtrend and recent shifts in the macro environment suggest that this downtrend is warranted.<\/p>\n
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In recent weeks, US jobs, service sector (PMI) and inflation data have remained stronger\/hotter than expected, pushing back against the idea that the Fed is done with rate hikes.<\/p>\n
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Meanwhile, strong data and commentary from Fed policymakers has forced markets to price out bets on rate cuts in the second half of 2023 as US recession bets are squared.<\/p>\n
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All of this has given the US dollar decent support and lifted US yields (the 2 and 10-year, for example) above recent multi-month ranges.<\/p>\n
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Whilst AI optimism and a paring of US recession bets has kept the rally in US stocks (particularly in big tech names), which would normally help Bitcoin, the stronger dollar and higher yields have been the stronger influence.<\/p>\n
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If upcoming June jobs, inflation and activity data continue to paint a picture of a US economy that remains resilient and still faces unacceptably high inflationary pressures, another Fed hike is likely in June, and the Bitcoin price could well fall further.<\/p>"
