Bank Run (Core Strategy Rebalance)
Most significant Banking Failure Since the GFC
Our clients know the rationale behind our bullish perspective on crypto this year. Consumer prices are broadly trending lower, peak-tightening occurred last year (on a rate-of-change basis), and global liquidity conditions have been more favorable than many anticipated. We also felt comfortable that most of the “forced selling” from market participants exiting the ecosystem was behind us.
Unfortunately, over the past few weeks, economic data became hotter than expected, and Fed Chair Powell was more hawkish in his discourse. As a result, rates did not abate nearly as fast as we had anticipated. In fact, the US 2Y hit its highest level in over 15 years, and the futures market repriced the expected hike at the March FOMC meeting from 25 bps to 50 bps (note: this chart is as of premarket hours on Wednesday, and the futures market has since reversed course a bit).
Further, the liquidity injections from the PBOC and BOJ were paused.
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RATE EXPECTATIONS MOVING LOWER Last week, we discussed how rate expectations were a barrier to crypto moving higher and that we anticipate continued non-recessionary but soft economic data will help spur flows. Fast forward to this week, and we have seen a cool manufacturing PMI, a soft JOLTS report, and a services PMI in which the price component was below market expectations. The remaining important data for this week includes...
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