Altcoins Will Bottom in Early Summer Before Bull Run — Analyst

Cryptocurrency

Summary:

An altcoin bull run would first require Bitcoin to break out from its current range, according to Nansen’s principal research analyst.

Bitcoin aside, the cryptocurrency market could find its local bottom in June, marking the start of the next altcoin bull cycle, according to market analysts.

Altcoin bottom could occur in June — Analyst

Based on historical chart patterns, altcoins could be set to find their local price bottom around the beginning of June, according to popular crypto analyst Rekt Capital, who wrote in a May 8 X post:

“Altcoins are following the plan perfectly. Altcoins bottomed in early February. Altcoins sold off around the BTC Halving. Altcoins to bottom early summer.”

Altcoin hype cycles. Source: Rekt Capital

The altcoin market took a beating in the past month. The market cap of altcoins, excluding the 10 largest cryptocurrencies, fell over 21% during the previous month to $265 billion. Altcoins Will Bottom in Early Summer Before Bull Run — Analyst_2

Altcoins Will Bottom in Early Summer Before Bull Run — Analyst_2

Altcoin market cap. Source: TradingView

Despite the monthly slump, the altcoin market cap is still up over 24% year-to-date (YTD) and over 167% during the past year.

Altcoin sentiment is historically correlated with the Bitcoin

BTC price. Altcoins could find their local bottom around June, as market sentiment and the Bitcoin price remain subdued by decreasing inflows from United States spot Bitcoin exchange-traded funds (ETFs), according to Alex Onufriychuk, blockchain adviser and coach at Qubic Labs Accelerator. He told Cointelegraph:

“There is a possibility that they could find their local bottom by June due to the lack of sufficient new liquidity from Bitcoin ETFs in the U.S. and Hong Kong. This indicates that the consolidation period may be prolonged.”

Bitcoin breakout will spark altcoin bull cycle — Nansen

Despite seeing a potential local bottom, an altcoin bull run would first require Bitcoin price to break out to the upside, according to Aurelie Barthere, principal research analyst at Nansen, who told Cointelegraph:

“Altcoins are high beta crypto, they are successful when the sentiment is very bullish. Since mid-March, the sentiment among crypto investors is less exuberant. As BTC price consolidates around the 20-day exponential moving average, there is more volatility in alts. We need a break above and a clear resumption of BTC uptrend for alts to outperform.”

BTC price has been posting lower highs since mid-March. However, many analysts argue that this is a healthy period of consolidation after the halving. Moreover, the charts hint at a multimonth bull flag taking shape for new all-time highs later in 2024. Altcoins Will Bottom in Early Summer Before Bull Run — Analyst_3

Altcoins Will Bottom in Early Summer Before Bull Run — Analyst_3

BTC/USDT, one-day chart. Source: TradingView

Since altcoin sentiment is strongly related to Bitcoin price, finding a local bottom wouldn’t necessarily translate into an altcoin rally, wrote Qubic Labs’ Onufriychuk:

“Even if altcoins find their local bottom around June, it does not necessarily mean that a bull run will start. For a significant turnaround, more fundamental changes are required, such as increased retail and institutional investment and favorable regulatory developments, given the scarcity of new liquidity and heavy reliance on institutional reinvestment into newer projects.”

On the monthly chart, 10 out of 12 moving averages (MA) are flashing a buy signal for the top altcoins, such as Ether

ETH which has struggled. Moving average indicators are commonly used in technical analysis to determine the average price of the underlying asset in relation to a set period. Altcoins Will Bottom in Early Summer Before Bull Run — Analyst_4

Altcoins Will Bottom in Early Summer Before Bull Run — Analyst_4

Moving average, altcoins. Source: TradingView

Altcoin prices could also rise due to the M2 money supply, which turned positive year-over-year for the first time since November 2023, signaling that investors could soon start looking for hedges against inflation or alternative investments.

The M2 money supply estimates all cash and short-term bank deposits across the United States.

As the money supply in the world’s largest economy increases, part of the new supply could find its way into altcoins and memecoins, contributing to the beginning of the “altszn.”

Source: Cointelegraph

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Warren Takunda

Central Bank

Economic

Asian stocks rose on Friday, on course for a third week of gains, while the dollar was steady as fresh signs of an easing U.S. labour market stoked optimism around interest rate cuts this year ahead of next week's crucial inflation data.

Sterling was steady at $1.2515, having touched a more than two-week low of $1.2446 on Thursday after Bank of England (BoE) paved the way for the start of rate cuts as soon as next month.

MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.66% and was on course for a nearly 1% gain for the week, its third straight week of gains. Japan's Nikkei (.N225) was 0.37% higher.

China stocks were lower, with blue-chip shares (.CSI300) down 0.28% as geopolitical concerns weighed on sentiment following a trade restriction list issued by the Biden administration and potential new China tariff.

Hong Kong's Hang Seng Index (.HSI) though rose 2%, having touched an eight-month high in early trading.

The risk-on mood is set to continue in Europe, with Eurostoxx 50 futures up 0.14%, German DAX futures 0.19% higher and FTSE futures up 0.45%.

Data on Thursday showed U.S. initial claims for state unemployment benefits increased more than expected by 22,000 to a seasonally adjusted 231,000 for the week ended May 4, the Labor Department said.

The figures follow last week's report showing U.S. job growth slowed more than expected in April and the increase in annual wages fell below 4.0% for the first time in nearly three years.

"After a period of remarkable strength and resilience, signs are growing that the U.S. labour market may be starting to soften," said Ryan Brandham, head of global capital markets, North America at Validus Risk Management.

Markets will be closely watching April U.S. producer price index and the consumer price index out next week for signs that inflation has resumed its downward trend towards the Fed's 2% target rate.

Hotter-than-expected inflation reports last month knocked back any lingering expectations of interest rate cuts in the near term, with markets now fully pricing in a rate cut only in November though there remains a chance of a cut in September.

In contrast, markets now imply a 50-50 chance of a BoE cut in June and are almost fully priced for August. They also imply an 88% chance the European Central Bank will ease in June.

BOE Governor Andrew Bailey said there could be more reductions than investors expect, the latest sign of the growing divergence between Europe and U.S. rate outlook.

Traders currently anticipate 47 basis points of cuts this year from the Fed. In comparison, traders are pricing in 58 bps of easing from the BoE this year, while anticipating 72 bps of cuts from the ECB. , ,

The shifting expectations around U.S. rates have kept the dollar adrift, with the euro holding to most of its 0.3% overnight gains. It last fetched $1.0774.

The single currency was on track for its fourth straight week of gains on the dollar.

The dollar index , which measures the U.S. currency versus six peers, inched higher to 105.30.

The yen remains in the spotlight after last week's suspected rounds of interventions from Japanese authorities totalling nearly $60 billion aimed at pulling the yen off its 34-year lows of 106.245 per dollar touched on April 29.

On Friday, the yen was last at 155.71 per dollar, with Japan's Finance Minister Shunichi Suzuki repeating Tokyo's recent warnings that it was ready to take action against disorderly currency moves.

Ben Bennett, Asia-Pacific investment strategist at Legal And General Investment Management, said the Ministry of Finance wants to avoid spikes in volatility which could negatively impact domestic financial markets.

"So like we suspect a few days ago, they will intervene if intraday moves become too large. But I don't think they'll push against a steady depreciation, like we've seen since."

In commodities, oil prices were on the rise, with U.S. crude up 0.68% to $79.80 per barrel and Brent at $84.38, up 0.6% on the day.

Spot gold added 0.3% to $2,353.95 an ounce.

Source: Reuters

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Westpac

Economic

Central Bank

Please complete this form before arriving for your appointment In Australia, the RBA Board left the cash rate unchanged at 4.35%. This decision, following an upside surprise on inflation data and stronger-than-expected labour market data but weaker partials for consumption, highlights the Board's cautious approach amid volatile data.

The Board is certainly not ignoring incoming information regarding inflation. Refreshed staff projections incorporate recent upside momentum into both the headline and trimmed mean inflation forecasts, the year-end figures revised up from 3.2% and 3.1% to 3.8% and 3.4% respectively. Dec-25 and Jun-26 were unchanged, however. The profile for unemployment is slightly firmer too, Dec-24 and Dec-25 revised down 0.1ppt to 4.2% and 4.3% respectively. The weak state of consumption meanwhile saw year-end GDP revised down from 1.8% to 1.6% for 2024. 2025-26 is unchanged.

As discussed by Chief Economist Luci Ellis in a video update mid-week, we view the Board's forecasts, language and ultimate decision as striking a delicate balance. Recent data has put the Board back on high alert for further near-term upside risks. But, the Board's confidence in returning inflation sustainably to target in the medium-term without undue cost to the economy remains. Rate cuts are therefore unlikely to be delivered until late in the year, November being our forecast for the first move, with policy relief ensuing at a measured pace thereafter – 25bp per quarter, taking the cash rate to 3.10% at Q4 2025.

Highlighting the consequence of elevated inflation and rates for the consumer, real retail sales contracted again in Q1, declining –0.4% (–1.3%yr). The modest gain in nominal sales (0.2%) suggests retail prices posted a solid increase (0.6%) despite enduring weakness in sales volumes. Perhaps even more stark, real retail sales have fallen 5.9% since mid-2022 on a per capita basis – a result that stands in stark contrast to most other advanced economies. Alongside other consumption partials for vehicle and fuel sales, this release suggests consumer spending was near flat in Q1.

Next week on May 14, the Federal Government will deliver Budget 2024/25. For more detail, see our preview published earlier this week. For more information on our broader views on the state of the domestic and global economy, our latest Market Outlook will be published today on WestpacIQ.

The international data flow has been relatively quiet this week, leaving last Friday's US employment and ISM services reports front of mind. Much has already been written about these releases, so we will be brief. Key is that April saw a material step down in the pace of nonfarm payrolls growth, to 175k from 269k per month in the three months to March. Household survey employment was weak again at 25k (having averaged 94k per month in Q1) and average hourly earnings were benign, rising just 0.2%. One month does not make a trend, but the labour market continuing on this path is consistent with US inflation sustainably returning near target.

Ahead, the FOMC will have to scrutinise downside risks for activity and the labour market more closely. Both the ISM surveys, but particularly the services measure, are pointing to outright job losses in coming months. This week's Senior Loan Officers Survey for April also highlighted that banks continue to tighten standards across most lines of lending. Credit demand from businesses and households was also said to have weakened broadly in the last reporting period.

Turning to the UK, in their May meeting communications, the Bank of England's MPC made clear a return to target inflation is within sight and consequently that they will likely be able to ease policy soon. Indeed, two members of the MPC voted for a 25bp cut at this meeting and “Conditioned on market interest rates [which include several rate cuts]… CPI inflation is [now] projected to be 1.9% in two years' time and 1.6% in three years”, below the BoE's 2.0% medium-term target. Demand has certainly been weaker in the UK than many other developed markets, particularly the US; but this revised projection highlights the success policy makers are having globally in the fight against inflation.

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Warren Takunda

Central Bank

Economic

"As if this interest rate situation wasn't CAD-unfriendly enough, let's not forget the recent federal budget, which raised the capital gains inclusion rate from 50% to 67%, effective June 25," says Stefan Marion, an economist at NBC.

In a monthly exchange rate forecast update, he explains Ottawa expects to see significant profit-taking between now and the tax deadline as investors decide to avoid the higher taxation.

This is a "development that could prompt the sale of CAD assets," warns Marion.

"This will serve to discourage investment, demotivate Canadians from getting into business in the first place or working hard to grow a small business to a medium-sized business," said the Canadian Federation of Independent Business (CFIB) following the budget announcement.

When screened over the course of 2024, the Canadian Dollar is a mid-pack performer in the G10 currency space, which actually reflects a nearer-term decline in performance. At one stage, it was tracking USD outperformance quite closely as investors assumed ongoing synchronicity in the Canadian and U.S. economies.

However, although the U.S. continues with its exceptionalism theme, Canada is starting to struggle.

"Despite a resilient U.S. economy, external trade is not improving," says Marion. "Economic weakness in Canada certainly argues for a divergence in interest rates between Canada."

The Bank of Canada is widely expected to cut interest rates this summer, while the U.S. will likely cut later in the year, creating a divergence in interest rates that are unfavourable to CAD.

"Will the 1.38 resistance be broken? We think so," says Marion.

Oil prices are also important for the outlook, with National Bank now expecting a WTI oil price of USD 75 in their forecasts; "we still see the USD/CAD exchange rate moving above 1.40 in the second half of 2024 in 2024."

National Bank is also concerned about Canada's inability to keep up with migration levels. Economists note Q1 GDP is currently on track to grow 2.5% annualised, but "this is underwhelming given record population growth (3.7% annualised) in the first three months of 2024. As a result, GDP per capita continues to trend down and is now 3% below its peak of September 2022. A decline of this magnitude has never been seen outside of a recession," says Marion.

The U.S. Dollar-Canadian Dollar exchange rate is forecast to peak near 1.42 by the fourth quarter. The Pound to Canadian Dollar exchange rate is forecast to close the year nearer 1.71 and the Euro to Canadian Dollar at 1.46.

Source: Poundsterlinglive

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Kevin Du

Economic

Forex

The Pound to Euro exchange rate rallied to 1.1630 after the ONS said UK GDP rose 0.6% quarter-on-quarter in the first quarter of 2024, outstripping consensus expectations for 0.4%.

"Wow. Big beat for the UK econony. I am feeling more comfortable about my growth estimate of 1.2% for 2024 vs consensus at 0.4%," says Simon French, an economist at Panmure Gordon.

The final two quarters of 2023 registered negative growth, meaning the UK had entered a recession. But today's update confirms the recession was shallow and short-lived. Year-on-year growth stood at 0.2% in Q1, which was more than the consensus estimate for a flat 0%.

GDP Wows, and Pound Sterling Recovers Against Euro and Dollar_1

According to money market pricing, these data surprises have pushed back the chances of June rate cut from 45% to 40%, which explains the recovery by Sterling. The Pound to Dollar exchange rate has risen back above 1.25 to quote at 1.2540 at the time of writing, suggesting markets might be ready to put a floor under the recent Bank of England-inspired weakness.

"The UK is clearly entering a more optimistic period. The government will be hoping to take advantage of this in the lead up to the general election, however, there are still factors, such as productivity and manufacturing struggles, that will weigh on economic growth for some time," says Richard Carter, head of fixed interest research at Quilter Cheviot.

Much of the growth was driven by a rise in consumer spending, which picked up by 0.2% q/q, confirming the ongoing falls in inflation are having an impact.

Encouragingly, total business investment recorded another sizeable gain at 1.4% q/q, which is the right kind of growth as it can help boost productivity in the economy.

Net trade - which was a particularly noticeable drag in Q4 - was helped by a sharp fall in imports, which boosted GDP growth by 0.4ppts.

Although the British Pound is stronger in response to these data, we see limited upside potential ahead of next week's labour market data release and the following week's inflation print.

GDP Wows, and Pound Sterling Recovers Against Euro and Dollar_2

Although June rate cut bets have receded following today's GDP print, the two upcoming inflation and wage releases will ultimately determine whether the Bank of England proceeds with an interest rate cut in June.

Undershoots in these data prints would firmly suggest a June cut, which could potentially weigh on the Pound.

"The economy is still fairly weak. Even so, all the early indicators suggest that GDP growth rose robustly in April as well. At the margin, this may mean the Bank of England doesn’t need to rush to cut interest rates. But the timing of the first interest rate cut will ultimately be determined by the next inflation and labour market releases," says Ruth Gregory, Deputy Chief UK Economist at Capital Economics.

Source: Pound Sterling

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Warren Takunda

Central Bank

Economic

Britain's economy grew by the most in nearly in three years in the first quarter of 2024, ending the shallow recession it entered in the second half of last year and delivering a boost to Prime Minister Rishi Sunak ahead of an election.

The Office for National Statistics said gross domestic product expanded by 0.6% in the three months to March, the strongest growth since the fourth quarter of 2021 when it rose by 1.5%.

The first-quarter growth exceeded all forecasts in a Reuters poll of 39 economists which had pointed to a 0.4% expansion of gross domestic product in the January-to-March period, after GDP shrank by 0.3% in the final quarter of 2023.

Friday's data was welcomed by Sunak who said the economy had "turned a corner", although the opposition Labour Party, which has a large lead in opinion polls, accused Sunak and finance minister Jeremy Hunt of being out of touch.

"There is no doubt it has been a difficult few years, but today's growth figures are proof that the economy is returning to full health for the first time since the pandemic," Hunt said.

But the opposition Labour Party rejected those claims.

"This is no time for Conservative ministers to be doing a victory lap and telling the British people that they have never had it so good," said Labour's Rachel Reeves, who hopes to succeed Hunt as finance minister.

The Bank of England, which held interest rates at a 16-year high on Thursday, forecast quarterly growth of 0.4% for the first quarter of this year and a smaller 0.2% rise for the second quarter.

Sterling strengthened against the U.S. dollar after Friday's ONS figures were released.

TURNING A CORNER?

On a monthly basis, the economy grew by 0.4% in March, faster than the 0.1% growth forecast by economists in a Reuters poll, reflecting strength in retail, public transport, haulage and health - partly due to fewer public-sector strikes.

Car manufacturing also performed well, offset by continued weakness in construction, the ONS said.

Friday's data also showed that GDP in March was 0.7% higher than a year earlier, and above all economists' expectations of a 0.3% rise.

However, Britain has still had one of the slowest recoveries from the effects of the coronavirus pandemic.

At the end of the first quarter of 2024, the country's economy was just 1.7% bigger than its level in late 2019, before the pandemic, with only Germany among the G7 faring worse.

"Despite the better near-term outlook, the improvement in GDP growth looks likely to be constrained by the ongoing weakness in productivity growth as well as reduced scope to increase employment levels," Yael Selfin, chief economist at KPMG UK, said.

GDP per head rose for the first time in two years in the first quarter, up 0.4%, but was 0.7% lower than a year earlier, highlighting the ongoing squeeze on living standards and Britain's struggle to boost productivity.

"In per capita terms, it could be said that UK households have seen little meaningful improvement in living standards in the last two years," Gora Suri, economist at PwC, said.

Source: Reuters

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Kevin Du

Economic

Bond

MSCI Inc. this week started a consultation on whether EU debt should be added to its sovereign bond indexes, following a similar proposal by Intercontinental Exchange Inc. last month.

Fund managers at J.P. Morgan Asset Management, Royal London Asset Management and Barings are among those supporting the inclusion — the prospect of which has already erased the premium that some EU bonds used to pay over lower-rated French notes.

It's a thorny concept, with the EU politically divided on many traditional hallmarks of sovereignty, including joint debt issuance itself. Benchmark providers currently class the bloc's nearly €500 billion ($539 billion) of index-eligible bonds as a supranational, alongside state-run development banks and multilateral lenders, in benchmarks tracked by a far smaller cohort of investors.

EU officials hope that a reclassification would lower borrowing costs, an expectation that's backed up by the latest market moves. The bloc's AAA bonds have been outperforming those of its member states, and Citigroup Inc. estimates 10 basis points of the recent decline in spreads is due to index inclusion speculation.

“From a market point of view, they do look like government bonds,” said Seamus Mac Gorain, head of global rates at J.P. Morgan Asset Management. While he says there is “some ambiguity” about whether the EU itself is actually a sovereign, he reckons the bonds should get the nod for index entry regardless.

Societe Generale SA analyst Ninon Bachet forecasts investment flows of up to €10 billion if the EU is included in sovereign bond indexes. Recent analysis from Commerzbank SA, Citigroup Inc. and JPMorgan Chase & Co. predict further outperformance.

“The more people for whom these bonds become an eligible or a necessary holding, the more of a squeeze it's going to cause,” said Gareth Hill, a portfolio manager at Royal London Asset Management, who favors sovereign index entry.

The next development is likely to be the MSCI's verdict on its survey at the end of May, followed by ICE's decision in August. Other firms such as S&P's iBoxx are yet to open formal consultations. Bloomberg LP, the parent company of Bloomberg News, also offers index products for various asset classes through Bloomberg Index Services Ltd.

Barclays Plc analysts said in a note last month that Bloomberg and S&P are meant to discuss the topic at index reviews in the fourth quarter of 2024. S&P and Bloomberg Index Services declined to comment. FTSE Russell, which owns the WGBI benchmark, said the issue was “on its radar.”

Index providers are already grappling with the sheer weight of EU bonds in their supranational indexes: they comprise over a fifth of a Bloomberg supranational gauge, up from less than 5% just four years ago. Continued heavy issuance means that by 2026 it could constitute over 60% in supranational benchmarks, according to Barclays research.

ICE and MSCI said they would make up approximately 5% of their European government bond benchmarks.

Some Obstacles

One potential hurdle to reclassification is that under current rules, the EU will cease additional net borrowing from 2026 when its pandemic-relief program expires. While there are discussions about additional issuance to fund items such as defense and climate, calls for permanent joint borrowing have been steadfastly opposed by the bloc's economic powerhouse, Germany.

There's also the argument that the EU isn't technically a sovereign because it isn't an independent government with tax-raising powers. Mark Dowding at RBC BlueBay Asset Management is among those who say EU bonds “don't pass the smell test” when it comes to a conceptual definition of a sovereign, though he says that's unlikely to prevent them entering sovereign indexes.

Collateral Benefit

There are other reasons why designating the EU as a sovereign is favored by all sides. A sizeable bond market can boost the euro as a reserve currency, and improve confidence in the resilience of the European project. The EU's pool of bonds is already the fifth largest in the region and is expected to swell to almost €1 trillion by 2026.

Investors, meanwhile, would welcome more AAA-rated sovereign paper, which is scarce after last year's US credit downgrade. Barings portfolio manager Brian Mangwiro thinks reclassification will at a stroke resolve Europe's regular shortages of safe securities used as collateral to obtain cash.

While the European Central Bank does accept EU debt as collateral, they are not widely used because clearing houses apply a far larger “haircut” than on bonds from similar or even lower-rated sovereigns. Bringing EU bonds into the fold as collateral will drive down their yields even further, Mangwiro predicts.

“We are already long and we don't plan to lighten up,” he said.