Bitcoin: The Bulls seem to have Chickened out

Traders' Opinions

Summary:

It’s all in the charts as the Bitcoin continues to tumble leaving those trying to catch a falling knife in pain with the deep moves to the downside. Where are we heading to next?

Sound the alarm!

Sound the alarm!!

Bitcoin is back to the 18k area of support and this simply means that the Bulls have failed to hold forth the 20750 area of support.

Let's dive in further to better look at the impending continuous crash from the monthly time frame perspective. As you can see, August candle has almost swallowed July's bullish candle and this doesn't look good at all for the BTC.

Bitcoin: The Bulls seem to have Chickened out_1

The bearish engulfing from the weekly time frame tipped its hand and the new question is, will 18k gold or are we going to see a break of the level and then 10K? Looking up the prevailing trend, it is clear that the bulls are nowhere to be seen and this might easily lead to a break of the 18k level.

Bitcoin: The Bulls seem to have Chickened out_2

Most definitely this 18k level is one to pay attention to now as it is a make or break area and we wait to see if the Bulls have anything in them to give hope to the buy-and-hold traders.

The daily time frame shows how the bearish wedge played out and also how the 20750 last line of defense for the bulls tried to hold its ground but failed woefully.

Bitcoin: The Bulls seem to have Chickened out_3

As the trend is clearly to the downside, it is obvious that selling is the safest way to go, hence the 4 hours and 1 hour analysis shows that 20000 to 21100 are the areas of interest for price to retest in order to join the moving train.

Bitcoin: The Bulls seem to have Chickened out_4

Bitcoin: The Bulls seem to have Chickened out_5

Just as a coin has two sides, some other analysts are looking at this as a good time to start loading on the longs. These traders are known as the counter-trend traders and they will need more than RSI divergence/ oversold to make the decisions.

The trend is your friend so it's best to follow it.

Trade safely

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Owen Li

Indian equities, which had run up about 15 per cent since June, have got a reality check with Federal Reserve Chairman Jerome Powell sounding a resolve to double down on inflation and pursue aggressive interest rate increases in the near future.

After dumping stocks worth billions since the start of the year due to rising inflation and war between Russia and Ukraine, foreign portfolio investors had returned to India, pumping nearly Rs 45,000 crore in stocks in August.

As an immediate reaction to Powell's statement, the FPI purchases may stop and reverse the capital flows to the US where yields have turned attractive.

However, the Fed move has ramifications beyond the stock market.

The dollar has strengthened and the yield on US bonds spiked after Powell's comments.

When the US dollar and bond yields move up, it's a sign of tighter central bank liquidity, which is considered negative for growth by the market.

Impact on rates

The rise in US rates may lead to higher rate increases in India. While the Reserve Bank of India (RBI) is expected to raise rates by another 25-30 bps before going for a pause by the year-end, the renewed Fed vigour on rate hikes makes it more complicated and the RBI may also have to toe the Fed line.

When the Fed raises its policy rates, the difference between the interest rates of India and the US narrows. This makes emerging countries such as India less attractive for the currency carry trade. And since India is vulnerable to US rates, it could lead to capital flow out of India, depress the Indian rupee further, prolong imported inflation and prompt more domestic rate hikes.

However, the MPC is more likely to be guided by the outlook for domestic inflation growth dynamics, than the size of the Fed's rate hike. If aggressive Fed tightening brings down commodity prices, it may transmit to lowering domestic inflation readings within the MPC's comfort zone.

Impact on inflation, growth

An interest rate hike in the US increases the relative returns on dollar investments, leading the US currency to strengthen. Hence, with the dollar gaining more strength, India is likely to see more foreign investment outflows.

A weakening rupee will put pressure on inflation via higher cost of imported goods and services.

The RBI will also be under pressure to hike interest rates, adding to the borrowing cost of firms. Banks have already increased their 1-year marginal cost of funds-based lending rates after the RBI rate hikes. FII outflows will strengthen causing depletion of forex reserves, adding pressure on the rupee. The sharp fall and the volatility of rupee will substantially impact the firms engaged in cross-border activities

The depreciation of the rupee is adding to the import cost and coupled with risks over geopolitical uncertainty around oil and natural gas raising the probability of widening the current account deficit beyond the sustainable limit of 3 per cent will hit growth.

Source: ET

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Kevin Du

The Monetary Authority of Singapore (MAS) is considering restricting retail investors' use of leverage and credit facilities to trade cryptocurrencies as it joins global regulators in forging rules to govern digital assets.

Any new MAS' rules may also include tests to determine customer suitability, managing director Ravi Menon said in a speech on Monday, noting that many people seem to be "irrationally oblivious" about the trading risks. It plans to publicly consult on the proposals by October, he said.

"Banning retail access to cryptocurrencies is not likely to work. The cryptocurrency world is borderless," Menon said in front of a room of more than 50 industry players, with the seminar titled "Yes to Digital Asset Innovation, No to Cryptocurrency Speculation" also streamed online. "There is greater impetus now among global regulators to enhance regulations in this space. MAS will also do so."

By October, the regulator will also consult industry participants about regulation of stablecoins, an issue that came to the forefront after TerraUSD collapsed in a US$40 billion (RM179.55 billion) wipeout, sending shockwaves through digital asset markets. Menon said regulators globally are looking to impose requirements such as secure reserve backing and timely redemption at par for stablecoins.

The pitfalls of lacking global regulatory coordination have come sharply into focus over the past few months, as a series of high-profile company failures exacerbated a US$2 trillion market meltdown. Singapore's regime for crypto companies has garnered particular attention, given that several entities including disgraced hedge fund Three Arrows Capital and platforms Vauld, Zipmex, and Hodlnaut operated out of the country.

'Highly hazardous'

Menon reiterated a stance that cryptocurrencies' volatility makes them unsuitable for use as money and "highly hazardous" for retail investors. Tokenisation and distributed ledgers, which record the ownership and transfer of digital assets, offer economic potential however, he said.

Singapore was early to study blockchain technology as well as tout its ambitions as a crypto hub. It is now trying to achieve a delicate balance between encouraging blockchain innovation and protecting investors from some of the risks of participating in a nascent market.

Menon stressed the city-state can thread that needle, while acknowledging that the regulator could have done a better job explaining its approach, following complaints from some in the crypto industry about a lack of clarity.

Singapore started tightening crypto rules early this year with a ban on advertising, and plans to require virtual-asset providers to be licensed locally even if they only do business overseas. The regulator further stepped up scrutiny of the sector in recent weeks, sending a questionnaire to some applicants and holders of its digital-payment licence seeking highly granular information about their business activity and holdings.

So far in the city-state, just over 10 entities have permits to operate as digital service token providers out of nearly 200 applicants.

Given the large number of applicants for crypto licences, the MAS prioritises those who demonstrate "strong risk management capabilities", Menon said, adding the due diligence process takes a long time "but it is necessary".

"With the rapid growth in scale and complexity of digital asset activities, other risks have surfaced," he said. "Regulators around the world including MAS are therefore stepping up their responses to these new risks."

Source: Bloomberg

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Damon

Just as all national politics is local, all international politics is domestic. The intrusion of the domestic onto the international stage gets a bad rap — from Trump to Brexit to the Taiwan Strait. But individual countries' activism in pursuit of domestic political and economic interests can be good for the international system.

A keen eye for where national economic self-interest lies has been at the heart of the process of international economic integration and the institutions designed to further it throughout the Asia Pacific over the decades. The Australian governments that liberalised the Australian economy from the beginning of the 1980s saw domestic microeconomic reform, negotiating multilateral trade liberalisation in the GATT Uruguay Round and helping build a new multilateral architecture to liberalise trade and investment across the Asia Pacific as inseparable elements in a process of 'making the world safe' for a newly competitive post-industrial Australian economy. They had the benefit of being able to build upon Japan's liberalisation and opening up — deeply linked to post-war leaders' concern with securing both Japan's access to raw materials and prosperous markets for its exports of consumer and capital goods — and, for a short sweet-time, a US political leadership that saw free trade as a boon to its powerful knowledge economy.

Fast forward to the present day: if there's to be pushback against pervasive economic isolationism and new energy to the process of integration and cooperation, it will be found in new coalitions of developing countries who seek to mould it to suit their domestic growth and economic security needs.

No country has more potential in this regard than Indonesia — but there are still doubts about whether the nexus between Indonesia's domestic politics and global activism is as productive as it could be, writes Shafiah Muhibat in this week's feature article.

Indonesia's hosting of the G20 in 2022 'exposes Indonesia's global leadership aspirations to a new level of international scrutiny'. The administration of President Joko Widodo has invested a good deal of political credibility in the successful holding of the summit, and 'a "successful" G20 summit is essential to save Indonesia significant national embarrassment'.

This is especially true on the home front for Widodo who, facing the end of his term in 2024, has put his domestic political muscle behind Indonesia's three key G20 agendas: 'global health architecture, the digital transformation of the global economy and energy transition'. Indeed, 'explaining how the G20 presidency will benefit the country has been a main part of the government's effort to ensure domestic support for all the efforts.' But 'while the Widodo administration still needs to please its domestic audience, it now confronts a severe test of its capacities to deliver global outcomes in a complicated geopolitical and crisis-plagued world'.

Russia's invasion of Ukraine hasn't just exacerbated the global economic tumult that the G20 was designed to prevent and address — it threatens to make the group itself politically untenable. Were the G20 chairmanship in the hands of a G7 state, or one of the developing members with close ties to Moscow, there's every chance that there would be no G20 this year. That the group isn't dead in the water is down to Indonesia's unique leadership position within the developing world as a bridge between these two broad factions within the G20, and some deft diplomacy by its president and officials.

But there's a risk that relief at just the successful securing of the G20's meeting schedule gives rise to complacent expectations about what those meetings might achieve. Former Indonesian foreign minister Marty Natalegawa was surely alluding to this when he observed that 'there is a very important distinction between chairmanship and leadership'.

Indonesia can and should press against the odds for agreement at the G20 not only on its signature issues but also on issues of WTO reform, building on the welcome momentum out of the MC12 meeting. Ambitions should likewise be kept high for Indonesia's ASEAN chairmanship in 2023, which offers an opportunity to bed down the institutions and process of RCEP so its potential as an instrument of regional economic integration can be achieved.

Granted, these issues don't automatically capture the public's imagination in any country — certainly not in Indonesia, where voters have more tangible things — like the price of cooking oil — to worry about. But as Natalegawa says, 'policymakers must have the courage to inform the wider public on how things actually are externally, rather than simply be dictated by what they think the public wants to hear and expect from them'.

The Widodo administration has worked hard to justify its investment of time, resources and political capital in the G20 this year on the grounds that it addresses voters' short-term concerns with food and energy costs, and vindicates a general sense of Indonesia's growing importance in world affairs. But this is a somewhat limited domestic political basis for Indonesia's activism on the world stage. An ongoing agenda for reformers and internationalists will be to not only emphasise how engagement with multilateral institutions addresses the problems the voters think they have, but to highlight the problems and opportunities the voters don't recognise affect them, and how Indonesia's agency is critical in realising those opportunities.

To be sure, that is the work of years and decades, not the months that remain until crunch time at November's G20 leaders' summit. A more acute domestic understanding of Indonesia's global interests — among voters, the media, and politicos — will be a critical ingredient to Indonesia's maximising its potential as a champion of developing-economy interests in global and regional cooperation.

Source: eastasiaforum

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Alex

Oil prices rose on Monday amid the possibility of Saudi Arabia and its allies at OPEC+ cutting output to counter market volatility, as well as fears of supply disruptions in Libya, which is facing political conflict.

Brent, the benchmark for two thirds of the world's oil, was trading 0.56 per cent higher at $101.56 a barrel at 11.06am UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 0.76 per cent at $93.77 a barrel.

"Oil prices had a decent week [last week], with Brent futures up by 4.4 per cent to $100.99 per barrel and WTI adding 2.5 per cent to $93.06 per barrel," said Khatija Haque, head of research and chief economist at Emirates NBD.

"While the chorus of hawkish central bankers may dent the economic outlook even more, the comments from Saudi [Arabia's] oil minister — that the producers' bloc may seek to limit output at upcoming meetings — are helping to provide a floor in oil."

Oil Prices Rise on Possibility of OPEC+ Output Cuts and Libya Conflict_1

Oil prices have remained volatile, dipping in the past few weeks amid investor concern about a looming recession.

US Federal Reserve chairman Jerome Powell's comments on Friday, indicating the continuation of tighter monetary policy to tame inflation, also affected market sentiment.

However, Saudi Energy Minister Prince Abdulaziz bin Salman said in an interview with Bloomberg last week that OPEC and its allies, including Russia, had "the commitment … and the means" to deal with volatility in prices and "provide guidance, including cutting production at any time and in different forms".

The OPEC+ super group, comprising 23 producers, agreed to increase output by 648,000 barrels per day in both July and August as it fully unwinds cuts of about 10 million bpd introduced in May 2020 to counter the slump in demand caused by the coronavirus pandemic.

OPEC+ agreed earlier this month to raise production by another 100,000 bpd in September amid pressure from major consumers, including the US, to cool prices. The group will meet on September 5 to decide on its future output policy.

OPEC+ will soon "start working on a new agreement beyond 2022, which will build on our previous experiences, achievements and successes", Prince Abdulaziz said.

Kuwait will also continue to support efforts to promote market stability through the alliance, the country's Deputy Prime Minister and Minister of Oil Mohammad Al-Faris has said.

The continuing conflict in OPEC member Libya is also supporting oil prices.

The North African country's health ministry said on Saturday that 32 people had been killed and 159 wounded during fighting between rival armed groups in the capital, Tripoli.

The clashes began on Friday night and continued into Saturday, with buildings set on fire and hospitals damaged.

Oil Prices Rise on Possibility of OPEC+ Output Cuts and Libya Conflict_2

Libya, which has some of the cheapest oil in Northern Africa, has had much of its production disrupted during the civil war that erupted after the downfall of the country's former leader, Muammar Qaddafi, in 2011.

There have been two competing governments since March and the country could return to instability under the rival administrations, the UN warned earlier this year.

"Crude oil kicks off the week on a positive note, as the supply side issues came back in force last week after the Saudi minister said that OPEC is unhappy about the falling prices, and could restrict output," said Swissquote Bank senior analyst Ipek Ozkardeskaya.

There is also "no breakthrough in the US-Iran nuclear deal" talks, with the impasse supporting oil prices, she said.

Discussions on the Iran nuclear deal are continuing among the major world powers. Iranian Foreign Ministry spokesman Nasser Kanaani said last week that the country had received a response from the US about the EU's final draft for the revival of the 2015 nuclear deal and "the careful review of the response has started in Tehran".

If signed, the nuclear deal is expected to add 4 million barrels of Iranian oil per day to the market to ease supply concerns.

In a research note last week, Swiss bank UBS said oil prices could rebound to $125 in the coming months due to tight market supply, declining spare capacity and low oil inventories.

Source: The National News

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Devin

Central Bank

Euro zone money markets moved to price in a two-thirds chance of a large 75 basis-point European Central Bank rate hike in September on Monday, as policymakers made the case over the weekend for a large move to tame uncomfortably high inflation.

Among the officials speaking at the Jackson Hole symposium, particularly in focus was ECB board member Isabel Schnabel, who argued that the risk is rising that long-term inflation expectations "de-anchor" from the bank's target and surveys suggest inflation is denting public trust in central banks.

Others said frontloading rate hikes would be reasonable and that the neutral rate, estimated to be around 1.5%, should be reached before the end of the year or the first quarter of 2023.

Traders now price in around 67 basis points of rate hikes at the bank's Sept. 8 policy meeting, meaning they fully price in a 50 basis-point move and a 67% chance of a 75 basis-point move, Refinitiv data showed.

That compares to a 24% chance of the larger move they priced on Friday, before a Reuters report that some policymakers wanted to discuss the bigger move pushed the odds up to 48%.

"I think notably Schnabel was quite clear that ECB may force a recession with higher unemployment rates to follow to get inflation lower," said Piet Christiansen, chief analyst at Danske Bank in Copenhagen.

"The ECB clearly looks with determination to frontload the hikes and this will linger on ahead of the September meeting," he added.

As rate hike bets rose, Germany's two-year bond yield, sensitive to interest rate expectations, rose 18 basis points (bps) to 1.147%, the highest since June 21.

Its 10-year yield, the benchmark for the euro area, rose 13 bps on the day to 1.532%, its highest in two months.

10-year yields in Italy, among the biggest beneficiaries of ECB stimulus, jumped as much as 17 bps to 3.87%, the highest since June 16, pushing the closely-watched spread to German peers to 236 bps, the highest in a month.

"The more resolute and front-loaded these rate hikes become in the wake of weaker growth, the closer we are likely getting to the point where the ECB may have to consider if TPI has to be activated," said Rohan Khanna, strategist at UBS, referring to the ECB's Transmission Protection Instrument.

Under the TPI, ECB will buy bonds from countries whose borrowing costs relative to Germany it sees as soaring through no fault of their own.

Arguing that the ECB skewing reinvestments from maturing bonds under its pandemic bond buying programme, its current line of defense, wouldn't be enough, Khanna said, "the harder the

ECB pushes on the rate-hike pedal, the faster we are likely to get to 300 bps on this spread."

Source: Reuters

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Damon

You might expect high-income households to fare relatively well during challenging economic periods. But they too are changing the way they spend as inflation eats away at purchasing power.

Consider this anecdote about Walmart evolving customer mix (via CNBC):

More high-income consumers, penny-pinching

Some of Walmart's sales gains came from inflation, which is driving up prices of food and other items. It also got a boost as families across income levels shopped at its stores and website.Chief Financial Officer John David Rainey told CNBC the retailer's reputation as a discounter is attracting more middle- and high-income shoppers. About three-quarters of Walmart's market share gains in food came from customers with annual household incomes of $100,000 or more.

This is not an anomaly.

According to The Bank of America Institute, spending among households earning more than $125,000 has declined over the last three consecutive months. Inflation: Higher Income Americans are Pulling Back on Spending_1

Inflation: Higher Income Americans are Pulling Back on Spending_1

BofA notes that the deterioration in spending for higher-income households was more pronounced in discretionary categories (emphasis added):

We take a look at the indexed level of spending for airline and lodging instead of the %YoY rates given that the %YoY rates are distorted by base effects from last year as the surge of the Delta variant depressed spending. As Exhibit 6 shows, airline spending per household for both the lower and higher income groups peaked in March as consumers booked summer vacations, but has leveled off in recent months, though the moderation seems to be more noticeable for the higher income households. Similarly, lodging spending per household for higher income consumers seems to be returning to its April average while that of the lower income is still 10% higher than its April average as of the week ending August 13. Inflation: Higher Income Americans are Pulling Back on Spending_2

Inflation: Higher Income Americans are Pulling Back on Spending_2

While folks in the high-income demographic enjoy higher income, they tend to hold a greater share of their wealth in financial assets like stocks. And stocks have been getting slammed with the Federal Reserve tightening financial conditions.

"Discretionary services spending such as travel spending tends to be the most sensitive to household financial conditions," BofA analysts said. "As such, negative real wage and deteriorating sentiment likely weighed on travel spending for the higher income consumers."

The University of Michigan's Surveys of Consumers observed in preliminary August results a divergence in sentiment among different income groups (emphasis added).

All components of the expectations index improved this month, particularly among low and middle income consumers for whom inflation is particularly salient. The year-ahead economic outlook rose substantially to just above its average reading from the second quarter 2022, while the two other expectations index components remain at or below their second quarter averages. At the same time, high income consumers, who generate a disproportionate share of spending, registered large declines in both their current personal finances as well as buying conditions for durables.

In their final results published Friday, the University of Michigan observed sentiment among lower-income consumers "now even exceeds that of higher-income consumers, when it typically lags higher-income sentiment…"

Jewelry sales send mixed signals

As TKer readers know, consumer behavior is incredibly complex and nuanced.

"Interestingly, jewelry spending per household remains strong for the higher income households on both %YoY and level basis," BofA analysts observed in their July data.

"One possible explanation is that jewelry spending could be benefitting from the wedding boom this year," they added. "According to wedding planning site The Knot, the total number of weddings is expected to reach 2.6 million in 2022, compared with 2.2 million in 2019."

So wedding and bridal jewelry appears to be like french fries — regardless of the what's going on in the economy, people will spend in these categories.1

If BofA is right, then the strength in wedding jewelry is more than offsetting what appears to be going on in high-end watches. From Nicholas Colas, co-founder of DataTrek Research, in an email to subscribers on Friday:

If you go to the Rolex corporate website, you will see that a no-frills Daytona costs $14,550… Rolex Daytonas have been in high demand for many years, as much because of the brand and watch's appeal to A-list celebrities as its own technical merits… The chart below shows "gray market" (used and new watches sold outside official dealer channels) prices for Daytonas over the last 5 years. Just before the Pandemic Crisis (December 2019), they were going for about $21,000 (44 percent over retail). A year later (December 2020), the price was slightly higher ($22,000). In 2021, Daytona prices increased quickly and reached $40,000 (170 pct above retail) in March 2022. Now, prices are starting to drop. A Daytona can be yours for about $36,000. Inflation: Higher Income Americans are Pulling Back on Spending_3

Inflation: Higher Income Americans are Pulling Back on Spending_3

While the market price for a Rolex Daytona is still up from year-ago levels, it has come down in recent months. Kinda like stocks, which tend to be a bigger part of the wealthy's portfolios.

"[T]he root cause of post-Pandemic Crisis Daytona inflation is high financial asset prices and confidence among the world's wealthy that these would remain elevated," Colas wrote.

The big picture

Regardless of how you feel about people who earn more than you, it's encouraging to see that even the richest folks are cutting back on spending during a time when slower spending will help bring down high inflation.

"No one 'needs' a Daytona, and supply is relatively inelastic," Colas said. "Marginal demand therefore moves prices very quickly. Daytona inflation is therefore one way to understand how the wealth effect impacts prices more generally."

While inflation may have a long way to go before it reaches comfortable levels, it at least appears that tighter financial conditions and the cooling economy are helping to bring down prices.