GB Market Commentary 25/04/2022
by Marcus Sotiriou
The crypto markets tumbled this morning, as Bitcoin fails to hold the $40k level. Fears about a 50-basis point rate hike have strengthened after Federal Reserve Chairman Jerome Powell’s comments last Thursday. He stated, “it is appropriate in my view to be moving a little more quickly”, which is a key change in direction of the Federal Reserve’s strategy – instead of raising rates steadily at 25 basis points this year, he said how the FOMC are more willing to raise interest rates quicker and reach the 2-2.5% target at a faster pace. This means that a 50-basis point rate hike is very likely at the next FOMC meeting on May 3rd-4th. It is clear that the Federal Reserve has taken this aggressive stance due to consumers in the US are still spending substantially, which comes as a surprise after the Russia-Ukraine war. I think that even though we have a more hawkish Federal Reserve which could lead to more pain for global markets in the short term, I am still cautiously bullish. This is because the market was already expecting a 50-basis point rate hike before Jerome Powell’s announcement last week, so this news has already been priced into a large extent. This could lead to a buy-the-fact event on the day of the FOMC meeting on 3rd-4th May.
Despite the hawkish Federal Reserve, Bitcoin’s on-chain metrics are contrastingly bullish. Data from Glassnode shows that the percentage of Bitcoin’s supply that has not moved in 1 year is at an all-time-high. I think this data tells us that whilst these macro headwinds are ongoing, Bitcoin is being distributed from those who see it as a risk-on asset, to long-term holders who have strong conviction in Bitcoin’s long-term potential.