LD Capital: Stock and currency double bull, more than 97% of Bitcoin profits

Source: LD Capital

As can be seen in February, if the reason for rising bond yields is positive factors (strong economic growth rather than Fed rate hikes), stocks can do better in this environment. good performance. Despite rising interest rates, the S&P and Nasdaq rose about 5% last month, and global stock markets also hit record highs, with many major global stock indexes hitting record highs, including Germany, France, and Japan. Chip stocks rose sharply, with NVIDIA rising another 30%, AMD rising 20%, Broadcom and TSMC rising 17%. The logic of chip stocks is that the closer they are to the upstream of the AI ​​industry chain, the more they will rise. As for downstream software companies, especially big technology, their performance is average. For example, Google fell by 4% in the past month, Apple fell by 2.4%, Microsoft rose by 3%, and Meta rose by 500 Billions of repurchases rose 27%. Crude oil prices edged higher with WTI approaching $80. The U.S. dollar index rose first and then fell, basically flat. Bitcoin and Ethereum are up nearly 50%.

Unlike several periods last year when rising yields triggered corrections in stock markets and cryptocurrencies, global stock markets were able to hold firm and rise amid a renewed rise in short- and long-term interest rates for three main reasons: 1) Fourth Strong quarterly corporate earnings results; 2) NVIDIA's prospects fueling new enthusiasm for artificial intelligence; and 3) strong economic growth.

Weak U.S. economic data and speeches by Federal Reserve Board members released on Friday heightened the market’s expectations for monetary easing, and U.S. bond yields plunged significantly. The U.S. ISM manufacturing index unexpectedly fell to a seven-month low of 47.8 in February, contracting for 16 consecutive months, with both new orders and employment shrinking.

Federal Reserve Governor Waller (a popular candidate for the next Fed chairman) hinted that it will implement a reverse "Operation Twist" (QT), that is, the Fed should "buy short and sell long" on the balance sheet. He also hopes to see the Fed's holdings of agency MBS be reduced to zero and the proportion of short-term debt on the balance sheet increase. Waller's speech hinted that the Fed hopes to lower short-term bond yields, that is, lower interest rates that are closer to the money market. It is a dovish signal and can alleviate the inversion of the yield curve to a certain extent.

Before the global financial crisis, about one-third of the Fed's portfolio was in short-term Treasury bonds. Today, short-term Treasury bonds account for less than 5% of Treasury holdings.

At an event on the same day, Dallas Fed President Lori Logan once again emphasized that as bank reserves fall, the Fed may begin to slow down the pace of its balance sheet reduction. U.S. bonds and gold surged, and the U.S. stock index hit a record high.

As for whether the recent rise is overheated, history shows that the market is still not overheated, but the rate of growth may slow and volatility may increase.

Compared to the past 12 bull markets, the current bull market’s first 16 months have seen slower-than-average gains (42%) (50%). (This kind of statistics does not apply in the currency circle)

If the Federal Reserve gradually relaxes monetary policy in the future, it will be beneficial to economic expansion and promote further rise in risk assets. "The Fed's rate cuts are stirring up 'animal spirits' and driving risk assets," Bank of America wrote in a commentary last week.

However, the stock market will not rise forever. When investor sentiment becomes too optimistic, markets tend to become more volatile. Although investor sentiment has turned optimistic, it has not yet reached extreme levels. Investors should maintain reasonable expectations for returns and volatility, which historically has averaged three 5% corrections and one 10% correction per year.

All About Bitcoin

Ten spot Bitcoin ETFs are arguably among the most successful financial products in history, with trading volumes and inflows hitting new highs last week. Total net inflows reached $7.35 billion. BlackRock's IBIT hit the $10 billion asset mark in just seven weeks, the fastest an ETF has ever reached that figure and surpassing the largest silver ETF in size.

Friday saw the first net outflow in seven trading days, mainly due to the massive outflow of nearly 1.1 billion U.S. dollars in GBTC for two consecutive days. The market speculated that the main reason behind the sell-off may be lending institutions. Due to Genesis repayment. Genesis received bankruptcy court approval on February 14 to sell 35 million GBTC shares (worth $1.3 billion then, about $1.9 billion now), but outflows from GBTC had been modest over the past two weeks until a spike on Thursday, However, most of this selling pressure seems to have been digested now.

Currently we can expect large institutions to “capitulate” one after another.

Matt Hougan, Chief Investment Officer of Bitwise, said that current demand mainly comes from retail investors, hedge funds and independent financial advisors. He expects demand for spot Bitcoin ETFs to increase further as larger U.S. brokerages begin to participate. Some of the largest banks in the United States include Bank of America, Wells Fargo, Goldman Sachs, and JPMorgan Chase, but these banks have yet to offer BTC ETFs to their customers.