Crypto Markets Update as Federal Reserve Leaves Rates Unchanged

Bitcoin is above 35,000. Uh The Federal Reserve left the rates unchanged, the fed funds rate unchanged. Uh The second straight time that it's done it. So Federal Federal Chair, Federal Reserve Chair Jerome Powell also hinted how much the central bank could proceed in December. Have a look. The committee is proceeding carefully. We will make decisions about the extent of additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook and the balance of risks. So what does this all mean for the crypto markets? Joining us now to discuss is tact of wealth Advisor Eddie Gifford along with New Edge wealth senior portfolio strategist and Principal Ben Emmons. Welcome Eddie and Ben. Thank you for having us. Good morning Lawrence. Thank you. Thank you. Good seeing you both. Ok, Boe Bank of England also left rates unchanged. Um And we're seeing in general the, the economy in the US booming or at least doing much better than expected. Uh Yet, uh the, the fed seems reluctant to raise rates. Uh Let, let's let me give this to you first. Uh Ben, what do you think uh is the fed done tightening? I'm, I'm looking at this yield curve, it's still inverted. Uh What, what's going on here? Yeah, that's what the market took from me. Yesterday said Lawrence said that Paul gave a more clear signal that the fed code code is done. But Powell was also cautious in saying that these financial conditions that have tightened, that has to stay more persistent for them to be convinced that they can actually can reach that inflation target. But the market takes it as in well, fine, you could keep the rate hike alive, but you're not going to do anything near term or, or, or, or worse, you're going to step on the accelerator to hike more. So therefore, they price out the, the, the possibility of a rate hike near term to a probability of less than 10%. And the yield curve became a bit flatter over the over the last day or so. And that's a bit of a change from what we've experienced in the last three months when we had this relentless steeping of the curve. I said, then the yield went up and up. It's now somewhat reversing. So I think the Microsoft saying fed can stay on hold perhaps a bit longer, maybe skip also the December meeting and then assess what happens next. I, you know, when to, to uh go a little bit further on, on the curve. It's been in this kind of weird shape though. There's that, that little bit of a hump on the edge of the 20 year where it just kind of goes up and then back down on the third year, what's going on there? Is there, is there anything specific with 20 years? It's always been a point of illiquidity on the U curve. You know, the Feds started issuing 28 bonds, I believe about three years ago, the last time it issued 28 bonds was way back in the, in the eighties. So it's sort of a sector where apparently there's not always the consistent demand from say pension funds or mutual funds and therefore it's priced in a bit of a higher yield. I don't think it has anything to do with worries about the deficit or anything that's just expressed across the entire yield curve. But to the shape of the curve in itself, as you know, I could still invert it. It actually got a bit more inverted yesterday as the UK became a bit flatter. And that does tell you that the market is still seeing that fed policy one is restrictive, otherwise it wouldn't be inverted. And two, that inversion ultimately means at least a slowdown in the economy and that may be starting to unfold now. So the 20 year point will stay a bit higher than the 3010 year. That's technical, but the shape of you could probably stay a bit inverted for the time being until the fact really gives a signal that they can switch to a, a different stance as in easy. So Eddie translate this to the crypto markets. Uh How, how does this, how does this affect ultimately uh liquidity in the, in the crypto markets and whether or not people are willing to take on risks? Well, I think in general what you're saying, uh because you're seeing it in the bond market is they're not convinced that there's going to be a rate hike, especially short term. You know, I'm not convinced that there will be one at all. Uh and what that does is that kind of like opens up the option for a more risk on trade, right? I mean, if you, if you were to talk to anybody last week, everyone would be saying like run for the fences, everything is going down except for Bitcoin, right? Uh Is that look to be served being as almost a flight to safety and, and then you look at it uh today and it's like, oh yeah, but then it's also doing good uh in a more risk on environment. So I think that the thing that I've been noticing is there's been kind of a decoupling of correlation between Bitcoin and broad markets and it's kind of like uh starting to stand on its own, of course, uh getting a spot ETF is, has been something that has or the speculation of, of approval has been something that has driven the price up. But I think that you'll have more people willing to lean into a risk on whether it's a Bitcoin or Ethereum or, you know, any of the other alt coins because they feel like it's safer to take risk. Of course, there's still a lot of stuff out there that could implode really fast. So I still think that it's more of a trader's market than a holder market. Uh but I wouldn't be afraid to be buying a little bit of uh Cryptocurrency right now. I want to turn now to the statement from the Federal Open Market Committee's policy. It says tighter financial and credit conditions for households and businesses are likely to weigh on economic activity hiring and inflation. The extent of these effects remains uncertain. The committee remains highly attentive to inflation risks. Ben let's start with you. What do you make of this? Yeah, that's what he says is that they're proceeding cautiously, but they, they recognize that these conditions are getting tighter and if you look at mortgage rates and credit card rates, I mean, they are really up there. I know the average mortgage rate is over 8% the credit card rate is over 22%. So it definitely is affecting households, but they also know that that could change again quickly if rates go down a bit, especially if they discount that the economy may be a little slower from here. And secondly, that the, the, the lack of that, of that tightening policy can be extremely long. And that's I think where the fed struggles with because since last year, when Powell spoke at Jackson Hole and they really started ratcheting up interest rates by 75 basis points at a time. All that has happened is the economy only got stronger and only got better. I only got more people finding jobs wages up and inflation although moderating has not really fallen much more since then. So the Fed is careful by saying, look, we're going to have to monitor these, these impacts, but we cannot make an assessment here of the economy so clearly that we can change this tightening policy to something else, a a more neutral policy. And that's why he answered one of the questions from uh one of the reporters saying when he was specifically asking, is there a tightening bias in the Fed that he more or less acknowledged that? I guess we're still all of us convinced that we may have to hike at some point again, if the economy stays too strong. Eddie, I wanna turn to you. We mentioned paypal at the top of the show wondering if you have any reaction to that news. Of course, the SEC subpoenaed paypal over their uh stablecoin any reaction there. I think that, you know, I kind of have the same reaction as Lawrence. I think that it's just the sec poking and prodding around but I think that it, it just, you, you gotta keep in mind that if you're in the Cryptocurrency space, you better be doing things by the book, you better be doing things right? Because the SEC is gonna continue to look around, they're gonna be, continue to try to find stuff because what we don't want is we don't want another like FTX situation, right? Where, where something just blows up. So they're, they're, they're paying closer attention. They're gonna look at the, the outliers, but they're gonna look at the mainstream companies too. So you just have to make sure that you're doing things, right? Uh I don't think, see it as uh harmful to paypal. I mean, they're up like 7% free market today. So uh the market doesn't really seem to care about it. Uh So until we hear something good or bad, you know, uh there's no reason for us to really care about it either at this point, Ben, I kind of want to turn to what's going on globally because this is the US, of course, doesn't operate in a vacuum. It kept rates unchanged. So the Bank of England, we have other inflation issues throughout the world, other concerns and ultimately that will affect crypto and whether or not people are excited about going into crypto, of course, Japan uh recently uh basically said, you know, that 1% on the upper bounds here on the 10 year, we're not going to necessarily be upset if it goes above 1% anymore. So what does that tell us globally about how central banks are approaching inflation, whether or not they're aggressive, whether or not it means that they're going to finally say we, we, we had tons of liquidity because of COVID post COVID et cetera. It's time for that to get sopped up. We got the sponges. Let's go. Yeah, I think the sponges are out Lawrence, you know, because there as much as this language from the fact is interpreted and now by the Bank of India, two of OK, you're going to be on hold for a bit bit longer here. And the Bank of Japan obviously now acknowledging that as their inflation has risen quite a bit for their standards that they have to become less involved in their bond market. It really is about mopping up that liquidity as you say, because that's still massive. If you think about it, we just come off the mountain really of that liquidity by a trillion plus or so globally, by the way. And it will take time to bring that really back to more normal level. And they're careful about doing that because if you withdraw it too quickly, the lessons of the of the financial markets are clear, you're getting major shocks if you do so. And so I think the approach here is about caution, but also about let markets more normalized by themselves. So the Bank of Japan is a really interesting example of that. They decided to release that what they say cap on 1%. That the Japanese bond market finally gets some relief of like, hey, you know, we actually have to trade among ourselves instead of the Bank of Japan and the Ministry of Finance trading for us, right? So, and this has already happened in the Treasury market that way and it's happening in the UK Guild market. So I think it's the idea of let things normalize. So that that Liquidity Mountain also slowly, slowly melts by itself more normal. And we, and we're getting at least a soft landing on that part. I think that is the approach that they are taking, don't step on the brakes on that liquidity, but do let it roll off so that we get a more a different environment instead of this upside down world that we were in. But, you know, during COVID and Preco and Eddie, of course, since we're talking global issues and, and that does affect uh crypto, even though everything is priced in dollars, dollars still remain the the the biggest effect on uh it still has the biggest effect on on crypto, particularly Bitcoin. Uh What does this all mean in terms of global uh willingness to take on risk via crypto? Well, I think as long as they stay cautious and, and they're just kind of slowly sucking liquidity out, I think that any risk on asset, uh, you know, especially something like Bitcoin or Ethereum, uh, has a chance to continue to climb, you know, like right now we're feeling a little top in, in, in Bitcoin. I feel like it's going to take a breather before we, we, uh, continue to move on to potential new highs. But I think that if, uh, we, as long as they stay the course, you know, obviously if something happens next month and all of a sudden everything just goes down, uh I'm, I'm guessing that Bitcoin and crypto would go down with it because it's really hard to avoid a falling knife in broad markets. Uh, but I think that right now, uh, that there's definitely a reason to be dabbling. Uh, and, and even building a, a little bit of Cryptocurrency into your longer term portfolio, I think that there's a lot of upside there over the next 5 to 10 years for sure. And I've got to get your reaction now to Matrix Report saying a Santa rally could be on the horizon and could push Bitcoin to $56,000 before the end of the year. What do you think? Well, 56,000 would be awesome. Uh I think we need that pullback first, but the, this is a very seasonally strong time for risk assets in general. So if it's more of the same over the next two months, like it's been over the last 2 to 3 days there's no reason to think that we can't see a 2030 40% rise in the, in the Bitcoin space and, and you know, a 15 20% rise in, in uh large cap growth stocks. So, uh I'm, I'm excited to see how it all unfolds. Uh We're, we're taking risk accordingly. We, we did buy uh some Bitcoin for our portfolios today. Uh So we would love to see it at 56,000. I think everybody else did too. 56,000. Of course, uh almost doubling, uh a little less than doubling in the next two months. That would be a hell of a return. That's, that's a lot of dreaming, I would think. But speaking of dreaming, then one last question because we have the jobs report coming out tomorrow and we've seen, we've seen unemployment is still relatively low. That's a, that's, I don't want to say it's a concern for the fed as far as the, uh, we all interpret that uh the fed, raising, raising rates is to lower employment. However, it could just be a testing to see how far they can go before they need to stop raising rates. So what do you expect us to see tomorrow with the jobs report if you had to guess what's it gonna be? It may be softer, Lawrence, you know, yesterday's ism data uh was a uh a surprise to markets because the employment component in that report had a sharp drop in there. And I've, I've done some work on this in the past that whenever ism employment is up or down sharply, it affects the payroll report too. This has a relationship. Now, the other good indicator though is, is Jarra claims it was up a little bit this morning, but it has been very consistent around just above 200,000. So that bodes at least for that the job, the payroll report will not be a negative print which some people speculated on. But I do think it's a soft print and that was forecasters seems to be forecasted about 190,000. So I think it could be below that. Um, it's a knife edge report. Um, you know, I take a page out of the playbook of the movie, the 25th hour of show that movie that is actually about the payroll report. You just don't know what you're going to get right. And it could be really a surprise like the last report, which was a monster surprise and it could be the other way around and you're sitting there trading Bitcoin and you're trading me bonds and you know, it could fly anywhere. But I think the trends are looking at it is softening slowly, but it remains a robust labor market and that's what the fed will continue to keep in mind that you can have any lower rates right now. You have to keep them higher and restrictive Right. And, and until that labor market does soften. So to your point, you don't have to maybe raise rates anymore as much or at all, but you cannot cut them either given with the strength of the labor market. Eddie Ben, thanks so much for joining us this morning. I appreciate it. Thank you. Thank you for having us. That was tact of wealth Advisor, Eddie Gifford along with New Edge wealth senior portfolio strategist Ben Emmons.