😲 Bitcoin Wobbles Below $61k, Time to Panic? 🫣

Good Morning!

Bitcoin ETFs in the U.S. received $31 million inflows on June 25, ending a seven-day decline, hinting at sustained institutional interest amid government selling pressure, while, Ethereum grapples with high gas fees and stagnant demand despite DApp dominance.

In today’s email:

• USDJPY: Hitting fresh 38-year highs. Higher for longer policy at the Fed means JPY keeps going lower.

• Bitcoin: Bitcoin looking very wobbly here below $61k mark. Further pain maybe due before we get a reversal.

• SpaceX: Now the 2nd most valuable private company at $210 Billion

• Crypto Selling: US and German governments selling large amounts of BTC on CeXs.

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THE BIG IDEA

The relentless drop of the yen highlights the Federal Reserve's influence on global markets.

The yen touched a 38-year low as the dollar climbed higher (literally JPY is weakest it’s been since 1986!), showcasing the Fed's grip.

Japanese efforts to intervene have largely failed because the issue is rooted in the Fed's high interest rates.

As US borrowing costs remain high, they draw money into the US, keeping the dollar strong. US rates are highest among G-10. This strength in the dollar weakens other major currencies, including the yen.

The yen tumbled by 0.7% to 160.87 per dollar and dropped to a record low against the euro. Japan's top currency official reiterated the urgency of monitoring the markets, but past interventions have had little effect.

No end in sight just yet

Market strategists suggest that the yen's decline will not reverse until the Fed eases its policies.

The gap between Japan’s near-zero interest rates and the higher US rates has been a central factor in the yen’s downward trajectory.

Asset managers have been increasingly betting against the yen. The expectation at the year's start was that the Fed would cut rates, but a strong US economy and persistent inflation have kept rates high.

Japan has significant funds for further intervention, but strategists believe these efforts only slow the yen's decline. The next key indicator for the yen will be the US inflation gauge, which could influence the Fed's decisions on interest rates.

Selling the Yen, still a hot bet!

The success of yen short trades extends beyond bets against the dollar or emerging-market currencies.

The euro is now historically strong against the yen, while Australia's and New Zealand's dollars are also at multiyear highs relative to the yen.

This popularity in shorting the yen can trigger a self-reinforcing cycle: as more investors engage in these strategies, the demand to borrow yen to sell it increases, further pressuring the currency's value downward.

MARKETS AT A GLANCE

TOP NEWS

SpaceX gets valued at $210 Billion

SpaceX is set to value itself at a record $210 billion in its upcoming tender offer, marking a significant increase from its previous valuation of $180 billion in December.

The decision to price shares at $112 each, higher than the anticipated $200 billion valuation, reflects strong investor demand.

This valuation positions SpaceX as the second-most valuable startup globally, behind ByteDance's $268 billion, and aligns it with some of the largest publicly traded companies by market capitalization.

Private Equity increasingly drawn to India

Private equity giants are increasingly drawn to India's burgeoning market, lured by robust economic growth, a deep talent pool, and favorable regulatory changes.

Initially challenged by complex tax rules and limited ownership leverage, firms like Blackstone have pivoted to buying majority stakes in startups and established companies alike.

This shift has paid off, with returns surpassing those from other markets. International firms, from KKR to Carlyle, are expanding investments across sectors like renewables and healthcare, leveraging India's expanding IPO market and growth potential without resorting to drastic restructuring.

Bond Yields

The yield on 10-year US Treasuries was unchanged at 4.33%.

German 10-year yield increased by four basis points to 2.45%.

UK 10-year yield rose by five basis points to 4.13%.

Commodities

Brent crude fell by 0.2% to $85.05 per barrel.

Spot gold prices were little changed.

CRYPTO

Uncle Sam’s selling BTC

It seems there's significant activity in the Bitcoin market recently, especially with the U.S. government sending 3,940 BTC ($240 million) to Coinbase, raising eyebrows among traders and analysts. This move follows a similar action by Germany, which sold 900 BTC last week from its holdings. Market observers are noting potential coordination between these government actions, which could impact Bitcoin's price dynamics.

Germans are selling BTC

The German government's sale of 900 BTC, with 400 BTC sent to Coinbase and Kraken, adds to selling pressure. Holding over $2.8 billion in BTC, its actions could push Bitcoin below $60,000. Bitcoin's recent downtrend, down 11% monthly and over 7% weekly, suggests potential for further correction before a price rally resumes. Mt. Gox's upcoming Bitcoin repayments to creditors may also impact market dynamics in July.

Bitcoin ETFs still have net positive inflow

Despite this, Bitcoin ETFs in the U.S. saw a positive net inflow of $31 million on June 25, breaking a seven-day losing streak. This slight increase in institutional flows into Bitcoin ETFs suggests ongoing interest from institutional investors despite the selling pressure from governments.

Ethereum struggles

Ethereum faces challenges with high gas fees and limited demand growth, despite its dominance in decentralized applications. ETH futures show a neutral sentiment, contrasting earlier bullish trends. Analysts doubt significant inflows from a proposed spot ETF, citing Ethereum's modest revenue and macroeconomic uncertainties. These factors make a near-term ETH rally to $3,700 unlikely.

GOLD

Copper/gold ratio

The copper/gold ratio, historically a macroeconomic indicator, is now highly correlated, suggesting economic strength favoring copper over gold.

This anomaly challenges traditional market interpretations, potentially weakening gold's safe-haven status amid industrial demand spikes. Despite this, gold's resilience and recent price highs defy typical economic models, reflecting complex market dynamics influenced by speculative plays and geopolitical factors.

Gold's future may hinge on resolving these contradictions, impacting its trading range and investor sentiment globally.

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