🔥 Bitcoin to the Moon? New ATH Hits as Interest Rate Decision Looms

Good Morning!

Global markets shrug off political drama, turning laser-focused on central bank maneuvers. Investors remain unfazed by governmental shifts in Germany, South Korea, and Canada, instead tracking potential Federal Reserve rate cuts. With multiple central banks meeting this week, the financial world anticipates crucial monetary policy signals that could reshape investment strategies and economic outlooks.

In today’s email:

• FedWatch: All eyes on interest rate decision tomorrow

• Bitcoin: Hit new ATH $107K+ now! 🚀

• Stablecoins: Ethena Labs unveiled USDtb 

• Gold: Ready to rally into 2025

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THE BIG IDEA

The Federal Reserve is poised to make a strategic 25 basis point rate cut tomorrow

Signaling a cautious approach to monetary policy in 2025, while markets anticipate this move, the Fed is expected to temper expectations by suggesting a slower, more measured easing cycle. Key economic indicators, including inflation and job market trends, are driving this nuanced decision.

Analysts predict the Fed will likely reduce its projected rate cuts from four to three in 2025, reflecting ongoing economic complexities. The central bank's dual mandate requires careful balance between managing inflation and supporting employment. Recent data shows mixed signals: cooling job markets alongside persistent inflation challenges. The core personal consumer expenditure deflator offers a glimmer of hope, with potential for a favorable 0.2% month-over-month print.

The upcoming meeting carries additional intrigue with potential implications of the new political landscape

President-elect Trump's pro-business policies, including potential tax cuts and regulatory adjustments, add another layer of complexity to the Fed's calculations. Market expectations are finely tuned, with futures contracts already pricing in approximately 23-24 basis points of the anticipated cut.

Technical adjustments are also on the table, including potential modifications to the reverse repo rate and interest on reserves. These subtle mechanisms demonstrate the Fed's precision in managing monetary policy. The broader context suggests a strategic approach to gradually moving from a restrictive monetary stance to a more neutral position.

Investors and economists will be closely watching the Fed's updated economic forecasts, looking for insights into growth projections, inflation expectations, and unemployment trends. The central bank's communication will be crucial in shaping market sentiments and investment strategies for the coming year.

MARKETS AT A GLANCE

TOP NEWS

Nasdaq soars to record heights as mega-cap tech stocks surge ahead of critical Federal Reserve meeting

Tech stocks propel Nasdaq to record highs, with mega-cap performers leading the charge. Investors eagerly anticipate the Federal Reserve's expected 25 basis point rate cut this week. The market watches closely for signals on future monetary policy, with November Core PCE data on Friday potentially influencing the Fed's next moves.

Eastern European central banks resist global monetary easing trend

Driven by persistent inflation, currency volatility, and complex economic challenges amid anticipated geopolitical shifts under potential Trump presidency, Eastern European central banks sidestep a wave of monetary easing. Eastern European economies stand apart from global easing patterns, with central banks in Hungary, Czech Republic, Poland, and Romania cautiously maintaining high interest rates.

Asian currencies plummet to two-year lows, pressured by China's economic struggles, Trump's potential trade policies, and mounting geopolitical uncertainties across the region

Asian markets face significant headwinds as the Bloomberg Asia Dollar Index drops, reflecting challenges from China's tepid economic recovery, potential US tariffs, and political instability in countries like Korea. The yuan's weakness and dollar strength further compound regional currency pressures.

CRYPTO

Bitcoin surges past $107,000 on speculation of U.S. reserve asset status under Trump

Bitcoin reached an all-time high of $107K+ as optimism grows about potential U.S. adoption as a reserve asset and a Federal Reserve rate cut expected on Dec. 18. Speculation of a day-one executive order by President-Elect Trump and new crypto accounting rules have boosted institutional interest. Analysts predict further gains to $125,000 in early 2025 but caution a potential 30% correction.

Bitcoin's bullish momentum shows signs of cooling as options market reveals more measured trader sentiment

Cautious positioning ahead of potential market-moving Fed announcements continues. Bitcoin set record highs, but options trading suggests traders are no longer aggressively chasing the rally. Recent block trades and risk reversal metrics indicate a more subdued outlook, potentially reflecting anticipated Federal Reserve policy decisions and market uncertainty.

Ethena Labs launches USDtb stablecoin backed by BlackRock’s tokenized fund, enhancing security and cross-chain functionality

Ethena Labs unveiled USDtb, a stablecoin backed by BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL) for 90% of its reserves. Built as a multichain token, USDtb enables seamless transfers across Ethereum, Solana, and more. Its launch strengthens Ethena’s ecosystem, complementing its $5.6 billion USDe stablecoin, while BlackRock’s involvement underscores a growing intersection between traditional finance and DeFi. Major market makers like Jump and Wintermute will provide liquidity.

MicroStrategy's inclusion in the Nasdaq-100 sparks optimism for its Bitcoin-driven strategy and potential S&P 500 entry

MicroStrategy (MSTR) will join the Nasdaq-100 on Dec. 23, benefiting from approximately $2.1 billion in passive inflows. The company plans to adopt new FASB accounting rules in 2025, potentially enabling positive earnings and S&P 500 eligibility. Analysts cite its unparalleled Bitcoin accumulation—holding 439,000 BTC worth over $45 billion—as a transformative strategy, with price targets for MSTR stock ranging between $600 and $650.

GOLD

Gold mirrors its 2007-2008 bullish trajectory amid economic instability and a pivot in Fed policy

Gold's recent price action resembles the 2007-2008 surge, fueled by Federal Reserve rate cuts and economic warning signs like inverted yield curves and rising delinquencies. With fears of the "Everything Bubble" collapse and recession mounting, safe-haven demand, alongside potential Fed measures like quantitative easing, could push gold to new highs, potentially exceeding $3,380 in the near term and $10,000 in the long term.

DAILY ECONOMIC CALENDAR (ET)

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