🧨 Powell's Speech Today: Brace for Bitcoin's Next Move?

Good Morning!

The October CPI came in hot, pushing inflation to 2.6% year-over-year – a bump that's got everyone wondering if the Fed's recent rate cuts might've been a tad optimistic. After slashing a full percentage point since September, the Fed might need to pump the brakes on future cuts if this trend continues. All eyes are on Powell's Thursday speech for clarity on what's next. Meanwhile, crypto's stealing the spotlight – Bitcoin's soared past $93K, riding a 32% post-election wave. Trump's campaign promise to make the US a "crypto capital" has lit a fire under digital assets, with Ether up 37% and Dogecoin skyrocketing over 150%.

In today’s email:

• FedWatch: Sir Powell speaks today!

• Bitcoin: Sitting at $90k, ready for next leg higher? 🚀

• Ethereum: EIP-7702 Could Spark a Smart Account Revolution

• Gold: Now $2555 on increased risk appetite post election

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THE BIG IDEA

Markets are on edge as Powell's upcoming speech could reshape rate cut expectations, potentially putting pressure on global stocks amid rising yields and cooling economic growth

The markets just played it cool when October's inflation numbers landed right on target – core CPI at 3.3% year-over-year had Wall Street doing a brief victory lap. The S&P 500 jumped and Treasury yields dipped, but that party didn't last longer than your average TikTok. Within hours, yields were back up testing new highs, while stocks wobbled like a rookie trader's portfolio.

Here's where it gets interesting: The Treasury yield curve is telling us the Fed's rate-cutting dreams for 2025 might be more fantasy than reality. Markets are now betting on just two 25-point cuts next year – half of what the Fed teased in September. Though ironically, the odds of a December cut this year have shot up to 82.3%, the highest we've seen in a month.

Sure, optimists are quick to point out how stocks shrugged off similar rate-cut disappointments earlier this year, with the S&P 500 climbing 5% during a similar reality check

But here's the plot twist: Back then, the global economy was firing on all cylinders. Now? Not so much. While the U.S. is still flexing its economic muscles, the rest of the world is looking more like it skipped leg day.

Enter Jerome Powell, who's about to take the stage for his economic outlook speech. Given his recent "we're not done yet" vibes at the last Fed meeting, another hawkish performance could send global yields even higher. And unlike last time, markets might not be so quick to shrug it off – especially with a global economy that's looking more fragile than a house of cards in a hurricane.

The real question isn't just about U.S. rates anymore; it's about how much more pressure the global economy can take as the dollar's dominance forces everyone else to play follow-the-leader with higher borrowing costs.

MARKETS AT A GLANCE

TOP NEWS

Japan's ambitious $65B chip initiative marks its aggressive bid to reclaim semiconductor dominance, with state-backed Rapidus leading the charge

Japan's betting big on silicon with a massive ¥10 trillion ($65B) push to revive its chip glory days. The stakes? Catching up to Taiwan and South Korea in 2-nanometer chip production by 2027. State-backed Rapidus is leading the charge, while global giants like TSMC and Samsung are being wooed with subsidies to set up shop. It's a bold play to triple domestic chip sales to ¥15 trillion by 2030.

Wall Street's current sky-high valuations spark debate on whether AI has fundamentally changed traditional market dynamics

Those "what goes up must come down" market rules? They're being put to the test by the AI boom. The S&P 500's soared 94% in five years, with the Magnificent Seven leading the charge. While skeptics cry "mean reversion" pointing to a Shiller CAPE ratio of 38 (way above the 27 average), analysts are betting AI-driven earnings growth could justify these valuations without requiring a crash.

Wall Street's making strategic bets across sectors as Trump's victory reshapes the investment landscape

The market's doing its post-election shuffle, with fossil fuels and banks climbing on hopes of lighter regulation. Tech stocks are eyeing potential antitrust relief and AI opportunities, while retailers sweat over possible 60% China tariffs. Crypto's having a moment too – Bitcoin's soared past $93K on Trump's promise to make the US a crypto hub. Meanwhile, EV makers might need a new charging plan.

CRYPTO

Bitcoin's meteoric rise shows strong fundamentals but carries leverage risks, with spot buying leading the charge

Bitcoin's charging ahead with spot buyers, not just futures traders, fueling the fire. While BTC hit $93K, there's a catch – leverage is at an all-time high, with futures-to-USDT ratio hitting 0.593. But here's the bullish part: retail demand's at a 52-month peak, spot ETFs have pulled in $8.8B in 30 days, and Coinbase's spot volume delta touched $143M.

Ethereum's EIP-7702 Could Spark a Smart Account Revolution, Says Safe Co-Founder

Safe co-founder Lukas Schor stated at Devcon 2024 that Ethereum Improvement Proposal EIP-7702 could rapidly increase the adoption of smart accounts by enabling easy upgrades for existing wallets. This shift would address the "wallet trilemma" of non-custodial control, convenience, and security. Schor envisions smart accounts dominating Ethereum in the next five years, driving seamless cross-chain interactions.

Polymarket CEO Shayne Coplan’s home was raided by the FBI, with electronic devices reportedly confiscated

The DOJ is investigating Polymarket for allegedly allowing U.S. users to access its prediction platform, violating a CFTC settlement. Despite these restrictions, some Americans have accessed the site via VPNs. Polymarket’s spokesperson called the raid “political retribution” for correctly predicting the 2024 election outcome. Coplan has not been charged with any crime.

Crypto-Friendly Lawmakers Poised to Lead House Financial Services, Paving Way for 2025 Legislation Push

With Republicans retaining control of the U.S. House, crypto-friendly lawmakers could take charge of the House Financial Services Committee, overseeing the SEC and Federal Reserve. Potential chairs include Reps. French Hill, Andy Barr, Bill Huizenga, and Frank Lucas, all supportive of digital assets. Key focus areas will likely be stablecoins and market structure, followed by DeFi and NFTs, per the Blockchain Association’s Ron Hammond. This shift could accelerate crypto legislation efforts in 2025.

GOLD

UBS recommends buying gold on dips near $2,600, targeting $2,900 within 12 months as a hedge against ongoing policy uncertainty and economic risks under new U.S. leadership

The bank highlights factors such as continued rate cuts by the U.S. Fed, potential fiscal deficits, and strong central bank demand for gold as supporting its outlook. UBS advises maintaining a 5% allocation to gold in balanced portfolios for diversification and risk management.

DAILY ECONOMIC CALENDAR (ET)

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