Bloodgood's Notes #140
Markets expect 25 bps cut after CPI data comes in, presidential betting becomes mainstream and more
Fundamental Overview
We’ve had both the CPI and PPI inflation numbers this week, and both paint a similar picture. The Year-over-Year (YoY) CPI came in at 2.5%, a bit below estimates of 2.6%, while the Month-over-Month (MoM) was 0.2%, in line with expectations. As for the PPI, it was 1.7% YoY, below expectations of 1.8%, with the MoM reading at 0.2%, slightly higher than the expected 0.1% increase. Given these numbers—which are reassuring but not too different from the forecasts—it’s not a surprise that almost everyone is expecting a 25 bps cut for the Fed meeting on Wednesday.
All in all, it looks like we’re about to enter a fairly orderly cutting cycle, which should be very good for risk-on assets. As I mentioned in previous issues, historically this does tend to come with some initial downside volatility, but that should be dampened given that the elections are right around the corner. Barring some really unexpected economic developments, the macro picture for Q4 remains bullish in fundamental terms.
Bitcoin
Bitcoin drops towards $50k as bulls save the day.
We’ve seen another drop in Bitcoin a few days after the newsletter was issued last week. However, this time, the pullback wasn’t as quick as it was in early August, indicating that bears are getting exhausted. At the time of writing, BTC is sitting below the breakdown area, which is a key point for the near future trend. Breaking above this level would lead to higher levels quickly, while a rejection would make $50k a very likely target in the next few weeks.
Keep in mind that the structure remains bearish in terms of TA, so I’m not getting my hopes up until a lower high is broken.
SPX, Gold, and DXY
SPX fights to stay close to its all-time highs.
As last week’s selloff was partially absorbed, we’re seeing a strong reaction from bulls hoping for another chance to break the highs.
Gold breaks another ATH!
While the gold chart looked like it was reversing and could drop back down to its breakout area, we’re excited to see new highs.
DXY fights at the 101 level, teasing a breakout. Keep your eyes glued to this potential breakout, as it could impact Bitcoin’s price action.
Ethereum
Ethereum fails to follow Bitcoin’s strength.
While Bitcoin managed to push back to its breakdown area, Ethereum hasn’t. The $2,000 level is getting closer with each week, offering a good long-term buying opportunity.
Concluding notes
The breakout app for this cycle so far seems to be prediction markets, with Polymarket, a blockchain-based prediction market platform, being integrated into Bloomberg Terminal, one of the most widely used financial data services globally. This is in large part due to the upcoming U.S. elections, which take up the lion’s share of Polymarket’s volume, so it will be interesting to see how things will develop after the elections are over, but I think that there should be enough interest in other events that capture a lot of attention globally.
As for prediction markets about election outcomes, an important recent development was a federal ruling that the Commodity Futures Trading Commission (CFTC) doesn’t have the authority to block such contracts. This means that election betting is okay as far as regulators are concerned, clearing the way for this—and potentially other use cases of prediction markets—to become more mainstream. The legal ruling in question didn’t concern a blockchain-based platform specifically, but the positive repercussions for crypto should still be clear, since crypto is especially well-suited for this particular use case.