“Fed Watch” may be a macro podcast with a real and rebellious bitcoin nature. In each episode we question mainstream and Bitcoin narratives by examining current events from across the world, with a stress on central banks and currencies.
In this episode, Christian Keroles and that i catch informed the week, bear an update on the evolving Chinese financial crisis, speak about why folding money today should rightly be called credit-based money and therefore the side effects of that fact. Last, we dive into the bitcoin chart.
You can access this episode’s slide deck of charts here or below.
First up is that the situation within the Chinese economy. they’re facing some major issues in their property market, economy and industry. Currently, 28 of the highest 100 assets developers have defaulted on or restructured their debts. there’s a growing “mortgage boycott,” where purchasers of unbuilt housing units in projects that are now delayed thanks to the pandemic, developers’ financial situation and also the country’s zero-COVID policy, have refused to pay their mortgages. The boycott started with 20 projects and has since grown to 235 projects.
The rhetoric around this mortgage crisis is eerily just like that within the U.S. in 2007. Excuses like, “It may be a small number of mortgages” and “Effects are contained” are being offered.
As a results of the developer and mortgage problems, small- and medium-sized banks are running into solvency issues. Chinese banks have $9 trillion in exposure to land. If there was an issue with perpetually falling home prices, it could very quickly cause a solvency issue for banks. Indeed, that’s exactly what we are seeing.
New unit home prices in China have fallen for the 10th straight month in June 2022.
Gross domestic product crashed in Q2 2022 to 0.4%.
The GDP chart nicely supports my personal macro predictions that the main economies are visiting return to the post-Global Financial Crisis (GFC) “normal.” Since the GFC, growth in China has been slowly trending downward. Then there was the violent economic disruption and whiplash effect within the economy, followed by a return to slowing growth.
At the tip of the China segment of the podcast, I read through a desirable article from Nikkei Asia on true around recent bank runs within the Henan province. The article highlighted the abusive response to the bank withdrawal and therefore the growing dangers of a full-blown financial crisis in China.
Next, we bear a pair of bitcoin charts. the primary two charts highlight the similarities and differences within the chart during times that resembled today’s price action. I discovered that the present flat consolidation differs because it’s higher highs and better lows, where the previous breakout attempts didn’t.
There are some very interesting observations from Twitter on cash positions in hedge funds and also the bitcoin market.
When this turns, it will be violent to the upside. So many funds are down huge and if they don’t make it back in 2H, they’re gonna get redeemed. You can’t make it back sitting in cash. They’ll be forced to buy what’s working. Career survival will force $$ into value and energy… https://t.co/wK1d8peZ5v
— Kuppy (@hkuppy) July 19, 2022
Kuppy is commenting that the share of hedge fund portfolios that are holding cash is above any period since the dot-com bubble back in 2000. When these peaks happen and hedge funds rotate back to stocks, the market bottoms and includes a nice rally.
We can also see this effect within the bitcoin market.
This chart may be a little busy, but the highest panel is that the “stablecoin dominance,” as I’ve called it, the ratio between the stablecoin Market Cap and bitcoin’s market cap. it’s a proxy for a “cash position” within the bitcoin market. the underside panel is that the bitcoin price. At relative tops within the stablecoin ratio, bitcoin bottoms in price because those stablecoins can rotate into buying bitcoin and contrariwise.
THE U.S. DOLLAR
There has been lots of speak about the strengthening dollar. We are the sole bitcoin podcast that unequivocally needed a powerful dollar over the last two years, and boy have we been right that.
I don’t expect the dollar to unload dramatically after its parabolic rise, but to ascertain a replacement higher range, perhaps between 100-115 on the U.S. Dollar Index (DXY).
I stress that bitcoin doesn’t need a weakening dollar to explode higher. In fact, if you have a look at the history of bitcoin charted with the DXY, you’ll be able to see the dollar establishes a brand new higher range where bitcoin does dump. After periods of a rising dollar, bitcoin tends to require off. I didn’t have a chart prepared to indicate this during the live stream, but it’s included below.
The pink zones indicate periods of rising dollar and falling bitcoin. The black arrows indicate rising bitcoin amid a gentle dollar at a better range. Important to notice, bitcoin and therefore the dollar have both stair-stepped higher over the last 10 years, only on slightly different schedules.
Last, we take a glance at the euro and discuss how and why it’s within the most trouble out of the foremost currencies. We mention fragmentation risk several times