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nerdzvest Insight
More downside is to be expected with worsening sentiment and economic situation but likely to see bearish sideway movement for now
The week saw Fed announcement of an aggressive 75bps hike to curb the high inflation. During the speech, Powell indicated that the measures are taken dynamically with Fed monitoring the inflation data closely and will only conclude “job done” when there are clear signs of multi-months inflation declining.
While this was in line with market expectation, the relief after the announcement was short lived as the market continues its decline with fear of recession. The Nerdz reckons that there will be more of such Fed-induced or Inflation data induced swing in the market as Fed continues its aggressive stance in its battle to curb inflation.
We are entering recession phase soon! :(
Meanwhile, news of companies layoff are gaining steam, hinting that we are in the late phase of the economic cycle. The Nerdz thinks that recession news will start appearing in mainstream media in the later part of the year or early next year with the markets dropping and forming a bottom. This will coincide nicely with Fed hikes reaching its tail end, allowing it to potentially reduce rates when the economy is in dismay.
More downside in crypto is expected but should be range bound for now
The wishes of many to see BTC at US$10K range and ETH at three digits come to fruition over the weekend. Bloodshed was seen everywhere as news of popular firms such as 3AC and Celsius hit into insolvency issues after huge losses from the declines. The Nerdz wonders how many people actually stick to their plan to buy at these levels when they were wishing for them last year. On a more serious note, BTC is likely to hit a local bottom for now with possibility of a short relief if the external environment allows. However, The Nerdz believes more downside is to be expected to maximise the pain to flush out the non-believers and wrongdoers of the industry especially when the whole world is entering the recession phase. Technical charts have reconciled with this notion of further downside while futures have turned negative (i.e. shorts are getting more expensive).
Nerdz Indicator
Short Term: Cautious
Medium Term: Bearish
Long Term: Opportunistic
Market Updates
Market extends losses with Fed announcing a 75bps hike
Market has declined for the past week with volatility increasing. Wednesday saw the Fed announcement of a 75bps hike which was aligned with the market expectation after the hot inflation data. However, Powell continues his aggressive stance while highlighting that there are external factors that are out of their control in their quest to curb high inflation. With all these uncertainty, market extended its losses with fear of imminent recession. Meanwhile, Chinese equities continue its slight uptick.
Crypto plummets too with BTC hitting below US$18K
Similar to the equities market, the crypto market saw its value plummeted with BTC dropping to below US$18K. DeFi TVL also hit record lows since mid 2021.This was amidst all the negative news of insolvency and stETH issues on the back of LUNA-TERRA incident.
Key Happenings
China property troubles continue
A measure of risk levels for debt in Asia has surpassed its 2009 financial crisis high, thanks to a surge in downgrades of Chinese property developers since late last year according to ratings agency Moody’s. Moody’s said it issued 91 downgrades for high-yield Chinese property developers in the last nine months which is a record pace as it only issued 56 downgrades for such companies in the 10 years ending December 2020.
Three Arrows Capital faces potential insolvency
Venture firm Three Arrows Capital (3AC) has reportedly failed to meet margin calls from its lenders, raising the spectre of insolvency after this week’s crypto market collapse triggered unforeseen liquidations for 3AC. It has hired legal and financial advisers to figure out a solution for its investors and lenders such as asset sales or a bailout. It is believed that 3AC was deeply impacted by losses from its holdings of LUNA, Grayscale Bitcoin Trust and stETH.
https://cryptoslate.com/three-arrows-capital-reportedly-considering-asset-sales-bailout/
Celsius freezes withdrawals of digital assets from platform
Celsius is rumoured to be insolvent following a freeze on withdrawals over the last weekend. This is on the back of insolvency rumours about Three Arrows capital. The week just couldn’t get any worse as Coinbase, BlockFi and Crypto.com have also announced job cuts.
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